===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
December 23, 2002
----------------
BBVA Banco Frances S.A.
(Exact name of registrant as specified in its charter)
BBVA Banco Frances S.A.
-----------------------
(Translation of registrant's name into English)
Reconquista 199, 1006
Buenos Aires, Argentina
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F:
Form 20-F [X] Form 40-F [_]
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934:
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A
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BBVA Banco Frances S.A.
TABLE OF CONTENTS
Item
----
1. Financial Statements as of September 30, 2002 and 2001 together with
Accountant's Review Report
2. Minutes No. 4871 of the Board of Directors of BBVA Banco Frances
dated December 18, 2002.
3. Sub Delegate's Minutes dated December 19, 2002
SIGNATURE
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 Banco Frances S.A.
Date: December 23, 2002 By: /s/ Maria Elena Siburu de Lopez Oliva
----------------------------------------
Name: Maria Elena Siburu de Lopez Oliva
Title: Investor Relations Manager
Item 1
BBVA Banco Frances
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002 AND 2001
TOGETHER WITH ACCOUNTANT'S REVIEW REPORT
ACCOUNTANT'S REVIEW REPORT
English translation of the report originally issued in Spanish
(See Note 19 to the Financial Statements)
To the Directors of
BBVA BANCO FRANCES S.A.
Reconquista 199
Buenos Aires
1. We have made a limited review of the accompanying balance sheet of BBVA
BANCO FRANCES S.A. (a bank organized under Argentine Legislation) as of
September 30, 2002, and the related statements of income, changes in
stockholders' equity and cash flows for the nine-month period then ended.
We have also made a limited review of the consolidated balance sheet of
BBVA BANCO FRANCES S.A. and its subsidiaries as of September 30, 2002, and
the related consolidated statements of income and cash flows for the
nine-month period then ended. These financial statements are the
responsibility of the Bank's Management.
2. The individual and consolidated financial statements of BBVA BANCO FRANCES
S.A. as of September 30, 2001, and for the nine-month period then ended,
which are presented for comparative purposes, were subject to a review
performed by Pistrelli, Diaz y Asociados Sociedad Civil, as Andersen
member firm. The review report dated November 8, 2001, included a
qualification as to the valuation of government securities and certain
assets in government securities under repurchase agreements under
Argentine professional accounting standards. The effect of applying that
criterion on the stockholders' equity and income (loss) for the nine-month
period then ended is disclosed in Note 5 to the accompanying financial
statements.
3. Except for the matters mentioned in paragraphs 4 and 5 below, our review
was made in accordance with the standards of Technical Resolution
N(degree) 7 of the Argentine Federation of Professional Councils in
Economic Sciences applicable to the limited review of interim financial
statements and with the "Minimum standards for independents audits" of the
Central Bank of Argentine Republic (BCRA) applicable to the review of
quarterly financial statements. A limited review is substantially less in
scope than an audit of financial statements, because it does not require
the application of all audit procedures necessary to express an opinion on
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
- 2 -
4. We have not reviewed Consolidar Administradora de Jubilaciones y Pensiones
S.A., Consolidar Cia. de Seguros de Vida S.A. and Consolidar Cia. de
Seguros de Retiro S.A. as of September 30, 2002. BBVA BANCO FRANCES S.A.
has 53.89%, 65.96% and 66.67% equity interests in the referred companies,
respectively, which are booked in the individual financial statements by
the equity method in an aggregate amount of ARS 187,068,000, representing
1.21% and 1.11% of total individual and consolidated assets, respectively,
and 13.75% of consolidated income for the nine-month period ended
September 30, 2002. The financial statements of Consolidar Administradora
de Jubilaciones y Pensiones S.A., Consolidar Cia. de Seguros de Vida S.A.
and Consolidar Cia. de Seguros de Retiro S.A. were subject to a limited
review by other auditors, whose reports dated November 18, 27 and 28,
2002, respectively, have been made available to us and include:
a) Consolidar Administradora de Jubilaciones y Pensiones S.A.: i) a
qualification for unresolved uncertainties related to the
recoverability of the book values of government securities and loans
granted to the governmental sector, and the Company's overall
financial position; ii) an "except for" qualification for the
application of professional accounting standards in force in the City
of Buenos Aires in the amount of ARS 3,061,000 as a result of booking
in Liabilities, in the "Exchange differences to be realized" account,
the effect of changing the exchange rate of certain instruments
denominated in foreign currency during the fiscal year ended June 30,
2002; and iii) a qualification for the professional accounting
standards in force in the City of Buenos Aires as a result of failing
to apply the new valuation and disclosure methods established by
Technical Resolutions Nos. 16, 17, 18 and 19, as approved by the
Professional Council of Economic Sciences of the City of Buenos
Aires.
b) Consolidar Cia. de Seguros de Vida S.A.: i) a qualification for
unresolved uncertainties related to the recoverability of the book
values of government securities, tax credit certificates and loans
granted to the governmental sector , and the Company's overall
financial position; ii) an "except for" qualification for the
application of professional accounting standards in force in the City
of Buenos Aires in the amount of ARS 40,402,000 for deferred income
resulting from the swap of secured government loans and their
dedollarization during the fiscal year ended June 30, 2002, and iii)
a qualification for professional accounting standards in force in the
City of Buenos Aires as a result of failing to apply the new
valuation and disclosure methods established by Technical Resolutions
Nos. 16, 17, 18 and 19, as approved by the Professional Council of
Economic Sciences of the City of Buenos Aires. In view of the
uncertainties referred to in this paragraph, the Company's auditors
do not make any representation on the financial statements of
Consolidar Cia. de Seguros de Vida S.A. as of September 30, 2002.
- 3 -
c) Consolidar Cia de Seguros de Retiro S.A.: i) a qualification for
unresolved uncertainties related to the recoverability of the book
values of tax credit certificates and loans granted to the
governmental sector, and the Company's overall financial position;
ii) an "except for" qualification for the application of professional
accounting standards in force in the City of Buenos Aires in the
amount of ARS 82,369,000 for deferred income resulting from the swap
of secured government loans and their dedollarization during the
fiscal year ended June 30, 2002, and iii) a qualification for
professional accounting standards in force in the City of Buenos
Aires as a result of failing to apply the new valuation and
disclosure methods established by Technical Resolutions Nos. 16, 17,
18 and 19, as approved by the Professional Council of Economic
Sciences of the City of Buenos Aires. In view of the uncertainties
referred to in this paragraph, the Company's auditors do not make any
representation on the financial statements of Consolidar Cia. de
Seguros de Retiro S.A. as of September 30, 2002.
5. As explained in Notes 1.1.3 and 1.2.a) to the accompanying financial
statements, the Bank is in the process of analyzing and assessing the
impact of the changes introduced by Communique "A" 3825 of the BCRA on the
calculation of the compensation established by sections 28 and 29,
Executive Decree 905/2002. The most relevant transactions that are still
in the process of being analyzed are related to: (i) the settlement of
certain transactions prior to June 28, 2002 for the distribution of book
amounts of assets and liabilities in foreign currency as of December 31,
2001, at different exchange rates, and (ii) the compliance with the
requirements provided by section 1, clause (a), Executive Decree 1570/2001
to determine the amount of overdrafts and credit cards in foreign currency
and its related subsequent dedollarization. The amount involved for the
Bank's calculation of the compensation is USD 314,522,000. Therefore, as
of the issuance date of this report, we were unable to determine the
effects of applying such standard to the book value of the compensation
received and to be received, booked in the accounts Government and Private
Securities and Other Receivables from Financial Transactions in the amount
of ARS 1,596,103,000 and ARS 754,016,000, respectively.
6. As further explained in Note 1 to the accompanying financial statements,
during this year the Argentine economic model was deeply changed and the
currency board in force since March 1991 was amended, which included,
among other measures, the Argentine peso devaluation, the translation into
pesos of certain assets and liabilities in foreign currency, severe
restrictions on the cash withdrawal from the financial system and
transfers of funds abroad, the noncompliance with public debt payments and
the increase in domestic prices. These initial measures significantly
affected the liquidity, solvency and profitability of the financial system
as a whole, thus requiring the Federal Government and the BCRA to adopt
additional measures, in order to mitigate the effects referred to above
and foster the financial system restructuring, some of which are still in
the process of being issued and implemented. The audit report dated April
30, 2002, issued by Pistrelli, Diaz y Asociados Sociedad Civil, as
Andersen member firm, on the individual and consolidated financial
statements as of December 31, 2001, included a disclaimer of opinion
originated in significant uncertainties as to the Bank's ability to
continue to operate as a going concern and the recoverability of the book
values of the government and private securities held, financing facilities
and investments in other companies. Those uncertainties continue to exist
as of this reporting date and their evolution is detailed in Notes 1 and 4
to the
- 4 -
accompanying financial statements, including, additionally the
compensation established by section 28 and 29, Executive Decree 905/2002,
booked in the Government and Private Securities and Other Receivables from
Financial Transactions accounts and pending settlement, for which it is
also not possible to determine the recoverability of the book values. In
addition, the Bank keeps booked goodwill in the "Intangible assets"
account. As a consequence of the abovementioned uncertainties, it is not
possible to determine the Bank's ability to recover this booked amounts.
As mentioned in Note 1 to the accompanying financial statements, those
statements have been prepared by the Bank following the going concern
criteria, understanding that the financial system restructuring as a whole
and the particular plans and actions to be implemented by the Bank and its
subsidiaries will allow it to continue with its operations and keep the
liquidity and solvency ratios required by the BCRA and, therefore, do not
include the adjustments related to the recoverability of booked amounts of
assets and the sufficiency of the amount of liabilities that may be
necessary if the situations described above are not resolved.
7. As detailed in note 1.2.e) to the accompanying financial statements, the
Bank capitalized under the "Other receivables" account the differences
between US-dollar denominated deposits paid in such currency or in pesos
at the freely floating exchange rate under protection actions and the
rescheduled deposit balance (converted at the USD 1-to-ARS 1,40 exchange
rate and adjusted by the benchmark stabilization coefficient). As of
September 30, 2002, such balance, net of allowances, was ARS 278,251,000.
The eventual recoverability of such assets is contingent on the resolution
by the Federal or Provincial Courts on the substance of the above legal
actions or the possible compensation granted by the Federal Government.
8. As explained in note 5 to the accompanying financial statements, in
valuing a portion of their government securities, certain assets in
government securities applied to repurchase agreements, the guaranteed
loans to the non-financial government sector and the compensation
established in Decree No. 905/2002, sections 28 and 29 of Executive Power,
the Bank and its subsidiaries applied certain criteria that are in
conformity with BCRA regulations but depart from effective professional
accounting standards in the City of Buenos Aires. The effects of applying
such criteria on stockholders' equity as of September 30, 2002 and results
of operations for the nine-month period then ended are disclosed in the
abovementioned note 5.
9. In view of the scope limitations referred to in paragraphs 4 and 5 and the
significance of the uncertainties mentioned in paragraphs 6 and 7, we are
not in a position to make any representation on the individual and
consolidated financial statements of BBVA BANCO FRANCES S.A. as of
September 30, 2002.
- 5 -
10. In compliance with effective legal rules and Buenos Aires Stock Exchange
regulations, please note that:
a) The financial statements mentioned in the first paragraph have been
entered into the inventories and financial statements book.
b) The financial statements of BBVA BANCO FRANCES S.A. mentioned in the
first paragraph arise from the accounting records kept, in all formal
aspects, pursuant to effective legal provisions and BCRA standards.
c) As of September 30, 2002, the amount payable in employer and employee
contributions to the Integrated Retirement and Pension System, as
evidenced by the Bank's records, totals ARS 1,576,407, and was not
due as of such date.
Buenos Aires, PISTRELLI, DIAZ Y ASOCIADOS SRL
December 11, 2002 CPCECABA Vol. 1 - Fo. 8
ERNESTO M. SAN GIL
Partner
Certified Public Accountant UBA
CPCECABA Vol. 119 - Fo. 114
BALANCE SHEETS AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
-Stated in thousands of pesos-
ASSETS 2002 2001
----------- -----------
CASH AND DUE FROM BANKS
Cash 183,666 446,442
Due from banks and correspondents 654,095 2,329,139
----------- -----------
837,761 2,775,581
----------- -----------
GOVERNMENT AND PRIVATE SECURITIES (Exhibit A)
Holdings in investment accounts 1,675,987 3,996,395
Holdings for trading or financial transactions 1,581 263,930
Unlisted Government Securities 574,944 694,413
Investments in listed private securities 285 3,421
----------- -----------
2,252,797 4,958,159
----------- -----------
LOANS
To the non financial governmental sector (Exhibits B, C and D) 5,392,152 2,349,311
To the financial sector (Exhibits B, C and D) 41,950 263,742
To the non financial private sector and residents abroad (Exhibits B, C and D) 2,975,242 7,044,989
----------- -----------
Overdraft 198,557 607,180
Discounted instruments 274,930 1,530,302
Real estate mortgage 545,651 1,713,808
Collateral loans 11,967 54,351
Consumer 179,470 677,133
Credit cards 132,244 499,986
Other (Note 6) 1,483,730 1,879,829
Interest, adjustments and listed-price differences accrued and pending collection 149,947 126,053
Less: unused collections 822 -
Less: Interest documented together with main obligation 432 43,653
Less: Allowances (Exhibit J) 1,079,965 437,485
----------- -----------
7,329,379 9,220,557
----------- -----------
OTHER RECEIVABLES FROM FINANCIAL TRANSACTIONS
Central Bank of the Argentine Republic 348,607 98,425
Amounts receivable for spot and forward sales pending settlement 758 1,143,944
Instruments to be received for spot and forward purchases pending settlement 757,027 531,122
Premiums on options purchased - 3,379
Unlisted corporate bonds (Exhibits B, C and D) 197,765 159,297
Other receivables not covered by debtor classification regulations (Note 6) 860,427 134,109
Other receivables covered by debtor classification regulations (Exhibits B, C and D) 14,459 66,363
Interest and adjustments accrued and pending collection not covered by debtor
classification regulations 3,164 31
Interest and adjustments accrued and pending collection covered by debtor
classification regulations 9,188 64
(Exhibits B, C and D)
Less: unused collections 116 -
Less: Allowances (Exhibit J) 59,641 7,648
----------- -----------
2,131,638 2,129,086
----------- -----------
ASSETS OUT ON FINANCING LEASE
Assets out on financing lease (Exhibits B, C and D) 19,718 49,417
Less: Allowances (Exhibit J) 579 673
----------- -----------
19,139 48,744
----------- -----------
INVESTMENTS IN OTHER COMPANIES (Exhibit E)
In financial institutions 1,415,920 721,014
Other (Note 6) 237,630 262,199
Less: Allowances (Exhibit J) 20,047 2,657
----------- -----------
1,633,503 980,556
----------- -----------
OTHER RECEIVABLES
Receivables from sale of assets (Exhibits B, C and D) 145 582
Other (Note 6) 737,561 128,117
Other accrued interest and adjustments receivable 1 2
Less: Allowances (Exhibit J) 282,353 9,646
----------- -----------
455,354 119,055
----------- -----------
BANK PREMISES AND EQUIPMENT (Exhibit F) 483,831 499,862
----------- -----------
OTHER ASSETS (Exhibit F) 129,220 135,322
----------- -----------
INTANGIBLE ASSETS (Exhibit G)
Goodwill 52,869 118,002
Organization and development expenses 146,245 152,206
----------- -----------
199,114 270,208
----------- -----------
SUSPENSE ITEMS 2,593 4,856
----------- -----------
TOTAL ASSETS 15,474,329 21,141,986
=========== ===========
(Contd.)
BALANCE SHEETS AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
-Stated in thousands of pesos-
LIABILITIES 2002 2001
----------- -----------
DEPOSITS (Exhibits H and I)
From the non financial governmental sector 26,432 49,807
From the financial sector 123,272 241,537
From the non financial private sector and residents abroad 5,925,898 14,497,234
----------- -----------
Checking accounts 1,050,891 1,490,327
Savings deposits 482,434 2,320,702
Certificates of deposit 1,805,150 10,318,467
Other (Note 6) 1,882,725 272,812
Interest, adjustments and listed-price differences accrued payable 704,698 94,926
----------- -----------
6,075,602 14,788,578
----------- -----------
OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS
Central Bank of the Argentine Republic (Exhibit I) 1,979,135 23,421
----------- -----------
Other 1,979,135 23,421
Banks and International Organizations (Exhibit I) 1,167,107 696,519
Non-subordinated corporate bonds (Exhibit I) 559,005 553,582
Amounts payable for spot and forward purchases pending settlement 412,951 453,319
Instruments to be delivered for spot and forward sales pending settlement 5,064 1,116,502
Premiums on options sold - 3,379
Financing received from Argentine financial institutions (Exhibit I) 82,167 165,266
Other (Note 6 and Exhibit I) 1,236,850 111,824
Interest, adjustments and listed-price differences accrued payable (Exhibit I) 56,923 29,767
----------- -----------
5,499,202 3,153,579
----------- -----------
OTHER LIABILITIES
Other (Note 6) 1,517,117 317,613
----------- -----------
1,517,117 317,613
----------- -----------
ALLOWANCES (Exhibit J) 198,130 119,359
----------- -----------
SUBORDINATED CORPORATE BONDS (Exhibit I) 585,216 389,066
----------- -----------
SUSPENSE ITEMS 10,995 2,746
----------- -----------
TOTAL LIABILITIES 13,886,262 18,770,941
=========== ===========
STOCKHOLDERS' EQUITY (as for the related statement) 1,588,067 2,371,045
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 15,474,329 21,141,986
=========== ===========
MEMORANDUM ACCOUNTS
2002 2001
----------- -----------
DEBIT ACCOUNTS
Contingent
- Guaranties received 6,229,149 6,615,371
- Contra contingent debit accounts 3,740,240 2,212,586
----------- -----------
9,969,389 8,827,957
----------- -----------
Control
- Receivables classified as irrecoverable 511,818 1,083,546
- Other (Note 6) 23,866,164 26,231,251
- Contra control debit accounts 80,506 153,674
----------- -----------
24,458,488 27,468,471
----------- -----------
For Derivatives
- Notional value of call options purchased - 24,041
- Contra debit accounts for derivatives - 24,041
----------- -----------
- 48,042
----------- -----------
For trustee activities
- Funds received in trust 44,032 194,830
----------- -----------
44,032 194,830
----------- -----------
TOTAL 34,471,909 36,539,340
=========== ===========
CREDIT ACCOUNTS
Contingent
- Credit lines granted (unused portion) covered by debtor classification regulations
(Exhibits B, C and D) 154,263 450,474
- Guaranties provided to the BCRA 2,289,812 23,129
- Other guaranties given covered by debtor classification regulations (Exhibits B, C 861,212 1,283,283
and D)
- Other guaranties given not covered by debtor classification regulations 1,730 2,998
- Other covered by debtor classification regulations (Exhibits B, C and D) 433,223 452,702
- Contra contingent credit accounts 6,229,149 6,615,371
----------- -----------
9,969,389 8,827,957
----------- -----------
Control
- Items to be credited 80,350 153,584
- Other 156 90
- Contra control credit accounts 24,377,982 27,314,797
----------- -----------
24,458,488 27,468,471
----------- -----------
For Derivatives
- Notional value of call options sold - 24,041
- Contra credit accounts for derivatives - 24,041
----------- -----------
- 48,082
----------- -----------
For trustee activities
- Contra credit accounts for trustee activities 44,032 194,830
----------- -----------
44,032 194,830
----------- -----------
TOTAL 34,471,909 36,539,340
=========== ===========
The accompanying notes 1 through 19 and exhibits A through L and N are an
integral part of these statements.
STATEMENTS OF INCOME FOR THE NINE-MONTH PERIODS
ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
2002 2001
----------- -----------
FINANCIAL INCOME
Interest on cash and due from banks 4,892 45,839
Interest on loans to the financial sector 25,752 29,074
Interest on overdraft 161,110 129,558
Interest on discounted instruments 58,052 148,710
Interest on real estate mortage loans 77,390 158,099
Interest on collateral loans 2,414 6,284
Interest on credit card loans 46,671 71,069
Interest on other loans 296,666 790,462
Interest on other receivables from financial transactions 21,479 45,653
Income from guaranteed loans - Decree 1387/01 1,489,781 -
Net income from government and private securities 178,701 382,930
Indexation by benchmark stabilization coefficient (CER) 984,315 -
Other (Note 6) 1,350,223 117,439
----------- -----------
4,697,446 1,925,117
----------- -----------
FINANCIAL EXPENSE
Interest on checking accounts 243,696 13,060
Interest on savings deposits 7,589 40,261
Interest on certificates of deposit 424,458 688,727
Interest on financing to the financial sector 14,119 2,106
Interest on other liabilities from financial transactions 82,282 92,453
Other interest 649,254 31,089
Indexation by CER 1,288,130 -
Other (Note 6) 236,518 100,229
----------- -----------
2,946,046 967,925
----------- -----------
GROSS INTERMEDIATION MARGIN 1,751,400 957,192
----------- -----------
PROVISION FOR LOAN LOSSES 685,411 238,972
----------- -----------
SERVICE CHARGE INCOME
Related to lending transactions 76,289 116,859
Related to borrowing transactions 127,033 195,457
Other commissions 12,898 16,676
Other (Note 6) 50,246 118,152
----------- -----------
266,466 447,144
----------- -----------
SERVICE CHARGE EXPENSE
Commissions 28,746 57,435
Other (Note 6) 7,269 21,964
----------- -----------
36,015 79,399
----------- -----------
MONETARY GAIN ON FINANCIAL INTERMEDIATION 45,684 -
----------- -----------
(Contd.)
STATEMENTS OF INCOME FOR THE NINE-MONTH PERIODS
ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
2002 2001
----------- -----------
OPERATING EXPENSES
Payroll expenses 239,071 425,499
Fees to Bank Directors and Statutory Auditors 465 2,710
Other professional fees 11,206 14,110
Advertising and publicity 13,790 29,386
Taxes 15,315 21,240
Other operating expenses (Note 6) 158,218 214,668
Other 29,306 52,054
----------- -----------
467,371 759,667
----------- -----------
MONETARY LOSS ON OPERATING EXPENSES (71,028) -
----------- -----------
NET INCOME FROM FINANCIAL TRANSACTIONS 803,725 326,298
----------- -----------
OTHER INCOME
Income from long-term investments - 163,402
Punitive interests 2,268 3,793
Loans recovered and reversals of allowances 27,715 58,910
Other (Note 6) 18,543 15,261
----------- -----------
48,526 241,366
----------- -----------
OTHER EXPENSE
Losses from long-term investments 1,178,515 -
Punitive interests and charges paid to Central Bank of the Argentine Republic 2,630 13
Charge for uncollectibility of other receivables and other allowances 586,777 103,511
Other (Note 6) 100,453 60,509
----------- -----------
1,868,375 164,033
----------- -----------
MONETARY GAIN ON OTHER OPERATIONS 24,506 -
----------- -----------
NET (LOSS) INCOME BEFORE INCOME TAX AND TAX ON MINIMUM
PRESUMED INCOME (991,618) 403,631
----------- -----------
INCOME TAX AND TAX ON MINIMUM PRESUMED INCOME - 96,199
----------- -----------
NET (LOSS) INCOME FOR THE PERIOD (991,618) 307,432
=========== ===========
The accompanying notes 1 through 19 and exhibits A through L and N are an
integral part of these statements.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
2002
------------------------------------------------
Noncapitalized
contributions
------------------
Adjustments to
Capital Premiums on the stockholders'
Movements Stock issuance of shares equity (1)
------------------------------------------------------------------- ----------- --------------------- --------------
1. Balance at beginning of fiscal year (restated) 209,631 343,215 752,000
2. Adjustment to prior-year income (Note 3.1.c) - - -
--------- --------- ---------
3. Subtotal 209,631 343,215 752,000
4. Decisions of stockholder's meeting of April 5, 2001
- Cash dividends - - -
5. Adjustment to Capital Stock of the interest in BBVA
Uruguay S.A - - -
6. Sale of interest in BBVA Uruguay S.A. (Note 2.2) - - 21,976
7. Unrealized valuation difference (Note 1.2.a) - - -
8. Net (loss) income for the period - - -
--------- --------- ---------
9. Balance at end of the period 209,631 343,215 773,976
========= ========= =========
(Contd.)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
2002 2001
------------------------------------------------------------------- ----------
Earnings reserved
------------------------
Unrealized
valuation Unappropriated
Movements Legal Other (2) difference (3) earnings Total Total
--------------------------------------------- ---------- ---------- -------------- ------------- ---------- ----------
1. Balance at beginning of year (restated) 431,832 1,816 - 346,879 2,085,373 2,394,393
2. Adjustment to prior-year income (Note
3.1.c) - - - - - (156,666)
---------- ---------- ---------- ---------- ---------- ----------
3. Subtotal 431,832 1,816 - 346,879 2,085,373 2,237,727
4. Decisions of stockholder's meeting of
April 5, 2001
- Cash dividends - - - - - (162,467)
5. Adjustment to Capital Stock of the
interest in BBVA Uruguay S.A - - - - - (11,647)
6. Sale of interest in BBVA Uruguay S.A 1,976
(Note 2.2) - - - - 2 -
7. Unrealized valuation difference (Note
1.2.a) - - 472,336 - 472,336 -
8. Net (loss) income for the period - - - (991,618) (991,618) 307,432
---------- ---------- ---------- ---------- ---------- ----------
9. Balance at end of the period 431,832 1,816 472,336 (644,739) 1,588,067 2,371,045
========== ========== ========== ========== ========== ==========
BALANCE AT THE END OF THE PERIOD
(1) Adjustments to stockholders'equity include:
a) Adjustment to equity fund appraisal revaluation 41,587
b) Adjustment to Capital Stock 732,389
----------
773,976
----------
(2) Earnings reserved - Other includes:
Mandatory reserve recorded for granting loans to personnel 1,816
----------
(3) Including 6,097 related to the interest in the Unrealized
valuation difference booked by Rombo Cia. Financiera S.A.
The accompanying notes 1 through 19 and exhibits A through L and N are an
integral part of these statements.
STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS
ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
-Stated in thousands of pesos-
2002 2001
----------- -----------
CHANGES IN CASH FLOWS
Cash and due from banks at beginning of fiscal year (restated) 1,718,544 1,119,793
Increase / (decrease) in funds (880,783) 1,655,788
----------- -----------
Cash and due from banks at end of the period 837,761 2,775,581
----------- -----------
REASONS FOR CHANGES IN CASH FLOWS
Financial income collected 1,631,818 1,529,780
Service charge income collected 289,465 447,234
Less:
Financial expenses paid 1,999,563 899,976
Services charge expenses paid 36,015 79,674
Operating expenses paid 418,059 657,996
----------- -----------
FUNDS PROVIDED BY/ (USED IN) RECURRING OPERATIONS (532,354) 339,368
----------- -----------
OTHER SOURCES OF FUNDS
Net increase in deposits 874,362 -
Net increase in other liabilities from financial transactions 5,601,922 -
Net increase in other liabilities 2,707,540 -
Net decrease in loans - 3,454,721
Net decrease in other receivables from financial transactions - 3,002,897
Net decrease in other assets - 38,704
Other sources of funds 48,527 77,933
----------- -----------
TOTAL OF SOURCES OF FUNDS 9,232,351 6,574,255
----------- -----------
USE OF FUNDS
Net increase in government and private securities 2,125,626 3,000,913
Net increase in loans 2,505,243 -
Net increase in other receivables from financial transactions 2,285,391 -
Net increase in other assets 1,904,382 -
Net decrease in deposits - 1,647,774
Net decrease in other liabilities from financial transactions - 222,954
Net decrease in other liabilities - 182,078
Cash dividends - 162,467
Other uses of funds 27,320 41,649
----------- -----------
TOTAL USES OF FUNDS 8,847,962 5,257,835
----------- -----------
MONETARY LOSS GENERATED ON CASH AND DUE FROM BANKS 732,818 -
----------- -----------
INCREASE / (DECREASE) IN FUNDS (880,783) 1,655,788
=========== ===========
The accompanying notes 1 through 19 and exhibits A through L and N are an
integral part of these statements.
