Economic Environment

During July and August of 2011, the rate of growth of the Argentine economy decelerated. On average, the Monthly Estimator of Economic Activity (EMAE) decreased 0.2% compared to the second quarter of the year. However, this slowdown was not a surprise as it is in line with expectations.

Inflation, as measured by the Greater Buenos Aires Consumer Price Index (which is used to calculate the CER adjustment for some sovereign assets) increased 2.5% in the last three months (9.9% in annual terms) in the third quarter accumulating 7.3% during the first nine months of 2011.

The primary fiscal surplus of the national public sector was AR$ 1,269 million during the third quarter of 2011, a decrease of 79.0% compared to the previous quarter. Total public sector revenues increased 6.4% compared to the previous quarter while fiscal expenditures grew at a rate of 11.4% in the same period. The most important taxes such as VAT and Income tax were the main contributors to fiscal results, increasing 32% and 33.1% year over year and the third quarter of 2011, respectively; over Total Tax Revenues which increased 26.5% in the same period. While total fiscal spending increased 39% year over year, transfers to the private sector increased 31% in the same period.

The accumulated trade balance in the third quarter of 2011 ended with a surplus of US$ 2.375 million, 40.6% lower than the second quarter of the year, and 19.1% below the balance obtained in the same quarter of 2010.

The Argentine Central Bank (BCRA) intervention in the foreign exchange market resulted in sales of US$ 2,045 million in the third quarter compared to the second quarter of the year, when the monetary authority purchased US$ 397 million. The exchange rate (BCRA reference rate) closed at AR$ 4.2045 per U.S. dollar on September 30, 2011, increasing 2.3% compared to June 30, 2011. The stock of international reserves fell USS 3.106 million during the third quarter, totaling at US$ 48,590 million by September 30, 2011.

The Badlar rate at private banks averaged 13.06% in the last month of the third quarter an increase of 178 bp compared to the average of June 2011.

Total deposits in the financial system increased 6.4% on average in the third quarter of 2011 compared to the second quarter of 2011, while private sector deposits rose 7.6% in the same period, slightly lower than quarterly growth during the second quarter. Private sector loans showed a larger increase of 13.1% during the same period, reflecting an increase in the rhythm of growth compared to their performance during the second quarter of 2011.

The Bank

BBVA Francés remains one of the leaders among Argentine banks, demonstrating day by day its stability and solvency, as well as its flexibility to adapt and anticipate market changes.

Through its commercial strategy of focusing its actions and policies on clients, the Bank strengthened its relationship with all segments it services. To that end, it continued to give priority support to the productive segment, maintaining credit lines and leasing at fixed and variable rate for small and medium-sized companies. Such resulted in an increase in portfolio and share.

Because of that it continuous with the priority on the support to the productive segment, maintaining loans and leasing at fix and variable rate for small and middle size companies. Such actions results in an increase in the portfolio and in the market share.

During September, BBVA Francés launched a new marketing campaign for credit cards. Such campaign reflects the Bank’s effort to obtain more and better benefits and discounts for its clients, showing the varied and significant partnerships entered into during the most recent months.

-LAN:    New promotions that allow customers to redeem LANPASS kilometers earned to travel to different destinations in Argentina using fewer kilometers than usual.

-T4F:“Time 4 Rock Passport”, an original offer that allows customers to enjoy exclusive benefits for the most anticipated concerts by Guns N’Roses and Aerosmith.

-Frávega: 10 % discount and 24 installments with 0% interest rate.

BBVA Francés launched an innovative service for its Agribusiness segment: expert advice from DDN Brokers, Asesores de Seguros y Norden Broker. All of our customers that sign an agreement for agricultural insurance through such companies gain access to special dollar lines of credit to finance various enterprises. If such coverage is paid with the BBVA Francés Agro credit card, customers get an automatic 15% discount.

The Bank received 42 projects to be evaluated for its traditional prize BBVA Francés Award to the Agricultural Entrepreneur, created in 1989. Throughout its history, the Award has generated the possibility of entrance to an exclusive circle that offers a large of business opportunities, image, prestige and advertising, together with the recognition of the most important authorities of the sector, who also act as judges.

Finally, focusing on the social objectives that BBVA Francés assumes as one of Argentina’s leading banks and following the BBVA Group’s strategic plan for Corporate Social Responsibility, the Bank has a scholarship program with the purpose of integrating and keeping low income high school students in the educational system. Currently, the Fundación BBVA Francés manages, jointly with 16 NGOs 1,240 scholarships in 23 centers in 9 provinces and Capital Federal.

