Edgar Filing: BBVA BANCO FRANCES SA

Form 6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

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

of the Securities Exchange Act of 1934

For the month of August, 2018

Commission File Number: 001-12568

BBVA FRENCH BANK S.A.

(Translation of registrant’s name into English)

Córdoba 111, 1054

Buenos Aires, Argentina

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes ☐ No ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes ☐ No ☒

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes ☐ No ☒

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

BBVA French Bank S.A.

TABLE OF CONTENTS


Item
1.		Financial Statements as of March 31, 2018.

LOGO

INTERIM FINANCIAL STATEMENTS FOR

THE THREE-MONTH PERIOD ENDED

MARCH 31, 2018

LOGO

TABLE OF CONTENTS


Interim financial statements for the three-month period ended on March 31, 2018, submitted in comparative form.

Consolidated Balance Sheet			1
Consolidated Statement of Income			3
Consolidated Statement of Other Comprehensive Income			5
Consolidated Statement of Changes in Shareholders’ Equity			6
Consolidated Statement of Cash Flows			8
Notes			10
Exhibits			94

Independent auditors’ report on the review of the interim consolidated financial statements			108

Separate Balance Sheet			110
Separate Statement of Income			112
Separate Statement of Other Comprehensive Income			114
Separate Statement of Changes in Shareholders’ Equity			115
Separate Statement of Cash Flows			117
Notes			119
Exhibits			145

Independent auditors’ report on the review of the separate interim financial statements

Information Report


		- 1 -

CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)

Accounts

Notes and
Exhibits

03.31.18

12.31.17

12.31.16

ASSETS

Cash and deposits in banks

36,917,931

38,235,942

48,164,949

Cash

8,468,784

7,977,326

14,176,643

Financial institutions and correspondents

28,449,147

30,258,616

33,988,306

Argentine Central Bank (BCRA)

23,929,099

29,427,394

31,248,052

Other in the country and abroad

4,520,048

831,222

2,740,254

Debt securities at fair value through profit or loss

1,162,994

5,795,638

3,671,503

Derivative instruments

168,314

142,745

53,723

Repo transactions

7,144,101

6,329,939

58,322

Other financial assets

7,142,873

2,631,498

803,170

Loans and other financing

139,436,828

128,090,905

78,582,242

Non-financial government sector

142

218

98,819

Argentine Central Bank (BCRA)

2,354

—

Other financial institutions

4,917,871

4,608,947

2,661,976

Non-financial private sector and residents abroad

134,516,461

123,481,740

75,821,447

Other debt securities

15,578,336

16,298,649

9,173,565

Financial assets pledged as collateral

3,925,255

3,250,464

2,184,194

Current income tax assets

15 a)

1,375

9,340

1,521

Investments in equity instruments

145,256

127,287

70,808

Investments in associates

921,199

889,436

944,690

Property, plant and equipment

9,024,411

9,419,862

8,231,404

Intangible assets

448,944

436,120

315,637

Deferred income tax assets

15 c)

57,407

58,524

44,646

Other non-financial assets

1,457,379

1,530,260

1,468,920

Non-current assets held for sale

741,840

196,379

—

TOTAL ASSETS

224,274,443

213,442,988

153,769,294


		- 2 -

CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)


Accounts	Notes and Exhibits		03.31.18			12.31.17			12.31.16
LIABILITIES
Deposits		22		159,952,683			153,934,671			114,610,296
Non-financial government sector				1,252,061			1,042,016			2,640,909
Financial sector				102,883			166,970			222,974
Non-financial private sector and residents abroad				158,597,739			152,725,685			111,746,413
Derivative instruments		9		245,444			229,775			58,305
Repo transactions		10		579,184			285,410			135,139
Other financial liabilities		23		16,497,979			14,006,153			7,785,665
Financing received from the BCRA and other financial institutions		24		829,574			687,495			704,960
Corporate bonds issued		25		1,839,184			2,052,490			1,786,285
Current income tax liabilities		15 b)		884,250			1,469,886			1,104,739
Provisions		26 and Exhibit J		3,268,894			2,127,857			901,519
Deferred income tax liabilities		15 c)		514,787			505,078			888,240
Other non-financial liabilities		27		7,492,249			7,741,277			5,622,234

TOTAL LIABILITIES				192,104,228			183,040,092			133,597,382

SHAREHOLDERS’ EQUITY
Capital stock		28		612,660			612,660			536,878
Non-capitalized contributions				6,735,977			6,735,977			182,511
Capital adjustments				312,979			312,979			312,979
Reserved earnings				14,516,667			14,516,667			11,783,995
Unappropriated retained earnings				7,933,140			3,480,078			3,480,078
Accumulated other comprehensive income				(11,383	)		(16,558	)		(39,279	)
Income for the year/period				1,545,298			4,453,062			3,643,672

Shareholders’ equity attributable to owners of the parent				31,645,338			30,094,865			19,900,834
Shareholders’ equity attributable to non-controlling interests				524,877			308,031			271,078

TOTAL SHAREHOLDERS’ EQUITY				32,170,215			30,402,896			20,171,912

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY				224,274,443			213,442,988			153,769,294

The accompanying explanatory notes and exhibits are an integral part of these financial statements


		- 3 -

CONSOLIDATED STATEMENT OF INCOME

FOR THE INTERIM THREE-MONTH PERIODS ENDED ON MARCH 31, 2018 AND 2017

(stated in thousands of pesos)


Accounts	Notes		03.31.18			03.31.17
Interest income		29		7,914,035			5,296,190
Interest expenses		30		(2,808,837	)		(1,711,106	)

Net interest income				5,105,198			3,585,084

Commission income		31		2,034,541			1,507,251
Commission expenses		32		(1,354,822	)		(952,242	)

Net commission income				679,719			555,009

Net income from measurement of financial instruments at fair value through profit or loss		33		309,176			130,666
Net income/(loss) from write-down of assets at amortized cost		34		1,367			—
Gold and foreign currency quotation differences		35		695,250			305,895
Other operating income		36		1,742,608			1,806,624
Loan loss provision				(526,194	)		(380,226	)

Net operating income				8,007,124			6,003,052

Personnel benefits		37		(1,957,189	)		(1,559,287	)
Administrative expenses		38		(1,508,192	)		(1,231,009	)
Asset depreciations and impairments		39		(199,042	)		(122,468	)
Other operating expenses		40		(2,153,710	)		(2,355,712	)

Operating income				2,188,991			734,576
Income from associates				39,877			72,856

Income before income tax				2,228,868			807,432

Income tax		15 c)		(662,724	)		(243,885	)

Net income for the period				1,566,144			563,547

Net income attributable to owners of the parent				1,545,298			555,175
Net income attributable to non-controlling interests				20,846			8,372
Net income for the period				1,566,144			563,547


		- 4 -

EARNINGS PER SHARE

AS OF MARCH 31, 2018 AND 2017


Accounts	03.31.18		03.31.17
Numerator
Net income attributable to owners of the parent		1,545,298		555,175
Net income attributable to owners of the parent adjusted to reflect the effect of dilution		1,545,298		555,175
Denominator
Weighted average of outstanding ordinary shares for the quarter		612,659,638		536,877,850
Weighted average of outstanding ordinary shares for the quarter adjusted to reflect the effect of dilution		612,659,638		536,877,850
Earnings per basic share		2.5223		1.0341
Earnings per diluted share (1)		2.5223		1.0341

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


		- 5 -

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE INTERIM THREE-MONTH PERIODS ENDED ON MARCH 31, 2018 AND 2017

(stated in thousands of pesos)


Accounts	Notes	03.31.18			03.31.17
Net income/(loss) for the period			1,566,144			563,547
Other Comprehensive Income components to be re-classified to income/(loss) for the period
Profits or losses for financial instruments at fair value through OCI
Period’s income/(loss) from financial instruments at fair value through OCI			(11,231	)		—
Adjustment for reclassifications for the period			34,805			—
Income tax			(10,441	)		—

			13,133			—

Share in OCI from associates and joint ventures booked by application of the equity method
Income/(loss) for the period for the share in OCI from associates and joint ventures booked by application of the equity method			(7,958	)		(6,414	)

			(7,958	)		(6,414	)

Total OCI to be reclassified to income/(loss) for the period			5,175			(6,414	)
Total Other Comprehensive Income for the period			5,175			(6,414	)

Total comprehensive income			1,571,319			557,133

Comprehensive income attributable to owners of the parent			1,550,473			548,761
Comprehensive income attributable to non-controlling interests			20,846			8,372

Total Comprehensive Income for the period			1,571,319			557,133


		- 6 -

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE INTERIM THREE-MONTH PERIOD ENDED MARCH 31, 2018 (in thousands of pesos)


Transactions	Capital stock		Non-capitalized contributions				Other comprehensive income						Cumulative Results				Retained earnings		Total shareholders’ equity attributable to owners of the parent		Total shareholders’ equity attributable to non- controlling interests		Total shareholders’ equity
Transactions	Shares outstanding		Issuance Premiums		Adjustments to shareholders’ equity		Profits or losses for financial instruments at fair value through OCI			Other			Legal Reserve		Other		Retained earnings						Total shareholders’ equity
Balance at the beginning of the year		612,660		6,735,977		312,979		—			—			4,027,251		10,489,416		3,878,265		26,056,548		—		26,056,548
Impact of the implementation of the financial reporting framework set forth by the BCRA		—		—		—		(17,719	)		1,161			—		—		4,054,875		4,038,317		308,031		4,346,348

Adjusted balance at the beginning of the year		612,660		6,735,977		312,979		(17,719	)		1,161			4,027,251		10,489,416		7,933,140		30,094,865		308,031		30,402,896

Total Comprehensive income for the period
- Net income for the period		—		—		—		—			—			—		—		1,545,298		1,545,298		20,846		1,566,144
- Other Comprehensive Income for the period		—		—		—		13,133			(7,958	)		—		—		—		5,175		—		5,175
Capital increase of subsidiary		—		—		—		—			—			—		—		—		—		196,000		196,000

Balances at period end		612,660		6,735,977		312,979		(4,586	)		(6,797	)		4,027,251		10,489,416		9,478,438		31,645,338		524,877		32,170,215


		- 7 -

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE INTERIM THREE-MONTH PERIOD ENDED MARCH 31, 2017 (in thousands of pesos)


Transactions	Capital stock		Non-capitalized contributions				Other comprehensive income						Cumulative Results				Retained earnings			Total shareholders’ equity attributable to owners of the parent			Total shareholders’ equity attributable to non- controlling interests		Total shareholders’ equity
Transactions	Shares outstanding		Issuance Premiums		Adjustments to shareholders’ equity		Profits or losses for financial instruments at fair value through OCI			Other			Legal Reserve		Other		Retained earnings								Total shareholders’ equity
Balance at the beginning of the year		536,878		182,511		312,979		—			—			3,298,517		8,485,478		3,643,672			16,460,035			—		16,460,035
Impact of the implementation of the financial reporting framework set forth by the BCRA		—		—		—		(42,672	)		3,393			—		—		3,480,078			3,440,799			271,078		3,711,877

Adjusted balance at the beginning of the year		536,878		182,511		312,979		(42,672	)		3,393			3,298,517		8,485,478		7,123,750			19,900,834			271,078		20,171,912

Total Comprehensive income for the period
- Net income/(loss) for the period		—		—		—		—			—			—		—		555,175			555,175			8,372		563,547
- Other Comprehensive Income for the period		—		—		—		—			(6,414	)		—		—		—			(6,414	)		—		(6,414	)
Allocation of Retained earnings as per the Shareholders’ Meeting held on march 30, 2017 to:
Legal reserve		—		—		—		—			—			728,734		—		(728,734	)		—			—		—
Cash Dividends		—		—		—		—			—			—		—		(911,000	)		(911,000	)		—		(911,000	)
Optional Reserve for future distribution of earnings		—		—		—		—			—			—		2,003,938		(2,003,938	)		—			—		—

Balances at period end		536,878		182,511		312,979		(42,672	)		(3,021	)		4,027,251		10,489,416		4,035,253			19,538,595			279,450		19,818,045


		- 8 -

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE INTERIM THREE-MONTH PERIOD ENDED MARCH 31, 2018 AND 2017

(stated in thousands of pesos)


Accounts	Notes	03.31.18			03.31.17
Cash flow generated by operating activities
Income before Income Tax			2,228,868			807,432
Adjustments to obtain flows from operating activities:			(549,604	)		1,004,777
Amortizations and impairments			199,042			122,468
Loan loss provision			464,008			329,600
Other adjustments			(1,212,654	)		552,709
Net decreases from operating assets:			(11,160,653	)		(21,162,206	)
Debt securities at fair value through profit or loss			4,892,728			2,370,214
Derivative instruments			(23,920	)		24,959
Repo transactions			(814,162	)		(9,714,152	)
Loans and other financing			(11,981,452	)		(3,887,981	)
Non-financial government sector			76			98,664
Other financial institutions			(325,718	)		(18,415	)
Non-financial private sector and residents abroad			(11,655,810	)		(3,968,230	)
Other debt securities			1,723,891			(2,774,472	)
Financial assets pledged as collateral			(674,791	)		78,855
Investments in equity instruments			(17,969	)		(9,580	)
Other assets			(4,264,978	)		(7,250,049	)
Net increases from operating liabilities:			7,192,067			14,513,207
Deposits			6,421,365			8,298,160
Non-financial government sector			210,045			(961,611	)
Financial sector			(64,087	)		(119,313	)
Non-financial private sector and residents abroad			6,275,407			9,379,084
Derivative instruments			15,669			(28,511	)
Repo transactions			293,774			(135,139	)
Other liabilities			461,259			6,378,697
Income tax payments			(214,758	)		(402,791	)

Total cash flows used in operating activities			(2,504,080	)		(5,239,581	)


		- 9 -

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE INTERIM THREE-MONTH PERIOD ENDED MARCH 31, 2018 AND 2017

(stated in thousands of pesos)


Accounts	Notes		03.31.18			03.31.17
Cash flows from investment activities
Payments:				(319,653	)		(319,827	)
Purchase of property, plant, and equipment, intangible assets and other assets				(311,695	)		—
Other payments related to investment activities				(7,958	)		(319,827	)
Collections:				8,114			110,124
Other payments related to investment activities				8,114			110,124

Total cash flows used in investment activities				(311,539	)		(209,703	)

Cash flows obtained from financing activities
Payments:				(221,084	)		(1,072,809	)
Dividends				—			(911,000	)
Non-subordinated corporate bonds				(213,306	)		(150,018	)
Argentine Central Bank				(7,778	)		(11,791	)
Collections:				345,857			236,410
Financing by local financial institutions				149,857			236,410
Other collections from financing activities				196,000			—

Total cash flows generated by/used in financing activities				124,773			(836,399	)

Effect of exchange rate changes on cash and cash equivalents balances				1,372,835			(295,974	)
Total changes in cash flows

Net decrease in cash and cash equivalents				(1,318,011	)		(6,581,657	)

Cash and cash equivalents at the beginning of the year		7		38,235,942			48,164,949

Cash and cash equivalents at the end of the period		7		36,917,931			41,583,292


		- 10 -

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE

PERIOD ENDED MARCH 31, 2018

(Stated in thousands of pesos)

1.	General information

BBVA Banco Francés S.A. (hereinafter, indistinctly, “BBVA Francés” or the “Entity” or the “Bank”) is a corporation (“sociedad anónima”) incorporated under the laws of Argentina, operating as a universal bank with a network of 251 national branches.

Since December 1996, BBVA Francés is part of the global strategy of Banco Bilbao Vizcaya Argentaria S.A. (BBVA or the “controlling entity”), which directly and indirectly controls the Entity, with 66.55% of the share capital as of March 31, 2018.

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

•

BBVA Francés Valores S.A.: corporation incorporated under the laws of Argentina as a comprehensive clearing and settlement agent;

•

Volkswagen Financial Services Compañía Financiera S.A: corporation incorporated under the laws of Argentina as a financial company to provide financing for individuals, companies and dealers of the Volkswagen network, to acquire Volkswagen vehicles, as well as vehicles with the brands Audi, Man – VW Trucks and Buses, and Ducati;

•

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

•

Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings): corporation incorporated under the laws of Argentina undergoing liquidation proceedings. On December 4, 2008, Law No. 26,425 was enacted, providing for the elimination and replacement of the capitalization regime that was part of the Integrated Retirement and Pension System, with a single government regime called the Argentine Integrated Retirement and Pensions System [SIPA]. Consequently, Consolidar A.F.J.P. S.A. ceased to manage the resources that were part of the individual capitalization accounts of affiliates and beneficiaries of the capitalization regime of the Integrated Retirement and Pension System, which were transferred to the Guarantee Fund for the Sustainability of the Argentine Retirement and Pension Regime as they were already invested, and the Argentine Social Security Administration [ANSES] is now the sole and exclusive owner of those assets and rights. Likewise, on October 29, 2009, the ANSES issued Resolution No. 290/2009 whereby retirement and pension funds management companies interested in reconverting their social purpose to manage the funds for voluntary contributions and deposits held by participants in their capitalization accounts had 30 business days to express their intention of reconverting. On December 28, 2009, based on the foregoing and taking into consideration that it is impossible for Consolidar A.F.J.P. S.A. to comply with the corporate purpose for which it was incorporated, it was resolved, through a Unanimous General and Extraordinary Shareholders’ Meeting to approve the dissolution and subsequent liquidation of that company effective as of December 31, 2009.


		- 11 -

Argentine Capital Markets Law No. 26,831, enacted on December 28, 2012 and subsequently regulated through General Resolution No. 622/13 issued by the Argentine Securities Commission [CNV] on September 5, 2013, establishes in its Section 47 that agents have an obligation to register before the CNV, to act in the market in any of the capacities set forth in said resolution. On September 9 and 19, 2014, the Entity was registered as an Agent for the Custody of Mutual Fund Investment Products under No. 4 and as a Comprehensive Clearing and Settlement Agent under No. 42.

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

2.	Basis for the preparation of the Financial Statements

The financial reporting framework set forth by the BCRA requires supervised entities to submit financial statements prepared pursuant to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), with a temporary exception for the application of the impairment model in Section 5.5 “Impairment” of IFRS 9 “Financial instruments” and, in turn, taking into consideration the standards prescribed through Memorandum No. 6/2017 issued by the regulatory entity on May 29, 2017 regarding the treatment to be applied to uncertain tax positions (“financial reporting framework set forth by the BCRA”).

The exceptions described are a deviation from IFRS, and their impact has been evaluated by the Entity as detailed below:

Had the impairment model set forth in Section 5.5 “Impairment” of IFRS 9 been applied, assets would have decreased by 188,173 and 247,851 as of March 31, 2018 and December 31, 2017, respectively. Likewise, the income for the three-month period ended March 31, 2018 would have increased by 59,678 and retained earnings would have decreased by 247,851.

Had the IFRS treatment regarding uncertain tax positions been applied, liabilities would have decreased by 2,207,318 and 1,185,800 as of March 31, 2018 and December 31, 2017, respectively. Likewise, the result for the three-month periods ended March 31, 2018 and March 31, 2017 would have increased by 1,021,518 and 1,185,800, respectively.

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

These financial statements have been approved by the Board of Directors of BBVA Banco Francés S.A. as of May 31, 2018.

3.	Functional and presentation currency and Unit of account

3.1.

Functional and presentation currency

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

3.2.

Unit of account

IAS 29 -Financial Reporting in Hyperinflationary Economies- requires the financial statements of an entity with a functional currency that is hyperinflationary to be restated for the changes in the general pricing power of the functional currency for the reporting period, regardless of whether the financial statements are based on an historical cost or current cost approach. To do so, non-monetary items shall include the inflation from the date of acquisition or the date of revaluation, as applicable. To determine the existence of a hyperinflationary economy, the IAS provides a series of factors to be considered, such as a three-year cumulative inflation rate approaching or exceeding 100%.


		- 12 -

Pursuant to the provisions set forth in Decree No. 664/2003 issued by the Argentine Executive, Communication “A” 3921 of the BCRA and General Resolution No. 441/2003, as amended, of the Argentine Securities Commission, the Group does not apply financial statements restatement mechanisms as from March 1, 2003.

However, the existence of important changes such as those observed in recent years in the prices of the relevant variables of the economy, such as the cost of wages, prices of raw materials, interest rates and exchange rates, the financial standing, the results and cash flows of the Group, and, consequently, the information provided in its financial statements, may be affected, and therefore these changes should be taken into consideration in the interpretation of the information provided in these financial statements.

4.	Accounting estimates and judgments

In preparing these consolidated financial statements, the Board of Directors has to make judgements, estimates and assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses.

The related estimates and assumptions are based on expectations and other factors deemed reasonable, the result of which are the basis for the judgments on the value of assets and liabilities, which are not easily obtained from other sources. Actual results may differ from these estimates.

The underlying estimates and assumptions are continuously under review. The effect of the review of accounting estimates is recognized prospectively.

4.1.

Judgments

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in the following notes:

•

Note 5.1. – Determination of control over other entities

•

Note 5.4.b) – Classification of financial assets

•

Note 5.4.f) – Impairment of financial assets

•

Note 5.17.a). – Determination on weather an agreement contains a lease

•

Note 5.18 – Income tax

4.2

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in these consolidated financial statements is included in the following notes:

•

Note 4.3. - Financial instruments, in relation to the assessment of the fair values of Level 2 and 3 financial assets.

•

Notes 11, 12 and 13 – Impairment of financial assets

•

Note 15 - Income tax, regarding availability of future taxable profit against which deferred tax assets and uncertain tax positions may be used.


		- 13 -

4.3

Measurements at fair value

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

When available, the Group measures the fair value of a financial instrument using the quoted price in an active market. A market is considered active if transactions take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoting price in an active market, then the Group uses valuation techniques maximizing the use of relevant market inputs and minimizes the use of unobservable inputs. The choice of a valuation technique includes all factors market participants would take into consideration for the purposes of setting the price of the transaction.

Fair values are categorized into different levels in the fair value hierarchy based on the input data used in the measurement techniques, as follows:

•

Level 1: quoted prices in active markets (no adjustment) for identical assets or liabilities.

•

Level 2: valuation models using observable market data as significant inputs.

•

Level 3: valuation models using unobservable market data as significant inputs.

5.	Significant accounting policies

The Group has consistently applied the following accounting policies in all periods presented in these consolidated financial statements and the preparation of the Balance Sheet as of December 31, 2016 for the purposes of the transition to the financial reporting Framework set forth by the BCRA. Note 59 contains a detail of the impact of the transition regarding the accounting regulations set forth by the BCRA previously applied.

These financial statements for the three-month period ended March 31, 2018 have been prepared pursuant to IAS 34 “Interim Financial Reporting” and IFRS 1 “First-time Adoption of International Financial Reporting Standards”. The interim financial statements have been prepared based on the policies the Entity expects to adopt in its annual financial statements as of December 31, 2018. Comparative amounts and the amounts as of the date of transition have been modified to reflect the adjustments to the new financial reporting framework.

For the purposes of homogeneous application of the accounting policies, the balance sheet and consolidated statement of income as of March 31, 2017 were restated for the purpose of considering the regulations set forth by the BCRA in relation to the provisions in Memorandum No. 6/2017 issued by the regulatory authority on May 29, 2017 as detailed in Note 5.18.d).

5.1

Basis of consolidation:

a) Subsidiaries:

Subsidiaries are all entities (including structured entities, if any) controlled by the Group. The Group ‘controls’ an entity if it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. As of the closing of each period, the Group reassesses whether it has control if there are changes to one or more of the elements of control.

The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

b) Non-controlling interests

Non-controlling interests are the portion of income and shareholders’ equity which do not belong to the Group and are disclosed as a separate line in the Consolidated Statement of income, the Statement of Other Comprehensive Income, Balance sheet and Statement of changes in shareholders’ equity.


		- 14 -

c) Trusts

The Group acts as a trustee for financial trusts, management and guarantee trusts (refer to Note 56). Upon determining if the Group controls the trusts, the Group has analyzed the existence of Control, under the terms of IFRS 10. Consequently, how power is configured on the relevant activities of the vehicle has been evaluated in each case, the impact of changes in returns over those Structured Entities on the Group, and the relation of both. In all cases, it has been concluded that the Group acts as an agent and therefore does not consolidate those trusts.

d) Mutual funds

The Group acts as fund manager to a number of mutual funds (refer to Note 57). Determining whether the Group controls such an investment fund usually focuses on the assessment of the aggregate economic interests of the Group in the fund (comprising any carried interests and expected management fees) and considers that investors have no right to remove the fund manager without cause. In cases where the economic interest share is less than 37%, the Group concludes it acts as an agent for the investors and therefore does not consolidate those funds.

For further disclosure in respect of unconsolidated trusts and investment funds in which the Group is an agent or for which it is a sponsor, as the case may be, refer to Note 47.

e) Loss of control

When the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, any related non-controlling interest and other components of equity.

Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

f) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

5.2

Foreign currency

Transactions in foreign currencies are translated into the respective functional currency of Group entities at the spot exchange rates published by the BCRA at the date of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the spot exchange rate at the reporting date.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.

5.3

Cash and deposits in banks

Cash and cash equivalents includes cash and balances with no restrictions kept with the BCRA and on-demand accounts held at local and foreign financial entities.

5.4

Financial assets and liabilities

a) Recognition

The Group initially recognizes loans, deposits, debt securities issued and liabilities at origination. All other financial instruments (including ordinary purchase and sale of financial assets) are recognized on the date of negotiation, that is to say, the date when the Group becomes part of the instrument’s contractual provisions.


		- 15 -

The Group recognizes purchases of financial instruments with the commitment of non-optional reconveyance at a certain price (repos) as a financing granted in the line “Repo transactions” in the Consolidated Balance sheet. The difference between the purchase and sale prices of those instruments is recorded as interest accrued during the term of the transactions using the effective interest method.

Financial assets and liabilities are initially recognized at fair value. Instruments not measured at fair value through profit or loss are recognized at fair value plus (in the case of assets) or less (in the case of liabilities) the transaction costs directly attributable to the acquisition of the asset or the issuance of the liability.

The transaction price is usually the best evidence of fair value for initial recognition.

b) Classification of financial assets

On initial recognition, financial assets are classified as measured at amortized cost, fair value through Other Comprehensive Income (OCI) or fair value through profit or loss.

A financial asset is measured at amortized cost if it meets both of the following conditions:

•

the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

•

the contractual terms of the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset is measured at FVOCI only if it meets both of the following conditions:

•

the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

•

the contractual terms of the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may elect to, for each individual instrument, present subsequent changes in fair value in OCI.

All other financial assets are classified as measured at FVTPL. This category includes derivative financial instruments.

The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level. The information considered includes:

•

the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management’s strategy focuses on earning contractual interest revenue,

•

how the performance of the portfolio is evaluated and reported to the Group’s management,

•

the risks that affect the performance of the business model and how those risks are managed,

•

how managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

•

the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Group’s stated objective for managing the financial assets is achieved.

Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL.


		- 16 -

In the assessment on whether contractual cash flows are solely payments of principal and interest, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

Financial assets are not reclassified after their initial recognition, except for a change in the Group’s business models.

c) Classification of financial liabilities

The Group classifies its financial liabilities, other than derivatives, financial guarantees and loan commitments, as measured at amortized cost.

Derivative financial instruments are measured at fair value through profit or loss.

‘Financial guarantees’ are contracts that require the Group to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument.

The debt from financial guarantees issued are initially recognized at fair value. The debt is subsequently measured at the higher of this amortized amount and the present value of any expected payment to settle the liability when a payment under the contract has become probable.

d) Derecognition of financial assets and liabilities

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset and the consideration received and any recognized balance in OCI is recognized in profit or loss

The Group recognizes sales of financial instruments with the commitment of non-optional reconveyance at a certain price (repos) as a financing received in the line “Repo transactions” in the Consolidated Balance sheet. The difference between the purchase and sale prices of those instruments is booked as interest accrued during the term of the transactions using the effective interest method.

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. When an existing financial liability is replaced with another from the same borrower under significantly different conditions, or the conditions are substantially modified, said replacement or modification is treated as a derecognition of the original liability and the recognition of a new liability.

e) Measurement at amortized cost

The amortized cost of a financial asset or liability is the amount of its initial recognition less the capital reimbursements, plus or less the amortization, using the effective interest method, of any difference between the initial amount and the amount at maturity. In the case of financial assets, it also includes any impairment write-downs (doubtful accounts).

f) Impairment of financial assets

As mentioned in Note 2, the BCRA established that financial institutions shall continue to apply the model for recording provisions for loan losses for financial assets in force as of December 31, 2017 set forth through its Communication “A” 2950, as amended. Those regulations require financial institutions to:


		- 17 -

•

classify their debtors based on their “status” pursuant to the guidelines of the BCRA and

•

recognize an allowance for loan losses based on the minimum guidelines set forth by the BCRA, taking into consideration the debtor’s standing and guarantees in force.

The BCRA requires customers of the “commercial portfolio” to be analyzed and classified individually. The commercial portfolio includes loans exceeding an amount set forth by the BCRA, and loans with repayment linked to the progress of the customer’s productive or commercial activity. The assessment of the debtor’s repayment capacity is based on the estimated financial flow based on updated financial information and industry parameters, taking into consideration other circumstances of the economic activity.

The “consumer portfolio”, in turn, is analyzed globally, and debtors are classified based on the days in arrears recorded at the closing of each period. The consumer portfolio includes consumer loans, housing loans and loans up to an amount set forth by the BCRA with repayment not related to a productive or commercial activity.

The “consumer-like portfolio” is in turn analyzed and classified based on the Consumer portfolio criteria, but includes commercial loans not exceeding the amount of financing set forth in the regulations issued by the BCRA

Increases in the allowance for loan losses related to “Loans and other financing” are recognized in “Loan loss provision” in the Consolidated Statement of Income.

5.5

Investments in associates

An associate is an entity over which the Group has a significant influence but no control or joint control over financial and operating policies. A joint venture is an agreement whereby the Group has joint control, that is to say, the Group has a right over the agreement’s net assets instead of over the assets and liabilities of the agreement.

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

5.6

Property, plant and equipment

Property, plant, and equipment items are measured at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost includes the cash purchase price and expenses directly attributable to the acquisition necessary to take the asset to the location and operate as provided for by the Board of Directors.

The Group has used the option under IFRS 1 to consider the fair value of all its real property as the deemed cost as of January 1, 2017. Fair value was assessed based on the appraisal carried out by an independent professional, applying the Level 3 valuation techniques. To do so, a market approach was used.

Subsequent expenses are only capitalized if they are likely to provide future economic benefits for the Group.

Depreciations are calculated using the straight line method, applying the necessary rates to cancel the amounts at the end of the estimated useful life of the assets.

