BBVA Argentina - 20-F annual report

As filed with the Securities and Exchange Commission on April 27, 2016 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

FORM 20-F

Commission file number: 001-12568

BBVA BANCO FRANCÉS S.A.

(Exact name of Registrant as specified in its charter)

BBVA FRENCH BANK

(Translation of Registrant’s name into English)

Republic of Argentina

(Jurisdiction of incorporation or organization) 

Reconquista 199 

(C1003ABB) Buenos Aires. Republic of Argentina 

(Address of principal executive offices)

Adrián Bressani – 011-54-11-4346-4286 – abressani@bbva.com– Reconquista 281 3° (C1003ABE) Buenos Aires, Republic of Argentina

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

* The ordinary shares are not listed for trading, but are listed only in connection with the registration of the American Depositary Shares, pursuant to requirements of the New York Stock Exchange.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

The number of outstanding shares of each of the classes of capital or common stock of the registrant
as of the close of the period covered by the annual report:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days:☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☐Yes ☐ No

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☒           Accelerated filer ☐             Non-accelerated filer ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐  Item 17 ☒ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Form 20-F contains words, such as “believe”, “expect”, “estimate”, “intend”, “plan”, “may” and “anticipate” and similar expressions, that identify forward-looking statements, which reflect our views about future events and financial performance. Actual results could differ materially as a result of factors beyond our control, including but not limited to:

Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. BBVA Banco Francés S.A. (“BBVA Francés”) undertakes no obligation to update or revise these forward-looking statements or to publicly release the results of any revisions to these forward-looking statements. The accompanying information in this annual report, including, without limitation, the information under “Item 4. Information on the Company”,“Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk” identifies important factors that could cause material differences between any forward-looking statements and actual results.

PRESENTATION OF FINANCIAL INFORMATION

General

BBVA Francés is an Argentine bank and maintains its financial books and records in Argentine pesos and prepares its Consolidated Financial Statements in conformity with the accounting rules of the Banco Central de la República Argentina (the “Central Bank” or “BCRA”) related thereto (“Argentine Banking GAAP”), which differ in some respects from generally accepted accounting principles in Argentina (see Note 4 to our Consolidated Financial Statements) and the generally accepted accounting principles in the United States (“U.S. GAAP”). See Note 25 to our Consolidated Financial Statements for a description of the principal differences between Argentine Banking GAAP and U.S. GAAP, as they relate to us, and a reconciliation to U.S. GAAP of net income and total stockholders’ equity. In this annual report, references to “$”, “US$” and “dollars” are to United States dollar and references to “Ps.” or “pesos” are to Argentine pesos. Percentages and certain dollar and peso amounts have been rounded for ease of presentation. Unless otherwise stated, all market share and other industry information has been derived from information published by the Central Bank.

By Communication “A” 3921 of the BCRA and General Resolution No. 441/03 of the National Securities Commissionof Argentina (the “CNV”), in compliance with Decree No. 664/03 of the Federal Executive, application of the restatement method on financial statements in equivalent purchasing power has been suspended as from March 1, 2003.

Argentina’s professional accounting standards require applying Technical Pronouncement No. 6 of the Argentine Federation of Professional Councils in Economic Sciences (F.A.C.P.C.E.) (as amended by Technical Resolution No. 19) which sets forth that financial statements are to be restated in constant currency when the country’s economic environment exhibits certain characteristics. A prerequisite for the application of this pronouncement is that inflation as accumulated throughout a three-year period, measured by the so-called Domestic Wholesale Price Index (the “IPIM”) published by Argentina’s Official Statistics Bureau (the National Statistics and Censuses Institute or “INDEC”) attains or exceeds 100%. As per the latest information released by the INDEC, inflation accumulated in the period from October 31, 2012 to October 31, 2015, measured by the IPIM index was 66%. Therefore, the prerequisite for restatement into constant currency of the information contained in the Consolidated Financial Statements is not satisfied. If this prerequisite were satisfied, the restatement would be mandatory.

Unless otherwise indicated, financial information contained in this annual report reflects the consolidation of the following subsidiaries at and for the fiscal years indicated below:

On January 7, 2002, Argentina abandoned the peso-dollar parity introduced in April 1991 under Law No. 23,928 (the “Convertibility Law”). Following the initial devaluation and the setting of an official rate exchange at Ps.1.4 per US$1.00, the peso was allowed to float, and as of April 22, 2016 peso traded at approximately Ps.14.4558 per US$1.00. See “Item 3. Key Information—Exchange Rates” for information regarding the evolution of rates of exchange since fiscal year 2011.

CERTAIN TERMS AND CONVENTIONS

The terms below are used as follows throughout this report:

In this report, “$”, “U.S. dollars”, and “dollars” refer to United States Dollars and “Ps” and “peso” refer to the Argentine peso.

- PART I -

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

The historical financial information set forth below for the years ended December 31, 2015, 2014 and 2013 has been selected from, and should be read together with, the Consolidated Financial Statements included herein. The audited financial statements for 2012 and 2011 are not included in this document, but they are included in our annual reports on Form 20-F for the years ended December 31, 2014 and December 31, 2013, respectively, filed by us with the U.S. Securities and Exchange Commission (“SEC”) on April 10, 2015 and April 21, 2014, respectively, with retrospective adjustments made for the application of certain changes in accounting principles.

For information concerning the preparation and presentation of the Consolidated Financial Statements, see “Presentation of Financial Information”. See also “D. Risk Factors—Risks Related to Argentina”, and “Risk Factors—Risks Related to BBVA Francés” below.

Declared Dividends

The table below shows the declared dividends paid on each ordinary share and the equivalent of those dividends expressed in terms of dividends per American Depositary Share, each representing three ordinary shares (the “ADSs”), in each case adjusted for all stock dividends during the relevant periods. The Central Bank requires that we maintain 20% of our net income in legal reserves.

Exchange Rates

The following tables shows the annual high, low, average and period-end exchange rate for US$1.00 for the periods indicated. The exchange rate is calculated by the Central Bank based on the information provided by financial entities on the exchange rate for trading of U.S. dollars for settled transactions in Argentine Pesos and U.S. dollars. Such information must be representative of the prevailing market conditions. After gathering this information, the Central Bank calculates the daily exchange rate using the formula set out in Annex I of Communication “A” 3500.

The Federal Reserve Bank of New York does not report a noon buying rate for pesos.

(1) Source: BCRA.

(2) The average of monthly average rates during the period.

The exchange rate on April 22, 2016 was Ps.14.4558 = US$1.00.

Fluctuations in the exchange rate between pesos and dollars affect the dollar equivalent of the peso price of the ordinary shares on the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires — the “BCBA”) and as a result, would most likely affect the market price of the ADSs. Fluctuations in exchange rates also affect dividend income measured in dollars. The Bank of New York Mellon, as depositary for the ADSs, is required, subject to the terms of the deposit agreement, to convert pesos to dollars at the prevailing exchange rate at the time of making any dividend payments or other distributions. The following table shows the rate of devaluation of the peso vis-à-vis the dollar at year end, the rate of exchange (number of pesos per dollar prevailing in the Argentine foreign exchange market at year end) and the rate of inflation for wholesale price for fiscal year ended December 31, 2015 and for the four most recent fiscal years.

Since the repeal of the Convertibility Law in January 2002, the peso has devalued approximately 1,345.58% vis-à-vis the dollar.

Not applicable.

Not applicable.

Risks Relating to Argentina

Overview

We are an Argentine corporation (sociedad anónima), and the vast majority of our operations, properties and customers are located in Argentina. Accordingly, the quality of our assets, our financial condition and our results of operations depend primarily on macroeconomic and political conditions prevailing in Argentina. In 2001, the Argentine economy suffered a severe economic and political crisis (“the Argentine Crisis”) but recovered during Nestor Kirchner’s term as President, which ended in 2007. Kirchner was succeeded by Cristina Fernández de Kirchner, who was reelected for another four-year term on October 23, 2011. On December 10, 2015, Mauricio Macri, leader of the opposition party Cambiemos, was sworn in as the new President of Argentina after defeating Daniel Scioli, the candidate of President Cristina Fernández de Kirchner’s party, in a runoff presidential election. Since assuming office, the new administration (the “Macri Administration”) has announced and implemented several significant economic and policy reforms, which are further described below and which will continue to affect the quality of our assets, our financial condition and our results of operations.

The impact of the recent congressional and presidential elections on the future economic and political environment of Argentina is uncertain, but likely to be material.

Presidential and congressional elections took place in Argentina on October 25, 2015 and a runoff election (ballotage) between the two leading presidential candidates was held on November 22, 2015, which resulted in Mr. Mauricio Macri being elected as the new President of Argentina. The Macri Administration assumed office on December 10, 2015. Since assuming office, the Macri Administration has announced and/or implemented several significant economic and policy reforms, including:

It is expected that the new management team of the INDEC appointed by the Macri Administration will implement certain methodological reforms and adjust certain macroeconomic statistics on the basis of such reforms.

It is too early to predict as of the date of this annual report the impact that these measures will have on the Argentine economy and our business. There is uncertainty as to whether the Macri Administration will succeed in implementing all of the measures announced during the Presidential election campaign and as to the timing of their implementation. Even if adopted, such measures may fail to achieve the intended results. Additionally, despite Macri’s victory in the Presidential elections, his party does not have a majority of the seats in Congress, which will require the Macri Administration to seek political support from the opposition for its economic proposals. Further, new unexpected events may develop that create political and/or economic instability in Argentina. The inability of the Macri Administration to implement its agenda as a result of lack of political support or otherwise may weaken confidence in, and otherwise adversely affect, the Argentine economy and its economic and political conditions, which could in turn adversely affect our business, results of operations and financial condition.

