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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Report of Foreign Issuer

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

of the Securities Exchange Act of 1934

For the month of January, 2019

Commission File Number: 001-12568

 

 

BBVA FRENCH BANK S.A.

(Translation of registrant’s name into English)

 

 

Córdoba 111, 1054

Buenos Aires, Argentina

(Address of principal executive offices)

 

 

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

Form 20-F  ☒            Form 40-F  ☐

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

Yes  ☐            No  ☒

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

Yes  ☐            No  ☒

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

Yes  ☐            No  ☒

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

 

 

 

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BBVA French Bank S.A.

TABLE OF CONTENTS

 

Item
1.		Financial Statements as of September 30, 2018.

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CONDENSED INTERIM FINANCIAL STATEMENTS FOR

THE NINE-MONTH PERIOD ENDED

SEPTEMBER 30, 2018

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Condensed interim financial statements for the nine-month period ended on September 30, 2018, submitted in comparative form.
Condensed Consolidated Balance Sheet			1
Condensed Consolidated Statement of Income			3
Condensed Consolidated Statement of Other Comprehensive Income			5
Condensed Consolidated Statement of Changes in Shareholders’ Equity			6
Condensed Consolidated Statement of Cash Flows			8
Notes			10
Exhibits			51
Independent auditors’ report on the review of the condensed interim consolidated financial statements			59
Condensed Separate Balance Sheet			62
Condensed Separate Statement of Income			64
Condensed Separate Statement of Other Comprehensive Income			66
Condensed Separate Statement of Changes in Shareholders’ Equity			67
Condensed Separate Statement of Cash Flows			69
Notes			71
Exhibits			91
Independent auditors’ report on the review of the condensed separate interim financial statements			103
Information Report			105

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CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)

 

		Notes				09.30.18				12.31.17				12.31.16
ASSETS
Cash and deposits in banks			7				87,821,856				38,235,942				48,164,949
Cash							18,477,265				7,977,326				14,176,643
Financial institutions and correspondents							69,344,591				30,258,616				33,988,306
Argentine Central Bank (BCRA)							62,851,235				29,427,394				31,248,052
Other in the country and abroad							6,493,356				831,222				2,740,254
Debt securities at fair value through profit or loss			8				475,431				5,795,638				3,671,503
Derivatives			9				63,881				142,745				53,723
Repo transactions			10				9,582,646				6,329,939				58,322
Other financial assets			11				6,707,106				2,664,139				825,117
Loans and other financing			12				178,638,563				127,807,714				78,560,081
Non-financial government sector							177				218				98,819
Argentine Central Bank (BCRA)							1				—				—
Other financial institutions							9,634,439				4,608,947				2,661,976
Non-financial private sector and residents abroad							169,003,946				123,198,549				75,799,286
Other debt securities			13				30,982,187				16,298,834				9,194,483
Financial assets pledged as collateral			14				6,301,957				3,250,464				2,184,194
Current income tax assets			15 a)				385				9,340				1,521
Investments in equity instruments			16				129,234				127,287				70,808
Investments in associates			17				1,781,225				889,433				944,687
Property, plant and equipment			18				9,172,910				9,419,862				8,231,404
Intangible assets			19				596,310				436,120				315,637
Deferred income tax assets							100,826				21,053				7,112
Other non-financial assets			20				1,375,031				1,530,269				1,468,920
Assets held for sale			21				252,805				196,379				—
TOTAL ASSETS							333,982,353				213,155,158				153,752,461

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CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)

 

		Notes and Exhibits		09.30.18				12.31.17				12.31.16
LIABILITIES
Deposits		22 and Exhibit H			247,227,968				153,934,671				114,610,296
Non-financial government sector					2,030,030				1,042,016				2,640,909
Financial sector					196,891				166,970				222,974
Non-financial private sector and residents abroad					245,001,047				152,725,685				111,746,413
Liabilities at fair value through profit or loss		23			1,345,749				—				—
Derivative instruments		9			4,431,577				229,775				58,305
Repo transactions		10			—				285,410				135,139
Other financial liabilities		24			21,934,634				14,002,353				7,785,545
Financing received from the BCRA and other financial institutions		25			5,757,714				691,295				705,080
Corporate bonds issued		26			1,735,343				2,052,490				1,786,285
Current income tax liabilities		15 b)			2,548,311				1,469,886				1,104,739
Provisions		27 and Exhibit J			3,448,015				2,127,857				901,519
Deferred income tax liabilities					48,074				518,977				987,329
Other non-financial liabilities		28			9,776,753				7,458,086				5,588,729
TOTAL LIABILITIES					298,254,138				182,770,800				133,662,966
EQUITY
Share capital		29			612,660				612,660				536,878
Non-capital contributions					6,735,977				6,735,977				182,511
Capital adjustments					312,979				312,979				312,979
Reserves					17,424,932				14,516,667				11,783,995
Retained earnings					4,014,897				3,260,218				3,438,188
Accumulated other comprehensive income					(79,386	)			4,889				98,169
Income for the period					6,677,059				4,632,944				3,465,702
Equity attributable to owners of the Bank					35,699,118				30,076,334				19,818,422
Equity attributable to non-controlling interests					29,097				308,024				271,073
TOTAL EQUITY					35,728,215				30,384,358				20,089,495
TOTAL LIABILITIES AND EQUITY					333,982,353				213,155,158				153,752,461

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

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CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE INTERIM NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

		Notes and Exhibits		Accumulated as of 09.30.18				Accumulated as of 09.30.17				Quarter from 07.01.18 to 09.30.18				Quarter from 07.01.17 to 09.30.17
Interest income		30			29,718,075				15,603,997				12,299,911				5,245,596
Interest expenses		31			(12,051,588	)			(5,192,818	)			(5,735,581	)			(1,793,418	)
Net interest income					17,666,487				10,411,179				6,564,330				3,452,178
Commission income		32			8,160,095				4,936,557				3,847,287				1,852,853
Commission expenses		33			(4,868,367	)			(3,008,549	)			(1,991,381	)			(1,098,189	)
Net commission income					3,291,728				1,928,008				1,855,906				754,664
Net income/(loss) from financial instruments at fair value through profit or loss		34			(90,424	)			1,855,096				138,510				988,948
Net income/(loss) from write-down of assets at amortized cost and at fair value through OCI		35			(54,157	)			6,723				12,774				35
Foreign exchange gains/(losses)		36			4,329,081				1,372,182				1,624,223				634,133
Other operating income		37			3,655,282				3,253,816				1,152,946				785,157
Loan loss provision		Exhibit R			(2,363,194	)			(1,395,009	)			(1,032,752	)			(596,238	)
Net operating income					26,434,803				17,431,995				10,315,937				6,018,877
Personnel benefits		38			(6,390,864	)			(4,866,369	)			(2,503,707	)			(1,673,055	)
Administrative expenses		39			(4,980,915	)			(3,791,092	)			(1,826,091	)			(1,285,047	)
Depreciation and amortization		40			(626,686	)			(468,940	)			(219,784	)			(166,418	)
Other operating expenses		41			(5,217,967	)			(4,271,191	)			(1,635,777	)			(1,029,978	)
Operating income					9,218,371				4,034,403				4,130,578				1,864,379
Income from associates					210,212				386,661				48,892				139,237
Income before income tax					9,428,583				4,421,064				4,179,470				2,003,616
Income tax		15 c)			(2,661,049	)			(1,299,810	)			(1,131,938	)			(610,956	)
Net income for the period					6,767,534				3,121,254				3,047,532				1,392,660
Net income for the period attributable to:
Owners of the Bank					6,677,059				3,094,050				3,007,841				1,381,486
Non-controlling interests					90,475				27,204				39,691				11,174

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EARNINGS PER SHARE

AS OF SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

Accounts		09.30.18				09.30.17
Numerator:
Net income attributable to owners of the Bank			6,677,059				3,094,050
Net income attributable to owners of the Bank adjusted to reflect the effect of dilution			6,677,059				3,094,050
Denominator:
Weighted average of outstanding ordinary shares for the period			612,659,638				555,184,914
Weighted average of outstanding ordinary shares for the period adjusted to reflect the effect of dilution			612,659,638				555,184,914
Earnings per basic share (stated in thousands of pesos)			10.8985				5.5730
Earnings per diluted share (stated in thousands of pesos) (1)			10.8985				5.5730

 

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

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CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE INTERIM NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

		Accumulated as of 09.30.18				Accumulated as of 09.30.17				Quarter from 07.01.18 to 09.30.18				Quarter from 07.01.17 to 09.30.17
Net income			6,767,534				3,121,254				3,047,532				1,392,660
Other comprehensive income components not to be reclassified to income/(loss) for the period:
Post-employment defined benefits plans
Accumulated actuarial income/(loss) for post-employment defined benefits plans			(5,322	)			(2,698	)			—				—
Income tax			1,600				944				—				—
			(3,722	)			(1,754	)			—				—
Total Other Comprehensive Income/(Loss) not to be re-classified to income/(loss) for the period			(3,722	)			(1,754	)			—				—
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 (Item 4.1.2a of IFRS 9)
Income/(loss) for the period from financial instruments at fair value through OCI			(363,357	)			(100,794	)			(258,594	)			(86,303	)
Adjustment for reclassifications for the period			54,155				(90,672	)			42,612				(136	)
Income tax			92,885				66,923				65,773				38,945
			(216,317	)			(124,543	)			(150,209	)			(47,494	)
Share in Other Comprehensive Income from associates and joint ventures booked by application of the equity method
Income for the period for the share in OCI from associates at equity-method			135,764				1,710				32,931				7,485
			135,764				1,710				32,931				7,485
Total Other Comprehensive Income/(Loss) to be reclassified to income/(loss) for the period			(80,553	)			(122,833	)			(117,278	)			(40,009	)
Total Other Comprehensive Income/(Loss) for the period			(84,275	)			(124,587	)			(117,278	)			(40,009	)
Total comprehensive income			6,683,259				2,996,667				2,930,254				1,352,651
Total comprehensive income:
Attributable to owners of the Bank			6,592,784				2,969,463				2,890,563				1,341,477
Attributable to non-controlling interests			90,475				27,204				39,691				11,174

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE INTERIM NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018

(stated in thousands of pesos)

 

		Capital				Non-capital contributions								Other comprehensive income								Cumulative results
Transactions		Share capital				Share premium				Adjustments to equity				Fair value reserve				Other				Legal reserve				Optional reserve				Retained earnings				Total equity attributable to owners of the Bank				Non- controlling interest				Total 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 (Note 56)			—				—				—				14,922				(10,033	)			—				—				4,014,897				4,019,786				308,024				4,327,810
Adjusted balance at the beginning of the year			612,660				6,735,977				312,979				14,922				(10,033	)			4,027,251				10,489,416				7,893,162				30,076,334				308,024				30,384,358
Total Comprehensive income for the period
- Net income for the period			—				—				—				—				—				—				—				6,677,059				6,677,059				90,475				6,767,534
- Other Comprehensive Income/(Loss) for the period			—				—				—				(216,317	)			132,042				—				—				—				(84,275	)			—				(84,275	)
- Allocation of unappropriated retained earnings as per the Shareholders’ Meeting held on April 10, 2018
Legal reserve			—				—				—				—				—				775,653				—				(775,653	)			—				—				—
Cash dividends			—				—				—				—				—				—				—				(970,000	)			(970,000	)			—				(970,000	)
Other			—				—				—				—				—				—				2,132,612				(2,132,612	)			—				—				—
- Distribution of subsidiary dividends			—				—				—				—				—				—				—				—				—				(935	)			(935	)
- Capital increase in subsidiary			—				—				—				—				—				—				—				—				—				23,055				23,055
- Loss of control of subsidiary																																							(391,522	)			(391,522	)
Balances at period end			612,660				6,735,977				312,979				(201,395	)			122,009				4,802,904				12,622,028				10,691,956				35,699,118				29,097				35,728,215

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE INTERIM NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018

(stated in thousands of pesos)

 

		Capital				Non-capital contributions								Other comprehensive income								Cumulative results
Transactions		Share capital				Share premium				Adjustments to equity				Fair value reserve				Other				Legal reserve				Optional reserve				Retained earnings				Total equity attributable to owners of the Bank				Non- controlling interest				Total 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 (Note 56)			—				—				—				100,117				(1,948	)			—				—				3,260,218				3,358,387				271,073				3,629,460
Adjusted balance at the beginning of the year			536,878				182,511				312,979				100,117				(1,948	)			3,298,517				8,485,478				6,903,890				19,818,422				271,073				20,089,495
Total Comprehensive income for the period
- Net income for the period			—				—				—				—				—				—				—				3,094,050				3,094,050				27,204				3,121,254
- Other Comprehensive Income/(Loss) for the period			—				—				—				(124,543	)			(44	)			—				—				—				(124,587	)			—				(124,587	)
- Allocation of unappropriated retained earnings as per the Shareholders’ Meeting held on March 30, 2017
Legal reserve			—				—				—				—				—				728,734				—				(728,734	)			—				—				—
Cash dividends			—				—				—				—				—				—				—				(911,000	)			(911,000	)			—				(911,000	)
Other			—				—				—				—				—				—				2,003,938				(2,003,938	)			—				—				—
- Subscription for shares approved as per the Shareholders’ Meeting held on June 13, 2017			75,782				6,556,640				—				—				—				—				—				—				6,632,422				—				6,632,422
- Other transactions			—				—				—				—				—				—				—				—				—				(211	)			(211	)
Balances at period end			612,660				6,739,151				312,979				(24,426	)			(1,992	)			4,027,251				10,489,416				6,354,268				28,509,307				298,066				28,807,373

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE INTERIM NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

Accounts		09.30.18				09.30.17
Cash flows from operating activities
Income before Income Tax			9,428,583				4,421,064
Adjustments to obtain flows from operating activities:			(23,260,863	)			(1,296,090	)
Depreciation and amortization			626,686				468,940
Net impairment loss			2,363,194				1,395,009
Other adjustments			(26,250,743	)			(3,160,039	)
Net decreases from operating assets:			(72,414,986	)			(51,477,534	)
Debt securities at fair value through profit or loss			5,106,363				(1,805,097	)
Derivatives			132,799				53,723
Reverse repurchase agreements			(3,055,859	)			(5,057,830	)
Loans and other financing			(52,294,324	)			(32,869,113	)
Non-financial government sector			41				98,552
Other financial institutions			(1,136,055	)			(862,182	)
Non-financial private sector and residents abroad			(51,158,310	)			(32,105,483	)
Other debt securities			(15,244,323	)			(5,539,666	)
Financial assets pledged as collateral			(3,051,759	)			(1,546,914	)
Investments in equity instruments			(1,947	)			2,308
Other assets			(4,005,936	)			(4,714,945	)
Net increases from operating liabilities:			101,935,056				22,754,598
Deposits			91,270,354				15,164,816
Non-financial government sector			988,014				(1,112,585	)
Financial sector			29,921				(137,858	)
Non-financial private sector and residents abroad			90,252,419				16,415,259
Liabilities at fair value through profit or loss			1,345,749				44,415
Derivative instruments			(67,810	)			44,485
Repo transactions			(285,410	)			1,108,021
Other liabilities			9,672,173				6,392,861
Income tax paid			(794,250	)			(571,412	)
Total cash flows generated by / (used in) operating activities			14,893,540				(26,169,374	)

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE INTERIM NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

Accounts		09.30.18				09.30.17
Cash flows from investing activities
Payments:			(96,337	)			(1,582,113	)
Purchase of property, plant, and equipment, intangible assets and other assets			(94,672	)			(1,582,103	)
Purchase of debt or equity instruments issued by other entities			(1,665	)			—
Collections:			854,668				241,561
Sale of property, plant and equipment, intangible assets and other assets			527,436				—
Other collections related to investing activities			327,232				241,561
Total cash flows generated by / (used in) investing activities			758,331				(1,340,552	)
Cash flows from financing activities
Payments:			(1,591,469	)			(1,946,632	)
Dividends			(970,935	)			(911,000	)
Non-subordinated corporate bonds			(350,312	)			(699,354	)
Financing to local financial institutions			(262,601	)			(332,183	)
BCRA			(7,621	)			(4,095	)
Collections:			6,873,386				6,632,422
Financing by local financial institutions			—				6,632,422
Other collections from financing activities			6,873,386				—
Total cash flows generated by financing activities			5,281,917				4,685,790
Effect of exchange rate changes on cash and cash equivalents balances
Total changes in cash flows			28,722,481				2,382,329
Net increase / (net decrease) in cash and cash equivalents			49,656,269				(20,441,807	)
Cash and cash equivalents at the beginning of the year (1)			38,235,942	(1)			48,164,949
Cash and cash equivalents at the end of the period (1)			87,892,211	(2)			27,723,142

 

(1)

Note 7.

(2)	Cash and cash equivalents as of September 30, 2018 include 70,355 corresponding to VWFS, net of eliminations.

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR

THE PERIOD ENDED SEPTEMBER 30, 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 September 30, 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;

 

•

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.

 

•

Volkswagen Financial Services Compañía Financiera S.A. (VWFS): On September 25, 2018, BBVA Francés ceased to have control over the company due to the termination of the two-year term committed by the Entity to provide financing to the company if it would fail to diversify its sources of funding. According to International Financial Reporting Standard (IFRS) No. 11 “Joint Arrangements”, Volkswagen Financial Services Compañía Financiera S.A. qualifies as a joint arrangement and, as such, it has been deconsolidated effective since September 25, 2018.

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Argentine Capital Markets Law No. 26,831, enacted on December 28, 2012 and amended by Law No. 27,440 dated May 11, 2018, subsequently regulated through General Resolution No. 622/13 and General Resolution No. 731/2018 issued by the Argentine Securities Commission (CNV), 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 such law. 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. On August 7, 2014, the subsidiary BBVA Banco Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión was registered as Mutual Investment Funds Products Management Agent under No. 3. On September 19, 2014, the subsidiary BBVA Francés Valores S.A. was registered as comprehensive Settlement, Clearing and Trading Agent under No. 41.

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

 

2.	Basis for the preparation of the Financial Statements

These condensed financial statements for the nine-month period ended September 30, 2018 are part of the period covered by the first annual financial statements prepared pursuant to the reporting framework established by the Argentine Central Bank (B.C.R.A.) that requires supervised entities to submit financial statements prepared pursuant to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), 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. Besides, given the effectiveness of Communication “A” 3921 issued by the B.C.R.A., the Entity has not applied International Accounting Standard No. 29 (IAS No. 29) “Financial reporting in hyperinflationary economies” in the preparation of these financial statements (“financial reporting framework established by the BCRA”).

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

 

a)

Had the impairment model set forth in Section 5.5 “Impairment” of IFRS 9 been applied, assets would have decreased by 2,385 and 247,851 as of September 30, 2018 and December 31, 2017, respectively. Likewise, the income for the nine-month period ended September 30, 2018 would have increased by 245,466 and retained earnings would have decreased by 247,851.

 

b)

Had the IFRS treatment regarding uncertain tax positions been applied, liabilities would have decreased by 2,207,318 and 1,185,800 as of September 30, 2018 and December 31, 2017, respectively. Likewise, the result for the nine-month periods ended September 30, 2018 and September 30, 2017 would have increased by 1,021,518 and 1,185,800, respectively.

 

c)

In the particular case of IAS No. 29, due to the effectiveness of Communication “A” 3921 issued by the B.C.R.A. which prohibits the presentation of information adjusted for inflation, the Entity has not quantified the effect that would derive from the application thereof.

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

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As of September 30, 2018, no new standards were adopted for the period ended on that date that may affect these financial statements.

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

These financial statements have been approved by the Board of Directors of BBVA Banco Francés S.A. as of November 22, 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

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

As a result of the increase in inflation that has been experienced in the first months of fiscal year 2018, the Argentine economy would qualify as a hyperinflationary economy according to the guidelines set forth under IAS No. 29. Therefore, IAS No. 29 should be applied in preparing financial statements under IFRS for annual or interim periods ending after July 1, 2018.

IAS 29 sets forth that the financial statements of an entity with a functional currency of a high inflationary economy shall 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 that effect, non-monetary items shall include the inflation from the date of acquisition or the date of revaluation, as applicable.

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

As stated below, considering the restriction for the preparation of financial statements adjusted for inflation as set forth in Communication “A” 3921 issued by the B.C.R.A., the Group does not apply, and will not apply during the effectiveness of such restriction, financial statements restatement mechanisms.

The existence of such inflationary economic environment affects the Group’s financial position and results of operations; therefore, the impact of inflation should be taken into consideration in understanding the Group’s information reported in these interim condensed financial statements.