Depreciation methods and useful lives are reviewed at closing and adjusted prospectively, if necessary.


		- 18 -

5.7

Intangible assets

Intangible assets include the information systems costs of acquisition and implementation, which are measured at cost less accumulated amortization and impairments, if any.

Subsequent expenses related to information systems are only capitalized if the economic benefits of the related asset increase. All other expenses are recognized as a loss when incurred.

Information systems are amortized using the straight line method over their estimated useful life of 5 years.

Amortization methods, as well as the useful life assigned are reviewed at each closing date and adjusted prospectively, if applicable.

5.8

Goodwill

Goodwill is the difference between the total amount paid and the amount resulting from calculating the proportion of the capital acquired over the recorded net shareholders’ equity of Volkswagen Financial Services Compañía Financiera S.A., at the date of acquisition.

5.9

Other non-financial assets

a) Investment properties

Investment properties are measured at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost includes the cash purchase price and expenses directly attributable to the acquisition necessary to take the asset to the location and operate as provided for by the Board of Directors.

The Group has used the option under IFRS 1 to consider the fair value of all its investment properties items as the deemed cost as of January 1, 2017. Fair value was assessed based on the appraisal carried out by an independent professional, applying the Level 3 valuation techniques. To do so, a market approach was used.

b) Assets acquired as safeguarding of claims

Assets acquired as safeguarding of claims are measured at fair value as of the date on which the entity received ownership thereof, and any differences with the accounting balance of the related loan are recognized in results.

5.10

Non-current assets held for sale

Non-current assets are classified as held for sale if it is highly likely that they will be recovered, mainly through their sale, which is estimated to occur within the twelve months following the date of their classification as such.

These assets or this group of assets are generally measured at the lesser of their book value and their fair value less the cost of disposal.

When a property, plant, and equipment item is classified as “non-current assets held for sale”, depreciation stops.

When an investment in an associate measured applying the equity method is classified as “non-current assets held for sale”, the application of the equity method stops.

5.11

Impairment of non-financial assets

At least at each closing date, the Group assesses whether there are indications that a non-financial asset may be impaired (except deferred tax assets). If there is such an indication, the asset’s recoverable value is estimated.


		- 19 -

For the impairment test, assets are grouped into the smallest group of assets generating inflows for their continued use that are largely independent of the cash inflows from other assets or other cash generating units (CGU). The business goodwill acquired in business combinations is distributed to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The “recoverable value” of an asset or CGU is the highest of its value in use and its fair value less the cost of disposal. The “value in use” is based on estimated cash flows, discounted at their present value using the pre-tax interest rate that reflects current market assessment of the time value of money and the risks specific to the asset or CGU.

If the accounting balance of an asset (or CGU) is higher than its recoverable value, the asset (or CGU), is considered impaired and its book value is reduced to its recoverable value and the difference is recognized in results.

Reversal of an impairment loss for goodwill is prohibited. For other assets, an impairment loss is reversed only to the extent the book value of the assets does not exceed the value they would have had if the impairment had not been recognized.

5.12

Provisions

The Group recognizes a provision if, as a result of a past event, there is a legal or implied obligation for an amount that can be reliably estimated and it is likely that an outflow of resources will be required to settle the liability.

To assess provisions, the existing risks and uncertainties were considered, taking into consideration the opinion of the Group’s external and internal legal advisors. Based on the analysis carried out, the Group recognizes a provision for the amount considered as the best estimate of the potential expense necessary to settle the present obligation at each closing date.

The provisions recognized by the Group are reviewed at each closing date and are adjusted to reflect the best estimate available.

5.13

Personnel benefits

a) Short term personnel benefits

Short term personnel benefits are recognized in results when the employee provides the related service. A provision is recognized if the Group has the legal or implied obligation, as a result of past services provided by the employee, to pay an amount that can be reliably estimated.

b) Other long term personnel benefits

The Group’s obligation in relation to long term personnel benefits is the amount of the future benefit the employees have earned in exchange for services provided during the period and prior periods. The benefit is discounted at present value. Changes in the measurement of the obligation are recognized in results.

c) Termination benefits

Termination benefits are recognized when the Group can no longer withdraw the offer of those benefits.

5.14

Capital stock

Increasing transaction costs directly attributable to the issuance of ordinary shares are recognized as a reduction of the contributions received, net of the related income tax.


		- 20 -

5.15

Interest income and expenses

Interest income and expenses are recognized in results using the effective interest rate method. The effective interest rate method is the rate exactly discounting contractual payments and collections cash flows during the expected lifetime of the financial instrument at the book value of the financial asset or liability.

The calculation of the effective interest rate includes transaction costs, commissions and other items paid or received that are an integral part of the effective interest rate. Transaction costs include increasing costs that are directly attributable to the acquisition of a financial asset or the issuance of a financial liability.

Based on the provisions of the BCRA and until December 31, 2019, the Group globally calculates the effective interest rate for financial assets and liabilities.

Interest income and expenses presented in the consolidated Statement of income include interest on:

•

financial assets and liabilities measured at amortized cost; and

•

financial assets measured at fair value through OCI

5.16

Commission income and expenses

Commissions, fees and similar items that are part of a financial asset or liability’s effective interest rate are included in the measurement of the effective interest rate (see Note 5.15).

The rest of commission income, which include fees for services, fees for mutual investment funds management, sales commissions, fees for syndicated loan, are recognized when the related service is provided.

The Bank has a benefits program granting Latam Airlines miles to enrolled customers. Since the obligation is accrued upon each eligible transaction made by customers (when the Group has the obligation to credit the miles and pay the equivalent of consumptions for miles to the airline), and the program is fully managed by that airline, after the miles are granted the Bank has no obligation related to the exchange of the miles granted.

The rest of commission expenses are recognized in income/loss when the related service is received.

5.17

Leases

a) Contracts with a lease

Upon the commencement of the contract, the Group determines if it contains a lease, in which case lease payments shall be separated into those related with the lease and those for other items, based on relative fair values.

b) Classification of a lease

When the lease substantially transfers the risks and benefits of the property of the leased asset, it is classified as a financial lease. Otherwise, the lease is classified as an operating lease.

c) Leases where the Group is the lessee

The leased asset of an operating lease is not recognized for accounting purposes. Payments under an operating lease are recognized in income/loss by applying the straight line method in the term of the lease.


		- 21 -

d) Leases where the Group is the lessor

The leased asset in an operating lease is classified as “Other non-financial assets” and depreciated over its estimated useful life. Collections received under an operating lease are recognized in income/loss by applying the straight line method in the term of the lease.

The leased asset in a financial lease is derecognized and a receivable is recognized for the amount of the net investment in the lease in the line “Loans and other financing”.

Collections received under a financial lease are separated into interest and the reduction of the lease’s net investment. Interest is recognized along the term of the lease applying a constant interest rate. Contingent leases are not considered in the assessment of the lease’s net investment.

5.18

Current and deferred income tax

Income tax charge for each period includes the current income tax and deferred income tax and is recognized in income/loss, except to the extent it relates to an item recognized in OCI or directly in shareholders’ equity.

a) Current taxes

Current income tax includes the income payable, or advances on the period’s tax and any adjustment to pay or collect related to previous years. The current amount of taxes payable (or to be recovered) is the best estimate of the amount that is expected to be paid (or recovered) measured at the applicable rate as of the closing date.

b) Deferred tax

Deferred income tax recognizes the tax effect of temporary differences between the accounting balances of the assets and liabilities and the related tax bases used to assess the taxable income.

A deferred tax liability is recognized for the tax effect of all taxable temporary differences.

A deferred tax asset is recognized for the tax effect of deductible temporary differences and non-prescribed tax losses, insofar as it is likely to have future tax income to be used.

Deferred tax assets and liabilities are measured at the tax rates expected to apply during the year when the liability is canceled or the asset is realized, in accordance with the laws substantially enacted as of the date of closing.

c) Income tax rate

The income tax rate is 30% for fiscal years beginning on or after January 1, 2018 until December 31, 2019 and 25% for subsequent fiscal years.

d) Uncertain tax positions

As prescribed by the accounting regulations set forth by the BCRA, which includes the provisions set forth by the regulator through Memorandum No. 6/2017, the Group recognizes a contingency provision regarding uncertain tax positions recorded as of March 31, 2018 and December 31, 2017 from the effect of applying the inflation adjustment in the assessment of income subject to tax for the assessment of the income tax debt as of December 31, 2016 and December 31, 2017 pursuant to the action seeking declaration of unconstitutionality filed for those periods on May 10, 2017 and May 10, 2018, respectively.

On April 2018, the process related to the action seeking declaration for the fiscal period 2016 was open for submitting evidence.

As a result of the assessment made and based on the opinion of the legal and tax advisors, the Entity’s Board of Directors considers it is highly likely that the Entity will obtain a favorable judgment at the last instance because if the effect of the inflation adjustment is not considered in the income tax assessment for the fiscal periods involved, the income tax rate would result in a confiscatory rate.


		- 22 -

Therefore, the Entity considers that pursuant to IFRS, and within the framework of IFRIC 23, no debt recognition or provision is required in relation to this uncertain status, and therefore the registration of the contingency provision required by the BCRA results in a deviation from IFRS, as stated in Note 2 to these financial statements.

6.	IFRS issued but not yet in force

A series of new standards and changes to the standards in force will enter into force after January 1, 2018, with early adoption allowed.

The Group has decided not to make early adoption of these new regulations or changes to regulations in force in the preparation of these consolidated financial statements.

The Group considers the only standards which may have a potentially significant impact on the financial standing and the results of the Group is IFRS 16 - “Leases”, which will replace the current standards on leases for fiscal years beginning on or after January 1, 2019.

IFRS 16 introduces a single lease accounting model for lessors, whereby a right-of-use asset and a lease liability for the obligation of making payments for the lease are recognized. There are exemptions allowing not to recognize short-term leases and low-value leases.

IFRS 16 does not introduce any changes to the lessor’s accounting, that is to say, leases are still classified as financial or operating.

The Group is the lessor of a series of branches and offices, which is why the Group is expected to recognize new assets for the right to use such real property and the related debt for leases. The Group has not yet completed the assessment of the amounts that will be required to be recognized in the following fiscal year as a consequence of the entry into force of IFRS 16.

7.	Cash and deposits in banks

The breakdown of the item in the Consolidated Balance Sheet and the balance of Cash and cash equivalents computed for the purposes of the preparation of the Consolidated Statement of Cash Flows includes the following items:


	03.31.18		12.31.17		03.31.17		12.31.16
Cash		8,468,784		7,977,326		10,751,228		14,176,643
BCRA - Checking account		23,929,099		29,427,394		30,635,367		31,248,052
Balances in local and foreign financial entities.		4,520,048		831,222		196,697		2,740,254

TOTAL		36,917,931		38,235,942		41,583,292		48,164,949


		- 23 -

8.	Debt securities at fair value through profit or loss

Financial assets holdings measured at fair value through profit or loss


Description	Maturity		Currency (1)		Rate		Amortization		03.31.18		12.31.17			12.31.16
Treasury Bills in USD, Maturity April 2018		04/27/2018		USD		Issue with a discount				419,679		385,645			—
Treasury Bills in USD Maturity April 2018 Argentine Bonds		04/27/2018		USD		Issue with a discount		At maturity		330,287		305,651			—
Discount in pesos under Argentine Law, Maturity 2033 (DISS)		12/31/2033		ARS		5.83% + CER		20 semianual installments		179,775		—			227,048
Argentine Treasury Bond adjusted by CER, Maturity 2021 (BONCER 2021)		07222021		ARS		2.5% + CER		At maturity		107,800		(19,415	)		—
BCRA Bills		From 01/04/17 to 06/21/18		ARS		Issue with a discount		At maturity		94,926		4,251,189			1,460.628
Consolidation Bond in legal currency Sub series		O8/04/2022		ARS		BADLAR		14 quarterly installments		20,176		20,177			27.340
Argentine Treasury bonds in pesos, fixed rate, Maturity 2021 (BONTE 021)		10032021		ARS		18.20%		At maturity		798		19,776			326,596
Argentine Treasury bonds in pesos, fixed rate, Maturity 2023 (BONTE 023)		10/17/2023		ARS		16.00%		At maturity		5		398,162			193,022
Argentine Treasury Bonds in pesos, fixed rate, Maturity 2018 (BONAR 2018)		0305 2018		ARS		22.75%		At Maturity		—		—			542,000
Argentine Bond in USD 7%,Maturity 2017 (BONAR X)		03/11/2019		ARS		2.50% + BADLAR		At maturity		—		—			196,624
Argentine Bond in pesos PRIVATE BADLAR - 300 pbc., Maturity 2017 (BONAR B17)		1009 2017		ARS		3.00% + BADLAR		At maturity		—		—			129,290
Province of Buenos Aires debt security, Maturity 2018 (TDPBA28D8)		12/28/2018		ARS		3.50% + BADLAR		3 quarterly installments		—		—			100,277
Corporate Bond PAN AMERICAN ENERGY. Maturity 2020 (CB PNC80)		12/10/2020		ARS		BADLAR		At Maturity		—		—			46,672
Corporate Bond TELECOM PERSONAL S.A. Maturity 2017 (CB TLS1O)		06/10/2017		ARS		3.75% + BADLAR		At maturity		—		—			25,359
Corporate Bond AXION ENERGY ARGENTINA. Maturity 2017 (CB AXION2)		O8/15/2017		ARS		3.25% + BADLAR		At maturity		—		—
Other										9,548		433,753			376,035

										1,162,994		5,795,638			3,671,503

(1) ARS: pesos

USD US Dollars

The Bank’s holdings are primarily composed of the financial assets described below:

1) Treasury Bills issued by the Argentine Government on April 7, 2017, in US Dollars with total repayment at maturity on April 27, 2018 and interest at a discount.

2) Treasury Bills issued by the Argentine Government on April 28, 2017, in US Dollars with total repayment at maturity on April 27, 2018 and interest at a discount.

3) Discount Bonds in Argentine Pesos (DIS$): bonds in pesos issued by the Argentine Government, maturing on December 31, 2033, with repayment of capital in 20 semiannual installments beginning June 30, 2024. Each payment shall include capitalized amounts adjusted by CER, accrued before the first amortization date. Accrues interest at a fixed 5.83% annual nominal rate, payable every six months. A portion of interest accrued before December 31, 2013 was paid in cash and another portion will be capitalized. The portion of interest capitalized is added to the principal amount of the securities.

4) Argentine Treasury Bond (BONCER 2021) in pesos, adjusted by CER 2021 and full repayment upon maturity on July 22, 2021. Interest is calculated on the balances adjusted as from the date of issuance, at an annual 2.5% rate payable every six months on January 22 and July 22 of each year.

5) BCRA Bills (LEBAC): short term securities offered by the monetary authority. LEBACs are issued at discount, as a zero coupon bond, with total repayment at maturity with no interest payments.

6) Consolidation bond in local currency, 8th series (PR15) repaid in 14 quarterly consecutive installments, with the first due date on July 4, 2019. It shall accrue interest at the annual nominal rate resulting from the simple average of passive interest rate published by the BCRA of the last 20 business days preceding the 5 business days prior to the commencement of each interest period, reported through a daily inquiry to private banks for 30 to 35-day term deposits in pesos for amounts of $ 1,000,000 or more. As from the date of issuance and until April 4, 2014, inclusive, interest are capitalized quarterly and paid with the repayment installments. As from July 4, 2014, interest will be payable on a quarterly basis.


		- 24 -

7) Argentine Treasury Bond (BONTE O21) in pesos, with full repayment upon maturity on October 3, 2021. It shall accrue interest as from the date of issuance at an annual rate of 18.20%. Interest shall be paid semiannually in arrears, with the first payment on April 3, 2017 and the last on the date of repayment. They shall be computed on the basis of a three hundred and sixty-day year comprised of twelve thirty-day months.

8) Argentine Treasury Bond (BONTE O23) in pesos, with full repayment upon maturity on October 17, 2023. It shall accrue interest as from the date of issuance at an annual rate of 16%. Interest shall be paid semiannually in arrears, with the first payment on April 17, 2017 and the last on the date of repayment. They shall be computed on the basis of a three hundred and sixty-day year comprised of twelve thirty-day months.

9.	Derivative instruments

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

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

The breakdown of the item is as follows:

Assets


	03.31.18		12.31.17		12.31.16
Debt balances linked to foreign currency forward transactions pending settlement in pesos		107,512		110,057		28,655
Debt balances linked to swaps of variable interest rate for fixed interest rate		60,802		32,688		25,068

TOTAL		168,314		142,745		53,723

Liabilities


	03.31.18		12.31.17		12.31.16
Credit balances linked to foreign currency forward transactions pending settlement in pesos		162,200		137,639		5,070
Credit balances linked to swaps of variable interest rate for fixed interest rate		83,244		92,136		53,235

TOTAL		245,444		229,775		58,305

The notional amounts of the term and foreign currency forward transactions, stated in US Dollars (USD), as well as the base value of interest rate swaps are reported below;


	03.31.18		12.31.17		12.31.16
Foreign currency forward transactions
Foreign currency forward purchases		11,137,186		12,671,490		2,623,708
Foreign currency forward sales		12,455,906		12,592,256		3,186,904
Interest rate swap
Receives fixed delivers variable		4,826,121		4,376,498		2,251,362


		- 25 -

10.

Repo and reverse repo transactions

The breakdown of the item is as follows:

Assets


	03.31.18		12.31.17		12.31.16
Amounts receivable for repo transactions of government securities with financial entities		482,571		603,035		82
Amounts receivable for repo transactions with the BCRA		1,917,624		1,353,992		58,240
Amounts receivable for repo transactions of government securities with non-financial institutions		4,743,906		4,372,912		—

TOTAL		7,144,101		6,329,939		58,322

(1)	For two repo transactions of Argentine Bonds in US Dollars 2024 carried out in August and September 2017 with Argentina for a total of USD 250,000,000 with final maturity on December 28, 2018 and March 1, 2019, for 4,743,906 and 4,372,912, respectively.

Liabilities


	03.31.18		12.31.17		12.31.16
Amounts payable for repo transactions of government securities with financial institutions		579,184		285,389		937
Amounts payable for repo transactions of monetary regulation instruments with the BCRA		—		21		134,202

TOTAL		579,184		285,410		135,139

11.

Other financial assets

The breakdown of Other financial assets is as follows:


	03.31.18			12.31.17			12.31.16
Measured at amortized cost
Financial debtors for spot transactions pending settlement		4,910,246			1,431,589			—
Non-financial debtors for spot transactions pending settlement		724,237			110,454			75,025
Other receivables		792,029			783,696			629,377
Other		380,370			56,344			71,647

		6,806,882			2,382,083			776,049

Measured at fair value through profit or loss Mutual investment funds		439,058			350,754			154,850

		439,058			350,754			154,850

Allowance for loan losses		(103,067	)		(101,339	)		(127,729	)

TOTAL		7,142,873			2,631,498			803,170

Allowance for loan losses in Other financial assets:


Changes in Allowances per instrument class	Other financial assets			Total
Balances as of January 1, 2018		101,339			101,339
Allowances set up during the period (1)		1,756			1,756
Allowances reversed for the period		(918	)		(918	)
Allowances used during the period		1,890			1,890

Balances as of March 31, 2018		103,067			103,067


		- 26 -


Changes in Allowances per instrument class	Other financial assets			Total
Balances as of January 1, 2017		127,729			127,729
Allowances set up during the period (1)		65,592			65,592
Allowances reversed for the period		(572	)		(572	)
Allowances used during the period		(87,567	)		(87,567	)

Balances as of March 31, 2017		105,182			105,182

(1)	Includes exchange rate difference of 613 and (209) as of March 31, 2018 and 2017, respectively.

12.

Loans and other financing

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


	03.31.18			12.31.17			12.31.16
Financing to non-financial government sector		142			218			98,819
Financing to the BCRA		2,354			—			—
Financing to other financial institutions		4,947,081			4,649,114			2,686,109
Overdrafts		13,605,365			11,707,261			9,801,870
Discounted instruments		10,729,573			11,164,895			6,456,171
Signature documents		7381,415			7,049,131			4,348,688
Documents purchased		40,993			13,450			—
Real estate mortgage		5,881,749			4,457,821			1,917,412
Collateral Icons		4,844,257			4,539,300			2,974,398
Consumer loans		19,376,800			16,638,201			9,566,943
Credit Cards		31,874,928			30,144,824			22,625,315
Loans for the prefinancing and financing of exports		27,656,928			23,147,427			8,486,700
Receivables from financial leases		2,565,658			2,296,233			1,994,613
Loans to personnel		777,549			626,305			176,129

Other financing		12,300,358			13,947,152			9,062,725

		141,985,l50			130,381,335			80,195,892

Allowance for loan losses		(2548,322	)		(2,290,430	)		(1,613,650	)

TOTAL		139,436,828			128,090,905			78,582,242

Allowance for loan losses for loans and other financing:


Changes in Allowances per instrument class	Loans to the financial sector			Advances			Documents			Mortgage		Pledge			Personal			Credit cards			Other			Total
Balances as of January 1, 2018		40,167			79,099			376,589			38,924		106,417			473,853			805,049			370,332			2,290,430
Allowances set up during the period (1)		29,642			12,011			51,776			14,060		7,990			132,963			240,940			58,810			548,192
Allowances reversed for the period		(41,797	)		—			—			—		—			—			—			(8,894	)		(50,691	)
Allowances used during the period		1,198			(39,408	)		(403	)		—		(3,018	)		(61,030	)		(104,018	)		(32,930	)		(239,609	)

Balances as of March 31, 2018		29,210			51,702			427,962			52,984		111,389			545,786			941,971			387,318			2,548,322


		- 27 -


Changes in Allowances per instrument class	Loans to the financial sector			Advances			Documents			Mortgage			Pledge			Personal			Credit cards			Other			Total
Balances as of January 1, 2017		24,133			202,544			167,034			13,211			79,633			375,341			491,678			260,076			1,613,650
Allowances set up during the period (1)		(1,404	)		121,170			24,186			326			6,984			85,847			56,909			16,236			310,254
Allowances reversed for the period		—			—			—			—			—			—			—			(653	)		(653	)
Allowances used during the period		3,776			(75,137	)		(108	)		(20	)		(679	)		(61,067	)		(17,913	)		(22,498	)		(173,646	)

Balances as of March 31, 2017		26,505			248,577			191,112			13,517			85,938			400,121			530,674			253,161			1,749,605

(1)	Includes exchange rate difference of 22,160 and (4,185) as of March 31, 2018 and 2017, respectively.

The information on the concentration of loans and other financing is presented in Exhibits B and C. The reconciliation of the information included in that Exhibit with the accounting balances is shown below:


	03.31.18		12.31.17		12.31.16
Total Exhibit B and C		143,087,289		131,993,461		81,693,140
Plus:
Argentine Central Bank (BCRA)		2,354		—		—
Loans to personnel		777,549		626,305		176,129
Less:
Allowance for loan losses		2,548,322		2,290,430		1,613,650
Effective rate adjustments		346,423		316,269		559,071
Corporate bonds		167,927		292,352		325,925
Loan commitments		1,367,692		1,629,810		788,381

Total loans and other financing		139,436,828		128,090,905		78,582,242

Loan commitments

To meet the specific financial needs of customers, the Group’s credit policy also includes, among others, the granting of collateral, surety, warranties, letters of credit and documented credits. Although these transactions are not recognized in the Consolidated Balance Sheet, because they imply a potential liability for the Group, they expose the Group to credit risks in addition to those recognized in the Consolidated Balance Sheet and are, therefore, an integral part of the Group’s total risk.

As of March 31, 2018 and December 31, 2017 and 2016, the Group holds the following contingent transactions:


	03.31.18		12.31.17		12.31.16
Overdrafts and receivables agreed not used		582,301		772,541		176,296
Guarantees granted		415,473		398,063		264,058
Liabilities for foreign trade transactions		126,777		107,418		97,467
Discounted instruments		243,141		351,788		250,560

		1,367,692		1,629,810		788,381


		- 28 -

Such guarantees are initially recognized at fair value of the commission received in “Other financial liabilities”.

Risks related to the aforementioned contingent transactions are evaluated and controlled in the framework of the Group’s credit risks policy mentioned in Note 42.

13.

Other Debt securities

13.1 Financial assets measured at amortized cost

They include corporate bonds for which the Group is carrying out credit recovery transactions, for an amount of 190 as of March 31, 2018 and December 31, 2017, and 243 as of December 31, 2016.

13.2 Financial assets measured at fair value through OCI

Description

Maturity

Currency(1)

Rate

Amortization

03.31.18

12.31.17

12.31.16

BCRA Bills

From 01/04/17 to 09/19/18

ARS

Issue with a discount

At maturity

11,059,861

10,559,358

5,903,518

Treasury Bills in USD. Maturity- August 2018

08/24/2018

USD

Issue with a discount

At maturity

1,094,517

—

Treasury Bills in USD. Maturity February 2019

02/08/2019

USD

Issue with a discount

At maturity

926,373

—

Treasury Bills in USD. Maturity November 2018

11/16/2018

USD

Issue with a discount

At maturity

891,217

826,467

—

Treasury Bills in USD. Maturity October 2018

10/12/2018

USD

Issue with a discount

At maturity

426,331

394,795

—

Tresury Bills in USD. Maturity May 2018

05/11/2018

USD

Issue with a discount

At maturity

295,394

275,861

—

Treasury Bills in USD. Maturity December 2018

12/14/2018

USD

Issue with a discount

At maturity

263,075

243,401

—

Treasury Bills in USD. Maturity August 2018

08/10/2018

USD

Issue with a discount

At maturity

218,923

—

Treasury Bills a USD. Maturity July 2018

07/27/2018

USD

Issue with a discount

At maturity

172,365

—

Corporate Bond YPF S.A Class XLIV (CB YPF 44)

12/10/2018

ARS

4.75%+ BADLAR

At maturity

101,001

103,340

101,929

Argentine Treason- Bond adjusted by CER Maturity 2021 (BONCER 2021)

07/22/2021

ARS

2.5%+CER

At maturity

69,300

64,598

649,721

Treasury Bills in USD. Maturity February 2018

02/23/2018

USD

Issue with a discount

At maturity

—

1,500,077

—

Secured Bond Maturity 2020 (BOGAR 2020)

10/04/2020

ARS

2%+CER

156
monthly
installments

—

1,469,473

1,683,892

Treasury Bills in USD. Maturity Match 2018

03/16/2018

USD

Issue with a discount

At maturity

—

546,837

—

Treasury Bills a USD. Maturity January 2018

01/26/2018

USD

Issue with a discount

At maturity

—

258,607

—

Treasury Bills in USD. Maturity March 2017

03/20/2017

USD

Issue with a discount

At maturity

—

787,465

Other

61,413

15,579,770

57,250

16,300,064

48,299

9,174,824

Allowance for loan losses

(1,624

)

(1,605

)

(1,502

)

TOTAL

15,578,146

16,298,459

9,173,322

(1)	ARS: pesos

USD: US Dollars

The Bank’s holdings are primarily composed of the financial assets described below:

1) BCRA Bills (LEBAC): short term securities offered by the monetary authority. LEBACs are issued at discount, as a zero coupon bond, with total repayment at maturity with no interest payments.

2) Treasury Bills issued by the Argentine Government on May 22, 2017, in US Dollars with total repayment at maturity on August 24, 2018 and interest at a discount.

3) Treasury Bills issued by the Argentine Government on February 5, 2018, in US Dollars with total repayment at maturity on February 8, 2019 and interest at a discount.


		- 29 -

4) Treasury Bills issued by the Argentine Government on November 3, 2017, in US Dollars with total repayment at maturity on November 16, 2018 and interest at a discount.

5) Treasury Bills issued by the Argentine Government on July 7, 2017, in US Dollars with total repayment at maturity on October 12, 2018 and interest at a discount.

6) Treasury Bills issued by the Argentine Government on September 25, 2017, in US Dollars with total repayment at maturity on May 11, 2018 and interest at a discount.

7) Treasury Bills issued by the Argentine Government on June 26, 2017, in US Dollars with total repayment at maturity on December 14, 2018 and interest at a discount.

8) Treasury Bills issued by the Argentine Government on May 8, 2017, in US Dollars with total repayment at maturity on August 10, 2018 and interest at a discount.

9) Treasury Bills issued by the Argentine Government on January 8, 2018, in US Dollars with total repayment at maturity on July 27, 2018 and interest at a discount.

10) Private securities (Corporate Bond YPF44) issued by YPF S.A. on December 10, 2015, in pesos with total repayment at maturity on December 10, 2018. Interest are paid quarterly and calculated by determining the average of the Badlar rate plus a cut-off rate of 4.75%, with the first payment on March 10, 2016 and the last payment on the date of repayment.

11) Argentine Treasury Bond (BONCER 2021) in pesos, adjusted by CER 2021 and full repayment upon maturity on July 22, 2021. Interest is calculated on the balances adjusted as from the date of issuance, at an annual 2.5% rate payable every six months on January 22 and July 22 of each year.


Changes in Allowances per instrument class	Corporate bonds			Total
Balances as of January 1, 2018		1,605			1,605
Allowances set up during the period		19			19

Balances as of March 31, 2018		1,624			1,624


Changes in Allowances per instrument class	Corporate bonds			Total
Balances as of January 1, 2017		1,502			1,502
Allowances reversed for the period		(14	)		(14	)

Balances as of March 31, 2017		1,488			1,488

14.

Financial assets pledged as collateral

The breakdown of the financial assets pledged as collateral as of March 31, 2018, December 31, 2017 and 2016 is included below:


			03.31.18		12.31.17		12.31.16
BCRA - Special guarantee accounts	(1	)		1,039,886		977,566		914,587
Guarantee Trust - BCRA Bills at fair value through OCI	(2	)		517,124		476,370		12,905
Gurantee trust - Pesos	(2	)		8,500		3,090		1,120
Deposits as collateral	(3	)		1,715,487		1,475,728		1,120,490
For reverse repo transactions - BCRA Bills at fair value though OCI				644,258		296,630		134,027
For reverse repo transactions - Government securities at fair value through OCI				—		21,080		1,065

TOTAL				3,925,255		3,250,464		2,184,194


		- 30 -

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

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

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

15.

Income Tax:

Current income tax assets

The breakdown of the item is as follows:


	03.31.18		12.31.17		12.31.16
Advances		385		9,189		1,161
Collections and withholdings		990		151		360

		1,375		9,340		1,521

Current income tax liabilities

The breakdown of the item is as follows:


	03.31.18			12.31.17			12.31.16
Advances		(861,643	)		(637,952	)		(1,204,305	)
Collections and withholdings		(9,725	)		(7,579	)		(4,386	)
Income tax provision (1)		1,755,618			2,115,417			2,313,430

		884,250			1,469,886			1,104,739

(1)	The balance as of 03.31.18 includes a reduction by 1,021,518 for the action seeking declaration of unconstitutionality mentioned in Note 60, while, as of 12.31.17 the reduction amounts to 1,185,800 as mentioned in Note 5.18.d).