Recently, with the aim of promoting the BBVA Francés Scholarship program, the Bank entered into a sponsorship agreement with the Colon Theatre, to promote the opera singing in cities around the country.

Presentation of Financial Information

Net income for BBVA Francés totaled AR$ 114.7 million at September 30, 2011. Such income includes the non-recurring effects resulting from the decline in the public bonds valuations.

The following “pro forma” table presents the non-recurring earnings.

In order to standardize the comparison with previous quarters; the analysis of the variations is made in terms of recurring results. Such homogenization is becoming increasingly important given the high degree of volatility in public bond valuations. This, in September, caused the loss registered during the quarter.

Proof of the volatility affecting results is seen in the price variation of the Bogar 18 bonds (adjusted by CER) and the Bonar 14 bonds (adjusted by Badlar); which decreased by -15.6% and -1.9%, respectively, in September compared to August. The price variations in October compared to September were increases of 11.6% for the Bogar 18 and 3.6% for the Bonar 14 bonds.

As of September 30, 2011, BBVA Francés total net income reached AR$ 291.7 million, representing an increase of 38.3% compared with the same quarter in 2010 and 11.7% compared to the previous quarter.

Net interest income reflected the growth in business volume, increasing 32.1% and 9.2% compared to the third quarter of 2010 and the previous quarter, respectively.

During the second quarter of 2011, the Bank modified its allowances policy, as a consequence of the periodic monitoring that it makes of the loan portfolio behavior and the type of financings; resulting in a steady decrease in the

non-performing ratio with a significant growth in the level of coverage.

At the same time, net income from services also registered a significant increase, growing 40.9% compared to the third quarter of 2010 and 13.3% during the last three months.

Administrative expenses increased 24% compared to the third quarter 2010 and 6.4% compared to the previous quarter.

Other/Income expenses registered a loss during the quarter mainly due to lower recovered credits, together with a tax recovery recorded during the second quarter.

With regard to Income tax, it is important to note that the second quarter reflected a significant fiscal impact from the sale of Consolidar Seguros de Retiro S.A.

Net Financial Income

Net financial income generated by the intermediation with the private sector maintained its upward trend, reflecting the significant expansion in the loan portfolio. It increased 51.8% compared to the third quarter of 2010 and 21.3% compared to the previous quarter.

As previously mentioned, income from private and public securities includes the non-recurring income originated by

variations in their valuation. Such results totaled losses of AR$ 190.5 million and AR$ 66.7 million in the third and second quarter of 2011, respectively, whereas the quarter ended on September 30, 2011 included a gain or AR$ 347.1 million.

Income related to foreign currency exchange showed improvement of 68.0% and 21.0% compared to the same quarter of 2010 and to the previous quarter, respectively.

Income from Public and Private Securities

Beginning on March 1, 2011, according to Central Bank Communication A 5180, there was a change in the presentation criteria on which public assets were registered, rendering the “available for sale” category no longer valid; consequently, the unrealized valuation difference generated by such portfolio was recorded in the income statement.

The Bank has the discretion to mark-to market its total public bonds portfolio; because of that, such income includes the unrealized losses/gain from variations in the valuations of the portfolio.

Net Income from Services

Net income from services increased 41.0% compared to the same quarter of 2010 and 13.3% compared to the second quarter of 2011.

During the last twelve months, there was significant growth in income from services (37.4%), driven mainly by increased consumption on credit cards, by growth in fees generated from insurance sales, along with those from PSA Finance S.A:, which increased 55% during the analyzed period.

Services charge expenses grew mainly due to the increase in promotions related to the Lan pass kilometers program.

Compared to the previous quarter, net income from services continued to grow, due mainly to higher levels of consumption in credit cards, which fees represented 34.4% of the total. Services charge on deposits and in foreign exchange and trade operations also increased. Service charge expenses decreased due to lower costs on promotions.

Administrative Expenses

Administrative expenses did not register a significant variation compared to the third quarter of 2010 consequence of the decrease of 12.6% in personnel expenses, due to the charge related to the early retirements plans registered in such period of 2010; partially offset by growth in general expenses.

General expenses grew 28.4% in the last twelve months; such increase was due to higher taxes and the higher level business activity, partially offset by lower charges in advertisement and promotion expenses.