 

4.	Accounting estimates and judgments

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

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

 

5.	Significant accounting policies

The Group has consistently applied the accounting policies described in Note 5 to the interim consolidated financial statements as of March 31, 2018, 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 established by the BCRA. Note 56 details the impact of the transition regarding the accounting regulations set forth by the BCRA previously applied.

These financial statements for the nine-month period ended September 30, 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.

 

6.	IFRS issued but not yet effective

A series of new standards and changes to the standards will become effective after January 1, 2019, 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 standard that 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 lessees, 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 acts as 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 estate 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 IFRS 16 becoming effective.

 

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:

 

		09.30.18				12.31.17				09.30.17				12.31.16
Cash			18,477,265				7,977,326				6,156,681				14,176,643
BCRA - Unrestricted current account			62,851,235				29,427,394				20,574,258				31,248,052
Balances with other local and foreign financial institutions			6,493,356				831,222				992,203				2,740,254
TOTAL			87,821,856				38,235,942				27,723,142				48,164,949

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8.	Debt securities at fair value through profit or loss

 

		09.30.18				12.31.17				12.31.16
Government securities			224,661				1,410,356				2,034,161
Private securities - Corporate bonds			152,809				134,094				176,714
BCRA Bills			97,961				4,251,188				1,460,628
TOTAL			475,431				5,795,638				3,671,503

 

9.	Derivatives

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 were recognized in the Condensed Consolidated Balance Sheet in the item “Derivative instruments”; and changes in fair values were recognized in the Condensed 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

 

		09.30.18				12.31.17				12.31.16
Foreign Currency Forwards			63,881				110,057				28,655
Interest Rate Swaps			—				32,688				25,068
TOTAL			63,881				142,745				53,723

Liabilities

 

		09.30.18				12.31.17				12.31.16
Foreign Currency Forwards			3,879,997				137,639				5,070
Interest Rate Swaps			551,580				92,136				53,235
TOTAL			4,431,577				229,775				58,305

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

 

		09.30.18				12.31.17				12.31.16
Foreign Currency Forwards
Foreign currency forward purchases			31,431,933				12,671,490				2,623,708
Foreign currency forward sales			33,971,903				12,592,256				3,186,904
Interest rate swaps
Fixed rate for variable rate			3,857,661				4,376,498				2,251,362

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10.	Repo transactions

The breakdown of the item is as follows:

Assets

 

				09.30.18				12.31.17				12.31.16
Financial institutions					209,348				603,035				58,322
BCRA					1,124,065				1,353,992				—
Non-financial institutions		(1)			8,249,233				4,372,912				—
TOTAL					9,582,646				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.

Liabilities

 

		09.30.18				12.31.17				12.31.16
Financial institutions			—				285,410				135,139
TOTAL			—				285,410				135,139

 

11.	Other financial assets

The breakdown of Other financial assets is as follows:

 

		09.30.18				12.31.17				12.31.16
Measured at amortized cost
Financial debtors for spot transactions pending settlement			4,535,016				1,431,589				—
Non-financial debtors for spot transactions pending settlement			154,073				110,454				75,025
Other receivables			1,352,709				783,696				594,880
Other			465,801				56,344				71,647
			6,507,599				2,382,083				741,552
Measured at fair value through profit or loss Investment funds			284,192				350,754				154,850
			284,192				350,754				154,850
Allowance for loan losses (Exhibit R)			(84,685	)			(68,698	)			(71,285	)
TOTAL			6,707,106				2,664,139				825,117

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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:

 

		09.30.18				12.31.17				12.31.16
Non-financial government sector			177				218				98,819
BCRA			1				—				—
Other financial institutions			9,724,645				4,649,114				2,686,109
Overdrafts			16,405,607				11,707,264				9,801,870
Discounted instruments			10,122,369				11,164,895				6,456,171
Notes			12,422,189				7,049,131				4,348,688
Documents purchased			—				13,450				—
Real estate mortgage			8,718,885				4,457,821				1,917,412
Pledge loans			1,774,642				4,539,300				2,974,398
Consumer loans			21,923,282				16,638,201				9,566,943
Credit Cards			37,421,393				30,144,824				22,625,315
Loans for the prefinancing and financing of exports			46,551,521				23,147,427				8,486,700
Receivables from financial leases			2,617,227				2,296,233				1,994,613
Loans to personnel			1,037,125				626,305				176,129
Other financing			13,920,418				13,663,961				9,040,564
			182,639,481				130,098,144				80,173,731
Allowance for loan losses (Exhibit R)			(4,000,918	)			(2,290,430	)			(1,613,650	)
TOTAL			178,638,563				127,807,714				78,560,081

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 carrying amounts is shown below:

 

		09.30.18				12.31.17				12.31.16
Total exhibits B and C			184,227,925				131,993,461				81,693,140
Plus:
BCRA			1				—				—
Loans to personnel			1,037,125				626,305				176,129
Less:
Allowances for loan losses			4,000,918				2,290,430				1,613,650
Adjustments for effective interest rate			118,436				599,460				581,232
Corporate bonds			221,574				292,352				325,925
Loans commitments			2,285,560				1,629,810				788,381
Total loans and other financing			178,638,563				127,807,714				78,560,081

Loan commitments

To meet the specific financial needs of customers, the Group’s credit policy also includes, among others, the granting of collaterals, letters of credit and in relation to foreign trade transactions. 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.

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As of September 30, 2018 and December 31, 2017 and 2016, the Group holds the following contingent transactions:

 

		09.30.18				12.31.17				12.31.16
Overdrafts and receivables agreed not used			589,732				772,541				176,296
Guarantees granted			1,005,726				398,063				264,058
Liabilities related to foreign trade transactions			265,291				107,418				97,467
Discounted instruments			424,811				351,788				250,560
			2,285,560				1,629,810				788,381

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.

 

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 September 30, 2018 and December 31, 2017, and 243 as of December 31, 2016.

13.2    Financial assets measured at fair value through OCI

 

		09.30.18				12.31.17				12.31.16
Government securities			13,352,630				5,580,301				3,121,198
BCRA Bills			—				10,559,358				5,924,317
BCRA Liquidity Bills			17,421,132				—				—
Private securities - Corporate bonds			210,577				160,590				150,227
			30,984,339				16,300,249				9,195,742
Allowance for loan losses-Private securities (Exhibit R)			(2,342	)			(1,605	)			(1,502	)
TOTAL			30,981,997				16,298,644				9,194,240

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14.	Financial assets pledged as collateral

The breakdown of the financial assets pledged as collateral as of September 30, 2018, December 31, 2017 and 2016 is included below:

 

						09.30.18				12.31.17				12.31.16
BCRA - Special guarantee accounts			(1	)			1,717,920				977,566				914,587
Guarantee Trust - BCRA Bills at fair value through OCI			(2	)			2,316,742				476,370				12,905
Guarantee Trust - Pesos			(2	)			8,400				3,090				1,120
Deposits as collateral			(3	)			2,258,895				1,475,728				1,120,490
For reverse repo transactions - BCRA Bills at fan value through OCI							—				296,630				134,027
For reverse repo transactions - Government securities at fair value through OCI							—				21,080				1,065
TOTAL							6,301,957				3,250,464				2,184,194

 

(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, with leases and forward transactions.

 

15.	Income Tax:

 

a)

Current income tax assets

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Advances			385				9,189				1,161
Collections and withholdings			—				151				360
			385				9,340				1,521

 

b)

Current income tax liabilities

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Advances			(49,463	)			(637,952	)			(1,204,305	)
Collections and withholdings			(12,777	)			(7,579	)			(4,386	)
Income Tax Provision (1)			3,053,551				2,115,417				2,313,430
			2,548,311				1,469,886				1,104,739

 

(1)	The balance as of September 30, 2018 includes a reduction by 1,021,518 for the action seeking declaration of unconstitutionality, while, as of December 31, 2017, such reduction amounts to 1,185,800.

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c)

Income tax charge

Breakdown of income tax expense:

 

		09.30.18				09.30.17
Current tax			3,141,014				1,432,394
Deferred tax			(479,965	)			(132,584	)
			2,661,049				1,299,810

Income tax, pursuant to IAS No. 34, is recognized in interim periods over the best estimate of the weighted average tax rate that the Entity expects for the fiscal year.

The Group’s effective rate for the nine-month period ended September 30, 2018 was 28%, while for the nine-month period ended September 30, 2017, it was 29%.

 

•

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 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 during 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 required by the BCRA results in a deviation from IFRS, as stated in Note 2.

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•

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.

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:

 

		09.30.18				12.31.17				12.31.16
Mercado de Valores de Buenos Aires S.A.			28,240				35,417				66,400
BYMA-Bolsas y Mercados Argentinos S.A.			89,962				85,000				—
Banco Latinoaméricano de Exportaciones S.A.			10,293				4,725				3,989
Other			739				2,145				419
TOTAL			129,234				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:

 

		09.30.18				12.31.17				12.31.16
Volkswagen Financial Services Compañía Financiera S.A. (1)			611,500				—				—
PSA Finance Arg. Cía. Financiera S.A.			432,462				344,710				369,977
Rombo Cia. Financiera S.A.			518,230				393,953				349,027
BBVA Consolidar Seguros S.A.			184,591				131,334				109,399
Interbanking S.A.			33,864				18,798				10,581
Prisma Medios de Pago S.A. (2)			—				—				105,185
Other			578				638				518
TOTAL			1,781,225				889,433				944,687

 

(1)	Reclassified to “Investments in associates” as of September 30, 2018 due to the loss of control of the subsidiary, mentioned in Note 1.

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

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18.	Property, plant and equipment

 

		09.30.18				12.31.17				12.31.16
Real estate			6,628,152				7,160,050				7,045,777
Constructions in progress			372,587				350,316				141,101
Furniture and facilities			1,418,174				1,163,405				571,877
Machinery and equipment			740,346				734,878				461,421
Automobiles			13,651				11,213				11,228
TOTAL			9,172,910				9,419,862				8,231,404

 

19.	Intangible Assets

 

		09.30.18				12.31.17				12.31.16
Licenses			429,880				340,971				238,675
Other intangible assets			166,430				95,149				76,962
TOTAL			596,310				436,120				315,637

 

20.	Other non-financial assets

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Investment properties			100,853				102,720				105,106
Tax advances			295,548				66,239				65,130
Prepayments			703,781				764,223				447,881
Advances to suppliers of goods			114,426				266,649				475,767
Other miscellaneous assets			134,069				197,207				210,304
Advances to personnel			11,771				45,316				118,544
Foreclosed assets			1,636				1,066				1,831
Other			12,947				86,849				44,357
TOTAL			1,375,031				1,530,269				1,468,920

 

21.	Assets held for sale

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 “Assets held for sale”, for an amount of 252,805 as of September 30, 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.

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22.

Deposits

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

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Non-financial government sector			2,030,030				1,042,016				2,640,909
Financial sector			196,891				166,970				222,974
Non-financial private sector and residents abroad			245,001,047				152,725,685				111,746,413
Checking accounts			24,722,884				24,275,831				19,879,927
Savings accounts			143,828,389				79,047,758				42,591,155
Time deposits			71,779,030				44,825,433				35,747,602
Investment accounts			—				—				85,194
Other			4,670,744				4,576,663				13,442,535
TOTAL			247,227,968				153,934,671				114,610,296

 

23.	Liabilities at fair value through profit or loss

 

		09.30.18				12.31.17				12.31.16
Obligations for securities transactions			1,345,749				—				—
TOTAL			1,345,749				—				—

 

24.	Other financial liabilities

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

 

		09.30.18				12.31.17				12.31.16
Creditors for spot transactions pending settlement			5,457,682				2,089,348				189,883
Obligations for financing of purchases			8,412,734				7,644,011				4,796,098
Accrued commisions payable			11,680				16,321				16,274
Collections and other transactions on behalf of thud parties			3,862,739				1,613,752				1,570,768
Interest accrued payable			62,002				17,115				7,761
Other			4,127,797				2,621,806				1,204,761
TOTAL			21,934,634				14,002,353				7,785,545

 

25.	Financing received from the BCRA and other financial institutions

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

 

		09.30.18				12.31.17				12.31.16
Local financial institutions			124,510				387,111				36,957
BCRA			7,622				8,482				31,970
Foreign financial institutions			5,625,582				295,702				636,153
TOTAL			5,757,714				691,295				705,080

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26.	Corporate bonds issued

Below is a detail of corporate bonds in force as of September 30, 2018, as of December 31, 2017 and 2016:

 

																				Carrying amount as of
Detail		Issuance date				Nominal Value (in thousands of pesos)				Maturity date				Annual Nominal Rate		Payment of interest				09.30.18				12.31.17				12.31.16
Class 9			02/11/2014				145,116				02/11/2017			Badlar Private + 4.70%			Quarterly				—				—				143,116
Class 11			07/18/2014				165,900				07/18/2017			Badlar Private + 3.75%			Quarterly				—				—				165,900
Class 13			11/13/2014				107,500				11/13/2017			Badlar Private + 3.75%			Quarterly				—				—				107,500
Class 16			07/30/2015				204,375				07/30/2017			Badlar Private + 3.75%			Quarterly				—				—				204,375
Class 17			12/28/2015				199,722				06/28/2017			Badlar Private + 3.50%			Quarterly				—				—				189,750
Class 18			12/28/2015				152,500				12/28/2018			Badlar Private + 4.08%			Quarterly				137,500				152,500				152,500
Class 19			08/08/2016				207,500				02/08/2018			Badlar Private + 2.40%			Quarterly				—				207,500				207,500
Class 20			08/08/2016				292,500				08/08/2019			Badlar Private + 3.23%			Quarterly				289,000				290,500				292,500
Class 21			11/18/2016				90,000				05/18/2018			Badlar Private + 2.75%			Quarterly				—				90,000				90,000
Class 22			11/18/2016				181,053				11/18/2019			Badlar Private + 3.50%			Quarterly				181,053				180,053				181,053
Class 23			12/27/2017				553,125				12/27/2019			TM20 (*)+ 3.20%			Quarterly				553,125				553,125				—
Class 24			12/27/2017				546,500				12/27/2020			Badlar Private + 4.25%			Quarterly				541,500				546,500				—
														Total Capital							1,702,178				2,020,178				1,734,194
														Interest accrued							33,165				32,312				52,091
														Total capital and interest accrued							1,735,343				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.

On November 8, 2018, the Entity issued Class 25 Corporate Notes, which were fully subscribed and paid in in the form of 27,852,778 UVAs, equivalent to 784,334, at 24 months and fully payable upon maturity, with an annual nominal margin of 9.50% and quarterly interest payments. The proceeds of the issue were applied to interest-bearing checking accounts.

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27.	Provisions

 

		09.30.18				12.31.17				12.31.16
Income tax contingency (Note 15.c))			2,207,318				1,185,800				—
Occasional commitments provision			1,432				1,117				581
For administrative, disciplinary and criminal penalties (Note 55)			5,000				5,000				5,000
Provisions for post-employment defined benefit plans			55,317				48,173				42,362
Other contingencies			1,178,948				887,767				853,576
TOTAL			3,448,015				2,127,857				901,519

Provisions for post-employment defined benefits plans

There are groups of terminated employees for which the Bank assumes the coverage of the cost of prepaid medical plan service installments (total or partially) for a certain period after their termination. The Bank does not cover events requiring medical assistance, but it simply pays the medical plan service installments.

The main actuarial hypotheses considered are as follows:

 

•

The inflation rate projected by private consulting agencies was used.

 

•

For the medical plan service installment, a 2% increase was estimated over the projected inflation.

 

•

The discount rate curve was estimated based on the projected inflation for each year, also considering an annual actual discount rate of 4%.

 

•

In order to make the sensitivity analysis, a variation of 100 basis points in the hypotheses presented was considered. This variation implies an increase or reduction of approximately 2% in the actuarial value of liabilities.

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.

 

28.	Other non-financial liabilities

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Short term personnel benefits			2,337,187				1,737,009				1,356,494
Long term personnel benefits			154,429				137,389				109,240
Other collections and withholdings			1,775,105				1,504,774				1,321,518
Social security payable			241,811				20,045				14,945
Advance collections			1,178,967				827,850				947,619
Miscellaneous creditors			3,028,318				2,512,994				1,290,560
For contract liabilities			209,425				212,022				158,152
Other taxes payable			842,834				474,447				348,957
Other			8,677				31,556				41,244
TOTAL			9,776,753				7,458,086				5,588,729

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29.	Share Capital

The breakdown of the item is as follows:

 

Shares

Share capital

Class

Quantity

Nominal value per share

Votes per share

Shares outstanding

Pending issuance or distribution

Paid-in (1)

Ordinary

612,659,638

1

1

612,615

45

612,660

 

(1)	Registered with the Public Registry of Commerce.

BBVA Banco Francés S.A. is a corporation (sociedad anónima) incorporated under the laws of Argentina. The 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.

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.

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30.	Interest income

 

		09.30.18				09.30.17
Interest on loans to the financial sector			1,049,728				470,830
Interest from overdrafts			3,956,923				2,185,343
Interest from documented instruments			3,470,030				1,448,391
Real estate mortgage			520,112				264,002
Interest from pledge loans			1,014,742				637,853
Interest from credit card loans			4,952,684				4,410,599
Interest from financial leases			388,673				298,001
Interest from consumer loans			4,513,028				2,775,764
Interest from other loans			2,359,349				1,381,042
Premium for reverse repurchase agreements			421,870				355,274
Interest from government securities			4,232,063				731,303
Interest from private securities			—				27,148
Interest from loans for the prefinancing and financing of exports			986,599				246,270
Stabilization Coefficient (CER) clause adjustment			63,245				312,625
Acquisition Value Unit (UVA) clause adjustment			1,760,389				56,000
Other financial income			28,640				3,552
TOTAL			29,718,075				15,603,997

 

31.	Interest expenses

 

		09.30.18				09.30.17
Checking accounts deposits			1,845,594				302,094
Savings accounts deposits			64,338				24,507
Time deposits			8,281,445				4,423,875
Bank loans			229,629				16,851
Other liabilities			906,331				323,012
Premium for reverse repurchase agreements			82,637				72,520
Acquisition Value Unit (UVA) clause adjustments			636,895				28,788
Other			4,719				1,171
TOTAL			12,051,588				5,192,818

 

32.	Commission income

 

		09.30.18				09.30.17
Linked to liabilities			4,192,247				2,746,891
Linked to loans			3,539,261				1,920,417
Linked to securities			103,069				59,468
From guarantees granted			2,108				572
From foreign currency transactions			323,410				209,209
TOTAL			8,160,095				4,936,557

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33.	Commission expenses

 

		09.30.18				09.30.17
For credit and debit cards			2,084,459				1,288,596
Latam Pass Commissions			1,653,189				1,046,594
Linked to transactions with securities			1,022				718
For foreign trade transactions			97,807				58,592
For payment of wages			201,701				114,189
For promotions			176,634				104,140
For digital sales services			294,680				181,014
Other commission expenses			358,875				214,706
TOTAL			4,868,367				3,008,549

 

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

 

		09.30.18				09.30.17
Loss from foreign currency forward transactions			(442,734	)			(18,301	)
Income from government securities			648,616				1,768,506
Income from corporate bonds			11,227				45,374
Income from private securities			375,375				44,087
Interest rate swaps			(682,907	)			15,431
Other			(1	)			(1	)
TOTAL			(90,424	)			1,855,096

 

35.	Net income from write-down of assets at amortized cost and at fair value through OCI

 

		09.30.18				09.30.17
Income from sale or derecognition of government securities			57,241				6,742
Expenses for sale or derecognition of government securities			(111,398	)			(19	)
TOTAL			(54,157	)			6,723

 

36.	Foreign exchange gains/(losses)

 

		09.30.18				09.30.17
Conversion of foreign currency assets and liabilities into pesos			1,564,090				(134,406	)
Income from purchase-sale of foreign currency			2,764,991				1,506,588
TOTAL			4,329,081				1,372,182

 

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37.	Other operating income

 

		09.30.18				09.30.17
Rental of safe deposit boxes			323,592				245,975
Adjustments and interest on miscellaneous receivables			325,284				102,691
Punitive interest			53,070				28,691
Loans recovered			202,001				220,772
Allowances reversed			79,794				82,822
Commissions for the hiring of insurance			511,225				494,762
Income tax contingency (Note 15.c))			1,021,518				1,185,800
Commissions for transportation of values			33,917				38,231
Commissions for custody			46,212				35,151
Commissions for credit and debit cards			328,403				233,352
Other operating income			730,266				585,569
TOTAL			3,655,282				3,253,816

 

38.	Personnel benefits

 

		09.30.18				09.30.17
Salaries			3,684,484				2,941,548
Social security charges			1,109,696				859,545
Personnel compensations and rewards			391,585				298,085
Personnel services			129,883				109,264
Other short term personnel benefits			1,056,670				643,933
Post-employment personnel benefits - Defined benefits			1,822				1,617
Other long term benefits			16,724				12,377
TOTAL			6,390,864				4,866,369

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39.	Administrative expenses

 

		09.30.18				09.30.17
Travel expenses			62,774				48,023
Administrative services			385,915				255,666
Security services			222,065				227,682
Fees to Bank Directors and Supervisory Committee			10,153				7,448
Other fees			207,696				150,593
Insurance			51,239				40,942
Rent			538,696				342,700
Stationery and supplies			28,829				30,732
Electricity and communications			209,143				151,309
Advertising			325,316				294,216
Taxes			1,161,476				872,860
Maintenance costs			536,232				396,779
Armored transportation services			650,193				504,244
Other administrative expenses			591,188				467,898
TOTAL			4,980,915				3,791,092

 

40.	Depreciation and amortization

 

		09.30.18				09.30.17
Depreciation of property, plant and equipment			531,284				381,326
Amortization of intangible assets			93,422				85,743
Depreciation of other assets			1,980				1,871
TOTAL			626,686				468,940

 

41.	Other operating expenses

 

		09.30.18				09.30.17
Contributions to the Deposits Guarantee Fund (Note 49)			223,842				156,365
Turnover tax			2,872,712				1,634,778
Charge for other allowances			1,428,376				1,444,159
Sinisters			101,931				68,813
Other operating expenses			591,106				967,076
TOTAL			5,217,967				4,271,191

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42.	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 September 30, 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			475,431				475,431				84,149				185,598				205,684
Other financial assets			284,192				284,192				284,192				—				—
Other debt securities			30,984,339				30,984,339				1,412,165				29,361,597				210,577
Financial assets pledged as collateral			2,316,742				2,316,742				1,117,160				1,199,582				—
Investments in equity instruments			129,234				129,234				118,202				—				11,032
Financial Liabilities
Liabilities at fair value through profit or loss			1,345,749				1,345,749				1,258,486				87,263				—
Derivative instruments			4,431,577				4,431,577				—				4,431,577				—

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			16,300,249				16,300,249				10,201,453				5,995,456				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				—

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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			3,671,503				3,671,503				2,149,034				1,522,469				—
Other financial assets			154,850				154,850				154,850				—				—
Other debt securities			9,195,742				9,195,742				649,721				8,546,021				—
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:

 

•

Level 1: Valuation using the quoting of the financial instrument, observable and available in independent prices sources and in active markets that the Group 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 or sub-sovereign bonds

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b)	Transfers between hierarchy levels

 

b.1)	Transfers from Level 1 to Level 2

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

 

		12.31.17
Argentine Treasury Bonds at fixed rate due 2023			398,162
Argentine Treasury Bonds in Pesos at fixed rate due 2021			19,776
Argentine Bond in Pesos at private Badlar + 325 bps. due 2020			(22,659	)
Argentine Bond in Pesos at private Badlar + 250 bps. due 2019			877

As of September 30, 2018, no transfers have occurred from Level 1 to Level 2.