Deferred income tax assets and liabilities

The breakdown and changes in deferred income tax assets and liabilities are disclosed below:


Account				Changes recognized in						As of 03.31.18
Account	As of 12.31.17			Consolidated statement of income			Consolidated statement of OCI			Deferred tax asset		Deferred tax liabilities
Allowance for loan losses		561,503			90,634			—			652,137		—
Provisions		467,608			25,099			—			494,878		(2,170	)
Loan commissions		133,308			—			—			133,308		—
Organizational and other expenses		(215,107	)		(108,003	)		—			—		(323,110	)
Property, plant and equipment and Miscellaneous assets		(1,336,828	)		23,888			—			—		(1,312,941	)
Debt securities and Investments in equity instruments		(105,934	)		(33,252	)		(10,441	)		70		(149,697	)
Derivatives		11,201			—			—			11,201		—
Other		38,590			353			—			38,943		—

Balance		(445,658	)		(1,281	)		(10,441	)		1,330,538		(1,787,918	)


		- 31 -


Account				Changes recognized in					As of 03.31.17
Account	As of 12.31.16			Consolidated statement of income			Consolidated statement of OCI		Deferred tax asset		Deferred tax liabilities
Allowance for loan losses		453,640			82,116			—		535,756		—
Provisions		454,533			(18,560	)		—		449,934		(13,961	)
Loan commissions		245,407			(10,818	)		—		245,836		(11,247	)
Organizational and other expenses		(240,258	)		(32,741	)		—		—		(272,999	)
Property, plant and equipment and Miscellaneous assets		(1,807,214	)		18,566			—		—		(1,788,648	)
Debt securities and Investments in equity instruments		431			9,479			—		46,694		(36,784	)
Derivatives		11,943			(12,570	)		—		423		(1,050	)
Other		31,498			5,356			—		36,851		—

Balance		(850,022	)		40,829			—		1,315,493		(2,124,689	)

Breakdown of income tax charges:


	03.31.18		03.31.17
Current tax		661,443		284,714
Deferred tax		1,281		(40,829	)

Income tax charges		662,724		243,885

The reconciliation of effective tax rate is disclosed below:


	03.31.18			03.31.17
Income/(loss) before income tax		2,228,868			807,432
Income tax rate		30	%		35	%

Tax on taxable income		668,660			282,601
Permanent differences:
Income not subject to income tax		(20,705	)		(30,223	)
Expenses not deductible from income tax		26,455			5,253
Other		(11,686	)		(13,746	)

Income tax charges		662,724			243,885

On December 28, 2017, Law No. 27,430 was enacted through Decree No. 1112/2017 issued by the Argentine Executive, which established changes to the tax regime and set a gradual reduction of the income tax rate, which shall be 30% for fiscal years beginning on or after January 1, 2018 and up to December 31, 2019, while the rate shall be 25% for fiscal years beginning on or after 2020. This scenario has been considered to calculate the deferred tax as of December 31, 2017.

•

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

On May 10, 2017 and May 10, 2018, and based on related case law, the Entity approved the filing of an action seeking declaration of unconstitutionality of Section 39 of Law 24,073, Section 4 of Law 25,561, Section 5 of Decree No. 214/02 issued by the Argentine Executive and any other regulation voiding the inflation adjustment mechanism provided for under Law 20,628, as amended, due to the confiscatory effect in the specific case, for fiscal years 2016 and 2017. Consequently, the Entity submitted its Income


		- 32 -

Tax Returns for fiscal years 2016 and 2017 taking into consideration the effect of those restatement mechanisms.

The net impact of this measure is an adjustment to the Income Tax assessed for the fiscal year ended December 31, 2016 of 1,185,800 while for the fiscal year ended December 31, 2017 the Income Tax adjustment amounted to 1,021,518.

Through Memorandum No. 6/2017 dated May 29, 2017, the BCRA, without passing judgment on the decisions adopted by the corporate bodies or the right of the Entity regarding the suit filed, in its capacity as issuer of accounting standards, requested the Entity to record a contingency provision in the applicable item in “Liabilities” in the amount of earnings recorded, because it considers that “a new assessment of income tax applying the inflation adjustment is not contemplated in the regulation issued by the BCRA”.

In response to this Memorandum, the Entity submitted the related statement and ratified its position and provided the background of the accounting registration made. Notwithstanding the foregoing, the Entity recorded the requested provision in the “Provisions” account in liabilities and in “Other operating expenses” in the Statement of Income, specifically pursuant to the accounting standard prescribed by the regulator for this case.

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

Therefore, the recording of the contingency provision requested by the BCRA results in a deviation from IFRS, as stated in Note 2.

•

Income tax – requests for recovery for fiscal years 2013, 2014 and 2015

Regarding fiscal years 2013, 2014 and 2015, the Entity assessed income tax without applying the tax inflation adjustment, which resulted in an amount higher than the tax paid, by 264,257, 647,945 and 555,002 for those periods.

Based on the grounds stated in the previous section, on November 19, 2015, the refund administrative claim was filed for periods 2013 and 2014, and the related complaint was filed on September 23, 2016 for both periods, given that there was no response from the administration.

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

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

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


		- 33 -

16.

Investments in equity instruments

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


	03.31.18		12.31.17		12.31.16
Mercado de Valores de Buenos Aires S.A.		40,296		35,417		66,400
BYMA-Bolsas y Mercados Argentinos S.A.		99,412		85,000		—
Banco Latinoamericano de Exportacioon S.A.		5,070		4,725		3,989
Other		478		2,145		419

TOTAL		145,256		127,287		70,808

17.

Investments in Associates

The Group has investments in the following entities over which it has a significant influence and, therefore, measures those investments by applying the equity method:


	03.31.18		12.31.17		12.31.16
PSA Finance Arg. Cía. Financiera S.A.		357,824		344,710		369,977
Rombo Cía. Financiera S.A.		395,965		393,953		349,027
BBVA Consolidar Seguros S.A.		147,848		131,334		109,399
Interbanking S.A.		18,799		18,798		10,581
Prisma Medios de Pago S.A. (1)		—		—		105,185
Other		763		644		521

TOTAL		921,199		889,436		944,690

(1)	Reclassified to “Assets held for sale” as of December 31, 2017, based on the divestment agreement mentioned in Note 21.

18.

Property, plant and equipment

Below are the changes in the item:


Account	Original value as of 12.31.17		Total estimated useful life in years		Additions		Derecognitions		Depreciation								Residual value as of 03.31.18
Account	Original value as of 12.31.17		Total estimated useful life in years		Additions		Derecognitions		Accumulated as of 12.31.17		Derecognition		For the period		Accumulated at closing		Residual value as of 03.31.18
Real estate		7,567,179		50		10,514		547,279		407,129		75,724		31,149		362,554		6,667,860
Furniture and Facilities		1,495,549		10		49,044		4,003		332,144		3,989		38,354		366,509		1,174,081
Machinery and equipment		1,127,040		3 - 5		121,360		10,222		392,162		10,222		97,587		479,527		758,651
Automobiles		22,019		5		1,474		626		10,806		—		926		11,732		11,135
Construction in progress		350,316		—		71,017		8,649		—		—		—		—		412,684

Total		10,562,103				253,409		570,779		1,142,241		89,935		168,016		1,220,322		9,024,411


		- 34 -


Account	Original value as of 12.31.16		Total estimated useful life in years		Additions		Derecognitions		Depreciation								Residual value as of 03.31.17
Account	Original value as of 12.31.16		Total estimated useful life in years		Additions		Derecognitions		Accumulated as of 12.31.16		Derecognition		For the period		Accumulated at closing		Residual value as of 03.31.17
Real estate		7,352,770		50		97,113		—		306,993		—		16,154		323,147		7,126,736
Furniture and Facilities		794,274		10		54,421		3,525		222,397		3,526		20,932		239,803		605,367
Machinery and equipment		694,206		3 - 5		60,425		15,258		232,785		15,258		59,148		276,675		462,698
Automobiles		19,102		5		856		193		7,874		10		783		8,647		11,118
Construction in progress		141,101		—		41,965		36,799		—		—		—		—		146,267

Total		9,001,453				254,780		55,775		770,049		18,794		97,017		848,272		8,352,186

As mentioned in Note 5.6, the Group considers the fair value of all its real property as the deemed cost, based on their fair values as of January 1, 2017.

The assessment of fair value was carried out by Favereau S.A. Tasaciones, an independent expert.

The valuation was carried out by applying the Costs Approach and the Sales Comparison Approach. It was possible to apply the Sales Comparison method because there are comparable units with a level of prices known in the market. When the characteristics so allowed, the values obtained using the Costs Method considering the Sales Comparison Method were confirmed. The Sales Comparison Approach assumes a well-informed buyer will not pay for an asset more than the purchase price for another similar asset. It provides an indication of value comparing the asset to other similar assets that have been sold or are for sale. Analyzes recent sales (or offers) of similar assets (Comparables) to indicate the value of the asset; if there are no comparables identical to the analyzed asset, the sale prices for comparables are adjusted to match the characteristics of the asset under analysis.

Significant inputs used, detailed by area and their relation to fair value are disclosed below:


Main calculation variables, unobservable	Interrelation between the main variables and fair value	City of Buenos Aires	Provinces of Buenos Aires, Córdoba and Santa Fe	Rest of the country

Price per square meter	The higher the price per square meter, the higher the fair value	$18,452 to $145,631	$17,699 to $89,655	$4,800 to $57,143

Age and preservation status	The higher the age, the less the fair value.	From 1930 to 2017	From 1920 to 2010	From 1935 to 2016

	The better the preservation status, the higher the fair value	Status: Good to Medium	Status: Good to Very good	Status: Good to Very good


		- 35 -

19.

Intangible Assets

Below are the changes in the item:


Account	Original value as of 12.31.17		Total estimated useful life in years		Additions		Derecognitions		Amortization								Residual value as of 03.31.18
Account	Original value as of 12.31.17		Total estimated useful life in years		Additions		Derecognitions		Accumulated as of 12.31.17		Derecognition		For the period		Accumulated at closing		Residual value as of 03.31.18
Licenses		829,041		1 - 5		43,208		20,406		396,397		20,406		30,384		406,375		445,468
Other		3,476		—		—		—		—		—		—		—		3,476

Total		832,517				43,208		20,406		396,397		20,406		30,384		406,375		448,944


Account	Original value as of 12.31.16		Total estimated useful life in years		Additions		Derecognitions		Amortization								Residual value as of 03.31.17
Account	Original value as of 12.31.16		Total estimated useful life in years		Additions		Derecognitions		Accumulated as of 12.31.16		Derecognition		For the period		Accumulated at closing		Residual value as of 03.31.17
Licenses		472,162		1 - 5		40,544		18,480		160,001		18,480		24,827		166,348		327,878
Other		3,476		—		—		—		—		—		—		—		3,476

Total		475,638				40,544		18,480		160,001		18,480		24,827		166,348		331,354

20.

Other non-financial assets

The breakdown of the item is as follows:


	03.31.18		12.31.17		12.31.16
Investment properties		102,098		102,720		105,106
Tax advances		278,215		66,230		65,130
Advance payment		641,599		764,223		447,881
Advances to suppliers of goods		216,468		266,649		475,767
Other miscellaneous assets		160,943		197,207		210,304
Advances to personnel		6,605		45,316		118,544
Property taken as security for loans		1,050		1,066		1,831
Other		50,401		86,849		44,357

TOTAL		1,457,379		1,530,260		1,468,920

Below are the changes in investment properties:


	03.31.2018			03.31.2017
Balance at the beginning of the year		102,720			105,106
Additions		—			85
Depreciation for the period		(622	)		(618	)

Balance at the closing of the period		102,098			104,573

As mentioned in Note 5.9, the Group considers the fair value of all its real property as the deemed cost, based on their fair values as of January 1, 2017.

The assessment of fair value was carried out by Favereau S.A. Tasaciones, an independent expert


		- 36 -

Analyzes recent sales (or offers) of similar assets (Comparables) to indicate the value of the asset; if there are no comparables identical to the analyzed asset, the sale prices for comparables are adjusted to match the characteristics of the asset under analysis.

Significant inputs used, detailed by area and their relation to fair value are disclosed below:


Main calculation variables, unobservable	Interrelation between the main variables and fair value	City of Buenos Aires	Provinces of Buenos Aires, Córdoba and Santa Fe	Rest of the country

Price per square meter	The higher the price per square meter, the higher the fair value	$8,367 to $46,581	$10,985 to $20,175	$8,830 to $14,047

Age and preservation status	The higher the age, the less the fair value.	From 1900 to 1990	From 1973 to 1984	From 1970 to 1984

	The better the preservation status, the higher the fair value	Status: Good to Fair	Status: Good to Fair	Status: Good to Fair

21.

Non-current assets held for sale

On February 27, 2018, the Board of Directors agreed to a plan to sell a group of real property assets located in the City of Buenos Aires. Therefore, these assets, the value of which, as of March 31, 2018 amounts to 471,556, were classified as “Non-current assets held for sale”, after the efforts to sell that group of assets began. The Board of Directors expects the sale to take place during the year 2018.

Furthermore, during November 2017, the Board of Directors agreed to a plan to sell its ownership interest in Prisma Medios de Pago S.A., and therefore the accounting balance of that ownership interest is presented as “Non-current assets held for sale”, for an amount of 270,284 as of March 31, 2018 and 196,379 as of December 31, 2017. The efforts to sell that asset have begun and the sale is expected to take place in 2018.

22.

Deposits

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

The breakdown of the item is as follows:


	03.31.18		12.31.17		12.31.16
Non-financial government sector		1,252,061		1,042,016		2,640,909
Financial sector		102,883		166,970		222,974
Non-financial private sector and residents abroad		158,597,739		152,725,685		111,746,413
Checking accounts		23,682,353		24,275,831		19,879,927
Savings accounts		78,651,990		79,047,758		42,591,155
Term deposits		51,945,470		44,825,433		35,747,602
Investment accounts		—		—		85,194
Other		4,317,926		4,576,663		13,442,535

TOTAL		159,952,683		153,934,671		114,610,296


		- 37 -

23.

Other financial liabilities

Other financial liabilities are measured at amortized cost and the breakdown is as follows:


	03.31.18		12.31.17		12.31.16
Creditors for spot transactions pending settlement		5,233,947		2,089,348		189,883
Obligations for financing of purchases		7,326,792		7,644,011		4,796,098
Accrued compassions payable		11,639		16,321		16,274
Collections and other transactions on behalf of third parties		1,405,251		1,613,752		1,570,768
Interest accrued payable		32,341		20,915		7,881
Other		2,488,009		2,621,806		1,201,761

TOTAL		16,497,979		14,006,153		7,785,665

24.

Financing received from the BCRA and other financial institutions

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


	03.31.18		12.31.17		12.31.16
Financing received from local financial institutions		297,275		383,311		36,837
Financing received from the BCRA		7,783		8,482		31,970
Financing received from foreign financial institutions		524,516		295,702		636,153

TOTAL		829,574		687,495		704,960

25.

Corporate bonds issued

Below is a detail of corporate bonds in force as of March 31, 2018, as of December 31, 2017 and 2016:


Detail	Issue date	Nominal Value (in thousands of pesos)		Maturity	Rate	Payment of interest	Residual value as of 03.31.18		Residual value as of 12.31.17		Residual value as of 12.31.16
Class 9	2/11/2014		145,116	2/11/2017	Badlar Private + 4.70% annual nominal	Quarterly		—		—		145,116
Class 11	7/18/2014		165,900	7/18/2017	Badlar Private + 3.75% annual nominal	Quarterly		—		—		165,900
Class 13	11/13/2014		107,500	11/13/2017	Badlar Private + 3.75% annual nominal	Quarterly		—		—		107,500
Class 16	7/30/2015		204,375	7/30/2017	Badlar Private + 3.75% annual nominal	Quarterly		—		—		204,375
Class 17	12/28/2015		199,722	6/28/2017	Badlar Private + 3.50% annual nominal	Quarterly		—		—		189,750
Class 18	12/28/2015		152,500	12/28/2018	Badlar Private + 4.08% annual nominal	Quarterly		152,500		152,500		152,500
Class 19	8/8/2016		207,500	2/8/2018	Badlar Private + 2.40% annual nominal	Quarterly		—		207,500		205,500
Class 20	8/8/2016		292,500	8/8/2019	Badlar Private + 3.23% annual nominal	Quarterly		292,500		290,500		292,500
Class 21	11/18/2016		90,000	5/18/2018	Badlar Private + 2.75% annual nominal	Quarterly		90,000		90,000		90,000
Class 22	11/18/2016		181,053	11/18/2019	Badlar Private + 3.50% annual nominal	Quarterly		181,053		180,053		181,053
Class 23	12/27/2017		553,125	12/27/2019	TM20 (*)+ 3.20% annual nominal	Quarterly		553,125		553,125		—
Class 24	12/27/2017		546,500	12/27/2020	Badlar Private + 4.25% annual nominal	Quarterly		546,500		546,500		—
					Total Capital			1,815,678		2,020,178		1,734,194
					Interest accrued			23,506		32,312		52,091

					Total capital and interest accrued			1,839,184		2,052,490		1,786,285

(*)	The TM20 rate is the single arithmetic mean of interest rates for term deposits of twenty million pesos or more and thirty to thirty five day terms.


		- 38 -

26.

Provisions

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

The breakdown and changes of accounting provisions are included in Exhibit J; however, below is a brief description:

•

Re-assessment of Income Tax due to the application of the inflation adjustment: reflects the provision required by the BCRA through Memorandum No. 6/2017 dated May 29, 2017, because it was considered that the re-assessment made for that tax for the application of the inflation adjustment is not contemplated in the regulations in force. The Bank has replied to the memorandum issued by the BCRA, with evidence of the validity of the accounting registration timely made and has requested that it be reviewed. Notwithstanding the foregoing, the requested allowance was set up.

•

Occasional commitments: reflects the credit risk arising from the assessment of the degree of compliance of the beneficiaries of unused balances of checking account advances granted, collateral, sureties and other occasional commitments in favor of third parties per customers account, their economic and financial standing and the counter guarantees supporting those transactions.

•

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

•

Benefits plans defined after employment: reflects the coverage of the cost of prepaid medical plan service installments (total or partial) for a group of terminated employees of the Bank for a certain period after their termination.

•

Other: reflects the estimated amounts to pay tax claims for a total of 50,064, labor-related claims for a total of 186,985, commercial claims for a total of 749,923 and miscellaneous demands for a total of 20,295.


		- 39 -

The expected terms to settle these obligations are as follows:


Provisions	Within 12 months		After 12 months
For reassessment of income tax due to inflation adjustment		—		2,207,318
For contingent commitments		1,136		—
For administrative, disciplinary and criminal penalties		—		5,000
For post-employment defined benefits plans		25,137		23,036
Other		471,763		535,504

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

27.

Other non-financial liabilities

The breakdown of the item is as follows:


	03.31.18		12.31.17		12.31.16
Short term personnel benefits		1,484,902		1,737,009		1,356,494
Long term personnel benefits		137,389		137,389		109,240
Other collections and withholdings		1,343,616		1,504,774		1321,518
Social security payment order s pending settlement		216,568		20,045		14,945
Advance collections		1,139,869		1,111,041		969,780
Miscellaneous creditors		2,412,921		2311,855		1,300,765
For contract liabilities		219,719		212,022		158,152
Other taxes payable		498,638		474,447		348,957
Other		38,627		32,695		42,383

TOTAL		7,492,249		7,741,277		5,622,234

28.

Capital Stock

The breakdown of the item is as follows:

Capital stock

Class

Quantity

Nominal
value
per
share

Votes
per
share

Shares
outstanding

Pending
issuance or
distribution

Paid-in
(1)

Ordinary

612,659,638

612,615

612,660

(1)	Registered with the Public Registry of Commerce.

BBVA Banco Francés S.A. is a corporation (sociedad anónima) incorporated under the laws of Argentina. The liability of its shareholders is limited to the shares subscribed and paid in, pursuant to the Argentine Companies Law (Law No. 19,550). Therefore, and pursuant to Law No. 25,738, it is reported that neither foreign capital majority shareholders nor local or foreign shareholders shall be liable in excess of the above mentioned capital contribution for obligations arising from transactions carried out by the financial institution.


		- 40 -

The Shareholders’ Meeting held on June 13, 2017 approved the increase in capital stock by up to $ 145,000,000 in par value through the issuance of 145,000,000 new ordinary book-entry shares entitled to one vote and with a nominal value of $ 1 per share, granting the Board of Directors the necessary authority to implement that capital increase and determine the issuance conditions.

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

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

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

29.

Interest income


	03.31.18		03.31.17
Interest on loans to the financial sector		246,176		139,247
Interest from overdrafts		917,500		769,018
Interest from documented instruments		865,226		463,665
Interest from real estate mortgage		142,561		87,054
Interest from collateral loans		316,562		195,269
Interest from credit card loans		1,671,465		1,465,047
Interest from financial leases		124,947		97,430
Interest from consumer loans		1,355,898		822,971
Interest from other loans		651,892		448,378
Primes for repo transactions		109,473		132,746
Interest for government securities		954,233		480,943
Income from private securities		43,010		20,030
Interest from loans for the prefinancing and financing of exports		174,907		72,255
Stabilization Coefficient (CER) clause adjustment		44,416		95,932
Acquisition Value Unit (UYA) clause adjustments		287,997		4,353
Other financial income		7,772		1,852

TOTAL		7,914,035		5,296,190


		- 41 -

30.

Interest expenses


	03.31.18		03.31.17
Interest for checking accounts deposits		288,583		14,811
Interest for savings accounts deposits		10,820		7,760
Interest for fixed-term deposits		2,074,916		1,533,688
Interest for inter financial loans received		16,893		8,873
Interest for other liabilities from financial transactions		233,765		120,992
Premium for reverse repo transactions		25,416		22,438
Other interest		40		629
Acquisition Value Unit (UVA) clause adjustments		158,404		1,915

TOTAL		2,808,837		1,711,106

31.

Commission income


	03.31.18		03.31.17
Commissions linked to liabilities		1,241,128		842,305
Commissions linked to loans		684,183		586,296
Commissions linked to securities		30,186		16,166
Commissions from guarantees granted		1,154		506
Commissions from foreign and exchange transactions		77,890		61,978

TOTAL		2,034,541		1,507,251

32.

Commission expenses


	03.31.18		03.31.17
Commissions for credit and debit cards		561,809		378,058
Latam Pass Commissions		422,974		312,438
Commissions linked to transactions with securities		291		147
Commissions for foreign trade transactions		24,530		16,680
Other commission expenses		345,218		244,919

TOTAL		1,354,822		952,242

33.

Net income from measurement of financial instruments at fair value through profit or loss


	03.31.18			03.31.17
Income from foreign currency forward transactions		39,614			(16,188	)
Income from government securities		186,284			81,623
Income from corporate bonds		7,830			12,874
Income from private securities		73,800			24
Income from interest rate swaps		1,649			52,334
Other		(1	)		(1	)

TOTAL		309,176			130,666

34.

Net income from write-down of assets at amortized cost


	03.31.18			03.31.17
Income from sale or derecognition of government securities		2,306			—
Expenses for sale or derecognition of government securities		(939	)		—

TOTAL		1,367			—


		- 42 -

35.

Gold and foreign currency exchange differences


	03.31.18		03.31.17
Conversion of assets and liabilities in foreign currency into pesos		162,961		(75,646	)
Income from purchase-sale of currency		532,289		381,541

TOTAL		695,250		305,895

36.

Other operating income


	03.31.18		03.31.17
Rental of safe deposit boxes		100,082		74,202
Adjustments and interest on miscellaneous receivables		61,240		29,026
Punitive interest		12,296		8,526
Loans recovered		62,186		50,626
Allowances reversed		51,609		4,068
Commissions for the hiring of insurance		167,493		164,410
Income tax - Tax inflation adjustment - Fiscal years 2017 and 2016		1,021,518		1,185,800
Other operating income		266,184		289,966

TOTAL		1,742,608		1,806,624

37.

Personnel benefits


	03.31.18		03.31.17
Salaries and wages		1,192,494		962,273
Social security charges on compensations		357,813		260,288
Personnel compensation and benefits		118,941		85,638
Personnel services		38,156		34,922
Other short term personnel benefits		249,785		216,166

TOTAL		1,957,189		1,559,287

38.

Administrative expenses


	03.31.18		03.31.17
Entertainment and travel expenses		20,266		17,340
Administrative services hired		111,278		79,266
Security services		77,006		71,101
Fees to bank Directors and Supervisory Committee		3,593		2,820
Other fees		56,443		40,677
Insurance		15,834		15,544
Rent		151,107		111,547
Stationery and supplies		9,257		10,768
Electricity and communications		64,192		51,758
Advertising and publicity		112,503		82,019
Taxes		380,433		277,646
Maintenance preservation and repairs expenses		159,145		133,842
Transportation of values		163,315		164,899
Other administrative expenses		183,820		171,782

TOTAL		1,508,192		1,231,009


		- 43 -

39.

Depreciation of assets


	03.31.18		03.31.17
Depreciation of premises and equipment		168,016		97,017
Amortization of intangible assets		30,384		24,827
Depreciation of other assets		642		624

TOTAL		199,042		122,468

40.

Other operating expenses


	03.31.18		03.31.17
Contributions to the Deposits Guarantee Fund (Note 52)		65,805		48,770
Turnover tax		725,069		517,734
Charge for other allowances		1,147,904		1,211,084
Losses		58,052		11,858
Other operating expenses		156,880		566,266

TOTAL		2,153,710		2,355,712

41.

Capital management and corporate governance transparency policy

Board of Directors

According to BBVA Banco Francés S.A.’s bylaws, the Entity shall be managed by a Board of Directors composed of a minimum of three and a maximum of nine directors, as set forth by the Ordinary General Shareholders’ Meeting at each time, for a term of three years, with the option for reelection (the “Board of Directors”). The Shareholders’ Meeting may also appoint an equal or lower number of alternate directors. The Board of Directors shall meet at least once a month.

The composition of the Board of Directors shall be previously submitted to evaluation by the Appointments and Remunerations Committee.

Below is a list of the members of our Board of Directors, their current position in the Entity and their business experience.

Name

Position

Background and work history

Jorge Carlos Bledel

Chairman

Business experience: Regular Director, Rombo Compañía Financiera S.A.; Regular Director, RPBC GAS S.A.; Regular Director, Distrilec Inversora S.A.; Regular Director, Credilogros Compañía Financiera S.A.; Credit Manager, Banco del Interior y Buenos Aires; Business Manager, Corporación Metropolitana de Finanzas; Financial Manager, BBVA Francés; Wholesale Banking Director, BBVA Francés; Retail Banking Director, BBVA Francés; Regular Director, Central Puerto S.A.; Vice-President, RPM Gas S.A.; Alternate Director, RPU Agropecuaria S.A.; Regular Director, RPE Distribución S.A.; Vice-President, PB Distribución S.A.; Regular Director, Hidro Distribución.

Independent director under the terms of General Resolution No. 622/13 (as per its new wording dating back to 2013).


		- 44 -


Name	Position	Background and work history

Alfredo Castillo Triguero	Vice-Chairman 1	Business experience: General Risk Manager and General Director of Audit, BBVA Bancomer; Executive Vice President Financial Area, BBVA Banco Provincial de Venezuela; Member of the Boards of Directors of several companies, Grupo Financiero BBVA Bancomer and BBVA Colombia; Executive Vice President Financial Area, BBVA Banco Ganadero de Colombia. Independent director under the terms of General Resolution No. 622/13 (as per its new wording dating back to 2013).

Juan Manuel Ballesteros Castellano	Vice-Chairman 2	Business experience: Organization Director, Banco Bilbao Vizcaya Argentaria; HR Director, Banco Bilbao Vizcaya Argentaria. Independent director under the terms of General Resolution No. 622/13 (as per its new wording dating back to 2013).

Oscar Miguel Castro	Regular Director	Business experience: Regular Director at Molino Agro; Regular Director at Volkswagen Financial Services Compañía Financiera S.A.; International Partner at Arthur Andersen, Pistrelli Diaz y Asociados for 20 years, Partner in charge of the Financial Services division for Argentina and Latin America and member of the Executive Committee for Financial Services at Arthur Andersen at a global level; Regular Director at Zurich Argentina Compañía de Seguros S.A. and Zurich Argentina Compañía de Reaseguros S.A. Independent director under the terms of General Resolution No. 622/13 (as per its new wording dating back to 2013).

Gabriel Eugenio Milstein	Regular Director	Business experience: Regular Director, PSA Finance Argentina Compañía Financiera S.A.; Regular Director, Rombo Compañía Financiera S.A.; Alternate Director, Volkswagen Financial Services Compañía Financiera S.A.; member of Banco Frances foundation; Director of Media and Director of Human Resources and Services, BBVA Francés. Independent director under the terms of General Resolution No. 622/13 (as per its new wording dating back to 2013).

Jorge Delfín Luna	Regular Director	Business experience: Regular Director at BBVA Francés Valores S.A.; Regular Director, Rombo Compañía Financiera S.A.; Regular Director at PSA Finance Argentina Compañía Financiera S.A.; Vice-Chairman of the Board of Directors of Fundación Banco Francés S.A.; Commercial Banking Director at BBVA Francés; Member of the Management Committee at BBVA Banco Francés S.A.; Regional Manager, Citibank; Regional Manager, Ex Banco Crédito Argentino; General Manager, Easy Bank; General Manager and Vice-Chairman at BBVA Uruguay; Enterprise and Foreign Trade Banking Director; BBVA Francés; Business Director, BBVA Francés. Not an independent director pursuant to General Resolution No. 622/13 (as per its new wording dating back to 2013).


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Name	Position	Background and work history

Javier Pérez Cardete	Alternate Director	Business experience: Regional Director South and East, Banco Bilbao Vizcaya Argentaria; Territorial Director, Banco Bilbao Vizcaya Argentaria; Risks Manager in Valencia. Independent director under the terms of General Resolution No. 622/13 (as per its new wording dating back to 2013).