- 1 -
NOTES TO THE FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
(Stated in thousands of pesos)
1. MACROECONOMIC SITUATION OF THE FINANCIAL SYSTEM AND THE BANK AND
SUBSEQUENT EVENTS TO THE PERIOD END
1.1. Effects of the Argentine peso devaluation and other
modifications to economic rules
1.1.1. Macroeconomic situation of the financial system
The economic and financial situation in Argentina
deteriorated unrelentingly over the last few months;
this was basically reflected in an increase in
sovereign risk, diminishing reserves, continuing fiscal
imbalance, lower deposits in the overall financial
system, deep recession with significant drops in both
consumption and investment, decreased real cash flows,
difficulties to settle short-term debt and a
deteriorating chain of payments.
On November 1, 2001, the Argentine Government announced
a new economic plan, the main measures of which related
to the comprehensive restructuring of public debt at
lower interest rates, launching a plan to revive the
economy, and other fiscal measures, while the
convertibility law (whereby the Argentine peso was
pegged at par with the US dollar) and the
balanced-budget law were to remain in effect.
Although the domestic phase of the national public-debt
restructuring process pursuant to Decree No. 1387/01
was successful, a new crisis broke out on November 30,
2001, triggered by the loss of deposits out of the
financial system, which led the Government to issue
Decree No. 1570/01, which set tight restrictions on the
withdrawal of cash from banks and controls on the
transfer of funds abroad while fostering an increased
dollarization of the economy.
By the end of the last year, the deterioration of the
economic and financial situation affected the
institutions, with several successive changes taking
place at the highest levels of the Federal Executive,
which culminated with National Congress electing a new
President to complete the constitutional period until
December 10, 2003. In the interim, the suspension of
payments on public debt, was declared.
On January 6, 2002, National Congress enacted Public
Emergency and Foreign Exchange System Reform Law
No.25,561, which introduced deep changes to the
economic framework effective until then and,
particularly, amended the Convertibility Law (whereby
the Argentine peso was pegged at par with the US
dollar) which had been in effect since 1991; Law No.
25,561 also empowered the Federal Executive to issue
additional monetary, financial and foreign exchange
measures aimed at overcoming the economic crisis in the
medium term. The law and decrees included, among
others, the following measures:
a) The switch into pesos of certain debts towards
the financial sector originally denominated in
US dollars and outstanding as of December 31,
2001, at the exchange rate of ARS 1 to USD 1;
b) The switch into pesos of private contracts
stipulated in US dollars or including
indexation clauses, over a term of 180 days, at
the exchange rate of one Argentine peso to each
US dollar;
- 2 -
c) The switch into pesos at the exchange rate of
one Argentine peso to each US dollar of public
utility rates priorly stipulated in US dollars,
to be subsequently renegotiated on a
case-by-case basis;
d) The implementation of a new system levying
duties on the export of oil and gas;
e) Empowering the Federal Executive to establish
compensatory measures to avoid imbalances in
financial institutions that may result from the
switch into pesos of certain receivables.
f) The establishment of an "official" foreign
exchange market (ARS 1.4 to USD 1) and a
"floating" exchange market.
The "switch into pesos" governmental system as of that
date kept, in general terms, the financial system
balance (since the imbalances generated by the
asymmetrical exchange rates were low with reference to
the total assets and liabilities of the financial
system). The reaction of different sectors of the
economy forced the Federal Government to apply
significant changes to the original regulations, that
emphasized the original assymetry. In addition, the
injunctions pursuant to constitutional protection
actions that require deposits to be reimbursed, without
rendering an opinion of the substance of the matter,
and the deep crisis arised among the Federal Powers,
originated by the beginning of the Supreme Court
judgement, increased the economic and financial system
crisis.
Subsequently, new rules (Decrees No. 214/02 and No.
410/02, among others) were issued that amended or
supplemented existing rules and regulations. The main
new measures were:
a) The switch into pesos of all obligations,
whatever their cause or origin, to deliver sums
of money stipulated in US dollars or any other
foreign currency outstanding as of the date of
enactment of Law No. 25,561, with the
exceptions, mainly, of financing related to
foreign trade granted by financial
institutions, and the private and government
sectors' obligations to deliver sums to which
foreign law is applicable.
b) The switch into pesos of all deposits with all
financial institutions stipulated in US dollars
or other foreign currencies at an exchange rate
of 1.4 Argentine pesos to each US dollar, or
its equivalent in other currencies.
c) The switch into pesos of all debts towards
financial institutions stipulated in US dollars
or other foreign currencies, whatever the
amount or nature, at the exchange rate of one
Argentine peso to each US dollar, or its
equivalent in other currencies.
d) The conversion into pesos of obligations to
deliver monies, stipulated in US dollars or
other foreign currencies, unrelated to
financial institutions and whatever their
origin or nature, at the exchange rate of one
Argentine peso to each US dollar, or its
equivalent in other currencies.
e) The indexation of all receivables and payables
referred to in points b) through d) by applying
a "benchmark stabilization coefficient" ("CER")
that is to be published by the Central Bank of
the Argentine Republic (BCRA) and,
additionally, the application of a minimum set
interest rate for deposits and a maximum set
interest rate for loans. The CER is applicable
as from the publication of Decree No. 214/02.
Obligations of any nature or origin arising
after the enactment of such Law No. 25,561,
shall not be allowed to contain and shall not
be subject to adjustment clauses.
f) The issuance of a Bond to be borne by the
Federal Treasury to compensate the imbalances
in the financial system resulting from the
exchange difference caused by the switch of
deposits with and payables to the financial
system mentioned in points b) and c) above.
Please find below a deeper description of some measures
adopted by the Federal Government effective as of the
date of filing these financial statements.
- 3 -
1.1.2. Relevant issues of the exchange system
Decree No. 71/2002 of the Argentine Executive and Communique
"A" 3425 of the BCRA established an "official" foreign exchange
market, mainly for exports, certain imports and financial
obligations, and a "floating" exchange market for the rest of
transactions. The official exchange rate was set at ARS 1.40 to
USD 1 and the "floating" exchange rate on the first day on
which the system operated, January 11, 2002, (it had been
suspended from December 23, 2001) ranged from ARS 1.6 to 1.7 to
USD 1, selling rate. Federal Executive Decree No. 260/2002 of
February 8, 2002, established a single floating market where
all foreign exchange transactions will be carried out as from
issuance of such decree. Foreign exchange transactions will be
made at the exchange rate freely agreed between the parties,
subject to the requirements and rules established by the BCRA.
Foreign exchange transactions in the floating market have,
among others, the following characteristics:
a) The exchange rate will be freely agreed between supply
and demand. As of September 30, 2002, the exchange rate
was ARS 3.7267 to USD 1, and as of the date of filing
this financial statements, the exchange rate was ARS
3.5268 to USD 1.
b) Foreign exchange transactions may only be carried out
at institutions authorized by the BCRA.
c) Criminal Foreign Exchange Laws will apply to
transactions that do not conform to effective
regulations.
d) Foreign currency will be sold only against the delivery
of peso notes. Other payment instruments are accepted,
as defined by the BCRA.
e) Transfers abroad to be made by the financial and
nonfinancial private sector and by government companies
have to be authorized by the BCRA, according to the
characteristics of the related payment.
f) Certain requirements related to the registration of
transactions and customer identification and certain
provisions of the information system must be complied
with.
g) The requirements established by tax and money
laundering prevention laws must be complied with.
Foreign trade transactions and services to be settled in such
market are regulated by the BCRA as to the transactions to be
settled, terms and manner to credit the accounts.
The BCRA has regulated the purchase and sale of US dollars on
behalf of the BCRA. Such transactions will be conducted through
Financial Institutions that have enrolled in the system. The
regulations will include the transaction amounts and formal
requirements.
Communique "A" 3511 of March 14, 2002, issued by the BCRA
established restrictions on the Foreign Exchange Position (FEP)
of financial institutions, which is mainly formed by holdings
in foreign currency, plus foreign currency cash held in
Argentina or abroad, and foreign currency forward transactions.
The FEP of each Bank will not exceed 5% of the computable
equity of each Bank as of the end of November 2001. Should that
limits be exceeded, such exceed has to be cured within certain
dates established by the BCRA.
1.1.3. Compensation to Financial Institution due to the effects of the
devaluation and conversion into pesos
According to the provisions of Law No. 25,561 and of sections
2, 3 and 6 of Decree No. 214/2002, as amended and supplemented,
a significant portion of the assets and liabilities were
switched into Argentine pesos. Sections 28 and 29 of Decree No.
905/2002 of June 1, 2002, established a compensation for
financial institutions.
- 4 -
Under such sections, the Ministry of Economy will deliver
Federal Government Bonds denominated in Argentine pesos and US
dollars to the financial institutions as a full and final
compensation, for the negative monetary effects arising from
conversion into Argentine pesos at an asymmetrical exchange
rate of receivables and payables denominated in foreign
currency, as well as for the net negative position in foreign
currency resulting from its conversion into Argentine pesos.
BCRA Communiques "A" 3650 and "A" 3716, as supplemented,
determined the compensation procedures as follows:
a) The reference was the Financial Institution's balance
sheet as of December 31, 2001, which included, under
assets, the Federal Government's secured loans whose
new conditions had been accepted by means of the
acceptance letter included in Decree No. 644/2002 of
April 18, 2002, taken at the value at which they had
been booked by foreign subsidiaries of local financial
institutions, net of "Investments in other companies"
booked by such local institutions as of December 31,
2001.
b) The stockholders' equity resulting from the balance
sheet mentioned in (a) was adjusted by applying the ARS
1.40 to USD 1 exchange rate, or its equivalent in any
other currency, to the net position in foreign
currency.
c) The amount to be compensated is the positive difference
between the adjusted stockholders' equity determined on
the basis of (b) above and the stockholders' equity
resulting from conversion into pesos of certain assets
and liabilities in foreign currency at the exchange
rates defined by the rules and regulations.
d) The compensation for each Financial Institution,
determined in Argentine pesos, will be paid by
delivering "2% Federal Government Bonds in Argentine
pesos maturing in 2007".
e) Financial Institutions will have the right to request
the Bond swap mentioned in d) for "LIBOR 2012 Federal
Government Banks denominated in US dollars " at the ARS
1.40 to USD 1 exchange rate, for up to the amount of
the net negative position in foreign currency,
resulting from conversion into pesos of assets and
liabilities booked in the balance sheet as of December
31, 2001, as per the above paragraphs.
f) The Federal Government, through the Ministry of
Economy, may issue additional bonds in US dollars to be
subscribed by Financial Institutions up to the amount
of the net position in foreign currency of such
Financial Institution and after allocating all the
holdings in Bonds denominated in Argentine pesos
received as a compensation. The subscription price of
such will be ARS 140 to USD 100, face value.
g) For purposes of financing the subscription of Bonds
referred to in (f), the BCRA may grant advances to such
financial institutions.
Decree 2167/2002 of October 28, 2002 ammended Section 29 of
Decree 905/2002, establishing that in the compensation
procedure, the assets reached by Decrees 214/2002 and 471/2002
booked in foreign subsidiaries owned by local financial
institutions, will be included in the Bank assets. Moreover, by
Communique "B" 7564 of October 24, 2002, the BCRA published
certain regulatory constructions on the treatment to be given
to certain transactions related to the calculation of the
compensation described above. Lastly, Communique "A" 3825
established a new information requirement that incorporates,
among others, the provisions contained in the rules mentioned
above. The term for presenting such requirement will extend to
December 23, 2002.
1.1.4. Financial assistance to the governmental and private sectors
- Guaranteed loans - Decree No. 1387/2001
On November 1, 2001, the Federal Executive issued
Decree No. 1387/01 directing the Ministry of Economy to
offer a voluntary federal and provincial debt swap for
loans secured by the Federal Government or the
Provincial Development Trust Fund to obtain a reduction
in the interest of swapped debt, as well as an
extension of repayment terms.
- 5 -
Decrees 1387/01 and 1646/01 established the basic
characteristics of guaranteed loans (conversion at
nominal value plus interest accrued on the swapped
obligation - one to one -, issuance in the same
currency that the swapped obligation, tax exemption
covering both the difference between the swap and
market or book value and of interest and secured loans,
allocation of revenues from the tax on bank-account
transactions and, in general, of all revenues of the
Federal Government arising from the Revenue Sharing
system to secure all principal and interest payments on
such secured loans). In addition, Decree No. 471/02
established, among other things, the conversion into
pesos of all the obligations of the federal, provincial
or municipal government in foreign currency governed by
Argentine law, at the ARS 1.40 to USD 1 exchange rate,
or its equivalent in any other currency, and adjusted
on the basis of the CER and the interest rate
applicable to each type of government security and
guaranteed loan, on the basis of their average life and
original issuance currency.
Subsequently, the Federal Executive issued Decree No.
644/02 establishing the steps to be followed by banks
to accept the new conditions (conversion at the ARS
1.40 to USD 1 rate, CER application and modification of
the interest rate), for purposes of receiving principal
and interest payments on guaranteed loans. If the new
conditions are not accepted, the banks receive the
securities originally submitted for the swap.
On August 27, 2002, through Decree No. 1579/02, the
Federal Executive instructed the Trustee Fund for
Provincial Development to bear provincial debt in the
form of Government Securities, Bonds, Treasury Bills,
or Loans voluntary converted into Secured Bonds.
Likewise, it empowered the Ministry of Economy to
determine the term to express the will to withdraw bids
already submitted to convert provincial debt under
Section No. 25, Decree No. 1387/01, as supplemented, as
the case may be.
Later, on October 25 and November 12, 2002, through
Resolutions Nos. 539/02 and 611/02, respectively, the
Ministry of Economy established the unified calculation
mechanism for all debts included in the conversion
system under Decree No. 1579/02, and it provided the
term for financial institutions that submitted bids to
convert provincial debt under Section No. 25, Decree
No. 1387/01, as supplemented, to express their will to
withdraw them (10 business days as from the date when
Resolution No. 539/02 becomes effective for provincial
debt in the form of Loans, and 15 days as from the date
when Resolution No. 539/02 becomes effective for
provincial debt in the form of Government Securities,
Bonds or Treasury Bills).
- Financial assistance to the private sector - Maximum
rates
Decree No. 214/2002 established that certain debts in
US dollars or other foreign currency to the Financial
System, regardless of their amount and nature, be
converted into Argentine pesos at the ARS 1 to USD 1 or
its equivalent in any other currency. Furthermore, as
from February 3, 2002, the CER and a maximum interest
rate determined by the BCRA in Communique "A" 3561
became applicable to such loans. Interest rates are
determined on the basis of whether the lender is an
entity or an individual and depending on the loan's
guarantee, and the interest rate caps are 6% and 8%.
1.1.5. Amendment of the bankruptcy and insolvency law
On January 30, 2002, the Argentine Congress enacted Law No.
25,563 whereby it declared a state of productive and credit
emergency originated in the Argentine crisis. Such emergency
will extend until December 10, 2003. The law established, among
other things:
a) Suspension for 180 days as from the effective date of
the law of all insolvency proceedings and court and
out-of-court sales (included foreclosures and
enforcement of security interests of any origin).
b) Suspension for 180 days of any petition in bankruptcy.
Subsequently, Law No. 25,640 of September 11, 2002,
extended such term for 90 days.
- 6 -
Later, on May 15, 2002, the Government enacted Law No. 25,589
on bankruptcy and insolvency proceedings introducing
modifications to the above law. The main changes are:
a) within 90 days or within the longer term determined by
the court, the debtor will have an exclusivity period
to submit proposals to reach a compromise with credits.
b) Application of the "cramdown" device, whereby creditors
may takeover the debtor company.
1.1.6. CER application
Receivables and obligations denominated in foreign currency as
of the enactment of Law No. 25,561 were converted into
Argentine pesos at the ARS 1 to USD 1 or ARS 1.40 to USD 1, as
applicable. Such receivables and payables are updated by
application of the CER. Loans converted into Argentine pesos
will be indexed on the basis of the CER under the above terms,
plus a maximum interest rate established by the BCRA, except in
the case of (i) loans granted to individuals secured by a
collateral constituting the single dwelling home, (ii) personal
loans, whether secured by a mortgage or not, originally agreed
up to the amount of USD 12,000 or its equivalent in other
currency, and (iii) personal loans, secured by a security
interest originally agreed up to the amount of USD 30,000 or
its equivalent in any other currency, that will be adjusted as
from October 1, 2002, on the basis of a "salary variation
coefficient" ("CVS") that will be published by the INDEC
(Argentine Institute of Statistics and Census). Law No. 25,642
of September 12, 2002, extended until September 30, 2002,
application of the CER established by section 4 of Presidential
Decree No. 214/2002 for all obligations of individuals and/or
entities to pay a sum of money not in excess of ARS 400,000.
The rates effective as of February 2, 2002, will remain
effective until such date and, as from October 1, 2002, they
will accrue the lower of such rate or the average interest
rates prevailing in the financial systems for such transactions
in 2001 published by the BCRA. Rescheduled deposits converted
into Argentine pesos will be subsequently indexed on the basis
of the CER published by the BCRA, that will be applied as from
February 3, 2002 (date of publication of Decree No. 214/2002),
plus a minimum interest rate established by the BCRA.
1.1.7. Deposits. Balance rescheduling. Swap for government bonds
(Swaps I and II)
- Balance rescheduling
As mentioned in the above paragraphs, the Federal Executive has
issued Decree No. 1570/2001 establishing severe restrictions on
the withdrawal of funds from Financial Institutions.
Subsequently, a number of rules were issued that established a
schedule for maturity of deposits existing in the financial
system. The BCRA issued a number of Communiques that
established the schedule for returning deposits on the basis of
their currency and amount.
In the case of deposits in Argentine pesos, three reimbursement
levels were determined, on the basis of the amount of the
deposits. The date for the first disbursement in each category
was March, August and December 2002. In the case of deposits in
foreign currency converted into Argentine pesos, the method was
similar to the above, and the dates for the first reimbursement
were January, March, June and September 2003.
On November 22, 2002, the Ministry of Economy issued Resolution
No. 688/2002, which provides, as from December 2, 2002, the
elimination of restrictions on the amounts that may be
withdrawn from deposit accounts under Resolution No. 06/2002,
as amended, incorporating such accounts to the free
availability account system set forth by section 26 of Decree
No. 905/2002.
Swap I
Decrees No. 494/2002 of March 13, 2002, and 620/2002 of April
17, 2002, established the general conditions and the procedure
through which the owners of deposits in foreign currency and in
Argentine pesos may exercise the option to receive "Federal
Government Bonds in US Dollars at a 2% rate maturing in 2012",
"Federal Government Capitalized Bonds in US dollars at LIBOR
plus 1% maturing in 2012" and "Federal Government Bonds in
Argentine pesos at a 3% rate maturing in 2007", within the term
established by Decree No. 620/2002, i.e. by April 30, 2002.
- 7 -
For the purpose of improving the conditions of the securities
to be issued and to make the above option more attractive, the
Federal Executive issued Decree No. 905/2002, which established
the options that will be available to depositors on the
features of their deposits (Swap I).
The owners of deposits originally made in foreign currency that
were converted into Argentine pesos and then rescheduled will
have the option to receive through the Financial Institution
where they made their deposit, as total or partial payment of
such deposits, "Federal Government Bonds in US dollars at LIBOR
and maturing in 2012", at the rate of USD 100 in face value for
every ARS 140 deposited.
On the other hand, the owners of deposits originally made in
Argentine pesos in financial institutions and the owners of
deposits originally made in foreign currency and that were
converted into Argentine pesos and rescheduled will have the
option to receive through the financial institutions, as a
total or partial payment of such deposits, "Federal Government
Bonds in Argentine pesos at a 2% rate, maturing in 2007".
Finally, the owners of deposits, regardless of their currency
of origin, that are (a) individuals aged 75 or older, (b)
individual that received the deposit amount as severance
payments or payment of a similar nature due to labor
termination, and (c) individuals undergoing situations that
pose a threat to their life, health or physical integrity will
have the option to receive through the financial institution,
as a total or partial payment of such deposits, for up to the
amount that was rescheduled, "Federal Government Bonds in Us
dollars at LIBOR maturing in 2005", at the rate of USD 100 in
face value for every ARS 140 deposited.
The owners of deposits originally made in foreign currency in
financial institutions that have a rescheduled deposit for up
to ARS 10,000 will have the option to receive through the
financial institution, as a total or partial payment of such
deposits, for up to the abovementioned amount "Federal
Government Bonds in US dollars at LIBOR maturing in 2005".
Finally, the owners of checking accounts, savings accounts and
other demand deposits will have the option of acquiring through
the financial institution "Federal Government Bonds in US
dollars at LIBOR maturing in 2012" and/or "Federal Government
Bonds in Argentine pesos at 2% rate maturing in 2007". The
owners of checking accounts, savings accounts and other demand
deposits who are individuals will have the option of submitting
bids for acquiring "Federal Government bonds in US dollars at
LIBOR maturing in 2005".
For purposes of obtaining such Bonds, the financial
institutions must first apply their holding in Federal
Government Bonds at a 9% rate maturing in 2002. For the
remaining amount of bonds to be subscribed on behalf of
depositors, financial institutions may opt between:
a) Swap them for Federal Government Bonds at a 2% rate in
Argentine pesos maturing in 2007 received as a
compensation as described in 1.1.3, federal government
guaranteed loans converted into pesos by Decree 471/02
and provincial government sector debts covered by
Decree 1387/01, including those incurred by the
Provincial Development Trust Fund.
b) Obtaining advances from the BCRA in Argentine pesos
secured by guarantees in the amount required to acquire
the abovementioned Bonds, so that financial
institutions may comply with the requests from
depositors. Financial institutions will provide
security covering such 100% of such advances with
assets considered at their book value, according to the
BCRA rules, in the order priority established in
section 15 of such Decree.
c) Pay them with their own resources without receiving the
BCRA's financial assistance.
Swap II
On September 17, 2002, the Federal Executive issued Decree No.
1836/2002 (amended by Decree 2167/2002) that established the
basis for the second deposit swap. Such decree established the
options of deposit owners and modified some sections of Decree
No. 905/02.
- 8 -
Under the above regulations, the holders of certificates of
rescheduled deposits originally made in foreign currency may
opt to receive "Federal Government Bonds in US dollars 2013"
from the related bank in exchange for such certificates. These
bonds will be subscribed at the rate of USD 100 (face value)
for each ARS 140 (face value) of the certificate, adjusted by
the benchmark stabilization coefficient through the issuance
date, and the related bank will also grant a coupon put option.
Where deposit holders opt to receive the above bonds, the banks
where such deposits were made shall grant them a put option for
principal or interest coupons. The exercise price in pesos
shall equal the bond coupon face value in US dollars converted
into pesos at the USD 1-to-ARS 1.40 exchange rate, and adjusted
by the benchmark stabilization coefficient from February 3,
2002, through the coupon maturity date.
The coupon put options shall be booked, and to that effect,
they shall be regarded as negotiable investments, they shall be
publicly traded, they shall be tradable in self-governed
Argentine markets, and they shall circulate independently from
the Government bonds to which they relate. The above put option
may be exercised within thirty days as from the related coupon
payment date, free of charges for the deposit holder. Expiry of
the above period implies expiry of the put option related to
that coupon.
On the other hand, deposit holders may opt to convert the
rescheduled amount into fixed-term bills in pesos issued by
each bank, jointly with an option issued by the Federal
Government to switch them into the original currency.
Those who opted to receive "Federal Government Bonds in US
dollars 2005" and "Federal Government Bonds in US dollars 2012"
under Decree No. 905/2002 (Swap I) may choose to ask the bank
from which they received the above bonds to grant them the
above put option or to exchange the bonds for fixed-term bills.
The above options may be exercised through December 12, 2002.
1.1.8. Legal actions
The measures adopted by the Federal Executive with respect to
the political, economic, financial and foreign exchange
emergency triggered a number of legal actions to be filed by
individuals and companies, in the form of amparos (judicial
injunctions resulting in the immediate release of frozen
deposits), against the Federal Government and the BCRA as the
petitioners consider that the Law on Public Emergency and its
supplementary provisions are unconstitutional. Based, mainly in
the "Kiper against Federal Government and Others" case,
dictated by the Supreme Court, the courts massively started to
dictate through amparos , the partial reimbursement of bank
deposits in US dollars or Argentine pesos at the "floating"
exchange rate. The Supreme Court has not dictated about the
constitutional sustenance of the "switch to pesos" established
by the Federal Government.
On March 11, 2002, the Argentine Association of
Government-owned and Private Banks and the Argentine Bank
Association filed a "per saltum" appeal with the Argentine
Supreme Court under section 195 bis of the Argentine Code of
Civil and Commercial Procedure (according to the modification
introduced by Law No. 25,561). The appeal was filed for the
benefit of government-owned and private banks that are members
of such associations and was based on the Argentine
institutional and systemic crisis and on the need to comply
with effective regulations to attain an ordered and gradual
solution for the restrictions affecting the financial system
and guaranteeing a plurality of interests. Such appeal seek
communication to all federal courts of cases in which
precautionary measures have been enforced or are about to be
enforced since the effective date of Decree No. 1570/2001 until
March 11, 2002, against banks that are members of such
associations.
Moreover, BF has joined, as additional party, the action for
declaratory judgment brought by ABA (Argentine Banking
Association) by reason of the enactment of Act No. 5303 by the
legislative body of the Province of San Luis, which orders
banks domiciled or having branches in the province to pay all
foreign currency deposits. To the date of issuance of these
financial statements, the Supreme Court has issued a
precautionary measure ordering the province and
- 9 -
provincial tribunals to refrain from enforcing such law until
the constitutional issue brought by ABA is resolved. That is to
say, whether the provincial legislative body is empowered to
enact laws that, in the opinion of ABA and the banks, exceed
the powers conferred under the terms of the Argentine National
Constitution.
On April 25, 2002, the Argentine Congress passed Law No. 25,587
on Public Emergency and Reform of the Exchange System that
establishes that, in any legal action brought against, among
others, financial institutions due to loans, debts,
obligations, deposits or rescheduling that may be affected by
the provisions included in Law No. 25,561, as regulated and
supplemented, the precautionary measure established by section
230 of the Argentine Code of Civil and Commercial Procedure
will only be admitted where maintenance of the situation,
whether from a factual or legal situation, will result in
irreparable damage such as impossibility to enforce the
judgment. This public policy provision will be applied to all
outstanding cases and will also apply to all precautionary
measures pending enforcement, regardless of the court-order
date.
Finally, on July 24, 2002, the Federal Executive issued Decree
No. 1316/2002 establishing the temporary suspension for 120
business days of compliance with and enforcement of
precautionary measures and final judgments issued in the legal
actions referred to in section 1 of Law No. 25,587. Court
orders must be recorded in financial institutions in
chronological order and the court ordering the measure must be
given notice that the financial institution acknowledges such
measures. Furthermore, the Bank will report, on a weekly basis,
all precautionary measures occurred in such week to the BCRA.