 

b.2)	Transfers from Level 2 to Level 1

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

 

		09.30.18
Treasury Bills in US dollars due 11-16-18			1,315,513

No transfers have occurred from Level 2 to Level 1 as of December 31, 2017.

Transfers from Level 2 to Level 1 were due to the fact that, in the most recent period, the instruments had executable prices and were listed for more than 90% of the last business days, thus qualifying for classification under Level 1.

 

b.3)	Valuation techniques for Levels 2 and 3

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

The valuation allocated to corporate notes and sub-sovereign bonds that were not listed in the last 10 business days is determined by considering the latest quoted market price, plus interest accrued until the valuation date.

The theoretical assessment carried out for swaps and non-delivery forwards consists in discounting the future flows of the investment applying the interest rate as per the proper spot curve (prepared with comparable instruments with market quoting).

The estimate of future cash flows for swaps is made considering the ARS and BADLAR rates curve as input. In the case of non-delivery forwards, future cash flows are estimated considering the fair values of Rofex futures as inputs.

Calculations both for Level 2 and Level 3 species do not require quantitative information based on non-observable inputs. In all cases, the input data is observable: the last quoted market price (MAE or BYMA), the terms of the bond issue as detailed in the respective offering memorandum or, in the particular case of BADLAR-adjustable bonds, the terms published in the BCRA’s web site.

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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.

 

		09.30.18				12.31.17
Balances at the beginning of the year			239,958				4,408
(Loss) / Income for the period recognized in profit or loss			(710	)			1,106
(Loss)/Income for the period recognized in OCI			(2,965	)			1,411
Purchases			154,598				112,256
Sales			(76,188	)			—
Transfers from Level 2			110,202				120,777
Balance at closing			424,895				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 financial liabilities maturing in less than one year, it is considered that the accounting balance is similar to fair value. This assumption also applies for deposits, because a significant portion thereof (more than 99% considering contractual terms) have a residual maturity of less than one year.

 

•

Fixed rate financial instruments

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

 

•

Variable rate financial instruments

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

The fair value hierarchy of assets and liabilities not measured at fair value as of September 30, 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			87,821,856				(1	)			—				—				—
Repo transactions			9,582,646				(1	)			—				—				—
Other financial assets			6,422,914				(1	)			—				—				—
Loans and other financing
Non-financial government sector			177				177				—				177				—
Argentine Central Bank (BCRA)			1				1				—				1				—
Other financial institutions			9,634,439				9,519,686				—				2,071,093				7,448,593
Non-financial private sector and residents abroad			169,003,946				160,960,063				—				111,987,717				48,972,346
Other debt securities			190				(1	)			—				—				—
Financial assets pledged as collateral			3,985,215				(1	)			—				—				—
Financial Liabilities
Deposits			247,227,968				(1	)			—				—				—
Other financial liabilities			21,934,634				(1	)			—				—				—
Financing received from the Argentine Central Bank (BCRA) and other financial institutions			5,757,714				(1	)			—				—				—
Corporate bonds issued			1,735,343				(1	)			—				—				—

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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				(1	)			—				—				—
Repo transactions			6,329,939				(1	)			—				—				—
Other financial assets			2,313,385				(1	)			—				—				—
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			123,198,549				122,052,647				—				80,890,239				41,162,408
Other debt securities			190				(1	)			—				—				—
Financial assets pledged as collateral			2,456,384				(1	)			—				—				—
Financial Liabilities
Deposits			153,934,671				(1	)			—				—				—
Repo transactions			285,410				(1	)			—				—				—
Other financial liabilities			14,002,353				(1	)			—				—				—
Financing received from the Argentine Central Bank (BCRA) and other financial institutions			691,295				(1	)			—				—				—
Corporate bonds issued			2,052,490				(1	)			—				—				—

 

(1)	The Group does not report the fair value as it considers it to be similar to its accounting value.

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				(1	)			—				—				—
Repo transactions			58,322				(1	)			—				—				—
Other financial assets			670,267				(1	)			—				—				—
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			75,799,286				74,887,339				—				50,349,392				24,537,947
Other debt securities			243				(1	)			—				—				—
Financial assets pledged as collateral			2,036,197				(1	)			—				—				—
Financial Liabilities
Deposits			114,610,296				(1	)			—				—				—
Repo transactions			135,139				(1	)			—				—				—
Other financial liabilities			7,785,545				(1	)			—				—				—
Financing received from the Argentine Central Bank (BCRA) and other financial institutions			705,080				(1	)			—				—				—
Corporate bonds issued			1,786,285				(1	)			—				—				—

 

(1)	The Group does not report the fair value as it considers it to be similar to its accounting value.

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43.	Segment reporting

Basis for segmentation

The Group identified the operating segments based on the management information reviewed by the chief operating decision maker:

 

•

As of September 30, 2018, the Group has determined that it has only one reporting segment related to banking activities; and

 

•

As of September 30, 2017, December 31, 2017 and 2016, the information presented to the chief operating decision maker was prepared 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 Group 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 Entity 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)		Total as of 09.30.18
Loans and other financing			178,638,563
Corporate Banking			58,706,660
Small and medium companies			50,176,235
Retail			69,755,669
Other assets			155,269,607
TOTAL ASSETS			333,908,170
Deposits			247,227,968
Corporate Banking			41,702,887
Small and medium companies			46,546,184
Retail			158,978,897
Other liabilities			51,026,170
TOTAL LIABILITIES			298,254,138

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		BBVA Banco Francés S.A. (bank) (1)				VWFS (financial services)				Total as of 12.31.17
Loans and other financing			123,126,092				4,681,622				127,807,714
Corporate Banking			30,515,864				—				30,515,864
Small and medium companies			40,895,786				2,010,777				42,906,563
Retail			51,714,442				2,670,845				54,385,287
Other assets			85,209,812				137,632				85,347,444
TOTAL ASSETS			208,335,904				4,819,254				213,155,158
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			28,410,590				425,539				28,836,129
TOTAL LIABILITIES			182,345,261				425,539				182,770,800
		BBVA Banco Francés S.A. (bank) (1)				VWFS (financial services)				Total as of 12.31.16
Loans and other financing			76,974,605				1,585,476				78,560,081
Other assets			74,999,661				192,719				75,192,380
TOTAL ASSETS			151,974,266				1,778,195				153,752,461
Deposits			114,610,296				—				114,610,296
Other liabilities			18,795,909				256,761				19,052,670
TOTAL LIABILITIES			133,406,205				256,761				133,662,966
		BBVA Banco Francés S.A. (bank) (1)				VWFS (financial services)				Total as of 09.30.17
Net income from interest and similar items			9,824,879				586,300				10,411,179
Net commission income			1,941,033				(13,025	)			1,928,008
Income from financial assets at fair value through profit or loss			1,855,096				—				1,855,096
Income from write-down of assets at amortized cost			6,723				—				6,723
Net foreign exchange difference			1,372,000				182				1,372,182
Other operating income			3,252,029				1,787				3,253,816
TOTAL OPERATING INCOME BEFORE FINANCIAL ASSETS IMPAIRMENT LOSS			18,251,760				575,244				18,827,004
Net loan loss provision generated by loans			(1,370,845	)			(24,164	)			(1,395,009	)
SUBTOTAL			16,880,915				551,080				17,431,995
Total operating expenses			(13,259,069	)			(138,523	)			(13,397,592	)
Total income from associates and joint ventures			386,661				—				386,661
INCOME BEFORE INCOME TAX			4,008,507				412,557				4,421,064
Net income tax			(1,267,763	)			(32,047	)			(1,299,810	)
NET INCOME			2,740,744				380,510				3,121,254
Attributable to:
Shareholders of the Controlling Entity											3,094,050
Non-controlling interest											27,204

 

(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).

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44.	Subsidiaries

Below is the information on the Bank’s subsidiaries:

 

Name		Registered Office (country)				Ownership interest as of
						09.30.18				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				(2	)			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.

(2)	On September 25, 2018, the Bank deconsolidated Volkswagen Financial Services Compañía Financiera S.A. as a result of the loss of control referred to in Note 1.

 

45.	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 53 and 54).

 

46.	Related parties

 

a)

Parent

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

 

b)

Key Management personnel

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

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

 

b.1)

Remuneration of key management personnel

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

 

		09.30.18				09.30.17
Fees			8,714				6,079
Total			8,714				6,079

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b.2)

Transactions and balances with key management personnel

 

		Balances as of												Transactions
		09.30.18				12.31.17				12.31.16				09.30.18				09.30.17
Loans
Credit cards			2,146				2,435				1,907				69				44
Overdrafts			27				20				—				7				12
Personal loans			—				10				—				—				8
Mortgage loans			1,329				1,366				—				178				184
Financial leases			—				—				86				—				1
Deposits
Checking account			9				12				3				—				—
Savings account			26,826				10,567				4,511				2				1
Term deposits			—				—				6,306				—				—

Loans are granted on an arm’s length basis.

 

b.3)

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

 

		Balances as of												Transactions
Parent		09.30.18				12.31.17				12.31.16				09.30.18				09.30.17
Cash balances and deposits in banks			350,603				425,754				245,089				—				—
Derivative instruments (Assets)			9,946				—				—				—				—
Other Non-financial Liabilities			192,783				54,701				113,967				77,483				46,306
Securities in custody			64,789,534				62,359,948				37,468,665				—				—
Derivative instruments (Memorandum Accounts)			212,769				—				—				1,353				—
Sureties Granted			585,981				296,403				126,286				17				—
Guarantees Received			1,100				371				371				—				—

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		Balances as of												Transactions
Associates		09.30.18				12.31.17				12.31.16				09.30.18				09.30.17
Cash and deposits in banks			77				76				8								—
Loans and other financing			6,137,148				2,067,515				1,165,928				645,901				478,416
Debt securities at fair value through profit or loss			14,154				4,179				5,849				11,146				—
Derivative instruments (Assets)			—				743				3,093				—				13,315
Deposits			278,817				36,506				25,983				5,642				—
Other Non-Financial Liabilities			3,370				3,124				407				5,599				3,855
Financing Received			—				82,175				—				5,357				—
Derivative instruments (Liabilities)			408,246				12,026				576				505,739				—
Corporate bonds issued			80,716				95,374				29,738				21,600				5,179
Interest Rate Swaps			2,609,450				2,711,960				1,087,279				—				—
Securities in custody			1,017,841				223,475				380,819				—				—
Notes			28,676				—				—				—				—

Transactions have been agreed upon on an arm’s length basis.

 

47.	Restrictions to the payment of dividends

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

Furthermore, pursuant to the requirements in General Resolution No. 622 issued by the CNV, the Shareholders’ Meeting considering the financial statements with 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 Group shall maintain a minimum capital after the proposed distribution of profits.

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On April 10, 2018 the Shareholders’ Meeting approved the distribution of dividends for an amount of 970,000, which were paid on May 9, 2018. Furthermore, on March 30, 2017, the Shareholders’ Meeting approved the distribution of dividends for an amount of 911,000, which were paid on August 10, 2017.

The Shareholders’ Meeting of the subsidiary BBVA Francés Valores S.A. held on April 19, 2018 approved the distribution of dividends for an amount of 20,000, which were paid on May 18, 2018.

The Shareholders’ Meeting of the subsidiary BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión held on April 20, 2018, approved the distribution of dividends for an amount of 221,266, which were paid on May 15, 2018. Furthermore, the Shareholders’ Meeting held on April 24, 2017 approved the distribution of dividends for an amount of 140,000, which were paid on May 29, 2017.

 

48.	Restricted availability assets

As of September 30, 2018, as of December 31, 2017 and 2016, the Entity has the following restricted assets:

 

a)

The Entity applied Argentine Treasury Bonds adjusted by CER in pesos maturing in 2021 in the amount of 76,508 and 41,108 as of September 30, 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).

 

b)

The Entity applied Argentine Treasury Bonds adjusted by CER in pesos maturing in 2021 in the amount of 7,830 as of December 31, 2017, 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.

 

c)

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, court proceedings and leases in the amount of 6,301,957, 2,932,754 and 2,049,102, as of September 30, 2018, December 31, 2017 and 2016, respectively.

 

d)

The Entity maintains accounts opened at the BCRA for retirement and pension payments for 167,006 as of September 30, 2018.

 

e)

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.

 

f)

BBVA Francés Valores S.A. has shares in Mercado de Valores de Buenos Aires S.A. (VALO) in the amounts of 28,240 and 35,417, and BYMA, in the amounts of 89,962 and 85,000 as of September 30, 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.

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.

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49.	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 September 30, 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 223,842 and 156,365, respectively.

 

50.	Minimum cash and minimum capital requirements

50.1 Minimum cash requirements

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

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

 

Accounts		09.30.18				12.31.17				12.31.16
Balances at the BCRA
Argentine Central Bank (BCRA) – checking account - not restricted			66,734,020				28,112,990				31,248,052
Argentine Central Bank (BCRA) – special guarantee accounts – restricted (Note 14)			1,717,920				977,566				914,587
Argentine Central Bank (BCRA) – special retirement and pension accounts – restricted (Note 48)			206,364				—				—
			68,658,304				29,090,556				32,162,639
Argentine Treasury Bonds in pesos at fixed rate due November 2020			6,056,250				—				—
Liquidity Bills – B.C.R.A.			17,421,132				—				—
TOTAL			92,135,686				29,090,556				32,162,639

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50.2

Minimum capital requirements

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

 

		09.30.18				09.30.17
Credit risk			17,914,664				11,661,200
Operational risk			3,256,660				2,414,538
Market risk			192,083				317,338
Breach of other technical ratios			25,102				—
Pay-in			35,303,313				26,009,378
Excess			13,914,804				11,616,302

 

51.	Compliance with the provisions of the Argentine Securities Commission – minimum shareholders’ equity and liquid assets

According to CNV’s General Resolution No. 622/13, as amended by CNV’s General Resolution No. 731, the minimum Shareholders’ Equity required to operate as “Settlement and Clearing Agent - Comprehensive” and “Mutual Investment Funds Products Custodian Agent” amounts to 27,000 and the minimum of liquid assets required by those rules amounts to 13,750. 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 September 30, 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. Sociedad Gerente de Fondos Comunes de Inversión, as Mutual Investment Funds 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 3,672, through custody account No. 493-0005459481 at BBVA Banco Francés S.A. The minimum equity required to act as Mutual Investment Funds Products Management Agent of the Company amounts to 2,100. As of September 30, 2018, December 31, 2017 and 2016, the company’s Shareholders’ Equity exceeds the minimum amount imposed by the CNV.

The subsidiary BBVA Francés Valores S.A., as Comprehensive Settlement and Clearing Agent, provided the minimum counterbalance entry required by the CNV, with 9,000,000 investment units of FBA Renta Fija Plus for an amount of 11,875, through custody account No. 601-493-0005448549 at BBVA Banco Francés S.A. The minimum equity required to act as Comprehensive Settlement and Clearing Agent amounts to 18,000, while the liquid counterbalance entry amounts to 9,000. As of September 30, 2018, December 31, 2017 and 2016, the company’s Shareholders’ Equity exceeds the minimum amount imposed by the CNV.

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

The CNV issued General Resolution No. 629 on August 14, 2014 to introduce changes to its own rules governing the maintenance and safekeeping of corporate books, accounting records and business documentation. In this respect, it is reported that the Bank keeps the documentation that supports its operations for the periods still open to audit for safekeeping in Administradora de Archivos S.A. (AdeA), domiciled at Ruta 36 Km, 31,5 of Florencio Varela, Province of Buenos Aires.

In addition, it is 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).

 

53.	Trust activities

On January 5, 2001, the Board of Directors of BCRA issued Resolution No. 19/2001, providing for the exclusion of Mercobank S.A.’s senior liabilities under the terms of section 35 bis of the Financial Institutions Law, the authorization to transfer the excluded assets to the Bank as trustee of the Diagonal Trust, and the authorization to transfer the excluded liabilities to beneficiary banks. Also, on the mentioned date, the agreement to set up the Diagonal Trust was subscribed by Mercobank S.A. as Settler and the Bank as Trustee in relation to the exclusion of assets as provided in the above-mentioned resolution. As of September 30, 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 September 30, 2018, December 31, 2017 and 2016.

In addition, the Entity acts as Trustee in 11 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 231,632, 167,724 and 152,337 as of September 30, 2018, December 31, 2017 and 2016, respectively, and consist of cash, creditors’ rights, real estate and shares.

 

54.	Mutual funds

As of September 30, 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 20,361,356, 31,533,051 and 16,665,210, which are part of the Funds’ portfolio and are recorded in debit accounts “Control – Others”.

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The Mutual Funds equities are as follows:

 

		EQUITY AS OF
MUTUAL FUNDS		09.30.18				12.31.17				12.31.16
FBA Renta Pesos			14,648,149				4,965,075				2,609,965
FBA Renta Fija Dólar			5,196,379				3,571,433				—
FBA Ahorro Pesos			4,727,063				15,207,847				11,269,857
FBA Bonos Argentina			4,425,166				5,602,270				2,793,125
FBA Renta Fija Dólar Plus			2,385,616				3,631,659				—
FBA Horizonte			2,292,220				317,162				252,402
FBA Acciones Argentinas			554,351				615,530				35,594
FBA Calificado			518,650				617,636				393,708
FBA Acciones Latinoamericanas			426,607				193,867				101,400
FBA Horizonte Plus			230,151				78,972				—
FBA Renta Fija Plus (ex FBA Commodities)			193,092				237,710				—
FBA Retorno Total II			132,787				34,524				—
FBA Retorno Total I			123,630				9,104				—
FBA Renta Mixta			115,495				327,777				9,055
FBA Bonos Globales			73,789				6,837				282
FBA Bonos Latam			61,686				32,541				—
FBA Renta Pesos Plus			14,467				11,894				10,083
TOTAL			36,119,298				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 August 7, 2014.