Gustavo Alberto Mazzolini Casas	Alternate Director	Business experience: Director of Financial Institutions, Ernst & Young; Financial Director, Corp Banca Argentina; Financial Planning Director, Credilogros Compañía Financiera; Head of Countries II - Financial Directors Coordination Latam, Banca América; Head of Financial Directors Coordination Department Latam, Banca América; Financial Director, Banco Provincial; Director of Strategy and Finance Lobs and AdS, Grupo BBVA; Financial Staff Country Monitoring, Grupo BBVA; CFO AdS, Grupo BBVA. Not an independent director pursuant to General Resolution No. 622/13 (as per its new wording dating back to 2013).

Adriana María Fernández de Melero	Alternate Director	Business experience: Structures and Productivity Manager, BBVA Francés; Human Resources Development and Planning Manager, Banco Crédito Argentino; Human Resources Administration Manager, BBVA Francés; Organization and Productivity Manager, BBVA Francés; Business and Channels Development Manager, BBVA Francés; Director of Corporate Development and Transformation, BBVA Francés; Member of the Management Committee, BBVA Francés; Advisor for the Chairman and the Board of Directors, Banco Provincia de Buenos Aires. Not an independent director pursuant to General Resolution No. 622/13 (as per its new wording dating back to 2013).

II.

Senior Management

Senior Management is made up by the General Manager and by those executive officers who have decision-making powers and who report directly to the General Manager, or the Chairman of the Board of Directors.

The officers in Senior Management positions must have the skills and experience required by the financial industry to run the business with which they are entrusted and to oversee as appropriate the personnel in the various areas.

III.

Management Committee - Members

The main members of Senior Management make up the Management Committee. The Committee is chaired by the General Manager who shall be replaced, in case of absence or disability, by the Director of the Financial and Planning Area.

Prospective management committee members shall first be evaluated by the Nominations and Remunerations Committee for subsequent consideration by the Board.


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Powers

The Management Committee shall have the following powers, and, when appropriate, it shall be required to submit matters to consideration by the Board for final decision.

•

Implement the strategies and policies approved by the Board.

•

Evaluate and propose business and investment strategies and general risk policies. For such purpose, it shall annually approve the Business Plan and the Financial Program

•

Develop the processes necessary to identify, assess, monitor and mitigate the risks to which the Bank is exposed.

•

Implement appropriate internal control systems and monitor their effectiveness, periodically reporting to the Board on the attainment of objectives. To do so, the Internal Control and Operational Risk Reports shall be approved.

•

Establish business synergies with the remaining Group companies.

•

Analyze and propose the year’s comprehensive budget, monitor evolution and determine any corrective actions as called for by internal and market variables.

•

Propose the delegation of powers to the Bank’s officers. Supervise the managers in the various areas to make sure that they comply with the policies and procedures set forth by the Board.

•

Evaluate and propose Entity-wide policies, strategies and guidelines and then oversee and follow up on model implementation

Below is a detail of the members of the Management Committee, as well as their business background. The main executives are appointed for an indefinite term.



Martín Ezequiel Zarich	General Manager	Business experience: Alternate Director, BBVA Banco Francés S.A.; Regular Director, BBVA Consolidar Seguros SA.; Regular Director, BBVA Francés Valores S.A., Member of the Board of Directors, Fundación Banco Francés; Innovation and Development Director, BBVA Francés; Director of Mergers, BBVA Francés; Planning Director, BBVA Francés; Financial Director, BBVA Francés; Retail Banking Director, BBVA Francés; Director, Credilogros; Director, BBVA Francés Uruguay.; Deputy Managing Director, Commercial Development, BBVA Group; Deputy Managing Director, Business Development, BBVA Group; Economist, Banco de Crédito Argentino; Management and Budget Control Manager, Banco de Crédito Argentino; Planning, Management Control and Economics Director, Banco de Crédito Argentino.
Ernesto R. Gallardo Jimenez	Director of Finance and Planning	Business experience: Director of Financial Management, BBVA Bancomer; Director, COAP América; Global Director of Fixed Income for Assets Management Companies, Banco Santander; Fixed Income and Arbitrations Director, Société Générale; Derivatives Director, Capital Markets Sociedad de Valores y Bolsa.
Jorge Alberto Bledel	Business Development Director	Business experience: Innovation and Business Model Manager, BBVA Francés, Manager of Business Investment Products, Insurance and Capital Services, BBVA Francés; Head Portfolio Manager, BBVA Francés; Portfolio Manager, BBVA Francés; Wholesale Banking Analyst and Personal Banking Officer, BBVA Francés.


		- 47 -



Gustavo Osvaldo Fernández	Talent and Culture Director	Business experience: Director of Technology and Operations, BBVA; Coordinator, Systems & Organizations, Banca Nazionale del Lavoro; Systems Coordinator, Banco Galicia; System Organization and Development Manager, Banco de Crédito Argentino; Design and Development Manager, BBVA Francés; Media Director, BBVA Francés; Director of Design and Development for the Americas, BBVA; Business Partner for the Americas, BBVA.
Carlos Elizalde	Corporate & Investment Banking Director	Business experience: Regional Director for Global Transaction Banking LATAM, BBVA; General Manager, AL-Rajhi Bank; Independent Advisor, Riyadh/ Buenos Aires; General Director, Citigroup Miami; Regional Head for Latin America, Citigroup Miami; Head of Regional Sales, Citigroup Buenos Aires.
Gustavo Siciliano	Systems and Operations Director	Business experience: Director of Design and Development - Technology and Operations, BBVA; Information Technology – Media Manager, BBVA; Media Director, BBVA Uruguay; Media Planning and Information Security Manager, BBVA Francés; Media Information Security Manager, Banco de Crédito Argentino.
Gerardo Fiandrino	Risks Director	Business experience: Retail Banking Director for South America, BBVA; Wholesale Banking Director for South America, BBVA; Retail Risk Manager, BBVA Francés; Wholesale and Enterprise Risk Manager, BBVA Francés; Admission and Follow-up Manager, BBVA Francés; Monitoring and Operation Risk Manager, BBVA Francés; Director, Rombo Compañía Financiera S.A.; Director, PSA Finance Argentina Compañía Financiera S.A.; Portfolio Monitoring Manager, Banco de Crédito Argentino. Investment Banking Senior Officer, Banco de Crédito Argentino.
Gustavo Alonso	Commercial Director	Business experience: Retail Product Manager, BBVA Francés; Manager of Payment and Commercial Services and Retail, BBVA Francés; Manager of Strategic Alliances and Products, BBVA Francés; Marketing Manager, BBVA Francés; Commercial Banking Advisor Manager, BBVA Francés; Area Manager, BBVA Francés; Branch Manager at Pilar, San Nicolás and Rosario, BBVA Francés.
Eduardo González Correas	Director of Legal Services	Business experience: Legal Manager of Banking Business and Corporate & Investment Banking, BBVA Francés; Deputy Legal Manager of Corporate & Investment Banking, BBVA Francés; Lawyer at the Legal Sub-Management of Corporate & Investment Banking, BBVA Francés; Lawyer at Allende & Brea Law Firm; Lawyer at Pérez Alati, Grondona, Benites, Arntsen & Martinez de Hoz (Jr.) Law Firm.

IV.

Basic ownership structure of BBVA Banco Francés S.A.

The following table sets forth certain information regarding the beneficial ownership of the Entity’s ordinary shares as of March 31, 2018, by each person who, to our knowledge, owns more than 5% of our ordinary shares. These persons do not have different voting rights.


	Holding of ordinary shares as of March 31, 2018
Holder of shares	Quantity		Class percentage
Banco Bilbao Vizcaya Argentaria S.A.		244,870,968		39.97
BBV América S.L. ⁽¹⁾		160,060,144		26.13
The Bank of New York Mellon ⁽²⁾		124,833,651		20.38
ANSeS (Argentine Social Security Administration)		42,439,494		6.93

(1)	BBV América S.L. is controlled by BBVA. Direct holder of 26.13 % of BBVA Francés’ share capital.

(2)	As agent holder of ADSs.


		- 48 -

Organizational structure

General Organizational Structure

LOGO

VI.

Committees of the Board of Directors

Audit Committee - Law 26,831 (CNV / S.E.C.)

The Audit Committee (C.N.V./S.E.C.) of BBVA Banco Francés is a collegiate body composed mostly of independent directors according to the criteria established in the regulations of the CNV, with authority to assist the Board in evaluating the role and independence of the External Auditor and the exercise of the function of internal control of the Bank. The Audit Committee has internal rules and regulations in place that govern its purpose, organization and functions and that were approved at the General Ordinary and Special Shareholder’s meeting held on April 22, 2004. The Audit Committee also has a Recording Secretary who also serves as Board of Director’s Secretary.

The Audit Committee is comprised by three (3) regular members of the Board of Directors to be appointed by the board by a simple majority of votes. The Board may also appoint an Alternate Member.

In the first meeting held following its designation, the Committee shall appoint a Chairman who shall call for, set the agenda of, and preside over the meetings.

The directors comprising the Audit Committee shall have knowledge on business, financial or accounting issues.

Upon resignation, removal, death or incapacity of any member of the Audit Committee, the designated Alternate Member shall replace the outgoing regular member until the following Annual Ordinary Shareholders’ Meeting. The alternate member shall also have knowledge on business, financial or accounting issues and its incorporation shall not affect the majority of independent members that shall comprise the Audit Committee. The Audit Committee also meets the specifications of the Sarbanes Oxley Act.


		- 49 -

Its main functions are:

•

Give an opinion on the Board of Director’s proposal for the designation of the external auditors to be retained by the company and watch for their independence status and transparency;

•

Oversee the operation of the internal control system and the accounting and administration system, including the reliability of the latter, as well as all financial reporting and information on other significant events to be filed with the CNV and the self-regulated entities, in compliance with the applicable disclosure requirements;

•

Oversee the application of disclosure policies on the company’s risk management;

•

Provide the market with complete information on operations that entail a conflict of interest with members of the corporate bodies or controlling shareholders;

•

Give an opinion on the fairness of the compensation and stock option plans for the company’s directors and managers proposed by the Board of Directors;

•

Give an opinion on the company’s compliance with legal requirements and on the fairness of the terms and condition of stock or convertible security issues, upon a capital increase excluding or restricting preemptive rights;

•

Verify compliance with the applicable code of conduct;

•

Render an informed opinion on transactions with related parties, where the applicable standards so require;

•

Prepare an action plan on an annual basis for the fiscal year to be reported to the Board of Directors and supervisory committee.

Nominations and Remunerations Committee

BBVA Francés Nominations and Remunerations Committee is a non-executive body whose purpose consists in assisting the Board on matters concerning the Bank’s remuneration and benefit policies. Furthermore, the Nominations and Remunerations Committee is the body entrusted with the establishment of the standards and procedures governing the recruitment and training of Executive and other officers, and top-ranked personnel.

Structure:

BBVA Francés Nominations and Remunerations Committee shall be formed by three Non-Executive Directors, most of them independent, to be designated by the Board in the same manner as the President and such individuals with executive duties as determined by the Board of Directors. The Committee shall be presided over by an Independent Director.

Each member of the Nominations and Remunerations Committee shall prove sufficient knowledge on and experience in Human Resources (HR), compensation policies and labor risk management.

Functions:

The Nominations and Remunerations Committee shall perform the following functions:

•

Develop recruitment criteria for the members of the Board of Directors and senior management;

•

Identify potential candidates to fill positions at the Board of Directors to be proposed at the General Shareholders’ meeting;


		- 50 -

•

Ensure the Training and Development of the members of the Board of Directors and senior management and other executives;

•

Establish policies and criteria to review the performance of the main executive and the key executives;

•

Annually inform the Board of Directors the assessment guidelines that were followed to determine the compensation level of directors, senior positions and first-line managers;

•

Ensure that the entity has an employees incentive program in place that takes into consideration the risks undertaken by employees on behalf of the entity (both future and already assumed risks) and that adjusts incentives based on all risks;

•

Ensure a clear link between the performance of key staff and their fixed or variable compensation, taking into account the risks undertaken and how they are managed;

•

Oversee that the variable portion of Senior Management’s compensation is tied to the medium and/or long-term performance of their members;

•

Manage the stock options system;

•

Review the competitive position of the Bank’s compensation and benefit policies and practices and approve the respective changes. To such end, these policies shall embrace the company’s goals, culture and activities and shall be mainly intended to reduce incentives to undertake excessive risks in the face of the structure of the employee’s incentive system;

•

Define and communicate key staff retention, promotion, dismissal and suspension policies;

•

Present to the Board of Directors the guidelines followed to determine the retirement plans for the Bank’s directors and first-line managers;

•

Regularly report to the Board of Directors on any actions undertaken and the issues discussed in the meetings;

•

Suggest which members of the Board of Directors should comprise the several Board committees, based on their respective backgrounds;

•

Ensure that the resumes of the Board of Directors’ and Senior Management’s members are available at the Issuer’s web site (stating Directors’ term in office);

•

Assess the convenience of the members of the Board of Directors and/or statutory auditors performing functions at several Issuers;

•

Annually prepare, review and assess the Committee’s rules and regulations and propose changes for the Board’s approval;

•

Ensure that the HR policy does not embrace any form of discrimination;

•

Ensure that a member of the Committee is present at the General Shareholders’ meeting at which the Board’s compensation will be approved in order to explain the Bank’s policy in connection with the Board of Directors’ and Senior Management’s compensation.

Organization and Operation Rules:

The Nominations and Remunerations Committee shall meet as frequently as deemed necessary to perform its functions and, at least, twice per year. Meetings shall be indistinctly convened by the President or other member.

The Committee may convene individuals within the Bank that perform tasks related to the Committee’s functions, and may seek such external advice, through the Board of Directors, as deemed necessary to form an opinion on the matters within its competence.


		- 51 -

The President of the Committee shall be available at the Shareholders’ Meeting approving the Board of Directors’ compensation to explain the Bank’s policies.

Internal Audit Committee (BCRA)

Pursuant to the provisions of the BCRA, the Internal Audit Committee of BBVA Banco Francés is formed by the officers determined by the Board of Directors, which shall consist of at least two directors, one of which, at least, shall be an independent director. It shall operate in accordance with the provisions of the BCRA and internal rules.

The Board of Directors must use the conclusions of the internal audit in a timely and efficient manner and promote the independence of the internal auditor in relation to the areas and processes controlled by the internal audit.

Other Committees

The composition and functions of the Committees that are listed below are governed by the Bank’s internal manuals and the applicable rules and regulations laid down by oversight agencies. The Argentine Central Bank, the Financial Information Unit, the CNV, etc.

a) Committee for the Prevention of Money Laundering and Terrorist Financing

This Committee is made up by: (i) BBVA Banco Francés S.A.’s Regular Director in his capacity as Regulatory Compliance Officer; (ii) Highest-Ranking Officer in the field of Regulatory Compliance; (iii) one Regular Director and (iv) the Officer responsible for the Prevention of Money Laundering and Terrorism Financing.

Specifically, this Committee shall be in charge of:

•

Setting action plans and continuously reviewing their progress;

•

Filing reports with the competent authorities concerning the so-called “unusual or suspicious” transactions or, either, deciding to disregard them when appropriate.

•

Evaluating the potential risk of asset laundering in the new products and/or services.

•

Reaching an agreement on actions for the analysis of suspicious transactions;

•

Raising awareness in their areas about the importance of preventing asset laundering and terrorism financing;

•

Identifying any relevant situation that may occur in this regard in their respective areas;

•

Undertaking the necessary commitments within its area to put in place prevention procedures, on a coordinated basis with the Officer Responsible for Prevention of Money Laundering.

b) Information Technology Committee

This Committee is made up by a member of the Board, the Director of Systems and Operations, the Systems Manager, the Technology Architecture and Infrastructure Manager, the Security Manager, the Information Risks and PMO Manager; the Re-engineering and Processes Management Manager, and the Solutions Development Manager.


		- 52 -

Specifically, this Committee shall be in charge of:

•

Overseeing the proper operation of the IT environment and contributing to an improvement in its efficiency.

•

Approving the IT and Systems Plan and assessing it from time to time to review degree of completion.

•

Reviewing the reports issued by the auditors in connection with the IT and Systems environment and watching for the execution of corrective actions to address or minimize the identified weaknesses, taking into account their associated risks;

•

Approving physical and/or logic security policies or plans to mitigate the risk associated to the Entity’s systems;

•

Maintaining timely communications with the officers of the Systems External Audit Division of the Office of the Superintendent of Financial and Exchange Entities in connection with the issues identified during the audits conducted at the entities, and with the monitoring of the actions taken to find an IT solution to such issues;

•

The Committee shall be empowered to define new review functions or areas, as deemed necessary, in order for the Entity’s Information Systems to comply with overall objectives of Effectiveness, Efficiency, Confidentiality, Integrity, Availability, Reliability and Compliance.

c) Disclosure Committee

This Committee is comprised by an Independent Director, the Finance and Planning Director, the Risks Director, the Legal Services Director, the Manager of the Institutional Area, the Audit Director, the Accounting and Intervention Manager, the Planning and Efficiency Manager and an Officer of Investor Relations and Analyst of Investor Relations.

The main functions of this committee are:

•

Ensuring that the information provided to the Bank’s shareholders, the markets where the Bank’s shares are listed and such markets’ regulatory authorities are truthful and complete, reflect fairly the Bank’s financial condition and the results of operations and that it is communicated with the formalities and within the terms set forth by applicable laws, the general principles governing market operation and good corporate governance, thus fostering active involvement of all shareholders.

•

Ensuring that the Bank has and maintains procedures and controls concerning the preparation and content of the information disclosed in the Financial Statements, as well as of any accounting or financial information to be filed with the CNV and other regulators and agents of the stock exchanges where the Bank’s shares of stock are listed;

•

Ensuring that the Bank has and maintains procedures and controls concerning the preparation and content of the information included in the 20F form.

A quorum shall be present with the absolute majority of the Committee’s members and decisions shall be made by a majority of the present members. Such individuals having expertise on the issues to be discussed at the meetings may attend them as guests, and may sign the minutes; provided, however, that the presence of such individuals shall not be taken into account for the meeting quorum and required majorities.


		- 53 -

d) Risk Committee. Risk Management Committee

This committee is the Entity’s uttermost risk management collegiate body. It is comprised by the Chief Executive Officer or General Manager, Risks Director, Internal Control Assistant Manager (Technical Division), Retail Risk Manager, Wholesale and Enterprise Risks Manager (regular Participants); Financial Risks Manager, Recoveries Manager (optional Participants, or for specific issues); Head of the area of the issue to be addressed and Presenter (specific Participants).

The main functions of this committee are to:

•

Approve all transactions and Financial Programs for Customers or Economic Groups exceeding the powers vested in Risks Managements (Wholesale / Retail), Financial Entities and Issuer Risk, and any issues requiring approval from other areas (C&IB, GRMC, CTOG).

•

Approve individual and corporate customers’ refinance transactions, cancellations and charge-offs, as per the effective Delegation Rule.

•

Approve the operations of Non-Delegated Risks (risks related to media, public relevance, political parties, trade unions or companies related to the Bank or its officers).

•

Define and approve the strategies, manuals, policies, necessary practices and procedures to identify, evaluate, measure and manage the risks to which the entity is exposed (credit, market, structural, liquidity, operational risk, etc.).

•

Approve Credit Policies, classification tools and new campaigns of pre-approved loans or massive campaigns.

•

Approve the limits of Asset Allocation, PLPs and stress tests.

•

Outlooks’ Review.

•

Approve the portfolio sales processes and results thereof, and realization of assets taken as safeguarding of claims.

•

Call the Crisis Committee, if deemed necessary or at the request of the wholesale or retail follow-up Committee, and approve actions defined at such committee to mitigate risk alerts previously exposed by the related Follow-up Committees.

•

Report to the Board of Directors decisions taken on the approval of transactions and definition of risks policies and strategies.

•

Submit and analyze periodic management reports, which are then submitted to the Senior Management and the Board of Directors. These reports shall gather the main aspects of the management of all the risks of the entity.

•

Take over the roles as the Committee for the treatment of issues regarding the “Governance of Information, Risk Follow-up and Reporting”.

The Committee shall be presided by the Chairman (Risks Director) and shall have a Secretary (Head of Internal Control of Risks - Technical Division), who shall be in charge of, amongst other things, setting the agenda, preparing the Minutes for each subject submitted with the related decision taken. In case of absence of the Chairman, the Chief Executive Officer or General Manager shall act as such. In absence of the latter, the role shall be jointly taken over by two regular participants (including optional participants or participants for specific issues) in the following order: Wholesale and Enterprise Risk Manager, Retail Risk Manager, Financial Risks Manager, Recoveries Manager and Internal Control and Global Management Manager.

The Committee shall meet twice a week (on Tuesdays and Thursdays). If an urgent meeting is necessary, it shall be called as an extraordinary meeting.


		- 54 -

e) Corporate Assurance Committee

This Committee is comprised by the Executive Director as Chairman, members of the Management Committee as Regular Members, and the Committee’s Secretariat in charge of the Audit Director.

The main functions of this committee are:

•

Communicating and watching over the effective operation of the control model, as well as the required culture of transparency and self-criticism;

•

Ensuring the implementation and preservation of the Corporate Assurance model across the entities comprising the BBVA Group;

•

Setting priorities as to control weaknesses identified by the specialized areas and by the Internal Audit and as to the suitability, relevance and timing of the proposed corrective measures;

•

Ensuring that specialists fulfill their responsibilities with transparency and self-criticism;

•

Being familiar with, assessing and assigning responsibilities for managing the risks submitted to its consideration;

•

Timely following up on the agreed-up risk mitigation action plans;

•

Communicating the actions taken to the specialists and Business Units;

•

Fostering the knowledge on the Operational Risk Model, as well as the dissemination of the corporate policies in that regard;

•

Addressing and making decisions regarding Operational Risk as required due to the materiality or importance of the issues involved;

•

Ensuring the application of the Operational Risk Model and facilitating the adequate management of the operational risks associated to the Bank’s activities;

•

Overseeing the adequate deployment of the model tools and methodology; and

•

The Committee may take care of all such issues that enhance the quality and reliability of BBVA Francés’ and its affiliates’ internal controls.

The Committee shall hold ordinary and extraordinary meetings. Ordinary meetings shall be held every four months, following the required call by the Secretary. Special meetings shall be held when convened by the Secretary or at the request of one or more members of the Committee, when special circumstances so warrant.

f) Integrity, Market Behavior, Customer Compliance, Personal Data Protection and Regulatory Oversight Committee.

This committee is comprised by: (i) BBVA Francés S.A.’s Regular Director in his capacity as Regulatory Compliance Officer; (ii) Highest-Ranking Officer in the field of Regulatory Compliance; (iii) one Regular Director and (iv) the Head of Integrity, Market Behavior, Customer Compliance, Personal Data Protection and Regulatory Oversight.

Its main functions are the following:

•

Setting action plans and continuously reviewing their progress;

•

Agreeing upon anti-money laundering actions to be considered in cases involving employees and suppliers;


		- 55 -

•

Fostering the adoption of the necessary actions to address ethically questionable situations;

•

Adopting the necessary measures to comply with the Code of Ethical Conduct, the Capital Markets Code, and the Personal Data Protection, Customer Compliance and Regulatory Oversight regulations;

•

Fostering action plans to train and raise awareness among the employees of the Bank and its affiliates about the importance of being acquainted with matters concerning Integrity, Market Conduct, Customer Compliance, Personal Data Protection, and Regulatory Oversight.

This Committee will meet on a monthly basis.

g) Assets & Liabilities Committee

This committee is comprised by: (i) the General Manager; (ii) the Business Development Director; (iii) the Finance and Planning Director; (iv) the Risks Director; (v) the Commercial Director; (vi) the Corporate & Investment Banking Director; (vii) the Associate Director of Economic Studies Services; the Planning and Efficiency Manager; (viii) the Manager of Financial Performance and Relations with Investors, and (ix) the Financial Risk Manager.

Its main functions are the following:

•

Following up on macroeconomic variables;

•

Analyzing and discussing the conditions of local and international financial markets, forecast and impact on the Bank’s structural risks;

•

Follow-up and control on liquidity limits and alerts, rate, exchange position and market risk, both at an internal and regulatory levels. Defining corrective measures, as necessary;

•

Reviewing historical changes in and projection of the balance sheet, deviations from the budget, and comparison against the market and the competition;

•

Follow-up on the bank’s excess liquidity, comparison against the market and review of stress scenarios;

•

Establishing the funding strategy and the allocation of resources;

•

Defining the pricing policy and lending and borrowing products;

•

Follow-up on the changes to the bank’s financial margin and its main deviations. Changes to business spreads. Analysis of the impact of management proposals;

•

Designing the investment strategy and the investment of excess funds;

•

Defining the strategy of investment in Public Venture Capital;

•

Historical and projected changes to the Bank’s capital position and projected dividends and analyze proposals leading to the efficient use of such capital;

•

Causing financial and other analyses to be done as necessary to optimize the performance of the above items;

•

The Finance Area is responsible for analyzing and following up on the proposals submitted to the committee through the applicable commissions.

This Committee will meet on a monthly basis.


		- 56 -

VII.

BBVA Francés S.A.’s subsidiaries and associates

The main subsidiaries and associates of BBVA Francés are:

BBVA Francés Valores S.A., provides security trading services and other authorized operations to customers, either directly or through BBVA Banco Francés S.A.

BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión, the corporate purpose of this mutual fund manager is to run and manage Mutual Funds in accordance with Section 3 of Law No. 24,083 as subsequently amended by Law No. 26,831.

PSA Finance Argentina Compañía Financiera S.A., whose corporate purpose consists in financing the acquisition of new and second-hand Peugeot and Citroën vehicles through pledge loans, receivables from financial leases and other financial products and in supplying services associated to the purchase, maintenance and insurance coverage of motor vehicles.

Consolidar AFJP S.A. (undergoing liquidation proceedings), see Note 1 to the Consolidated Financial Statements of BBVA Francés as of December 31, 2017.

Rombo Compañía Financiera S.A., whose corporate purpose is to finance the acquisition of new and second-hand Renault and Nissan vehicles through pledge loans, receivables from financial leases and other financial products and in supplying services associated to the purchase, maintenance and insurance coverage of motor vehicles.

BBVA Consolidar Seguros S.A. This insurance carrier operates in the following lines of business: fire, comprehensive household insurance, civil liability, theft, personal accidents, group life insurance and other coverage.

Volkswagen Financial Services Compañía Financiera S.A., a company engaged in providing pledge loans for the purchase of VW, Audi and Ducati new or second hand vehicles, credit through operating leases, and other financial products and services associated to the purchase, maintenance and insurance of vehicles.

VIII.

Network of branches and retail offices

BBVA Banco Francés S.A. operates a network of 251 branches distributed as follows: City of Buenos Aires: 82 branches; Greater Buenos Aires: 53 branches and rest of the country: 116 branches.

IX.

Information on business lines

The most relevant business lines are: Retail Banking, whose strategy relies on building a comprehensive relationship with customers and strengthening the credit card segment; Enterprise Banking, which aims at aiding companies through both short- and long-term financing and Corporate & Investment Banking, an area concerned with Foreign Trade transactions as much as with advice in mergers and acquisitions and in capital market transactions.

Economic incentives for the personnel

BBVA Banco Francés S.A. adopts a policy of applying a rewards system to attract and retain the proper individuals for each position, based on the following principles:


		- 57 -

•

Acknowledge and compensate based on individual performance, results achieved, team work and the quality of the results achieved, as well as the skills and competences applied by individuals to their work.

•

Ensure internal fairness through structure analysis, descriptions of positions and remunerations.

•

Ensure external competitiveness by updating the information with the reference market.

•

Reward the contribution of tangible results.

The rewards system includes compensations paid to employees as consideration for their contribution to the organization in terms of time, role and results, and is formed by the fixed remuneration system and the variable remuneration system.

For the purposes of complying with such principles, the Entity has tools within the remuneration processes, as detailed below:

•

Salary surveys into the benchmark market: the position adopted within the survey is defined in accordance with the Bank’s needs and strategy for each period. This benchmark market is made up by a number of companies that have similar organizational structures and business sizes.

•

Salary categories/brackets: these are designed on the basis of the internal structure of the positions and the information derived from market salary surveys. These brackets represent salary ranges that group positions that rank similarly in terms of responsibility, experience, knowledge, etc.

Also, BBVA Francés uses performance evaluations as a key tool to compensate the effort and results of each employee. At the end of each fiscal year, each person in charge evaluates the goals of their collaborators to obtain an individual assessment of the performance for the year. Such assessment has four types of goals: Quantitative, Customer, Tactical and Other Goals.

The result of the assessment reflects the level of contribution by each member of the team, which is the basis to assess the right to collect the rewards defined.

Classification is the process whereby the manager carries out a global assessment of each collaborator to assess the performance of their current position. The results of such assessment are used to apply certain Human Resources policies.

In turn, projection is the process whereby the manager assesses each one of the collaborators on the capabilities to perform higher level functions inside BBVA Francés. This assessment shall be based on experience, knowledge, skills and the commitment of the collaborator.

Each employee has access to variable rewards related to the work position and the results of the performance evaluation. The goal is to encourage and reward the achievement of results. The models currently in force are:

•

Network rewards model: It consists of four quarterly payments and one payment of annual indicators. Payment is related to the attainment of the goals assigned to each individual, for each period. Each position has a set of goals, and each goal has a certain weight.

•

Reward model for Central Areas, Channels and Network Support: It consists of variable payment yearly assigned to each employee by the supervisor, taking into consideration the performance assessment and the position’s reference reward. Additionally, variables related to the attainment of the Entity’s goals are considered, based on the criteria adopted by the degree of compliance with the budget. These factors may have an impact on the defined variable reward.


		- 58 -

•

Results-oriented incentives reward model: At the end of each fiscal year, each employee is subject to an evaluation, where the score is related to the degree of attainment of the goals. The goals are renewed each year, according to the Entity’s strategy. Payment is defined based on a reference reward weighted by the individual score and adjusted based on the accomplishment of the Entity’s goals and the degree of compliance with the budget.

•

Commissions reward model: The value of the commission depends on the unit value of each product based on the contribution of the product to the Entity’s profit and loss account. The criteria to be applied for rewards through commissions are reviewed annually. They are paid monthly in arrears.

•

Share-based incentives reward model: It is an incentive program for directors, based on the delivery of shares. The number of units to be assigned is determined taking as a reference the level of responsibility of each beneficiary within the Bank. The number of shares to be actually delivered shall depend on the employee’s individual performance ratio.

In turn, as from the year 2012, the Entity has a system in place to assess and pay the variable annual reward for a certain group of executives whose professional activities have a material impact on the Entity’s risk profile.

Executives included in that group receive at least 50% of the annual variable reward for each year in shares of the controlling entity. The individuals who are part of that group shall receive: 60% of their rewards during the first quarter of the year and the remaining 40% 3 years as from the first payment date of the variable reward.