High inflation rates could negatively affect the Argentine economy in general, including access to the long-term financing market.

High inflation rates have led to the loss of competiveness of Argentine exports in international markets and to a decline in private consumption, causing a negative effect on economic activity and employment. Moreover, high inflation rates have in the past and could in the future undermine confidence in the Argentine financial system, in particular with respect to the peso deposit base,

deteriorating the demand for pesos and leading to a portfolio dollarization, which would in turn cause a decrease in the deposit base. This would negatively affect the business volume of banks, including BBVA Francés.

Since 2007, consumer price index (“CPI”) data for the Greater Buenos Aires area (the “CPI-GBA”) and for other Argentine regions/provinces published by the INDEC has not been consistent with CPI data published by private institutions. These inconsistencies created uncertainty regarding the country’s actual inflation rate and made it difficult to anchor inflation expectations. It should be noted that assets, such as public bonds, indexed to the Benchmark Stabilization Ratio (Coeficiente de Estabilización de Referencia or “CER”) are adjusted according to the CPI-GBA. For more information see “Item 5. Operating and Financial Review and Prospect—Effects of Recent Events on BBVA Francés”.

Argentina’s professional accounting standards require applying Technical Pronouncement No. 6 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) (as amended by Technical Resolution No. 19), which sets forth that financial statements are to be restated in constant currency when the country’s economic environment exhibits certain characteristics. A prerequisite for the application of this pronouncement is that inflation as accumulated throughout a three-year period, measured by the so-called Domestic Wholesale Price Index (the “IPIM”) published by the INDEC attains or exceeds 100%. As per the latest information released by the INDEC, inflation accumulated in the period from October 31, 2012 to October 31, 2015 measured by the IPIM index was 66%. Therefore, the prerequisite for restatement into constant currency of the information contained in the consolidated financial statements is not satisfied. If this prerequisite were satisfied, the restatement of the consolidated financial statements in constant currency would be mandatory.

In February 2014, following the imposition by the International Monetary Fund (the “IMF”) of certain requirements to improve the quality of official data, including inflation and GDP data, Argentina began to report a new CPI index (the “CPI NU”), which covers the whole country and uses a new base year (fourth quarter 2013). The CPI NU index was first published in February 2014. The IMF recognized the progress of the Argentine authorities to remedy the inaccurate provision of data, but has delayed the definitive evaluation of the new index. The new index replaces the previous measurement and is used to calculate CER indexation.

The Macri Administration has recognized the previous government’s interference with the INDEC and the unreliability of the data it published. On January 8, 2016, the Macri Administration issued Decree No. 55/2016, declaring the state of administrative emergency related to the national statistical system and the INDEC until December 31, 2016. INDEC has thus ceased publishing statistical information until its technical and administrative structure is reorganized. During this reorganization period, which is expected to last between six and eight months, the INDEC is to use the official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires.

Moreover, in February 2016, the Minister of the Economy Alfonso Prat-Gay announced that the IMF will conduct inspections in Argentina pursuant to Section IV of the by-laws of the IMF, which allows officials to conduct inspections with employers and unions in order to make economic recommendations to member countries.

Although the Macri Administration has consistently informed that one of its main goals is to control and reduce of inflation, it remains uncertain as of the date of this annual report whether the reforms described above will be implemented as planned, and whether, even if implemented, will be successful at all. It is also uncertain the extent to which official data will be reviewed and what effect these reforms will have on the Argentine economy or our consolidated financial statements. No assurance can be given as to the reliability of the official data as the INDEC’s data may be materially revised at any time and reveal different historical or prevailing economic conditions and performance from those previously believed, which could in turn affect the credibility of Argentina and its economic and political conditions. All these factors could adversely affect our business, results of operations and financial condition.

A considerable increase in the government’s expenditure could negatively affect the Argentine economy and its access to international financial markets.

Starting in 2005, public expenditures began to increase faster than public revenues and the primary fiscal balance of the national public non-financial sector went from a surplus of 3.2% of GDP in 2004 to a deficit of 5.3% of GDP in 2015. The fiscal deficit deteriorated during 2015, reaching Ps. 225.6 billion as of the year end, which represented a 105.6% increase compared with the 2014 fiscal deficit. The Macri Administration announced gradual adjustments to the fiscal deficit of around 5 percentage points of GDP per year until 2019. Most of the fiscal adjustments are intended to come from the elimination of the subsidies to the energy sector, a measure which is currently being implemented, the reduction of the overall tax burden, the reduction of export duties and the income tax reform announced by the Macri Administration.

Any further deterioration of the government’s fiscal position, however, would negatively affect its ability to access the debt markets and could in turn result in more limited access to such markets by Argentine companies, including BBVA Francés.

Moreover, the former government has started issuing debt in the local Argentine market again after a number of years without it, which Argentine private banks, such as BBVA Francés, often purchase. The Macri Administration has announced that it will continue to issue debt in the local Argentine market and this could lead to increased exposure of private banks, such as BBVA Francés, to the public sector.

It is uncertain whether the Macri Administration will succeed in implementing its strategy to reduce the fiscal deficit and public expenditures, particularly in light of the fact that any measures subject to congressional approval will require support from the opposition. Failure to implement these policies, or if they prove ineffective, could negatively impact consumers’ purchasing power and lead to overall higher prices. Furthermore, the government’s primary fiscal balance could be negatively affected if public expenditures continue to increase in the future. A weaker fiscal position could have a material adverse effect on the government’s ability to obtain long-term financing and adversely affect economic conditions in Argentina, which could adversely affect our business, results of operations and financial condition.

Holdout creditors who participated in the debt exchange that took place in 2005 and 2010 have filed numerous lawsuits against Argentina in several jurisdictions, including the United States, which have resulted in limitations on the country’s ability to make payments on certain of its outstanding debt and access the international capital markets. It cannot be assured that further litigation against Argentina will not negatively affect its assets or Argentina’s ability to access the international capital markets.

In 2005 and 2010, Argentina conducted exchange offers (the “Exchange Offers”) to restructure part of its sovereign debt that had been in default since the end of 2001 (the “Defaulted Debt”). As a result of the Exchange Offers, Argentina restructured over 92% of its eligible Defaulted Debt. Holders of Defaulted Debt who participated in the Exchange Offers (the “Exchange Bondholders”) obtained new bonds with different terms (the “Exchange Bonds”).

Bondholders who did not participate in the Exchange Offers (the “Holdouts”) have obtained favorable rulings in the U.S. District Court for the Southern District of New York (the “District Court”) ordering the payment by Argentina of the principal amount and interest due on their bonds. The District Court held that repaying the Exchange Bondholders but not the Holdouts would violate the pari passu clause of the bonds held by the Holdouts and enjoined Argentina from making any payment on the Exchange Bonds unless similar payments were made to the Holdouts (the “Pari Passu Injunctions”). The U.S. Court of Appeals for the Second Circuit (the “Second Circuit”) upheld the District Court’s rulings on several occasions and ordered Argentina to pay US$1.3 billion plus post-judgment interest to the Holdouts. The Second Circuit stayed its decision pending Argentina’s appeal to the U.S. Supreme Court (the “Supreme Court”). On June 16, 2014 the Supreme Court declined to review the Second Circuit’s decision and the stay was lifted shortly thereafter.

By denying Argentina’s petition for review, the Supreme Court upheld the Second Circuit’s decision ordering Argentina to pay US$1.3 billion to the Holdouts. While the Argentine government has repeatedly stated its intention to pay the full amount only to the Exchange Bondholders, any potential payment to the Exchange Bondholders not accompanied by a similar payment to the Holdouts could be blocked based on the decision of the Second Circuit. On June 30, 2014, the deadline for the payment of interest installments on certain Exchange Bonds expired. The government transferred the necessary funds to the trustee, the Bank of New York Mellon, to make the payment, but the funds were blocked by the District Court. On July 30, 2014, the grace period expired for payment of said interest installments and the payments had not yet been cleared. On September 11, 2014, the Argentine government passed Law 26,984 (the “Sovereign Payment Law”) replacing Bank of New York Mellon with a local Argentine bank, Nación Fideicomisos S.A. in the city of Buenos Aires, as trustee. With this law the government sought to create a new voluntary exchange of restructured debt. Furthermore, in August 2014, the Central Bank revoked the license of the Bank of New York Mellon to act in Argentina. On September 29, 2014, the District Court held Argentina in contempt, due to its attempts to make payments to the Exchange Bondholders but not to the Holdouts, in defiance of the District Court’s orders.

In February 2016, the Macri Administration announced initial agreements with several groups of Holdouts and made a settlement proposal to all other Holdouts, including those with pending claims in U.S. courts. In turn, in March 2, 2016, the District Court ordered the Pari Passu Injunctions, including the so-called “me too injunctions” (injunctions carried out by other creditors which were not included in the original Holdouts’ claim) to be automatically vacated once (i) Argentina repeals Law No. 26,017 issued during Fernández de Kirchner Administration under which the government would not make payments to Holdouts and also repeals the Sovereign Payment Law, and (ii) Argentina pays in full the parties who have entered into settlement agreements on or before February 29, 2016 (the “March 2 Order”). On March 31, 2016, Congress approved the so-called Debt Authorization Law repealing the legislative obstacles to settle claims with Holdouts and approving the settlement proposal. The Court of Appeals affirmed the March 2 Order and instructed the District Court to monitor and confirm that the actual payment to the Holdouts takes place under the terms of the relevant agreements.