 

55.	Penalties and administrative proceedings instituted by the BCRA

According to the requirements of Communication “A” 5689, as amended, issued by the BCRA, below is a detail of the administrative and/or disciplinary penalties as well as the 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.

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•

“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. On July 5, 2018, the Entity was notified of the hearing under Section No. 41 of the Criminal Code, which was held on August 7, 2018.

 

•

“BBVA Banco Francés S.A. over breach of Law 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 Management Head 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 applicable exchange regulations (Communications “A” 3471, “A” 3826 and “A” 5264), allegedly the

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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.

 

56.	Initial implementation of the financial reporting framework established 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.    

 

a)

Reconciliations of equity

 

		Reference				12.31.17				09.30.17				12.31.16
Equity as per the previous financial statements							26,056,548				24,638,812				16,460,035
Adjustments due to initial implementation of the new financial reporting framework set forth by the BCRA
Deemed cost of properties			(a)				4,889,491				4,909,496				4,960,575
Effective rate of Loans			(b)				(316,269	)			(261,198	)			(559,072	)
Rate below market rate			(c)				(3,116	)			—				—
Fair value of government and private securities			(d)				(24,587	)			(14,193	)			(31,439	)
Fair value of derivatives			(e)				(37,337	)			(37,188	)			(34,122	)
Equity method for associates and joint ventures			(f)				115,304				195,943				155,464
Assets and Liabilities for contracts with customers			(g)				(131,840	)			(126,202	)			(138,665	)
Goodwill			(h)				360				270				—
Deferred income tax			(i)				(450,485	)			(781,217	)			(981,667	)
Financial guarantee contracts			(j)				(5,454	)			(5,393	)			(3,425	)
Employee benefits			(k)				(1,562	)			(2,302	)			(1,683	)
Actions for the protection of constitutional rights (Amparos)			(l)				(4,821	)			(4,504	)			(4,243	)
Non-controlling interest			(m)				298,126				295,049				267,737
Shareholders’ equity pursuant to the new financial reporting framework set forth by the BCRA							30,384,358				28,807,373				20,089,495
Attributable to the Bank							30,076,334				28,509,307				19,818,422
Attributable to the non-controlling interest							308,024				298,066				271,073

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b)

Reconciliations of Comprehensive Income

 

		Reference				Quarter from 07.01.17 to 09.30.17				Accumulated as of 09.30.17
Income as per the previous financial statements							1,134,580				2,457,355
Adjustments due to initial implementation of the financial reporting framework set forth by the BCRA
Depreciation/Impairment of properties			(a)				(2,391	)			(51,080	)
Effective rate of Loans			(b)				63,369				297,874
Fair value of government and private securities			(d)				111,190				208,712
Fair value of derivatives			(e)				(44,396	)			(3,066	)
Equity method of associates and joint ventures			(f)				8,650				38,768
Assets and Liabilities for contracts with customers			(g)				31,191				12,463
Goodwill			(h)				90				270
Deferred income tax			(i)				78,520				132,584
Financial guarantee contracts			(j)				(851	)			(1,968	)
Employee benefits			(k)				(100	)			(619	)
Provision for actions for the protection of constitutional rights (Amparos)			(l)				(118	)			(261	)
Prepaid medical plan service			(m)				—				2,698
Non-controlling interest			(n)				12,926				27,524
Net income pursuant to the new financial reporting framework set forth by the BCRA							1,392,660				3,121,254
Other comprehensive income
Fair value of government and private securities							(86,439	)			(191,466	)
Equity method of associates and joint ventures							7,485				1,710
Deferred income tax							38,945				66,923
Post-employment defined benefit plans							—				(1,754	)
Other Comprehensive Income pursuant to the new financial reporting framework set forth by the BCRA							(40,009	)			(124,587	)
Total Comprehensive Income pursuant to the new financial reporting framework set forth by the BCRA							1,352,651				2,996,667
Attributable to the Bank							1,341,477				2,969,463
Attributable to the non-controlling interest							11,174				27,204

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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 financial 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)		In those cases where the Entity has paid amounts relating to actions for the protection of constitutional rights (Amparos) filed by its customers for government securities and quotas of Common Funds under the custody of the Entity, such amounts were capitalized by blocking the custody account of the depositor. Paragraph 21 of IAS 37 Provisions, Contingent Liabilities and Contingent Assets sets forth that contingent assets should not be recognized in the financial statements.
(m)		The Entity reclassified income for defined benefit plans to other comprehensive income, as set forth in IFRS 19 Employee benefits.
(n)		For minority interests as per the previous accounting standards that are part of the net shareholders’ equity consolidated as per IFRS.

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c)

Significant adjustments to the Cash Flows are detailed below:

 

Cash and cash equivalents		Previous accounting framework 12.31.17				Non- consolidated transactions PSA Finance S.A.				Adjustments				IFRS accounting framework 12.31.17
Cash			7,977,326				—				—				7,977,326
Argentine Central Bank (BCRA)			28,129,615				(16,625	)			1,314,404				29,427,394
Financial institutions and correspondents			1,557,441				(48	)			(726,171	)			831,222
Local interfinancial loans			1,860,000				—				(1,860,000	)			—
Total			39,524,382				(16,673	)			(1,271,767	)			38,235,942

 

Cash and cash equivalents		Previous accounting framework 09.30.17				Non- consolidated transactions PSA Finance S.A.				Adjustments				IFRS accounting framework 09.30.17
Cash			6,156,681				—				—				6,156,681
Argentine Central Bank (BCRA)			17,189,932				(89,978	)			3,474,304				20,574,258
Financial institutions and correspondents			4,600,719				(38	)			(3,608,478	)			992,203
Local interfinancial loans			170,000				—				(170,000	)			—
Total			28,417,332				(90,016	)			(304,174	)			27,723,142

 

Cash and cash equivalents		Previous accounting framework 12.31.16				Non- consolidated transactions PSA Finance S.A.				Adjustments				IFRS accounting framework 12.31.16
Cash			14,176,644				(1	)			—				14,176,643
Argentine Central Bank (BCRA)			31,268,051				(19,999	)			—				31,248,052
Financial institutions and correspondents			2,781,412				(20	)			(41,138	)			2,740,254
Local interfinancial loans			630,000				—				(630,000	)			—
Total			48,856,107				(20,020	)			(671,138	)			48,164,949

Under the previous reporting framework, Cash and due from banks and investments with high liquidity with an original maturity of three months or less were deemed cash and cash equivalents. Under the reporting framework based on the IFRS, Cash and deposits in banks, which include foreign currency purchases and sales to be settled with an original maturity of three months or less are deemed cash and cash equivalents.

Under the previous reporting framework, cash and cash equivalents from the interest in PSA Finance Argentina Compañía Financiera S.A. (PSA Finance S.A.) were consolidated with the Group. Under the reporting framework based on the IFRS, such company is not consolidated.

Under the new financial reporting framework set forth by the BCRA, the main impacts on the presentation of the statement of cash flows derive from the application of the indirect method set for by IAS 7.

 

57.	Subsequent events

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 September 30, 2018.

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58.	Accounting principles – Explanation added for translation into English

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

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

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

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EXHIBIT B

CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO PERFORMANCE AND GUARANTEES RECEIVED

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

Account		09.30.18				12.31.17
COMMERCIAL PORTFOLIO
Normal performance			109,104,563				73,469,368
Preferred collaterals and counter guarantees “A”			2,420,255				1,429,483
Preferred collaterals and counter guarantees “B”			1,340,743				1,262,598
No preferred collateral or counter guarantees			105,343,565				70,777,287
With special follow-up			1,512,355				34,601
Under observation			1,512,355				34,601
Preferred collaterals and counter guarantees “B”			3,970				8,570
No preferred collateral or counter guarantees			1,508,385				26,031
Troubled			103,701				55,393
Preferred collaterals and counter guarantees “B”			3,446				—
No preferred collateral or counter guarantees			100,255				55,393
With high insolvency risk			238,879				58,410
Preferred collaterals and counter guarantees “B”			8,627				9,895
No preferred collateral or counter guarantees			230,252				48,515
Uncollectible			12,527				7,040
No preferred collateral or counter guarantees			12,527				7,040
TOTAL			110,972,025				73,624,812

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EXHIBIT B

(Continued)

CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO PERFORMANCE AND GUARANTEES RECEIVED

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

Account		09.30.18				12.31.17
CONSUMER AND HOUSING PORTFOLIO
Normal performance			70,786,914				57,047,162
Preferred collaterals and counter guarantees “A”			9,375				11,517
Preferred collaterals and counter guarantees “B”			6,695,439				5,051,088
No preferred collateral or counter guarantees			64,082,100				51,984,557
Low risk			964,062				540,883
Preferred collaterals and counter guarantees “B”			37,518				56,459
No preferred collateral or counter guarantees			926,544				484,424
Medium risk			908,102				483,019
Preferred collaterals and counter guarantees “B”			13,088				12,547
No preferred collateral or counter guarantees			895,014				470,472
High risk			547,570				260,898
Preferred collaterals and counter guarantees “A”			51				—
Preferred collaterals and counter guarantees “B”			22,959				22,031
No preferred collateral or counter guarantees			524,560				238,867
Uncollectible			49,252				36,685
Preferred collaterals and counter guarantees “A”			15				—
Preferred collaterals and counter guarantees “B”			8,148				6,784
No preferred collateral or counter guarantees			41,089				29,901
Uncollectible for technical reasons			—				2
Preferred collaterals and counter guarantees “B”			—				—
No preferred collateral or counter guarantees			—				2
TOTAL			73,255,900				58,368,649
TOTAL GENERAL			184,227,925				131,993,461

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EXHIBIT C

CONCENTRATION OF LOANS AND OTHER FINANCING

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

		09.30.18								31.12.17
Number of customers		Debt balance				% over total portfolio				Debt balance				% over total portfolio
10 largest customers			25,876,809				14.05	%			12,983,980				9.84	%
50 following largest customers			33,607,244				18.24	%			20,804,256				15.76	%
100 following largest customers			18,848,647				10.23	%			10,985,454				8.32	%
All other customers			105,895,225				57.48	%			87,219,771				66.08	%
TOTAL			184,227,925				100.00	%			131,993,461				100.00	%

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EXHIBIT D

BREAKDOWN PER TERM OF LOANS AND OTHER FINANCING

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF SEPTEMBER 30, 2018

(stated in thousands of pesos) (1)

 

						Terms remaining to maturity
ITEM		Portfolio due				1 month				3 months				6 months				12 months				24 months				more than 24 months				TOTAL as of 09.30.18
Non-financial government sector			—				177				—				—				—				—				—				177
Agrentine Central Bank (BCRA)			—				1				—				—				—				—				—				1
Financial Sector			—				2,985,803				2,487,897				1,004,346				1,463,266				1,351,681				1,177,942				10,470,935
Non-financial private sector and residents abroad			907,493				68,262,944				23,807,859				24,468,540				17,746,549				19,693,352				39,816,039				194,702,776
TOTAL			907,493				71,248,925				26,295,756				25,472,886				19,209,815				21,045,033				40,993,981				205,173,889

 

(1)	Balances hereof are total contractual flows and, therefore, include principal, interest and accrued and to be accrued accesories.

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EXHIBIT H

DEPOSITS CONCENTRATION

CONSOLIDATED WITH CONTROLLED COMPANIES

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

		09.30.18								12.31.17
Number of customers		Debt balance				% over total portfolio				Debt balance				% over total portfolio
10 largest customers			17,144,324				6.93	%			5,616,361				3.65	%
50 following largest customers			20,199,867				8.17	%			8,597,760				5.58	%
100 following largest customers			12,992,446				5.26	%			6,168,839				4.01	%
All other customers			196,891,331				79.64	%			133,551,711				86.76	%
TOTAL			247,227,968				100.00	%			153,934,671				100.00	%

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EXHIBIT I

BREAKDOWN OF FINANCIAL LIABILITIES PER REMAINING TERMS

AS OF SEPTEMBER 30, 2018

(stated in thousands of pesos) (1)

 

		Terms remaining to maturity
ITEMS		1 month				3 months				6 months				12 months				24 months				more than 24 months				TOTAL as of 09.30.18
Deposits			227,347,333				17,006,125				5,631,554				977,529				28,621				670				250,991,832
Non-financial government sector			2,024,578				23,859				—				65				—				—				2,048,502
Financial sector			196,891				—				—				—				—				—				196,891
Non-financial private sector and residents abroad			225,125,864				16,982,266				5,631,554				977,464				28,621				670				248,746,439
Liabilities at fair value through profit or loss			1,345,749				—				—				—				—				—				1,345,749
Derivative instruments			4,431,577				—				—				—				—				—				4,431,577
Other financial liabilities			19,728,791				172,661				232,227				449,144				892,466				198,599				21,673,888
Financing received from the BCRA and other financial institutions			277,654				2,497,271				2,815,977				—				187,725				—				5,778,627
Corporate bonds issued			51,233				355,092				184,523				661,547				1,079,614				611,482				2,943,491
TOTAL			253,182,337				20,031,149				8,864,281				2,088,220				2,188,426				810,751				287,165,164

 

(1)	Balances hereof are total contractual flows and, therefore, include principal, interest and accrued and to be accrued accessories.

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EXHIBIT J

PROVISIONS

CONSOLIDATED WITH CONTROLLED COMPANIES

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 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 09.30.18				Balances as of 12.31.17
OF LIABILITIES
- Provisions for potential commitments			1,117				773(1	)			458				—				1,432				1,117
- For administrative, disciplinary and criminal penalties			5,000				—				—				—				5,000				5,000
- Provisions for post-employment defined benefits plans			48,173				7,144(2	)			—				—				55,317				48,173
- Other			2,073,567				1,427,603(3	)			8,307				106,597(4	)			3,386,266				2,073,567
TOTAL PROVISIONS			2,127,857				1,435,520				8,765				106,597				3,448,015				2,127,857

 

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

(2)	Set up to cover contingencies referred to prepaid medical service.

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

(4)	Includes a reduction of 15,421 due to the effect of the loss of control in the subsidiary Volkswagen Financial Services Compañía Financiera S.A.

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EXHIBIT R

ADJUSTMENT OF VALUES FOR LOSSES - ALLOWANCES FOR LOAN LOSSES

CONSOLIDATED WITH CONTROLLED COMPANIES

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 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				Loss of control over subsidiary (1)				Balances as of 09.30.18				Balances as of 12.31.17
Other financial assets			68,698				20,066	(2)			2,594				1,485				—				84,685				68,698
Loans and other financing			2,290,430				2,745,514	(3)			69,142				931,010				34,874				4,000,918				2,290,430
Other financial institutions			40,167				72,231				60,546								(38,354	)			90,206				40,167
Non-financial private sector and residents abroad			2,250,263				2,673,283				8,596				931,010				73,228				3,910,712				2,250,263
Overdrafts			79,099				67,817				—				64,653				—				82,263				79,099
Discounted instruments			376,589				648,397				—				1,609				—				1,023,377				376,589
Real estate mortgage			38,924				44,555				—				79				—				83,400				38,924
Collateral loans			106,417				27,924				—				8,700				71,877				53,764				106,417
Consumer loans			473,853				513,748				—				230,467				—				757,134				473,853
Credit cards			805,049				996,417				—				447,121				—				1,354,345				805,049
Financial leases			34,767				21,968				—				6,645				140				49,950				34,767
Other			335,565				352,457				8,596				171,736				1,211				506,479				335,565
Private Securities			1,605				737	(3)			—				—				—				2,342				1,605
Occasional commitments			1,117				773				458				—				—				1,432				1,117
TOTAL ALLOWANCES			2,361,850				2,767,090	(4)			72,194				932,495				34,874				4,089,377				2,361,850

 

(1)	On September 25, 2018, the Bank and Volkswagen Financial Services Compañía Financiera S. A. deconsolidated as a result of the loss of control (see Note 1).

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

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

(4)	Includes total exchange rate difference of:

 

- Other financial assets			13,075
- Loans and other financing			389,413
- Private securities			635

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		KPMG		Telephone + 54 11 4316 5700
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REPORT ON THE REVIEW OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

To the President and Directors of

BBVA Banco Francés S.A.

Legal address: Av. Córdoba 111

City of Buenos Aires

Taxpayer Identification Number (C.U.I.T.): 30-50000319-3

Report on Interim Financial Statements

We have reviewed the attached condensed consolidated interim financial statements of BBVA Banco Francés S.A. (the “Entity”) and its controlled companies, which comprise the condensed consolidated statement of financial position as at September 30, 2018, the condensed consolidated statements of income, other comprehensive income, changes in shareholders’ equity and cash flows for the nine-month period ended as of that date, exhibits and the selected explanatory notes.

The balances and other information corresponding to the fiscal year 2017 and interim periods are an integral part of the aforementioned financial statements and should therefore be considered in relation to those financial statements.

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 financial reporting framework established by the Argentine Central Bank (BCRA), which, as described in Note 2 to the attached financial statements, are based on the International Financial Reporting Standards (“IFRS”) and specifically on International Accounting Standard No. 34, “Interim Financial Reporting” (IAS 34), as issued by the International Accounting Standards Board (“IASB”) and adopted by the Argentine Federation of Professional Councils of Economic Sciences (“FACPCE”), with the exception in the application of section 5.5 “Impairment” of IFRS 9 “Financial instruments”, which was temporarily excluded by the BCRA from the accounting framework applicable to financial institutions and, in turn, taking into consideration the standards prescribed through Memorandum No. 6/2017 issued by the regulator on May 29, 2017 regarding the accounting treatment to be applied to uncertain tax positions. Besides, given the effectiveness of Communication “A” 3921 issued by the BCRA, the Entity has not applied International Accounting Standard 29 “Financial reporting in Hyperinflationary Economies” (IAS 29) for the preparation of these financial statements. 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.

Scope of the Review

Our responsibility is to express a conclusion on the accompanying condensed consolidated interim financial statements based on our review. We conducted our review in accordance with the standards 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 other review procedures on the accounting information included in the interim financial statements and making inquiries to persons responsible for financial and accounting matters.

KPMG, una sociedad argentina y firma miembro de la red de firmas miembro independientes de KPMG afiliadas a

KPMG International Cooperative (“KPMG International”), una entidad suiza. Derechos reservados.

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It is substantially less in scope than an audit conducted in accordance with auditing standards in force, 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 on the condensed consolidated financial statements of interim period attached.

Conclusion

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

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 financial statements:

 

a)

as mentioned in Note 2 to the accompanying financial statements, they have been prepared by the Entity’s Board of Directors and Management pursuant to financial reporting framework established by the BCRA, which differs from IFRS in relation with the application of Section 5.5 “Impairment” of IFRS 9 “Financial Instruments” that was temporarily excluded by the BCRA from the accounting framework applicable to financial institutions and considering, in turn, the standards prescribed through Memorandum No. 6/2017 issued by the regulator on May 29, 2017 regarding the treatment to be applied to uncertain tax positions,

 

b)

as mentioned in Note 2 to the accompanying financial statements, given the effectiveness of Communication “A” 3921 of the BCRA, the Entity has not applied International Accounting Standard 29 (IAS 29) “Financial reporting in Hyperinflationary Economies” for the preparation of the accompanying financial statements.

As of the date of this report, the Entity is in the process of quantifying the effect that the application of IAS 29 would have, as mentioned in section b) above. The issues indicated in paragraphs a) and b) above do not modify the conclusion expressed in the previous paragraph but must be taken into account by those users who use IFRS for the interpretation of the attached financial statements,

 

c)

as mentioned in note 5 to the accompanying financial statements, they refer to an interim period in the first fiscal year in which the Entity applies the new financial reporting framework established by the BCRA. The effects of changes caused by the application of this new accounting framework are presented in note 56 to the accompanying financial statements. The items and figures, contained in the reconciliations included in these note, are subject to changes that may occur as a result of changes in IFRS that are finally applied and can only be considered final when preparing the annual financial statements for the current fiscal year. This issue does not modify the conclusion expressed in the previous section.

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Other matters

Regarding the amounts and other information for the fiscal year ended December 31, 2016, date of transition to the new financial reporting framework 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 financial reporting framework established by the BCRA, which we have audited and, in our opinion, are appropriate and have been prepared according to the new financial reporting framework established by the BCRA.

City of Buenos Aires, November 22, 2018.