Shares delivered to this group of employees, which are part of their annual variable reward for the year, cannot be disposed of during the 6 months immediately following delivery. The unavailability regime applies to the net amount of the shares, that is to say, discounting the portion necessary for the employee to pay the taxes for the shares received. This shares unavailability regime also applies in the event of termination of the employment contract or the contract of a director with BBVA Francés for any cause, except in the case of death and all degrees of declared labor incapacity. After the unavailability period, BBVA Francés employees that are part of the “Colectivo Sujeto” group may freely transfer their shares.

In addition to achieving the goals set forth for such incentive, the beneficiary shall remain active in the Entity as of the settlement date, as well as generated the right to receive regular variable rewards for that fiscal year, and shall not be subject to penalties for serious noncompliance with the code of conduct and other internal regulations.

XI.

Code of conduct

The Entity has a Code of Conduct that binds all employees and officers of BBVA Francés.

The Code of Conduct defines the ethical behavior that the Board of BBVA Francés considers applicable to the businesses and activities conducted by BBVA Francés and the group companies in Argentina, builds on their foundations and lays down the guidelines required for corporate integrity to be outwardly expressed in (i) relationships with customers, employees and officers, suppliers and third parties; (ii) acting in the various markets as issuers or operators; (iii) individual actions by employees and officers; and (iv) establishing specific bodies and functions endowed with the responsibility for enforcing the Code and fostering the actions necessary to effectively safeguard corporate integrity as a whole.


		- 59 -

XII.

Conflict of interest

On December 16, 2014, the Board of Directors approved the most recent version of the Rules for Preventing and Handling Conflicts of Interest at BBVA Francés and other affiliates in Argentina.

The Rule contains the following principal guidelines: (i) it determines the scope of application; (ii) it identifies conflicts of interest; (iii) it establishes the measures for preventing and handling conflicts of interest; and (iv) it provides a procedure to be followed for interest conflict resolution.

In addition, Section 12 “Standards for discharging directorship duties” of the Code of Corporate Governance regulates, among other matters, transactions between Directors and the Bank or other Group companies.

Basically, it mandates that any Director involved shall not be in attendance when the relevant corporate bodies in which he or she is a member are in session to discuss the matters in which he or she might have a direct or indirect interest or which might affect persons related to him or her in the terms defined by the laws.

It also prescribes that the Director involved shall refrain from entering, either directly or indirectly, into personal, professional or commercial transactions with the Bank or companies of its group, other than ordinary banking transactions, unless these transactions are subject to a procurement process that ensures transparency, with competing bids and in arm’s length conditions.

42.

Financial instruments risks

Presentation of Risk Management and Risk-Weighted Assets (RWA)

Strategies and processes

The purpose of the organization is based on assuming a prudent level of risks in order to generate yields and keep acceptable levels of capital and funding, and generate benefits on a recurring basis. Therefore, it is vital that the teams assigned to risk management are highly trained professionals.

The General Risks Policy of BBVA Francés expresses the levels and types of risk the entity is willing to take to carry out its strategic plan, with no relevant deviations, even under stress conditions. Along this line, the process for risks management is comprehensive and proportional to the economic size and importance of the financial institution.

To achieve its goals, BBVA Francés uses a management model with two principles for the decision-making process:

Caution: Materialized in relation to the management of the various risks known to the entity.

Anticipation: Makes reference to the capacity of making decisions foreseeing relevant changes in the environment, the competition and customers, having effects on a medium-term.

This process is adequate, sufficiently proven, duly documented and periodically reviewed based on the changes to the entity’s risk profile and the market.

Along this line, the Board of Directors and the Senior Management are highly committed to the identification, evaluation, follow-up, control and mitigation of significant risks. These organizations periodically review credit, financial and operational risks which may potentially affect the success of BBVA Francés’ activities, as well as with a special emphasis on strategic, reputation and concentration risks.


		- 60 -

Structure and organization

The Entity has a formal organizational structure, with a set of roles, responsibilities and powers, organized in a pyramidal structure, generating control instances from lower to higher levels, up to the highest decision-making bodies. Below are the areas in each structure and a list of their functions:

•

Risks Management

•

Committees

•

Control and Reporting Units

•

Cross-Control Areas

Risks Management:

This is an area that is independent from business units, in charge of implementing the criteria, policies and procedures defined by the organization within the scope of credit (retail and wholesale), operational and market risk management, with a follow-up and control of proper application and proposing the actions necessary to the keep quality of risks within the defined goals. Some of its main functions are to ensure proper information for the decision-making process at all levels, including relevant risk factors, such as:

•

Active management throughout the life of the risk.

•

Clear processes and procedures.

•

Integrated management of all risks through identification and quantification.

•

Generation, implementation and dissemination of advanced decision-making support tools.

Committees:

Committees are the instances through which risks are treated. This implies knowledge, assessment, weighting and potential mitigation. BBVA Francés has an agile and proper structure of committees for the management of the various risks.

Cross-Control Areas

The entity also has cross-control areas for business and support units, such as: Internal Audit, Regulatory Compliance and Internal Control.

Appetite

for Risk

Appetite for Risk is a key element in the management of financial institutions, providing the Entity with a comprehensive framework to determine the risks and level of risks, willing to take to reach its business goals, expressed in terms of capital, liquidity, profitability, income recurrence, risks costs, etc.

The Appetite for Risk is expressed through a Statement containing the general principles for the Bank’s strategy and quantitative metrics.

Stress

Tests

In compliance with the provisions on “guidelines for risk management in Financial Institutions” set forth by the Argentine Central Bank, the Entity has developed a stress tests program, within the Entity’s general risks management.


		- 61 -

Stress test means the evaluation of the Entity’s financial position under a severe but plausible scenario, which requires the simulation of scenarios to estimate the potential impact on the value of portfolios, profitability, solvency and liquidity for the purposes of identifying latent risks or detecting vulnerabilities.

Credit Risk

The Bank defines credit risk as the possibility to sustain losses as a result of a debtor’s or counterparty’s noncompliance with the contractual obligations assumed.

Credit risk is present in on and off-balance sheet transactions, as well as liquidation risk, that is to say, when a financial transaction cannot be completed or settled as agreed. Credit risk losses arise from a debtor’s or counterparty’s noncompliance with its obligations. Also, it takes into consideration several types of risks, such as country risk, and counterparty credit risk.

BBVA Francés defines country risk as the risk of sustaining losses generated in investments and loans to individuals, companies and governments due to the incidence of economic, political and social events occurring in a foreign country. In turn, counterparty credit risk shall be defined in Section 5.

Strategy and processes

BBVA Francés develops the credit risk strategy defining the goals that will guide its granting activities, the policies to be adopted and the necessary practices and procedures to carry out those activities.

Additionally, annually the Risks Management develops, together with the rest of the Bank’s management departments, a budget process, including the main variables of credit risk:

•

Expected growth per portfolio and product.

•

Evolution of the default ratio.

•

Evolution of write-off portfolios.

This way, the expected standard credit risk values for a term of one year are set. Afterwards, the real values obtained are compared with that budget, to assess both the growth of the portfolio and its quality.

Also, maximum limits or exposures per economic activity are formalized, pursuant to the Bank’s placement strategy, which are used to follow up credit portfolios. In the event of deviations from the limits set, these are analyzed by the Risks Follow-Up Committees to take the necessary measures.

Admission

BBVA has credit risk admission policies, to define the criteria to obtain quality assets, establish risk tolerance levels and alignment of the credit activities with the strategy of BBVA Francés and in accordance with the BBVA Group.

Follow-up

The Bank establishes certain follow-up procedures based on the banking area involved, since the admission stage is not the end of the process. Follow-up is as important as deciding, since the risk is dynamic and customers rely on themselves and the environment.

The main follow-up procedures carried out for the various Banking areas are:

•

Follow-up of the limit granted: Since customer profiles vary over time, the limits of the product hired are periodically reviewed for the purpose of broadening, reducing or suspending the limit assigned, based on the risk situation.


		- 62 -

•

Maintenance of proactive limits: Customers’ characteristics, and therefore the characteristics of the data originating certain limits, vary over time. Therefore, there is periodical maintenance of the proactive limits, taking into consideration the changes in a customer’s situation (position of asset and liability and relationship). Likewise, there is a periodic follow-up of the evolution of proactive limits for the purpose of controlling and ensuring the risk assigned is in accordance with the desired risk levels.

•

Follow-up of rating tools: Rating tools are a reflection of the internal inputs and show the characteristics and biases of such inputs. Therefore, they need a long period of use to soften or eliminate those biases through the inclusion of new information, correction of existing information and periodic reviews optimizing the results of back-tests.

•

Portfolio analysis: The portfolio analysis consists of a follow-up process and study of the complete cycle of the risk of portfolios for the purpose of analyzing the status of the portfolio, identifying potential paths towards improvements in management and forecasting future behavior.

Additionally, the following functions shall be carried out:

•

Follow-up of specific customers.

•

Follow-up of products.

•

Follow-up of units (branches, areas, channels).

•

Other follow-up actions (samples, control of admission process and risk management, campaigns).

The priority in credit risk follow-up processes is focused mainly on problematic or potentially problematic customers, for preventive purposes. The remaining aspects, the follow-up of products, units and other follow-up actions are supplementary to the specific follow-up of customers.

Recovery

BBVA Francés has also a Recoveries Area within Risks Management, to mitigate the severity of credit portfolios, both from the Bank and from companies related to the entity, as well as to provide the results from the Bank directly, through collections of Write-Off portfolios and indirectly through collections of active portfolios, which imply a reduction of allowances.

Structure and organization

The credit risk management model at BBVA Francés has a formal organizational structure, with a set of roles, responsibilities and powers, organized in a pyramidal structure, generating control instances from lower to higher levels, up to the highest decision-making bodies: Management Committee and Board of Directors.

For the purpose of having a continuous and integrated management process with coordination between all areas involved, the Risks Management has admissions areas, follow-up areas, recoveries areas and policies and tools areas.

That management model is completed with an agile and proper structure of committees for credit risk management to treat risks, which implies knowledge, assessment, weighting and potential mitigation.

Scope and nature of information and/or risk measurement systems

BBVA has several tools to be used in credit risk management for effective risk control and facilitating the entire process. Along this line, the entity prepares, among others, the following periodic reports:

•

Progress of Risks.

•

Payment Schedules.

•

Ratings.

•

Dashboard.

•

Early Alerts System.

•

Quarterly tools follow-up sheet.


		- 63 -

Additional

Information on the credit quality of assets

Definitions

of positions due and impaired for accounting purposes and for the determination of allowances for loan losses

BBVA Francés considers a customer’s positions as due as from failure to make one of the payments and during the term those remain unpaid. Furthermore, pursuant to the provisions in the Classification of Debtors (Liquidity and Solvency), a customer’s positions are considered impaired:

•

As from ninety days of arrears for the consumer or consumer-like portfolio.

•

When the customer is unable to repay, for the commercial portfolio. This is derived from a series of objective and subjective guidelines, such as:

•

The economic-financial and equity standing.

•

Cash flow.

•

Level of compliance at maturity.

•

The quality of the management.

•

The quality of the internal control system and fluidity and consistency of information.

•

The sector of the economy and competitive position within its industry.

Likewise, there are other supplementary criteria giving rise to impaired positions for both portfolios:

•

Status of court filings.

•

Compliance with re-financing.

•

When the customer is subject to a mandatory recategorization process.

For the purposes of the accounting determination of allowances for loan losses, the Bank makes a distinction between both positions, which allows for proper management of credit risk allowances, and is a key tool to preserve the entity’s solvency.

Description

of the approaches used to set up specific and general allowances

The BCRA establishes minimum percentages to assess allowances for loan losses, based on the customers’ rating. In that sense, the regulations on Minimum Allowances (Communication A 4738 issued by the BCRA) provide in Section 2.3 that allowances may be set up above minimum allowances for each category, without reclassification of the debtor to the subsequent category in consumer and consumer-like portfolios. Furthermore, Section 2.4 provides that regular portfolio allowances shall be global and those for the remaining categories shall be applied individually.

Pursuant to the provisions in the regulations in force, the entity applies allowance percentages above the minimum set forth for the portfolios. The main destination of these allowances is to generate a coverage based on the expectation of default and the estimate of expected loss per portfolio and per type of financing. Likewise, a periodic monitoring of the behavior of portfolios and types of financing is made.

Refinanced

positions:

Refinanced customers are customers who qualify for any kind of transactions imposing changes in the term and/or amount of the initial contract, for causes related to difficulties in their payment abilities.


		- 64 -

Credit

Risk Hedging.

Coverage

and/or risk mitigation policy

Although coverages and/or risk mitigation with additional guarantees are an important factor for the granting of risks, the main factor to decide is that the customer has sufficient generation of resources to pay for the obligations agreed.

The ability of the beneficiary to repay by generating sufficient resources is above any other consideration. Thus, the decision of risks is based on the borrower’s payment capacity to timely and duly comply with all the financial obligations assumed, based on income from the customer’s business or usual income source, without relying on sureties, guarantors or assets delivered as collateral.

In addition to the policies and follow-ups, BBVA Francés uses collateral, comfort letters and covenants as mitigators.

Collateral

Upon assessing collateral, BBVA Francés carefully analyzes if they are appropriate. Along this line, the milestones to update the value of collateral apply under the principles of caution.

Regarding the types of collateral managed by BBVA Francés, the following stand out:

•

Personal: It includes personal securities, sureties or general collateral.

•

Joint and several: Payment surety granted by a third party for an obligation are included, so that the creditor may collect the credit from the debtor or the guarantor, indistinctly.

•

Several and not joint: Includes securities where no debtor may be liable for the entire debt, since the liability of guarantors / holders is proportional to their interest in the company / transaction and limited to that amount or percentage.

•

Security Interest: Includes guarantees based on tangible assets and are in turn classified as:

•

Mortgage: A mortgage does not change the debtor’s unlimited liability. Formalized pursuant to the Bank’s internal regulations for such purposes and duly registered in the record. Also, there is an independent rating, at market value and fast sale.

•

Pledge Security: This includes pledges with registration of motor vehicles or machinery, as well as pledges of Term Deposits and Mutual Investment Funds. To be accepted, they shall be in force upon liquidation, and subsequently, if that is the case, they are properly documented, always with the approval of the Legal Services area. Finally, the Bank protects itself from changes in the value of the pledge.

Coverage

based on compensation of on and off-balance sheet transactions

The Entity, within the limits defined by regulations regarding netting, negotiates with its customers the adhesion of the derivatives business to master agreements (ISDA or CMOF, for instance) including the netting of off-balance sheet transactions.

The wording of each agreement determines in each case the transaction subject to netting. The reduction in the exposure of counterparty risk arising from the use of mitigation techniques (netting plus use of collateral agreements) implies a decrease in total exposure (current market value plus potential risk).


		- 65 -

Main

types of guarantors and counterparties of credit derivatives

The Bank defines that the collateral (or credit derivative) shall be direct, explicit, irrevocable and unconditional in order to be accepted as risk mitigation. Furthermore, regarding admissible guarantors, BBVA Francés accepts financial institutions (local or foreign), public entities, Stock Exchange Companies, resident and non-resident companies, including insurance companies.

Concentration

of the market or credit risk through the instruments used to mitigate credit risk

The Entity classifies the collateral received pursuant to the regulations in force of the BCRA into:

Preferred Collateral “A”

Preferred Collateral “B”

Other collateral (not included in the sections above)

Collateral received for loans are reported in Exhibit B.

Market Risk

Market Risk is the possibility of suffering losses in the value of a portfolio in the event of changes in market prices.

The Financial Risks Management of the Risks Management area applies the criteria, policies and procedures defined by the Board of Directors within the management of that risk, with a follow-up and control of its proper application, and proposing the necessary actions to maintain the quality of risk within the defined appetite for risk.

The Financial Risks management model of BBVA Francés consists of the Market Risks and Structural Risks and Economic Capital areas, which are coordinated for control and follow-up of risks.

The management of these risks is in line with the basic principles of the Basel Committee on Banking Supervision, with a comprehensive process to identify, measure, monitor and control risks.

The organization of financial Risks is completed with a scheme of committees in which it participates, for the purpose of having an agile management process integrated into the treatment of the various risks.

Among others:

Assets and liabilities committee (ALCO)

Risk Management Committee (RMC)

Financial Risks Committee (FRC)

BBVA Francés has many tools and systems to manage and follow-up market risk, to achieve effective risk control and treatment.

To measure Market Risk, a VaR (Value at Risk) parameter model is used, to estimate the maximum loss expected in market positions with a 99% confidence level in 1-day time horizon.

The market risk measurement model is periodically validated through Back-Testing to determine the quality and precision of the VaR estimate.


		- 66 -

The structure of Market Risk limits sets forth a scheme of indicators for the management, control and mitigation of risk in terms of Economic Capital (CeR), VaR, VaR stress and annual and monthly stop loss.

That structure made of limits, alerts and sub limits is formalized through the Risk Management Committee and approved by the Board of Directors.

The Market Risk management model contemplates procedures for communication in the event the risks levels defined are exceeded, establishing specific communication and acting circuits based on the exceeded threshold.

The main market risk factors of BBVA Francés are:

Interest rate.

Exchange rate.

The market risk measurement perimeter is the trading portfolio (trading book) managed by the Global Markets unit. This portfolio mainly consists of:

Argentine Government Securities.

Argentine Central Bank Bills

Provincial debt securities.

Corporate Bonds.

Foreign exchange spot.

Derivatives (Exchange rate Futures and Forwards, interest rate Swaps).

The following tables show the evolution of total VaR and VaR per risk factors.

VaR (in millions of pesos)


	03.31.18		12.31.17		12.31.16
Average		21.41		48.39		15.63
Minimum		7.03		10.29		2.55
Maximum		39.64		85.04		39.60
Closing		7.60		43.33		27.35

VaR per risk factors – (in millions of pesos)


	03.31.18		12.31.17		12.31.16
VaR interest rate
Average		20.23		35.14		10.63
Minimum		5.29		9.42		0.38
Maximum		39.68		57.36		24.95
Closing		5.29		43.38		13.35


		- 67 -


	03.31.18		12.31.17		12.31.16
VaR foreign exchange rate
Average		5.52		30.50		9.91
Minimum		1.43		0.99		0.41
Maximum		14.11		80.91		41.17
Closing		5.39		1.66		24.70

Currency risk

The position in foreign currency is shown below:


	TOTAL		AS OF 03.31.18 (per currency)								TOTAL
	AS OF										AS OF
	03.31.18		Dollar		Euro		Real		Other		12.31.17
ASSETS
Cash and Deposits in banks		18,944.936		17/771,052		1,145,880		11,430		16,574		21,258,981
Debt securities at fair value through profit or loss		763,216		763,216		—		—		—		697,121
Repo transactions		4,743.906		4,743,906		—		—		—		4,372,912
Other financial assets		126,922		125,186		1,736		—		—		114,932
Loans and other financing		34,230,667		34,225,452		5,215		—		—		28,183,009
Non-financial government sector		30		30		—		—		—		62
BCRA		2,354		2,354		—		—		—		—
Other Financial Institutions		100,024		100,024		—		—		—		93,156
Non-FinanciaL Private Sector and Residents abroad		34,128,259		34,123,044		5,215		—		—		28,089,791
Other Debt Securities		4,348.994		4,348594		—		—		—		4,102,722
Financial assets pledged as collateral		959,495		959,495		—		—		—		766,844
Investments in Equity Instruments		5,323		5,323		—		—		—		4,961

TOTAL ASSETS		64,123,459		62,942,624		1,152,831		11,430		16,574		59,501,482


	TOTAL		AS OF 03 .31.18 (per currency)								TOTAL
	AS OF										AS OF
	03.31.18		Dollar		Euro		Real		Other		12.31.17
LIABILITIES
Deposits		57,614261		56,650,995		963,266		—		—		54,349,370
Non-financial government sector		119,122		119,122		—		—		—		101,861
Financial Sector		44,601		44,601		—		—		—		55,867
Non-Financial Private Sector and Residents abroad		57,450,538		56,487,272		963,266		—		—		54,191,642
Other financial liabilities		2,458,084		2,311,603		139,690		—		6,791		2,139509
Financing received from the BCRA and other financial institutions		526,870		526,870		—		—		—		298,578
Other non-financial liabilities		440,358		436,958		3,400		—		—		335,829

TOTAL LIABILITIES		61,039,573		59,926,426		1,106,356		—		6,791		57,123,686

Interest Rate Risk

Structural interest risk (SIR) gathers the potential impact of market interest rate variations on the margin of interest and the equity value of BBVA Francés.

The process to manage this risk has a limits and alerts structure to keep the exposure to this risk within levels that are consistent with the appetite for risk and the business strategy defined and approved by the Board of Directors.


		- 68 -

Within the core metrics used for measurement, follow-up and control, the following stand out:

•

Margin at Risk (MaR): quantifies the maximum loss which may be recorded in the financial margin projected for 12 months under the worst case scenario of rate curves for a certain level of confidence.

•

Economic Capital (EC): quantifies the maximum loss which may be recorded in the economic value of the entity under the worst case scenario of rate curves for a certain level of confidence.

The Bank additionally carries out an analysis of sensitivity of the economic value and the financial margin for parallel variations by +/- 100 basis points over interest rates.

The following table shows the progress of the sensitivity of the economic value (SEV), given a variation of +100 basis points in relation to the Core Capital:

SEV +100 bps


	03.31.18			12.31.17			12.31.16
Closing		1.71	%		1.53	%		1.03	%
Minimum		1.30	%		0.80	%		0.68	%
Maximum		1.71	%		1.65	%		1.33	%
Average		1.47	%		1.13	%		0.94	%

The following table shows the progress of the sensitivity of the financial margin (SFM), given a variation of -100 basis points in relation to the 12-month projected margin:

SFM

-100 bps


	03.31.18			12.31.17			12.31.16
Average		2.21	%		2.18	%		0.03	%
Minimum		2.10	%		0.03	%		0.02	%
Maximum		2.21	%		2.18	%		0.37	%
Closing		2.16	%		2.18	%		0.17	%

Liquidity and Financing Risk

The liquidity risk is defined as the possibility of the entity not efficiently meeting its payment obligations without incurring significant losses which may affect its daily operations or its financial standing.

The short-term purpose of the liquidity and financing risk management process at BBVA Francés is to timely and duly address payment commitments agreed, without resorting to additional funding deteriorating the entity’s reputation or significantly affecting its financial position, keeping the exposure to this risk within levels that are consistent with the appetite for risk and the business strategy defined and approved by the Board of Directors. In the medium and long term, to watch for the suitability of the financial structure of the Bank and its evolution, according to the economic situation, the markets and regulatory changes.


		- 69 -

Within the core metrics used for measurement, follow-up and control of this risk, the following stand out:

LtSCD: (Loan to Stable Customers Deposits) measures the relationship between the net credit investment and the customers’ stable resources, and is set forth as the key metric of appetite for risk. The goal is to preserve a stable financing structure in the medium and long term.

LCR: (Liquidity Coverage Ratio) measures the relation between high quality liquid assets and total net cash outflows during a 30-day period. BBVA Francés, as established in the regulations issued by the BCRA. “A” 5693, calculates the liquidity coverage coefficient on a daily basis.

Below is the progress of LCR ratios:


	03.31.18			12.31.17			12.31.16
LCR		332	%		294	%		515	%

The following table shows the breakdown per term of loans and other financing considering the total amounts as of the due date:


			Terms remaining to maturity
ITEM	Portfolio due		1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Non-financial government sector		—		142		—		—		—		—		—		142
Argentine Central Bank (BCRA)		—		2,354		—		—		—		—		—		2,354
Financial sector		—		3,286,234		842,153		880,052		830,139		824,344		229,530		6,892,452
Non-financial private sector and residents abroad		560,676		55,430,093		21,043,959		19,583,434		13,190,852		13,220,281		28,521,427		151,550,722

TOTAL		560,676		58,718,823		21,886,112		20,463,486		14,020,991		14,044,625		28,750,957		158,445,670


			Terms remaining to maturity
ITEM	Portfolio due		1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Non-financial government sector		—		218		—		—		—		—		—		218
Financial sector		—		1,857,010		1,797,617		770,250		1,282,217		621,211		302,822		6,631,127
Non-financial private sector and residents abroad		461,313		53,848,907		20,454,032		13,793,547		15,169,887		12,334,654		25,063,031		141,125371

TOTAL		461,313		55,706,135		22,251,649		14,563,797		16,452,104		12,955,865		25,365,853		147,756,716


		- 70 -


			Terns remaining to maturity
ITEM	Portfolio due		1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Son-financial government sector		—		99,573		—		—		—		—		—		99,573
Argentine Central Bank (BCRA)		—		—		—		—		—		—		—		—
Financial sector		—		2,106,691		238,917		672,686		184,692		232,051		179,093 3,614,130
Son-financial private sector and residents abroad		281,244		35,435,652		10,441,395		8,737,494		8,666,005		7,781,311		10,697,636		82,040,737

TOTAL		281,244		37,641,916		10,680,312		9,410,180		8,850,697		8,013,362		10,876,729 85,754,440

The following table discloses the breakdown of financial liabilities per remaining terms considering the total amounts at the due date:


	Terms remaining to maturity
ITEMS	1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL as of 03.31.18
Deposits		145,683,133		14,143,848		4,872,910		4,199,188		11,568		297		168,910,944
Non-financial government sector		1,285,762		19,750		21,514		—		—		—		1,327,026
Financial Sector		154,423		—		—		—		—		—		154,423
Non-Financial Private Sector and Residents abroad		144,242,948		14,124,098		4,851,396		4,199,188		11,568		297		167,429,495
Derivative instruments		245,444		—		—		—		—		—		245,444
Repo transactions		579,184		—		—		—		—		—		579,184
Other Financial Institutions		579,184		—		—		—		—		—		579,184
Other financial liabilities		16,292,418		835		954		—		—		—		16,294,207
Financing received from BCRA and other financial institutions		74,914		130,211		497,012		345,186		65,699		—		1,113,021
Corporate bonds issued		23,506		112,779		193,126		—		1,291,781		669,790		2,290,982

TOTAL		162,898,599		14,387,673		5,370,876		4,737,500		1,369,048		670,087		189,433,783


	Terms remaining to maturity
ITEMS	1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL as of 12.31.17
Deposits		143,701,672		12,516,102		2,849,579		1,589,539		476,820		371		161,134,083
Non-financial government sector		986,351		141,888		—		—		—		—		1,128,239
Financial Sector		187,121		—		—		—		—		—		187,121
Non-Financial Private Sector and Residents abroad		142,528,200		12,374,214		2,849,579		1,589,539		476,820		371		159,818,723
Derivative instruments		164,303		—		—		—		—		—		164,303
Repo transactions		285,410		—		—		—		—		—		285,410
Argentine Central Bank		21		—		—		—		—		—		21
Other Financial Institutions		285,389		—		—		—		—		—		285,389
Other financial liabilities		12,728,127		962,375		252,351		258,585		—		—		14,201,438
Financing received from BCRA and other financial institutions		325,221		292,312		134,997		157,650		115,520		—		1,025,700
Corporate bonds issued		32,312		260,724		113,400		194,178		1,295,865		673,561		2,570,040

TOTAL		157,237,045		14,031,513		3,350,327		2,199,952		1,888,205		673,932		179,380,974


		- 71 -


	Terms remaining to maturity
ITEMS	1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL as of 12.31.16
Deposits		105,932,132		10,084,980		3,379,389		478,820		231,066		134		120,106,521
Non-financial government sector		2,437,165		29,230		306,541		—		—		—		2,772,936
Financial Sector		247,892		—		—		—		—		—		247,892
Non-Financial Private Sector and Residents abroad		103,247,075		10,055,750		3,072,848		478,820		231,066		134		117,085,693
Derivative instruments		6,354		—		—		—		—		—		6,354
Repo transactions		135,140		—		—		—		—		—		135,140
Argentine Central Bank		134,202		—		—		—		—		—		134,202
Other Financial Institutions		938		—		—		—		—		—		938
Other financial liabilities		7,315,091		84,021		127,549		170,648		27,141		—		7,724,450
Financing received from BCRA and other financial institutions		401,985		102,158		164,654		29,134		1,606		—		699,537
Corporate bonds issued		52,187		178,675		236,425		590,625		553,092		583,417		2,194,421

TOTAL		113,842,889		10,449,834		3,908,017		1,269,227		812,905		583,551		130,866,423

The amounts of the Group’s financial assets and liabilities, which are expected to be collected or paid twelve months after the closing date, are disclosed below:


	03.31.18		12.31.17		12.31.16
Financial assets
Debt securities at fair value through profit or loss		574,693		1,214,107		1,721,216
Loans and other financing		35,598,168		31,788,392		14,837,660
Other debt securities		130,713		1,096,814		2,097,287

Total		36,303,574		34,099,313		18,656,163

Financial liabilities
Deposits		10,647		394,283		177,888
Other financial liabilities		—		—		22,338
Financing received from the BCRA and other financial institutions		76,638		129,391		1,322
Corporate bonds issued		1,573,178		1,570,178		923,553

Total		1,660,463		2,093,852		1,125,101

43.

Fair values of financial instruments

a)	Assets and liabilities measured at fair value

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


	Accounting balance		Total Fair value		Level 1 Fair value		Level 2 Fair value		Level 3 Fair value
Financial assets
Debt securities at fair value through profit or loss		1,162,994		1,162,994		361,633		671,282		130,079
Other financial assets		439,058		439,058		439,058		—		—
Other debt securities		15,579,770		15,579,770		10,853,521		4,625,248		101,001
Financial assets pledged as collateral		1,161,382		1,161,382		992,442		168,940		—
Investments in equity instruments		145,256		145,256		139,708		—		5,548
Derivative instruments		168,314		168,314		—		168,314		—
Financial liabilities
Derivative instruments		245,444		245,444		—		245,444		—


		- 72 -

The fair value hierarchy of assets and liabilities measured at fair value as of December 31, 2017 is detailed below.


	Accounting balance		Total Fair value		Level 1 Fair value		Level 2 Fair value		Level 3 Fair value
Financial assets
Debt securities at fair value through profit or loss		5,795,638		5,795,638		4,230,903		1,433,301		131,434
Other financial assets		350,754		350,754		350,754		—		—
Other debt securities		16,300,064		16,300,064		10,201,453		5,995,271		103,340
Financial assets pledged as collateral		794,080		794,080		794,080		—		—
Investments in equity instruments		127,287		127,287		122,103		—		5,184
Derivative instruments		142,745		142,745		—		142,745		—
Financial liabilities
Derivative instruments		229,775		229,775		—		229,775		—

The fair value hierarchy of assets and liabilities measured at fair value as of December 31, 2016 is detailed below.