On April, 22, 2016, Argentina began the process of tranferring the funds for the payment to the holdouts in order to terminate the default situation of 2001 and the 15-year trail. The payment was split between US$6,200 million to be paid directly by a transfer of funds for those holdouts who signed an agreement with the Macri Administration before February 29, 2016 and another US$3.1 billion to be transfered to a trust in the Bank of New York for those who reached an agreement to after that date. After these payments, Judge Thomas Griesa decided to lift the precautionary measures.

Not all creditors have agreed to settle on the Macri Administration´s proposed terms and other holders of untendered debt who have not yet agreed to the settlement proposal of the Macri Adminsitration litigation continue in the United States and other jurisdictions, and the consequences of potentially inconsistent rulings from different courts are unclear. As a result of this continuing and potential future litigation, it cannot be assure that further judgements, injuctions or attachments orders could not lead to the freezing or attachment of some of Argentina’s assets, which could have a material adverse effect on the Argentine economy and affect our ability to access international financing or pay our debts.

The Argentine economy remains vulnerable to external events that could be caused by significant economic difficulties of Argentina’s major regional trading partners or by more general “contagion” effects, which could have a material adverse effect on Argentina’s economic growth and its ability to service its public debt.

Weak, flat or negative economic growth of any of Argentina’s major trading partners, such as Brazil, could adversely affect Argentina’s balance of trade and, consequently, Argentina’s economic growth. Brazil is currently Argentina’s largest export market. The Brazilian GDP decreased by 3.8 % during 2015, mainly due to a 8.3% decrease in industrial production. In addition, the Brazilian

real depreciated by 33% against the U.S. dollar over the course of 2015, according to the Brazilian institute of geography and statistics (Instituto Brasilero de Geografía y Estadística, IBGE).

Moreover, Brazil is currently undergoing an internal political crisis as its congress initiated an impeachment process against the current President Dilma Russeff, who faces charges of manipulating the budget deficit and attempt to obstruct an investigation of a potential multibillion-dollar bribery scheme at Petrobras, the state-controlled oil giant.

The Argentine economy may also be affected by “contagion” effects. International investors’ reactions to events occurring in one developing country sometimes appear to follow a “contagion” pattern resulting in an entire region or investment class being disfavored by international investors. In the past, the Argentine economy has been adversely affected by such contagion effects on a number of occasions, including the 1994 Mexican financial crisis, the 1997 Asian financial crisis, the 1998 Russian financial crisis, the 1999 devaluation of the Brazilian real, the 2001 collapse of Turkey’s fixed exchange rate regime and the global financial crisis that began in 2008.

The Argentine economy may also be affected by conditions in developed economies, such as the United States, that are significant trading partners of Argentina or have influence over world economic cycles. For example, if interest rates increase significantly in developed economies, including the United States, Argentina and its trading partners, such as Brazil and other developing economies, could find it more difficult and expensive to borrow capital and refinance existing debt, which could adversely affect economic growth in those countries.

Any of these factors could adversely affect Argentine economic growth. As an Argentine bank, any of these factors would in turn adversely affect our business, results of operations and financial condition.

A decline in international prices for Argentina’s principal commodity exports could have a material adverse effect on Argentina’s economy and public finances.

Commodities markets have historically been characterized by high volatility. Despite the volatility of prices of most of Argentina’s commodities exports, commodities have significantly contributed to the government’s revenues during recent years. Consequently, the Argentine economy has remained relatively dependent on the price of its main agricultural exports, primarily soy. This dependence has, in turn, rendered the Argentine economy more vulnerable to fluctuations in commodity prices. A decline in commodity prices may adversely affect the Argentine economy, as well as its public finances due to a decrease in government revenue from export taxes. As of the date of this annual report, the Macri Administration has eliminated export taxes on many agricultural products and reduced the export taxes on soy from 35% to 30%. Any reduction in commodity prices or further reduction of export taxes could negatively impact Argentina’s public finances, which could in turn adversely affect our business, results of operations and financial condition.

The relatively low level of international reserves could lead to further depreciation of the peso if there is an abrupt increase in foreign currency demand by the public in the new floating exchange rate system.

The level of international reserves of the Central Bank has increased by more than 4 billion dollars since the Macri Administration took office even though there has been virtually no Central Bank intervention in the foreign exchange market since the removal of certain foreign exchange restrictions. The Central Bank is now committed to a policy of floating exchange rates in order to deviate from the devaluation-inflation dynamics that have affected the Argentine economy in recent years. During the first 100 days in office of the Macri Administration, the Central Bank obtained a loan of US$5 billion from a group of seven international banks in order to strengthen its international reserves.

For the same purpose, during December 2015, the Central Bank also converted Chinese Yuans into U.S. dollar in an amount of US$3 billion under the terms of the swap currency agreement with China. This currency swap was originally made for the equivalent of US$11 billion and, although the funds were recorded on the Central Bank’s balance sheet, they were not considered as available liquidity. The swap agreement already contemplated the possibility of the conversion of Chinese Yuans into U.S. dollars at a cost and the fact that the IMF officially accepted the Yuan as a reserve currency further facilitated the transaction. The current stock of international reserves held by the Central Bank subtracting the currency swap with China and the US$5 billion loan with international banks is relatively low, which would reduce the capacity of the Central Bank to endure a hypothetical increase in demand of foreign currency.

Moreover, because of the final agreement reached with the Holdouts, the Central Bank received US$7,200 million to be added to reserves due to the oversubscription of the debt issued to pay the holdouts and exit the default.

A low level of international reserves could lead to a further depreciation of the peso, if there is an abrupt increase in foreign currency demand, which could in turn adversely affect our business, results of operations and financial condition.

Risks Relating to the Argentine Financial System and to BBVA Francés

The short-term structure of the deposit base of the Argentine financial system, including the deposit base of the Bank, could lead to a reduction in liquidity levels and limit the long-term expansion of financial intermediation.

After the Argentine Crisis, the volume of financial activity regarding deposits and loans was severely reduced. Between 2003 and 2007, a gradual and increasing recovery of deposit levels took place. As a result of the global financial crisis, deposit levels decreased again during 2008 until the last semester of 2009 but they have been increasing since then.

The growth of the Argentine financial system is heavily dependent on deposit levels because of the small size of the Argentine capital markets and the lack of access to foreign capital markets in recent years. In the medium term, the growth of credit will likely depend on the growth of deposit levels. During the 2011-2013 period, credit grew at a higher rate than deposits, thereby consuming excess liquidity of financial institutions. In 2014, this scenario started to change, and deposits started to grow at a higher rate than credit.

The liquidity of the Argentine financial system at the present date is relatively high due to the high level of mandatory deposit reserves applicable to Argentine financial entities, among other short-term investments, such as repurchase transaction with the Central Bank. These liquid assets account for approximately 20% of the total deposits of the Argentine financial entities as of December 31, 2015. Banks can also invest in short-term Central Bank bills (Lebac) which also increase the liquidity ratios of the financial system.

Notwithstanding that, because most deposits are short-term deposits, a substantial part of loans must also have short-term maturities to match the terms of the deposits. The proportion of long-term credit lines, such as mortgages, is small.

Although we believe that deposit liquidity levels are currently reasonable, no assurance can be given that those levels will not be reduced due to future negative economic conditions or otherwise. If depositors lose confidence as a result of negative economic conditions or otherwise and withdraw significant funds from the banks, there will be a substantial negative impact on the manner in which financial institutions, including us, conduct their business and on their and our ability to operate as financial intermediaries. If Argentine financial institutions, such as BBVA Francés, are unable to access adequate sources of medium and long-term funding or if they are required to pay high costs in order to obtain the same and/or if they cannot generate profits and/or maintain their current volume and/or scale of their business, whether due to a decline in deposits or otherwise, our liquidity position and ability to honor our debts as they come due may be adversely affected.

The instability of the regulatory framework, in particular the regulatory framework affecting financial institutions, could have a material adverse effect on financial institutions such as the Bank.

During Cristina Kirchner’s second term as President a series of new regulations were issued affecting financial institutions, mainly regulating the foreign exchange market and imposing new capital requirements for financial institutions. In this regard, Communications “A” 5272 and 5273 of the Central Bank, dated February 1, 2012, increased the capital requirements for financial institutions carrying out activities in Argentina. These Communications required certain minimum capital levels in order to support operational risks and the distribution of dividends, and an additional capital buffer equivalent to 75% of the total capital requirements. The Central Bank stated that these new requirements were based on the credit risk measure required by Basel II. For more information regarding capital requirements for Argentine banks please see “Item 4. Information on the Company—F. The Argentine Banking System”. Moreover, a new law was approved by the Congress introducing amendments to the Central Bank’s charter. The principal issues addressed by this bill were the use of Central Bank’s reserves for the cancellation of public debt together with the implementation of polices by the Central Bank in order to interfere in the determination of interest rates and terms of loans to financial institutions.

The Central Bank issued Communications “A” 5319 and “A” 5380, dated July 5, 2012 and December 21, 2012, respectively, and Communication “A” 5516, dated December 27, 2013, making it mandatory for banks to provide credit lines for productive purposes. The government’s intention was to increase investments, although an increase in the demand for these loans could in turn lower the demand for other types of loans. BBVA Francés used approximately Ps.6,691 million in 2015 for these types of loans.