KPMG

María Gabriela Saavedra

Partner

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CONDENSED SEPARATE BALANCE SHEETS

AS OF SEPTEMBER 30, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)

 

		Notes and Exhibits				09.30.18				12.31.17				12.31.16
ASSETS
Cash and deposits in banks			4				87,818,503				38,179,507				48,029,860
Cash							18,476,752				7,977,088				14,176,412
Financial institutions and correspondents							69,341,751				30,202,419				33,853,448
Argentine Central Bank (BCRA)							62,851,235				29,405,422				31,230,217
Other in the country and abroad							6,490,516				796,997				2,623,231
Debt securities at fair value through profit or loss			5 and Exhibit A				473,033				5,772,572				3,640,801
Derivatives			6				63,881				142,745				53,723
Repo transactions			7				9,582,646				6,329,939				58,322
Other financial assets			8				6,357,184				2,276,081				646,953
Loans and other financing			9				178,616,519				126,900,123				77,967,675
Non-financial government sector							177				218				98,819
Argentine Central Bank (BCRA)							1				—				—
Other financial institutions							9,634,439				8,405,517				3,672,017
Non-financial private sector and residents abroad							168,981,902				118,494,388				74,196,839
Other debt securities			10				30,982,187				16,298,834				9,194,483
Financial assets pledged as collateral			11				6,301,957				3,250,464				2,184,194
Investments in equity instruments			13 and Exhibit A				11,032				6,870				4,408
Investments in subsidiaries, associates and joint ventures			14				2,330,561				1,724,235				1,605,718
Property, plant and equipment			15				9,172,910				9,206,870				8,017,217
Intangible assets			16				596,310				434,572				315,637
Deferred income tax assets							100,826				—				—
Other non-financial assets			17				1,372,686				1,521,106				1,449,278
Assets held for sale			18				252,805				196,379				—
TOTAL ASSETS							334,033,040				212,240,297				153,168,269

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CONDENSED SEPARATE BALANCE SHEETS

AS OF SEPTEMBER 30, 2018, DECEMBER 31, 2017 AND 2016

(stated in thousands of pesos)

 

		Notes and Exhibits		09.30.18				12.31.17				12.31.16
LIABILITIES
Deposits		19 and Exhibit H			247,477,881				153,962,733				114,652,105
Non-financial government sector					2,030,030				1,042,016				2,640,909
Financial sector					196,891				187,122				247,891
Non-financial private sector and residents abroad					245,250,960				152,733,595				111,763,305
Liabilities at fair value through profit or loss		20			1,345,749				—				—
Derivative instruments		6			4,431,577				229,775				58,305
Repo transactions		7			—				285,410				135,139
Other financial liabilities		21			21,934,634				13,865,576				7,648,411
Financing received from the BCRA and other financial institutions		22			5,757,714				562,175				668,123
Corporate bonds issued		23			1,735,343				2,052,490				1,786,285
Current income tax liabilities		12 a)			2,474,435				1,346,870				1,066,172
Provisions		Exhibit J			3,430,745				2,092,059				860,176
Deferred income tax liabilities					—				421,099				937,293
Other non-financial liabilities		24			9,745,844				7,345,776				5,537,838
TOTAL LIABILITIES					298,333,922				182,163,963				133,349,847
EQUITY
Share capital		25			612,660				612,660				536,878
Non-capital contributions					6,735,977				6,735,977				182,511
Capital adjustments					312,979				312,979				312,979
Reserves					17,424,932				14,516,667				11,783,995
Retained earnings					4,014,897				3,260,218				3,438,188
Accumulated other comprehensive income					(79,386	)			4,889				98,169
Income for the period					6,677,059				4,632,944				3,465,702
TOTAL EQUITY					35,699,118				30,076,334				19,818,422
TOTAL LIABILITIES AND EQUITY					334,033,040				212,240,297				153,168,269

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CONDENSED SEPARATE STATEMENT OF INCOME

FOR THE INTERIM NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

		Notes and Exhibits		Accumulated as of 09.30.18				Accumulated as of 09.30.17				Quarter from 07.01.18 to 09.30.18				Quarter from 07.01.17 to 09.30.17
Interest income		26			28,899,208				15,307,855				11,897,359				5,114,597
Interest expenses		27			(11,864,668	)			(5,193,158	)			(5,607,946	)			(1,793,499	)
Net interest income					17,034,540				10,114,697				6,289,413				3,321,098
Commission income		28			7,860,133				4,697,955				3,772,503				1,766,858
Commission expenses		29			(4,846,275	)			(2,995,524	)			(1,978,674	)			(1,090,661	)
Net commission income					3,013,858				1,702,431				1,793,829				676,197
Net income/(loss) from financial instruments at fair value through profit or loss		30			(156,206	)			1,806,517				105,687				996,685
Net income/(loss) from write-down of assets at amortized cost and at fair value through OCI		31			(54,157	)			6,723				12,774				35
Foreign exchange gains/(losses)		32			4,242,969				1,370,514				1,544,951				633,393
Other operating income		33			3,672,832				3,262,306				1,162,997				788,556
Loan loss provision		Exhibit R			(2,337,129	)			(1,370,845	)			(1,023,549	)			(585,930	)
Net operating income					25,416,707				16,892,343				9,886,102				5,830,034
Personnel benefits		34			(6,285,755	)			(4,795,547	)			(2,460,824	)			(1,646,644	)
Administrative expenses		35			(4,899,413	)			(3,752,707	)			(1,793,719	)			(1,276,131	)
Depreciation and amortization		36			(623,370	)			(463,971	)			(219,127	)			(164,488	)
Other operating expenses		37			(4,929,211	)			(4,206,266	)			(1,536,193	)			(1,001,604	)
Operating income					8,678,958				3,673,852				3,876,239				1,741,167
Income from associates and joint ventures					490,660				574,490				188,302				207,213
Income before income tax					9,169,618				4,248,342				4,064,541				1,948,380
Income tax		12 b)			(2,492,559	)			(1,154,292	)			(1,056,700	)			(566,894	)
Net income for the period					6,677,059				3,094,050				3,007,841				1,381,486

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EARNINGS PER SHARE

AS OF SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

Accounts		09.30.18				09.30.17
Numerator:
Net income attributable to owners of the Bank			6,677,059				3,094,050
Net income attributable to owners of the Bank adjusted to reflect the effect of dilution			6,677,059				3,094,050
Denominator:
Weighted average of outstanding ordinary shares for the period			612,659,638				555,184,914
Weighted average of outstanding ordinary shares for the period adjusted to reflect the effect of dilution			612,659,638				555,184,914
Earnings per basic share (stated in thousands of pesos)			10.8985				5.5730
Earnings per diluted share (stated in thousands of pesos) (1)			10.8985				5.5730

 

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

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CONDENSED SEPARATE STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE INTERIM NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

		Accumulated as of 09.30.18				Accumulated as of 09.30.17				Quarter from 07.01.18 to 09.30.18				Quarter from 07.01.17 to 09.30.17
Net income			6,677,059				3,094,050				3,007,841				1,381,486
Other comprehensive income components not to be reclassified to income/(loss) for the period:
Post-employment defined benefits plans
Accumulated actuarial income/(loss) for post-employment defined benefits plans			(5,322	)			(2,698	)			—				—
Income tax			1,600				944				—				—
			(3,722	)			(1,754	)			—				—
Total Other Comprehensive Income/(Loss) not to be re-classified to income/(loss) for the period			(3,722	)			(1,754	)			—				—
Other Comprehensive Income components to be re-classified to income/(loss) for the period:
Fair value reserve (Item 4.1.2a of IFRS 9)
Net change in fair value of financial assets at FVOCI			(363,357	)			(100,794	)			(258,594	)			(86,303	)
Net amount reclassified to profit or loss			54,155				(90,672	)			42,612				(136	)
Income tax			92,885				66,923				65,773				38,945
			(216,317	)			(124,543	)			(150,209	)			(47,494	)
Share in Other Comprehensive Income from associates and joint ventures booked by application of the equity method:
Income/(loss) for the period for the share in OCI from associates at equity-method			135,764				1,710				32,931				7,485
			135,764				1,710				32,931				7,485
Total Other Comprehensive Loss to be reclassified to income/(loss) for the period			(80,553	)			(122,833	)			(117,278	)			(40,009	)
Total Other Comprehensive Loss for the period			(84,275	)			(124,587	)			(117,278	)			(40,009	)
Total comprehensive income			6,592,784				2,969,463				2,890,563				1,341,477

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CONDENSED SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE INTERIM NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018

(stated in thousands of pesos)

 

		Capital				Non- capital contributions								Other comprehensive income								Cumulative results
Transactions		Share capital				Share premium				Adjustments to equity				Fair value reserve				Other				Legal reserve				Optional reserve				Retained earnings				Total 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 (Note 42)			—				—				—				14,922				(10,033	)			—				—				4,014,897				4,019,786
Adjusted balance at the beginning of the year			612,660				6,735,977				312,979				14,922				(10,033	)			4,027,251				10,489,416				7,893,162				30,076,334
Total Comprehensive income for the period
- Net income for the period			—				—				—				—				—				—				—				6,677,059				6,677,059
- Other Comprehensive Income/(Loss) for the period			—				—				—				(216,317	)			132,042				—				—				—				(84,275	)
- Allocation of unappropriated retained earnings as per the Shareholders’ Meeting held on April 10, 2018 to:
Legal reserve			—				—				—				—				—				775,653				—				(775,653	)			—
Cash dividends			—				—				—				—				—				—				—				(970,000	)			(970,000	)
Other			—				—				—				—				—				—				2,132,612				(2,132,612	)			—
Balances at period end			612,660				6,735,977				312,979				(201,395	)			122,009				4,802,904				12,622,028				10,691,956				35,699,118

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CONDENSED SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE INTERIM NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2017

(stated in thousands of pesos)

 

		Capital				Non- capital contributions								Other comprehensive income								Cumulative results
Transactions		Share capital				Share premium				Adjustments to equity				Fair value reserve				Other				Legal reserve				Optional reserve				Retained earnings				Total 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 (Note 42)			—				—				—				100,117				(1,948	)			—				—				3,260,218				3,358,387
Adjusted balance at the beginning of the year			536,878				182,511				312,979				100,117				(1,948	)			3,298,517				8,485,478				6,903,890				19,818,422
Total Comprehensive income for the period
- Net income for the period			—				—				—				—				—				—				—				3,094,050				3,094,050
- Other Comprehensive Income/(Loss) for the period			—				—				—				(124,543	)			(44	)			—				—				—				(124,587	)
- Allocation of unappropriated 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	)
Other			—				—				—				—				—				—				2,003,938				(2,003,938	)			—
-Subscription for shares as per the Shareholders’
Meeting held on June 13, 2017			75,782				6,556,640				—				—				—				—				—				—				6,632,422
Balances at period end			612,660				6,739,151				312,979				(24,426	)			(1,992	)			4,027,251				10,489,416				6,354,268				28,509,307

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CONDENSED SEPARATE STATEMENT OF CASH FLOWS

FOR THE INTERIM NINE-MONTH PERIODS ENDED ON SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

Accounts		09.30.18				09.30.17
Cash flow from operating activities
Income before Income Tax			9,169,618				4,248,342
Adjustments to obtain flows from operating activities:			(22,872,357	)			(1,391,245	)
Depreciation and amortization			623,370				463,971
Net impairment loss			2,337,129				1,370,845
Other adjustments			(25,832,856	)			(3,226,061	)
Net decreases from operating assets:			(70,773,485	)			(51,200,459	)
Debt securities at fair value through profit or loss			5,085,695				(2,070,765	)
Derivative instruments			132,799				53,723
Repo transactions			(3,055,859	)			(5,057,830	)
Loans and other financing			(50,685,950	)			(32,347,305	)
Non-financial government sector			41				98,552
Other financial institutions			(838,379	)			(2,654,233	)
Non-financial private sector and residents abroad			(49,847,612	)			(29,791,624	)
Other debt securities			(15,244,323	)			(5,619,976	)
Financial assets pledged as collateral			(3,051,493	)			(1,546,914	)
Investments in equity instruments			(4,162	)			(391	)
Other assets			(3,950,192	)			(4,611,001	)
Net increases from operating liabilities:			102,127,628				22,610,032
Deposits			91,546,972				15,169,923
Non-financial government sector			988,014				(1,112,585	)
Financial sector			9,769				(132,820	)
Non-financial private sector and residents abroad			90,549,189				16,415,328
Liabilities at fair value through profit or loss			1,345,749				44,415
Derivative instruments			(67,810	)			44,485
Repo transactions			(285,410	)			1,108,021
Other liabilities			9,588,127				6,243,188
Income tax paid			(668,318	)			(510,928	)
Total cash flows generated by / (used in) operating activities			16,983,086				(26,244,258	)

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CONDENSED SEPARATE STATEMENT OF CASH FLOWS

FOR THE INTERIM NINE-MONTH PERIODS ENDED ON SEPTEMBER 30, 2018 AND 2017

(stated in thousands of pesos)

 

Accounts		09.30.18				09.30.17
Cash flows from investing activities
Payments:			(876,463	)			(1,575,999	)
Purchase of property, plant, and equipment, intangible assets and other assets			(599,651	)			(1,575,999	)
Purchase of debt or equity instruments issued by other entities			(232,610	)			—
Other payments related to investing activities			(44,202	)			—
Collections:			934,664				374,347
Sale of property, plant and equipment, intangible assets and other assets			380,261				—
Other collections related to investing activities			554,403				374,347
Total cash flows generated by / (used in) investing activities			58,201				(1,201,652	)
Cash flows from financing activities
Payments:			(1,387,950	)			(1,940,665	)
Dividends			(970,000	)			(911,000	)
Non-subordinated corporate bonds			(350,312	)			(699,354	)
BCRA			—				(4,095	)
Financing by local financial institutions			(67,638	)			(326,216	)
Collections:			5,263,177				6,632,422
Issuance of equity instruments			—				6,632,422
Argentine Central Bank			1,998				—
Other collections related to financing activities			5,261,179				—
Total cash flows generated by financing activities			3,875,227				4,691,757
Effect of exchange rate changes on cash and cash equivalents balances			28,772,481				2,382,329
Total changes in cash flows
Net increase / (net decrease) in cash and cash equivalents			49,638,996				(20,371,824	)
Cash and cash equivalents at the beginning of the year (1)			38,179,507				48,029,860
Cash and cash equivalents at the end of the period (1)			87,818,503				27,658,036

 

(1)	See Note 4.

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NOTES TO THE CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 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 condensed financial statements for the nine-month period ended September 30, 2018 are part of the period covered by the first annual financial statements prepared based on the reporting framework established by the Argentine Central Bank (BCRA), which provide that entities under its supervision shall submit financial statements prepared pursuant to International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), 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 established 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. IAS 29 has not been applied as provided by BCRA Communication “A” 3924.

As stated in Note 2 to the consolidated financial statements, the above mentioned circumstances result in a deviation from the IFRS, as detailed in that note.

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

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

 

•

Functional and presentation currency and measurement unit (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 effective (Note 6 to the consolidated financial statements)

 

•

Provisions (Note 27 to the consolidated financial statements)

 

•

Fair values of financial instruments (Note 42 to the consolidated financial statements)

 

•

Segment reporting (Note 43 to the consolidated financial statements)

 

•

Subsidiaries (Note 44 to the consolidated financial statements)

 

•

Involvement with non-consolidated structured entities (Note 45 to the consolidated financial statements)

 

•

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

 

•

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

 

•

Trust activities (Note 53 to the consolidated financial statements)

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•

Mutual funds (Note 54 to the consolidated financial statements)

 

•

Penalties and administrative proceedings instituted by the BCRA (Note 55 to the consolidated financial statements)

 

•

Subsequent events (Note 57 to the consolidated financial statements)

 

3.	Significant accounting policies

The Bank has consistently applied the accounting policies described in Note 5 to the interim consolidated financial statements as of March 31, 2018, 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 42 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 nine-month period ended September 30, 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.

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

 

		09.30.18				12.31.17				09.30.17				12.31.16
Cash			18,476,752				7,977,088				6,156,460				14,176,412
BCRA - Unrestricted current account			62,851,235				29,405,422				20,539,990				31,230,217
Balances in local and foreign financial institutions			6,490,516				796,997				961,586				2,623,231
TOTAL			87,818,503				38,179,507				27,658,036				48,029,860

 

5.	Debt securities at fair value through profit or loss

 

		09.30.18				12.31.17				12.31.16
Government securities			222,263				1,387,290				2,003,459
Private securities - Corporate bonds			152,809				134,094				176,714
BCRA Bills			97,961				4,251,188				1,460,628
TOTAL			473,033				5,772,572				3,640,801

 

6.	Derivatives

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”.

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

The breakdown of the item is as follows:

Assets

 

		09.30.18				12.31.17				12.31.16
Foreign Currency Forwards			63,881				110,057				28,655
Interest Rate Swaps			—				32,688				25,068
TOTAL			63,881				142,745				53,723

Liabilities

 

		09.30.18				12.31.17				12.31.16
Foreign Currency Forwards			3,879,997				137,639				5,070
Interest Rate Swaps			551,580				92,136				53,235
TOTAL			4,431,577				229,775				58,305

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

 

		09.30.18				12.31.17				12.31.16
Foreign Currency Forwards
Foreign currency forward purchases			31,431,933				12,671,490				2,623,708
Foreign currency forward sales			33,971,903				12,592,256				3,186,904
Interest rate swaps
Fixed rate for variable rate			3,857,661				4,376,498				2,251,362

 

7.	Repo transactions

The breakdown of the item is as follows:

Assets

 

						09.30.18				12.31.17				12.31.16
Financial institutions							209,348				603,035				58,322
BCRA							1,124,065				1,353,992				—
Non-financial institutions			(1	)			8,249,233				4,372,912				—
TOTAL							9,582,646				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.

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Liabilities

 

		09.30.18				12.31.17				12.31.16
Financial institutions			—				285,410				135,139
TOTAL			—				285,410				135,139

 

8.	Other financial assets

The breakdown of Other financial assets is as follows:

 

		09.30.18				12.31.17				12.31.16
Measured at amortized cost Financial debtors for spot transactions pending settlement			4,535,016				1,431,589				—
Non-financial debtors for spot transactions pending settlement			94,328				110,454				75,025
Other receivables			1,330,716				735,260				560,415
Other			465,801				56,344				71,647
			6,425,861				2,333,647				707,087
Allowance for loan losses (Exhibit R)			(68,677	)			(57,566	)			(60,134	)
TOTAL			6,357,184				2,276,081				646,953

 

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:

 

		09.30.18				12.31.17				12.31.16
Non-financial government sector			177				218				98,819
BCRA			1				—				—
Other financial institutions			9,724,645				8,484,038				3,703,085
Overdrafts			16,405,607				11,707,264				9,801,870
Discounted instruments			10,122,369				11,164,895				6,456,171
Notes			12,422,189				7,049,131				4,348,688
Documents purchased			—				13,450				—
Real estate mortgage			8,718,885				4,457,821				1,917,412
Pledge loans			1,774,642				2,088,092				2,966,858
Consumer loans			21,923,282				16,638,201				9,566,943
Credit Cards			37,421,393				30,144,824				22,625,315
Loans for the prefinancing and financing of exports			46,551,521				23,147,427				8,486,700
Receivables from financial leases			2,617,227				2,290,031				1,992,915
Loans to personnel			1,037,125				626,175				174,993
Other financing			13,898,374				11,365,907				7,432,255
			182,617,437				129,177,474				79,572,024
Allowance for loan losses (Exhibit R)			(4,000,918	)			(2,277,351	)			(1,604,349	)
TOTAL			178,616,519				126,900,123				77,967,675

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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.

 

		09.30.18				12.31.17				12.31.16
Total exhibits B and C			184,205,881				130,789,730				81,070,409
Plus:
BCRA			1				—				—
Loans to personnel			1,037,125				626,175				174,993
Less:
Allowance for loan losses			4,000,918				2,277,351				1,604,349
Adjustments for effective interest rate			118,436				316,269				559,072
Corporate bonds			221,574				292,352				325,925
Loans commitments			2,285,560				1,629,810				788,381
Total loans and other financing			178,616,519				126,900,123				77,967,675

 

10.	Other debt securities

 

a)

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 September 30, 2018 and December 31, 2017 and 243 as of December 31, 2016.