Suspended resolutions will be complied with after expiration of
the term in their chronological order and within 30 business
days. In the case of exceptions to the above rules, the measure
will presented to the BCRA that will comply with the court
orders on behalf and account of the Bank.
1.2. Impact of the measures on the Bank's particular situation
As described in detail in note 1.1, since late in the year ended on
December 31, 2001, the financial system in general and the Bank in
particular have to cope with a significant impact in their liquidity
position, mainly as a result of mass withdrawals of deposits, actions
for infringement of fundamental rights and freedoms filed by
depositors, the ordering of precautionary measures and immediate
measures by tribunals, the suspension of court-enforced collections and
foreclosures, and the enactment of numerous laws, decrees, resolutions
from the Ministry of Economy and Communiques by the BCRA, which led to
frequent changes in the Bank's positions.
The liquidity crisis became especially aggravated in the second quarter
of the year, when cash withdrawals (accelerated by the uncertainty
derived from cash withdrawal restrictions) and the reimbursement of
deposits under precautionary measures, actions for infringement of
fundamental rights and freedoms, and immediate measures reached their
maximum level, with reimbursements by the bank in the amounts of
approximately ARS 467 million and USD 52 million in such quarter. It
should be noted that such precautionary measures, actions for
infringement of fundamental rights and freedoms, and immediate measures
order partial payment of foreign currency deposits (USD) or an
equivalent amount in Argentine pesos at the freely floating exchange
rate. To date, the debate about the unconstitutionality of the law that
provides the mandatory switch of deposits into Argentine pesos has not
been decided by the Supreme Court of Justice.
The situation described above led the Board of the Bank to decide the
implementation of a plan to strengthen the Bank's stockholders' equity
and liquidity. Similarly, the Board of Governors of the BCRA in
exercise of its powers requested that the Bank formally submit a
regularization plan to the BCRA. By the end of May 2002, BF submitted
to the BCRA the mentioned plan intended to regularize and reorganize
the aspects related to complying with the technical regulation on
minimum cash, which had been affected by the above-mentioned liquidity
crisis triggered by the fall of deposits, court rulings on the actions
brought by depositors, and by regulatory changes on prudential
regulations. Such plan comprised the measures that had been adopted in
April and May 2002, in relation to the financial assistance received
from BBVA, the sale of stock holding in a subsidiary abroad and
advances due to illiquidity received from the BCRA. The Board of the
Bank also notified its decision to capitalize BF and informed BBVA's
intention to convert into equity in BF the subordinated corporate bonds
in the amount of USD 130 million issued by BF and held by the former,
as well as a financial loan granted in April 2002, in the amount of
- 10 -
USD 79.3 million, submitting this capitalization to the approval of the
related controlling authorities and the Stockholders' Meeting of BF.
Furthermore, the Board of the Bank reported the commencement of the
execution of an administrative restructuring plan, expense reduction,
and voluntary termination and early retirement of personnel.
Additionally, in July 2002, BF entered into repurchase agreements with
BBVA in the amount of USD 102.9 million, thus obtaining additional
liquidity to refinance its foreign trade lines and local currency
needs.
Moreover, the Bank agreed the refinancing of non-subordinated corporate
bonds totaling USD 150 million maturing October 31, 2002, through a new
bond issuance. Such refinancing included the interest payment and a
five percent of capital as of October 31, 2002, the payment of a 5,26%
of capital of the new bond in 180 days, while the remaining capital
will be paid in a year. Additionally, BF is in the process of
negotiation and instrumentation of the refinancing of its foreign trade
lines.
During the third quarter of the year, the situation improved gradually,
showing a decrease in the volume of legal actions seeking the
withdrawal of funds and a gradual change in deposit tendencies, which
started rising. In this quarter, precautionary measures under actions
for infringement of fundamental rights and freedoms paid by the bank
amounted to approximately ARS 293 million and USD 4 million.
Detailed below are the measures taken by the Argentine Government in
effect as of the date of filing these financial statements and which
have affected or could affect the Bank's equity and financial position.
a) Compensation to financial institutions for the effects of the
devaluation and conversion into pesos
As mentioned in note 1.1.3. the amount that the Bank is to
receive in compensation under Decree No. 905 /2000 and
Communiques "A" 3650 and "A" 3716 as supplemented amount to:
----------------------------------------------------------------------------------------------
Balances as of December 31, 2001
----------------------------------------------------------------------------------------------
Exch. rate Exch. Rate
ARS 1 = ARS 1.4 = Currently effective
USD 1 USD 1 exchange rate under decrees Difference
----------------------------------------------------------------------------------------------
Assets 8,369,234 11,028,945 10,153,352 875,593
Liabilities 7,427,471 9,862,424 9,828,122 (34,302)
-----------
Compensation 841,291
===========
Additionally, the remaining foreign exchange position after
computing the effect on the switch to pesos of applicable
assets and liabilites amounted to US dollars 618,699,800
(negative). Accordingly, the Bank applied the compensation
amount in Argentina pesos of 841,291 to receive LIBOR 2012
Federal Government Bonds denominated in US dollars for a face
value of 600,922,400, (at the ARS 1,40 = USD 1 exchange rate).
In addition, that the net negative position in foreign currency
exceeded the amount of compensation to be received, the Bank
decided to take an advance from its BCRA account to subscribe
Bonds for a face value of USD 17,777,400 to compensate such
position. Subsequently, on September 11, 2002 and October 29,
2002, the Bank's account No. 017 with the Government Debt
Instruments Registration and Payment Center was credited by the
BCRA with Bonds for a face value of 421,890,000 and 88,894,100,
respectively, (net of a gauging of 15%). Such Bonds remain
blocked until the BCRA gives definitive confirmation of the
compensation amount. As of September 30, 2002, the Bank booked
the compensation to be received in Federal Government bonds as
"Private and public bonds" (for the portion of bonds credited
as of September 30, 2002) and "Other receivables from financial
intermediation".
As required by BCRA Communique "A" 3703, the compensation
received was booked in January, 2002, as follows:
- 11 -
- The gain resulting from the asymmetrical switch into
pesos, which amounted to 616,533, was allocated to
"Financial Income - Gold and foreign currency exchange
difference", for the purpose of neutralizing the
negative effects of the switch into pesos.
- The amount of the compensation received for the
difference between Stockholders' Equity as of December
31, 2001, and the Stockholders' Equity that resulted
from adjusting the net position in foreign currency
switched into pesos at the exchange rate USD 1 = ARS
1.4 , amounting to 224,758 (adjusted as of September
30, 2002: 466,239), was allocated to the Stockholders'
Equity account "Unrealized valuation difference from
compensation of the net position in foreign currency".
As mentioned in note 1.1.3, the BCRA, by Communique "A" 3825
of November 29, 2002, established a new information
requirement related to the compensation set forth in section
28 and 29 of Decree No. 905/2002. The term for presenting
such information extends until December 23, 2002. The Bank is
analyzing and determining the impact of the amendments made
by such rules, mainly those related to (i) the analysis of
the settlement of certain transactions prior to June 28,
2002, for distributing book balances in foreign currency
assets and liabilities as of December 31, 2001, at the
different exchange rates, (ii) compliance with the
requirements set forth by section 1, subsection (a) of Decree
No. 1570/2001 for calculation in foreign currency and
subsequent dedollarization of the amounts for compensation
calculation submitted by the Bank that total USD 314,522
thousand and, (iii) the effect of the incorporation of the
assets booked by foreign affiliates under the scope of
Decrees Nos. 214/02 and 471/02.
To the date of issuance of these financial statements, it is
not possible to determine the effects of the application of
the above-mentioned rules on the book value of the
compensation received and to be received.
b) Guaranteed Loans - Decree No. 1378/2001
As mentioned in note 1.1.4 and pursuant to Decrees Nos.
1387/01 and 1646/01, the Bank and its subsidiaries swapped a
portion of their holdings in federal government securities
and/or loans to the federal government sector outstanding as
of November 6, 2001, for a nominal value of USD 3,291,795
thousands, for Guaranteed Loans amounting to USD 3,360,403
thousands. Such guaranteed loans are recorded in the
consolidated financial statements under the account "Loans -
to the non-financial government sector" for a total amount of
5,937,428 , net of discounts.
Subsequently, the Federal Executive established, by Decree
No. 644/02, the steps that the financial institutions were to
follow to accept the new conditions so as to receive the
payments of principal and interest related to the Guaranteed
Loans. In this respect, on May 22 and July 12, 2002, the Bank
and its subsidiary, Banco Frances (Cayman) Ltd., accepted the
abovementioned changes to the conditions of the Guaranteed
Loans for a face value of USD 2,838,727,000. On the other
hand, Consolidar AFJP S.A., Consolidar Cia. de Seguros de
Vida S.A., and Consolidar Cia. de Seguros de Retiro S.A.
(except for loans for a face value of USD 34,034,000, which
new conditions were accepted on May 21, 2002) did not accept
the changes to the conditions of the Guaranteed Loans for a
face value of USD 487,642,000. This means reverting to the
original government securities, i.e. those that had been
submitted for swapping.
In addition, the Bank has presented before Banco de la Nacion
Argentina, in its capacity as trustee for the FFDP
(Provincial Development Trust Fund), provincial governments
securities and loans granted to the government sectors of the
provinces for a nominal value of USD 481,572 thousands, so as
to carry out the swap provided by Decree No. 1387/01. Such
transaction is recorded under the account "Loans - to the
non-financial government sector" for the abovementioned value
plus the related accrued interest receivable as of September
30, 2002, converted into pesos at the exchange rate of USD 1
= ARS 1.4 and adjusted by the CER, as provided by Decrees
Nos. 1387/01 and 471/02. On October 25, 2002, the Ministry of
Economy issued Resolution No. 539/2002, regulating Decree
1579/2002, establishing new conditions for the provincial
government debt swap, allowing the financial institutions to
decide its conversion for Guaranteed Loans.
As mentioned in note 1.1(4), and considering Decree No.
1579/02 and Resolutions Nos. 539/02 and 611/02, the Bank and
its subsidiaries had not withdrawn the bids to convert
provincial debt under Section No. 25, Decree No. 1387/01, as
supplemented.
- 12 -
c) Application of the CER
As mentioned in note 1.1.6., the Bank adjusted by the CER the
deposits that were switched into pesos and rescheduled, as
well as the loans switched into pesos. This adjustment is
recorded in the Statement of Income under the Financial
Income and Financial Expense accounts, respectively.
d) Deposits. Rescheduling of balances. Swap for Government Bonds
(Swap I)
As mentioned in note 1.1.7., as of July 29, 2002, the Bank's
customers opted to swap their rescheduled deposits into bonds
as follows:
Amount in
thousands of pesos
------------------
Section 2 of Decree No. 905 /2002 608,688
Section 3 of Decree No. 905 /2002 5,709
Section 4 of Decree No. 905 /2002 93,128
Section 5 of Decree No. 905 /2002 36,752
Section 24 of Decree No. 905 /2002 34,107
------------
Total 778,384
------------
% of total deposits 10.74%
% of deposits eligible for swap 31.20%
In accordance with matters disclosed in such note, the Bank
will opt to swap the eligible assets mentioned so as to
obtain the bonds requested by its depositors. Through a note
dated October 25, 2002, the Bank informed the BCRA its will
of swapping the following holdings for the mentioned bonds
suscription:
- Argentine Federal Government 9% Bonds for a valuation
of 298,295.
- Guaranteed Loans of the Federal Governmental for an
average booking amount of 285,234.
- Provincial Governmental debts of an average booking
amount of 194,855.
On September 17, 2002, the Federal Executive issued Decree
No. 1836/2002, which established the conditions for Swap II
of deposits with the Financial System (amended by Decree
N(degree) 2167/2002), for which deposit owners are entitled
to opt and at the same time amended some sections of Decree
905/02 as explained in note 1.1.7.
The Bank received the following options from depositors as of
November 30, 2002, in relation to Swap II:
Amount in
thousands of pesos
------------------
USD-denominated Argentine federal government
bonds maturing 2013 273,151
ARS-denominated certificate of deposit T-bills 1,709
------------
Total 274,860
------------
% on total rescheduled deposits as of
November 30, 2002 15.42%
Additionally, the Bank reimbursed in cash 192,071 in
rescheduled deposits pursuant to the option provided by the
BCRA which, in the case of the Bank, totaled 10,000 plus CER
(benchmark stabilization coefficient).
- 13 -
e) Legal actions
As mentioned in note 1.1.8., the Bank has been notified of
injunctions, mainly pursuant to constitutional protection
actions, that require deposits to be reimbursed in cash in
amounts larger than provided under current legislation or
regulations, and/or the release of rescheduled deposits
and/or declare the inapplicability of legislation passed by
National Congress or measures issued by the Federal Executive
or the BCRA. As of September 30, 2002, the Bank had paid USD
80,042,000 for actions in that currency, and ARS 838,967,000
for actions in Argentine Pesos and in USD, paid in Argentine
Pesos at the "floating" exchange rate. Also, as of the date
of filing these Financial Statements, the Bank had paid USD
82,996,000 for actions in that currency, and ARS
1,094,231,000 for actions in Argentine Pesos and in USD, paid
in Argentine Pesos at the "floating" exchange rate.
Moreover, in view of the damage to the financial position of
the financial system overall and, naturally, of the Bank
caused by the execution of the precautionary measures ordered
by the various tribunals in relation to actions for
infringement of fundamental rights and freedoms and immediate
measures, in addition to the prejudice derived from the
application to certain bank loans of the salary variation
coefficient instead of the benchmark stabilization
coefficient, BF reported these prejudices to the Ministry of
Economy and the BCRA, making express reserve of its rights to
bring claims therefor.
As of the date of filing these Financial Statements, neither
Federal, nor Buenos Aires City nor Provincial courts had
ruled on the substance of the matter; accordingly, the final
outcome of these legal actions is unknown.
As mentioned in the preceding paragraphs, the Bank
capitalized under the "Other receivables" account the
differences between US-dollar denominated deposits paid in
such currency or in pesos at the freely floating exchange
rate under protection actions and the rescheduled deposit
balance (converted at the USD 1-to-ARS 1.40 exchange rate and
adjusted by the benchmark stabilization coefficient). As of
September 30, 2002, such balance, net of allowances, was ARS
278,251 (see Note 6). Following a conservative accounting
criterion, the Bank booked the allowances it considered
necessary to date to cover the future recoverability of such
assets.
In the opinion of the Bank's management and legal advisors,
it is highly probable that the Federal Government may
compensate such exchange difference. To the date of issuance
of these financial statements, it is not possible to
anticipate the final resolution of this issue; therefore, the
financial statements do not include any adjustment that may
end up in the resolution of this contingency.
f) Advances requested from the BCRA and financing received from
BBVA Madrid
For the purpose of covering the decrease in deposits, the
Bank obtained, during the period March through July 2002,
advances from the BCRA, which as of September 30, 2002, and
the filing date of these financial statements amount to
1,763,951 and 1,793,682, respectively, and are recorded under
"Other liabilities from financial transactions - Central Bank
of the Argentine Republic Other". In guarantee of such
assistance, the Bank executed a first-degree security
agreement whereby it encumbered in favor of the BCRA a
portion of the Bank's credit rights under the Guaranteed Loan
Agreement executed on December 7, 2001, pursuant to Federal
Executive Decree No. 1387/2001 as supplemented and amended.
In addition to the advances granted by the BCRA, BF received
from BBVA the following:
- In April 2002, the Bank received assistance from BBVA
Madrid in the amount of USD 159 million, in security
for which it provided Guaranteed Loans to the Argentine
Government and syndicated loans granted to customers of
the non-financial private sector.
- In May 2002, the Bank sold its equity interest in BBVA
Uruguay to BBVA Madrid for USD 55 million (see note
2.2.).
- During July 2002, the Bank entered into repurchase
agreements with BBVA Madrid for an amount of USD 102.9
million.
- 14 -
- As disclosed in note 2.3., BBVA has offered to convert
into equity its holdings of subordinated corporate
bonds issued by the Bank for an amount of about USD 130
million as well as the loan for USD 79.3 million
disbursed in April 2002.
g) Liquidity
BCRA Communique "A" 3498 introduced changes to the minimum
cash and minimum liquidity requirements systems. The minimum
cash requirements thus imposed are higher than before.
Subsequently, the BCRA provided that for the period November
2001 through February 2002, the minimum cash and minimum
liquidity requirements and the related cash and liquidity
actually held are to be calculated as an average over such
four-month period, that is to say that the aggregate over
such period of the daily balances of the items comprised is
to be divided over the total number of days in the period.
Lastly, the BCRA issued Communiques "A" 3597, 3598 and 3732,
which established the System for Minimum Application of
Resources from on-demand and term obligations in pesos. The
items included are basically deposits and other financial
intermediation on-demand obligations in pesos as well as
fixed-term deposits subject to CER indexation. The related
requirement was set at 18%.
The Bank requested the BCRA to allow it to reduce minimum
cash requirements by and up to the excess of mandatory
deposit allocation arising from franchises granted by the
BCRA, as well as to offset the November 2001 - February 2002
position regarding minimum cash requirements in pesos against
those in foreign currency. This issue is being analyzed by
the oversight agency.
h) BCRA Information Requirements
The BCRA issued a series of communiques related to its
monthly accounting information requirements whereby, it
provided postponements, suspensions and new due dates, as
well as additional information requirements also on an
exceptional basis. The information involved included trial
balances, information on debtors to the financial system,
makeup of groups of companies and minimum capital
requirements and capital actually held. Such changes also
affected the filing of financial statements for the quarters
ended March 31, June 30, and September 30, 2002.
BCRA Communique "A" 3599 suspended the requirements to file
the information for January and February 2002 on debtors to
the financial system, makeup of groups of companies and
minimum capital requirements and capital actually held.
Communique "A" 3687 set a new due-dates calendar, which was
abrogated by Communique "A" 3691.
After a series of Communiques that postponed or suspended
information filing requirements, Communiques "A" 3760, "A"
3773, "A" 3782 and "A" 3802, set the definitive due-dates
calendar for trial balances, debtors to the financial system
and makeup of groups of companies, financial statements
consolidated with significant branches and subsidiaries in
Argentina and abroad, and the respective consolidated
debtors'-situation statement.
On October 30, 2002, the Bank filed with the BCRA, the
Pro-forma balance sheets as of December 31, 2001, which
include the effects of Law No. 25,561, and the Decrees and
Regulations that constitute its administrative order.
As of filing date of these Financial Statements, the Bank had
filed with the BCRA the following required information: Trial
Balances and financial statements consolidated with
significant branches and subsidiaries in Argentina and
abroad, for January, February, March, April, May, June, July,
August and September 2002.
The negative consequences of the situations described above on the
Financial System overall and in particular on the Bank, involve the
significant illiquidity, the impact of the devaluation of the
Argentine peso and the switch into pesos, the recoverability of
loans to both the Government and the private sectors, lost
profitability and the mismatch of terms and currencies.
- 15 -
In addition, the measures taken by the Federal Executive (Decrees
No. 905/02 and 1836/02) allowed progress towards the compensation
for the asymmetrical switch into pesos and coverage of the foreign
currency position. Swap I of rescheduled deposits for federal
government bonds allowed depositors to choose to take such bonds in
exchange for their deposits and, as from October 1, 2002, banks are
authorized to reimburse part of such deposits in cash (in the case
of the bank, such reimbursement will amount to ARS 10,000 plus the
benchmark stabilization coefficient). Moreover, SWAP II of deposits
for bonds began on October 1, 2002.
On the basis of the situation described, the search for solutions
to Argentina's economic and financial situation will require
further measures. For example, the possibility of covering deposits
with some form of insurance, the settlement of Private Sector loans
with bonds, the lifting of the suspension of foreclosures on assets
provided as collateral, the lifting of the suspension of CER
application, compensation to financial institutions for the
suspension of the CER, the resolution of constitutional protection
actions, compensation due to financial institutions for having
returned - by court order pursuant to constitutional protection
actions - deposits in dollars at the floating exchange rate,
differentiated application of the CER to assets and liabilities,
and the maturity of rescheduled deposits. As of the filing date of
these financial statements, issues that are key to the Argentine
economy remain pending solution. These include the reconstitution
of the Financial System, closing an agreement with the
International Monetary Fund, initiating negotiations with foreign
creditors, negotiations with operators of privatized utilities, and
the negotiations to refinance corporate loans of the private sector
companies.
To the date of filing of these financial statements, BF has
increased its deposit portfolio and the volume of transactions,
coming into compliance with the minimum cash ratio, and, barring
any situation beyond its control, the Board of the Bank expects to
maintain the equilibrium level achieved. Thus, the BCRA and the
Bank are continually assessing the measures while on October 29,
2002, the Bank filed an update of the evolution of the actions
included in the plan presented in May 2002, and the evolution of
the actions carried by the Bank.
The Board of the Bank is optimistic as to the development of future
operations, especially if the Federal Government is eventually able
to correct the profound imbalance caused by the execution of the
precautionary measures ordered under actions for infringement of
fundamental rights and freedoms and immediate measures due, mainly,
to the impact of exchange differences between the provisions of
such court rulings and of the legal rules on de-dollarization of
deposits, and if the Federal Government eventually compensates for
the financial loss that the application of the salary variation
coefficient instead of the benchmark stabilization coefficient
causes to the economic and financial position of the Bank and the
system overall. BF has reported this situation to the Ministry of
Economy and the BCRA, making express reserve of its rights to bring
claims therefor.
The Bank's Management is continually assessing the impact that such
measures could have on the Bank's equity and financial position.
These financial statements have been prepared on the basis of the
going-concern assumption, based on the understanding that the
restructuring of the Financial System overall, the government-debt
restructuring and the Bank's and its subsidiaries' own plans and
actions will allow it to continue operating and maintain the
liquidity and solvency indicators required by the BCRA and,
accordingly, these financial statements do not include any
adjustments related to the recoverability of the asset amounts
booked and the sufficiency of liabilities, as could be necessary
should the situations described above not be resolved favorably.
2. CORPORATE SITUATION AND BANK'S ACTIVITIES
2.1. Corporate situation
BBVA Banco Frances S.A. (BF) has its main place of business in
Buenos Aires and operates, a 244-branch network and 39 offices of
its affiliate Credilogros Compania Financiera S.A.
- 16 -
As from December, 1996, BF is part of Banco Bilbao Vizcaya
Argentaria S.A. (BBVA) global strategy, which controls the bank
with 68,24% corporate stock as of September 30, 2002.
Part of BF's corporate stock is publicly traded and has been
registered with the Buenos Aires Stock Exchange, New York Stock
Exchange and Madrid Stock Exchange.
2.2. Sale of interest in Banco Bilbao Vizcaya Argentaria Uruguay S.A.
On May 13, 2002, the Bank entered into an agreement with BBVA for
the sale of its 60.87% interest in BBVA Uruguay. This transaction
was approved by the Bank's Board of Directors at their meeting held
on May 13, 2002, and the Central Bank of the Uruguayan Republic on
May 10, 2002. The total selling price for the shares amounted to
USD 55 million, which was collected on the date the transaction was
carried out.
2.3. Capital increase
At the Regular and Special Meetings held on August 7, 2002, the
stockholders approved the Bank's capital increase in the amount of
up to 1,250,000 nominal value for the subscription of common,
book-entry shares, entitled to one vote per share. Those shares may
be paid up in cash and/or with subordinated corporate bonds in
foreign currency issued by the Bank, maturing on March 31, 2005,
and/or loans granted by BBVA to the Bank. At the referred meeting
the stockholders delegated to the Board of Directors the powers to
establish the remaining conditions.
The Bank has commenced the process for listing stock on the CNV
(Argentine Securities Commission) and the Buenos Aires Stock
Exchange.
On November 28, 2002, the Buenos Aires Stock Exchange granted a
favorable preliminary approval for listing up to 1,250,000,000
shares of common stock to be offered for subscription. Moreover, on
December 3, 2002, CNV Resolution No. 14,361 authorized listing new
shares.
The Bank's management, at its meeting of December 5, 2002, decided
on the following issues, among others:
- Approve the assets to be contributed, should the capital
increase proceed, as follows: (i) cash, (ii) subordinated
corporate bonds issued by the Bank, maturing March 31, 2005,
and (iii) the loan granted by BBVA on April 19, 2002, in the
amount of USD 79,316 thousand.
- Establish the value of subordinated corporate bonds to
capitalize USD 58,10 per USD 100 nominal value, based on
valuation reports made by independent third parties.
- Establish the amount of shares to be listed in 209,631,892.
- Establish the subscription term from December 17 through
December 26, 2002.
To the date of issuance of these financial statements, the
capitalization process is pending final approval by the Buenos
Aires Stock Exchange.
2.4. Banco Frances (Cayman) Limited
On August 15, 2002, the Bank made a capital irrevocable
contribution in kind (Federal Government Guaranteed Loans GL 08)
with original nominal values of USD 185,043,841, which were
dedollarized under the Executive Orders mentioned in 1.1.4,
representing a book value in pesos, as of that date, of 305,409.
Such contribution was authorized by Resolution No. 360 of BCRA's
Board of Directors dated May 30, 2002, mean while is pending the
Cayman Islands Monetary Authority resolution, authorizing the
contribution capitalization.
- 17 -
In addition, the Bank has requested from the BCRA the authorization
to make the contribution of the Federal Government Libor 2012 bonds
in US dollars received as compensation, as disclosed in 1.1.3.e)
derived from the dedollarization effect of the Federal Government
Guaranteed Loans portfolio held by such subsidiary. Through Board
Resolution No. 645 of October 17, 2002, the BCRA authorized the
Bank to make the contribution in kind in the mentioned subsidiary
for the minor resulting of the amount of USD 386 million of BODEN
2012 (amount resulting of the Guaranteed Loans holdings in that
subsidiary as of December 31, 2001) or the required amount to
comply the capital relations requirements, according to the
regulations of such country monetary authority. Up to date, the
Bank informed of this Resolution to the Cayman Islands Monetary
Authority, waiting for its autorization to proceed to the
capitalization.
As of September 30, 2002, such contribution commitment for USD
386,000 thousands is booked in "Other liabilities - Miscellaneous
payables."
3. SIGNIFICANT ACCOUNTING POLICIES
3.1. COMPARATIVE INFORMATION
a) As required by FACPCE Technical Resolution No. 8 (Argentine
Federation of Professional Councils of Economic Sciences),
CPCECABA Resolution No. 89/88 (Professional Council of
Economic Sciences of the City of Buenos Aires) and BCRA
regulations, the financial statements for the nine-month
period ended September 30, 2002, are presented comparatively
with those of the same period of prior year. For that
purpose, the financial statements for the period ended
September 30, 2001, were restated in the September 30, 2002
currency by applying the adjustment rate derived from the
Internal Wholesale Price Index published by INDEC (Federal
Institute of Statistics and Census), considering that the
accounting measurements prior to January 1, 2002, are stated
in December 31, 2001 currency.
b) Through Communique "A" 3345, as supplemented, BCRA introduced
some changes to the rules related to the presentation and
disclosure of financial institution financial statements
effective as from December 31, 2001. Therefore, the financial
statements as of September 30, 2001, were reclassified, due
to the application of such rules, only for comparison with
the financial statements for the nine-month period ended
September 30, 2002.
c) The financial statements, notes and exhibits for the
nine-month period ended September 30, 2001, include certain
changes originated in adjustments to prior years' losses of
156,666 booked in the year ended December 31, 2001, as a
result of the change in the criterion followed by the Bank to
estimate the income tax charge, applying the deferred tax
method as from that date.