On November 29, 2012, the Argentine Congress passed the new “Securities Law”, which modified the public offer regime set forth by Law No. 17,811, as amended. One of the most significant amendments introduced by the Securities Law referred to the powers of the CNV. The adoption of Section 20 of the Securities Law raised concern in the market, especially among listed companies, since it entitles the CNV to (i) appoint supervisors with veto power over the resolutions adopted by the board of directors of listed companies and (ii) disqualify the board of directors of listed companies for a period of 180 days when, as determined by the CNV, the interests of the minority shareholders and/or security holders are adversely affected.

On October 1, 2013, the Central Bank issued Communication “A” 5460, granting broad protections to consumers of financial services, including, among other aspects, the regulation of fees and commissions charged by financial institutions for their services. As a result, fees and charges must represent a real, direct and demonstrable cost and should have technical and economic justification. Communication “A” 5514 introduced an exception to the application of Communication “A” 5460 for certain credit agreements that have pledges as collateral and are entered into before September 30, 2019.

On December 23, 2014, the Central Bank amended Communication “A” 5460 through Communication “A” 5685. As a result of this amendment, any increase in commissions for new products or services for retail customers must have the prior authorization of the Central Bank.

Additionally, according to Central Bank Communication “A” 5689, dated January 8, 2015, financial entities must deduct from the potential dividend distributable amount any fine imposed by the Central Bank, the CNV and the Unidad de Información Financiera (the Argentine anti-money laundering agency, “UIF”).

While the Macri Administration has repealed part of the regulatory framework enacted by the Fernández de Kirchner Administration, such as (i) the restrictions on the foreign exchange market, (ii) the regulations concerning minimum and maximum interest rates on certain loans and deposits, (iii) the requirements governing the flow of capital into Argentina, (iv) the percentage of foreign currency positions of financial entites, (v) the monthly contributions that banks must set aside each month to fund the deposit gurantee fund, (vi) and additional capital requieremnts, it is still early to know whether the new regulatory framework will be stable and the impact that the new regulatory framework may have on the Bank’s business. The absence of a stable regulatory framework or a new regulations that may affect the banks business could limit the ability of financial institutions, including BBVA Francés, to make long-term decisions, such as asset-allocation decisions, and that could cause uncertainty with respect to our future business, results of operations and financial condition. We cannot assure that laws and regulations currently governing the financial sector will not continue to change in the future or that any changes will not adversely affect our business, results of operations and financial condition.

Argentine corporate disclosure, governance and accounting standards may require the Bank to provide different information than would be required under U.S. standards. This difference could influence foreign investors’ decisions to invest in Argentine securities and could therefore limit the Bank’s access to international markets.

The securities laws of Argentina that govern publicly-listed companies such as the Bank impose disclosure requirements that are more limited than those in the United States. The Argentine securities markets are not as highly regulated and supervised as the U.S.

securities markets. There are also important differences between accounting and financial reporting standards applicable to financial institutions in Argentina and those in the United States. As a result, financial statements and reported earnings of Argentine financial institutions generally differ from those reported based on U.S. accounting and reporting standards. See “Item 5. Operating and Financial Review and Prospects—U.S. and Argentine Banking GAAP Reconciliation” for a description of the principal differences between Argentine banking GAAP and U.S. GAAP and how they affect our financial statements and the reconciliation to U.S. GAAP of net income and total stockholders’ equity for the periods ended and as of the dates therein indicated.

Accordingly, the information available about the Bank will not be the same as the information available about a U.S. company. The difference in the disclosure requirements between Argentine corporate governance and accounting standards and U.S. GAAP could limit foreign investors’ ability to evaluate our business, results of operations and financial condition, and influence foreign investors’ decisions whether to invest in Argentine securities, thereby limiting the Bank’s access to international financial markets.

Lawsuits brought against us outside Argentina, the enforcement of foreign judgments and complaints based on foreign legal concepts may be unsuccessful.

We are a commercial bank organized under the laws of Argentina. Most of our shareholders, directors, members of the supervisory committee and officers and certain experts named herein reside outside the United States (principally in Argentina). Substantially all of our assets are located outside the United States. If any shareholder were to bring a lawsuit against our directors, officers or experts in the United States, it may be difficult for them to effect service of legal process within the United States upon these persons or to enforce in Argentina a judgment against them obtained in the courts of the United States based upon the civil liability provisions of the United States federal securities laws, due to specific requirements of Argentine law regarding procedural law issues and principles of public policy.

Because we are a financial institution, any insolvency proceeding against us would be subject to the powers of, and intervention by, the Central Bank, which may limit remedies otherwise available and extend the duration of the proceedings.

Under Argentine law, the liquidation and commencement of bankruptcy proceedings against financial institutions, until their banking license has been revoked by the Central Bank, may only be commenced by the Central Bank. If BBVA Francés were unable to pay its debts as they come due, the Central Bank could intervene and revoke its banking license, and file a bankruptcy petition before a commercial court. If the Central Bank intervenes, the reorganization proceeding could take longer and it is likely that the shareholders’ remedies would be restricted. During any such process, the Central Bank would have to consider its interests as a regulator and could well prioritize the claims of other creditors and third parties against the Bank. As a result of any such intervention, shareholders may realize substantially less on the claims than they would in a bankruptcy proceeding of a non-financial institution in Argentina or a financial institution or non-financial institution in the United States or any other country.

The special rules that govern the priority of different stakeholders of financial institutions in Argentina, which give priority to depositors with respect to most other creditors, may negatively affect other stakeholders in case of judicial liquidation or bankruptcy of the Bank.

Argentine Law No. 24,485, in force since April 18, 1995 and as amended by Law No. 25,089, provides that in case of judicial liquidation or bankruptcy of a financial institution such as the Bank, all depositors, irrespective of the type, amount or currency of their deposits, will have general and absolute preferential rights with respect to all other creditors, except for certain labor credits and credits secured with a pledge or mortgage, to be paid with 100% of the funds deriving from the liquidation of the Bank’s assets. In addition, depositors of any kind of deposits have special preferential rights over the remaining creditors of the Bank, except for certain labor credits, to be paid with (i) any of the Bank’s funds which may be held by the Central Bank as total reserves, (ii) any remaining funds of the Bank in existence as of the date on which the Bank’s license is revoked, or (iii) any funds derived from the compulsory transfer of certain assets of the Bank according to instructions of the Central Bank, in the following order of priority: (a) deposits made by legal entities up to Ps.5,000 per entity, or its equivalent in foreign currency, (b) deposits for terms exceeding 90 days and (c) all other deposits on a pro rata basis.

In case of a judicial liquidation or bankruptcy of a financial institution such as the Bank, shareholders may not be able to partially or completely recover their investment due to the priority imposed by law.

Volatility of credit ratings in Argentina could affect the volatility of the Bank’s credit ratings, and therefore limit the Bank’s access to international financial markets.

The Bank’s credit ratings are based on Argentina's sovereign rating, which has fluctuated considerably since the Argentine Crisis. As a result, the Bank’s ratings have also fluctuated in this period, although they have tended to be higher than the sovereign

rating. These fluctuations impact our costs of funding, our collateral obligations and our ability to access international markets. Although Argentina is not longer in default following the final agreement with Holdouts, continued volatility of, or a decrease in, Argentina’s sovereign rating could limit our access to financing or make such financing more expensive for us, even if available, which could in turn adversely affect our business, results of operations and financial condition.

Factors Related to BBVA Francés’ Subsidiaries

As a consequence of the social security reform and the consequent loss of corporate purpose and liquidation of our subsidiary Consolidar AFJP S.A., labor lawsuits were filed against it claiming certain payments. Adverse rulings against Consolidar AFJP in such lawsuits could result in severance payment obligations in significant amounts, which could have a material adverse effect on the financial condition of Consolidar AFJP.

Consolidar AFJP S.A. (“Consolidar AFJP” or “AFJP”) was a privately-owned pension fund managing company whose purpose was the administration of retirement contributions from affiliates and the corresponding payment of senior, disability and widow’s pensions. On December 4, 2008, the Federal government enacted Law No. 26,425 to implement a social security reform, by which the government assumed any liabilities of the pension fund arising from retirement, disability and death.

On December 7, 2010, Consolidar AFJP filed a claim against the Federal government and the Ministry of Labor and Social Security, requesting compensation for the losses suffered by the company and its shareholders, as a result of the aforementioned social security reform.

Moreover, as a consequence of the social security reform and the consequent loss of its corporate business purpose, at an extraordinary shareholder meeting held on December 28, 2009, the AFJP shareholders, decided to terminate the corporate existence of the company and liquidate it. As of the present date, the liquidation process is still ongoing.

During 2015, 10 labor legal actions were filed against AFJP claiming differences in severance payment amounts. The differences in amounts are immaterial and include wage differences, overtime payments, and payment of additional commissions. AFJP has estimated this contingency and recorded the corresponding allowances it believes are appropriate. Adverse rulings against Consolidar AFJP could result in severance payments by the company in significant amounts, which could have a material adverse effect on the financial condition of the company. If AFJP were to have insufficient funds to cancel all of its debt obligations and consummate the liquidation process, AFJP’s creditors could have in certain circumstances recourse to BBVA Francés, as BBVA Francés holds a 53.89% equity interest in AFJP.