Compared with the previous quarter, administrative expanses grew 6.4%, including a 7.1% increase in personnel expenses, resulting from staggered salary increases whereas the increase in general expenses was 5.5% mainly due to increases related directly to the activity level and price adjustments related to structural fix costs, (cleaning, rent and security).

As of September 30, 2011, the Bank and its subsidiaries (except the Consolidar Group) had 5,032 employees. The branch’ office network totaled 268 offices, including 240 consumer branch offices and 28 branch offices specializing in the middle-market

segment. Corporate banking included 7 business units grouped by industry. Complementing its distribution network, the Bank has 14in-company branches and 2 point of sale outlets, 650 ATM’s and 694 quick deposit boxes (QDBs).

Other Income / Expenses

Other income/expenses totaled a loss of AR$ 19.5 million during the third quarter of 2011, mainly due to lower recovered credits compared to the previous quarters. Besides, during the second quarter of 2011, an important tax recovered was registered, whereas that during the same quarter a year ago was a recovered of provisions for other contingencies.

Income from Equity Investments

Income from equity investments sets forth net income from related companies that are not consolidated. A gain of AR$ 18.4 million was recorded during the third quarter of 2011, mainly due to BBVA Frances’ stake in the Consolidar Group.

Total Public Sector Exposure

The presentation criteria for public bonds and Central Bank’s instruments were modified in accordance with the mentioned BCRA Communication “A5180”, dated March 1, 2011.

In line with the new regulation, holdings recorded in the available for sale category were reclassified in holdings booked at fair value and in central banks instruments line items.

Exposure to the public sector’s National treasury decreased compared to the previous quarter mainly due to a lower valuations and sale of bonds.

The Bank’s portfolio of BCRA bills and notes increased 14.1% during the third quarter of 2011.

As of September 30, 2011, public sector national treasure assets represented 6.3% of the Bank’s total assets. Total exposure to BCRA’s bills and notes net of holdings linked to reverse repo transactions, represented 5.2% of the Bank’s total assets.

Total exposure to the public sector includes public debt of the national treasury through public securities, guaranteed loans and trustees, as well as, the BCRA’s bills and notes.

Loan Portfolio

The private sector loan portfolio totaled AR$ 20,723 million as of September 30, 2011, an increase of AR$ 7,584.9 million (57.7%), whereas in the last three months was AR$ 2,336.9 million (12.7%). Such increase was in line with the significant growth in consumption and capital investment.

All segments recorded an outstanding performance during the last twelve months. The middle market segment portfolio grew 68%, the retail segment increased 54% and the corporate segment grew 47%.

Increases in discounted notes, loans to finance foreign trade operations and leasing led the growth in the portfolio of small-and medium-size companies, while increases in personal loans, credit cards and car loans led the expansion in the consumer segment. Other financial loans and advances drove the increase in wholesale banking.

Compared to the previous quarter, the increase was mainly due to the expansion in the middle market portfolio (19%), consumer lending (10.3%) and the corporate segment (8.7%).

Asset Quality

BBVA Francés continues being the leader in the financial system in terms of asset quality.

As of September 30, 2011, the Bank’ asset quality ratio (non-performing loans over total loans) was 0.44%, while its coverage ratio (provisions over of non-performing loans) reached 456.9%.

Ti is important to note that on line with this performance and as a result of the Bank’s periodic monitoring of the portfolio’ performance and types of financing, it modified its allowances’ policy during the second quarter to adapt it to the default and expected loss estimates.

The following table shows the evolution of provisions for loan losses, including charges relating to transactions

recorded under other receivables from financial intermediation.

Deposits

As of September 30, 2011, total deposits reached AR$ 28.5 billion, an increase of 31.2% and 8.9% compared to the third quarter of 2010 and to the previous quarter, respectively.

Compared to the same quarter of 2010, both, sight deposits and time deposits registered growth, increasing 38.7% and 26.4%, respectively.

Both register a similar performance during the third quarter; increasing 11.1% and 7.1% respectively.

Currency deposits denominated in pesos increased 35.2% in the last twelve months and 7.7% in the last quarter. Meanwhile, deposits denominated in foreign currency increased 19.2% and 13.5% compared to the quarters ended September 30, 2010 and June 30, 2011, respectively.

By the end of September 30, 2011 deposits denominated in foreign currency reached AR$ 6.4 billion (equivalent to US$ 1.5 billion), representing 22.3% of the Bank’s total deposits, maintaining a similar level to that of the previous quarter.