3.2. RESTATEMENT OF THE HEAD OFFICE'S AND LOCAL BRANCHES FINANCIAL
STATEMENTS IN EQUIVALENT PURCHASING POWER
The financial statements have been taken from the Bank's books of
account in conformity with the standards of the BCRA.
The Bank presents its financial statements in constant currency,
following the restatement method established by FACPCE Technical
Resolution No. 6, using adjustment rate derived from the Internal
Wholesale Price Index published by the INDEC and under the
provisions set forth by General Resolution No. 415 of the CNV and
BCRA's Communique "A" 3702.
Accordingly to the above mentioned method, the accounting
measurements were restated by the purchasing power changes through
August 31, 1995. As of that date, based in the prevailing economic
stability conditions and accordingly with CNV General Resolution
No. 272 and BCRA Communique "A" 2365, accepted by the professional
accounting standards, the accounting measures were not restated
- 18 -
through December 31, 2001. In view of CNV General Resolution No.
415 and BCRA Communique "A" 3702, the method was reinstated
effective as from January 1(degree), 2002, considering the previous
accounting measures restated as of December 31, 2001.
3.3. VALUATION METHODS
The main valuation methods used in the preparation of the financial
statements have been as follows:
a) Foreign currency assets and liabilities:
As of September 30, 2002, such amounts were converted at the
bench-mark exchange rate of the BCRA as of the closing date
of transactions on the last business day of such period. The
exchange differences were charged to income (loss) for the
period.
As of September 30, 2001, they were converted at the Banco
Nacion selling rate effective for each currency as of the
last working day of such period. Exchange differences were
credited/charged to income for the period.
b) Government and private securities:
Government securities:
- Holdings in investment accounts:
Federal government compensation: as mentioned in note
1, the Bank assessed the amount of the compensation to
be received for the negative effect in equity derived
from the conversion into Argentine pesos of foreign
currency receivables and payables, pursuant to the
method mentioned in such note.
BCRA Communique A 3785 determined that the federal
government bonds received for the compensation
mentioned above could be booked at technical value,
limiting dividend distribution in cash to income
exceeding the difference between book value and the
listing value of such bonds booked in the month in
which the year is closed. Additionally, such Communique
set forth that the cap derived from rising market price
by 20% will not apply for the valuation of the bonds
mentioned above for treating valuation differences.
As of September 30, 2002, the Bank booked the
compensation received, pursuant to the provisions of
BCRA Communique "A" 3785 at nominal residual value as
of such date, plus interest accrued pursuant to the
conditions of their issuance, converted into Argentine
pesos under the method described in note 3.3 a).
- Remaining holding: as provided by Communique "A" 3278
by the BCRA, they were valued at acquisition cost,
increased by compound interest formula due to the
accrual generated on the internal rate of return and
the time elapsed from the acquisition date. For the
case of predating holdings recorded in investment
accounts as of May 31, 2001, the acquisition cost was
considered to be their respective book values as of the
same date.
The book value for each security is decreased in the
amount of the positive difference resulting from the
book value less 120% of the market value. As
established by Communiques "A" 3269 and 3303 of the
BCRA, this treatment was suspended from April to
December 2001, reinstated from January 2002, according
to Communique "A" 3785 of the BCRA.
The differences existing between acquisition values and
those mentioned in the preceding paragraphs were
credited/charged to income for the nine-month periods
ended September 30, 2002 and 2001 (see note 5).
- Holdings for trading or financial transactions: they
were valued based on current listed prices for each
security as of September 30, 2002 and 2001. Differences
in listed prices were credited/charged to income for
the nine-month periods then ended.
- 19 -
- Unlisted Government Securities: they were valued at
residual nominal value plus income accrued as of
September 30, 2002 and 2001.
Investments in listed private securities:
- Equity and debt instruments: they were valued based on
current listed prices as of September 30, 2002 and
2001. Differences in listed prices were
credited/charged to income for the nine-month periods
then ended.
c) Guaranteed Loans - Decree No. 1387/2001:
As mentioned in Note 1, as of September 30, 2002, guaranteed
loans are stated at the swap values established by the
Ministry of Economy as of November 6, 2001, plus the related
interest accrued through period-end, translated into pesos at
the ARS 1.40 = USD 1 exchange rate and adjusted to the CER
(Benchmark Stabilization Coefficient). These guaranteed loans
are booked in "Loans - To the nonfinancial public sector"
totaling ARS 5,937,428, net of discounts, in the consolidated
financial statements.
As set forth by BCRA Communique "A" 3366 and "A" 3385, the
initial value of guaranteed loans matched the previous book
value of Federal government bonds (classified and valued as
"Investment accounts" or "For trading or intermediation",
under the BCRA's accounting standards) and/or loans as of the
swap date, without giving rise to any income (loss) for the
swap recognition, since the positive difference generated
between the swap values established by the Ministry of
Economy and the book value of the swapped bonds was reflected
in a balancing account. The balance of that account will be
charged to income on a monthly basis in proportion to the
term of each of the guaranteed loans.
As mentioned in note 1.1.4), and considering Decree No.
1579/02 and Resolutions Nos. 539/02 and 611/02, the Bank and
its subsidiaries had not withdrawn the bids to convert
provincial debt under Section No. 25, Decree No. 1387/01, as
supplemented.
d) Interest accrual:
Interest has been accrued according to a compound interest
formula in the periods in which it was generated, except
interest on transactions in foreign currency and those whose
maturity does not exceed 92 days, on which interest has been
accrued by the straight line method.
e) CER accrual:
As mentioned in Note 1, as of September 30, 2002, receivables
and payables have been adjusted to the CER as follows:
- Guaranteed loans: they have been adjusted under
Resolution 50/2002 of the Ministry of Economy, which
resolved that the CER effective 10 (ten) business days
prior to the maturity date of the related service will
be considered for yield and repayments of these loans.
- Other loans and receivables from sale of assets: they
have been adjusted under Communique "A" 3507 and
supplementary regulations, which resolved that the
payments through September 30, 2002, will be made under
the original terms of each transaction and will be
booked as prepayments, where as from February 3, 2002,
the principal was adjusted to the CER prevailing on
September 30, 2002, deducting the prepayments mentioned
above as from the payment date, except those subject to
the provisions of Decrees 762/02 and 1242/02, which
excluded the application of that coefficient from some
mortgage, pledge, personal and other lines of credit.
- Deposits and other assets and liabilities: the CER
prevailing on September 30, 2002 was applied.
- 20 -
f) Allowance for loan losses and contingent commitments:
For loans, other receivables from financial transactions and
contingent commitments: this allowance has been calculated
based on the Bank's estimated loan loss risk in light of
debtor compliance and the guarantee/security supporting the
respective transactions, as provided by Communique "A" 2729
as supplemented of the BCRA.
BCRA Communique "A" 3418 of January 3, 2002, provided that,
for the purposes of classificating debtors as of January
2002, the overdue term admitted for debtors under normal
situation classifications and in potential risk / inadequate
compliance should be increased by 31 days.
BCRA Communique "A" 3463 of February 7, 2002, extended by 31
days the overdue term admitted in addition to the term
referred to above. Such Communique also established that by
February 2002, the overdue term admitted for such
classifications would be 62 days and 121 days, respectively.
BCRA Communique "A" 3630 of June 10, 2002, provided that, for
the purposes of assessing the bad debt allowances for March
and June 2002, the allowance percentages applicable to
categories 1 and 2, respectively (debtors in normal situation
and inadequate compliance), should be admitted for debtors
classified as 2 and 3 (debtors in inadequate compliance and
nonperforming/deficient compliance) who are 62 and 121 days
in arrears, respectively. BCRA Communique A 3815 extended
such treatment to July and August 2002, providing that as
from September 2002, general rules on allowance will apply.
g) Loans and deposits in government securities:
They were valued at current listed price for each security as
of September 30, 2002 and 2001, plus related accrued
interest. Differences in listed prices were credited/charged
to income for the nine-month periods then ended.
h) Instruments to be received and to be delivered for spot and
forward transactions:
- Of foreign currency: they were valued based on the
exchange rate (seller's price) of Banco Nacion for each
currency determined on the last business day of the
period.
- Of securities, associated with repurchase agreements:
o Holding in investment accounts (government
securities): as provided by Communique "A" 3278
by the BCRA, they were valued at acquisition
cost, increased by compound interest formula due
to the accrual generated on the internal rate of
return and the time elapsed from the acquisition
date. For the case of predating holdings recorded
in investment accounts as of May 31, 2001, the
acquisition cost was considered to be their
respective book values as of the same date.
The book value for each security is decreased in
the amount of the positive difference resulting
from the book value less 120% of the market value.
As established by Communiques "A" 3269 and 3303 of
the BCRA, this treatment was suspended from April
to December 2001, reinstated from January 2002,
according to Communique "A" 3785 of the BCRA.
The differences existing between acquisition
values and those mentioned in the preceding
paragraphs were credited/charged to the income of
the nine-month period ended September 30, 2002 and
2001 (see note 5).
o Holdings for trading or financial transactions
(government and private securities): they were
valued based on current listed prices for each
security as of September 30, 2002 and 2001.
Differences in listed prices were
credited/charged to income for the nine-month
periods then ended.
- 21 -
i) Amounts receivable and payable from spot and forward
transactions pending settlement:
They were valued based on the prices agreed upon for each
transaction, plus related premiums accrued as of September
30, 2002 and 2001.
j) Unlisted Corporate Bonds:
They were valued at acquisition cost plus income accrued but
not received as of September 30, 2002 and 2001.
k) Other receivables from financial transactions - Compensation
to be received from the Federal Government:
As mentioned in note 1, the Bank assessed the amount of the
compensation to be received for the negative effect of
stockholders' equity as a result of the switch into Argentine
pesos of foreign currency payables and receivables, according
to the method mentioned in such note. Pursuant to the
provisions of Decree No. 905/2002, the Bank decided to apply
the amount of the compensation to be received to subscribe
bonds for covering the foreign currency negative equity
position, which amounts to USD 600,922,400. Moreover, since
such position exceeded the amount of the compensation to be
received, the Bank decided to accept a payment in advance
from the BCRA in the amount of 24,888 to subscribe the bonds
necessary for compensating such position.
As of September 30, 2002, the compensation to be received by
the Bank has been booked as "Other receivables from financial
transactions - Other receivables not covered by debtor
classification regulations", and was valued as follows:
- Compensation to be received from the Federal Government
in US dollars: at its residual nominal value plus the
interest accrued according to the conditions of
issuance, switched into pesos according to the
provisions of note 3.3.a).
Additionally, Communique "A" 3785 settled that the Federal
Government Bonds to be received for the mentioned
compensation, may be booked at its technical valuation, and
established a limitation for the dividends distribution in
cash up to the income exceeding the difference among the book
value of the bonds, and its listed price.
l) Assets out on financing lease:
As of September 30, 2002 and 2001, they have been valued at
the net cost value of the accumulated amortization through
the end of the nine-month periods then ended. Such
amortization was calculated, on a monthly basis, considering
the cost value less the current value of unaccrued
installments plus the net book value calculated as per the
conditions agreed upon in the respective contracts applying
the imputed interest rate thereto.
m) Investments in other companies:
- Investments in controlled financial institutions,
supplementary activities and authorized: they were
valued based on the following methods:
o Credilogros Compania Financiera S.A., Frances
Valores Sociedad de Bolsa S.A., Consolidar
Administradora de Fondos de Jubilaciones y
Pensiones S.A., Consolidar Cia. de Seguros de
Vida S.A., Consolidar Cia. de Seguros de Retiro
S.A. and Atuel Fideicomisos S.A.: were valued by
the equity method.
o Banco Frances (Cayman) Ltd. and BBVA Uruguay SA:
valued by the equity method, converted into pesos
following to the following criteria:
The financial statements were adapted to the
professional accounting standards effective in
Argentina and the rules of the Central Bank of
Argentina. Such financial statements, which were
originally stated in foreign currency, were
converted into Argentine pesos as detailed below:
- Assets and liabilities were converted based on the
criterion described in 3.3.a).
- 22 -
- The assigned capital was calculated at the ARS
amounts remitted by the Bank.
- Unappropiated earnings were determined by the
difference between assets, liabilities and
assigned capital, converted into pesos as
indicated above.
- Income (loss) for the period was determined by
the difference between unappropiated earnings at
beginning, less earnings distributed in cash and
unappropiated earnings at period-end, and was
allocated to "Income (loss) from long-term
investments".
- Investments in noncontrolled financial institutions,
supplementary activities and authorized: they were
valued according to the following methods:
o Rombo Cia. Financiera S.A., Visa Argentina S.A.,
Banelco S.A. and Interbanking S.A.: were valued
by the equity method.
o Bladex S.A.: was valued at acquisition cost in
foreign currency plus the nominal value of stock
dividends received, converted into pesos based on
the method described in 3.3.a).
o Other: valued at acquisition cost, without
exceeding their recoverable value.
- Other noncontrolled affiliates: they were valued based
on the following methods:
o Consolidar A.R.T. S.A.: was valued by the equity
method.
o Other: were valued at acquisition cost, without
exceeding their recoverable value.
As from the effectiveness date of Law No. 25,063, dividends
in cash or in kind received by the Bank from investments in
other companies in excess of accumulated taxable income of
such companies at the time of distribution thereof shall be
subject to a 35% income tax withholding, which shall be a
single and final payment.
The Bank has not accrued this tax as it believes dividends
from profits recorded applying the equity method would not be
subject to this tax.
n) Bank premises and equipment and other assets:
They have been valued at acquisition cost plus increased from
prior-year appraisal revaluations, restated as explained in
note 3.2., less related accumulated depreciation calculated
in proportion to the months of estimated useful life of items
concerned. The net book value of Bank premises and equipment
and other assets taken as a whole does not exceed the
recoverable value of these items.
o) Intangible assets:
They have been valued at acquisition cost restated as
explained in note 3.2., less related accumulated depreciation
calculated in proportion to the months of estimated useful
life of the items concerned (see useful life assigned in
Exhibit G).
p) Valuation of options:
Options purchased and sold, recorded under memorandum
accounts, have been valued at the exercise and market values,
respectively, of the asset or underlying index.
q) Employee termination pay:
The Entity expenses employee termination pay disbursed.
r) Reserve for other contingencies:
Includes the estimated amounts to meet contingencies of
probable occurrence that, if occurred, would give rise to a
loss for the Bank.
- 23 -
s) Stockholders' equity accounts:
They are restated as explained in note 3.2., except for the
"Capital Stock" and "Noncapitalized contributions" accounts
which has been kept at original value. The adjustment
resulting from its restatement is included in the "Adjustment
to Stockholders' Equity - Adjustment to Capital Stock"
account.
Additionally, through Communique "A" 3800 dated November 12,
2002, the BCRA granted financial institutions an option to
absorb in advance the losses posed during the current year,
equal to the amounts booked in Unappropriated earnings and
Unrealized valuation difference, with the prior Board of
Directors' approval and adding the decision to be made by the
Stockholders' Meeting, when appropriate. When there are
accumulated losses, they should be absorbed firstly. This
absorption should be disclosed following the net income
(loss) for the period in the Statement of Income and the
balance at period-end in the Statement of Changes in
Stockholders' Equity. As of the issuance date of these
financial statements, the Bank has not made use of that
option.
t) Income tax:
The Bank determined the charge for income tax applying the
effective 35% rate to taxable income estimated for each
period considering the effect of temporary differences
between book and taxable income. The bank considered as
temporary differences those that have a definitive reversal
date in subsequent years. Therefore, as of September 30,
2002, it determined a net operating loss (NOL).
Tax on minimum presumed income (TOMPI) was established by Law
No. 25,063 in the year ended December 31, 1998, for a
ten-year term. This tax is supplementary to income tax: while
the latter is levied on the taxable income for the year,
TOMPI is a minimum levy determined by applying the current 1%
rate on the potential income of certain productive assets.
Therefore, the Bank's tax obligation for each year will
coincide with the highest of these taxes. The above Law
provides that institutions governed by Financial Institutions
Law must consider as tax base 20% of their taxable assets,
after deducting non-computable ones. However, if TOMPI
exceeds income tax in a given year, the excess thereof may be
computed as a payment on account of any income tax in excess
of TOMPI that may occur in any of the following ten years.
In every year that net operating losses are offset, the tax
benefit (the benefit of the effective rate on the NOL used)
will be realized to the extent that income tax (net of the
offsetting) equals or exceeds tax on minimum presumed income,
but will reduced by any excess of the latter over former.
The AFIP (Argentine Public Revenue Administration) inspected
open tax periods and the Bank received ex officio
assessments, which were appealed before the Argentine
Administrative Tax Court. Such agency, to the issuance date
of these financial statements, issued an opinion on the ex
officio assessment made in 1992, partially admitting the
claim of tax authorities. This ruling will be appealed before
the courts. Bank Management and tax and legal counsel
estimate that the Bank made a reasonable interpretation of
effective regulations regarding the periods in question.
In addition, on June 23, 2000, the Bank adhered to the system
provided by Decree No. 93/2000, relating to the taxes
included therein.
u) Statement of Income Accounts:
- The accounts accumulating monetary transactions
(financial expense and income, service charge expense
and income, provision for loan losses, operating
expenses, etc.) were restated by applying the
adjustment coefficients to the historical amounts
accrued on a monthly basis.
- Accounts reflecting the effect on income resulting from
the sale, write-off, or usage of nonmonetary assets
were computed based on the value of such assets, as
mentioned in note 3.2.
- Income from investments in subsidiaries was computed
based on such companies' income adjusted as explained
in note 3.2.
- 24 -
- The effect derived from inflation for maintaining
monetary assets and liabilities has been recorded in
three accounts: "Monetary gain (loss) on financial
intermediation", "Monetary gain (loss) on operating
expenses" and "Monetary gain (loss) on other
operations".
3.4. NEW PROFESSIONAL ACCOUNTING STANDARDS
On December 8, 2000, the Board of the Argentine Federation of
Councils in Economic Sciences approved Technical Resolutions No.
16, 17, 18 and 19, which introduced changes to the professional
accounting standards for valuation and disclosure. On December 21,
2001, such standards were approved, subject to certain amendments,
by the Professional Council of Economic Sciences of the City of
Buenos Aires by Resolutions Nos. 238, 243, 261 and 262, mandatory
for the fiscal years beginning on July 1, 2002, and the interim
periods related to such years (in the case of the Bank, as from the
year beginning January 1, 2003). To the date of approval of these
financial statements, the BCRA is analyzing the scope and
opportunity for adopting such rules.
4. CREDIT ASSISTANCE
4.1. CREDIT ASSISTANCE TO THE NONFINANCIAL GOVERNMENTAL SECTOR
As a result of Public Emergency and Exchange System Reform Law and
the public debt default, meeting such obligations is based on scant
Argentine Treasury resources and the persistent fiscal deficit of
the Federal, Provincial and Municipal Governments, which inevitably
led to a significant public indebtedness. Therefore, the Ministry
of Economy was empowered to take the actions and deal with the
formalities needed to reschedule the Federal Government's debt.
Thus, on February 27, 2002, the Federal and Provincial Governments
signed an agreement on the financial relationship and bases of a
federal tax revenue sharing system which, among other issues,
established that the Provincial Governments may request from
Federal Government to renegotiate provincial public debts; such
debts could thus be reprogrammed under the guidelines to which the
federal public debt is subject.
Subsequently, Decrees No. 471/2002 and 644/2002 established the
treatment applicable to debts originally assumed in US dollars or
other foreign currencies by the federal, provincial, and municipal
governmental sectors when such obligations are subject to Argentine
law regarding the regulatory framework provided for in Law No.
25,561 and Decree No. 214/2002.
As of September 30, 2002 and December 31, 2002, the Bank carried
the following receivables from the non financial governmental
sector:
I. Securities:
09-30-02 12-31-01
----------------------------------- ----------------
BBVA Banco Consolidated Consolidated
Frances position position (1)
---------------- ----------------- ----------------
Argentine Federal Government 9% Bonds - 2002 414,931 414,931 212,076
Argentine Republic External Bills 22,810 26,753 204,497
Tucuman Provincial Treasury Bonds 65,193 65,193 48,917
CCF (Tax credit certificates) 92,293 92,293 46,356
Argentine Federal Government Bonds Libor 2012 1,596,103 1,596,103 -
Treasury Bills 57,995 70,568 13,043
LECOP Bonds Treasury Bills 1,232 1,232 -
Other 1,955 44,945 22,683
----------- ----------- -----------
Total 2,252,512 2,312,018 547,572
=========== =========== ===========
(1) Stated in December 31, 2001 currency.
- 25 -
II. Credit assistance to the governmental sector classified by
origin as follows:
09-30-02 12-31-01
---------------------------------- -----------------
BBVA Banco Consolidated Consolidated
Frances position position (1)
---------------- ---------------- -----------------
o Argentine Government guaranteed loans
- Decree No. 1387/01 (net of discounts) 3,507,369 5,937,428 2,933,211
o Loans to the provincial governmental sector
- Buenos Aires 101,498 101,498 51,254
- Cordoba 318,187 318,187 160,508
- Entre Rios 97,501 97,501 49,235
- Chaco 181,502 181,502 91,653
- Formosa 96,133 96,133 48,545
- Santa Fe 123,554 123,554 61,791
- Misiones 66,675 66,675 33,669
- Other 108,625 108,625 73,259
o Loans to other governmental sector agencies 791,108 791,108 416,047
---------- ---------- ----------
Total 5,392,152 7,822,211 3,919,172
========== ========== ==========
(1) Stated in December 31, 2001 currency.
As to guaranteed loans, under Decree No. 1387/2001, during
the months of April to December, the Bank collected 126,370
in interest on such loans.
III. Amount pending compensation to be received from the Federal
Government: as detailed in notes 1.1.3. and 1.2.a), the Bank
and its subsidiaries booked as "Other receivables from
financial transactions - Other receivables not covered by
debtor classification regulations" in 754,016 , which
reflects the amount pending compensation, as established by
Decree No. 905/2002.
Considering that BCRA regulations related to minimum allowances for
loan loss risk do not entail setting an allowance for the credit
assistance granted to this sector and that, as of the date of
issuance of these financial statements, it is impossible to assess
the future effects which the ongoing economic crisis could have on
the recoverability of the book values of such holding and
financing, these financial statements do not include any
adjustments which could result from the resolution of these
uncertainties.
4.2. CREDIT ASSISTANCE TO NONFINANCIAL PRIVATE SECTOR DEBTORS
The effects resulting from the crisis that Argentina is currently
enmeshed by and the difficulties evidenced in the payment chain
have had a negative impact on the Bank's credit assistance of
debtors from the commercial and consumer portfolios generating ever
increasing deterioration added to a highly uncertain environment in
which it is difficult to establish objective criteria to reach an
agreement on the refinancing of the loans granted.
BCRA Communique "A" 3630 of June 10, 2002, provided that, for the
purposes of assessing the bad debt allowances for March to June
2002, the allowance percentages applicable to categories 1 and 2,
respectively (debtors in normal situation and inadequate
compliance) should be admitted for the debtors classified as 2 and
3 (debtors in inadequate compliance and nonperforming/deficient
compliance) who are 62 and 121 days in arrears, respectively. BCRA
Communique A 3815 extended such treatment to July and August 2002,
providing that as from September 2002, general rules on allowance
will apply.
Considering that the basic criterion to measure uncollectibility
risk is the ability to pay debts or commitments in the future
emphasizing cash flow analysis, the current situation does not
allow for uncollectibility risk to be objectively assessed.
On February 14, 2002, Law No. 25,563 was enacted. Such Law provides
that through December 10, 2003, Argentina is undergoing a
productive and loan emergency resulting from the current crisis.
Such regulation amended bankruptcy and insolvency proceedings laws
and other related regulations mainly aimed at debtors who have the
possibility of rescheduling their payables to the financial system
as well as suspending for a 180-day term all court or
administrative foreclosure proceedings, including mortgages and
security interest.
- 26 -
After that, as mentioned note 1.1.5., Law No. 25,589 enacted on May
15, 2002, incorporated new amendments to the Bankruptcy Procedures
Law (under Law No. 25,563) and established limitations to the
suspension of judicial foreclosures, establishing a new
180-calendar day term as from the enactment of such law, which was
later extended in 90 additional days.
As of September 30, 2002 and December 31, 2001, the Bank carried
the following principal and interest receivable from the
non-financial private sector:
09-30-02 12-31-01
----------------------------------- ----------------
BBVA Banco Consolidated Consolidated
Frances position position (1)
----------------- ---------------- -----------------
Commercial loans portfolio 3,316,185 3,452,136 3,122,665
Consumer loans portfolio 1,151,265 1,220,003 1,868,976
Debt securities 197,802 258,923 96,168
(Allowances on loan portfolio) (1,079,965) (1,395,612) (582,929)
(Allowances on debt securities) (55,655) (70,834) (2,912)
----------- ----------- ----------
TOTAL 3,529,632 3,464,616 4,501,968
=========== =========== ==========
(1) Stated in December 31, 2001 currency.
The final recoverability of the credit assistance granted to the
Governmental Sector and Private Sector depends on the evolution of
the Argentine economy and the effects of the above restructuring.
To the approval date of these financial statements, the future
effects that the continuous economic crisis may have on the
recoverability of the financing book value could not be determined.
These financial statements do not include any adjustments that may
arise from the solution of these uncertainties. Nevertheless, the
Bank is analyzing its loan portfolio in order to determine
necessary additional allowances. These situation may have a
significant effect on the year income (loss).
5. DIFFERENCES BETWEEN CENTRAL BANK OF THE ARGENTINE REPUBLIC STANDARDS AND
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES EFFECTIVE IN THE CITY OF BUENOS
AIRES
a) BCRA standards allow valuation of certain assets such as "holdings
in investment accounts" for the purposes of avoiding significant
alterations of financial entity income (loss) upon temporary
listing value oscillations of Government securities which are not
earmarked for trading transactions. In this sense and as disclosed
in notes 3.3.b) and 3.3.h), as of September 30, 2002 and 2001, the
Bank and its subsidiaries classified part of its Government
securities and certain assets in Government securities under
repurchase agreements (bank borrows) as "holdings in investment
accounts" in a total amount of 871,051 and 6,230,193, respectively.
The amounts of 38,038 and 626,294 will be held until maturity of
the related issues. As of September 30, 2002 and 2001, the listed
price of such assets amounted to 757,299 and 4,764,987,
respectively. The amounts of 28,268 and 575,883 will be held until
maturity of the related issues.
Under professional accounting standards effective in the City of
Buenos Aires, the above listed Govermment Securities should have
been valued at the respective listed price, net of the estimated
selling expenses, and charging listed price differences to income
for each period.
b) As mentioned in note 3.3.c), during the fiscal year ended December
31, 2001, and as a result of Decree No. 1387/2001 provisions, the
Bank and its subsidiaries swapped, on November 6, 2001, Federal
State securities, bonds, T-bills and unsecured loans at face value
3,291,795 with contra to guaranteed loans in the amount of
3,360,403. As of September 30, 2002, such loans were booked in the
consolidated financial statements under the account "Loans" in the
amount of 5,937,428.