ITEM 4. INFORMATION ON THE COMPANY

RECENT POLITICAL AND ECONOMIC DEVELOPMENTS IN ARGENTINA

Macroeconomic Environment

Argentina held presidential and legislative elections in October 2015. Daniel Scioli, candidate of the governing party, Frente para la Victoria (“FPV”), received 36.8% of the votes, followed by Mauricio Macri, of the opposition coalition Cambiemos, with 34.3%. Argentina’s election system establishes that a candidate must win more than 50% of the vote or obtain least a 10% advantage over his immediate follower in order to be declared as winner in the first round of voting. Given these results, a runoff election took place in November between. Mr. Scioli and Mr. Macri, which Mr. Macri won with 51.4% of the votes. On December 10, 2015 Cambiemos took over after 12 years of FPV government.

The Macri Administration has recognized the previous government’s interference with the INDEC and the unreliability of the data it published. On January 8, 2016, the Macri Administration issued Decree No. 55/2016, declaring the state of administrative emergency related to the national statistical system and the INDEC until December 31, 2016. INDEC thus ceased publishing statistical information until its technical and administrative structure is reorganized. During this reorganization period, which is expected to last between six and eight months, the INDEC is to use the official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires..

INDEC published revised GDP figures for 2015 on March 30, 2016. According to this, Argentine GDP at constant prices grew 2.1% in 2015 with respect to 2014.

With respect to the labor market, the latest published information is for the third quarter of 2015, and reflected a decrease in the unemployment rate to 5.9% from 7.5% in the third quarter of 2014. Salaries, according to an average Salary index including both

private and public sector wages compiled by INDEC, rose 30.1% between October 2014 and October 2015. Salaries for workers in the private sector (excluding the underground economy) and for public employees increased 28.1% and 32.8%, respectively, during that period.

Since January 2014 the INDEC publishes a new price index, the so-called National and Urban Consumer Price Index (IPC-NU), which has tended to measure price variations below those recorded by other provincial and private indices For the first ten months of 2015 inflation measured by the IPC-NU was 11.9%, and annual inflation was 14.3% by that measure. By contrast, the IPCBA (a price index compiled by the Statistical Office of the Government of the Autonomous City of Buenos Aires) recorded an accumulated inflation of 19.8% (23.8% year-to-year) for the same period. Publication of the IPC-NU has also been suspended since October 2015. Using the IPCBA figures, as suggested by the new INDEC officials, to calculate the CER coefficient, which is used to adjust inflation-indexed instruments, inflation reached 26.9% between December 2014 and December 2015.

During 2015, an expansive fiscal policy remained in place. The primary fiscal deficit was Ps.104.797 billion, compared to Ps.38.562 billion in 2014, an increase of 171.8%. This resulted from the fact that primary spending rose by 34.5%, while total revenues rose by a 29.3% rate year-to-year during the same period.

With respect to specific expense items, social security benefits increased by 47.4% year over year, followed by a 39% increase in wage expenses and a 50.6% increase in transfers to the provinces. All these items grew well above the primary spending average rate for the year. By contrast, transfers to the private sector (+31.5%) and capital expenses (+22.5%) grew at below-average rates.

On the income side, during 2015 social security revenue (+39.4%) was the main contributor to overall revenue growth. Tax revenue grew at a slower rate (25.8% during the period), mainly because of a decrease in the collection of export duties. After interest, the national government recorded a deficit of Ps.225.637 billion, 105.6% higher than the 2014 deficit.

Total tax revenue increased by 31.5% year on year in 2015 with income tax revenue increasing by 42.8%. Revenue from export duties decreased 9.7% because of lower agricultural commodity prices.VAT revenue was up by 30.8%, while revenue from Social Security taxes increased by 34.8% year-to-year in 2015.

There was a strong foreign trade contraction in 2015. The trade balance fell to a deficit of US$3,038 million compared to a US$3,107 million surplus in 2014. On the exports side, this decline was the result of stagnant volumes and a significant slump in prices, especially for agricultural commodities. The value of exports in 2015 reached US$56,751 million, a contraction of 16.9% compared to 2014, while total imports fell by 8.3% to US$59,789 million.

On December 17, 2015 the new government announced the elimination of all restrictions imposed on the access of agents to the foreign exchange market, the so-called “Cepo” (“Foreign-Exchange Clamp”), which had been implemented in October 2011. The Peso was subject to an average devaluation of around 1.1% per month between January and November 2015. In December, in line with the elimination of those restrictions and the normalization of the exchange rate market, the Argentine Peso experienced a devaluation of 34% The official exchange rate reached 13.005 Ps./US$ at the end of the month, an accumulated 52.6% increase in the price of the dollar in pesos for the year, with an average rate in December of 11.45 Ps./US$, 33.9% higher than the average of 8.55 Ps./US$ in December 2014.

During the enforcement of the “Foreign-Exchange Clamp” in 2015, US$6,720 million dollars were sold to the public for “portfolio dollarization” purposes, out of total net sales of US$7,531 million by the BCRA during the whole year. On the income side, the main items were export settlements for US$23,834 million plus US$11,000 million from a swap transaction with the Popular Bank of China. Of these, an equivalent of US$3.0 billion yuans were converted into dollars after the lifting of the foreign exchange restrictions to increase liquid reserves. At December 31, 2015 there were international reserves of US$25,563 million, a decrease of US$5,879 million with respect to the end of 2014.

Monetary Policy

Monetary policy was strongly expansive in 2015. The year recorded an increase of Ps.161.365 billion in the monetary base, a 40.5% increase over the previous year (almost double the 22.5% rate recorded in 2014). The main source of expansion was the financing of the public sector, amounting to Ps.177.926 billion (a 10.2% increase over the Ps.161.508 billion of 2014), followed by monetary expansion which originated in the cancellation of foreign exchange futures contracts (some Ps.30 billion) signed by the

previous administration. This monetary expansion was partially compensated by net sales by the Central Bank in the foreign-exchange market in order to support the peso, amounting to Ps.71.822 billion or the equivalent of USD 7,530 million. The M2 monetary aggregate, which includes currency held by the public, checking accounts and savings accounts, increased 28.0% year over year in 2015 and 28.9% in 2014.

The private banks’ Badlar interest rate (the rate paid by private banks on 30-35 day term deposits over 1 million pesos) expressed in monthly averages, showed an upward trend, going from 19.98% in December 2014 to a year-high of 27.54% in December 2015. That figure was significantly influenced by the adjustment of interest rates on BCRA short-term bills used to absorb excess liquidity (“Lebacs”), which reached a record 38% in mid-December, 2015. The hike was implemented in order to increase the appeal of holding positions in local currency and to contain the depreciation of the Peso after the normalization of the foreign exchange market mentioned above.

Total deposits in the financial system increased by 37.9% in 2015. The public sector increased its deposits by 11% year on year, while private sector deposits recorded increases of 40,7% for deposits in pesos and 116.4% for deposits in dollars (42.3% if measured in dollars) mainly due to the effects of the December devaluation.

The stock of loans in pesos granted to the non-financial private sector increased by 36.9% during 2015, with credit card loans playing a leading role with a 54.1% increase. An analysis of the financial system’s credit allocation by currency reveals the private agents’ perception of an impending devaluation, as loans in dollars fell by 9.8% compared to 2014.

It is worth mentioning that after the Macri Administration took office, both the President and several members of the Board of Directors of the BCRA resigned and new officials were appointed. Also, a series of financial system regulations were modified as explained above.

A. HISTORY AND DEVELOPMENT OF THE COMPANY

BBVA Francés (the Bank), an Argentine corporation (a “sociedad anónima” or “S.A.”), was duly incorporated under the name Banco Francés del Río de la Plata S.A. on October 14, 1886. The Bank has registered its office in Reconquista 199, C1003ABB, Ciudad Autónoma de Buenos Aires, Argentina; telephone number 54-11-4346-4000. The Bank’s agent in the United States for U.S. federal securities law purposes is CT Corporation System, currently with offices at 111 Eighth Avenue, New York, New York 10011.

BBVA Francés original by-laws (“Estatutos”) were approved on November 20, 1886, by a decree recorded in the Public Registry of Commerce of Buenos Aires City on December 6, 1886, under No. 1,065 on Folio 359, Book 5, Volume “A” of National By-laws. The by-laws, including all amendments introduced to this date, were recorded in the Public Registry of Commerce (the governmental regulatory agency of corporations). The last amendment was recorded on March 8, 2011, under No. 3,930 Book 62 of Corporations (“sociedades anónimas”). Pursuant to its current corporate by-laws, the Bank will terminate its activities on December 31, 2080, unless this term is extended by the shareholders.

The Bank is supervised by the Central Bank of Argentina, an entity that establishes valuation and accounting criteria, the rules on liquidity and capital requirements as well as the reporting systems of Argentine financial institutions. It is also subject to inspections by the Central Bank, based on which it is assigned a “rating”. See “Item 4. Information on the Company—The Argentine Banking System and its Regulatory Framework”.

Since 1886, the Bank has been recognized as a leading provider of financial services to large corporations. In the early 1980s, it broadened its customer base to include SMEs as well as individual customers. In response to demands from the corporate market and following the structural changes brought about by the stabilization process in Argentina, since 1991, the Bank added to its traditional commercial banking products a full range of services, such as investment banking, capital market transactions and international banking.

In the 1980s and 1990s, in order to achieve a wider market penetration, it expanded its distribution network by opening branches throughout Argentina.

In December 1996, when BBVA became the principal shareholder, the Bank reaffirmed its universal banking strategy with the goal of increasing the most profitable business segment: medium- and low-income individuals and SMEs in the middle market.