	Accounting balance		Total Fair value		Level 1 Fair value		Level 2 Fair value		Level 3 Fair value
Financial assets
Debt securities at fair value through profit or loss		3,671,603		3,671,503		2,149,034		1,522,469		—
Other financial assets		154,850		154,850		154,850		—		—
Other debt securities		9,174,824		9,174,824		649,721		8,525,103		—
Financial assets pledged as collateral		147,997		147,997		147,997		—		—
Investments in equity instruments		70,808		70,808		66,400		—		4,408
Derivative instruments		53,723		53,723		28,655		25,068		—
Financial liabilities
Derivative instruments		58,305		58,305		5,070		53,235		—

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

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

If it is not possible to obtain a market price, a fair value is determined using best market practice quoting techniques, such as cash flows discount based on a yields curve for the same class and type of instrument.

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


		- 73 -

•

Level 1: Valuation using the quoting of the financial instrument, observable and available in independent prices sources and in active markets that the entity can access at the measurement date.

•

Level 2: Valuation with market prices with criterion different to those considered in Level 1, or through techniques using variables obtained from observable market data.

•

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

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

Level 3 financial assets are corporate bonds.

b)	Transfers between hierarchy levels

b.1)	Transfers from Level 1 to Level 2

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


	03.31.18			12.31.17		12.31.16
I15G8B.C.R.A.		11,998			688		—
I18L8B.C.R.A.		(130,349	)		72,983		—

The transfer of levels is because during March 2018, I15G8BCRA and I18L8BCRA bills were not quoted in active markets the entity can access for a sufficient number of days to be considered Level 1.

b.2)	Transfers from Level 2 to Level 1

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


	03.31.18			12.31.17		12.31.16
BONAR XVIII		(21,199	)		138,271		—

The Bonar XVIII had a high frequency of quoting during the month, and was therefore classified as Level 1.

b.3)	Valuation techniques for Levels 2 and 3

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

The theoretical assessment carried out for Level 2 species consists in discounting the future flows of the investment applying the interest rate as per the proper spot curve (prepared with comparable instruments with market quoting).

The theoretical assessment of Level 3 species carried out is a technical value. Therefore, the calculation includes interest collected of the investment plus nominal value.


		- 74 -

Calculations both for Level 2 and Level 3 species do not require quantitative information based on non-observable inputs. In all cases, input data are observable in the market.

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

The following table shows a reconciliation between initial and closing balances of Level 3 fair values.


	March 31, 2018			December 31, 2017
Balances at the beginning of the year		239,958			4,408
(Loss)/Income for the period recognized in results		(991	)		1,106
(Loss)/Income for the period recognized in OCI		(2,339	)		1,411
Purchases		—			112,256
Sales		—			—
Transfers from Level 3		—			120,777

Balance at closing		236,628			239,958

c)	Fair value of assets and liabilities not measured at fair value

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

•

Assets and liabilities with fair value similar to their accounting balance

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

•

Fixed rate financial instruments

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

•

Variable rate financial instruments

The fair value of financial assets and liabilities accruing a variable rate was assessed by discounting estimated future cash flows considering a contractually applicable variable rate at the measurement date, discounted applying market rates for financial instruments with similar characteristics and credit risk.


		- 75 -

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


	Accounting balance		Total Fair value		Level 1 Fair value		Level 2 Fair value		Level 3 Fair value
Financial assets
Cash and deposits in banks		36,917,931		36,917,931		36,917,931		—		—
Repo transactions		7,144,101		7,144,101		7,144,101		—		—
Other financial assets		7,143,752		7,143,752		7,143,752		—		—
Loans and other financing
Non-financial government sector		142		142		—		142		—
Argentine Central Bank (BCRA)		2,354		2,354		—		2,354		—
Other financial institutions		4,917,871		4,815,489		—		2,257,809		2,557,680
Non-financial private sector and residents abroad		134,516,461		135,934,600		—		91,109,096		44,825,504
Other debt securities		15,578,336		15,579,770		10,853,521		4,625,248		101,001
Financial liabilities
Deposits		159,952,683		159,952,683		—		159,952,683		—
Repo transactions		579,184		579,184		579,184		—		—
Other financial liabilities		16,497,979		16,497,979		16,497,979		—		—
Financing received from the BCRA and other financial institutions		829,574		829,574		9,533		820,041		—
Corporate bonds issued		1,839,184		1,839,184		—		—		1,839,184

The fair value hierarchy of assets and liabilities not measured at fair value as of December 31, 2017 is detailed below.


	Accounting balance		Total Fair value		Level 1 Fair value		Level 2 Fair value		Level 3 Fair value
Financial assets
Cash and deposits in banks		38,235,942		38,235,942		38,235,942		—		—
Repo transactions		6,329,939		6,329,939		6,329,939		—		—
Other financial assets		2,632,371		2,632,371		2,632,371		—		—
Loans and other financing
Non-financial government sector		218		218		—		218		—
Other financial institutions		4,608,947		4,608,279		—		933,359		3,674,920
Non-financial private sector and residents abroad		123,481,740		122,335,838		—		81,173,430		41,162,408
Other debt securities		16,298,649		16,300,064		10,201,453		5,995,270		103,341
Financial liabilities
Deposits		153,934,671		153,934,671		—		153,934,671		—
Repo transactions		285,410		285,410		285,410		—		—
Other financial liabilities		14,006,153		14,006,153		14,006,153		—		—
Financing received from the BCRA and other financial institutions		687,495		687,495		10,301		677,194		—
Corporate bonds issued		2,052,490		2,052,490		—		—		2,052,490


		- 76 -

The fair value hierarchy of assets and liabilities not measured at fair value as of December 31, 2016 is detailed below.


	Accounting balance		Total Fair value		Level 1 Fair value		Level 2 Fair value		Level 3 Fair value
Financial assets
Cash and deposits in banks		48,164,949		48,164,949		48,164,949		—		—
Repo transactions		58,322		58,322		58,322		—		—
Other financial assets		812,209		812,209		812,209		—		—
Loans and other financing
Non-financial government sector		98,819		98,819		2		98,817		—
Other financial institutions		2,661,976		2,659,352		—		902,851		1,756,501
Non-financial private sector and residents abroad		75,821,447		74,909,500		—		50,371,553		24,537,947
Other debt securities		9,173,565		9,174,824		596,106		8,578,718		—
Financial liabilities										—
Deposits		114,610,296		114,610,296		—		114,610,296		—
Repo transactions		135,139		135,139		135,139		—		—
Other financial liabilities		7,785,665		7,785,665		7,785,665		—		—
Financing received from the BCRA and other financial institutions		704,960		704,960		39,390		665,570		—
Corporate bonds issued		1,786,285		1,786,285		—		—		1,786,285

44.

Transfer of financial assets

In the ordinary course of business, the Group enters into transactions that result in the transfer of financial assets, primarily government securities.

In accordance with the accounting policy set out in Note 5.4 d), the transferred financial assets continue to be recognized in their entirety or to the extent of the Group’s continuing involvement, or are derecognized in their entirety.

Transfer of financial assets that are not derecognized

1) Repo transactions

‘Sale-and-repurchase agreements’ are transactions in which the Group sells financial instruments (usually government securities) and simultaneously agrees to repurchase them at a fixed price on a future date. The Group continues to recognize the securities in their entirety in the consolidated balance sheet because it retains substantially all of the risks and rewards of ownership. The cash consideration received is recognized as a financial asset and a financial liability is recognized for the obligation to pay the repurchase price.

2) Securities lending

‘Securities lending agreements’ are transactions in which the Group lends securities for a fee and receives cash as collateral. The Group continues to recognize the securities in their entirety in the consolidated balance sheet because it retains substantially all of the risks and rewards of ownership. The consideration received is recognized in income/loss during the term of the agreement.


		- 77 -

45.

Segment reporting

Basis for segmentation

The Group reports to the chief operating decision maker based on the following operating segments: (i) BBVA Banco Francés S.A. (banking), and (ii) Volkswagen Financial Services S.A. (financial services), each considered by the Bank as a single reportable segment. Reportable segments are strategic business units offering different products and services. They are managed separately because each segment is aimed at different markets and consequently requires different commercialization technologies and strategies.

During 2017, the Company updated its internal business segment information adding the analysis of loans and deposits per lines of business (corporate banking, small and medium enterprises and retail).

The following tables present information regarding business segments:


	BBVA Banco Francés S.A. (bank) (1)			Volkswagen Financial Services S.A. (financial services)			Total as of 03.31.18
Net income from interest and similar items		4,714,546			390,652			5,105,198
Net commission income		683,704			(3,985	)		679,719
Income from financial assets at fair value through profit or loss		309,176			—			309,176
Income from write-down of assets at amortized cost		1,367			—			1,367
Net foreign exchange difference		695,269			(19	)		695,250
Other operating income		1,741,489			1,119			1,742,608

TOTAL OPERATING INCOME BEFFINANCIAL ASSETS IMPAIRMENT LOSS		8,145,551			387,767			8,533,318

Net loan loss provision generated by loans		(521,926	)		(4,268	)		(526,194	)

SUBTOTAL		7,623,625			383,499			8,007,124

Total operating expenses		(5,747,700	)		(70,433	)		(5,818,133	)

Total income from associates and joint ventures		39,877			—			39,877

INCOME BEFORE INCOME TAX		1,915,802			313,066			2,228,868

Net income tax		(633,361	)		(29,363	)		(662,724	)

NET INCOME		1,282,441			283,703			1,566,144
Attributable to:
Shareholders of the Controlling Entity								1,545,298
Non-controlling interest								20,846


		- 78 -


	BBVA Banco Francés S.A. (bank) (1)			Volkswagen Financial Services S.A. (financial services)			Total as of 03.31.17
Net income from interest and similar items		3,423,699			161,385			3,585,084
Net commission Income/(Loss)		555,764			(755	)		555,009
Income from financial assets at fair value through profit or loss		130,666			—			130,666
Net foreign exchange difference		306,126			(231	)		305,895
Other operating income		1,805,102			1,522			1,806,624

TOTAL OPERATING INCOME BEFORE FINANCIAL ASSETS IMPAIRMENT LOSS		6,221,357			161,921			6,383,278

Net loan loss provision generated by loans		(371,039	)		(9,187	)		(380,226	)

SUBTOTAL		5,850,318			152,734			6,003,052

Total operating expenses		(5,228,982	)		(39,494	)		(5,268,476	)

Total income from associates and joint ventures		72,856			—			72,856

INCOME BEFORE INCOME TAX		694,192			113,240			807,432

Net income tax		(236,793	)		(7,092	)		(243,885	)

NET INCOME		457,399			106,148			563,547
Attributable to:
Shareholders of the Parent								555,175
Non-controlling interest								8,372


	BBVA Banco Francés S.A. (bank) (1)		Volkswagen Financial Services S.A. (financial services)		Total as of 03.31.18
Loans and other financing		133,923,077		5,513,751		139,436,828
Corporate Banking		34,230,363		270,759		34,501,122
Small and medium companies		41,594,222		2,064,010		43,658,232
Retail		58,098,492		3,178,982		61,277,474
Other assets		84,658,337		179,278		84,837,615

TOTAL ASSETS		218,581,414		5,693,029		224,274,443

Deposits		159,952,683		—		159,952,683
Corporate Banking		15,537,343		—		15,537,343
Small and medium companies		31,173,931		—		31,173,931
Retail		113,241,409		—		113,241,409
Other liabilities		31,142,593		1,008,952		32,151,545

TOTAL LIABILITIES		191,095,276		1,008,952		192,104,228


		- 79 -


	BBVA Banco Francés S.A. (banking activity) (1)		Volkswagen Financial Services S.A. (financial services)		Total as of 12.31.17
Loans and other financing		123,126,092		4,964,813		128,090,905
Corporate Banking		30,515,864		—		30,515,864
Small and medium companies		40,895,786		2,293,968		43,189,753
Retail		51,714,442		2,670,845		54,385,288

Other assets		85,214,451		137,632		85,352,083

TOTAL ASSETS		208,340,543		5,102,445		213,442,988

Deposits		153,934,671		—		153,934,671
Corporate Banking		13,199,994		—		13,199,994
Small and medium companies		31,526,243		—		31,526,243
Retail		109,208,434		—		109,208,434
Other liabilities		28,396,691		708,730		29,105,421

TOTAL LIABILITIES		182,331,362		708,730		183,040,092


	BBVA Banco Francés S.A. (banking activity) (1)		Volkswagen Financial Services S.A. (financial services)		Total as of 12.31.16
Loans and other financing		76,974,605		1,607,637		78,582,242
Other assets		74,994,333		192,719		75,187,052

TOTAL ASSETS		151,968,938		1,800,356		153,769,294

Deposits		114,610,296		—		114,610,296
Other liabilities		18,708,164		278,922		18,987,086

TOTAL LIABILITIES		133,318,460		278,922		133,597,382

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

46.

Subsidiaries

Below is the information on the Bank’s subsidiaries:


			Shareholding as of
Name	Registered Office (country)		03.31.18			12.31.17			12.31.16
BBVA Francés Valores S.A.		Argentina		96.9953	%		96.9953	%		96.9953	%
Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings)		Argentina		53.8892	%		53.8892	%		53.8892	%
Volkswagen Financial Services Compañía Financiera S.A.		Argentina		51.0000	%		51.0000	%		51.0000	%
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión (1)		Argentina		95.0000	%		95.0000	%		95.0000	%

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


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47.

Involvement with non-consolidated structured entities

The Group participates in a fiduciary capacity and as manager of financial and non-financial trusts and mutual investment funds (refer to Notes 56 and 57).

48.

Related parties

Parent

The Bank’s direct controlling entity is Banco Bilbao Vizcaya Argentaria.

Key Management personnel

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

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

b.1)

Remuneration of key management personnel

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


	March 31, 2018		March 31, 2017
Fees		3,322		2,634

Total		3,322		2,634

b.2)

Transactions and balances with key management personnel


	Balances as of						Transactions
	03.31.18		12.31.17		12.31.16		03.31.18		03.31.17
Loans
Credit cards		1,641		2,416		2,148		—		—
Personal loans		—		10		102		—		4
Mortgage loans		1,354		1,366		1,407		60		62
Checking accounts		13		11		14		—		—
Saving accounts		8,885		5,462		3,918		—		—


		- 81 -

b.3)

Transactions and balances with related parties (except key Management personnel)


	Balances as of						Transactions
Parent	03.31.18		12.31.17		12.31.16		03.31.18		03.31.17
Cash and Deposits in Banks		133,603		425,754		245,089		—		—
Other Non-Financial Liabilities		17,856		54,701		113,967		17,882		15,435
Securities in Custody		61,185,647		62,359,948		37,468,665		—		—
Sureties Granted		329,653		296,403		126,286		—		—
Guarantees Received		371		371		371		—		—


	Balances as of						Transactions
Associates	03.31.18		12.31.17		12.31.16		03.31.18		03.31.17
Loans and other financing		2,086,240		2,172,750		1,265,526		190,949		145,709
Debt Securities at Fair value through profit or loss		4,183		4,179		5,849		—		—
Derivative Instruments (Assets)		46,103		743		3,093		—		8,569
Deposits		28,138		26,445		22,789		—		—
Other Non-Financial Liabilities		5,277		3,124		407		3,496		761
Financing Received		—		82,175		—		655		—
Derivative Instruments (Liabilities)		49,641		12,026		576		9,357		—
Interest Rate Swaps		2,921,470		2,711,960		1,087,279		—		—
Securities in Custody		31,033		10,457		45,931		—		—

49.

Leases

The Group is the lessor in the following lease contracts:

a.1)

Finance leases

The Group executed finance lease contracts related to real property, motor vehicles, machinery and equipment.


		- 82 -

The following table shows the total gross investment of finance leases and the current value of minimum payments to be received thereunder:


Finance Leases	03.31.18				12.31.17				12.31.16
Term	Total investment		Current value of minimum payments		Total investment		Current value of minimum payments		Total investment		Current value of minimum payments
Up to 1 year		1,151,736		962,412		1,074,613		899,311		985,719		830,167
From 1 to 5 years		1,918,475		1,603,246		1,669,239		1,396,922		1,407,814		1,164,421
More than 5 years										29		25

TOTAL		3,070,211		2,565,658		2,743,852		2,296,233		2,393,562		1,994,613

Capital				2,561,659				2,283,577				1,969,957
Interest accrued				3,999				12,656				24,656

TOTAL				2,565,658				2,296,233				1,994,613

As of March 31, 2018, December 31, 2017 and 2016, non-accrued interest amount to 504,553, 447,619 and 398,949, respectively, and accumulated allowances for loan losses risk amount to 42,479, 34,391 and 27,204, respectively.

a.2)

Operating Leases

The Group executed commercial lease contracts for its investment properties, which include buildings. The average terms of those leases not subject to cancellation are from three to five years. All leases include a clause providing for an annual update of leases, taking into consideration market conditions.

Minimum future payments for operating lease contracts not subject to cancellation are as follows:


	03. 31.18		12.31.17		12.31.16
1 to 5 years		43,098		46,356		53,614

		43,098		46,356		53,614

Group acting as lessee

b.1)

Operating Leases

The Group leases branches under operating lease contracts. Leases are typically for a term of 5 years, with the option to renew after that date. Payments for leases are increased annually to reflect the market conditions.

Below are the minimum future payments of leases under operating lease contracts not subject to cancellation as of March 31, 2018 and December 31, 2017 and 2016:


	03.31.18		12.31.17		12.31.16
Up to one year		32,196		40,607		75,308
From 1 to 5 years		559,818		762,441		928,254
More than 5 years		372,851		479,066		520,219

Total		964,865		1,282,114		1,523,781

The amount of operating lease expenses recognized in income/loss was 151,107 and 111,547 as of March 31, 2018 and 2017, respectively. These amounts are included in “Administrative expenses”.


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50.

Restrictions to the payment of dividends

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

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

Specifically, the mechanism to be followed by financial institutions to assess distributable balances is defined by the BCRA through the regulations in force on the “Distribution of earnings”, provided certain conditions are not met, such as the registration for financial assistance for lack of liquidity granted by that entity, deficiencies in capital or minimum cash contributions and the existence of a certain type of penalty set forth by various regulators and weighted as significant and/or failure to implement corrective measures, among other conditions.

In addition, the Bank shall maintain a minimum capital after the proposed distribution of profits.

On April 10, 2018 the Ordinary and Extraordinary Shareholders’ Meeting was held, whereby the following allocation of profits was approved:

•

To Legal Reserve: 775,653

•

To Distribution of cash dividends: 970,000

•

To Optional Reserve for future distribution of earnings: 2,132,612

Dividends were paid on May 9, 2018.

51.

Restricted availability assets

As of March 31, 2018, as of December 31, 2017 and 2016, the Entity has the following restricted assets:

The Entity applied Argentine Treasury Bonds adjusted by CER in pesos maturing in 2021 in the amount of 44,100 and 41,108 as of March 31, 2018 and December 31, 2017, respectively, and Secured Bonds maturing in 2020 in the amount of 41,997 as of December 31, 2016, as security for loans agreed under the Global Credit Program for micro, small and medium enterprises granted by the Inter-American Development Bank (IDB).

The Entity applied Argentine Treasury Bonds adjusted by CER in pesos maturing in 2021 in the amount of 8,400 and 7,830 as of March 31, 2018 and December 31, 2017, respectively, and Secured Bonds maturing in 2020 in the amount of 45,717 as of December 31, 2016, as guarantee for funding granted by the Bicentennial Fund.

Also, the Entity has accounts, deposits and trusts applied as guarantee for activities related to credit card transactions, with automated clearing houses, transactions settled at maturity, foreign currency futures and court proceedings in the amount of 3,280,997, 2,932,754 and 2,049,102, respectively.

The Entity applied Argentine Treasury Bonds adjusted by CER in pesos maturing in 2021 in the amount of 227,946 as of December 31, 2016, as security for its role in the custody safekeeping on behalf of the Guarantee Fund for the Sustainability of the Argentine Retirement and Pension Regime and custody of Registered Bills.

BBVA Francés Valores S.A. has shares in Mercado de Valores de Buenos Aires S.A. (VALO) in the amounts of 40,296 and 35,417, and BYMA, in the amounts of 99,413 and 85,000 as of March 31, 2018 and December 31, 2017, respectively. Those shares are subject to a lien over credit rights in favor of “Crédito and Caución Compañía de Seguros S.A.” under the insurance contract signed by the company issuing such shares, to secure noncompliance with the company’s obligations.


		- 84 -

That company registered the shares in Mercado de Valores de Buenos Aires S.A. (MERVAL), in the amount of 66,400 as of December 31, 2016. These shares were subject to a lien over credit rights in favor of “CHUBB Argentina de Seguros S.A.” under the insurance contract executed by the company issuing those shares, to secure noncompliance with the company’s obligations.

52.

Deposits guarantee regime

The Entity is included in the Deposits Guarantee Fund Insurance System of Law No. 24,485, Regulatory Decrees No. 540/95, No. 1292/96, No. 1127/98 and No. 30/18 and Communication “A” 5943 issued by the BCRA

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

In August 1995 that company was incorporated, and the Entity has a 9.363% share of the corporate stock.

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

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

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

As of March 31, 2018 and 2017 the contributions to the Fund have been recorded in the item “Other operating expenses—Contributions to the deposits guarantee fund” in the amounts of 65,805 and 48,770, respectively.

53.

Minimum cash and minimum capital

53.1 Minimum cash

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


		- 85 -

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


Accounts	03.31.18		12.31.17		12.31.16
Balances at the BCRA
Argentine Central Bank (BCRA) – checking account - not restricted		27,779,708		28,113,804		31,352,018
Argentine Central Bank (BCRA) – special guarantee accounts – restricted		1,039,886		977,566		914,587
Argentine Central Bank (BCRA) – special retirement and pension accounts – restricted		177,928		—		—

		28,997,522		29,091,370		32,266,605

53.2 Minimum capital

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


Minimum capital requirements	03.31.18		03.31.17
Credit risk		14,025,626		8,785,277
Operational risk		2,742,422		2,150,325
Market risk		241,847		270,773
Pay-in		29,836,785		18,843,971

Excess		12,826,890		7,637,596

54.

Compliance with the provisions of the Argentine Securities Commission – minimum shareholders’ equity and liquid assets

According to CNV’s General Resolution No. 622/13, the minimum Shareholders’ Equity required to operate as “Settlement and Clearing Agent—Comprehensive” and “Mutual Investment Funds Products Custodian Agent” amounts to 24,000 and the minimum of liquid assets required by those rules amounts to 12,000. This amount is available in Argentine Treasury Bonds adjusted by CER due 2021 deposited with the account opened at Caja de Valores S.A. entitled “Depositor 1647 Brokerage Account 5446483 BBVA Banco Francés Minimum Counterbalancing Entry”. As of March 31, 2018, December 31, 2017 and 2016, the Bank’s Shareholders’ Equity exceeds the minimum amount imposed by the CNV.

Likewise, the subsidiary BBVA Francés Asset Management S.A., mutual funds investment products management agent, provided the minimum counterbalance entry required by the CNV, with 282,641 investment units of FBA Ahorro Pesos Fondo Común de Inversión, for a balance of 3,318, through custody account No. 493-0005459481 at BBVA Banco Francés S.A. The minimum equity required to act as Mutual Investment Funds Management Agent of the Company amounts to 2,100. As of March 31, 2018, December 31, 2017 and 2016, the company’s Shareholders’ Equity exceeds the minimum amount imposed by the CNV


		- 86 -

55.

Compliance with the provisions of the Argentine Securities Commission – documentation

The CNV issued General Resolution No. 629 on August 14, 2014 to introduce changes to its own rules governing the maintenance and safekeeping of corporate books, accounting records and business documentation. In this respect, it is reported that the Bank keeps the documentation that supports its operations for the periods still open to audit for safekeeping in Administradora de Archivos S.A. (AdeA), domiciled at Ruta 36 Km, 31,5 of Florencio Varela, Province of Buenos Aires.

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

56.

Trust activities

On January 5, 2001, the Board of Directors of BCRA issued Resolution No. 19/2001, providing for the exclusion of Mercobank S.A.’s senior liabilities under the terms of section 35 bis of the Financial Institutions Law, the authorization to transfer the excluded assets to the Bank as trustee of the Diagonal Trust, and the authorization to transfer the excluded liabilities to beneficiary banks. Also, on the mentioned date, the agreement to set up the Diagonal Trust was subscribed by Mercobank S.A. as Settler and the Bank as Trustee in relation to the exclusion of assets as provided in the above-mentioned resolution. As of March 31, 2018, December 31, 2017 and 2016, the assets of Diagonal Trust amount to 2,427, considering its recoverable value.

In addition, the Entity in its capacity as Trustee in the Corp Banca Trust recorded the selected assets on account of the redemption in kind of participation certificates for 4,177 as of March 31, 2018, December 31, 2017 and 2016.

In addition, the Entity acts as Trustee in 12 non-financial trusts, in no case as personally liable for the liabilities assumed in the performance of the contract obligations; such liabilities will be settled with and up to the full amount of the trust assets and the proceeds therefrom. The non-financial trusts concerned were set up to manage assets and/or secure the receivables of several creditors (beneficiaries) and the trustee was entrusted the management, care, preservation and custody of the corpus assets until (i) the requirements to show the noncompliance with the obligations by the debtor (settler) vis-a-vis the creditors (beneficiaries) are met, when such assets will be sold and the proceeds therefrom will be distributed (net of expenses) among all beneficiaries, the remainder (if any) being delivered to the settler, or (ii) all contract terms and conditions are complied with, in which case all the trust assets will be returned to the settler or to whom it may indicate. The trust assets totaled 173,603, 167,724 and 152,337 as of March 31, 2018, December 31, 2017 and 2016, respectively, and consist of cash, creditors’ rights, real estate and shares.

57.

Mutual funds

As of March 31, 2018, December 31, 2017 and 2016, the Entity holds in custody, as Custodian Agent of Mutual Funds managed by BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión, term deposit certificates, shares, corporate bonds, government securities, mutual investments, deferred payment checks, BCRA instruments, Buenos Aires City Government Bills, ADRS, Buenos Aires Province Government Bills and repos in the amounts of 38,818,130, 31,533,051 and 16,665,210, which are part of the Funds’ portfolio and are recorded in debit accounts “Control – Others”.


		- 87 -

The Mutual Funds equities are as follows:


	EQUITY AS OF
MUTUAL FUND	03.31.2018		12.31.2017		12.31.2016
FBA Ahorro Pesos		18,098,993		15,207,847		11,269,857
FBA Bonos Argentina		8,016,614		5,602,270		2,793,125
FBA Renta Fija Dólar		5,054,218		3,571,433		—
FBA Renta Pesos		4,271,277		4,965,075		2,609,965
FBA Renta Fija Dólar Plus		3,991,026		3,631,659		—
FBA Acciones Argentinas		965,803		615,530		35,594
FBA Calificado		756,382		617,636		393,708
FBA Renta Fija Plus (ex FBA Commodities)		565,068		237,710
FBA Horizonte		513,109		317,162		252,402
FBA Renta Mixta		420,653		327,777		9,055
FBA Acciones Latinoamericanas		293,024		193,867		101,400
FBA Retorno Total II		99,178		34,524		—
FBA Horizonte Plus		95,793		78,972		—
FBA Bonos Latam		43,594		32,541		—
FBA Retorno Total I		26,112		9,104		—
FBA Bonos Globales		14,077		6,837		282
FBA Renta Pesos Plus		12,498		11,894		10,083

TOTAL		43,237,419		35,461,838		17,475,471

The subsidiary BBVA Francés Asset Management S.A. acts as mutual funds manager, authorized by the CNV, which registered that company as mutual funds management agent under No. 3 under Provision 2002 issued by the CNV on 8/7/2014.

58.

Penalties and administrative proceedings instituted by the BCRA

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

Administrative proceedings commenced by the BCRA

•

“Banco Francés S.A. over breach of Law 19,359”. Administrative Proceedings for Foreign Exchange Offense investigated by the BCRA notified on February 22, 2008 and identified under No. 3511, File No. 100,194/05, on grounds of a breach of the Criminal Foreign Exchange Regime of foreign currency by reason of purchases and sales of US Dollars through the BCRA in excess of the authorized amounts. These totaled 44 transactions involving the Bank’s branches 099, 342, 999 and 320. BBVA Banco Francés S.A. and the following Bank officers who served in the capacities described below at the date when the breaches were perpetrated were accused: (i) two Territory Managers, (ii) four Branch Managers, (iii) four Heads of Back-Office Management and (iv) twelve cashiers. On August 21, 2014, the trial court acquitted all the accused from all charges. The State Attorney’s Office filed an appeal and the Panel A of the Appellate Court with jurisdiction over Criminal and Economic Matters confirmed the Bank’s and the involved officers’ acquittal from all charges. The State Attorney’s Office filed an Extraordinary Appeal which was granted and, as of the date of these financial statements, is being heard by the Supreme Court of Justice.


		- 88 -

•

“Banco Francés S.A. over breach of Law 19,359”. Administrative Proceedings for Foreign Exchange Offense investigated by the BCRA notified on December 1, 2010 and identified under No. 4539, File No. 18,398/05 where charges focus on simulated foreign exchange transactions through false statements in their processing incurred by personnel from five branches in Mar del Plata, which would entail failure to comply with the client identification requirements imposed by foreign exchange rules and regulations through Communication “A” 3471, paragraph 6. BBVA Banco Francés S.A., the five regular members of the Board of Directors and the following Bank officers who served in the capacities described below at the date when the breaches were perpetrated were accused: (i) the Retail Bank Manager, (ii) the Territorial Manager, (iii) the Area Manager, (iv) a commercial aide to the Area Manager, (v) five Branch Managers, (vi) four Heads of Back-Office Management, (vii) five Main Cashiers and (viii) one cashier. To date, the case is being heard by Federal Court No. 3, Criminal Division, of the City of Mar del Plata, under File No. 16,377/2016. On June 21, 2017 the court sought to obtain further evidence at its own initiative ordering that a court letter should be sent to the BCRA for it to ascertain if the rules governing the charges pressed in the Case File No. 18,398/05 Summary Proceedings No. 4539 have been subject to any change. The BCRA answered the request from the Court, stating that non-compliance with the provisions in Communication “A” 3471 would not currently be a case of application of the most favorable criminal law. Moreover, the Entity is waiting for an answer by the Court regarding the transfer of the requested court files.