 

b)

Financial assets measured at fair value through OCI

 

		09.30.18				12.31.17				12.31.16
Government securities			13,352,630				5,580,301				3,121,198
BCRA Bills			—				10,559,358				5,924,317
BCRA Liquidity Bills			17,421,132				—				—
Private securities - Corporate bonds			210,577				160,590				150,227
			30,984,339				16,300,249				9,195,742
Allowance for loan losses- Private securities (Exhibit R)			(2,342	)			(1,605	)			(1,502	)
TOTAL			30,981,997				16,298,644				9,194,240

 

11.	Financial assets pledged as collateral

As of September 30, 2018, December 31, 2017 and December 31, 2016, the Entity delivered the financial assets listed below as collateral:

 

						09.30.18				12.31.17				12.31.16
BCRA - Special guarantee accounts			(1	)			1,717,920				977,566				914,587
Guarantee Trust - BCRA Bills at fair value through OCI			(2	)			2,316,742				476,370				12,905
Guarantee Trust - Pesos			(2	)			8,400				3,090				1,120
Deposits as collateral			(3	)			2,258,895				1,475,728				1,120,490
For reverse repo transactions - BCRA Bills at fair value through OCI							—				296,630				134,027
For reverse repo transactions - Government securities at fair value through OCI							—				21,080				1,065
TOTAL							6,301,957				3,250,464				2,184,194

 

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

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(2)

Set up as collateral to operate with ROFEX and MAE on term and foreign currency forward 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, leases and forward transactions.

 

12.	Income tax

 

a)

Current income tax liabilities

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Advances			(444,990	)			(594,048	)			(1,172,124
Collections and withholdings			(575	)			(82	)			(4	)
Income Tax Provision			2,920,000				1,941,000				2,238,300
			2,474,435				1,346,870				1,066,172

 

b)

Income tax charge

Breakdown of income tax expense:

 

		09.30.18				09.30.17
Current tax			2,920,000				1,279,000
Deferred tax			(427,441	)			(124,708	)
			2,492,559				1,154,292

Income tax, pursuant to IAS 34, is recognized in interim periods based on the best estimate of the weighted average tax rate that the Entity expects for the fiscal year.

The Bank’s effective rate for the nine-month period ended September 30, 2018 and 2017 was 27%.

 

13.	Investments in equity instruments

Investments in equity instruments over which the Bank has no control, joint control or a significant influence are measured at fair value through OCI. The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Banco Latinoaméricano de Exportaciones S.A.			10,293				4,725				3,989
Other			739				2,145				419
TOTAL			11,032				6,870				4,408

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14.	Investments in subsidiaries and associates

The Bank has investments in the following entities over which it has a control or significant influence and, therefore, measures them by applying the equity method:

 

		09.30.18				12.31.17				12.31.16
BBVA Francés Valores S.A.			156,686				161,266				99,462
Consolidar A.F.J.P. S.A. (under liquidation proceedings)			27,657				5,490				3,253
Volkswagen Financial Services Compañía Financiera S.A.			611,500				309,845				275,494
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión			365,571				358,839				283,340
PSA Finance Arg. Cía. Financiera S.A.			432,463				344,710				369,977
Rombo Cía. Financiera S.A.			518,230				393,953				349,027
BBVA Consolidar Seguros S.A.			184,591				131,334				109,399
Interbanking S.A.			33,863				18,798				10,581
Prisma Medios de Pago S.A. (1)			—				—				105,185
TOTAL			2,330,561				1,724,235				1,605,718

 

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

 

15.	Property, plant and equipment

 

		09.30.18				12.31.17				12.31.16
Real estate			6,628,152				6,960,452				6,841,675
Constructions in progress			372,587				350,315				141,101
Furniture and facilities			1,418,174				1,156,711				564,791
Machinery and equipment			740,346				731,187				461,292
Automobiles			13,651				8,205				8,358
TOTAL			9,172,910				9,206,870				8,017,217

 

16.	Intangible assets

 

		09.30.18				12.31.17				12.31.16
Licenses			429,880				339,423				238,675
Other intangible assets			166,430				95,149				76,962
TOTAL			596,310				434,572				315,637

 

17.	Other non-financial assets

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Investment properties			100,853				102,720				105,106
Prepayments			295,079				65,635				58,900
Advance payments			703,221				760,184				446,837
Advances to suppliers of goods			114,426				266,649				475,767
Other miscellaneous assets			134,069				195,194				205,577
Advances to personnel			11,771				44,769				118,544
Property taken as security for loan			1,636				959				1,724
Other			11,631				84,996				36,823
TOTAL			1,372,686				1,521,106				1,449,278

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18.	Assets held for sale

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 “Assets held for sale”, for an amount of 252,805 and 196,379 as of September 30, 2018 and December 31, 2017. The efforts to sell that asset have begun and the sale is expected to take place in 2018.

 

19.

Deposits

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

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Non-financial government sector			2,030,030				1,042,016				2,640,909
Financial sector			196,891				187,122				247,891
Non-financial private sector and residents abroad			245,250,960				152,733,595				111,763,305
Checking accounts			24,972,797				24,283,741				19,896,819
Savings accounts			143,828,389				79,047,758				42,591,155
Time deposits			71,779,030				44,825,433				35,747,602
Investment accounts			—				—				85,194
Other			4,670,744				4,576,663				13,442,535
TOTAL			247,477,881				153,962,733				114,652,105

 

20.	Liabilities at fair value through profit or loss

 

		09.30.18				12.31.17				12.31.16
Obligations for securities transactions			1,345,749				—				—
TOTAL			1,345,749				—				—

 

21.	Other financial liabilities

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

 

		09.30.18				12.31.17				12.31.16
Creditors for spot transactions pending settlement			5,457,682				2,089,348				189,883
Obligations for financing of purchases			8,412,734				7,644,011				4,796,098
Accrued commissions payable			11,680				16,321				16,274
Collections and other transactions on behalf of third parties			3,862,739				1,613,752				1,570,768
Interest accrued payable			62,002				17,115				7,761
Other			4,127,797				2,485,029				1,067,627
TOTAL			21,934,634				13,865,576				7,648,411

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22.	Financing received from the BCRA and other financial institutions

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

 

		09.30.18				12.31.17				12.31.16
Local financial institutions			124,510				257,991				—
BCRA			7,622				8,482				31,970
Foreign financial institutions			5,625,582				295,702				636,153
TOTAL			5,757,714				562,175				668,123

 

23.	Corporate bonds issued

The detail of corporate bonds in force as of September 30, 2018, December 31, 2017 and 2016, is included in Note 26 to the consolidated financial statements.

 

24.	Other non-financial liabilities

The breakdown of the item is as follows:

 

		09.30.18				12.31.17				12.31.16
Short term personnel benefits			2,326,042				1,698,647				1,334,089
Long term personnel benefits			154,113				137,389				109,240
Other collections and withholdings			1,774,690				1,503,831				1,319,998
Social security payable			241,811				20,045				14,945
Advance collections			1,178,967				827,850				947,619
Miscellaneous creditors			3,012,519				2,474,331				1,288,898
For contract liabilities			209,425				212,022				158,152
Other taxes payable			839,858				466,268				346,008
Other			8,419				5,393				18,889
TOTAL			9,745,844				7,345,776				5,537,838

 

25.	Share capital

The information on the corporate stock is disclosed in Note 29 to the consolidated financial statements.

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26.	Interest income

 

		09.30.18				09.30.17
Interest on loans to the financial sector			1,836,055				784,168
Interest from overdrafts			3,956,923				2,185,343
Interest from documented instruments			3,470,030				1,448,391
Interest from mortgage loans			520,112				264,002
Interest from pledge loans			362,303				408,088
Interest from credit cards			4,952,684				4,410,599
Interest from financial leases			387,907				297,903
Interest from consumer loans			4,513,028				2,775,764
Interest from other loans			1,454,080				1,028,573
Premium for repo transactions			421,870				355,274
Interest from government securities			4,232,063				731,303
Interest from loans for the prefinancing and financing of exports			986,599				246,270
Stabilization Coefficient (CER) clause adjustment			63,245				312,625
Acquisition Value Unit (UVA) clause adjustment			1,713,669				56,000
Other financial income			28,640				3,552
TOTAL			28,899,208				15,307,855

 

27.	Interest expenses

 

		09.30.18				09.30.17
Checking accounts deposits			1,845,594				302,093
Savings accounts deposits			64,338				24,507
Time deposits			8,281,445				4,423,875
Bank loans			43,165				17,192
Other liabilities			905,875				323,012
Premium for repurchase agreements			82,637				72,520
Acquisition Value Unit (UVA) clause adjustments			636,895				28,788
Other			4,719				1,171
TOTAL			11,864,668				5,193,158

 

28.	Commission income

 

		09.30.18				09.30.17
Linked to liabilities			4,192,247				2,746,891
Linked to loans			3,239,299				1,682,047
Linked to securities			103,069				59,468
From guarantees granted			2,108				340
From foreign and exchange transactions			323,410				209,209
TOTAL			7,860,133				4,697,955

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29.	Commission expenses

 

		09.30.18				09.30.17
For credit and debit cards			2,084,459				1,184,637
Latam Pass Commissions			1,653,189				936,857
Linked to transactions with securities			858				718
For foreign trade transactions			97,807				58,592
For payment of wages			201,701				114,189
For promotions			176,634				104,140
For digital sales services			294,680				181,014
Other commission expenses			336,947				415,377
TOTAL			4,846,275				2,995,524

 

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

 

		09.30.18				09.30.17
Income/(loss) from foreign currency forward transactions			(442,734	)			(18,301	)
Income from government securities			647,308				1,763,981
Income from corporate bonds			11,227				45,374
Income from private securities			310,900				32
Income/(loss) from interest rate swaps			(682,907	)			15,431
TOTAL			(156,206	)			1,806,517

 

31.	Income from derecognition of financial assets

 

		09.30.18				09.30.17
Income from sale or derecognition of government securities			57,241				6,742
Expenses for sale or derecognition of government securities			(111,398	)			(19	)
TOTAL			(54,157	)			6,723

 

32.	Foreign exchange gains/(losses)

 

		09.30.18				09.30.17
Conversion of assets and liabilities in foreign currency into pesos			1,477,978				(136,074	)
Income from purchase-sale of foreign currency			2,764,991				1,506,588
TOTAL			4,242,969				1,370,514

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33.	Other operating income

 

		09.30.18				09.30.17
Rental of safe deposit boxes			323,592				245,975
Adjustments and interest on miscellaneous receivables			325,284				102,691
Punitive interest			51,520				28,299
Loans recovered			202,001				220,439
Allowances reversed			72,192				77,046
Commissions for the hiring of insurance			511,225				494,762
Income tax contingency (Note 15c. to the consolidated financial statements)			1,021,518				1,185,800
Commissions for transportation of values			33,917				38,231
Commissions for custody			46,212				35,151
Commissions for credit and debit cards			328,403				233,352
Other operating income			756,968				600,560
TOTAL			3,672,832				3,262,306

 

34.	Personnel benefits

 

		09.30.18				09.30.17
Salaries			3,600,548				2,888,003
Social security charges			1,099,078				851,232
Personnel compensation and benefits			384,653				291,909
Personnel services			126,687				107,095
Other short term personnel benefits			1,056,243				643,314
Post-employment personnel benefits - Defined benefits			1,822				1,617
Other long term benefits			16,724				12,377
TOTAL			6,285,755				4,795,547

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35.	Administrative expenses

 

		09.30.18				09.30.17
Travel expenses			58,908				45,773
Administrative services			343,854				251,014
Security services			222,065				227,682
Fees to Bank Directors and Supervisory Committee			9,599				6,854
Other fees			211,344				139,343
Insurance			50,514				39,876
Rent			535,641				345,841
Stationery and supplies			28,604				30,619
Electricity and communications			208,520				151,055
Advertising and publicity			322,882				293,116
Taxes			1,138,945				861,204
Maintenance costs			532,394				394,143
Armored transportation services			650,193				504,244
Other administrative expenses			585,950				461,943
TOTAL			4,899,413				3,752,707

 

36.	Depreciation and amortization

 

		09.30.18				09.30.17
Depreciation of property, plant and equipment			528,487				376,357
Amortization of intangible assets			92,903				85,743
Depreciation of other assets			1,980				1,871
TOTAL			623,370				463,971

 

37.	Other operating expenses

 

		09.30.18				09.30.17
Contribution to the Deposits Guarantee Fund (Note 49 to the consolidated financial statements)			223,842				156,365
Turnover tax			2,728,000				1,579,450
Charge for other allowances (Exhibit J)			1,423,181				1,443,642
Sinisters			101,931				68,813
Other operating expenses			452,257				957,996
TOTAL			4,929,211				4,206,266

 

38.	Related parties

a) Parent

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

b) 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.

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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 management personnel received the following remuneration:

 

		09.30.18				09.30.17
Fees			8,714				6,079
Total			8,714				6,079

b.2) Transactions and balances with key management personnel

 

		Balances as of												Transactions
		09.30.18				12.31.17				12.31.16				09.30.18				09.30.17
Loans
Credit cards			2,146				2,435				1,907				69				44
Overdrafts			27				20				—				7				12
Personal loans			—				10				—				—				8
Mortgage loans			1,329				1,366				—				178				184
Financial leases			—				—				86				—				1
Deposits
Checking account			9				12				3				—				—
Savings account			26,826				10,567				4,511				2				1
Term deposits			—				—				6,306				—				—

Transactions have been agreed upon on an arm’s length basis.

b.3) Transactions and balances with related parties (except key management personnel)

 

		Balances as of												Transactions
Parent		09.30.18				12.31.17				12.31.16				09.30.18				09.30.17
Cash and deposits in banks			350,603				425,754				245,089				—				—
Derivative instruments (Assets)			9,946				—				—				—				—
Other Non-financial Liabilities			192,783				54,701				113,967				77,483				46,306
Securities in custody			64,789,534				62,359,948				37,468,665				—				—
Derivative instruments (Memorandum Accounts)			212,769				—				—				1,353				—
Sureties Granted			585,981				296,403				126,286				17				—
Guarantees Received			1,100				371				371				—				—

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		Balances as of												Transactions
Subsidiaries		09.30.18				12.31.17				12.31.16				09.30.18				09.30.17
Loans and other financing			88				3,811,207				1,015,703				894,606				330.896
Other financial assets			422				229				12				—				—
Deposits			253,383				28,115				50,059				—				—
Financing Received			—				—				—				2,350				260
Securities in Custody			348,432				375,785				186,440				—				—
Sureties			281				281				281				—				—
Other Operating Income			—				—				—				4,666				3,590
Administrative Expenses			—				—				—				756				6,006

 

		Balances as of												Transactions
Associates		09.30.18				12.31.17				12.31.16				09.30.18				09.30.17
Cash and deposits in banks			77				76				8				—				—
Loans and other financing			6,137,148				2,067,515				1,165,928				645,901				478,416
Debt securities at fair value through profit or loss			14,154				4,179				5,849				11,146				—
Derivative instruments (Assets)			—				743				3,093				—				13,315
Deposits			278,817				36,506				25,983				5,642				—
Other Non-Financial Liabilities			3,370				3,124				407				5,599				3,855
Financing Received			—				82,175				—				5,357				—
Derivative instruments (Liabilities)			408,246				12,026				576				505,739
Corporate bonds issued			80,716				95,374				29,738				21,600				5,179
Interest Rate Swaps			2,609,450				2,711,960				1,087,279				—				—
Securities in custody			1,017,841				223,475				380,819				—				—
Documented credits			28,676				—				—				—				—

Transactions are agreed upon on an arm’s length basis.

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39.	Restrictions to the payment of dividends

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

 

40.	Restricted availability assets

The Entity’s restricted assets are detailed in Note 48 to the consolidated financial statements.

 

41.	Minimum cash and minimum capital requirements

41.1 Minimum cash requirements

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

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

 

Accounts		09.30.18				12.31.17				12.31.16
Balances at the BCRA
Argentine Central Bank (BCRA) – checking account not restricted			66,734,020				28,091,018				31,230,217
Argentine Central Bank (BCRA) – special guarantee accounts - restricted (Note 11)			1,717,920				977,566				914,587
Argentine Central Bank (BCRA) – special retirement and pension accounts – restricted (Note 40)			206,364				—				—
			68,658,304				29,068,584				32,144,804
Treasury Bonds in pesos at fixed rate due November 2020			6,056,250				—				—
Liquidity Bills – B.C.R.A.			17,421,132				—				—
TOTAL			92,135,686				29,068,584				32,144,804

41.2 Minimum capital requirements

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

 

		09.30.18				09.30.17
Credit risk			16,880,435				10,589,694
Operational risk			3,057,896				2,259,356
Market risk			171,996				316,024
Breach of other technical ratios			814,296				—
Pay-in			31,826,433				23,955,563
Excess			10,901,810				10,790,489

 

42.	Initial implementation of the financial reporting framework established 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 financial statements for this fiscal year.

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a) Reconciliations of equity

 

		Reference				12.31.17				09.30.17				12.31.16
Equity as per the previous financial statements							26,056,548				24,638,812				16,460,035
Adjustments due to initial implementation of the financial reporting framework set forth by the BCRA
Deemed cost of Real Property			(a)				4,721,093				4,740,292				4,788,955
Effective rate of Loans			(b)				(316,269	)			(261,198	)			(559,072	)
Rate below market rate			(c)				(3,116	)			—				—
Fair value of government and private securities			(d)				(24,587	)			(14,193	)			(31,439	)
Fair value of derivatives			(e)				(37,337	)			(37,188	)			(34,122	)
Equity method for subsidiaries, associates and joint ventures			(f)				240,464				321,103				275,577
Assets and Liabilities for contracts with customers			(g)				(131,840	)			(126,202	)			(138,665	)
Goodwill			(h)				360				270				—
Deferred income tax			(i)				(421,099	)			(744,718	)			(937,293	)
Financial guarantee contracts			(j)				(5,454	)			(5,393	)			(3,425	)
Actions for the protection of constitutional rights (Amparos)			(k)				(2,429	)			(2,278	)			(2,129	)
Shareholders’ equity pursuant to the new financial reporting framework set forth by the BCRA							30,076,334				28,509,307				19,818,422

b) Reconciliations of Income/(Loss)

 

		Reference				Quarter from 07.01.17 to 09.30.17				Accumulated as of 09.30.17
Income as per the previous financial statements							1,134,580				2,457,355
Adjustments due to initial implementation of the financial reporting framework set forth by BCRA
Depreciation/Impairment of Real Property			(a)				(1,585	)			(48,663	)
Effective rate of Loans			(b)				63,369				297,874
Fair value of government and private securities			(d)				111,190				208,712
Fair value of derivatives			(e)				(44,396	)			(3,066	)
Equity method for associates and joint ventures			(f)				13,867				43,816
Assets and Liabilities for contracts with customers			(g	)			31,191				12,463
Goodwill			(h)				90				270
Deferred income tax			(i)				74,106				124,708
Financial guarantee contracts			(j)				(851	)			(1,968	)
Actions for the protection of constitutional rights (Amparos)			(k)				(75	)			(149	)
Prepaid medical plan service			(l)				—				2,698
Net income pursuant to the new financial reporting framework set forth by the BCRA							1,381,486				3,094,050

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Other comprehensive income
Fair value of government and private securities					(86,439	)			(191,466	)
Equity method for associates and joint ventures					7,485				1,710
Deferred income tax					38,945				66,923
Post-employment defined benefits plans					—				(1,754	)
Other Comprehensive Income pursuant to the new financial reporting framework set forth by the BCRA					(40,009	)			(124,587	)
Total comprehensive income pursuant to the new financial reporting framework set forth by the BCRA					1,341,477				2,969,463

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Reference		Account
(a)		The Entity 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 financial liabilities valued at amortized cost the Entity 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 Entity’s loan 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 Entity. 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 Entity 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 Entity 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 Entity satisfies the performance obligations identified in the contract.
(h)		Pursuant to the previous accounting standards, the Entity 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 Entity 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)		Guarantees 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 accrues according to the criteria and scope of IFRS 15.
(k)		In those cases where the Entity has paid amounts relating to actions for the protection of constitutional rights (Amparos) filed by its customers for government securities and quotas of Common Funds under the custody of the Entity, such amounts were capitalized by blocking the custody account of the depositor. Paragraph 21 of IAS 37 Provisions, Contingent Liabilities and Contingent Assets sets forth that contingent assets should not be recognized in the financial statements.
(l)		The Entity reclassified income for defined benefit plans to other comprehensive income, as set forth in IFRS 19 Employee benefits.