To this end, in August 1997, 71.75% of Banco de Crédito Argentino (the “Crédito acquisition”) was acquired, a retail bank focused on the middle market and consumer banking sectors. This merger allowed it to maximize the strengths of each bank and to implement an ambitious leadership plan that included an expansion plan, starting with a strong initial positioning in each market.

To effect the merger, BBVA Francés issued 14,174,432 ordinary shares to the existing shareholders of Banco de Crédito through a capital increase. On March 5, 1998 the Public Registry of Commerce registered the merger as well as the change in the name of the company from Banco Francés del Río de la Plata S.A. to Banco Francés S.A.

At the ordinary and extraordinary shareholders’ meeting held on April 27, 2000, a resolution was passed to change our name to BBVA Francés S.A. On October 4, 2000, the Public Registry of Commerce registered our change from Banco Francés S.A. to BBVA Francés S.A., and the amendment to our by-laws were made reflects the name change.

In the early 2000’s the Argentine Crisis and the ensuing economic and political instability led to a deep contraction in the intermediation volumes. In response, the Bank changed its short-term commercial strategy towards the transactional business, adjusted its operating structure and implemented a strict cost control plan. Actions were also focused on recovering asset quality levels, which had been strongly affected by the Argentine Crisis. By mid-2003, the economy began to recover and it returned to offering the full range of financial services, including credit facilities, albeit restricted to short-term financing. Commencing in 2004, it gradually strengthened its credit activity in the midst of economic solvency, and consolidated its transactional business. During last years, the Bank focused mainly in the most profitable segments, retail and small and medium size companies, maintaining the leadership in the large corporations business.

On February 9, 2012, the board of directors of BBVA Francés and Inversora Otar S.A. approved the merger between both companies and on March 26, 2012, the Shareholders Meetings of both companies approved the transaction. On July 18, 2013, the Argentine Central Bank authorized the merger by Resolution No. 473 and on August 8, 2013 the National Securities Commission (Comisión Nacional de Valores) approved it by Resolution No. 17,155. On March 27, 2014, it was registered with the Superintendence of Corporations under No. 5,302, Book 68 of Corporations.

On March 26, 2014, BBVA Francés cancelled 50,410,182 ordinary shares and issued simultaneously 50,410,182 ordinary shares of BBVA Francés, to be delivered in exchange to the former owners of Inversora Otar (BBV América S.L., Corporación General Financiera S.A. and Sucesión Romero) pursuant to the exchange ratio duly approved. As a result of this transaction as of December 31, 2014, the shareholders of Inversora Otar S.A. have the following ownership on BBVA Frances: BBV América S.L. 29.81%, Corporación General Financiera S.A. 0.47% and Sucesión Romero 0.0041%.

Because of this simultaneous increase and cancellation of the shares, the total amount of the corporate capital of the Bank remained unchanged. On April 1, 2012, as a result of the merger between BBVA Francés and Inversora Otar S.A., BBVA Francés acquired all the shares of BBVA Francés Valores Sociedad de Bolsa S.A. previously held by Inversora Otar S.A., becoming its sole shareholder. On June 29, 2012, BBVA Francés S.A. sold a 3.0047% interest in BBVA Francés Valores Sociedad de Bolsa S.A. to BBV America SL for Ps.441,194.

On July 10, 2013, BBVA Francés and Consultatio S.A. signed a sale and purchase agreement, under which the Bank acquired 23 of the 33 floors of the building under construction by Consultatio S.A., which will became the “BBVA Tower”. This is the largest corporate headquarters real estate development project in the country and is part of the plan designed in 2010 by BBVA Francés to unify its core areas, currently divided among 10 buildings in the City of Buenos Aires. The goal is to have a building with the highest construction and environmental standards that will allow the Bank’s staff to work together in the same area, thus achieving greater efficiency. It is worth noting the building is being developed according to the highest international environmental and sustainability standards and with the commitment of the BBVA Group of preserving the environment. The investment of approximately Ps.1,200 million has a payment schedule associated with the work progress of the project. To date, construction is progressing according to plan and projected for completion in 2016.

BBVA Frances considers the high income segment as strategic and for that reason the Bank has been working over the past two years on a long term plan in order to achieve a leading and differentiated position in this target. Accordingly, by the end of November 2013, the Bank launched the PREMIUM segment with an exclusive event at the Greek embassy in Argentina. This new segment is composed of the 15,000 clients with the highest income, who will have access to a new and different service experience: “Premium” executives, parking at branches with VIP spaces, free of charge subscriptions to magazines and newspapers, birthday presents and many other premium experiences at theatres, concerts and movies, with pre-sales on tickets and priority in invitations and exclusive brochures, among others.

In September 2014, BBVA Francés created the new Digital and Transformation Banking Division, following the guidelines of the BBVA Group. The new division was created in order to develop more convenient and relevant products for its customers and to pursue more dynamic business, employing increasingly innovative communication channels. Furthermore, BBVA Francés implemented some organizational changes, redefining roles and simplifying the organizational chart, in order to adapt the Bank’s internal structure to its business needs.

On May 20, 2015, BBVA Francés executed a Share Purchase Agreement with the Volkswagen Group for the acquisition of 51% of the issued and outstanding capital stock and voting rights of the Volkswagen Credit Compañía Financiera S.A., representing 23,970,000 registered, non-endorsable shares of common stock, par value Ps.1. This transaction is subject to the prior approval of the Central Bank of Argentina. According to the terms and conditions of the agreement, the maximum amount to be paid for the shares is Ps.53,040,000, which will be paid by the Bank at the closing of the transaction.

In May 2015, BBVA Francés.’s Board of Directors accepted the resignation of Ricardo Enrique Moreno as Executive Director (CEO), and appointed Martin Ezequiel Zarich to fill this position. The Board also decided that the resignation of Mr. Moreno shall be effective when the Central Bank of Argentina authorizes Mr. Zarich as the new Executive Director (CEO). Finally, our Board has also decided to appoint Gustavo Alonso as the new Director of Innovation & Development, replacing Mr. Zarich.

On June 30, 2015, the Board of BBVA Francés decided to carry out some changes in the Senior Management. The Board accepted the resignation of Mr. Juan Eugenio Rogero González as Risk Director and appointed Mr. Gerardo Fiandrino for this position.

On January 11, 2016 Mr. Martin Ezequiel Zarich was appointed Chief Executive Officer (CEO) after BCRA issued the corresponding authorization through Resolution No. 9.

B. BUSINESS OVERVIEW

BBVA Francés has all its operations, property and customers located in Argentina. The Bank has traditionally accepted deposits and granted loans in pesos and in certain other currencies, primarily in U.S. dollars. Following the Argentine Crisis, U.S. dollar deposits were limited to granting U.S. dollar-denominated loans in relation to foreign trade transactions, which continued to be subject to Central Bank restrictions.

As part of its business, BBVA Francés conducts capital markets and securities operations directly in the over-the-counter market and indirectly in the BCBA. At the end of December 2015, the Bank had a 4.2% market share in the mutual fund portfolio management industry in Argentina through BBVA Francés Asset Management S.A. (“Mutual Investment Funds Manager”).

The Bank was one of the first companies listed on the BCBA, quoting since 1888 (ticker: FRAN). Its shares in the form of American Depositary Shares have been listed on the New York Stock Exchange since 1993 (ticker: BFR) and on the Madrid-based LATIBEX (“Mercado de Valores Latinoamericanos”) since December 1999 (ticker: XBFR).

BBVA Francés ended its fiscal year 2015 with Ps.110.7 billion in total assets, a total of Ps.76.9 billion in deposits on a consolidated basis, and a market capitalization of Ps.48.9 billion. It is the third largest private bank in terms of total deposits and the fourth in terms of total loans in the Argentine financial system according to statistics published by the Central Bank, as of November 30, 2015.

The following table presents financial information of our principal business for the year ended December 31, 2015.

The Bank has a large network of branches throughout Argentina. As of December 31, 2015 there were 285 attention-to-clients units, 251 of which are retail branches and 34 are specialized in the middle-market segment and institutions, while corporate banking is divided by industry: Consumer, Heavy Industries and Energy. BBVA Francés also had at December 31, 2015 14 in-company branches, one point of sale outlet (a contact point that offers only automated services and commercial assistance, but does not have a license granted by the BCRA to operate as a branch) and one point of express attention (see detailed description below under the subtitle Banking and Financial Services/Development of channels/Express attention point), 694 ATMs and 797 self-service terminals

(ATS), a telephone banking service, an Internet banking service called Francés Net and an app for smartphones from which clients and non-clients may access a wide variety of discounts and benefits. Through this wide network the Bank provides attention to approximately 2 million retail clients, 19,000 companies and 765 large corporations.

Strategy

The BBVA Group has been developing for years a “differential banking model”, focused on profitability but informed by principles of integrity, prudence and transparency. We have a permanent commitment to responsible banking in order to carry out our social mission.

This differential “BBVA Francés banking model” gives our business the flexibility and agility needed to adapt to the 21st century environment. It is based on four well-defined principles aimed at offering the best banking experience in the market and maintaining our leadership position in the future:

In light of these principles, in 2015 the BBVA Group devised a set of strategic priorities that guide the work to be done, with the goal of enhancing short-term results and successfully competing in the long term:

Plans for 2016

BBVA Francés believes that the present environment is complex, but at the same time it offers many opportunities. In this environment, client types are increasingly diverse: individuals and companies, digital and “classic.” Being able to give each of them due attention and satisfy their needs is a challenge BBVA Francés faces every day.