- 27 -
Under professional accounting standards effective in Argentina, as
of September 30, 2002, the valuation of the loans mentioned above
should have been carried out considering the related listed prices
as of November 6, 2001, of the securities swapped which, as from
such date are considered as part of the transaction cost plus the
related interest accrued through period, which have been amounted
to 4,671,202.
c) As disclosed in note 1.2.a), as of September 30, 2002, the Bank
allocated to stockholders' equity the amount of 472,336 from the
"Unrealized valuation difference" account related to the portion of
the compensation received under sections 28 and 29 of Decree No.
905/2002 of the Federal Executive. Such amount relates to the
recognition of 40% of the net position in foreign currency as of
December 31, 2001.
Under the professional accounting standards effective in the City
of Buenos Aires, as of September 30, 2002, such amount should have
been charged to income for the period.
d) As disclosed in notes 1.2.a), 3.3.b) and 3.3.k), as of September
30, 2002, the Bank and its subsidiaries booked as "Government and
Private Securities" and as "Other receivables from financial
transactions - Other receivables not covered by debtor
classification regulations" the bonds received and to be received,
respectively, for compensating the negative equity effect derived
from converting into pesos the receivables and payables stated in
foreign currency in the amount of 2,350,119. As mentioned in note
1.2.a), the Bank requested the compensation en "Optative Bonds of
the National Government (BODEN) in US dollars 2012" in the amount
of US dollars 618.699.800, meanwhile the subsidiaries requested the
compensation in "BODEN in Argentine pesos 2007" in the amount of
9,441. At the approval date of the Bank's financial statements the
possible applications of the BODEN have not been ruled.
Under professional accounting standards effective in the City of
Buenos Aires, the assets mentioned in the paragraph above should be
valued at its current value. At the approval date of the Bank's
financial statements, the market values are limited to the listed
prices of the BODEN 2012 and BODEN 2007, which have been traded
since September 25, 2002 and October 29, 2002, respectively, in the
Stock Market and in the over-the counter market, with prices
between 40% and 48% of its US dollars face value and prices around
65% of its peso face value, respectively, and the prices published
by the Ministry of Economy since October 7, 2002 for the
application of BODEN to settlement of certain financial loans, as
established by Decree N(degree) 905/02. Notwithstanding, at the
approval date of the Bank's financial statements, the traded volume
of BODEN has not been significant. Therefore, the market values may
not be representative of the effective value at which the mentioned
bonds will be traded.
Consequently, if the accounting standards effective in the City of Buenos
Aires, mentioned in the paragraphs a), b) and c) above had been applied,
stockholders' equity as of September 30, 2002, and 2001, would have
decreased by 1,370,208 and 1,414,795, respectively. Moreover, the loss
for the nine-month period ended September 30, 2002 would have decreased
in 788,111, meanwhile the income for the nine-month period ended
September 30, 2001 would have decreased in 1,382,870.
6. BREAKDOWN OF MAIN ITEMS AND ACCOUNTS
As of September 30, 2002 and 2001, the breakdown of the items included
under Other accounts which exceed 20% of the total amount of each item is
as follows:
2002 2001
---------- ----------
- LOANS
Corporate loans 959,734 1,623,583
Other 523,996 256,246
---------- ----------
Total 1,483,730 1,879,829
========== ==========
- 28 -
2002 2001
---------- ----------
- OTHER RECEIVABLES FROM FINANCIAL TRANSACTIONS
Other receivables not covered by debtor classification regulations
Compensation to be received from Federal Government 744,575 -
Other 115,852 134,109
---------- ----------
Total 860,427 134,109
========== ==========
- INVESTMENTS IN OTHER COMPANIES
In controlled-supplementary activities 194,233 219,543
In non-controlled-supplementary activities 6,321 10,612
In other non-controlled companies 37,076 32,044
---------- ----------
Total 237,630 262,199
========== ==========
- OTHER RECEIVABLES
Prepayments 2,299 14,431
Balances from losses to be recovered 1,974 4,413
Guarantee deposits 17,032 42,278
Miscellaneous receivables (1) 612,422 62,785
Tax prepayments 101,729 3,603
Other 2,105 607
---------- ----------
Total 737,561 128,117
========== ==========
(1) Includes for the difference between the amount of the
constitutional protection actions for deposits paid at floating
exchange rate and the rescheduled deposits balance (swichted
into pesos at the USD = 1 - ARS = 1,40 rate and adjusted by
CER). Following a conservative accounting criterion, the Bank
booked the allowances it considered necessary to cover the
future recoverability of such assets. As of September 30, 2002,
such balance, net of allowances, was 278,251.
- DEPOSITS
Rescheduled certificates of deposit subject to CER (CEDROS) 1,583,680 -
Other 299,045 272,812
---------- ----------
Total 1,882,725 272,812
========== ==========
- OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS
SWAP I 914,279 -
Other 322,571 111,824
---------- ----------
Total 1,236,850 111,824
========== ==========
- OTHER LIABILITIES
Accrued salaries and payroll taxes 18,693 35,932
Accrued taxes 10,055 216,323
Miscellaneous payables (1) 1,482,997 63,921
Other 5,372 1,437
---------- ----------
Total 1,517,117 317,613
========== ==========
(1) Includes 1,438,506 as of September 30, 2002, for the capital
irrevocable contribution to Banco Frances (Cayman) Ltd. (Note
2.4).
- 29 -
2002 2001
---------- ----------
- MEMORANDUM ACCOUNTS - DEBIT - CONTROL
Items in safekeeping 23,203,944 25,575,225
Collections items 578,831 516,964
Checks drawn on the Bank pending clearing 76,259 137,762
Other 7,130 1,300
---------- ----------
Total 23,866,164 26,231,251
========== ==========
- FINANCIAL INCOME
Gold and foreign currency exchange difference 1,344,278 52,953
Premiums on sales of foreign currency 2,775 60,442
Other 3,170 4,044
---------- ----------
Total 1,350,223 117,439
========== ==========
- FINANCIAL EXPENSE
Contribution to the Deposit Guarantee Fund 25,200 21,238
Turn-over tax 12,763 32,658
Charges on loans impairment value 174,779 -
Other 23,776 46,333
---------- ----------
Total 236,518 100,229
========== ==========
- SERVICE CHARGE INCOME
Rent of safe deposit boxes 4,570 6,605
Commissions for the activity of the depositary company of mutual funds 749 4,345
Commissions for Capital Market transactions 105 37,801
Commissions for salary - payment services 1,437 2,737
Commissions for managing trust 1,893 6,362
Commissions on loans 8,550 5,695
Commissions on sales of insurance 5,977 13,645
Other 26,965 40,962
---------- ----------
Total 50,246 118,152
========== ==========
- SERVICE CHARGE EXPENSE
Turn-over tax 6,989 21,603
Other 280 361
---------- ----------
Total 7,269 21,964
========== ==========
- OPERATING EXPENSES
Rent 15,309 21,818
Depreciations of bank premises and equipment 27,088 38,058
Amortizations of organization and development expenses 50,413 63,613
Electric power and communications 20,460 29,112
Maintenance, conservation and repair expenses 17,552 29,039
Security services 15,459 22,506
Other 11,937 10,522
---------- ----------
Total 158,218 214,668
========== ==========
- 30 -
2002 2001
---------- ----------
- OTHER INCOME
Income from sale of bank premises and equipment 3,662 6,333
Rent 749 1,791
Adjustment and interest on other receivables 9,515 596
Other 4,617 6,541
---------- ----------
Total 18,543 15,261
========== ==========
- OTHER EXPENSE
Loss from operations of bank premises and equipment and other assets 14,734 948
Amortization of goodwill 59,742 16,167
Depreciation of other assets 1,287 1,758
Uninsured losses 2,499 9,342
Other 22,191 32,294
---------- ----------
Total 100,453 60,509
========== ==========
7. RESTRICTIONS ON ASSETS
As of September 30, 2002, there are Bank assets which are restricted as
follows:
a) The Public and Private Securities account includes 1,596,103 in
Federal Government bonds in US dollars LIBOR 2012 which, as
mentioned in note 1.2 (a) have been frozen until final confirmation
by the BCRA of the compensation amount.
b) The "Loans to the non financial governmental sector" account
includes 77,432 in guaranteed loans under Decree No. 1387/01,
allocated to the guarantee required to act as custodian of
investment securities related to pension funds.
c) Out of the Bank's active loan portfolio, 13,000 is allocated to the
guarantee securing payables to the BCRA and 1,730 is pledged to
secure the payable to the International Finance Corporation.
d) The "Loans to the non financial governmental sector" account
includes 2,855,511 in guaranteed loans under Decree No. 1387/01,
which were pledged as security for the payments in advance received
by the BCRA (see note 1.2.f).
e) The account "Loans - to the non-financial private sector and
residents abroad" includes 447,825 in syndicated loans provided as
security for the assistance received from BBVA Madrid (see note
1.2.f).
- 31 -
8. CONTINGENTS
8.1 EXPORT TAX REBATES
In January 1993, ex-BCA found out that a group of companies
presumably related among them had used fake documentation to
collect export tax rebates, under current legislation through
certain of its branches.
Immediately upon becoming aware of such events, the ex-BCA reported
this situation to the Federal Police Banking Division pressing
criminal charges before the Federal Criminal Court N(degree) 2,
Clerk's Office N(degree) 5 of the City of Buenos Aires.
The BCRA has made certain observations to the procedure followed by
the ex-BCA in paying tax rebates. The ex-BCA has based its reply to
the BCRA on the fact that the aforesaid payments had been made
complying strictly with current regulations for the aforesaid
transactions.
On October 14, 1994, the General Director for Legal Affairs of the
Ministry of Economy and Public Works and Utilities (MEOSP) ordered
the ex-BCA to reimburse the amount which may be applicable to tax
rebate payments which, in his opinion, were considered
inapplicable.
On October 26, 1994, the ex-BCA filed a notice with the MEOSP by
which it fully and emphatically rejected the aforesaid order for
containing untrue, erroneous and legally unfounded representations
since the ex-BCA acted in strict compliance with current
regulations when carrying out each and every transaction related to
the payment of export tax rebates.
On December 17, 1996, the ex-BCA was notified of the lawsuit filed
by the Federal State in the action styled MEOSP, Federal State vs.
BCA in regard of "Request for Opinion", at the Federal
Administrative Tribunal of Original Jurisdiction, Clerk's Office
No. 1 of the City of Buenos Aires.
The lawsuit has been filed for an undetermined amount in November
1995 even when it was first notified by the Federal State on the
aforesaid date.
In February, 1997, the ex-BCA put forth a defense to stop the
progress of the lawsuit filed by the Federal Government suspending
the term until the complaint is answered. In that filing the
Bank's Legal Counsel alleged that the ex-BCA acted in
compliance with the standards in force, and after a background
analysis, it became abundantly clear that it was the responsibility
of the governmental agencies that had not met the express control
standards under their exclusive charge.
The abovementioned exception was dismissed on December 1997 by the
judge hearing the case, therefore, in February 1998, the Bank
decided to file an appeal with the Court of Appeals.
The Court of Appeals ruled in favor of the bank's appeal, that is
to say, it upheld the bank's defense based on a legal defect and
its request that the Banco de la Nacion Argentina, the Customs
Service and the BCRA be summoned as parties to the suit. Both such
requests were rejected by the court of original jurisdiction and
have now deserved a favorable ruling from the appellate court.
At present, the proceedings are awaiting that the Federal State
will amend the vices of its action, hence once this has been
complied with, notifications will be resumed. Irrespective of the
above, it has been agreed to suspend the legal proceedings with a
view to a possible out-of-court transactions formulated by sellers,
since this out-of-court settlement was dropped by sellers, the
abovementioned legal proceedings were resumed. Despite the
suspension of terms, the parties agreed to a pre-trial stage for
the production of evidence.
In any event, the eventual contingency resulting from such
situation will be assumed by the sellers of the ex-BCA under the
terms of the shares sales contracts.
- 32 -
9. TRANSACTIONS WITH SUBSIDIARIES AND AFFILIATES (ART. 33 OF LAW No. 19,550)
The balances as of September 30, 2002 and 2001, for transactions
performed with parents, subsidiaries and affiliates are as follows:
Balance Sheet Memorandum Accounts (1)
----------------------------------------------- ------------------------
Assets Liabilities
---------------------- -----------------------
Company 2002 2001 2002 2001 2002 2001
------------------------------------------------------------------------------------------------------------------------------------
BBVA Madrid 753,129 34,464 597,926 - 5,774 11,652
Frances Valores Sociedad de Bolsa S.A. - - 1,726 111 13 208
Banco Frances (Cayman) Limited - 7,850 1,830,093 286,946 37,608 44,756
Consolidar A.R.T. S.A. - - 41,144 23,100 109,579 177,303
Consolidar Administradora de Fondos de
Jubilaciones y Pensiones S.A. 481 - 8,374 30,254 87,636 41,226
Consolidar Cia. de Seguros de Retiro S.A. 11 11 153,148 35,857 696,279 668,911
Consolidar Cia. de Seguros de Vida S.A. 6 - 4,110 54,683 311,056 262,159
Banco Bilbao Vizcaya Argentaria Uruguay S.A. - 317 - 616 - 6,632
Credilogros Compania Financiera S.A. 41,840 62,274 3,860 3,045 - -
Atuel Fideicomisos S.A. - - 3,957 1,572 - -
BBV Seguros S.A. - - 19 36,222 - 43,543
Consolidar Comercializadora S.A. - - 46 38 1,283 633
Rombo Cia. Financiera S.A. 129 24,672 2,749 509 - -
Frances Administradora de Inversiones S.A. - - 5,905 - - -
Inversora Otar S.A. 1,416 - 305 - - -
(1) Includes Items in safekeeping, Credit lines granted (unused
portion) covered by debtor classification regulations and Other
guaranties given covered by debtor classification regulations.
10. BANK DEPOSITS GUARANTEE INSURANCE SYSTEM AND BANK LIQUIDITY FUND
10.1. Bank deposits guarantee insurance system
Law No. 24,485, published on April 18, 1995, and Decree No. 540/95
of the same date provided for the organization of a Bank Deposit
Guarantee Insurance System, characterized as being limited,
mandatory, and for valuable consideration, designed to provide
coverage for risks inherent in bank deposits, as a subsidiary and
supplementary protection to the one offered by the system of bank
deposit privileges and protection created by the Financial
Institutions Law.
Such Law provided for the organization of the company "Seguros de
Depositos Sociedad Anonima" (SEDESA) to manage the Deposit
Guarantee Fund (FGD), whose shareholders, as amended by Decree
N(degree) 1292/96, will be the BCRA with one share, as a minimum,
and the trust made up of the financial institutions is such
proportion as may be determined by the BCRA for each one, based on
their contributions to the FGD.
This guarantee system does not include deposits made by other
financial institutions (including certificates of deposits acquired
by secondary trading), deposits made by persons directly or
indirectly related to the financial institution, the deposits
procured through systems offering additional incentives to the
interest rate (among which, the deposits obtained through the
"Libreton" product are contemplated), certificates of deposits of
securities, acceptances or guarantees and, lastly, those deposits
made after July 1, 1995 and to September 17, 1998, at a rate
exceeding by two percentage points per annum or more that paid by
the Banco Nacion Argentina for similar terms and, after such date,
at a rate exceeding by two percentage points per annum the rolling
average for the last five
- 33 -
banking days of the deposit rates found by the survey performed by
the BCRA. Communique "A" 2399 issued on December 15, 1995, includes
within the exemptions those certificates of deposit transferable
whose ownership has been acquired by way of endorsement and
deposits gathered through systems offering additional incentives to
the agreed-upon interest rate.
By Communique "A" 2337 of May 19, 1995, the BCRA notified the
financial institutions about the approval of the regulations on the
application of the guarantee system as from April 18, 1995.
In August 1995, such company was organized. The Bank holds a
9,8512% equity interest therein.
Decree N(degree) 1127/98 of the Federal Executive of September 24,
1998, modified the amount covered by the deposit guarantee system
established by Decree N(degree) 540/95, increasing such amount to
thirty thousand, irrespective of the term. In the case of
transactions in the name of two or more persons, the guarantee will
be prorated among the respective holders. The total guarantee
amount by person may not exceed the abovementioned amount,
regardless of the number of accounts and/or deposits.
The deposits for amounts over thirty thousand are also included in
the guarantee system up to such maximum limit. The BCRA may decide
at any time and in general terms the amendment of such guarantee
system cover amount based on the development of the consolidation
process of the Argentine Financial System and other indicator that
may be considered appropriate.
On January 21, 2000, the BCRA established by Communique "A" 3064
that, as from the irrevocable contributions for January 2000, the
contribution percentage will be reduced from 0.03% to 0.015%
provided that for the remaining 0.015%, the financial institutions
and SEDESA execute a loan agreement to fund the FGD. Such agreement
will have a 36-month term and will expire on the 12th day of the
applicable month and will accrue a rate equivalent to the income to
be generated from the placements of resources of the abovementioned
fund made in similar instruments to those elected for the
investment of BCRA international currency reserves. Such loan to
the FGD is not subject to Minimum Capital Requirements. On February
8, 2000, the Bank executed the abovementioned loan agreement. In
accordance with BCRA regulations, such financing is recorded under
the "Other Receivables from Financial Transactions" account.
According to Communique "A" 3153 of the BCRA, from September 2000,
contributions decreased from 0.03% to 0.015% and the obligation to
take the loans mentioned in the prior paragraph was abrogated.
However, effective loans agreed prior to that date will remain
effective until their cancellation.
Finally, on November 9, 2001, through Communique A 3358, the BCRA
decided to reestablish the ordinary contribution to the deposit
guarantee fund at 0.03% as from the date upon which the
contributions for December 2001 are made.
As of September 30, 2002, the Bank had granted loans to SEDESA in
the amount of 7,667 that mature from January through August, 2003.
10.2. FLB (Bank Liquidity Fund)
On December 26, 2001, the Federal Executive issued Decree No.
32/2001 whereby it created the FLB to provide the financial system
with adequate liquidity levels. The FLB will be effective during
five years as from the date on which the decree is published and it
will be managed by SEDESA, which will act as trustee thereof.
In addition, the Decree provided that the FLB be set by financial
institutions by subscribing Class A Certificates of Participation
for up to 5% of the average daily private sector deposits balances
in pesos and foreign currency in each institutions as of November
2001 and by the Federal Government by annually subscribing Class B
Certificates of Participation. Class B Certificate of Participation
redemption will depend on the total settlement of Class A
Certificates of Participation.
BCRA issued a Communique on December 28, 2001, whereby it increased
such contribution to 6% of the average of the abovementioned
balances.
- 34 -
Subsequently, Communique "A" 3487 from the BCRA, dated February 22,
2002, set the contribution to the FLB at 1.9% effective as from
March 1, 2002, on the average daily balances of private sector
deposits in pesos and foreign currency for November 2001, and
provided that the amounts contributed would be deductible from the
minimum cash requirement.
BCRA Communique "A" 3513 dated March 15, 2002, established the
amount at 3.5% of the average fixed by Communique "A" 3487 above
effective as from March 15, 2002. Finally, BCRA Communique "A" 3582
of April 26, 2002, established such contribution at 0%.
In December 2001, the Bank made a contribution to the FLB in the
amount of USD 54,436 thousands. In April 2002, the contribution to
FLB was reimbursed to the Bank, after its translation into pesos at
the ARS 1.40 = USD 1 exchange rate.
11. TRUST ACTIVITIES
11.1. Financial Trusts
BF acts as trustee in the Fideicomiso Financiero RT Finance II
Trust, program to securitize credit instruments by issuing
securities representing the debt for a face value of up to US$
500,000,000 (the 1st. series of US$ 100,000,000 was issued on
September 30, 1999), in no case being personally liable for the
liabilities assumed in the performance of the contract obligations;
such liabilities will be satisfied with and up to the full amount
of the corpus assets or the proceeds therefrom. As of September 30,
2002, all principal and interest installments had been paid,
thereby terminating the commitments towards the security holders
and de-listing all the securities involved, and a residual amount
has been kept to meet any tax issues.
BF acts as financial trustee of the Noblex Argentina S.A. Trust, as
successor of the ex-BCA and is under no circumstances liable with
its own assets for liabilities undertaken in the performance of the
trust; such liabilities shall only be satisfied with and up to the
amount of the trust assets and the proceeds therefrom. The trust
was set up for the purpose of cancelling the receivables claimed by
unsecured creditors in the insolvency proceedings of "Noblex
Argentina S.A." which have been allowed and/or declared admissible
through the delivery of real property owned by the company in lieu
of payment and the full payment of its debts, and determine the way
of selling and allowing for the sale of the real property, to
distribute the proceeds (net of expenses) among all unsecured
creditors pro-rata according to the unsecured claims allowed and/or
declared admissible and/or for which proof of claim is filed after
the trust was set up. The main obligations assumed by the Bank for
acting as trustee are the following: attend the execution of the
deeds transferring legal title to the real property and accept or
receive possession thereof, execute the leases for the leased
premises and deliver to Noblex such real property under the lease;
manage, protect, preserve, keep in custody and insure the real
property as long as legal title to the real property continues to
vest in the trustee and hire, at the trust's expense, the services
of real estate or other brokers and/or auctioneers to sell such
property. As of September 30, 2002 and 2001, all the real estate
has been sold and the proceeds from such sale have been distributed
among the beneficiaries, the formal termination of the agreement
being pending.
On January 5, 2001, the BCRA's Board of Director issued Resolution
No. 19/2001, providing for the exclusion of Mercobank S.A.'s (a
bank organized under Argentine legislation) senior liabilities
under the terms of Section 35 bis of the Financial Institutions
Law, the authorization to transfer the excluded assets to BF as
trustee of the Diagonal Trust, and the authorization to transfer
the excluded liabilities to beneficiary banks. Also, on the
mentioned date, the agreement to set up the Diagonal Trust was
subscribed by Mercobank S.A. as settle and BF as trustee in
relation to the exclusion of assets as provided in the resolution
abovementioned. BF entrusted Atuel Fideicomisos S.A. the management
of collections and the realization of the corpus assets. As of
September 30, 2002, the book value of corpus assets amounts to
44,032.
- 35 -
11.2. Non Financial Trust
BF acts as trustee in 62 nonfinancial trusts, and in no case being
personally liable for the liabilities assumed in the performance of
the contract obligations; such liabilities will be satisfied with
and up to the full amount of the corpus assets and the proceeds
therefrom. The nonfinancial trusts concerned were set up to secure
the receivables of several creditors (beneficiaries) and the
trustee was entrusted the management, care, preservation and
custody of the corpus assets until (i) the requirements to show the
noncompliance with the obligations by the debtor (settlor)
vis-a-vis the beneficiaries are met, moment at which such assets
will be sold and the proceeds therefrom will be distributed (net of
expenses) among all beneficiaries, the remainder (if any) being
delivered to the settlor, or (ii) all contract terms and conditions
are complied with, in which case all the corpus assets will be
returned to the settlor or to whom it may indicate. The trust
assets represent about $ 6,317 million and are of different kinds,
because even though the majority of them consist of cash or
creditors' rights, BF is also trustee of real estate and shares.
12. CORPORATE BONDS
12.1. Corporate Bonds issued by BF
The Regular Stockholders' Meeting of ex- Banco Frances del Rio de
la Plata (ex-BFRP) held on September 30, 1994, authorized the
creation of a five-year program for issuance and reissuance of
corporate bonds, nonconvertible into shares, for an amount of up to
US$ 500,000,000.
On October 6, 1997, the Regular and Special Stockholders' Meeting
ratified for the whole program effective period the delegation to
the Board of Directors, approved by the Regular Stockholders'
Meeting held on September 30, 1994, of the necessary powers to
determine all the issuance conditions of the corporate bonds
(including collection subordination) to be issued under the
company's corporate bonds issuance program for an outstanding
amount of up to US$ 500,000,000, authorized by CNV's Certificate
No. 87 of December 16, 1994.
On April 27, 1999, the Regular and Special Stockholders' Meeting
decided to extend the term of the abovementioned program for five
years, authorizing the Board of Directors to take the necessary
steps for issuance thereof. In addition, it authorized the issuance
of corporate bonds convertible into share of commons stock in the
amount of up to US$ 200,000,000 either under the Bank's program or
otherwise, grating the Board of Directors the necessary authority
to carry out the issuance, establish the conversion value,
determine the terms of the securities and modify the current
program.
On April 27, 2000, the Regular and Special Stockholders' Meeting
approved to increase the outstanding amount under the
abovementioned program for up to US$ 1,000,000,000 and delegated
onto the Board of Directors the performance of proceedings to
obtain approval before CNV and Buenos Aires Stock Exchange (BCBA)
and such other stock exchanges as may be chosen to be listed. The
increase was authorized by CNV's Certificate No. 268 of July 18,
2000.
In addition, the abovementioned Stockholders' Meeting approved the
creation of a program for the issuance of non-subordinated
short-term corporate notes to be issued under several classes and
series up to a total amount outstanding at any given time of US$
300,000,000; the term of the program is five years, during which
corporate notes nonconvertible into shares and unsecured or
guaranteed by third parties may be issued for a term of up to one
year in accordance with the conditions stipulated by the Board of
Directors.
- 36 -
The following chart reflects corporate bonds in force as of
September 30, 2002:
Nominal Book Capital
Global program Date of Face Price of annual Payment of balance (in expiration
amount issue Features value Currency issue rate interest thousands) date
----------------------------------------------------------------------------------------------------------------------------------
USD 1,000,000,000 03/31/1998 Subordinated 150,000,000 USD 100% (1) Semiannual 559,005 03/31/2005 (3)
USD 1,000,000,000 10/31/2000 Non-subordinated 150,000,000 USD 100% (2) Semiannual 567,754 10/31/2002 (4)
(1) Libor plus 330 basis points.
(2) Libor plus 145 basis points.
(3) Principal is fully repayable upon maturity.
(4) At the issuance date of these financial statements this bonds
have been refinanced through the issuance of a new bond. Such
refinancing included the interest payment and a 5% of capital
as of October 31, 2002, the payment of a 5,26 percent of
capital of the new bond in 180 days, while the remaining
capital will be paid in a year.
According to the provisions of the Corporate Bond Law and to the
rules of the BCRA, the proceeds from the issuance of corporate
bonds are allocated to (i) granting mortgage loans to purchase and
repair housing and personal loans in Argentina; (ii) granting
corporate loans in Argentina earmarked for contributions to working
capital; investment in physical assets located in Argentina or
refinancing liabilities, or (iii) contributing to working capital,
investing in physical assets located in Argentina or refinancing
liabilities.
12.2. Corporate bonds issued by CB
As regards the agreement executed by CB with the Fondo Fiduciario
de Asistencia a Entidades Financieras y de Seguros (FFAEFS) (see
note 13), as of September 30, 2002, there is a series of common,
subordinate corporate bonds nonconvertible into shares for a face
value of US$ 30,000,000 issued on December 18, 1998, at LIBOR plus
4% per annum in the first period and then, LIBOR plus 3% or 8.07%
per annum in case the abovementioned interest rate were, for this
period, less than 8.07% per annum, due on December 29, 2004. The
principal is amortized in five annual, equal and consecutive
installments, having the first matured on December 29, 2000, and
the next maturing every December 29 through the final maturity
date. The interest will be payable in arrears on an annual basis on
same payment date of the principal's amortization.
As of September 30, 2002, the book value of such payables amounted
to 26,211, after conversion into Argentine pesos at the USD 1 = ARS
1 exchange rate.