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c) Significant adjustments to the Cash Flow are detailed below:

 

Cash and cash equivalents		Previous accounting framework 12.31.17				Adjustments				IFRS accounting framework 12.31.17
Cash			7,977,088				—				7,977,088
Argentine Central Bank (BCRA)			28,091,018				1,314,404				29,405,422
Financial institutions and correspondents			1,523,168				(726,171	)			796,997
Local interfinancial loans			3,132,000				(3,132,000	)			—
Total			40,723,274				(2,543,767	)			38,179,507
Cash and cash equivalents		Previous accounting framework 09.30.17				Adjustments				IFRS accounting framework 09.30.17
Cash			6,156,460				—				6,156,460
Argentine Central Bank (BCRA)			17,065,686				3,474,304				20,539,990
Financial institutions and correspondents			4,570,064				(3,608,478	)			961,586
Local interfinancial loans			1,340,700				(1,340,700	)			—
Total			29,132,910				(1,474,874	)			27,658,036
Cash and cash equivalents		Previous accounting framework 12.31.16				Adjustments				IFRS accounting framework 12.31.16
Cash			14,176,412				—				14,176,412
Argentine Central Bank (BCRA)			31,230,217				—				31,230,217
Financial institutions and correspondents			2,664,369				(41,138	)			2,623,231
Local interfinancial loans			1,705,000				(1,705,000	)			—
Total			49,775,998				(1,746,138	)			48,029,860

Under the previous reporting framework, Cash and due from banks and investments with high liquidity with an original maturity of three months or less were deemed cash and cash equivalents. Under the reporting framework based on the IFRS, Cash and deposits in banks, which include foreign currency purchases and sales to be settled with an original maturity of three months or less are deemed cash and cash equivalents.

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.

 

43.	Accounting principles – Explanation added for translation into English

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

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

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

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EXHIBIT A

DETAIL OF GOVERNMENT AND PRIVATE SECURITIES

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

						HOLDING																POSITION
Account		Identification				Fair Value				Fair value level				Book balance 09-30-18				Book balance 12-31-17				Position with no options				Options				Final position
SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Local:
Government Securities - In pesos
Secured Bond, Maturity 2020			2423				67,320				2				67,320				—				67,320				—				67,320
Province of Rio Negro debt security, variable rate, Maturity 2021			42016				50,477				3				50,477				—				50,477				—				50,477
Argentine Treasury Bond in pesos, fixed rate, Maturity 2021			5318				32,770				2				32,770				19,776				32,770				—				32,770
Federal Government Bond in pesos adjusted by CER, Maturity 03-06-23			5324				28,080				2				28,080				—				28,080				—				28,080
Treasury Bills in pesos, Maturity 11-30-18			5259				20,150				1				20,150				—				20,150				—				20,150
Argentine Treasury Bond in pesos, fixed rate, Maturity 2026			5320				18,344				2				18,344				53,748				18,344				—				18,344
Treasury Bills in pesos, Maturity 09-30-19			5266				2,653				2				2,653				—				2,653				—				2,653
Treasury Bills in pesos, Maturity 03-29-19			5260				439				2				439				—				439				—				439
Federal Government Bond in pesos BADLAR private + 200 Pbs, Maturity 2022			5480				—				2				—				471,717				—				—				—
Argentine Treasury Bond in pesos, fixed rate, Maturity 09-19-2018			5317				—				2				—				138,271				—				—				—
Other							727								727				6,657				727				—				727
Subtotal Government Securities - In pesos							220,960								220,960				690,169				220,960				—				220,960
Government Securities - In foreign currency
Treasury Bills in USD, Maturity 10-12-18			5231				138				2				138				—				138				—				138
Treasury Bills in USD, Maturity 01-11-19			5248				40				2				40				—				40				—				40
Treasury Bills in USD, Maturity 11-30-18			5226				26				2				26				—				26				—				26
Treasury Bills in USD, Maturity 11-16-18			5241				5				1				5				—				5				—				5
Treasury Bills in USD, Maturity 04-27-18 (375D)			5216				—				2				—				385,645				—				—				—
Treasury Bills in USD, Maturity 04-27-18 (360D)			5217				—				2				—				305,651				—				—				—
Treasury Bills in USD, Maturity 08-24-18			5222				—				2				—				3,748				—				—				—
Treasury Bills in USD, Maturity 10-26-18			5240				—				2				—				388				—				—				—
Other							1,094								1,094				1,689				1,094				—				1,094
Subtotal Government Securities - In Foreign Currency							1,303								1,303				697,121				1,303				—				1,303
BCRA Bills
BCRA Bills, internal segment in pesos, Maturity 10-17-18			46831				97,952				1				97,952				—				97,952				—				97952
BCRA Bills, internal segment in pesos, Maturity 11-21-18			46832				9				1				9				—				9				—				9
BCRA Bills, internal segment in pesos, Maturity 02-21-18			46822				—				2				—				1,678,068				—				—				—
BCRA Bills, internal segment in pesos, Maturity 06-21-18			46827				—				2				—				1,158,375				—				—				—
BCRA Bills, internal segment in pesos, Maturity 05-16-18			46825				—				2				—				482,766				—				—				—
BCRA Bills, internal segment in pesos, Maturity 04-18-18			46824				—				2				—				418,317				—				—				—
BCRA Bills, internal segment in pesos, Maturity 03-21-18			46823				—				2				—				167,026				—				—				—
BCRA Bills, internal segment in pesos, Maturity 09-19-18			46830				—				2				—				126,998				—				—				—
BCRA Bills, internal segment in pesos, Maturity 07-18-18			46828				—				1				—				72,983				—				—				—
Other							—								—				146,655				—				—				—
Subtotal BCRA Bills							97,961								97,961				4,251,188				97,961				—				97,961
Private Securities
Corporate Bond Banco de Galicia y Bs. As. Class II			53478				49,250				3				49,250				—				49,250				—				49,250
Corporate Bond Banco Santander Rio S.A. Class XXIII			53448				44,800				3				44,800				—				44,800				—				44,800
Corporate Bond YPF S.A. Class XVII			38562				18,070				3				18,070				16,048				18,070				—				18,070
Corporate Bond Banco de la Provincia de Bs. As. Class IV			32890				17,552				3				17,552				21,035				17,552				—				17,552
Corporate Bond YPF S.A. Class XXXV			39792				8,982				3				8,982				18,775				8,982				—				8,982
Corporate Bond Rombo Cia Financiera S.A. Class 42			53238				5,178				3				5,178				—				5,178				—				5,178
Corporate Bond Rombo Cia Financiera S.A. Class 40			52940				4,893				3				4,893				—				4,893				—				4,893
Corporate Bond Rombo Cia Financiera S.A. Class 36			52186				4,084				3				4,084				4,179				4,084				—				4,084
Corporate Bond Banco de Galicia y Bs. As. Maturity 05-18-20			52450				—				3				—				—				—				—				—
Corporate Bond Banco de la Provincia de Bs. As. Class III			32889				—				3				—				68,267				—				—				—
Other							—								—				5,790				—				—				—
Subtotal Private Securities							152,809								152,809				134,094				152,809				—				152,809
TOTAL DEBT SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS							473,033								473,033				5,772,572				473,033				—				473,033

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EXHIBIT A

(Continued)

DETAIL OF GOVERNMENT AND PRIVATE SECURITIES

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

						HOLDING																POSITION
Account		Identification				Fair Value				Fair value level				Book balance as of 09-30-18				Book balance as of 12-31-17				Position without options				Options				Final position
OTHER DEBT SECURITIES
MEASURED AT FAIR VALUE THROUGH OCI
Local:
Government Securities - In pesos
Argentine Treasury Bond in pesos at fixed rate, Maturity November 2020			5330				6,056,250				2				6,056,250				—				6,056,250				—				6,056,250
Argentine Treasury Bond adjusted by CER, Maturity 2021			5315				96,657				1				96,657				64,598				96,657				—				96,657
Secured Bond Maturity 2020			2423				—				2				—				1,469,473				—				—				—
Subtotal Government Securities - In pesos							6,152,907								6,152,907				1,534,071				6,152,907				—				6,152,907
Government Securities - In foreign currency
Treasury Bills in USD, Maturity 11-30-18			5226				2,486,859				2				2,486,859				—				2,486,859				—				2,486,859
Treasury Bills in USD, Maturity 11-16-18			5241				1,315,508				1				1,315,508				826,467				2,432,668				—				2,432,668
Treasury Bills in USD, Maturity 02-08-2019			5250				693,014				2				693,014				—				1,892,596				—				1,892,596
Treasury Bills in USD, Maturity 10-12-18			5231				863,069				2				863,069				395,258				863,069				—				863,069
Treasury Bills in USD, Maturity 03-15-19			5261				743,842				2				743,842				—				743,842				—				743,842
Federal Government Bond in Dual Currency, Maturity 02-13-20			5486				500,500				2				500,500				—				500,500				—				500,500
Treasury Bills in USD, Maturity 12-14-18			5229				495,004				2				495,004				243,498				495,004				—				495,004
Treasury Bills in USD, Maturity 10-26-18			5240				101,927				2				101,927				—				101,927				—				101,927
Treasury Bills in USD, Maturity 02-23-18			5234				—				2				—				1,500,077				—				—				—
Treasury Bills in USD, Maturity 03-16-18			5235				—				2				—				546,837				—				—				—
Other							—								—				534,093				—				—				—
Subtotal Government Securities - In foreign Currency							7,199,723								7,199,723				4,046,230				9,516,465				—				9,516,465
BCRA Bills
BCRA Liquidity Bills in pesos, Maturity 10-04-18			13254				9,704,685				2				9,704,685				—				9,704,685				—				9,704,685
BCRA Liquidity Bills in pesos, Maturity 10-05-18			13255				4,740,903				2				4,740,903				—				4,740,903				—				4,740,903
BCRA Liquidity Bills in pesos, Maturity 10-03-18			13253				2,975,544				2				2,975,544				—				2,975,544				—				2,975,544
BCRA Bills internal segment in pesos, Maturity 09-19-18			46830				—				2				—				422,503				—				—				—
BCRA Bills internal segment in pesos, Maturity 06-21-18			46827				—				2				—				1,805,368				—				—				—
BCRA Bills internal segment in pesos, Maturity 05-16-18			46825				—				2				—				2,376,688				—				—				—
BCRA Bills internal segment in pesos, Maturity 01-17-18			46821				—				2				—				5,932,590				—				—				—
Other							—								—				22,209				—				—				—
Subtotal BCRA Bills							17,421,132								17,421,132				10,559,358				17,421,132				—				17,421,132
Private Securities - In Pesos
Corporate Bond YPF S.A. Class XLIV			51096				100,375				3				100,375				103,341				100,375				—				100,375
Private Securities - In foreign currency
Corporate Bond John Deeree Credit Cia. Financiera S.A. Class XII			51620				110,202				3				110,202				57,249				110,202				—				110,202
Subtotal Private Securities							210,577								210,577				160,590				210,577				—				210,577
Subtotal Measured at Fair Value through OCI							30,984,339								30,984,339				16,300,249				33,301,081				—				33,301,081
MEASURED AT AMORTIZED COST
Private Securities - In Pesos
Corporate Bond EXO. S.A.							190				3				190				190				190				—				190
TOTAL OTHER DEBT SECURITIES							30,984,529								30,984,529				16,300,439				33,301,271				—				33,301,271
EQUITY INSTRUMENTS
Local:
Private Securities - In Pesos
Other							225				3				225				1,909				225				—				225
Foreign:
Private Securities - In foreign currency
Other							10,807				3				10,807				4,961				10,807				—				10,807
TOTAL EQUITY INSTRUMENTS							11,032								11,032				6,870				11,032				—				11,032

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		- 93 -

 

EXHIBIT B

CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO PERFORMANCE

AND GUARANTEES RECEIVED

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

		09.30.18				12.31.17
COMMERCIAL PORTFOLIO
Normal performance			109,082,519				74,979,005
Preferred collaterals and counter guarantees “A”			2,420,255				1,429,483
Preferred collaterals and counter guarantees “B”			1,340,743				1,262,556
No preferred collateral or counter guarantees			105,321,521				72,286,966
With special follow-up			1,512,355				34,601
Under observation			1,512,355				34,601
Preferred collaterals and counter guarantees “B”			3,970				8,570
No preferred collateral or counter guarantees			1,508,385				26,031
Troubled			103,701				55,393
Preferred collaterals and counter guarantees “B”			3,446				—
No preferred collateral or counter guarantees			100,255				55,393
With high insolvency risk			238,879				58,410
Preferred collaterals and counter guarantees “B”			8,627				9,895
No preferred collateral or counter guarantees			230,252				48,515
Uncollectible			12,527				7,040
No preferred collaterals and counter guarantees			12,527				7,040
TOTAL			110,949,981				75,134,449

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EXHIBIT B

(Continued)

CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO PERFORMANCE

AND GUARANTEES RECEIVED

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

		09.30.18				12.31.17
CONSUMER AND HOUSING PORTFOLIO
Normal performance			70,786,914				54,359,057
Preferred collaterals and counter guarantees “A”			9,375				11,517
Preferred collaterals and counter guarantees “B”			6,695,439				2,620,981
No preferred collaterals and counter guarantees			64,082,100				51,726,559
Low risk			964,062				519,727
Preferred collaterals and counter guarantees “B”			37,518				35,935
No preferred collaterals and counter guarantees			926,544				483,792
Medium risk			908,102				480,012
Preferred collaterals and counter guarantees “B”			13,088				9,551
No preferred collaterals and counter guarantees			895,014				470,461
High risk			547,570				259,798
Preferred collaterals and counter guarantees “A”			51				—
Preferred collaterals and counter guarantees “B”			22,959				20,932
No preferred collaterals and counter guarantees			524,560				238,866
Uncollectible			49,252				36,685
Preferred collaterals and counter guarantees “A”			15				—
Preferred collaterals and counter guarantees “B”			8,148				6,784
No preferred collaterals and counter guarantees			41,089				29,901
Uncollectible for technical reasons			—				2
No preferred collaterals and counter guarantees			—				2
TOTAL			73,255,900				55,655,281
TOTAL GENERAL			184,205,881				130,789,730

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		- 95 -		EXHIBIT C

 

CONCENTRATION OF LOANS AND OTHER FINANCING

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

		09.30.18								12.31.17
Number of customers		Debt balance				% over total portfolio				Debt balance				% over total portfolio
10 largest customers			25,876,809				14.05	%			16,002,640				12.24	%
50 following largest customers			33,607,244				18.24	%			21,441,157				16.39	%
100 following largest customers			18,848,647				10.23	%			10,907,665				8.34	%
All other customers			105,873,181				57.48	%			82,438,268				63.03	%
TOTAL			184,205,881				100.00	%			130,789,730				100.00	%

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		- 96 -

 

EXHIBIT D

BREAKDOWN PER TERM OF LOANS AND OTHER FINANCING

AS OF SEPTEMBER 30, 2018

(stated in thousands of pesos) (1)

 

						Terms remaining to maturity
ITEM		Portfolio due				1 month				3 months				6 months				12 months				24 months				more than 24 months				TOTAL
Non-financial government secto			—				177				—				—				—				—				—				177
Argentine Central Bank (BCRA			—				1				—				—				—				—				—				1
Financial sector			—				2,985,803				2,487,897				1,004,346				1,463,266				1,351,681				1,177,942				10,470,935
Non-financial private sector and residents abroad			907,493				68,240,900				23,807,859				24,468,540				17,746,549				19,693,352				39,816,039				194,680,732
TOTAL			907,493				71,226,881				26,295,756				25,472,886				19,209,815				21,045,033				40,993,981				205,151,845

 

(1)	Balances hereof are total contractual flows and, therefore, include principal, interest and accrued and to be accrued accesories.

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EXHIBIT H

DEPOSITS CONCENTRATION

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

		09.30.18								12.31.17
Number of customers		Debt balance				% over total portfolio				Debt balance				% over total portfolio
10 largest customers			17,144,324				6.93	%			5,616,361				3.65	%
50 following largest customers			20,199,867				8.16	%			8,597,760				5.58	%
100 following largest customers			12,992,446				5.25	%			6,168,839				4.01	%
All other customers			197,141,244				79.66	%			133,579,773				86.76	%
TOTAL			247,477,881				100.00	%			153,962,733				100.00	%

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EXHIBIT I

BREAKDOWN OF FINANCIAL LIABILITIES PER REMAINING TERMS

AS OF SEPTEMBER 30, 2018

(stated in thousands of pesos) (1)

 

		Terms remaining to maturity
ITEMS		1 month				3 months				6 months				12 months				24 months				more than 24 months				TOTAL
Deposits			227,597,246				17,006,125				5,631,554				977,529				28,621				670				251,241,745
Non-financial government sector			2,024,578				23,859				—				65				—				—				2,048,502
Financial sector			196,891				—				—				—				—				—				196,891
Non-financial private sector and residents abroad			225,375,777				16,982,266				5,631,554				977,464				28,621				670				248,996,352
Liabilities at fair value through profit or loss			1,345,749				—				—				—				—				—				1,345,749
Derivative instruments			4,431,577				—				—				—				—				—				4,431,577
Other financial liabilities			19,728,791				172,661				232,227				449,144				892,466				198,599				21,673,888
Financing received from the BCRA and other financial institutions			277,654				2,497,271				2,815,977				—				187,725				—				5,778,627
Corporate bonds issued			51,233				355,092				184,523				661,547				1,079,614				611,482				2,943,491
TOTAL			253,432,250				20,031,149				8,864,281				2,088,220				2,188,426				810,751				287,415,077

 

(1)	Balances hereof are total contractual flows and, therefore, include principal, interest and accrued and to be accrued accesories.

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EXHIBIT J

PROVISIONS

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 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 09.30.18				Balances as of 12.31.17
OF LIABILITIES
- Provisions for potential commitments			1,117				773	(1)			458				—				1,432				1,117
- For administrative, disciplinary and criminal penalties			5,000				—				—				—				5,000				5,000
- Provisions for post-employment defined benefits plans			48,173				7,144	(2)			—				—				55,317				48,173
- Other			2,037,769				1,422,408	(3)			5				91,176				3,368,996				2,037,769
TOTAL PROVISIONS			2,092,059				1,430,325				463				91,176				3,430,745				2,092,059

 

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

(2)	Set up to cover contingences referred to prepaid medical services.

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

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		- 100 -

 

EXHIBIT L

BALANCES IN FOREIGN CURRENCY

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(stated in thousands of pesos)

 

		TOTAL AS OF 09.30.18				AS OF 09.30.18 (per currency)																TOTAL AS OF 12.31.17
						Dollar				Euro				Real				Other
ASSETS
Cash and Deposits in Banks			49,920,771				47,597,773				2,261,853				18,632				42,513				21,258,981
Debt securities at fair value through profit or loss			1,303				1,303				—				—				—				697,121
Repo transactions			8,249,233				8,249,233				—				—				—				4,372,912
Other financial assets			630,847				625,042				5,805				—				—				114,932
Loans and other financing			62,109,698				61,843,700				265,998				—				—				28,183,009
Non-financial government sector			22				22				—				—				—				62
Argentine Central Bank (BCRA)			1				1				—				—				—				—
Other financial institutions			133,989				133,989								—				—				93,156
Non-financial private sector and residents abroad			61,975,686				61,709,688				265,998				—				—				28,089,791
Other Debt Securities			7,308,823				7,308,823				—				—				—				4,102,722
Financial assets pledged as collateral			3,988,688				3,988,688				—				—				—				766,844
Investments in Equity Instruments			10,807				10,807				—				—				—				4,961
TOTAL ASSETS			132,220,170				129,625,369				2,533,656				18,632				42,513				59,501,482
LIABILITIES
Deposits			115,780,018				113,915,327				1,864,691				—				—				54,349,370
Non-financial government sector			471,294				465,829				5,465				—				—				101,861
Financial sector			95,859				93,816				2,043				—				—				55,867
Non-financial private sector and residents abroad			115,212,865				113,355,683				1,857,182				—				—				54,191,642
Liabilities at fair value through profit or loss			814,658				814,658				—				—				—				—
Other financial liabilities			6,145,494				5,849,981				282,808				—				12,705				2,139,909
Financing received from the BCRA and other financial institutions			5,625,720				5,361,270				264,450				—				—				298,578
Other non-financial liabilities			534,206				524,140				10,066				—				—				335,829
TOTAL LIABILITIES			128,900,096				126,465,376				2,422,015				—				12,705				57,123,686

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		- 101 -

 

EXHIBIT O

DERIVATIVES

AS OF SEPTEMBER 30, 2018

(stated in thousands of pesos)

 

Type of Contract		Purpose of the transactions		Underlying Assets		Type of Settlement		Scope of Negotiation or Counterparty		Weighted Average Term Originally Agreed				Residual Weighted Average Term				Weighted Average Term for Settlement of Differences				Amount
SWAPS		Financial transactions own account		—		At maturity for differences		RESIDENTS IN THE COUNTRY FINANCIAL SECTOR			28				14				47				3,844,481
SWAPS		Interest rate hedging		—		At maturity for differences		RESIDENTS IN THE COUNTRY NON- FINANCIAL SECTOR			122				12				6				13,181
REPO TRANSACTIONS		Financial transactions own account		Other		At maturity for differences		RESIDENTS IN THE COUNTRY FINANCIAL SECTOR			1				1				3				1,222,951
REPO TRANSACTIONS		Financial transactions own account		Argentine Government Securities		At maturity for differences		RESIDENTS IN THE COUNTRY FINANCIAL SECTOR			1				1				4				227,111
REPO TRANSACTIONS		Financial transactions own account		Argentine Government Securities		At maturity for differences		RESIDENTS IN THE COUNTRY NON- FINANCIAL SECTOR			6				1				184				18,127,121
FUTURES		Financial transactions own account		Foreign Currency		Daily differences		ROFEX			4				2				1				31,349,461
FUTURES		Financial transactions own account		Foreign Currency		Daily differences		RESIDENTS IN THE COUNTRY FINANCIAL SECTOR			4				2				1				14,263,860
FUTURES		Financial transactions own account		Foreign Currency		At maturity for differences		RESIDENTS ABROAD FINANCIAL SECTOR			1				1				29				212,769
FUTURES		Financial transactions own account		Foreign Currency		At maturity for differences		RESIDENTS IN THE COUNTRY NON- FINANCIAL SECTOR			5				3				160				19,567,749

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EXHIBIT R

ADJUSTMENT OF VALUES FOR LOSSES - ALLOWANCES FOR LOAN LOSSES

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 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 09.30.18				Balances as of 12.31.17
Other financial assets			57,566				15,045	(1)			2,594				1,340				68,677				57,566
Loans and other financing			2,277,351				2,723,719	(1)			69,142				931,010				4,000,918				2,277,351
Other financial institutions			78,521				72,231				60,546				—				90,206				78,521
Non-financial private sector and residents abroad			2,198,830				2,651,488				8,596				931,010				3,910,712				2,198,830
Overdrafts			79,099				67,817				—				64,653				82,263				79,099
Discounted instruments			376,589				648,397				—				1,609				1,023,377				376,589
Real estate mortgage			38,924				44,555				—				79				83,400				38,924
Collateral loans			55,288				7,176				—				8,700				53,764				55,288
Consumer loans			473,853				513,748				—				230,467				757,134				473,853
Credit cards			805,049				996,417				—				447,121				1,354,345				805,049
Financial leases			34,705				21,890				—				6,645				49,950				34,705
Other			335,323				351,488				8,596				171,736				506,479				335,323
Private Securities			1,605				737	(2)			—				—				2,342				1,605
Occasional commitments			1,117				773				458				—				1,432				1,117
TOTAL ALLOWANCES			2,337,639				2,740,274	(3)			72,194				932,350				4,073,369				2,337,639

 

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

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

(3)	Includes total exchange rate difference of:

 

- Other financial assets			12,324
- Loans and other financing			389,413
- Private securities			635

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		KPMG Bouchard 710 - 1° piso - C1106ABL Buenos Aires, Argentina		Telephone+54 11 4316 5700 Fax +54 (11) 4316 5800 Internet.... www.kpmg.com.ar

REPORT ON THE REVIEW OF THE CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS

To the President and Directors of

BBVA Banco Francés S.A.