Challenges come not only from clients, but also from other actors such as employees, shareholders or regulators.

For this reason, BBVA Francés has defined its Strategic Plan for 2016-2018 with particular emphasis on the six priorities described above, deemed essential:

New Digital Banking

In a context of transformation, with technologies in permanent innovation, a generation of increasingly demanding clients, especially marked by the universal use of the Internet through mobile devices, and a host of new competitors offering innovative value proposals, BBVA Francés created the new Digital Banking and Transformation Division. The purpose is to transform the present-day business, adjust the commercial offer, adopt a multichannel strategy and a new distribution model, and re-devise all commercial and operational processes.

This change involved not only the creation of the new division, but also the reorientation of Commercial Banking and of all staff departments in order to accompany and provide leverage to the new strategy. This is the first step to achieve the goal of being the preferred bank for clients, one that they can rely on and recommend to others.

The main elements of the change include: transforming the client’s experience, developing offers based on information, creating channels and distribution models and optimizing and digitalizing all processes. It will be focused on the launching of new digital businesses with a strong culture of innovation.

Digital Banking will work through projects adapted to the local reality and developed by small multi-disciplinary teams. This entails a new, more agile and dynamic style of work, with a focus on execution and promoting internal entrepreneurship.

Quality

For some years now, BBVA Francés has been committed to working for a continuous improvement of the client experience with a view to achieving differentiation via the quality of our service.

As a result, for the third consecutive year BBVA Francés has been the most recommended bank by its clients, positioning itself as a leader with the highest Net Promoter Score (NPS) in the market. It has also substantially improved its standing in the high income segment, up from the 5th to 2nd place in the 2015 Banks ranking.

The NPS is a methodology that aims to understand how strongly our clients recommend BBVA Francés and the reasons for that. A set of experiences is valued (global experience, branch, internet, call center, among others) with a score between 0 (“surely wouldn't recommend it”) and 10 (“absolutely recommend it”). Clients are classified as Promoters, Neutrals or Detractors on the basis of the scores they give us. The final index is built by deducting the percentage of Detractors from the percentage of Promoters. Neutrals are not taken into account.

In order to improve our efficiency and productivity in 2015, we sought to leverage the basic goals of the Quality Plan, with the goal of proactively positioning the Bank as a leader in improving of the client experience, which is a key element to obtain recommendations by existing clients and to attract new clients.

In addition, in order to address the occasional instances in which the client experience does not meet our quality standards, two specific functions were formalized, which operate in two different stages:

As part of the cultural transformation promoted by BBVA Francés, we launched our second online course: “Perfecting Client Service,” focused on the conducts and behaviors oriented to a service culture. Seventy two percent of our employees participated in online training to improve the quality of service during 2015.

Within the framework of the Face-to-Face Quality Workshops, 27 meetings were staged during 2015 for sharing a vital experience through interaction among different areas, understanding the value of each person’s contribution as a component of the BBVA Francés value chain, putting the client at the center and striving to achieve the highest quality standards

Starting in December 2014, the functions of the officer responsible for attention to the user of financial services were re-allocated to Client Attention Management, whereas the Quality Management team remained in charge of ensuring compliance with the regulations in force for protection of the user of financial services with respect to:

Compliance with the provisions set forth in Section 2 of Communication “A” 5460 in all respects (operative offices and automated teller machines)

Banking and Financial Services

BBVA Francés is focused on the brokering business, mainly in the private sector. As of December 31, 2015, our private loan portfolio was Ps.55.9 billion, an increase of 36% compared to 2014, and our share of the private loan market was 7.8%.

During 2015, consumer loans registered strong growth, with a 42.4% increase in our portfolio. Such increase was mainly due to credit cards, with an increase of 59.8%, whereas car loans grew at a 23.6% rate and personal loans at a 20.6% rate.

Commercial loans grew 27.2% annually mainly due to the performance of loans to SMEs

In terms of liabilities, total deposits were Ps.76.9 billion at the end of 2015, 50% higher than the previous year, sight deposits increasing by 37% and time deposits by 59%.

As of December 31, 2015 the Bank’s dollar-denominated deposits totaled Ps.12,562 million (equivalent to US$966 million). These deposits represented 16% of the Bank’s total deposits.

The following table sets forth our estimates of the relative proportions of loans and deposits attributable to our principal markets

During 2015, BBVA Francés maintained its market position, centering its efforts on those values that marked the success of the strategy implemented in the preceding year.

In the area of consumer financing, the Bank staged the re-launching of Francés Go, with the new app Frances GO 2.0. The tool became the main channel through which we contact and interact with clients and non-clients, communicating promotions of strong impact involving leading brands in the main industries with the addition of experiences (i.e. tickets to football matches, international shows or exclusive events) via coupons and lotteries.

At the same time, the Bank continued with the holiday season campaigns, based on discounts and benefits. The Bank staged the popular “discount days” at the Unicenter shopping mall and “Summertime” campaigns were developed at the main tourist centers of the Argentine coastline, as well as a “Winter” campaign at Cerro Catedral, in San Carlos de Bariloche, the country’s most important skiing center.

BBVA Francés continues to have a presence in the world of entertainment, by sponsoring shows through its relationship with producers like Move and Popart and by offering differential services, such as exclusive pre-sale and installments without interest.

As sponsor of the two most important soccer clubs of Argentina, Boca Juniors and River Plate, the Bank accompanied its clients in one of the great Argentine passions, offering them exclusive benefits, such as visits to training sessions, photographs in the field and access to field seats among others. Halfway through the season, the Bank started sponsoring “Club Atlético Talleres de Córdoba”.

The Bank also adjusted its efforts in order to optimize its client-acquisition strategy and worked mainly on actions addressed to improve activation, use and retention of clients.

After re-engineering our client´s acquisition strategy in 2014, in 2015 we put substantial effort into multichannel experience, by incorporating new points of sale, one-click sales and actions aimed at gaining new clients through existing ones (“member get member”), thus generating an online response on the Bank’s website and app, which resulted in improved client acquisition results.

The consolidation of products offered through co-brandings was the result of the mature relationship with our partners, such as River, Boca, LANPASS, Peugeot. This has made it possible to increase brand recognition, creating tangible monetary value for the business and a growing sense of loyalty to the Bank.

The combined effect of all these actions has permitted to to consolidate BBVA Francés as the second largest private bank in the market for consumer financing products, maintaining the growth achieved in 2014 and gaining additional market share in 2015.

BBVA Francés continued proactively offering different investment options for each client:

The year started with an aggressive fixed-term deposit campaign in the first quarter, which fully complied with the established growth goals.

In addition, we continued to promote in multiple ways the use of the various channels where clients can sign up for our products safely and easily. We also added the possibility of operating fixed-term deposits through digital (mobile) channels.

The LANPASS Advanced Fixed-Term Deposit, which has little competition in the market and is highly valued by the different client segments, continues to be an innovative product that rewards clients with LAN frequent-flyer miles (“LANPASS KMs”) instead of a fixed interest rate, as traditional fixed-term deposits.

On July 27, 2015, the BCRA increased the minimum interest rate for long-term deposits and the maximum deposit amount to which that minimum rate applies (from 350,000 to 1 million pesos). BBVA Francés developed the tools required to appropriately and timely comply with this regulation.

Throughout 2015 BBVA Francés offered its clients investment alternatives based on their profiles with a view of making them maintain their investments with the Bank. This was achieved with a favorable spread versus the BCRA, in spite of the substantial volume of placements that were affected by the regulated rates. Near the end of the year, the new government de-regulated the rates for fixed-term deposits both in pesos and U.S. dollars.

In 2015, payroll management was a key driving force of our transactional business, with more than 17,000 new payrolls incorporated, the highest growth in the last three years.

To make this possible, we engaged in a series of commercial actions to attract, retain and finalize payrolls from companies, which involved designing offers tailored to employers and employees.

We believe that LANPASS, Francés Go and the alliances with Boca, River and Talleres were the main factors that made our payroll management products the most competitive in the market.

The challenge for 2016 will be to maintain this growth rate, focusing on attracting new clients and improving their experience.

Electronic banking continues its consolidation as a priority tool for BBVA Francés.

Automatic means have become the most important piece of the Transactions Migration Plan together with the cooperation of Express Managers at the branches, who instruct and help the clients in this process of change. There was staff of 152 managers giving assistance at 138 branches at December 31, 2015.

The Bank is working on an ambitious plan to be implemented in 2016, which involves an important investment and a significant increase in devices as well as the renovation of those that became obsolete, with the goal of replacing them for devices with greater and more advanced services.

In 2016, this plan will be intensified and the branches will be provided with tools and technology in order to improve management, and reduce amount and time attending customers and transactional costs.

We opened in 2015 an Express attention point at Reconquista 281, Microcentro, CABA, available from 7 to 20h. It includes four automated teller machines, four self-service stations, two Francés Express desks and personnel for assisting clients.

This new model is expected to help improve the clients’ experience by offering them a better service through modern technologies and channels. More operating sites are being made available, reducing waiting times and using more advanced equipment.

During the year, the Bank continued with the installation of “Plus” units, which have capacity for the recognition of banknotes and allow the introduction of deposits without using an envelope, with and without Visa Debit cards, into own or third parties’ accounts, with immediate crediting and 24-hour availability. As of December 31, 2015 there were 247 such units distributed at 184 branches.

In 2016 and the beginning of 2017 a significant investment will be made in new ATMs. The plan includes the installation of 54 Cash dispenser units and 43 Plus units, apart from the renovation of 146 Cash and 197 Plus units.