13. FUNDING OF THE FFAEFS
13.1. On November 22, 1996, the ex-BCA requested the Board of the FFAEFS
for a US$ 60,000,000 loan to finance the purchase of certain assets
and liabilities to be excluded from ex - Banco Caseros S.A. Such
request was granted and the respective agreement was signed on
December 18, 1996.
By means of such agreement, the Bank undertook to repay the loan
seven years after disbursement by the FFAEFS on December 20, 1996,
accruing compensatory interest at the rate fixed by the
International Bank for Reconstruction and Development for the
Argentine National State for the second tranche of the loan called
"Bank Reform Loan 3926-AR" plus 1% p.a.
Due to this agreement, the Bank may not distribute cash dividends
in amounts exceeding 50% of liquid and realized income related to
each balance sheet normally prepared.
The Bank may issue subordinate corporate bonds with authorization
of the public offering by the CNV and the authorization to trade on
the BCBA under the conditions established in the aforesaid
agreement and up to the amount actually loaned. In this sense, the
BCRA authorized to compute the financial assistance from its
granting as subordinated debt to calculate the minimum capital
requirement under BCRA regulations.
- 37 -
On July 22, 1997, the ex-BCA Regular Stockholders' Meeting approved
issuing subordinated corporate bonds in the amount of US$
60,000,000 and granted the Board of Directors the power to
determine the issuance terms and conditions not expressly
determined by such Stockholders' Meeting. To date, the mentioned
corporate bonds were not issued.
13.2. On December 22, 1997, CB executed with the FFAEFS a loan for
consumption agreement in the amount of US$ 30,000,000 which will be
reimbursed in five annual, equal and consecutive installments
starting as from the disbursement date. The first one will be paid
three years after such date. The loan will accrue LIBOR plus 4%.
Due to this agreement, the BF may not distribute cash dividends in
amounts exceeding 50% of liquid and realized income related to each
balance sheet normally prepared.
As per this agreement, CB issued subordinate corporate bonds with
the authorization for public offering by the CNV and the
authorization to trade on the BCBA in the terms and conditions
established in the loan for consumption agreement and under
Communique "A" 2264 of the BCRA for the amount equivalent to that
effectively loaned under the loan for consumption agreement
referred to above. By Resolution No. 12,384 of August 28, 1998, the
CNV authorized the issuance of common, subordinate corporate bonds
nonconvertible into shares for a nominal value of US$ 30,000,000.
Such issuance took place on December 18, 1998 (see note 12.2).
As of September 30, 2002, by Resolution No. 321 of the BCRA, the
Bank recorded the above mentioned financing in the "Subordinated
Corporate Bonds" account.
14. CHANGES IN CAPITAL STOCK
Changes in the Bank's capital stock are as follows:
Total
(in thousands)
--------------
Capital Stock as of September 30, 1986: 1
Date of
---------------------------------------------------------
Stockholders' Meeting Registration with the Public Form of Amount Total
deciding on the issuance Registry of Commerce placement (in thousands) (in thousands)
------------------------ ---------------------------- --------- -------------- --------------
10-29-1987 03-16-1988 (1) 1 2
09-09-1988 01-18-1989 (1) 14 16
10-19-1989 04-25-1990 (1) 608 624
09-20-1990 05-31-1991 (1) 26,027 26,651
08-23-1991 07-13-1992 (1) 31,448 58,099
09-02-1993 11-09-1993 (1) 34,860 92,959
09-02-1993 02-18-1994 (2) 18,540 111,499
09-28-1995 02-01-1996 (1) 16,725 128,224
10-10-1996 12-13-1996 (1) 19,233 147,457
10-06-1997 03-05-1998 (2) 25,000 172,457
10-06-1997 03-05-1998 (3) 14,174 186,631
04-27-1999 08-20-1999 (2) 23,000 209,631(4)
(1) Dividends in shares and/or partial capitalization of the Adjustment
to Capital.
(2) Through public subscription of shares.
(3) Shares issued and given in exchange to ex-BCA minority stockholders
under the merger with ex BFRP.
(4) The amount of Capital Stock is fully paid in and authorized for
public offering by CNV.
- 38 -
15. COMPLIANCE WITH CNV REQUIREMENTS
15.1. Compliance with the requirements to act as agent in the
over-the-counter market
As of September 30, 2002, the Bank's Stockholders' Equity exceeds
the minimum requested to act as agent in the over-the-counter
market, according to Resolution No. 368/01 of the CNV.
15.2. Mutual Fund custodian
As of September 30, 2002, in its capacity of custodian of "FBA
Acciones Globales", "FBA Total", "FBA Renta", "FBA Renta Pesos",
"FBA Renta Dolares", "FBA Bonos", "FBA Calificado", "FBA Ahorro
Dolares", "FBA Ahorro Pesos", "FBA Renta Fija", "FBA Total 50",
"FBA Renta Premium", "FBA Horizonte", "FBA Futuro" and "FBA Renta
Corto Plazo", the Bank holds certificates of deposits, shares,
corporate bonds, government securities, index and options in
custody in the amount of 47,468, all of which making up the Fund's
portfolio and booked in memorandum accounts "Debit-Control -
Other".
As of September 30, 2001, in its capacity of custodian of "FBA
Acciones Globales", "FBA Total", "FBA Renta", "FBA Renta Pesos",
"FBA Renta Dolares", "FBA Bonos", "FBA Calificado", "FBA
Internacional", "FBA Ahorro Dolares", "FBA Ahorro Pesos", "FBA
Renta Fija", "FBA Total 50", "FBA Renta Premium", "FBA Financiero",
"FBA Europa", "FBA Tecnologico", "FBA Biotecnologico", "FBA Japon",
"FBA Horizonte", "FBA Futuro", "FBA Renta Corto Plazo" and "FBA
EE.UU", the Bank held certificates of deposits, shares, corporate
bonds, options and Government securities in custody in the amount
of 1,166,752, all of which making up the Funds' portfolio and
booked in memorandum accounts "Debit-Control-Other".
16. CONTRIBUTION TO THE INSTITUTO DE SERVICIOS SOCIALES BANCARIOS (BANKING
HEALTH SERVICES INSTITUTE)
The contribution provided in Section 17, point (f) of Law No. 19,322 -
originally 2% on interest and commissions charged by banks - was reduced
to 1% as from July 1, 1996 through July 1, 1997; as from the latter date,
the abovementioned contribution was repealed (Decrees No. 263, dated
March 20, 1996 and No. 915, dated August 7, 1996).
The Argentine Bank Employees' Association (ABA) filed a constitutional
protection action seeking that the abovementioned decrees be declared
unconstitutional. The Federal Administrative-Contentious Court of Appeals
ruled in favor of the constitutional protection action, reversing the
original decision, and declared both decrees illegal. Subsequently, on
November 4, 1997, the Supreme Court of Justice of the Nation declared an
extraordinary appeal brought before the Federal
Administrative-Contentious Court of Appeals by the Federal Executive
Branch (PEN) against the abovementioned ruling to be inadmissible on
formal grounds (that is to say, the Supreme Court did not rule on the
substance of the matter).
On December 19, 1997, the Administrator of the Argentine Bank Employees'
Health Plan (OSBA) sent to the ex-BFRP and the ex-BCA a letter, in light
of the abovementioned developments, stating that the contribution
provided in Section 17, point (f) of Law No. 19,322 is in full effect and
requesting that steps be taken to have the abovementioned contributions
deposited to the order of the abovementioned Health Care Organization.
In another turn of events, by Decree No. 336/98 dated March 26, 1998, the
PEN confirmed the total elimination of the Banking Health Services
Institute (ISSB) and set up a new entity (OSBA) which is not a
continuation of the ISSB.
Upon an action against the Federal State for protection of a right
guaranteed by the Constitution started by the enrollees of the ABA and
OSBA to annul Decree No.336/98, on April 3, 1998, the Judiciary decided
to issue an official letter to the Ministry of Economy and Public Works
and Utilities, as a restraining order and without rendering an opinion on
the substance of the matter, notifying that the abovementioned Ministry
of
- 39 -
Economy will have to abstain from enforcing Decree No. 336/98,
specifically as far as the elimination of the contributions established
by Section No.17, point (f) of Law No. 19,322 in favor of the ISSB and
any other measure modifying the situation prior to the issuance of the
Decree objected to are concerned.
In the opinion of the Bank's Management, OSBA's request is illegitimate
and ungrounded since, to the date of issuance of these financial
statements, the court of last resource with jurisdiction on the merits of
the case has not ruled on the illegality of the Decrees. Therefore, in
the opinion of the Bank's Management, the contribution named has been
abrogated and the Bank has complied with all obligations arising out of
the abovementioned Decrees. No provision was recorded to cover the
contributions that may be claimed.
Notwithstanding with standing the above, on October 25, 2000, the BCRA
notified the bank, that OSBA requested and obtained an attachment over
the account held by the bank with the BCRA in the amount of 5,696 plus
1,709 for estimated interest, court costs and attorneys fees, while on
October 31, 2000, the Bank receive service of process of the execution
proceedings file by OSBA. On March 6, 2001, the trial court ruled against
the execution sought against the Bank and ordered that the attachment be
lifted. The plaintiff appealed the trial court's judgment. In the opinion
of the Bank's Management, the plaintiff has no right of action and the
claim is illegitimate and inappropriate.
17. RESTRICTION ON EARNINGS DISTRIBUTIONS
17.1. As stated in Note 13, the Bank may not distribute as dividends in
cash an amount exceeding 50% of liquid and realized income related
to each one of the financial statements regularly prepared.
17.2. Under BCRA Communication "A" 3574, the distribution of profits is
suspended for the period established by such institution.
17.3. As mentioned in note 3.3 (b), BCRA Communique "A" 3785 allowed
booking the Federal Government bonds received in compensation as
holdings in investment accounts at technical value, limiting the
distribution of dividends in cash to income exceeding the
difference between book value and the listing value booked in the
month in which the fiscal year ends.
18. PUBLICATION OF THE FINANCIAL STATEMENTS
As provided by Communique "A" 760, the previous intervention of the BCRA
is not required for the publication of these financial statements.
19. ACCOUNTING PRINCIPLES - EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH
This financial statements are presented on the basis of the standards of
the BCRA and, except for the effect of the matter mentioned in Note 5, in
accordance with generally accepted accounting principles in the City of
Buenos Aires. Certain accounting practices applied by the Bank that
conform with the standards of the BCRA and with generally accepted
accounting principles in the City of Buenos Aires may not conform with
the generally accepted accounting principles in other countries.
The effects of the differences, if any, between generally accepted
accounting principles in the City of Buenos Aires and the generally
accepted accounting principles in the countries in which the financial
statements are to be used have not been quantified. Accordingly, they are
not intended to present financial position, results of operations and
cash flows in accordance with generally accepted accounting principles in
the countries of the users of the financial statements, other than the
City of Buenos Aires (taking into account the effect of the matter
mentioned in Note 5).
EXHIBIT A
DETAIL OF GOVERNMENT AND PRIVATE SECURITIES
AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Holding
-----------------------------
Book Book
Balance Balance Position
Identifi- Market as of as of without Final
Description Serie cation value 2002 2001 options Options position
------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES
Holdings in investment accounts
Local
In pesos
Treasury bills 90 ARLE901=BA 57,445 57,445 57,445 - 57,445
--------- --------- --------- --------- ---------
Subtotal in pesos 57,445 - 57,445 - 57,445
--------- --------- --------- --------- ---------
In foreign currency
Argentine Republic External Bills ARVEY4D3=BA 19,506 22,439 671,586 - 671,586
Argentine Republic Bonds Libor 2012 1,596,103 1,596,103 - 1,596,103
--------- --------- --------- --------- ---------
Subtotal in foreign currency 1,618,542 3,996,395 2,267,689 - 2,267,689
--------- --------- --------- --------- ---------
Subtotal in Holdings in investment accounts 1,675,987 3,996,395 2,325,134 - 2,325,134
========= ========= ========= ========= =========
Holdings for trading or financial transactions
Local
In pesos
Treasury Bills 90 ARLE901=BA 550 550 550 - 550
Other 334 334 194 - 194
--------- --------- --------- --------- ---------
Subtotal in pesos 884 912 744 - 744
--------- --------- --------- --------- ---------
In foreign currency
Argentine Republic Global External Bonds 2030 155 155 155 - 155
Other 542 542 104 - 104
--------- --------- --------- --------- ---------
Subtotal in foreign currency 697 261,884 259 - 259
--------- --------- --------- --------- ---------
Foreign
Other - - - -
--------- --------- --------- --------- ---------
Subtotal in foreign - 1,134 - - -
--------- --------- --------- --------- ---------
Subtotal in Holdings for trading or
financial transactions 1,581 263,930 1,003 - 1,003
========= ========= ========= ========= =========
EXHIBIT A
(Contd.)
DETAIL OF GOVERNMENT AND PRIVATE SECURITIES
AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Holding
-----------------------------
Book Book
Balance Balance Position
Identifi- Market as of as of without Final
Description Serie cation value 2002 2001 options Options position
------------------------------------------------------------------------------------------------------------------------------------
Unlisted government securities
Local
In pesos
Argentine T-bills with which provincial
and federal governments settle
payables to vendors and employees and
which circulate in lieu of currency 1,232 1,232 - 1,232
Argentine Federal Government 9% Bonds 2002 ARBGA23=BA 414,931 414,931 - 414,931
Tax credit certificates due in 2003/2004 92,293 92,293 - 92,293
Tucuman Provincial Treasury Bonds ARTUCU13=BA 65,193 65,193 - 65,193
Argentine T-bills with which the
Province of Buenos Aires settles
payables to vendors and employees and
which circulate in lieu of currency 1,205 1,205 - 1,205
Other 90 90 - 90
--------- --------- --------- --------- ---------
Subtotal in pesos 574,944 644 574,944 - 574,944
--------- --------- --------- --------- ---------
In foreign currency
--------- --------- --------- --------- ---------
Subtotal in foreign currency - 693,769 - - -
--------- --------- --------- --------- ---------
Subtotal Unlisted government securities 574,944 694,413 574,944 - 574,944
========= ========= ========= ========= =========
TOTAL GOVERNMENT SECURITIES 2,252,512 4,954,738 2,901,081 - 2,901,081
========= ========= ========= ========= =========
EXHIBIT A
(Contd.)
DETAIL OF GOVERNMENT AND PRIVATE SECURITIES
AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Holding
-----------------------------
Book Book
Balance Balance Position
Identifi- Market as of as of without Final
Description Serie cation value 2002 2001 options Options position
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN LISTED PRIVATE SECURITIES
Other debt instruments
Local
In foreign currency
Metrogas 2003 Corporate Bonds 37 37 37 - 37
--------- --------- --------- --------- ---------
Subtotal in foreign currency 37 385 37 - 37
--------- --------- --------- --------- ---------
Subtotal Other debt instruments 37 385 37 - 37
========= ========= ========= ========= =========
Other Equity instruments
Local
In pesos
Sniafa S.A. SNI.BA 23 23 23 - 23
Telecom S.A. INU.BA 141 141 141 - 141
Perez Companc 84 84 (293) - (293)
Otros - (14) - (14)
--------- --------- --------- --------- ---------
Subtotal in pesos 248 1,045 (143) - (143)
--------- --------- --------- --------- ---------
In foreign currency - (67) - (67)
--------- --------- --------- --------- ---------
Subtotal in foreign currency - 343 (67) - (67)
--------- --------- --------- --------- ---------
Foreign
Other - 60 - 60
--------- --------- --------- --------- ---------
Subtotal in foreign - 1,648 60 - 60
--------- --------- --------- --------- ---------
Subtotal Equity instruments 248 3,036 (150) - (150)
========= ========= ========= ========= =========
TOTAL INVESTMENTS IN LISTED PRIVATE
SECURITIES 285 3,421 (113) - (113)
========= ========= ========= ========= =========
TOTAL GOVERNMENT AND PRIVATE SECURITIES 2,252,797 4,958,159 2,900,968 - 2,900,968
========= ========= ========= ========= =========
EXHIBIT B
CLASSIFICATION OF FINANCING FACILITIES BY STATUS
AND GUARANTIES RECEIVED AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
-Stated in thousands of pesos-
2002 2001
--------- ---------
COMMERCIAL PORTFOLIO
In normal situation
With senior or first - degree security and counter guaranty "A" 5,431,504 2,643,818
With senior or first - degree security and counter guaranty "B" 18,802 213,472
Without senior security or counter guaranty 1,111,269 5,114,850
In potential risk
With senior or first - degree security and counter guaranty "A" 3,439 -
With senior or first - degree security and counter guaranty "B" 15,090 20,339
Without senior security or counter guaranty 1,353,919 45,516
Nonperforming
With senior or first - degree security and counter guaranty "A" 36 -
With senior or first - degree security and counter guaranty "B" 2,801 22,940
Without senior security or counter guaranty 693,209 27,263
With high risk of uncollectibility
With senior or first - degree security and counter guaranty "A" 920 -
With senior or first - degree security and counter guaranty "B" 7,589 34,911
Without senior security or counter guaranty 68,735 94,098
Uncollectible
With senior or first - degree security and counter guaranty "A" 510 199
With senior or first - degree security and counter guaranty "B" 45,215 12,781
Without senior security or counter guaranty 195,014 66,443
--------- ---------
Total 8,948,052 8,296,630
========= =========
EXHIBIT B
(Contd.)
CLASSIFICATION OF FINANCING FACILITIES BY STATUS
AND GUARANTIES RECEIVED AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
-Stated in thousands of pesos-
2002 2001
---------- ----------
CONSUMER AND HOUSING PORTFOLIO
Normal compliance
With senior or first - degree security and counter guaranty "A" 1,604 28,594
With senior or first - degree security and counter guaranty "B" 469,868 1,505,989
Without senior security or counter guaranty 469,067 1,953,487
Inadequate compliance
With senior or first - degree security and counter guaranty "A" - 124
With senior or first - degree security and counter guaranty "B" 13,774 32,433
Without senior security or counter guaranty 16,424 54,417
Deficient compliance
With senior or first - degree security and counter guaranty "A" - 55
With senior or first - degree security and counter guaranty "B" 4,964 14,291
Without senior security or counter guaranty 17,807 48,013
Unlikely to be collected
With senior or first - degree security and counter guaranty "A" 98 -
With senior or first - degree security and counter guaranty "B" 21,237 16,486
Without senior security or counter guaranty 71,946 68,507
Uncollectible
With senior or first - degree security and counter guaranty "A" 59 111
With senior or first - degree security and counter guaranty "B" 22,715 36,417
Without senior security or counter guaranty 41,126 63,784
Uncollectible, classified as such under regulatory requirements
With senior or first - degree security and counter guaranty "A" - -
With senior or first - degree security and counter guaranty "B" 22 113
Without senior security or counter guaranty 554 773
---------- ----------
Total 1,151,265 3,823,594
---------- ----------
General Total (1) 10,099,317 12,120,224
========== ==========
(1) Items included: Loans (before allowances); Other receivables from
financial transactions: Unlisted corporate bonds, Other receivables
covered by debtor classification regulations, Interest accrued and
pending collection covered by debtor classification regulations; Assets
out on financing lease (before allowances); Other receivables:
Receivables from sale of assets; Contingent credit - balance memorandum
accounts: Credit lines granted (unused portion) covered by debtor
classification regulations, Other guaranties given covered by debtor
classification regulations and Other covered by debtor classification
regulations.
EXHIBIT C
FINANCING FACILITIES CONCENTRATION
AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
FINANCING
--------------------------------------------------------------------
2002 2001
----------------------------- -----------------------------
Outstanding % of total Outstanding % of total
Number of customers balance portfolio balance portfolio
--------------------------------------------------- ----------- ---------- ----------- ----------
10 largest customers 5,623,777 55.68% 2,371,324 19.57%
50 next largest customers 2,366,671 23.43% 2,563,902 21.15%
100 following customers 623,630 6.17% 1,350,634 11.14%
Remaining customers 1,485,239 14.72% 5,834,364 48.14%
---------- ---------- ---------- ----------
Total (1) 10,099,317 100.00% 12,120,224 100.00%
========== ========== ========== ==========
(1) See (1) in Exhibit B.
EXHIBIT D
BREAKDOWN BY FINANCING TERMS AS OF SEPTEMBER 30, 2002
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Term remaining to maturity
-----------------------------------------------------------------------
Past-due More than 24
Description portfolio 1 month 3 months 6 months 12 months 24 months months Total
--------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Non financial governmental sector - 129,939 33,271 37,448 75,137 306,321 4,810,036 5,392,152
Financial sector - 37,975 82 82 406 872 2,533 41,950
Non financial private sector and
residents abroad 581,678 2,269,095 173,637 294,160 409,657 319,308 617,680 4,665,215
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 581,678 2,437,009 206,990 331,690 485,200 626,501 5,430,249 10,099,317 (1)
========== ========== ========== ========== ========== ========== ========== ==========
(1) See (1) in Exhibit B.
EXHIBIT E
DETAIL OF INVESTMENTS IN OTHER COMPANIES AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Concept Shares Amount
----------------------------------------------------------- ------------------------------------------ ----------------------
Unit Votes
face per
Identification Description Class value share Number 2002 2001
-------------- -------------------------------------------- -------- ------- -------- ----------- --------- ---------
FINANCIAL INSTITUTIONS, SUPPLEMENTARY AND
AUTHORIZED
Controlled
Local
33642192049 o Frances Valores Sociedad de Bolsa S.A. Common $ 500 1 3,199 5,801 1,610
30663323926 o Consolidar Administradora de Fondos de
Jubilaciones y Pensiones S.A. Common $ 1 1 1,899,600 111,823 160,289
33678564139 o Consolidar Cia. de Seguros de Vida S.A. Common $ 10 1 197,875 33,066 29,143
30678574097 o Consolidar Cia. de Seguros de Retiro S.A. Common $ 10 1 200,000 42,179 28,204
30704936016 o Credilogros Compania Financiera S.A. Common $ 1 1 39,700,000 46,702 107,271
o Other 1,364 297
Foreign
17426001 o Banco Frances (Cayman) Ltd. Common US$ 1 - 82,283,621 1,355,479 469,880
17000952 o BBVA Uruguay S.A. - 126,981
--------- ---------
Subtotal controlled 1,596,414 923,675
--------- ---------
Noncontrolled
Local
33707124909 o Rombo Cia. Financiera S.A. Common $ 1 1 8,000,000 12,801 16,324
30604796357 o Banelco S.A. Common $ 1 1 12,014 3,884 5,275
o Other 2,437 5,337
Foreign
17220001 o Bladex S.A. Com. B US$6,67 - 17,646 726 432
Pref. US$ 10 - 2,498 212 126
--------- ---------
Subtotal noncontrolled 20,060 27,494
--------- ---------
Total in financial institutions,
supplementary and authorized 1,616,474 951,169
========= =========
IN OTHER COMPANIES
Noncontrolled
Local
30685228501 o Consolidar ART S.A. Common $ 1 1 375,000 12,289 12,976
o Other 4,683 5,340
Foreign
17415001 o A.I.G. Latin American Fund 20,047 11,911
o Other 57 1,817
--------- ---------
Subtotal noncontrolled 37,076 32,044
--------- ---------
Total in other companies 37,076 32,044
========= =========
TOTAL INVESTMENTS IN OTHER COMPANIES 1,653,550 983,213
========= =========
EXHIBIT E
(Contd.)
DETAIL OF INVESTMENTS IN OTHER COMPANIES AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Information about the issuer
------------------------------------------------------------------------------
Data from last published financial statements
-------------------------------------------------------
Fiscal Net income
year/ Capital Stockholders' for the fiscal
Description Main business period-end stock equity year/period
---------------------------------------------------- --------------------- ---------- -------- -------------- ---------------
FINANCIAL INSTITUTIONS, SUPPLEMENTARY AND AUTHORIZED
Controlled
Local Thousands of $
o Frances Valores Sociedad de Bolsa S.A. Stock broker 09/30/02 1,600 5,809 3,343
o Consolidar Administradora de Fondos de
Jubilaciones y Pensiones S.A. Pensions fund manager 09/30/02 3,525 216,638 2,583
o Consolidar Cia. de Seguros de Vida S.A. Insurance company 09/30/02 3,000 38,214 1,353
o Consolidar Cia. de Seguros de Retiro S.A. Insurance company 09/30/02 3,000 46,725 701
o Credilogros Compania Financiera S.A. Financial institution 09/30/02 57,100 63,388 (82,722)
o Other
Foreign Thousands of US$
o Banco Frances (Cayman) Ltd. Banking 09/30/02 306,648 1,355,479 (844,011)
o BBVA Uruguay S.A. Banking 03/31/02 94,315 270,020 1,963
Noncontrolled
Local Thousands of $
o Rombo Cia. Financiera S.A. Financial Institution 09/30/02 20,000 32,000 (24,026)
o Banelco S.A. Information services 06/30/02 9,755 28,005 7,818
o Other
Foreign Thousands of US$
o Bladex S.A. Banking 12/31/00 132,851 699,205 97,055
IN OTHER COMPANIES
Noncontrolled
Local Thousand of $
o Consolidar ART S.A. Workers compensation 09/30/02 3,000 98,465 6,967
o Other
Foreign Thousand of US$
o A.I.G. Latin American Fund Investing 12/31/00 37,048 27,615 (9,433)
o Other
EXHIBIT F
MOVEMENT OF BANK PREMISES AND EQUIPMENT
AND OTHER ASSETS FOR THE NINE MONTH PERIODS
ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Restated net
book value at Additions Transfers Decreases
beginning of in constant in constant in constant
Description fiscal year currency currency currency
--------------------------------------------- ------------- ----------- ----------- -----------
BANK PREMISES AND EQUIPMENT
Real Estate 387,990 5,813 387 3,707
Furniture and Facilities 42,244 2,188 - -
Machinery and Equipment 66,410 8,880 - -
Automobiles 572 208 - 66
---------- ---------- ---------- ----------
Total 497,216 17,089 387 3,773
========== ========== ========== ==========
OTHER ASSETS
Works of Art 991 - - -
Rent assets 7,361 - - 2,320
Assets received from collections of loans 19,471 4,945 (10,031) 4,465
Stationery and office supplies 2,187 3,386 - 4,596
Other assets 126,099 21 9,644 22,186
---------- ---------- ---------- ----------
Total 156,109 8,352 (387) 33,567
========== ========== ========== ==========
EXHIBIT F
(Contd.)
MOVEMENT OF BANK PREMISES AND EQUIPMENT
AND OTHER ASSETS FOR THE NINE MONTH PERIODS
ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Depreciation for the period
in constant currency
---------------------------
Years of Net book value Net book value
Description useful life Amount at 2002 at 2001
---------------------------------------------- ------------ ----------- -------------- --------------
BANK PREMISES AND EQUIPMENT
Real Estate 50 6,452 384,031 386,759
Furniture and Facilities 10 4,357 40,075 41,379
Machinery and Equipment 5 16,176 59,114 71,053
Automobiles 5 103 611 671
---------- ---------- ----------
Total 27,088 483,831 499,862
========== ========== ==========
OTHER ASSETS
Works of Art - - 991 990
Rent assets 50 60 4,981 7,396
Assets received from collections of loans 50 115 9,805 2,126
Stationery and office supplies - - 977 1,391
Other assets 50 1,112 112,466 123,420
---------- ---------- ----------
Total 1,287 129,220 135,323
========== ========== ==========
EXHIBIT G
MOVEMENT OF INTANGIBLE ASSETS FOR THE NINE MONTH PERIODS
ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Restated net book
value at beginning Additions Decreases
Description of fiscal year in constant currency in constant currency
--------------------------------------- ------------------ -------------------- --------------------
- Goodwill 112,611 - -
- Organization and development
expenses (1) 140,415 56,257 (14)
---------- ---------- ----------
Total 253,026 56,257 (14)
========== ========== ==========
Amortization for the period
in constant currency
-------------------------------
Years of Net book value Net book value
Description useful life Amount at 2002 at 2001
------------------------------------ ------------- ---------- -------------- --------------
- Goodwill 10 59,742 52,869 118,002
- Organization and development
expenses (1) 5 50,413 146,245 152,206
--------- ---------- ----------
Total 110,155 199,114 270,208
========= ========== ==========
(1) This mainly includes costs from information technology projects
contracted from independent parties and leasehold improvements.