•

“BBVA Banco Francés S.A. over breach of Law 19,359”. Administrative Proceedings for Foreign Exchange Offense investigated by the BCRA notified on December 1, 2010 and identified under No. 4524, File No. 3,406/06 where charges focus on simulated foreign exchange transactions, conducted in the name of a deceased, perpetrated by personnel from the Branch 240 - Mendoza -, which would entail failure to comply with the client identification requirements imposed by foreign exchange rules and regulations through Communication “A” 3471, Paragraph 6. BBVA Banco Francés S.A., five regular members of the Board of Directors and the following Bank officers who served in the capacities described below at the date when the breaches were perpetrated were accused: (i) the Retail Bank Manager, (ii) the Territorial Manager, (iii) the Area Manager, (iv) the Branch Manager, (v) the Back Office Branch Manager and (vi) the Main Cashier. The period for offering and producing evidence came to a close. The case is being heard by the Federal Court No. 1, Criminal department of the city of Mendoza, File No. 23,461/2015. The Federal Court of Mendoza requested by electronic mail to the Federal Justice of Comodoro Rivadavia and Mar del Plata, to certify the causes that are said to be related in terms of procedural object, imputed and legal qualification. The Federal Justice of Comodoro Rivadavia answered the letter partially while the Federal Justice of Mar del Plata has not done so at the date of issuance of these financial statements.

•

“BBVA Banco Francés S.A. over breach of Law 19,359”. Administrative Proceedings for Foreign Exchange Offense investigated by the BCRA notified on July 26, 2013 and identified under No. 5406, File No. 100,443/12 where charges focus on simulated foreign exchange transactions through false statements in their processing incurred by personnel in Branch 087—Salta -, which would entail failure to comply with the client identification requirements imposed by foreign exchange rules and regulations through Communication “A” 3471, Paragraph 6. BBVA Banco Francés S.A. and the following Bank officers who served in the capacities described below at the date when the breaches were perpetrated were accused: (i) the Branch Manager (ii) the Back Office Management Head, (iii) the Main Cashier and (iv) two cashiers. The period for offering and producing evidence came to a close and the BCRA must send the file to Salta’s Federal Court.

•

“BBVA Banco Francés S.A. over breach of Law 19,359”. Administrative Proceedings for foreign exchange offense by the BCRA, notified on December 23, 2015 and identified under No. 6684, File No. 100,068/13. The proceedings were brought for allegedly having completed operations under Code 631 “Professional and technical business services” from ROCA ARGENTINA S.A. against the


		- 89 -

applicable exchange regulations (Communications “A” 3471, “A” 3826 and “A” 5264), allegedly the provision of the services has not been fully evidenced. BBVA Banco Francés S.A. and two of the Entity’s officers holding the positions described below on the date of the charges were accused: (i) the Foreign Trade Manager and (ii) an officer of the Area. The BCRA has decided that the period for the production of evidence has come to an end. The case is being heard by Federal Court No. 2, in Lomas de Zamora, Province of Buenos Aires, Criminal Division, under File No. 39,130/2017. On October 26, 2017, the Entity filed a request for retroactive application of the most favorable criminal law, given that Communication “A” 5264, known as the “lifting of the restriction of foreign trade transactions”, released the payment of services abroad.

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

59.

Initial implementation of the financial reporting framework set forth by the BCRA

The items and amounts in the reconciliations included in this note are subject to changes and shall only be considered final upon preparation of the annual consolidated financial statements for this fiscal year.

Reconciliations of equity


		- 90 -


	Reference		12.31.17			03.31.17			12.31.17
Equity as per the previous financial statements				26,056,548			17,154,805			16,460,035
Adjustment as per criterion in Memorandum No. 6/2017 BCRA (Note 5)				—			(1,185,800	)		—
Adjustments due to initial implementation of the new financial reporting framework set forth by the BCRA
Deemed cost of properties		(a)		4,889,491			4,950,858			4,960,575
Effective rate of Loans		(b)		(316,269	)		(517,392	)		(559,072	)
Rate below market rate		(c)		(3,116	)		—			—
Fair value of government and private securities		(d)		(24,772	)		(52,357	)		(52,357	)
Fair value of derivatives		(e)		(37,337	)		1,791			(34,122	)
Equity method for associates and joint ventures		(f)		115,130			181,337			155,288
Assets and Liabilities for contracts with customers		(g)		(131,840	)		(149,926	)		(138,665	)
Goodwill		(h)		360			90			—
Deferred income tax		(i)		(436,586	)		(836,055	)		(882,578	)
Financial guarantee contracts		(j)		(5,454	)		(2,936	)		(3,425	)
Employee benefits		(k)		(1,562	)		(1,038	)		(1,683	)
Non-controlling interest		(l)		298,303			274,668			267,916

Shareholders’ equity pursuant to the new financial reporting framework set forth by the BCRA				30,402,896			19,818,045			20,171,912

Attributable to the parent entity				30,094,865			19,538,595			19,900,834
Attributable to non-controlling interests				308,031			279,450			271,078


		- 91 -

b) Reconciliations of Comprehensive Income


	Reference		12.31.17			03.31.17
Income/(loss) as per the previous financial statements				3,878,265			1,605,770
Adjustments as per criterion in Memorandum No. 6/2017 BCRA (Note 5)				—			(1,185,800	)
Adjustments due to initial implementation of the financial reporting framework set forth by the BCRA
Depreciation/Impairment of properties		(a)		(71,084	)		(9,717	)
Effective rate of Loans		(b)		242,803			41,680
Rate below market rate		(c)		(3,116	)		—
Fair value of derivatives		(e)		(3,215	)		35,913
Equity method for associates and joint ventures		(f)		(37,926	)		32,463
Assets and Liabilities for contracts with customers		(g)		6,825			(11,261	)
Goodwill		(h)		360			90
Deferred income tax		(i)		448,624			46,523
Financial guarantee contracts		(j)		(2,029	)		489
Employee benefits		(k)		121			645
Non-controlling interest		(l)		30,596			6,752

Net income/(loss) in accordance with the financial reporting framework set forth by the BCRA				4,490,224			563,547
Other comprehensive income
Fair value of government and private securities				27,585			—
Equity method for associates and joint ventures				(2,232	)		(6,414	)
Deferred income tax				(2,632	)		—

Other comprehensive income pursuant to the financial reporting framework set forth by the BCRA				22,721			(6,414	)

Total Comprehensive Income pursuant to the financial regulatory framework set forth by the BCRA				4,512,945			557,133

Attributable to the parent entity				4,475,783			548,761
Attributable to non-controlling interests				37,162			8,372


		- 92 -


Reference		Account

(a)		The Group has elected to use the option set forth in IFRS 1 to consider the fair value (market value) as the deemed cost as of January 1, 2017 for its real estate assets.

(b)		In accordance with IFRS, under the effective interest method, for financial assets and liabilities valued at amortized cost the Group shall identify commissions that are an integral part of those financial instruments and treat them as an adjustment to the effective interest rate, amortizing them along the instrument’s lifetime. Pursuant to prior accounting standards, those commissions were recognized in income/(loss) upon origination of the financial asset and/or liability.

(c)		Adjustments to take the Group’s loans portfolio at fair value upon initial recognition, since they are financing granted at a rate lower than the market rate.

(d)		Adjustments to the measurement of securities, pursuant to the business model for financial assets, defined by the Group. According to the previous regulations, they were measured at fair market value and/or cost plus yield.

(e)		Adjustment for the purpose of measuring derivative instruments of the Group at fair value through profit or loss.

(f)		An adjustment was recorded for the recognition of IFRS adjustments to subsidiaries and entities over which the Group has a significant influence (Rombo Compañía Financiera S.A., PSA Finance Compañía Financiera S.A., and BBVA Consolidar Seguros S.A.).

(g)		Pursuant to IFRS 15, income from contracts with customers accrue as the Group satisfies the performance obligations identified in the contract.

(h)		Pursuant to the previous accounting standards, the Group recognized goodwill generated by business combinations measured at net acquisition cost of accumulated amortizations calculated in proportion to the estimated useful life months. As per IFRS, there is no defined useful life for goodwill, and its recoverability shall be evaluated for each fiscal year or when there are indications of impairment.

(i)		The Group recognized the effect of deferred tax (net deferred liability) as set forth by IAS 12—“Income taxes”. Likewise, adjustments related to the transition to IFRS originate temporary differences that were taken into consideration in that assessment.

(j)		Collateral granted are recognized at the highest of the initially recognized value minus the accumulated amount of income recognized as per IFRS 15 and the allowance for loan losses (as per the regulations set forth by the BCRA). In that sense, the amount of income from services is accrued according to the criteria and scope of IFRS 15.

(k)		Amounts have been adapted to the amounts of vacation allowances, under the terms of IAS 19, pursuant to the amount set forth by the related law for pending vacation days in the payroll, including the related employer contributions.

(l)		For minority interests as per the previous accounting standards that are part of the net shareholders’ equity consolidated as per IFRS.

c) Consolidated Statement of Cash Flows

Under the new financial reporting framework set forth by the BCRA, the main impacts on the presentation of the statement of cash flows are from the use of the indirect method provided for by IAS 7.


		- 93 -

60.

Subsequent events

On May 9, 2018, the Entity paid the dividends approved by the Shareholders’ Meeting held on April 10, 2018, as mentioned in Note 50.

Based on related case law to this date and the confiscatory effect of the failure to apply the inflation tax adjustment mechanism, on May 10, 2018 the Entity approved the filing of a new action seeking declaration of unconstitutionality for the fiscal period 2017.

The impact of this measure is an adjustment to the Income Tax assessed for the fiscal year ended December 31, 2017 of 1,021,518, recorded under “Other operating income” as of March 31, 2018 (Note 36).

Based on the criterion set forth by the BCRA through Memorandum dated May 29, 2017, the Entity booked a provision for contingencies in the “Provisions” account in liabilities, with a counterbalance entry in “Other operating expenses” in the Statement of Income (refer to Note 40), equivalent to the profit recorded in the amount of 1,021,518 for the potential adverse decision regarding the Income Tax paid with inflation adjustment.

As a result of the assessment made and based on the opinion of its legal and tax advisors, the Entity considers that it is much more likely for the Entity to obtain a favorable judgment in the last instance supporting the idea that this period’s income tax shall be assessed including the inflation tax adjustment, based on the confiscatory nature of the rate that would result from not applying said adjustment.

Therefore, the recording of the contingency provision required by the BCRA results in a deviation from IFRS (Refer to Note 2).

Except as disclosed in the previous paragraphs, no other facts or transactions took place from the closing date for the fiscal period and the date these financial statements were issued which may significantly affect the shareholders’ equity or income/(loss) of the Entity as of March 31, 2018.

61.

Accounting principles – Explanation added for translation into english

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

These financial statements are presented on the basis of the accounting standards established by the financial reporting framework set forth by BCRA, except for the effect of the matters mentioned in Note 2 to the consolidated financial statements. Certain accounting practices applied by the Bank that conform with the standards of the BCRA may not conform with the generally accepted accounting principles in other countries.

The effects of the differences and the generally accepted accounting principles in the countries in which the financial statements are to be used have been quantified as detailed in Note 2 to the consolidated financial statements. Accordingly, these financial statements are not intended to present financial position, results of operations and cash flows in accordance with generally accepted accounting principles other than the financial reporting framework set forth by the BCRA.


		- 94 -

EXHIBIT B

CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO PERFORMANCE AND GUARANTEES RECEIVED

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF MARCH 31, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)


Account	03.31.18		12.31.17		12.31.16
COMMERCIAL PORTFOLIO
Normal performance		78,198,692		73,469,368		43,377,186

Preferred collaterals and counter guarantees “A”		1,650,601		1,429,483		1,751,341
Preferred collaterals and counter guarantees “B”		1,247,932		1,262,598		1,384,068
No preferred collateral or counter guarantees		75,300,159		70,777,287		40,241,777
With special follow-up		61,446		34,601		13,116

Under observation		61,446		34,601		5,968

Preferred collaterals and counter guarantees “B”		6,330		8,570		3,613
No preferred collateral or counter guarantees		55,116		26,031		2,355
Under negotiation or with refinancing agreements		—		—		7,148

Preferred collaterals and counter guarantees “B”		—		—		6,177
No preferred collateral or counter guarantees		—		—		971
Troubled		63,997		55,393		17,568

No preferred collateral or counter guarantees		63,997		55,393		17,568
With high insolvency risk		65,307		58,410		11,385

Preferred collaterals and counter guarantees “B”		9,895		9,895		7,105
No preferred collateral or counter guarantees		55,412		48,515		4,280
Uncollectible		11,844		7,040		—

No preferred collateral or counter guarantees		11,844		7,040		—

TOTAL		78,401,286		73,624,812		43,419,255


		- 95 -

EXHIBIT B

(Continued)

CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO PERFORMANCE AND GUARANTEES RECEIVED

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF MARCH 31, 2018, DECEMBER 31, 2017 and 2016

(stated in thousands of pesos)


Account	03.31.18		12.31.17		12.31.16
CONSUMER AND HOUSING PORTFOLIO
Normal performance		62,913,546		57,047,162		37,329,210

Preferred collaterals and counter guarantees “A”		7,531		11,517		11,534
Preferred collaterals and counter guarantees “B”		5,746,075		5,051,088		3,108,249
No preferred collateral or counter guarantees		57,159,940		51,984,557		34,209,427
Low risk		868,350		540,883		377,474

Preferred collaterals and counter guarantees “A”		51		—		—
Preferred collaterals and counter guarantees “B”		68,563		56,459		30,814
No preferred collateral or counter guarantees		799,736		484,424		346,660
Medium risk		567,069		483,019		350,546

Preferred collaterals and counter guarantees “B”		17,011		12,547		9,075
No preferred collateral or counter guarantees		550,058		470,472		341,471
High risk		300,451		260,898		188,922

Preferred collaterals and counter guarantees “A”
Preferred collaterals and counter guarantees “B”		24,919		22,031		16,460
No preferred collateral or counter guarantees		275,532		238,867		172,462
Uncollectible		36,585		36,685		27,707

Preferred collaterals and counter guarantees “A”
Preferred collaterals and counter guarantees “B”		8,411		6,784		6,609
No preferred collateral or counter guarantees		28,174		29,901		21,098
Uncollectible for technical reasons		2		2		26

No preferred collateral or counter guarantees		2		2		26

TOTAL		64,686,003		58,368,649		38,273,885

TOTAL GENERAL		143,087,289		131,993,461		81,693,140


		- 96 -

EXHIBIT C

CONCENTRATION OF LOANS AND OTHER FINANCING

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF MARCH 31, 2018, DECEMBER 31, 2017 and 2016

(stated in thousands of pesos)


	03.31.18					12.31.17					12.31.16
Number of customers	Debt balance		% over total portfolio			Debt balance		% over total portfolio			Debt balance		% over total portfolio
10 largest customers		13,404,836		9.37	%		12,983,980		9.84	%		9,738,433		11.92	%
50 following largest customers		22,530,977		15.75	%		20,804,256		15.76	%		11,992,612		14.68	%
100 following largest customers		12,789,268		8.94	%		10,985,454		8.32	%		6,116,918		7.49	%
All other customers		94,362,208		65.94	%		87,219,771		66.08	%		53,845,177		65.91	%

TOTAL		143,087,289		100.00	%		131,993,461		100.00	%		81,693,140		100.00	%


		- 97 -

EXHIBIT D

BREAKDOWN PER TERM OF LOANS AND OTHER FINANCING

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF MARCH 31. 2018

(stated in thousands of pesos)


	Terms remaining to maturity
ITEM	Portfolio due		1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Non-financial government sector		—		142		—		—		—		—		—		142
Argentine Central Bank (BCRA)		—		2,354		—		—		—		—		—		2,354
Financial sector		—		3,286,234		842,153		880,052		830,139		824,344		229,530		6,892,452
Non-financial private sector and residents abroad		560,676		55,430,093		21,043,959		19,583,434		13,190,852		13,220,281		28,521,427		151,550,722

TOTAL		560,676		58,718,823		21,886,112		20,463,486		14,020,991		14,044,625		28,750,957		158,445,670


		- 98 -

EXHIBIT D

BREAKDOWN PER TERM OF LOANS AND OTHER FINANCING

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF DECEMBER 31, 2017

(stated in thousands of pesos)


			Terms remaining to maturity
ITEM	Portfolio due		1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Non-financial government sector		—		218		—		—		—		—		—		218
Financial sector		—		1,857,010		1,797,617		770,250		1,282,217		621,211		302,822		6,631,127
Non-financial private sector and residents abroad		461,313		53,848,907		20,454,032		13,793,547		15,169,887		12,334,654		25,063,031		141,125,371

TOTAL		461,313		55,706,135		22,251,649		14,563,797		16,452,104		12,955,865		25,365,853		147,756,716


		- 99 -

EXHIBIT D

BREAKDOWN PER TERM OF LOANS AND OTHER FINANCING

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF DECEMBER 31, 2016

(stated in thousands of pesos)


			Terms remaining to maturity
ITEM	Portfolio due		1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Non-financial government sector		—		99,573		—		—		—		—		—		99,573
Argentine Central Bank (BCRA)		—		—		—		—		—		—		—		—
Financial sector		—		2,106,691		238,917		672,686		184,692		232,051		179,093		3,614,130
Non-financial private sector and residents abroad		281,244		35,435,652		10,441,395		8,737,494		8,666,005		7,781,311		10,697,636		82,040,737

TOTAL		281,244		37,641,916		10,680,312		9,410,180		8,850,697		8,013,362		10,876,729		85,754,440


		- 100 -

EXHIBIT H

DEPOSITS CONCENTRATION

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF MARCH 31, 2018, DECEMBER 31, 2017 and 2016

(stated in thousands of pesos)


	03.31.18					12.31.17					12.31.16
Number of customers	Debt balance		% over total portfolio			Debt balance		% over total portfolio			Debt balance		% over total portfolio
10 largest customers		5,919,306		3.70	%		5,616,361		3.65	%		4,048,094		3.53	%
50 following largest customers		9,810,983		6.13	%		8,597,760		5.59	%		6,503,517		5.67	%
100 following largest customers		5,786,242		3.62	%		6,168,839		4.01	%		4,508,402		3.93	%
All other customers		138,436,152		86.55	%		133,551,711		86.76	%		99,550,283		86.87	%

TOTAL		159,952,683		100.00	%		153,934,671		100.01	%		114,610,296		100.00	%


		- 101 -

EXHIBIT I

BREAKDOWN OF FINANCIAL LIABILITIES PER REMAINING TERMS

AS OF MARCH 31, 2018

(stated in thousands of pesos)


	Terms remaining to maturity
ITEMS	1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Deposits		145,683,133		14,143,848		4,872,910		4,199,188		11,568		297		168,910,944
Non-financial government sector		1,285,762		19,750		21,514		—		—		—		1,327,026
Financial sector		154,423		—		—		—		—		—		154,423
Non-financial private sector and residents abroad		144,242,948		14,124,098		4,851,396		4,199,188		11,568		297		167,429,495
Derivative instruments		245,444		—		—		—		—		—		245,444
Repo transactions		579,184		—		—		—		—		—		579,184
Other financial institutions		579,184		—		—		—		—		—		579,184
Other financial liabilities		16,292,418		835		954		—		—		—		16,294,207
Financing received from the BCRA and other financial institutions		74,914		130,211		497,012		345,186		65,699		—		1,113,021
Corporate bonds issued		23,506		112,779		—		193,126		1,291,781		669,790		2,290,982

TOTAL		162,898,599		14,387,673		5,370,876		4,737,500		1,369,048		670,087		189,433,783


		- 102 -

BREAKDOWN OF FINANCIAL LIABILITIES PER REMAINING TERMS

AS OF DECEMBER 31, 2017

(stated in thousands of pesos)

EXHIBIT I


	Terms remaining to maturity
ITEMS	1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Deposits		143,701,672		12,516,102		2,849,579		1,589,539		476,820		371		161,134,083
Non-financial government sector		986,351		141,888		—		—		—		—		1,128,239
Financial sector		187,121		—		—		—		—		—		187,121
Non-financial private sector and residents abroad		142,528,200		12,374,214		2,849,579		1,589,539		476,820		371		159,818,723
Derivative instruments		164,303		—		—		—		—		—		164,303
Repo transactions		285,410		—		—		—		—		—		285,410
Argentine Central Bank		21		—		—		—		—		—		21
Other financial institutions		285,389		—		—		—		—		—		285,389
Other financial liabilities		12,728,127		962,375		252,351		258,585		—		—		14,201,438
Financing received from the BCRA and Other financial institutions		325,221		292,312		134,997		157,650		115,520		—		1,025,700
Corporate bonds issued		32,312		260,724		113,400		194,178		1,295,865		673,561		2,570,040

TOTAL		157,237,045		14,031,513		3,350,327		2,199,952		1,888,205		673,932		179,380,974


		- 103 -

EXHIBIT I

BREAKDOWN OF FINANCIAL LIABILITIES PER REMAINING TERMS

AS OF DECEMBER 31, 2016

(stated in thousands of pesos)


	Terms remaining to maturity
ITEMS	1 month		3 months		6 months		12 months		24 months		more than 24 months		TOTAL
Deposits		105,932,132		10,084,980		3,379,389		478,820		231,066		134		120,106,521
Non-financial government sector		2,437,165		29,230		306,541		—		—		—		2,772,936
Financial sector		247,892		—		—		—		—		—		247,892
Non-financial private sector and residents abroad		103,247,075		10,055,750		3,072,848		478,820		231,066		134		117,085,693
Derivative instruments		6,354		—		—		—		—		—		6,354
Repo transactions		135,140		—		—		—		—		—		135,140
Argentine Central Bank		134,202		—		—		—		—		—		134,202
Other financial institutions		938		—		—		—		—		—		938
Other financial liabilities		7,315,091		84,021		127,549		170,648		27,141		—		7,724,450
Financing received from the BCRA and other financial institutions		401,985		102,158		164,654		29,134		1,606		—		699,537
Corporate bonds issued		52,187		178,675		236,425		590,625		553,092		583,417		2,194,421

TOTAL		113,842,889		10,449,834		3,908,017		1,269,227		812,905		583,551		130,866,423


		- 104 -

EXHIBIT J

TRANSACTIONS ON PROVISIONS

CONSOLIDATED WITH CONTROLLED COMPANIES

FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2018 AND

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

(stated in thousands of pesos)


						Decreases
Accounts	Balances as of beginning of the period		Increases			Reversals		Applications		Balances as of 03.31.18		Balances as of 12.31.17
OF LIABILITIES
- Provisions for potential commitments		1,117		19	(1)		—		—		1,136		1,117
- For administrative, disciplinary and criminal penalties		5,000		—			—		—		5,000		5,000
- Provisions for post-employment defined benefits plan		48,173		—			—		—		48,173		48,173
- Other		2,073,567		1,147,885	(2)		866		6,002		3,214,585		2,073,567

TOTAL PROVISIONS		2,127,857		1,147,904			866		6,002		3,268,894		2,127,857

(1)	Set up in compliance with the provisions in Communication “A” 2950 and supplementary regulations, taking into consideration the provisions in Note 26 to the consolidated financial statements

(2)	Set up to cover for potential contingencies not considered in other accounts (civil, commercial, labor and other lawsuits), and as required by Memorandum 6/2017 issued by the BCRA (Refer to Note 26 to the consolidated financial statements).


		- 105 -

EXHIBIT J

TRANSACTIONS ON PROVISIONS

CONSOLIDATED WITH CONTROLLED COMPANIES

FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2017 AND

THE FISCAL YEAR ENDED DECEMBER 31, 2016

(stated in thousands of pesos)


						Decreases
Accounts	Balances as of beginning of the period		Increases			Reversals		Applications		Balances as of 03.31.17		Balances as of 12.31.16
OF LIABILITIES
- Provisions for potential commitments		581		37	(1)		—		—		618		581
- For administrative, disciplinary and criminal penalties		5,000		—			—		—		5,000		5,000
- Provisions for post-employment defined benefits plan		42,362		—			—		—		42,362		42,362
- Provisions for defined benefits due to termination		116		—			—		85		31		116
- Other		853,460		25,130	(2)		4,451		104,551		769,588		853,460

TOTAL PROVISIONS		901,519		25,167			4,451		104,636		817,599		901,519

(1)	Set up in compliance with the provisions in Communication “A” 2950 and supplementary regulations, taking into consideration the provisions in Note 26 to the consolidated financial statements

(2)	Set up to cover for potential contingencies not considered in other accounts (civil, commercial, labor and other lawsuits), and as required by Memorandum 6/2017 issued by the BCRA (Refer to Note 26 to the consolidated financial statements).


		- 106 -

EXHIBIT R

ADJUSTMENT OF VALUES FOR LOSSES - ALLOWANCES FOR LOAN LOSSES

CONSOLIDATED WITH CONTROLLED COMPANIES

FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2018 AND

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

(stated in thousands of pesos)


						Decreases
Accounts	Balances as of beginning of the year		Increases			Reversals		Applications			Balances as of 03.31.18		Balances as of 12.31.17
Other financial assets		101,339		756	(1)		918		(1,890	)		103,067		101,339
Loans and other financing		2,290,430		548,192	(1)		50,691		239,609			2,548,322		2,290,430
Other financial institutions		40,167		29,642			41,797		(1,198	)		29,210		40,167
Non-financial private sector and residents abroad		2,250,263		518,550			8,894		240,807			2,519,112		2,250,263
Overdrafts		79,099		12,011			—		39,408			51,702		79,099
Discounted instruments		376,589		51,776			—		403			427,962		376,589
Real estate mortgage		38,924		14,060			—		—			52,984		38,924
Collateral loans		106,417		7,990			—		3,018			111,389		106,417
Consumer loans		473,853		132,963			—		61,030			545,786		473,853
Credit cards		805,049		240,940			—		104,018			941,971		805,049
Financial leases		34,767		9,360			—		1,318			42,809		34,767
Other		335,565		49,450			8,894		31,612			344,509		335,565
Private Securities		1,605		19	(2)		—		—			1,624		1,605
Occasional commitments		1,117		19			—		—			1,136		1,117

TOTAL ALLOWANCES		2,394,491		548,986	(3)		51,609		237,719			2,654,149		2,394,491

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

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

(3)	Includes total exchange difference in the amount of 22,773 (Notes 11 and 12).


		- 107 -

EXHIBIT R

ADJUSTMENT OF VALUE FOR LOSSES - ALLOWANCES FOR LOAN LOSSES

CONSOLIDATED WITH CONTROLLED COMPANIES

FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2017 AND

THE FISCAL YEAR ENDED DECEMBER 31, 2016

(stated in thousands of pesos)


						Decreases
Accounts	Balances as of beginning of the year		Increases			Reversals		Applications			Balances as of 03.31.17		Balances as of 12.31.16
Other financial assets		127,729		65,592	(1)		572		87,567			105,182		127,729
Loans and other financing		1,613,650		310,254	(1)		653		173,646			1,749,605		1,613,650
Other financial institutions		24,133		(1,404	)		653		(3,776	)		26,505		24,133
Non-financial private sector and residents abroad		1,589,517		311,658			—		177,422			1,723,100		1,589,517
Overdrafts		202,544		121,186			—		75,137			248,577		202,544
Discounted instruments		167,034		24,186			—		108			191,112		167,034
Real estate mortgage		13,211		326			—		20			13,517		13,211
Collateral loans		79,633		6,984			—		679			85,938		79,633
Consumer loans		375,341		85,847			—		61,067			400,121		375,341
Credit cards		491,678		56,909			—		17,913			530,674		491,678
Finance leases		27,445		65			—		3,413			24,097		27,445
Other		232,631		16,171			653		19,085			229,064		232,631
Private Securities		1,502		—	(2)		14		—			1,488		1,502
Occasional commitments		581		37			—		—			618		581

TOTAL ALLOWANCES		1,743,462		375,883	(3)		1,239		261,213			1,856,893		1,743,462

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

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

(3)	Includes total exchange difference in the amount of (4,394) (Notes 11 and 12).


		- 108 -

INDEPENDENT AUDITORS’ REPORT ON THE REVIEW OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

To the President and Directors of

BBVA Banco Francés S.A.

Taxpayer Identification Number (C.U.I.T.): 30-50000319-3

Legal address: Av. Córdoba 111

City of Buenos Aires

Argentina

Report on Interim Financial Statements

We have reviewed the attached consolidated interim financial statements of BBVA Banco Francés S.A. (the “Entity”) and its controlled companies, which comprise the consolidated statement of financial position as at March 31, 2018, the consolidated statements of income, other comprehensive income, changes in shareholders’ equity and cash flows for the three-month period ended as of that date, and the selected explanatory notes.

Responsibility of the Entity’s Board of Directors and Management

The Entity’s Board of Directors and Management are responsible for the preparation and presentation of the accompanying financial statements in accordance with the accounting standards established by the Argentine Central Bank (BCRA), which, as stated in Note 2 to the attached financial statements, is based on the International Financial Reporting Standards (IFRS) and specifically for the interim financial statements, on International Accounting Standard (IAS) No. 34, “Interim Financial Reporting”, as issued by the International Accounting Standards Board (IASB) and adopted by the Argentine Federation of Professional Councils of Economic Sciences (FACPCE), with the exceptions described in that note. The Entity’s Board of Directors and Management are also responsible for the proper internal control deemed necessary to allow for the preparation of interim financial reports free of significant misstatements due to errors or irregularities.

Auditors’ Responsibility and Scope of the Review

Our responsibility is to express a conclusion on the accompanying consolidated interim financial statements based on our review. We conducted our review in accordance with the review rules set forth by Technical Resolution No. 37 of the Argentine Federation of Professional Councils of Economic Sciences and the “Minimum Requirements on External Audits” issued by the BCRA applicable to the review of interim financial statements. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial statements are not prepared, in all material respects, in conformity with accounting standards established by the BCRA as described in Note 2 to the accompanying consolidated interim financial statements.


		- 109 -

Emphasis on certain matters disclosed in the financial statements

Without modifying our conclusion, we draw the attention of the users of this report to the following information disclosed in the attached consolidated interim financial statements:

as mentioned in Note 2 “Basis for the preparation of the Financial Statements” to the accompanying consolidated interim financial statements, they have been prepared by the Entity’s Board of Directors and Management pursuant to the new accounting standards established the BCRA, as described in that note, which differs from IFRS regarding certain significant valuation and presentation aspects, which are described and quantified in that note. This matter does not modify the conclusion stated in the previous paragraph, but should be taken into consideration by those who use IFRS for the interpretation of the accompanying financial statements, and

as mentioned in Note 5 “Significant accounting policies” to the accompanying consolidated interim financial statements, they make reference to an interim period of the first fiscal year the Entity applies the new accounting standards established by the BCRA. The effects of changes caused by the application of this new financial reporting framework are presented in Note 59 to the accompanying consolidated interim financial statements. The items and amounts in the reconciliations included in that note are subject to changes which may occur as a consequence of changes to the IFRS that will finally apply and shall only be considered final upon preparation of the annual financial statements for this fiscal year. This matter does not modify the conclusion stated in the previous paragraph.