Legal address: Av. Córdoba 111

City of Buenos Aires

Taxpayer Identification Number (C.U.I.T.): 30-50000319-3

Report on Interim Financial Statements

We have reviewed the attached condensed separate interim financial statements of BBVA BancoFrancés S.A. (the “Entity”), which comprise the statement of financial position as at September 30, 2018, the statements of income, other comprehensive income, changes in shareholders’ equity and cash flows for the nine-month period ended as of that date, exhibits and the selected explanatory notes.

The balances and other information corresponding to the fiscal year 2017 and interim periods are an integral part of the aforementioned financial statements and should therefore be considered in relation to those financial statements.

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 financial reporting framework established by the Argentine Central Bank (“BCRA”), which, as described in Note 2 to the attached financial statements, are based on the International Financial Reporting Standards (“IFRS”) and specifically on International Accounting Standard No. 34, “Interim Financial Reporting” (IAS 34), as issued by the International Accounting Standards Board (“IASB”) and adopted by the Argentine Federation of Professional Councils of Economic Sciences (“FACPCE”), with the exception in the application of section 5.5 “Impairment” of IFRS 9 “Financial instruments”, which was temporarily excluded by the BCRA from the accounting framework applicable to financial institutions and, in turn, taking into consideration the standards prescribed through Memorandum No. 6/2017 issued by the regulator on May 29, 2017 regarding the accounting treatment to be applied to uncertain tax positions. Besides, given the effectiveness of Communication “A” 3921 issued by the BCRA, the Entity has not applied International Accounting Standard 29 “Financial reporting in Hyperinflationary Economies” (IAS 29) for the preparation of these financial statements. 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.

Scope of the Review

Our responsibility is to express a conclusion on the accompanying condensed separate interim financial statements based on our review. We conducted our review in accordance with the standards 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 other review procedures on the accounting information included in the interim financial statements and making inquiries to persons responsible for financial and accounting matters. It is substantiallyless in scope than an audit conducted in accordance with auditing standards in force, 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 on the separate financial statements of interim period condensed attached.

KPMG, una sociedad argentina y firma miembro de la red de firmas miembro independientes de KPMG afiliadas a

KPMG International Cooperative (“KPMG International”), una entidad suiza. Derechos reservados.

 

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Conclusion

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

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 financial statements:

 

a)

as mentioned in Note 2 to the accompanying financial statements, they have been prepared by the Entity’s Board of Directors and Management pursuant to the financial reporting framework established by the BCRA, which differs from IFRS in relation with the application of Section 5.5 “Impairment” of IFRS 9 “Financial Instruments” that was temporarily excluded by the BCRA from the accounting framework applicable to financial institutions and considering, in turn, the standards prescribed through Memorandum No. 6/2017 issued by the regulator on May 29, 2017 regarding the treatment to be applied to uncertain tax positions,

 

b)

as mentioned in Note 2 to the accompanying financial statements, given the effectiveness of Communication “A” 3921 of the BCRA, the Entity has not applied International Accounting Standard 29 (IAS 29) “Financial reporting in Hyperinflationary Economies” for the preparation of the accompanying financial statements.

As of the date of this report, the Entity is in the process of quantifying the effect that the application of IAS 29 would have, as mentioned in section b) above. The issues indicated in paragraphs a) and b) above do not modify the conclusion expressed in the previous paragraph but must be taken into account by those users who use IFRS for the interpretation of the attached financial statements,

 

c)

as mentioned in Note 3 to the accompanying financial statements, they refer to an interim period in the first fiscal year in which the Entity applies the new financial reporting framework established by the BCRA. The effects of the changes caused by the application of this new accounting framework are presented in note 42 to the accompanying financial statements. The items and figures, contained in the reconciliations included in these note, are subject to changes that may occur as a result of changes in IFRS that are finally applied and can only be considered final when preparing the annual financial statements for the current fiscal year. This issue does not modify the conclusion expressed in the previous section.

Other matters

Regarding the amounts and other information for the fiscal year ended December 31, 2016, date of transition to the new financial reporting framework 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 financial reporting framework established by the BCRA, which we have audited and, in our opinion, are appropriate and have been prepared according to the new financial reporting framework established by the BCRA.

City of Buenos Aires, November 22, 2018.

KPMG

María Gabriela Saavedra

Partner

 

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INFORMATION REPORT FOR

THE PERIOD ENDED

SEPTEMBER 30, 2018

(Consolidated, stated in thousands of pesos)

On December 12, 2016, the BCRA set forth the application of International Financial Reporting Standards (IFRS) for fiscal years beginning on or after January 1, 2018 with a temporary exception for Section 5.5 - “Impairment”, in IFRS 9 and considering, in turn, the accounting standards set forth by that Regulatory Authority through Memorandum No. 6/2017 regarding the criterion to be applied in recognizing uncertain tax provisions. Besides, in the particular case of International Accounting Standard (IAS) No. 29, due to the effectiveness of Decree No. 664/2003 and Communication “A” 3921 of the BCRA which prohibit the presentation of information adjusted for inflation, the Entity has not quantified the effects that the application thereof would have (“New financial reporting framework set forth by the BCRA”). As a consequence of the application of those standards, BBVA Francés presents its financial statements prepared pursuant to the new financial reporting framework set forth by the BCRA as of September 30, 2018, December 2017 and September 30, 2017.

As of September 30, 2018 assets amounted to 333,982,353, liabilities amounted to 298,254,138 and shareholders’ equity amounted to 35,728,215.

On September 25, 2018, BBVA Francés ceased to have control over Volkswagen Financial Services Compañía Financiera S.A. (VWFS) due to the termination of the two-year term committed by the Bank to provide financing to the company if it would fail to diversify its sources of funding. According to International Financing Reporting Standard (IFRS) No. 11 “Joint Arrangements”, VWFS qualifies as a joint arrangement and, as such, it has been deconsolidated since such date.

The Entity offers its products and services through a wide multi-channel distribution network with presence in all the provinces in Argentina and the City of Buenos Aires, with more than 2.8 million customers as of September 30, 2018. That network includes 251 branches providing services for the retail segment and also to small and medium enterprises and organizations. Corporate Banking is divided by industry sector: Consumers, Heavy Industries and Energy, providing customized services for large companies. To supplement the distribution network, the Entity has 15 in-company banks, one point of sales, two points of Express attention, 820 ATMs and 823 self-service terminals.

Also, it has a telephone banking service, a modern, safe and functional Internet banking platform, a mobile banking app and a total of 6,250 employees as of September 30, 2018.

The private loans portfolio totaled 178,638,385 million pesos as of September 30, 2018, reflecting an increase by 61.5% as compared to the same period of the previous year, which allowed the Bank to win 14 basis points of the market share, reaching 8.4% as of the end of the nine-month period.

The growth of the loans portfolio was backed by the growth in the mortgage loans and personal loans portfolios, which recorded an increase by 188.1% and 56% as compared to September 2017, respectively, while the credit cards and collateral loans business continued to strengthen, increasing in consumer market share. Collateral loans has dropped during the period mainly due to the effect generated by the deconsolidation of Volkswagen Compañía Financiera.

Besides, commercial loans also dropped compared to the same period of 2017.

In terms of portfolio quality, the Entity has managed to maintain very good ratios. The irregular portfolio ratio (Financings with irregular compliance/total financing) was 1.01%, with a coverage level (total allowances/irregular compliance financing) of 215.1% as of September 30, 2018.

The total exposure for securities and loans to the Government Sector totaled 41,100,009 pesos at year end, including repos both with the BCRA and Argentina, the latter for USD 250 million.

 

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Information not Covered by the Review Report.

In terms of liabilities, customers’ resources totaled 247,227,968, with an increase by 90.5% over the last twelve months.

The market share of deposits to the private sector increased to 24 basis points, and reached 8.4% as of September 30, 2018.

Breakdown of changes in the main income/loss items:

BBVA Francés recorded an accumulated profit as of September 30, 2018 of 6,767,534, representing a return on average liabilities of 2.9% and a return on average assets of 2.5%.

Net financial income totaled 17,666,487, with a 69.7% growth as compared with the same period of the previous year, mainly driven by the growth of the activity and better spreads.

Net income from services totaled 3,291,728, a 70.7% increase compared with the same period for the previous year. This increase is due to both the increase in activity and the rise in prices and commissions from credit and debit cards, which is reflected in the increase of the consumption quota.

Administrative expenses and personnel benefits totaled 11,371,779, a 31.4% growth in relation to those recorded for September 2017. The increase in personnel expenses is mainly a consequence of salary increases agreed with the union. The remaining expenses grow due to the increased volume of activity, the general increase in prices, currency depreciation and increase in utility rates.

Outlook

BBVA Francés will continue to strengthen its strategy based on the growth and transformation for the purpose of leading a more efficient financial system and with a tendency towards consolidation and offering a better experience to customers through a change in banking.

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

Likewise, in a context that has turned out to be more complex, focus will be made on funding, mainly retail, so as to reach a higher efficiency in the mix and developing more relevant liabilities for the purpose of sustaining credit growth.

 

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Information not covered by the Review Report.

CONSOLIDATED BALANCE SHEET STRUCTURE

COMPARATIVE WITH THE SAME PERIODS FOR PREVIOUS YEARS

(Stated in thousands of pesos)

 

		09.30.18 (1)				09.30.17 (1)
Total Assets			333,982,353				185,198,241
Total Liabilities			298,254,138				156,390,868
Parent’s Shareholders’ Equity			35,699,118				28,509,307
Minority interest			29,097				298,066
Total Liabilities + Minority interest + Shareholders’ Equity			333,982,353				185,198,241

 

		09.30.16 (2)				09.30.15 (2)				09.30.14 (2)
Total Assets			130,932,897				92,177,134				74,947,272
Total Liabilities			114,667,119				79,350,232				65,182,951
Minority interest			388,148				298,800				246,802
Shareholders’ Equity			15,877,630				12,528,102				9,517,519
Total Liabilities + Minority interest + Shareholders’ Equity			130,932,897				92,177,134				74,947,272

 

(1)	Pursuant to the valuation and disclosure criteria mentioned in these financial statements.

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

 

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CONSOLIDATED STATEMENT OF INCOME STRUCTURE

COMPARATIVE WITH THE SAME PERIODS FOR PREVIOUS YEARS

(Stated in thousands of pesos)

 

		09.30.18 (1)				09.30.17 (1)
Net interest income			17,666,487				10,411,179
Net commission income			3,291,728				1,928,008
Net income / (loss) from measurement of financial instruments at fair value through profit or loss			(90,424	)			1,855,096
Net income / (loss) from write-down of assets at amortized cost and at fair value through OCI			(54,157	)			6,723
Gold and foreign currency quotation differences			4,329,081				1,372,182
Other operating income			3,655,282				3,253,816
Loan loss provision			(2,363,194	)			(1,395,009	)
Net operating income			26,434,803				17,431,995
Personnel benefits			(6,390,864	)			(4,866,369	)
Administrative expenses			(4,980,915	)			(3,791,092	)
Asset depreciation and impairment			(626,686	)			(468,940	)
Other operating expenses			(5,217,967	)			(4,271,191	)
Operating income			9,218,371				4,034,403
Income from associates and joint ventures			210,212				386,661
Income before income tax from continuing activities			9,428,583				4,421,064
Income before income tax from continuing activities			(2,661,049	)			(1,299,810	)
Income tax from continuing activities			6,767,534				3,121,254
Net income for the period			6,767,534				3,121,254

 

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		09.30.16 (2)				09.30.15 (2)				09.30.14 (2)
Financial income			9,170,396				6,587,358				5,638,654
Loan loss provision			(723,815	)			(439,476	)			(422,340	)
Income from services			3,246,377				2,714,330				2,430,573
Administrative expenses			(6,701,363	)			(4,703,610	)			(4,128,857	)
Net intermediation income			4,991,595				4,158,602				3,518,030
Miscellaneous profits and losses - net			197,514				29,875				196,145
Loss from minority interest			(94,821	)			(96,734	)			(74,407	)
Income tax and minimum presumed income tax			(2,033,021	)			(1,495,517	)			(1,249,629	)
Net income for the period			3,061,267				2,596,226				2,390,139

 

(1)	Pursuant to the valuation and disclosure criteria mentioned in these financial statements.

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

 

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CONSOLIDATED CASH FLOW STRUCTURE COMPARATIVE WITH

THE SAME PERIODS FOR PREVIOUS YEARS

(Stated in thousands of pesos)

 

		09.30.18 (1)				09.30.17 (1)
Net cash generated by / (used in) operating activities			14,893,540				(26,169,374	)
Net cash generated by / (used in) investment activities			758,331				(1,340,552	)
Net cash generated by financing activities			5,281,917				4,685,790
Effect of exchange rate changes			28,722,481				2,382,329
Total cash generated by / (used in) during the period			49,656,269				(20,441,807	)

 

		09.30.16 (2)				09.30.15 (2)				09.30.14 (2)
Net cash generated by operating activities			6,644,503				3,510,633				1,065,138
Net cash used in investment activities			(1,262,832	)			(1,014,942	)			(990,858	)
Net cash used in financing activities			(2,967,873	)			(1,394,829	)			(363,113	)
Total cash generated by / (used in) during the period			2,413,798				1,100,862				(288,833	)

 

(1)	Pursuant to the valuation and disclosure criteria mentioned in these financial statements.

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

 

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STATISTICAL DATA COMPARATIVE WITH THE SAME PERIOD

FOR PREVIOUS YEARS

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

 

		09.30.18 / 17 (1)
Total loans			61.51	%
Total Deposits			90.48	%
Income / (loss)			116.82	%
Shareholders’ Equity			24.02	%

 

		09.30.17 /16 (2)				09.30.16 / 15 (2)				09.30.15 / 14 (2)				09.30.14 / 13 (2)
Total loans			56.86	%			42.45	%			23.22	%			20.56	%
Total Deposits			41.39	%			45.38	%			27.10	%			25.72	%
Income / (loss)			-19.73	%			17.91	%			8.62	%			105.99	%
Shareholders’ Equity			55.18	%			26.74	%			31.63	%			51.26	%

 

(1)	Pursuant to the valuation and disclosure criteria mentioned in these financial statements.

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

 

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COMPARATIVE RATIOS WITH THE SAME PERIODS FOR PREVIOUS YEARS

 

		09.30.18 (1)				09.30.17 (1)
Solvency (1)			11.98	%			18.42	%
Liquidity (2)			48.25	%			37.02	%
Tied-up capital (3)			27.34	%			32.99	%
Indebtedness (4)			8.35				5.43

 

(1)	Total Shareholders’ Equity/Liabilities.

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

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

(4)	Total Liabilities/Shareholders’ Equity.

 

		09.30.16 (2)				09.30.15 (2)				09.30.14 (2)
Solvency (1)			13.80	%			15.73	%			14.55	%
Liquidity (2)			47.29	%			46.82	%			44.63	%
Tied-up capital (3)			2.84	%			2.88	%			2.69	%
Indebtedness (4)			7.25				6.36				6.87

 

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

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

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

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

 

(1)

Pursuant to the valuation and disclosure criteria mentioned in these financial statements.

(2)

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

 

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

 

1.	General matters concerning the Entity’s business

 

a)

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

None.

 

b)

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

The Shareholders’ Meeting held on June 13, 2017 adopted a decision to increase capital stock through the issuance of new book-entry ordinary shares. Refer to Note 29. Stock Capital of the Condensed Consolidated Financial Statements of BBVA Banco Francés S.A.

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

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

 

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

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

 

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

 

Item		Local currency												Foreign currency
In thousands of Pesos		With Interest rate clause				With CER adjustment clause				Without Interest rate clause				With interest rate clause				Without interest rate clause
Financing facilities (net of allowances) Loans and other financing			104,707,643				11,731,519				90,453				62,108,948				—
TOTAL			104,707,643				11,731,519				90,453				62,108,948				—
		Local currency												Foreign currency
Item In thousands of Pesos		With Interest rate clause				With CER adjustment clause				Without Interest rate clause				With interest rate clause				Without interest rate clause				Securities
Deposits and liabilities
Deposits			101,196,335				2,375,373				27,876,242				93,890,309				21,889,709				—
Other liabilities (1)			3,784,286				—				29,450,657				5,658,393				6,678,188				660,882
TOTAL			104,980,621				2,375,373				57,326,899				99,548,702				28,567,897				660,882

 

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

 

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

Refer to Note 44. Subsidiaries and Note 46. Related Parties of the Condensed Consolidated Financial Statements of BBVA Banco Francés S.A.

 

5.	Receivables from sales or loans to directors.

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

 

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

Does not apply.

 

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7.	Ownership interests in other companies in excess of the amount allowed under Section 31 of Law No. 19,550 and corrective measures plan.

None.

 

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

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

 

9.	Insurance covering tangible assets.

 

Assets insured in thousands of Pesos		Risk		Insured Amount				Book value
Monies, checks and other valuables		Fraud, robbery, safety boxes and valuables in transit			5,951,288				18,477,265
Buildings, machines, equipment, furniture, fixtures and works of art		Fire, vandalism and earthquake			21,264,450				9,649,614
Motor vehicles		All kinds of risks and third-party insurance			20,836				13,651
Furniture, electronic equipment used in IT, signage and telephones		Transportation of goods			81,793				—

 

10.	Positive and negative contingencies

 

a)

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

 

-

Refer to Note 15. Income Tax of the Condensed Consolidated Financial Statements.

 

b)

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

None.

 

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

None.

 

12.	Preferred shares cumulative dividends unpaid.

None.

 

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

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

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

				BBVA French Bank S.A.
Date: January 30, 2019				By:		/s/ Ernesto R. Gallardo Jimenez
						Name:   Ernesto R. Gallardo Jimenez
						Title:     Chief Financial Officer