EXHIBIT H
CONCENTRATION OF DEPOSITS
AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
2002 2001
------------------------------ --------------------------------
Outstanding % of total Outstanding % of total
Number of customers balance portfolio balance portfolio
--------------------------------- ------------- ------------- ------------- --------------
10 largest customers 578,269 9.52% 1,361,601 9.21%
50 next largest customers 502,702 8.27% 1,331,305 9.00%
100 following customers 303,938 5.00% 480,071 3.25%
Remaining customers 4,690,693 77.21% 11,615,601 78.54%
----------- ----------- ----------- -----------
TOTAL 6,075,602 100.00% 14,788,578 100.00%
=========== =========== =========== ===========
EXHIBIT I
BREAKDOWN OF MATURITY TERMS OF DEPOSITS,
OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS AND
SUBORDINATED CORPORATE BONDS
AS OF SEPTEMBER 30, 2002
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Term remaining to maturity
---------------------------------------------------------------------------------
More than 24
Description 1 month 3 months 6 months 12 months 24 months months Total
----------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Deposits 3,641,301 109,050 28,582 238,091 1,554,922 503,656 6,075,601
---------- ---------- ---------- ---------- ---------- ---------- ----------
Other liabilities from financial
transactions
Central Bank of the Argentine
Republic (1) 16,099 5,426 1,749,570 54,905 50,669 102,466 1,979,135
Banks and International
Organizations 1,033,960 39,455 9,666 104,398 210 - 1,187,689
Non-subordinated corporate bonds 567,754 - - - - - 567,754
Financing received from Argentine
financial institutions 26,044 - - - 83,715 - 109,759
Other 336,747 - - 18,303 18,570 863,230 1,236,850
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 1,980,604 44,881 1,759,236 177,606 153,164 965,696 5,081,187
---------- ---------- ---------- ---------- ---------- ---------- ----------
Subordinated corporate bonds - 7,110 - - 19,101 559,005 585,216
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 5,621,905 161,041 1,787,818 415,697 1,727,187 2,028,357 11,742,005
========== ========== ========== ========== ========== ========== ==========
EXHIBIT J
MOVEMENT OF ALLOWANCES FOR THE NINE MONTH PERIODS
ENDED SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Decrease Book value
-------------------------- ------------------------
Restated book Increase
value at in constant Reversals in Applications Monetary gain
beginning currency constant in constant generated on
Description of fiscal year (6) currency currency allowances 2002 2001
------------------------------ -------------- ----------- ------------ ------------ ------------- ---------- ----------
ALLOWANCES QUALIFYING ASSETS
Loans
- Doubtful accounts and
impairment value 1,012,202 1,120,991 (1)(5) - 137,513 (915,715) 1,079,965 437,485
Other receivables from
financial transactions
- Doubtful accounts and
impairment value 9,235 63,371 (1) - - (12,965) 59,641 7,648
Assets out on Financing Lease
- Doubtful accounts and
impairment value 738 263 (1) - - (422) 579 673
Investments in other companies
- Impairment value 11,909 24,231 (3) - - (16,093) 20,047 2,657
Other receivables
- Doubtful accounts 3,104 362,772 (2) - 1,975 (81,548) 282,353 9,646
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 1,037,188 1,571,628 - 139,488 (1,026,743) 1,442,585 458,109
========== ========== ========== ========== ========== ========== ==========
LIABILITIES-ALLOWANCES
- Contingents commitments 1,277 161,270 (1) - - (14,463) 148,084 1,050
- Other contingencies 114,216 67,519 (4) - 75,673 (56,016) 50,046 118,309
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 115,493 228,789 - 75,673 (70,479) 198,130 119,359
========== ========== ========== ========== ========== ========== ==========
(1) Recorded in compliance with the provisions of Communique "A" 2729, as
supplemented, of the BCRA, taking into account note 3.3.f).
(2) Recorded to cover possible uncollectibility risks arising out of payments
under protection actions booked in other receivables (see note 6).
(3) Recorded, mainly, to recognize the estimated impairment in AIG Latin
American Fund's equity as of September 30, 2002.
(4) Recorded to cover possible contingencies that were not considered in
other accounts (civil, labor, commercial and other lawsuits). See note
3.3.q).
(5) Includes 174,779 of charge on loans impairment, booked in "Financial
expense - Other".
(6) Includes exchange differences generated as allowances in foreign
currency, booked in the "Gold and foreign currency exchange difference"
account, as follows:
- Loans 318,939
- Other receivables from financial transactions 5,233
- Assets out on financing lease 263
- Investments in other companies 24,231
- Other receivables 4,784
EXHIBIT K
CAPITAL STRUCTURE AS OF SEPTEMBER 30, 2002
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
SHARES CAPITAL STOCK
------------------------------------------- ----------------------------------------------------------------------
Issued Pending
Votes per ---------------------------------- issuance or
Class Number share Outstanding In portfolio distribution Paid in
----------- -------------- ------------ ------------ -------------- -------------- -----------
Common 209.631.892 1 209,576 - 55 209,631
(1) (2)
(1) Shares issued and available to stockholders' but not as yet withdrawn.
(2) Capital registered with the Public Registry of Commerce (see note 14).
EXHIBIT L
FOREIGN CURRENCY ACCOUNTS AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
-Stated in thousands of pesos-
Accounts 2002
------------------------------ -----------------------------------------------------------------------------------------------
Total of period (per type of currency)
-----------------------------------------------------------------------------------
Total of Deutsche Pounds French Swiss
period Euro US Dollars Marks Sterling Franc Franc Yen
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ASSETS
Cash and due from banks 163,830 4,203 159,478 - 60 - - 3
Government and private
securities 1,619,276 - 1,619,276 - - - - -
Loans 1,238,538 638 1,237,900 - - - - -
Other receivables from
financial transactions 1,733,889 - 1,733,889 - - - - -
Assets out on financing
lease 130 - 130 - - - - -
Investments in other
companies 1,376,521 - 1,376,521 - - - - -
Other receivables 40,857 - 40,857 - - - - -
Suspense items 57 - 57 - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 6,173,098 4,841 6,168,108 - 60 - - 3
========== ========== ========== ========== ========== ========== ========== ==========
LIABILITIES
Deposits 174,071 - 174,071 - - - - -
Other liabilities from
financial transactions 2,372,819 6,575 2,366,240 - 4 - - -
Other liabilities 1,455,429 12 1,455,408 - 8 - - 1
Subordinated corporate
bonds 559,005 - 559,005 - - - - -
Suspense items 9,348 - 9,348 - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 4,570,672 6,587 4,564,072 - 12 - - 1
========== ========== ========== ========== ========== ========== ========== ==========
MEMORANDUM ACCOUNTS
Debit accounts (except
contra debit accounts)
Contingent 5,962,291 - 5,962,291 - - - - -
Control 16,987,913 14,038 16,971,800 - 24 - - -
For derivatives - - - - - - - -
For trust activities - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 22,950,204 14,038 22,934,091 - 24 - - -
========== ========== ========== ========== ========== ========== ========== ==========
Credit accounts (except
contra credit accounts)
Contingent 1,191,231 - 1,191,231 - - - - -
Control 223 - 223 - - - - -
For derivatives - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 1,191,454 - 1,191,454 - - - - -
========== ========== ========== ========== ========== ========== ========== ==========
Accounts 2001
------------------------------ ---------- ----------
----------
Total of
Other period
---------- ----------
ASSETS
Cash and due from banks 86 2,213,121
Government and private
securities - 4,955,558
Loans - 7,282,152
Other receivables from
financial transactions - 1,008,972
Assets out on financing
lease - 49,417
Investments in other
companies - 611,147
Other receivables - 36,211
Suspense items - 2,775
---------- ----------
TOTAL 86 16,159,353
========== ==========
LIABILITIES
Deposits - 11,849,153
Other liabilities from
financial transactions - 2,842,502
Other liabilities - 14,344
Subordinated corporate
bonds - 389,066
Suspense items - 2,166
---------- ----------
TOTAL - 15,097,231
========== ==========
MEMORANDUM ACCOUNTS
Debit accounts (except
contra debit accounts)
Contingent - 4,626,283
Control 2,051 17,169,352
For derivatives - 24,041
For trust activities - 194,830
---------- ----------
TOTAL 2,051 22,014,506
========== ==========
Credit accounts (except
contra credit accounts)
Contingent - 1,661,667
Control - 10,224
For derivatives - 24,041
---------- ----------
TOTAL - 1,695,932
========== ==========
EXHIBIT N
ASSISTANCE TO AFFILIATES AS SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Status
----------------------------------------------------------------
With high risk of
Nonperforming/ uncollectibility/
Deficient Unlikely to be
In Potential Compliance collected
Risk/ -------------------- --------------------
Inadequate Not yet Not yet
Concept Normal Compliance matured Past-due matured Past-due
---------------------------------------------------------- --------- --------- --------- --------- --------- ---------
1. Loans 46,968
- Overdraft 1,905 - - - - -
With senior or first - degree security and counter
guaranty "A"
With senior or first - degree security and counter
guaranty "B"
Without senior security or counter guaranty 1,905 - - - - -
- Discounted Instruments
With senior or first - degree security and counter
guaranty "A" - - - - - -
With senior or first - degree security and counter
guaranty "B" - - - - - -
Without senior security or counter guaranty
- Real Estate Mortgage and Collateral Loans 258 - - - - -
With senior or first - degree security and counter
guaranty "A" - - - - - -
With senior or first - degree security and counter
guaranty "B" 258 - - - - -
Without senior security or counter guaranty - - - - - -
- Consumer 22 - - - - -
With senior or first - degree security and counter
guaranty "A" - - - - - -
With senior or first - degree security and counter
guaranty "B" - - - - - -
Without senior security or counter guaranty 22 - - - - -
- Credit Cards 83 - - - - -
With senior or first - degree security and counter
guaranty "A" - - - - - -
With senior or first - degree security and counter
guaranty "B" - - - - - -
Without senior security or counter guaranty 83 - - - - -
- Other 44,700 - - - - -
With senior or first - degree security and counter
guaranty "A" - - - - - -
With senior or first - degree security and counter
guaranty "B" - - - - - -
Without senior security or counter guaranty 44,700 - - - - -
2. Other receivables from financial transactions 648 - - - - -
3. Assets out on financing lease and other - - - - - -
4. Contingent commitments 13,861 - - - - -
5. Investments in other companies and private securities 1,488,248 - - - - -
--------- --------- --------- --------- --------- ---------
Total 1,549,725 - - - - -
--------- --------- --------- --------- --------- ---------
Total Allowances 95 - - - - -
--------- --------- --------- --------- --------- ---------
EXHIBIT N
(Contd.)
ASSISTANCE TO AFFILIATES AS SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See Note 19)
- Stated in thousands of pesos -
Status
--------------------------------
Uncollectible,
classified as such Total
under regulatory -----------------------------
Concept Uncollectible requirements 2002 2001
---------------------------------------------------------- ------------- ------------------ ----------- -----------
1. Loans - - 46,968 90,182
- Overdraft - - 1,905 272
With senior or first - degree security and counter
guaranty "A" - - - -
With senior or first - degree security and counter
guaranty "B" - - - -
Without senior security or counter guaranty - - 1,905 272
- Discounted instruments - - - 1,209
With senior or first - degree security and counter
guaranty "A" - - - -
With senior or first - degree security and counter
guaranty "B" - - - -
Without senior security or counter guaranty - - - 1,209
- Real Estate Mortgage and Collateral Loans - - 258 1,032
With senior or first - degree security and counter
guaranty "A" - - -
With senior or first - degree security and counter
guaranty "B" - - 258 1,032
Without senior security or counter guaranty - - - -
- Consumer - - 22 95
With senior or first - degree security and counter
guaranty "A" - - - -
With senior or first - degree security and counter
guaranty "B" - - - -
Without senior security or counter guaranty - - 22 95
- Credit cards - - 83 124
With senior or first - degree security and counter
guaranty "A" - - - -
With senior or first - degree security and counter
guaranty "B" - - - -
Without senior security or counter guaranty - - 83 124
- Other - - 44,700 87,450
With senior or first - degree security and counter
guaranty "A" - - - -
With senior or first - degree security and counter
guaranty "B" - - - -
Without senior security or counter guaranty - - 44,700 87,450
2. Other receivables from financial transactions - - 648 -
3. Assets out on financing lease and other - - - 34,685
4. Contingent commitments - - 13,861 23,631
5. Investments in other companies and private securities - - 1,488,248 861,743
----------- ----------- ----------- -----------
Total - - 1,549,725 1,010,241
----------- ----------- ----------- -----------
Total Allowances - - 95 901
----------- ----------- ----------- -----------
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2002 AND 2001
(Art. 33 of Law No. 19,550)
(Translation of financial statements originally issued in Spanish - See
Note 19 to the financial statements of BBVA Banco Frances S.A.)
-Stated in thousands of pesos-
ASSETS 2002 2001
---------- ----------
CASH AND DUE FROM BANKS
Cash 199,537 476,355
Due from banks and correspondents 708,909 2,367,646
---------- ----------
908,446 2,844,001
---------- ----------
GOVERNMENT AND PRIVATE SECURITIES (Note 5)
Holdings in investment accounts 1,714,025 6,299,280
Holdings for trading or financial transactions 194,495 410,282
Unlisted Government Securities 579,120 725,790
Investments in listed private securities 58,451 186,285
Less: Allowances 30,964 -
---------- ----------
2,515,127 7,621,637
---------- ----------
LOANS
To the non financial governmental sector (Exhibit 1) 7,822,211 2,349,311
To the financial sector (Exhibit 1) 16,959 308,170
To the non financial private sector and residents abroad (Exhibit 1) 3,158,741 8,884,588
---------- ----------
Overdraft 203,397 622,432
Discounted instruments 283,169 2,261,847
Real estate mortgage 546,336 1,744,793
Collateral Loans 18,138 60,963
Consumer 233,058 910,888
Credit cards 138,791 524,333
Other 1,584,211 2,653,447
Interest, adjustments and listed-price differences accrued and pending collection 153,549 150,437
Less: Unused collections 1,476 -
Less: Interest documented together with main obligation 432 44,552
Less: Allowances 1,395,612 496,215
---------- ----------
9,602,299 11,045,854
---------- ----------
OTHER RECEIVABLES FROM FINANCIAL TRANSACTIONS
Central Bank of the Argentine Republic 348,610 98,425
Amounts receivable for spot and forward sales pending settlement 25,443 1,160,943
Instruments to be received for spot and forward purchases pending settlement 778,273 536,386
Premiums on options purchased - 3,379
Unlisted corporate bonds (Exhibit 1) 235,707 188,882
Other receivables not covered by debtor classification regulations 869,868 134,109
Other receivables covered by debtor classification regulations (Exhibit 1) 15,351 70,960
Interest and adjustments accrued and pending collection not covered by debtor classification
regulations 3,164 31
Interest and adjustments accrued and pending collection covered by debtor classification
regulations (Exhibit 1) 9,213 64
Less: unused collections 116 -
Less: Allowances 75,026 7,876
---------- ----------
2,210,487 2,185,303
ASSETS OUT ON FINANCING LEASE ---------- ----------
Assets out on financing lease (Exhibit 1) 20,936 56,481
Less: Allowances 597 695
---------- ----------
20,339 55,786
---------- ----------
INVESTMENTS IN OTHER COMPANIES
In financial institutions 13,739 19,417
Other 47,994 44,535
Less: Allowances 20,047 2,657
---------- ----------
41,686 61,295
---------- ----------
OTHER RECEIVABLES
Receivables from sale of assets (Exhibit 1) 145 582
Other 813,702 256,003
Other accrued interest and adjustments receivable 1 2
Less: Allowances 282,476 9,677
---------- ----------
531,372 246,910
---------- ----------
BANK PREMISES AND EQUIPMENT 523,575 555,703
---------- ----------
OTHER ASSETS 130,095 135,583
---------- ----------
INTANGIBLE ASSETS
Goodwill 52,869 118,002
Organization and development expenses 256,194 276,694
---------- ----------
309,063 394,696
---------- ----------
SUSPENSE ITEMS 2,619 5,370
---------- ----------
OTHER SUBSIDIARIES'ASSETS (Note 5) 7,625 19,375
---------- ----------
TOTAL ASSETS 16,802,733 25,171,513
========== ==========
(Contd.)
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2002 AND 2001
(Art. 33 of Law No. 19,550)
(Translation of financial statements originally issued in Spanish - See
Note 19 to the financial statements of BBVA Banco Frances S.A.)
-Stated in thousands of pesos-
LIABILITIES 2002 2001
---------- ----------
DEPOSITS
From the non financial government sector 26,432 49,807
From the financial sector 122,536 239,841
From the non financial private sector and residents abroad 6,506,223 16,530,205
---------- ----------
Checking accounts 1,188,622 1,724,519
Savings deposits 486,266 2,406,324
Certificates of deposit 2,235,038 12,131,092
Other 1,888,551 157,246
Interest, adjustments and listed-price differences accrued payable 707,746 111,024
---------- ----------
6,655,191 16,819,853
---------- ----------
OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS
Central Bank of the Argentine Republic 1,979,135 23,421
---------- ----------
Other 1,979,135 23,421
Banks and International Organizations 2,253,082 937,035
Non-subordinated corporate bonds 559,005 553,582
Amounts payable for spot and forward purchases pending settlement 434,130 458,523
Instruments to be delivered for spot and forward sales pending settlement 29,731 1,133,572
Premiums on options sold - 3,379
Financing received from Argentine financial institutions 71,067 204,509
Other 1,090,766 114,944
Interest, adjustments and listed-price differences accrued payable 58,325 33,396
---------- ----------
6,475,241 3,462,361
---------- ----------
OTHER LIABILITIES
Fees payable 149 1,495
Other 149,288 522,438
Adjustments and interest accrued pending payment - 131
---------- ----------
149,437 524,064
---------- ----------
ALLOWANCES 210,379 152,791
---------- ----------
SUBORDINATED CORPORATE BONDS 585,216 389,066
---------- ----------
SUSPENSE ITEMS 11,012 2,761
---------- ----------
OTHER SUBSIDIARIES' LIABILITIES (Note 5) 964,070 1,158,138
---------- ----------
TOTAL LIABILITIES 15,050,546 22,509,034
---------- ----------
MINORITY INTEREST IN SUBSIDIARIES (Note 3) 164,120 291,434
---------- ----------
STOCKHOLDERS' EQUITY 1,588,067 2,371,045
---------- ----------
TOTAL LIABILITIES, STOCKHOLDERS' EQUITY AND MINORITY INTEREST 16,802,733 25,171,513
========== ==========
MEMORANDUM ACCOUNTS
2002 2001
---------- ----------
DEBIT ACCOUNTS
Contingent
- Guaranties received 6,261,156 8,306,821
- Contra contingent debit accounts 3,759,295 2,377,103
---------- ----------
10,020,451 10,683,924
---------- ----------
Control
- Receivables classified as irrecoverable 535,745 1,169,457
- Other 24,511,206 30,000,196
- Contra control debit accounts 80,506 153,672
---------- ----------
25,127,457 31,323,325
---------- ----------
For derivatives
- Notional value of call options purchased - 24,041
- Contra debit accounts for derivatives - 24,041
---------- ----------
- 48,082
---------- ----------
For trustee activities
- Funds received in trust 63,401 261,355
---------- ----------
63,401 261,355
---------- ----------
TOTAL 35,211,309 42,316,686
========== ==========
CREDIT ACCOUNTS
Contingent
- Credit lines granted (unused portion) covered by debtor classification regulations
(Exhibit 1) 154,263 480,454
- Guaranties provided to the BCRA 2,289,812 23,129
- Other guaranties given covered by debtor classification regulations (Exhibit 1) 880,267 1,414,108
- Other guaranties given not covered by debtor classification regulations 1,730 2,998
- Other covered by debtor classification regulations (Exhibit 1) 433,223 456,414
- Contra contingent credit accounts 6,261,156 8,306,821
---------- ----------
10,020,451 10,683,924
---------- ----------
Control
- Items to be credited 80,350 153,584
- Other 156 88
- Contra control credit accounts 25,046,951 31,169,653
---------- ----------
25,127,457 31,323,325
---------- ----------
For derivatives
- Notional value of call options sold - 24,041
- Contra credit accounts for derivatives - 24,041
---------- ----------
- 48,082
---------- ----------
For trustee activities
- Contra credit accounts for trustee activities 63,401 261,355
---------- ----------
63,401 261,355
---------- ----------
TOTAL 35,211,309 42,316,686
========== ==========
The accompanying notes 1 through to 5 to the consolidated financial statements
with subsidiaries and the Exhibit 1 are an integral part of these statements,
which in turn are part of the individual Financial Statements of BBVA Banco
Frances S.A. and are to be read in conjunction therewith.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(Art. 33 of Law No. 19,550)
(Translation of financial statements originally issued in Spanish - See
Note 19 to the financial statements of BBVA Banco Frances S.A.)
- Stated in thousands of pesos -
2002 2001
---------- ----------
FINANCIAL INCOME
Interest on cash and due from banks 5,376 47,965
Interest on loans to the financial sector 4,647 31,005
Interest on overdraft 161,179 129,937
Interest on discounted instruments 58,052 187,815
Interest on real estate mortgage 77,452 161,037
Interest on collateral loans 3,307 6,949
Interest on credit card loans 50,790 82,539
Interest on other loans 321,043 870,977
Interest from other receivables from financial transactions 21,479 52,010
Income from guaranteed loans - Decree 1387/01 1,774,493 -
Net income from government and private securities 85,014 622,773
Indexation by CER 1,359,874 -
Other 890,021 134,624
---------- ----------
4,812,727 2,327,631
---------- ----------
FINANCIAL EXPENSE
Interest on checking accounts 235,062 15,824
Interest on savings deposits 6,306 34,805
Interest on certificates of deposit 391,175 740,549
Interest on financing to the financial sector 854 4,088
Interest from other liabilities from financial transactions 126,850 105,936
Other interest 649,254 31,089
Net loss on options - 31
Indexation by CER 1,289,505 -
Other 1,282,602 109,543
---------- ----------
3,981,608 1,041,865
---------- ----------
GROSS INTERMEDIATION MARGIN 831,119 1,285,766
---------- ----------
PROVISION FOR LOAN LOSSES 706,133 271,550
---------- ----------
SERVICE CHARGE INCOME
Related to lending transactions 78,973 125,003
Related to borrowing transactions 127,081 198,249
Other commissions 185,529 452,265
Other 53,541 125,648
---------- ----------
445,124 901,165
---------- ----------
SERVICE CHARGE EXPENSE
Commissions 27,665 56,204
Other 20,134 39,718
---------- ----------
47,799 95,922
---------- ----------
MONETARY LOSS ON FINANCIAL INTERMEDIATION (90,515) -
---------- ----------
(Contd.)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(Art. 33 of Law No. 19,550)
(Translation of financial statements originally issued in Spanish - See
Note 19 to the financial statements of BBVA Banco Frances S.A.)
- Stated in thousands of pesos -
2002 2001
---------- ----------
OPERATING EXPENSES
Payroll expenses 318,147 579,594
Fees to Bank Directors and Statutory Auditors 602 2,903
Other professional fees 16,875 22,044
Advertising and publicity 15,093 37,571
Taxes 23,847 53,421
Other operating expenses 193,136 265,553
Other 46,016 81,917
---------- ----------
613,716 1,043,003
---------- ----------
MONETARY LOSS ON OPERATING EXPENSES (109,796) -
---------- ----------
NET (LOSS) INCOME FROM FINANCIAL TRANSACTIONS (291,716) 776,456
---------- ----------
NET GAIN/(LOSS) ON MINORITY INTEREST IN SUBSIDIARIES 45,088 (36,100)
---------- ----------
OTHER INCOME
Income from long-term investments 179,140 2,473
Punitive interests 5,561 7,354
Loans recovered and reversals of allowances 28,593 64,069
Other 180,806 186,438
---------- ----------
394,100 260,334
---------- ----------
OTHER EXPENSE
Losses from long-term investments - 3,049
Punitive interests and charges paid to Central Bank of the Argentine Republic 2,630 13
Charge for uncollectibility of other receivables and other allowances 587,146 103,511
Other 116,674 440,116
---------- ----------
706,450 546,689
---------- ----------
MONETARY LOSS ON OTHER OPERATIONS (411,212) -
---------- ----------
NET (LOSS) INCOME BEFORE INCOME TAX AND TAX ON MINIMUM PRESUMED INCOME (970,190) 454,001
---------- ----------
INCOME TAX AND TAX ON MINIMUM PRESUMED INCOME 21,428 146,569
---------- ----------
NET (LOSS) INCOME FOR THE PERIOD (991,618) 307,432
========== ==========
The accompanying notes 1 through 5 to the consolidated financial statements
with subsidiaries and the Exhibit 1 are an integral part of these statements,
which in turn are part of the individual Financial Statements of BBVA Banco
Frances S.A. and are to be read in conjunction therewith.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(ART. 33 OF LAW No. 19,550)
(Translation of financial statements originally issued in Spanish - See
Note 19 to the financial statements of BBVA Banco Frances S.A.)
-Stated in thousands of pesos-
2002 2001
---------- ----------
CHANGES IN CASH FLOWS
Cash and due from banks at beginning of fiscal year restated 1,913,011 1,178,899
Increase/(decrease) in funds (1,004,565) 1,665,102
---------- ----------
Cash and due from banks at end of the period 908,446 2,844,001
---------- ----------
REASONS FOR CHANGES IN CASH FLOWS
Financial income collected 1,994,172 1,698,974
Service charge income collected 470,777 897,988
Less:
Financial expense paid 3,046,582 981,180
Services charge expense paid 47,799 96,197
Operating expenses paid 561,508 919,526
---------- ----------
FUNDS PROVIDED/(USED IN) BY RECURRING OPERATIONS (1,190,940) 600,059
---------- ----------
OTHER SOURCES OF FUNDS
Net increase in other liabilities from financial transactions 4,586,611 -
Net increase in other liabilities 1,984,275 -
Net decrease in loans - 3,245,680
Net decrease in other receivables from financial transactions - 3,042,584
Other sources of funds 214,084 252,670
---------- ----------
TOTAL OF SOURCES OF FUNDS 6,784,970 6,540,934
---------- ----------
USE OF FUNDS
Net increase in government and private securities 2,204,520 3,723,029
Net increase in loans 474,710 -
Net increase in other receivables from financial transactions 2,064,578 -
Net increase in other assets 115,816 72,147
Net decrease in deposits 989,538 920,627
Net decrease in other liabilities from financial transactions - 157,266
Net decrease in other liabilities - 19,101
Cash dividends - 162,467
Other uses of funds 43,533 421,254
---------- ----------
TOTAL USES OF FUNDS 5,892,695 5,475,891
---------- ----------
MONETARY LOSS GENERATED ON CASH AND DUE FROM BANKS 705,900 -
---------- ----------
INCREASE/(DECREASE) IN FUNDS (1,004,565) 1,665,102
========== ==========
The accompanying notes 1 through to 5 to the consolidated financial statements
with subsidiaries and the Exhibit 1 are an integral part of these statements,
which in turn are part of the individual Financial Statements of BBVA Banco
Frances S.A. and are to be read in conjunction therewith.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
WITH SUBSIDIARIES AS OF SEPTEMBER 30, 2002 AND 2001
(ART. 33 OF LAW No. 19,550)
(Translation of financial statements originally issued in Spanish - See
Note 19 to the financial statements of BBVA Banco Frances S.A.)