Other matters

Regarding the amounts and other information for the fiscal year ended December 31, 2016, date of transition to the new accounting standards established by the BCRA as from January 1, 2018, they arise from the financial statements as of December 31, 2016 issued by the Entity in accordance with the accounting standards of the BCRA applicable as of that date. Those financial statements were examined by other auditors, who issued their audit report on February 9, 2017, and stated an unqualified opinion. That report does not include the adjustments subsequently made by the Entity’s Board of Directors and Management for the conversion of that information to the new accounting standards issued by the BCRA, which we have audited and, in our opinion, are appropriate and have been prepared according to the new accounting standards established by the BCRA.

City of Buenos Aires, May 31, 2018.

KPMG

María Gabriela Saavedra

Partner


		- 110 -

SEPARATE BALANCE SHEETS

AS OF MARCH 31, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)

Accounts

Notes and
Exhibits

03.31.18

12.31.17

12.31.16

ASSETS

Cash and deposits in banks

36,823,662

38,179,507

48,029,860

Cash

8,468,528

7,977,088

14,176,412

Financial institutions and correspondents

28,355,134

30,202,419

33,853,448

Argentine Central Bank (BCRA)

23,903,542

29,405,422

31,230,217

Other in the country and abroad

4,451,592

796,997

2,623,231

Debt securities at fair value through profit or loss

5 and Exhibit A

1,140,411

5,772,572

3,640,801

Derivative instruments

168,314

142,745

53,723

Repo transactions

7,144,101

6,329,939

58,322

Other financial assets

6,690,768

2,278,510

649,082

Loans and other financing

137,569,973

126,900,123

77,967,675

Non-financial government sector

142

218

98,819

Argentine Central Bank (BCRA)

2,354

—

Other financial institutions

8,325,170

8,405,517

3,672,017

Non-financial private sector and residents abroad

129,242,307

118,494,388

74,196,839

Other debt securities

10 and Exhibit A

15,578,336

16,298,649

9,173,565

Financial assets pledged as collateral

3,925,255

3,250,464

2,184,194

Investments in equity instruments

13 and Exhibit A

5,548

6,870

4,408

Investments in subsidiaries and associates

2,080,152

1,726,623

1,607,830

Property, plant and equipment

9,010,785

9,206,870

8,017,217

Intangible assets

447,419

434,572

315,637

Other non-financial assets

1,445,687

1,521,106

1,449,278

Non-current assets held for sale

542,993

196,379

—

TOTAL ASSETS

222,573,404

212,244,929

153,151,592


		- 111 -

SEPARATE BALANCE SHEETS

AS OF MARCH 31, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)

Accounts

Notes and
Exhibits

03.31.18

12.31.17

12.31.16

LIABILITIES

Deposits

160,014,954

153,962,733

114,652,105

Non-financial government sector

1,252,061

1,042,016

2,640,909

Financial sector

154,423

187,122

247,891

Non-financial private sector and residents abroad

158,608,470

152,733,595

111,763,305

Derivative instruments

245,444

229,775

58,305

Repo transactions

579,184

285,410

135,139

Other financial liabilities

16,297,334

13,865,576

7,648,411

Financing received from the BCRA and other financial institutions

532,299

562,175

668,123

Corporate bonds issued

1,839,184

2,052,490

1,786,285

Current income tax liabilities

12 b)

730,363

1,346,870

1,066,172

Provisions

Exhibit J

3,233,961

2,092,059

860,176

Deferred income tax liabilities

12 c)

408,012

407,200

838,204

Other non-financial liabilities

7,047,331

7,345,776

5,537,838

TOTAL LIABILITIES

190,928,066

182,150,064

133,250,758

SHAREHOLDERS’ EQUITY

Capital stock

612,660

536,878

Non-capitalized contributions

6,735,977

182,511

Capital adjustments

312,979

Reserved earnings

14,516,667

11,783,995

Unappropriated retained earnings

7,933,140

3,480,078

Accumulated other comprehensive income

(11,383

)

(16,558

)

(39,279

)

Income for the year

1,545,298

4,453,062

3,643,672

TOTAL SHAREHOLDERS’ EQUITY

31,645,338

30,094,865

19,900,834

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

222,573,404

212,244,929

153,151,592


		- 112 -

SEPARATE STATEMENT OF INCOME

FOR THE INTERIM THREE-MONTH PERIODS ENDED ON MARCH 31, 2018 AND 2017

(stated in thousands of pesos)


Accounts	Notes	03.31.18			03.31.17
Interest income	25		7,703,148			5,197,085
Interest expenses	26		(2,798,989	)		(1,711,366	)

Net interest income			4,904,159			3,485,719

Commission income	27		1,921,191			1,436,996
Commission expenses	28		(1,350,837	)		(951,487	)

Net commission income			570,354			485,509

Net income from measurement of financial instruments at fair value through profit or loss	29		309,177			130,667
Net income/(loss) from write-down of assets at amortized cost			1,367			—
Gold and foreign currency quotation differences	30		694,629			306,382
Other operating income	31		1,748,445			1,810,242
Loan loss provision			(521,926	)		(371,039	)

Net operating income			7,706,205			5,847,480

Personnel benefits	32		(1,929,247	)		(1,537,755	)
Administrative expenses	33		(1,486,862	)		(1,220,436	)
Asset depreciations and impairments	34		(197,358	)		(120,958	)
Other operating expenses	35		(2,111,714	)		(2,338,263	)

Operating income			1,981,024			630,068
Income from associates and joint ventures			157,645			142,398

Income before income tax			2,138,669			772,466

Income tax	12		(593,371	)		(217,291	)

Net income for the period			1,545,298			555,175


		- 113 -

EARNINGS PER SHARE

AS OF MARCH 31, 2018 AND 2017


Accounts	03.31.18		03.31.17
Numerator
Net income attributable to the Parent’s Shareholders		1,545,298		555,175
Net income attributable to the Parent’s Shareholders adjusted to reflect the effect of dilution		1,545,298		555,175
Denominator
Weighted average of outstanding ordinary shares for the quarter		612,659,638		536,877,850
Weighted average of outstanding ordinary shares for the quarter adjusted to reflect the effect of dilution		612,659,638		536,877,850
Earnings per basic share		2.5223		1.0341
Earnings per diluted share		2.5223		1.0341

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


		- 114 -

SEPARATE STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE INTERIM THREE-MONTH PERIODS ENDED ON MARCH 31, 2018 AND 2017

(stated in thousands of pesos)


Accounts	03.31.18			03.31.17
Net income for the period		1,545,298			555,175
Other Comprehensive Income components to be re-classified to income/(loss) for the period
Profits or losses for financial instruments at fair value through OCI
Income for the period from financial instruments at fair value through OCI		(11,231	)		—
Adjustment for reclassifications for the period		34,805			—
Income tax		(10,441	)		—

		13,133			—

Share in OCI from associates and joint ventures booked by application of the equity method
Income/(loss) for the period for the share in OCI from associates and joint ventures booked by application of the equity method		(7,958	)		(6,414	)
Adjustment for reclassifications for the period		—			—
Income tax		—			—

		(7,958	)		(6,414	)

Total OCI to be reclassified to income/(loss) for the period		5,175			(6,414	)

Total Other comprehensive income for the period		5,175			(6,414	)

Total comprehensive income		1,550,473			548,761


		- 115 -

SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE INTERIM THREE-MONTH PERIOD ENDED MARCH 31, 2018 (in thousands of pesos)


	Capital stock		Non- capitalized contributions				Other comprehensive income						Cumulative results
Transactions	Shares outstanding		Issuance premium		Adjustments to shareholders’ equity		Profits or losses for financial instruments at fair value through OCI			Other			Legal Reserve		Other		Retained earnings		Total shareholders’ equity
Balance at the beginning of the year		612,660		6,735,977		312,979		—			—			4,027,251		10,489,416		3,878,265		26,056,548
Impact of the implementation of the financial reporting framework set forth by the BCRA		—		—		—		(17,719	)		1,161			—		—		4,054,875		4,038,317

Adjusted balance at the beginning of the year		612,660		6,735,977		312,979		(17,719	)		1,161			4,027,251		10,489,416		7,933,140		30,094,865

Total Comprehensive income for the period
- Net income for the period		—		—		—		—			—			—		—		1,545,298		1,545,298
- Other Comprehensive Income for the period		—		—		—		13,133			(7,958	)		—		—		—		5,175

Balances at period end		612,660		6,735,977		312,979		(4,586	)		(6,797	)		4,027,251		10,489,416		9,478,438		31,645,338


		- 116 -

SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE INTERIM THREE-MONTH PERIOD ENDED MARCH 31, 2017 (in thousands of pesos)


	Capital stock		Non- capitalized contributions				Other comprehensive income						Cumulative results
Transactions	Shares outstanding		Issuance premium		Adjustments to shareholders’ equity		Losses for financial instruments at fair value through OCI			Other			Legal Reserve		Other		Retained earnings			Total shareholders’ equity
Balance at the beginning of the year		536,878		182,511		312,979		—			—			3,298,517		8,485,478		3,643,672			16,460,035
Impact of the implementation of the financial reporting framework set forth by the BCRA		—		—		—		(42,672	)		3,393			—		—		3,480,078			3,440,799

Adjusted balance at the beginning of the year		536,878		182,511		312,979		(42,672	)		3,393			3,298,517		8,485,478		7,123,750			19,900,834

Total Comprehensive income for the period
- Net income for the period		—		—		—		—			—			—		—		555,175			555,175
- Other Comprehensive Income for the period		—		—		—		—			(6,414	)		—		—		—			(6,414	)
Allocation of Retained earnings as per the Shareholders’ Meeting held on March 30, 2017 to:
Legal reserve		—		—		—		—			—			728,734		—		(728,734	)		—
Dividends in cash		—		—		—		—			—			—		—		(911,000	)		(911,000	)
Other		—		—		—		—			—			—		2,003,938		(2,003,938	)		—

Balances at period end		536,878		182,511		312,979		(42,672	)		(3,021	)		4,027,251		10,489,416		4,035,253			19,538,595


		- 117 -

SEPARATE STATEMENT OF CASH FLOWS

FOR THE INTERIM THREE-MONTH PERIODS ENDED ON MARCH 31, 2018 AND 2017

(stated in thousands of pesos)


Accounts	Notes	03.31.18			03.31.17
Cash flow generated by operating activities
Income before Income Tax			2,138,669			772,466
Adjustments to obtain flows from operating activities:			(510,327	)		911,567
Amortizations and impairments			197,358			120,958
Loan loss provision			459,740			320,413
Other adjustments			(1,167,425	)		470,196
Net decreases from operating assets:			(10,585,298	)		(20,939,022	)
Debt securities at fair value through profit or loss			4,892,245			2,369,611
Derivative instruments			(23,920	)		24,959
Repo transactions			(814,162	)		(9,714,152	)
Loans and other financing			(11,301,111	)		(3,755,372	)
Non-financial government sector			76			98,664
Other financial institutions			63,553			(791,623	)
Non-financial private sector and residents abroad			(11,364,740	)		(3,062,413	)
Other debt securities			1,722,282			(2,777,153	)
Financial assets pledged as collateral			(674,791	)		78,855
Investments in equity instruments			1,322			120
Other assets			(4,387,163	)		(7,165,890	)
Net increases from operating liabilities:			7,183,843			14,480,149
Deposits			6,455,574			8,312,274
Non-financial government sector			210,045			(961,611	)
Financial sector			(32,699	)		(102,926	)
Non-financial private sector and residents abroad			6,278,228			9,376,811
Derivative instruments			15,669			(28,511	)
Repo transactions			293,774			(135,139	)
Other liabilities			418,826			6,331,525
Income tax payments			(197,989	)		(390,656	)

Total cash flows used in operating activities			(1,971,102	)		(5,165,496	)


		- 118 -

SEPARATE STATEMENT OF CASH FLOWS

FOR THE INTERIM THREE-MONTH PERIODS ENDED ON MARCH 31, 2018 AND 2017

(stated in thousands of pesos)


Accounts	Notes	03.31.18			03.31.17
Cash flows from investment activities
Payments:			(514,395	)		(318,877	)
Purchase of property, plant, and equipment, intangible assets and other assets			(310,553	)		—
Other payments related to investment activities			(203,842	)		(318,877	)
Collections:			—			110,123
Sale of property, plant, and equipment, intangible assets and other assets			—			110,123

Total cash flows used in investment activities			(514,395	)		(208,754	)

Cash flows obtained from financing activities
Payments:			(243,182	)		(1,072,809	)
Dividends			—			(911,000	)
Non-subordinated corporate bonds			(213,306	)		(150,018	)
Argentine Central Bank			(7,778	)		(11,791	)
Financing by local financial institutions			(22,098	)		—
Collections:			—			258,557
Financing by local financial institutions			—			258,557

Total cash flows used in financing activities			(243,182	)		(814,252	)

Effect of exchange rate changes on cash and cash equivalents balances			1,372,835			(295,974	)
Total changes in cash flows

Net decrease in cash and cash equivalents			(1,355,845	)		(6,484,476	)

Cash and cash equivalents at the beginning of the year	4		38,179,507			48,029,860

Cash and cash equivalents at the end of the period	4		36,823,662			41,545,384


		- 119 -

NOTES TO THE SEPARATE INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Stated in thousands of pesos)

1.	Basis for the preparation of the separate financial statements

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

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

2.	Criteria for the preparation of the financial statements

These separate financial statements have been prepared based on the regulations issued by the BCRA, which provides that entities under its supervision shall submit financial statements prepared pursuant to IFRS, with a temporary exception of the application of the impairment model in Section 5.5 “Impairment” of IFRS 9 “Financial Instruments” (hereinafter “financial reporting framework issued by the BCRA”) and considering, in turn, the accounting standards set forth by the BCRA through Memorandum No. 6/2017 regarding the criterion applicable to recognize uncertain tax provisions.

As stated in Note 2 to the consolidated financial statements, the above mentioned circumstances result in a deviation from the IFRS, quantified in that note.

Likewise, these separate financial statements contain the additional information and exhibits required by the BCRA through Communication “A” 6324.

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

•

Functional and presentation currency (Note 3 to the consolidated financial statements)

•

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

•

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

•

IFRS issued but not yet in force (Note 6 to the consolidated financial statements)

•

Provisions (Note 26 to the consolidated financial statements)

•

Capital management and corporate Governance transparency policy (Note 41 to the consolidated financial statements)

•

Financial instruments risks (Note 42 to the consolidated financial statements)

•

Fair value of financial instruments (Note 43 to the consolidated financial statements)

•

Transfer of financial assets (Note 44 to the consolidated financial statements)

•

Information per segments (Note 45 to the consolidated financial statements)

•

Subsidiaries (Note 46 to the consolidated financial statements)

•

Involvement with non-consolidated structured entities (Note 47 to the consolidated financial statements)

•

Deposits guarantee regime (Note 52 to the consolidated financial statements)

•

Compliance with the provisions of the Argentine Securities Commission – minimum shareholders’ equity and liquid assets (Note 54 to the consolidated financial statements)

•

Trust activities (Note 56 to the consolidated financial statements)

•

Mutual funds (Note 57 to the consolidated financial statements)

•

Penalties and administrative proceedings instituted by the BCRA (Note 58 to the consolidated financial statements)

•

Subsequent events (Note 60 to the consolidated financial statements)


		- 120 -

3.	Significant accounting policies

The Bank has consistently applied the following accounting policies in all periods presented in these financial statements and the preparation of the Balance Sheet as of December 31, 2016 for the purposes of the transition to the financial reporting framework set forth by the BCRA. Note 41 contains a detail of the impact of the transition regarding the accounting regulations set forth by the BCRA previously applied.

The financial statements have been prepared based on the policies the Entity expects to adopt in its annual financial statements as of December 31, 2018.

Comparative amounts and the amounts as of the date of transition have been modified to reflect the adjustments to the new financial reporting framework.

The accounting policies applied are those applied for the preparation of the consolidated financial statements (Refer to Note 5 to the consolidated financial statements), except the policy mentioned in the following paragraph. For the purposes of homogeneous application of the accounting policies, the separate balance sheet and statement of income were restated for the purpose of considering the regulations set forth by the BCRA through Memorandum No. 6/2017 issued on May 29, 2017.

Investments in subsidiaries

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

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

4.	Cash and deposits in Banks


	03.31.2018		12.31.2017		03.31.2017		12-31.2016
Cash		8,468,528		7,977,088		10,751,034		14,176,412
BCRA - Checking account		23,903,542		29,405,422		30,634,781		31,230,217
Balances in local and foreign financial institutions		4,451,592		796,997		159,569		2,623,231

TOTAL		36,823,662		38,179,507		41,545,384		48,029,860


		- 121 -

5.	Debt securities at fair value through profit or loss

Financial assets holdings measured at fair value through profit or loss

Description

Maturity

Currency (1)

Rate

Amortization

03.31.18

12.31.17

12.31.16

Treasury Bills in USD, Maturity April 2018

04/27/2018

USD

Issue with a discount

At maturity

419,679

385,645

—

Treasury Bills in USD, Maturity April 2018 Argentine Bonds

04/27/2018

USD

Issue with a discount

At maturity

330,287

305,651

—

Discount in pesos under Argentina

Law, Maturity 2033 (DIS$)

12/31/2033

ARS

5.83%+CER

20 semiannual installments

179,775

—

227,048

Argentine Treasury Bond adjusted by CER, Maturity 2021

(BONCER 2021)

07/22/2021

ARS

25%+ CER

At maturity

107,800

(19,415

)

—

BCRA Bills

From 01/04/17

06/21/18

ARS

Issue with a discount

At maturity

94,926

4,251,189

1,460,628

Argentine Treasury Bonds in pesos, fixed rate, Maturity 2021 (BONTE 021)

10 03/2021

ARS

18.20%

At maturity

798

19,776

326,596

Argentine Treasury Bonds in pesos, fixed rate, Maturity 2023 (BONTE 023)

10 17 2023

ARS

16.00%

At maturity

398,162

193,022

Argentine Treasury Bonds in pesos, fixed rate, Maturity 2018 (BONAR 2018)

03/05/2018

ARS

22.75%

At maturity

—

542,000

Argentine Bond in USD 7%, Maturity 2017 (BONARX)

03/11/2019

ARS

2.50% + BADLAR

At maturity

—

196,624

Argentine Bond in pesos PRIVATE BADLAR + 300 pbs, Maturity 2017 (BONAR B17)

10/09/2017

ARS

3,00% + ADLAR

At maturity

—

129,290

Province of Buenos Aires debt security, Maturity 2018 (TDPBA28D8)

12/28/2018

ARS

3,50% + BADLAR

3 quarterly installments

—

100,277

Corporate Bond PAN AMERICAN ENERGY, Maturity 2020 (CB PNC80)

12/10/2020

ARS

BADLAR

At maturity

—

46,672

Corporate Bond TELECOM PERSONAL S.A., Maturity 2017 (CB TL1O)

06/10/2017

ARS

3.75% + BADLAR

At maturity

—

25,359

Corporate Bond AXION ENERGY ARGENTINA, Maturity 2017 (CB AXION2)

08/15/2017

ARS

3.25% + BADLAR

At maturity

—

20,612

Other

7,141

431,564

372,673

1,140,411

5,772,572

3,640,801

(1) ARS: pesos

USD; US Dollars

The Bank’s holdings are primarily composed of the financial assets described below:

1) Treasury Bills issued by the Argentine Government on April 7, 2017, in US Dollars with total repayment at maturity on April 27, 2018 and interest at a discount.

2) Treasury Bills issued by the Argentine Government on April 28, 2017, in US Dollars with total repayment at maturity on April 27, 2018 and interest at a discount.

5) BCRA Bills (LEBAC): short term securities offered by the monetary authority. LEBACs are issued at discount, as a zero coupon bond, with total repayment at maturity with no interest payments.

6) Argentine Treasury Bond (BONTE O21) in pesos, with full repayment upon maturity on October 3, 2021. It shall accrue interest as from the date of issuance at an annual rate of 18.20%. Interest shall be paid semiannually in arrears, with the first payment on April 3, 2017 and the last on the date of repayment. They shall be computed on the basis of a three hundred and sixty (360) day year comprised of twelve (12) thirty (30) day months.


		- 122 -

7) Argentine Treasury Bond (BONTE O23) in pesos, with full repayment upon maturity on October 17, 2023. It shall accrue interest as from the date of issuance at an annual rate of 16%. Interest shall be paid semiannually in arrears, with the first payment on April 17, 2017 and the last on the date of repayment. They shall be computed on the basis of a three hundred and sixty (360) day year comprised of twelve (12) thirty (30) day months.

6.	Derivative instruments

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

The aforementioned instruments are measured at fair value and changes in fair values were recognized in the Consolidated Statement of Income in the items “From measurement of financial assets at fair value through profit or loss” and “From measurement of financial liabilities at fair value through profit or loss”. Those transactions do not qualify as hedging pursuant to IFRS 9.

The breakdown of the item is as follows:

03.31.18

1231.17

12.31.16

Assets

Debt balances linked to foreign currency forward transactions pending settlement in pesos

107,512

110,057

28,655

Debt balances linked to swaps of variable interest rate for fixed interest rate

60,802

32,688

25,068

TOTAL

168,314

142,745

53,723

Liabilities

03.31.18

12.31.17

12.31.16

Credit balances linked to foreign currency forward transactions pending settlement in pesos

162,200

137,639

5,070

Credit balances linked to swaps of variable interest rate for fixed interest rate

83,244

92,136

53,235

TOTAL

245.444

229,775

58,305

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


	March 31, 2018		December 31, 2017		December 31, 2016
Foreign currency forward transactions
Foreign currency forward purchases		11,137,186		12,671,490		2,623,708
Foreign currency forward sales		12,455,906		12,592,256		3,186,904
Interest rate swaps
Receives fixed delivers variable		4,826,121		4,376,498		2,251,362


		- 123 -

7.	Repo and reverse repo transactions

The breakdown of the item is as follows:

Assets


	03.31.18		12.31.17		12.31.16
Amounts receivable for repo transactions of government securities with financial entities		482,571		603,035		82
Amounts receivable for repo transactions with the BCRA		1,917,624		1,353,992		58,240
Amounts receivable for repo transactions of government securities with non-financial institutions		4,743,906		4,372,912		—

TOTAL		7,144,101		6,329,939		58,322

(1)	For two repo transactions of Argentine Bonds in US Dollars 2024 carried out in August and September 2017 with Argentina for a total of USD 250,000,000.

Liabilities


	03.31.18		12.31.17		12.31.16
Amounts payable for repo transactions of government securities with financial institutions		579,184		285,389		937
Amounts payable for repo transactions of monetary regulation instruments with the BCRA		—		21		134.202

TOTAL		579,184		285,410		135,139

8.	Other financial assets

The breakdown of Other financial assets is as follows:


Measured at amortized cost
Financial debtors for spot transactions pending settlement	4,910,246		1,431,589		—
Nod-financial debtors for spot transactions pending settlement	724,237		110,454		75,025
Other receivables	731,804		735,260		560,415
Other	380,370		56,344		71,647

	6,746,657		2,333,647		707.087

Allowance for loan losses (Exhibit R)	(55,889	)	(55,137	)	(58,005	)

TOTAL	6,690,768		2,278,510		649,082

Allowance for loan losses of Other financial assets:


Changes in Allowances per instrument class	Other financial assets		Total
Balances as of January 1, 2018		55,137		55,137
Allowances set up during the period (1)		756		756
Allowances reversed during the period		2		2
Allowances used during the period		2		2

Balances as of March 31, 2018		55,889		55,889


		- 124 -


Changes in Allowances per instrument class	Other financial assets			Total
Balances as of January 1, 2017		58,005			58,005
Allowances set up during the period (1)		65,592			65,592
Allowances used during the period		(64,002	)		(64,002	)

Balances as of March 31, 2017		59,595			59,595

(1)	Includes exchange rate difference of 613 and (209) as of March 31, 2018 and 2017.

9.	Loans and other financing

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


	03.31.2018			12.31.2017			12.31.2016
Financing to non-financial government sector		142			218			98,819
Financing to the BCRA		2,354			—			—
Financing to other financial institutions		8,391,536			8,484,038			3,703,085
Overdrafts		13,605,365			11,707,264			9,801,870
Discounted instruments		10,729,573			11,164,895			6,456,171
Signature documents		7,381,415			7,049,131			4,348,688
Documents purchased		40,993			13,450			—
Real estate mortgage		5,881,749			4,457,821			1,917,412
Collateral loans		1,992,524			2,088,092			2,966,858
Consumer loans		19,376,800			16,638,201			9,566,943
Credit Cards		31,874,928			30,144,824			22,625,315
Loans for the prefinancing and financing of exports		27,656,928			23,147,427			8,486,700
Receivables from financial leases		2,559,341			2,290,031			1,992,915
Loans to personnel		777,549			626,175			174,993
Other financing		9,828,553			11,365,907			7,432,255

		140,099,750			129,177,474			79,572,024

Allowance for loan losses (Exhibit R)		(2,529,777	)		(2,277,351	)		(1,604,349	)

TOTAL		137,569,973			126,900,123			77,967,675

Interest rates for loans are set based on the market rates existing as of the date such loans are granted.

Allowance for loans and other financing losses:


Changes in Allowances per instrument class	Loans to the financial sector			Advances			Documents			Mortgage		Pledge			Personal			Credit cards			Other			Total
Balances as of January 1, 2018		78,521			79,099			376,589			38,924		55,288			473,853			805,049			370,028			2,277,351
Allowances set up during the period (1)		29,642			12,011			51,776			14,060		3,951			132,963			240,940			58,581			543,924
Allowances reversed during the period		(41,797	)		—			—			—		—			—			—			(8,894	)		(50,691	)
Allowances used during the period		—			(39,408	)		(403	)		—		(3,018	)		(61,030	)		(104,018	)		(32,930	)		(240,807	)

Balances as of March 31, 2018		66,366			51,702			427,962			52,984		56,221			545,786			941,971			386,785			2,529,777


		- 125 -


Changes in Allowances per instrument class	Loans to the financial sector			Advances			Documents			Mortgage			Pledge			Personal			Credit cards			Other			Total
Balances as of January 1, 2017		31,068			202,544			167,034			13,211			63,434			375,341			491,678			260,039			1,604,349
Allowances set up during the period (1)		(1,404	)		121,170			24,186			326			(2,129	)		85,847			56,909			16,162			301,067
Allowances reversed during the period		—			—			—			—			—			—			—			(653	)		(653	)
Allowances used during the period		—			(75,137	)		(108	)		(20	)		(679	)		(61,067	)		(17,913	)		(22,498	)		(177,422	)

Balances as of March 31, 2017		29,664			248,577			191,112			13,517			60,626			400,121			530,674			253,050			1,727,341

(1)	Includes exchange rate difference of 22,160 and (4,185) as of March 31, 2018 and 2017.


	March 31, 2018		December 31, 2017		December 31, 2016
Total Exhibit B and C		141,201,889		130,789,730		81,070,409
Plus:
Argentine Central Bank (BCRA)		2,354		0
Loans to personnel		777,549		626,175		174,993
Less:
Allowance for loan losses		2,529,777		2,270,311		1,604,349
Effective rate adjustments		346,423		323,309		559,072
Corporate bonds		167,927		292,352		325,925
Loan commitments		1,367,692		1,629,810		788,381

Total loans and other financing		137,569,973		126,900,123		77,967,675

10. Other Debt securities

Financial assets measured at amortized cost

They include corporate bonds for which the Entity is carrying out credit recovery transactions, for an amount of 190 as of March 31, 2018 and December 31, 2017 and 243 as of December 31, 2016.


		- 126 -

Financial assets measured at fair value through OCI

Description

Maturity

Currency (1)

Rate

Amortization

03.31.18

12.31.17

12.31.16

BCRA Bills

From 01/04/17
to 09/19/18

ARS

Issue with a discount

At maturity

11,059 861

10,559,358

5,903,518

Treasury Bills in USD, Maturity August 2018

08/24/2018

USD

Issue with a discount

At maturity

1,094,517

—

Treasury Bills in USD, Maturity February 2019

02/08/2019

USD

Issue with a discount

At maturity

926,373

—

Treasury Bills in USD, Maturity November 2018

11/16/2018

USD

Issue with a discount

At maturity

891,217

826,467

—

Treasury Bills in USD. Maturity October 2018

10/12/2018

USD

Issue with a discount

At maturity

426,331

394,795

—

Treasury Bills in USD. Maturity May 2018

05/11/2018

USD

Issue with a discount

At maturity

295,394

275,861

—

Treasury Bills in USD, Maturity December

12/14/2018

USD

Issue with a discount

At maturity

263,075

243,401

—

Treasury Bills in USD, Maturity August 2018

08/10/2018

USD

Issue with a discount

At maturity

218,923

—

Treasury Bills in USD, Maturity July 2018

07/27/2011

USD

Issue with a discount

At maturity

172,365

—

Corporate Bond YPF S.A. Class XLIV (CB YPF 44)

12/10/2018

ARS

4.75%+ BADLAR

At maturity

101,001

103,340

101,929

Argentine Treasury Bond adjusted by CER, Maturity 2021 (BONCER 2021)

07/22/2021

ARS

2.5% + CER

At maturity

69,300

64,598

649,721

Treasury Bills in USD, Maturity February 2018

02/23/2011

USD

Issue with a discount

At maturity

—

1,500,077

—

Secured Bond maturity 2020 (BOGAR 2020)

10/04/2020

ARS

2% + CER

156 monthly
installments

—

1,469,473

1,683,892

Treasury Bills in USD, Maturity March 2018

03/16/2018

USD

Issue with a discount

At maturity

—

546,837

—

Treason Bills in USD, Maturity January 2018

01/26/2018

USD

Issue with a discount

At maturity

—

258,607

—

Treasury Bills in USD, Maturity March 2017

03/20/2017

USD

Issue with a discount

At maturity

—

717,465

Other

61,413

57,250

48,299

15,579,770

16,300,064

9,174,824

Allowance for loan losses

(1,624

)

(1,605

)

(1,502

)

TOTAL

15,578,146

16,298,459

9,73,322

(l)

ARS pesos

USD	US Dollars

The Bank’s holdings are primarily composed of the financial assets described below:

1) BCRA Bills (LEBAC): short term securities offered by the monetary authority, LEBACs are issued at discount, as a zero coupon bond, with total repayment at maturity with no interest payments.