-Stated in thousands of pesos-
1. SIGNIFICANT ACCOUNTING POLICIES AND SUBSIDIARIES
General rule
In accordance with the procedures set forth in BCRA's regulations and
Technical Resolution N(degree) 4 of the Argentine Federation of
Professional Councils in Economic Sciences, BBVA Banco Frances S.A. (BF)
has consolidated - line by line - its balance sheets as of September 30,
2002 and 2001, and the statements of income and cash flows for the
nine-month periods then ended, as per the following detail:
- As of September 30, 2002:
a) With the financial statements of Banco Frances (Cayman) Ltd. and
its subsidiary, Credilogros Cia. Financiera S.A. and its
subsidiary, Frances Valores Sociedad de Bolsa S.A. and Atuel
Fideicomisos S.A., for the nine-month period ended September 30,
2002.
b) With the financial statements of Consolidar Administradora de
Fondos de Jubilaciones y Pensiones S.A., Consolidar Cia. de
Seguros de Vida S.A. and its subsidiary and Consolidar Cia. de
Seguros de Retiro S.A. and its subsidiary, for the three-month
period ended September 30, 2002.
The income (loss) of Consolidar Administradora de Fondos de Jubilaciones y
Pensiones S.A., Consolidar Cia. de Seguros de Vida S.A. and its subsidiary
and Consolidar Cia. de Seguros de Retiro S.A. and its subsidiary, have
been adjusted to make the nine-month period of the companies being
consolidated consistent.
- As of September 30, 2001:
a) With the financial statements of Banco Frances (Cayman) Ltd. and
its subsidiary, BBVA Uruguay S.A. and its subsidiary,
Credilogros Cia. Financiera S.A., Frances Valores Sociedad de
Bolsa S.A. and Atuel Fideicomisos S.A., for the nine-month
periods ended September 30, 2001.
b) With the financial statements of Consolidar Administradora de
Fondos de Jubilaciones y Pensiones S.A., Consolidar Cia. de
Seguros de Vida S.A. and its subsidiary and Consolidar Cia. de
Seguros de Retiro S.A. and its subsidiary, for the three-month
period ended September 30, 2001.
The income of Consolidar Administradora de Fondos de Jubilaciones y
Pensiones S.A., Consolidar Cia. de Seguros de Vida S.A. and its subsidiary
and Consolidar Cia. de Seguros de Retiro S.A. and its subsidiary, have
been adjusted to make the nine-month period of the companies being
consolidated consistent.
Interests in subsidiaries as of September 30, 2002 and 2001 are listed
below:
Shares Interest percentage in
---------------------------------- ----------------------------------------------
Type Number Total Capital Possible Votes
-------- ----------------------- --------------------- --------------------
September, 30 September, 30,
----------------------- ----------------------------------------------
Companies 2002 2001 2002 2001 2002 2001
------------------------------------- ---------- ---------- -------- -------- -------- --------
Banco Frances (Cayman) Ltd. Common 82,283,621 82,283,621 100.0000 100.0000 100.0000 100.0000
BBVA Uruguay S.A. (1) Common - 79,130 - 60.8787 - 60.8787
Frances Valores Soc. de Bolsa S.A. Common 3,199 3,199 99.9700 99.9700 99.9700 99.9700
Atuel Fideicomisos S.A. Common 99,999 99,999 99.9999 99.9999 99.9999 99.9999
Consolidar A.F.J.P. S.A. Common 1,899,600 1,899,600 53.8892 53.8892 53.8892 53.8892
Consolidar Cia. de Seguros de Vida
S.A. Common 197,875 197,875 65.9582 65.9582 65.9582 65.9582
Consolidar Cia. de Seguros de Retiro
S.A. Common 200,000 200,000 66.6667 66.6667 66.6667 66.6667
Credilogros Cia. Financiera S.A. Common 39,700,000 39,700,000 69.5271 69.5271 69.5271 69.5271
(1) On May 13, 2002, these investment was sold to BBVA (see note 2.2. to
individual financial statements).
Assets, liabilities, stockholders' equity and subsidiaries' net income
(loss) balances as of September 30, 2002 and 2001 accordingly with BCRA
regulations, are listed below:
Stockholders' Net income/
Assets Liabilities Equity gain-(loss)
-------------------- --------------------- -------------------- -------------------
September, 30 September, 30, September, 30 September, 30,
-------------------- --------------------- -------------------- -------------------
Companies 2002 2001 2002 2001 2002 2001 2002 2001
------------------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
Banco Frances (Cayman) Ltd. and subsidiary 3,500,898 2,426,843 2,145,419 1,956,963 1,355,479 469,880 (844,011) 112,829
BBVA Uruguay S.A. and subsidiary - 2,363,585 - 2,155,006 - 208,579 - 5,600
Frances Valores Soc. de Bolsa S.A. 5,974 1,840 165 230 5,809 1,610 3,343 (731)
Atuel Fideicomisos S.A. 4,443 3,091 3,079 2,794 1,364 297 1,074 115
Consolidar A.F.J.P. S.A. 280,384 473,596 72,882 164,819 207,502 308,777 (54,555) 60,407
Consolidar Cia. de Seguros de Vida S.A.
and subsidiary 227,201 417,016 177,071 371,299 50,130 45,717 (11,659) 3,623
Consolidar Cia. de Seguros de Retiro S.A.
and subsidiary 877,328 884,347 814,063 838,373 63,265 45,974 (4,586) 6,889
Credilogros Cia. Financiera S.A. and
subsidiary 136,710 279,318 73,322 127,424 63,388 151,894 (82,722) 8,297
2. VALUATION METHODS
The financial statements of the subsidiaries have been prepared based on
similar methods to those applied by BF for preparing its own financial
statements, in connection with assets and liabilities valuation, income
measurement and restatement procedure as explained in note 3 to the
financial statements of BF, except for the financial statements of Banco
Frances (Cayman) Limited and its subsidiary. These financial statements
does not require restatement, since they are prepared in US Dollars.
The financial statements of Banco Frances (Cayman) Ltd. and its subsidiary
originally stated in US dollars were converted into Argentine pesos based
on the method described in Note 3.3.m) to the financial statements of BF.
3. MINORITY INTEREST IN SUBSIDIARIES
The breakdown of balances in the "Minority interest in subsidiaries"
account is as follows:
2002 2001
----------- -----------
Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. 95,679 137,148
Consolidar Cia. de Seguros de Vida S.A. 17,064 15,038
Consolidar Cia. de Seguros de Retiro S.A. 21,086 14,099
Credilogros Compania Financiera S.A. 30,291 43,551
BBVA Uruguay S.A. - 81,598
----------- -----------
164,120 291,434
=========== ===========
4. RESTRICTIONS ON ASSETS
a) Frances Valores Sociedad de Bolsa S.A. (stockbroking company) holds
three shares of Mercado de Valores de Buenos Aires S.A., booked in
the amount of 4,200. These shares have been pledged in favor of "HSBC
- La Buenos Aires Cia. Argentina de Seguros S.A." in security of the
contract this insurance company executed with Mercado de Valores de
Buenos Aires S.A. to cover the latter's guaranteeing any
noncompliance of stockbroking companies with their obligations.
b) See Note 7 to the financial statements of BF.
5. BREAKDOWN OF MAIN ITEMS
Detailed below are the balances of those accounts that show significant
variations in relation to the figures that arise from the financial
statements of BF:
2002 2001
---------- ----------
GOVERNMENT SECURITIES
Holdings in investment accounts
Global External Bonds of the Argentine Republic (ARG 2008) - 4,389,225
Global External Bonds of the Argentine Republic (ARG 2017) - 38,202
Global External Bonds of the Argentine Republic (ARG 2027) - 33,219
Global External Bonds of the Argentine Republic (ARG 2031) - 346,653
Medium - Term Treasury Bonds (BONTE 2003) - 93,212
Medium - Term Treasury Bonds (BONTE 2005) - 289,027
Medium - Term Treasury Bonds (BONTE 2002) - 23,966
Argentine Republic External Bills (VEY4D) 22,439 -
Argentine Federal Government (LIBOR 2012) 1,596,103 -
Floating Rate Bonds (FRB) - 598,686
Treasury bills 68,661 289,311
Other 26,822 197,779
---------- ----------
Total 1,714,025 6,299,280
========== ==========
Holdings for trading or financial transactions
Medium - Term Treasury Bonds (BONTE 2002) 5,359 -
Global External Bonds of the Argentine Republic (ARG 2008) 1,696 11,067
Treasury bills 1,907 35,691
USA Treasury bills 74,997 66,118
Argentine Republic External Bills (VEY4D) 4,314 225,757
USA Treasury Notes 100,621 15,631
Other 5,601 56,018
---------- ----------
Total 194,495 410,282
========== ==========
Unlisted government securities
Argentine Federal Government 9% Bonds (due in 2002) 414,931 479,847
Tucuman Provincial Treasury Bonds 65,193 114,244
Tax credit certificates due in 2003/2004 92,293 100,829
Brazilian Central Bank Note (NBC-E) - 28,888
Other 6,703 1,982
---------- ----------
Total 579,120 725,790
========== ==========
PRIVATE SECURITIES
Investments in listed private securities
Cointel S.A. Corporate Bonds 4,512 11,021
Acindar S.A. Corporate Bonds 2,440 4,798
Transener S.A. Corporate Bonds 1,917 6,094
Pecom S.A. Corporate Bonds - 4,843
Super Ahorro Pesos - 5,454
FBA Rent Pesos - 44,072
Roble Ahorro Dolars - 5,405
1784 Ahorro Pesos - 4,431
FBA Rent Dolars - 16,399
Optimun Dolar - 4,429
Nortel Inversora - 1,840
Financial Trust Bank Roberts 3,509 -
Financial Trust Radar - 22,509
Galtrust 1 Financial Trust 3,630 10,007
Other 42,443 44,983
---------- ----------
Total 58,451 186,285
---------- ----------
Allowances (30,964) -
---------- ----------
Total 2,515,127 7,621,637
========== ==========
2002 2001
---------- ----------
OTHER ASSETS
Premium receivables from insurance companies 7,164 15,445
Others related to insurance business 461 3,930
---------- ----------
Total 7,625 19,375
========== ==========
OTHER LIABILITIES
Insurance companies, claims in adjustment process 329,056 574,204
Insurance companies, mathematical reserve 589,086 752,929
Insurance companies, reinsurer reserve (242,111) (520,168)
Other related to insurance business 288,039 351,173
---------- ----------
Total 964,070 1,158,138
========== ==========
Exhibit 1
STATEMENT OF DEBTORS' STATUS CONSOLIDATED WITH SUBSIDIARIES AND
OTHER ENTITIES IN ARGENTINA AND ABROAD
AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See
Note 19 to the financial statement of BBVA Banco Frances S.A.)
-Stated in thousands of pesos-
2002 2001
---------- ----------
COMMERCIAL PORTFOLIO
In normal situation
- With senior or first - degree security and counter guaranty "A" 7,906,972 2,870,790
- With senior or first - degree security and counter guaranty "B" 20,166 279,249
- Without senior security or counter guaranty 1,213,093 6,484,598
In potential risk
- With senior or first - degree security and counter guaranty "A" 3,439 399
- With senior or first - degree security and counter guaranty "B" 15,395 23,948
- Without senior security or counter guaranty 1,353,919 48,485
Nonperforming
- With senior or first - degree security and counter guaranty "A" 36 -
- With senior or first - degree security and counter guaranty "B" 2,801 22,940
- Without senior security or counter guaranty 693,209 27,263
With high risk of uncollectibility
- With senior or first - degree security and counter guaranty "A" 920 -
- With senior or first - degree security and counter guaranty "B" 7,589 43,868
- Without senior security or counter guaranty 68,735 98,004
Uncollectible
- With senior or first - degree security and counter guaranty "A" 510 199
- With senior or first - degree security and counter guaranty "B" 45,215 22,987
- Without senior security or counter guaranty 195,014 69,452
Uncollectible, classified as such under regulatory requirements
- With senior or first - degree security and counter guaranty "A" - -
- With senior or first - degree security and counter guaranty "B" - -
- Without senior security or counter guaranty - -
---------- ----------
Total 11,527,013 9,992,182
========== ==========
Exhibit 1
(Contd.)
STATEMENT OF DEBTORS' STATUS CONSOLIDATED WITH SUBSIDIARIES AND
OTHER ENTITIES IN ARGENTINA AND ABROAD
AS OF SEPTEMBER 30, 2002 AND 2001
(Translation of financial statements originally issued in Spanish - See
Note 19 to the financial statement of BBVA Banco Frances S.A.)
-Stated in thousands of pesos-
2002 2001
---------- ----------
CONSUMER AND HOUSING PORTFOLIO
Normal compliance
- With senior or first - degree security and counter guaranty "A" 1,604 43,833
- With senior or first - degree security and counter guaranty "B" 470,906 1,551,476
- Without senior security or counter guaranty 504,782 2,209,334
Inadequate compliance
- With senior or first - degree security and counter guaranty "A" - 144
- With senior or first - degree security and counter guaranty "B" 13,827 35,755
- Without senior security or counter guaranty 21,589 74,530
Deficient compliance
- With senior or first - degree security and counter guaranty "A" - 55
- With senior or first - degree security and counter guaranty "B" 4,964 16,151
- Without senior security or counter guaranty 23,700 59,627
Unlikely to be collected
- With senior or first - degree security and counter guaranty "A" 98 2
- With senior or first - degree security and counter guaranty "B" 21,237 18,428
- Without senior security or counter guaranty 84,485 85,196
Uncollectible
- With senior or first - degree security and counter guaranty "A" 59 111
- With senior or first - degree security and counter guaranty "B" 22,717 39,880
- Without senior security or counter guaranty 49,208 81,494
Uncollectible, classified as such under regulatory requirements
- With senior or first - degree security and counter guaranty "A" - -
- With senior or first - degree security and counter guaranty "B" 22 113
- Without senior security or counter guaranty 805 1,703
---------- ----------
Total 1,220,003 4,217,832
---------- ----------
General Total (1) 12,747,016 14,210,014
========== ==========
(1) Items included: Loans (before allowances); Other receivables from
financial transactions: Unlisted corporate bonds, Other receivables
covered by debtor classification regulations, Interest accrued and pending
collection covered by debtor classification regulations; Assets out on
financing lease (before allowances); Other receivables: Receivables from
sale of assets; Contingent credit-balance memorandum accounts: Credit
lines granted (unused portion) covered by debtor classification
regulations, Other guaranties given covered by debtor classification
regulations and Other covered by debtor classification regulations.
Item 2
BANCO FRANCES IS NOT OFFERING ITS SHARES TO PERSONS IN THE UNITED STATES. ANY
SECURITIES OF BANCO FRANCES THAT MAY BE DELIVERED IN THE OFFERING WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 AND MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN APPLICABLE
EXEMPTION FROM REGISTRATION REQUIREMENTS.
THIS REPORT ON FORM 6-K HAS BEEN FURNISHED TO THE SECURITIES AND EXCHANGE
COMMISSION TO COMPLY WITH ITS REQUIREMENTS. COPIES OF THIS REPORT ON FORM 6-K
ARE NOT BEING MAILED OR OTHERWISE DISTRIBUTED OR SENT IN OR INTO OR MADE
AVAILABLE IN THE UNITED STATES. PERSONS RECEIVING THIS DOCUMENT (INCLUDING
CUSTODIANS, NOMINEES AND TRUSTEES) MUST NOT DISTRIBUTE OR SEND SUCH DOCUMENTS
OR ANY RELATED DOCUMENTS IN, INTO OR FROM THE UNITED STATES.
MINUTES No. 4871
----------------
Minutes of the Board of Directors of BBVA Banco Frances Sociedad Anonima held
at the offices of the Bank in Buenos Aires, (Argentina) on December 5, 2002.
The meeting was chaired by the Vice President and Acting President, Mr. Jaime
Guardiola. In addition to the directors named in the margin, Ms. Andrea Nora
Rey, CPA, member of the Statutory Audit Committee was present, all of whom
signed these minutes.
The meeting started at 8 p.m. It is hereby left on record that the Board of
Directors met with the membership resulting from the Regular General Meeting of
Shareholders held on June 13, 2002.
The Chairman reported that, within the capitalization process initiated by this
Bank, the Buenos Aires Stock Exchange had granted a favorable prior rating for
the listing of up to 1,250,000,000 common shares to be offered for subscription
and the National Securities Commission (CNV) had authorized the public
offering, pursuant to the affirmative vote of the Shareholders' Meeting held on
August 7, 2002. Accordingly, Mr. Guardiola reminded the Directors that, as
provided by the aforesaid Shareholders' Meeting, the Board of Directors had to
resolve, among others, the following matters:
(i) Determination of contributable loans
The Chairman reminded the Directors that the Shareholders' Meeting held on
August 7 last established that the Board of Directors would be delegated to
determine the loans granted by BANCO BILBAO VIZCAYA ARGENTINA S.A. that may
perhaps qualify to be used as Eligible Assets. Accordingly, the Chairman
proposed that the loan granted by BBVA Banco Bilbao Vizcaya Argentaria S.A. on
April 19, 2002 of US$79,316,040.33 plus interest accrued through its effective
payment date be determined as a Eligible Assets.
After an exchange of opinions among the Directors, the sum of US$ 79,316,040.33
plus accrued interest was approved as a Eligible Assets.
As a consequence of this approval, the Board of Directors ratified that the
Eligible Assets in accordance with the vote of the August 7 last Shareholders'
Meeting shall be: (i) Cash, (ii) Subordinated Corporate Bonds issued by the
Bank maturing on March 31, 2005 and (iii) the loan granted by Banco Bilbao
Vizcaya Argentaria S.A. on April 19, 2002 in the amount of US$79,316,040.33
plus accrued interest.
(ii) Valuation Reports
In addition, Mr. Guardiola continued to say that bearing in mind that the
August 7, 2002 Shareholders' Meeting delegated the Directors to fix the value
of the Eligible Assets and specifically the value of the subordinated Corporate
Bonds. As of to date the Valuation Reports on the Subordinated Corporate Bonds
issued by two top companies, BDO and KPMG, were received. The Bank had
requested these with respect to Subordinated Corporate Bonds. These valuations
have been distributed to the Directors and, in these circumstances, after an
exhaustive analysis by the Directors present, it was decided to set the value
of the Subordinated Corporate Bonds for the purpose of the proposed
capitalization at US$ 58.10 for each US$100 face value of Subordinated
Corporate Bonds, which was unanimously approved. The aforesaid reports are
attached to these Minutes as an exhibit.
(iii) Setting of the number of shares to be offered for subscription
The Chairman stated that the Shareholders' Meeting authorized the issuance of
up to $1,250,000,000 shares of common stock, anticipating probable market
conditions at that time, probable market movement scenarios and preferential
rights. However, the current market conditions, especially the exchange rate,
value of the BBVA Banco Frances share over the last few weeks and valuation of
the Subordinated Corporate Bonds, made it advisable to reduce the number of
shares to be offered. Hence, the Chairman proposed that the number of shares to
be offered not surpass 209,631,892 shares. In addition, the Directors should
bear in mind the commitment entered into vis-a-vis the Buenos Aires Stock
Exchange to the effect that the shares to be issued based on paying in
additional capital by contributing Subordinated Corporate Bonds shall not
exceed the number of 100,000,000 shares, even on the assumption that payment
were offered for the entire issue.
After a brief exchange of ideas, the Board of Directors approved that the
number of shares to be issued be set at up to 209,631,892.
(iv) Number of shares necessary to subscribe a new share
On this item, the Chairman stated that, taking into account the matters
approved in the preceding point, he proposed that the number of current
outstanding shares necessary to subscribe one new share be set at 1. Upon
consideration, the Directors ratified that the number of current outstanding
shares necessary to subscribe one new share shall be set at 1.
(v) Period of issuance, manner and conditions of payment
The Chairman stated that, as it was necessary that the capitalization process
of the new shares be finalized before the current fiscal year closed, he
proposed that the preferential subscription period should commence on Tuesday
December 17, 2002 to end on Thursday December 26, 2002. With respect to the
manner and conditions of payment, as resolved by the Shareholders' Meeting, he
reminded those present that the new shares must be paid-in in cash and/or by
capitalizing the Subordinated Corporate Bonds maturing on March 31, 2005 issued
by the Bank for a face value of US$150,000,000 and/or by capitalizing the loan
granted by BBVA to BBVA Banco Frances S.A. on April 19, 2002 in an amount of
US$79,316,040.33 plus accrued interest. The payment for the shares shall be
made within the terms that are set and indicated to this end in the Issuance
Prospectus.
After an exchange of opinions, the Board of Directors approved the motion
proposed by the Chairman.
(vi) Minimum amount of shares to be subscribed
On this point, the Chairman reported that, in view of the fact that the current
minimum denomination of the shares presently outstanding was $1 face value per
share, it was only right that the minimum number of shares to be subscribed
should be 1 share of $1 face value. Accordingly, the Directors approved the
minimum number of shares to be subscribed at 1 share of $1 face value.
(vii) Sub-delegation of the powers delegated by the Shareholders' Meeting to
the Board of Directors
As established by the Shareholders' Meeting, Mr. Guardiola proposed that the
Board of Directors, exercising the powers delegated by the August 7, 2002
Shareholders' Meeting, should sub-delegate them to Messrs. Jaime Guardiola,
Marcelo Canestri, Carlos Mari, Carlos Villahoz, Evelina Sarrailh, Jorge Bleder
and Daniel Gonzalez, so that any two of them may perform all acts delegated to
the Board of Directors by the August 7, 2002 Shareholders' Meeting. With
respect to this point, the Board of Directors approved to sub-delegate the
powers delegated to the Board of Directors to the persons mentioned by the
Chairman.
There being no further matters to discuss, the meeting was adjourned at 9.15
p.m.
M. CANESTRI J. GUARDIOLA
A.N. REY, CPA J.D. D'ORNELLAS
Item 3
BANCO FRANCES IS NOT OFFERING ITS SHARES TO PERSONS IN THE UNITED STATES. ANY
SECURITIES OF BANCO FRANCES THAT MAY BE DELIVERED IN THE OFFERING WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 AND MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN APPLICABLE
EXEMPTION FROM REGISTRATION REQUIREMENTS.
THIS REPORT ON FORM 6-K HAS BEEN FURNISHED TO THE SECURITIES AND EXCHANGE
COMMISSION TO COMPLY WITH ITS REQUIREMENTS. COPIES OF THIS REPORT ON FORM 6-K
ARE NOT BEING MAILED OR OTHERWISE DISTRIBUTED OR SENT IN OR INTO OR MADE
AVAILABLE IN THE UNITED STATES. PERSONS RECEIVING THIS DOCUMENT (INCLUDING
CUSTODIANS, NOMINEES AND TRUSTEES) MUST NOT DISTRIBUTE OR SEND SUCH DOCUMENTS
OR ANY RELATED DOCUMENTS IN, INTO OR FROM THE UNITED STATES.
TRANSLATION FROM SPANISH
SUB-DELEGATES' MINUTES
The undersigned, in our capacity as officers authorized by BBVA Banco Frances
S.A. (the "Bank"), pursuant to the delegation effected by the Ordinary and
Extraordinary Shareholders' Meeting of August 7, 2002 (the "Shareholders'
Meeting") and pursuant to the sub-delegation as per Board of Directors' Minutes
No. 4781 dated December 5, 2002, with respect to the issuance of 209,631,892
New Common Shares of BBVA Banco Frances S.A. to be placed by subscription,
authorized by Resolution No. 14,361 of the Argentine Securities Commission
(CNV) dated December 3, 2002 and by the Buenos Aires Stock Exchange on December
12, 2002, hereby resolve as follows:
1. To set the Issuance Premium. In accordance with the issuance conditions
established in the Prospectus, whose summarized version was published in
the Boletin Diario (Daily Bulletin) of the Buenos Aires Stock Exchange on
December 12, 2002: (a) the value of the Issuance Premium shall be
determined bearing in mind that the sum of the face value of each of the
New Shares plus the Issuance Premium cannot exceed the weighted average
value of the listed share price of the Bank on the Buenos Aires Stock
Exchange during the five Stock Exchange days preceding the setting of the
Subscription price and (b) if the weighted average value of the aforesaid
shares were equal to or below $1.00, then a Share Premium must not exist.
In view of the foregoing, it is resolved to set the Issuance Premium at
$2.59 for each New Share.
2. To set the Subscription Price: As resolved by the Shareholders' Meeting,
the Board of Directors is to set the Subscription Price on a date which
may, in no case, be later than the fifth stock exchange day following the
beginning of the Preferred Subscription Period, nor precede the fifth
Stock Exchange day prior to the end of the Preferred Subscription Period.
In addition, the Board of Directors resolved by Minutes No. 4871 to
sub-delegate the powers delegated by the Shareholders' Meeting.
Accordingly, it is resolved to set the Subscription Price for the entire
Preferred Subscription Period at $3.59.
3. Setting the Exchange Rate. In the case of Eligible Assets denominated in
foreign currency the applicable exchange shall be, as approved by the
Shareholders' Meeting, the free buying exchange rate in the New York
Market reported by the Bloomberg or the Reuters Agencies, at the Board of
Directors' option, as of the Stock Exchange day immediately preceding the
date on which the Subscription Price was set, i.e. December 16, 2002,
bearing in mind that, pursuant to the foregoing, the Subscription Price
was set as of today's date. In accordance with the sub-delegation of the
powers delegated by the Assembly, it is hence resolved to take the free
buying exchange rate in the New York market reported by the Bloomberg
Agency on December 16, 2002, i.e. US$ 1 = $ 3.44.
4. Determination of the Exchange Ratios. As to the guidelines to determine
the exchange ratios, the Shareholders' Meeting resolved to delegate their
determination to the Board of Directors based on the valuation of Eligible
Assets, the Subscription Price (including the Premium) and the Exchange
Rate. The exchange ratios shall be released when the Preferred
Subscription Price is published. In addition, the same Shareholders'
Meeting determined that the valuation of the Loan granted by Banco Bilbao
Vizcaya Argentaria, S.A. on April 19, 2002 of US$ 79,316,040.33 shall be
contributed at nominal value (principal amount plus accrued interest) and
the Board of Directors of BBVA Banco Frances S.A. determined, on December
5, 2002, that the valuation of the subordinated Corporate Bonds maturing
on March 31, 2005 should be US$ 58.10 for each 100 of Face Value.
Accordingly, the exchange ratios are hereby set as follows: (i) 0,9582173
New Shares for each US$ of nominal value (principal amount plus accrued
interest), for the loan granted by Banco Bilbao Vizcaya Argentaria, S.A.
(ii) 0.5567242 New Shares for each US$ of face value for the Subordinated
Corporate Bonds maturing on March 31, 2005.
In Buenos Aires, December 17, 2002, 9:00 a.m.
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