The Bank continued to go ahead with the installation of new self-service units, which permit making cash deposits, check deposits and credit card payments without using envelopes and with immediate crediting. As of December 31, 2015, the Bank had 327 units distributed in 93 branches.

These strategic advances result in an increase in operational capacity since they reduce processing tasks and facilitate operation, and are expected to permit enabling more hours of availability in the reception of transactions through these automatic means.

The equipment renovation plan includes the replacement of 418 self-service units which admit deposits in envelopes by new ATS with the capacity to recognize banknotes and checks. Furthermore, 61 additional ATS units will be installed at the branches.

New LED screens were installed which allow the client to navigate through Francés Net and manage his/her keywords, both at the Express and the Flagship Branches. At December 31, 2015, the Bank had 270 “Francés Express” screens operating in its offices.

New banknote counters with counterfeit recognition capacity were incorporated, making it possible to reduce teller times by accelerating the counting of money. At present, all branches have a device for every two tellers, covering 100% of the retail offices and in-company branches.

Since the third quarter of 2015 “Teller Systematics” was implemented as a new management model. Through it, tellers are integrated into the commercial or operative platform according to their orientation. This mode makes it possible to have integral tellers, equipped with a versatile, permanent profile in continuous relationship with the rest of the branch, resulting in significant productivity gains.

With respect to Francés Net, during 2015 various developments took place tending to digitalize clients, improve the service and promote digital sales, in addition to complying with the regulatory requirements with increasing flexibility. Some innovations in this channel were:

With respect to Francés Móvil, during the year a number of new functionalities were added in order to facilitate client transactions:

Also BBVA Francés is about to implement a new operating method to avoid the request for an 8-digit key in some transactions such as transfers, credit card payments and cellphone recharging.

During 2016 the Bank will work on the payment of services, subscription and redemption of mutual funds and the taking of personal loans.

Línea Francés continues to be one of the main alternative channels for the attention of clients. During 2015 5.2 million calls were received and more than 7.7 million transactions were carried out.

Business Trends by area

Retail Banking

As of December 2015, retail banking was intermediating a volume of transactions above Ps.80.3 billion. During the year, credit investment in pesos increased by 42%, to a total of Ps.30.8 billion.

It is important to point out that loans granted to micro companies within the framework of the BCRA regulations relating to credit lines for productive investments recorded a strong performance in 2015.

In terms of liabilities, client resources increased 42% to a volume of Ps.49.4 billion in deposits at December 31, 2015. Transactional deposits grew 40%, whereas fixed-term deposits were 45% higher than the previous year.

During 2015 we focused our work on the following issues:

Commercial and operative systematics are a fixture throughout the retail world.

Significant advances were made this year in systematizing controls, alerts and procedures both in the commercial and operative areas.

BBVA Francés opened in 2014 a new ‘Flagship branch’ office, which is an innovative space through which the Bank has launched the layout for the branch of the future. This new office model is aimed at improving the relationship with the clients by emphasizing such concepts as transparency, innovation and use of new technologies.

The branch is located in Martínez, in the province of Buenos Aires, and was built according to a futuristic design which we expect will become an icon in the district.

With this new office model, BBVA Francés places its clients at the center of the relationship, providing them with an office where the whole space is for the client.

As is the case with every innovation achievement, and with a new test methodology, the tools for attention to clients have been substantially improved, moving away from established standards and toward strong innovations.

The results so far are quite positive in terms of levels of attention, flow of new clients and requests from current clients seeking to be attended under this new branch concept. A substantial percentage of our clients operate digitally, in line with our strategy.

This channel’s management area continues to be strengthened and adjusted as a channel mainly devoted to the payroll segment. We made significant progress in productivity and made adjustments to the management and direction styles.

Access to the digital world continues to be a priority. We continue to simplify access to our digital tools and the use of Francés Net and Francés Móvil.

Additional strength was given to the functionalities for operating and acquiring products and the goal for 2016 is to have a new Francés Net with a completely renovated experience for clients.

We are developing various means and tools to ensure that clients become acquainted with our digital tools, experience them and verify their significant benefits.

Through internal campaigns and communications we promoted the spread of digital banking among our employees in all branches.

The launching of a new paradigm for Francés GO, with benefits and experiences for clients and non-clients, is something new in the Argentine market.

The year 2015 was heavily marked by the promotion of productivity, client attention and digital banking development.

In the retail banking area, we continued to advance towards a more personalized management supported by tools and protocols and assigning specialized managers by sector:

High-value clients are one of the main strategic objectives of BBVA Francés. During 2015, the so-called PREMIUM and PREMIUM WORLD segments have continued to develop as planned, with a schedule of actions and development of products suited to their requirements.

Among the highlights of the year are the following:

Improvements in the Model of Attention: training sessions were held for operators of the Francés Premium and Premium World Lines, oriented to the knowledge of the new Protocol of attention for High Value clients of the Francés Line. Apart from this, new Premium and Premium World Executives were trained so as to maintain management quality levels.

Middle Market

As of December 31, 2015, this segment was intermediating a volume of transactions above Ps.24.6 billion. During the year, credit investment in pesos grew 46% to Ps.15.8 billion.

Middle Market Banking maintained the best non-performing portfolio indicator in the market at December 31, 2015, with an NPL of 0.17%, as a result of careful administration and persistent monitoring of alerts and red flags.

Business profitability was an aspect to be preserved, and this was reflected in the income from services, which totaled Ps.867.5 million during 2015, up 102% during the year. Foreign trade and insurance were the main drivers of this growth.

In terms of liabilities, client resources went up 33% to a volume of deposits of Ps.8.8 billion at December 31, 2015. Sight deposit balances went up 39%, and fixed-term deposits up 11%.

As for the commercial strategy, it was centered on two basic objectives:

As a result of these actions, the total of clients assigned to and attended by company officers was 20,750 at the end of 2015. More than 160 clients were added to the Institutions segment, which at the end of 2015 had a portfolio of 3,551 clients, compared to 5,300 in the Agricultural segment.

Middle-market banking, together with its support areas, continued to develop the Relationship and Direction Model for the purpose of synchronizing all-inclusive client management, ratifying its centrality in all relationships.

This project was implemented along three main lines of action:

By the end of 2016, we expect our Banking business will be oriented to generate relationships with clients by combining an approach in three dimensions:

These three dimensions find support in processes that are the key for managing the business: Comex, Canal Vendor, Transactional, Leasing, Checks, Clients, Prices and Loans for productive investment

BBVA Francés continues to work in order to be a strategic ally of Argentine SMEs. It directs its commercial offering to services, industrial or commercial companies with annual revenues up to Ps.18 million.

For the purpose of spreading this model, in 2015 the Bank added 18 new executives. In addition, 18 specialists focused on companies with higher revenues added to their functions advising clients from both segments. Thus, SMEs and Businesses have already incorporated a total of 110 highly trained individuals to further the development of these clients.

On the other hand, and for the purpose of supporting SMEs’ growth, an integral program was launched called “On the road to success,” which includes a digital platform where an SME gets access to a community and receives free of charge online training on finance, business administration, leadership and personal management. It can also sign up for participation in the Road to Success

prizes. These rewards distinguish the best company growth plans according to four categories and give all contestants the opportunity to access free-of-charge in-person training at the Business School of the Argentine Catholic University, where they acquire expertise and analysis tools to improve such plans. There were also Ps.100,000 prizes for the winners in each category.

Thus we continued to work in order to provide more and much better services to the country’s most dynamic sector.

Corporate & Investment Banking (“C&IB”)

As of December 2015, C&IB was intermediating a volume of transactions above Ps.20.0 billion. During the year, credit investment in pesos increased by 15%, to a total of Ps.8.1 billion mainly due to a coordinated effort between C&IB, global management and the clients.

In terms of liabilities, client resources increased 40% to a volume of Ps.11.9 billion in deposits at December 31, 2015. Transactional deposits grew 24%, whereas fixed-term deposits were 60% higher than the previous year. All of these mainly due to a coordinated effort between C&IB, global management and the clients

Income from services continues to evolve favorably given the strengthening of transactional services and a consolidated relationship with clients. This strategy was the key to duplicating payment volumes and significantly increasing collection volumes.

In sum, in 2015 C&IB focused its management on increasing the transactional business. It consolidated the relationship with the clients thanks to a better understanding of their transactions, keeping ahead of their needs and offering a set of products and services adapted to them.

The development of activities throughout the year was marked by local and international factors that caused a slight deceleration of the Argentine economy as compared to previous years. The presidential election, the re-appreciation of the dollar and the slump in the price of commodities were some of the events that brought about the above-mentioned situation.

Anticipating this, the management of Corporate Banking was focused on gaining the client’s loyalty through a continuous development of non-credit products. Tools such as Francés Net Cash made it possible to improve the payments and collections system and integrate the relationship with Global and Distribution Markets, multiplying the offer of spot products and derivatives. The synergies with other areas of the Bank were also strengthened in order to give a boost to transactions in the Companies and Retail segments.

Global Market Products have been quite important with respect to the market’s liquidity needs, with the placement of new corporate debt issuances. Likewise, and as a complement to the investment banking business, a structuring service has been provided through swap transactions (IRS), designed to cover the clients’ interest rate risks.

Related products

During the year, the Bank maintained its bi-monthly campaigns to attract new clients, as well as those based on the portfolio’s cross-sell (Televenta).

We conducted tests to promote the sale of policies in two territories through the figure of the Insurance Promoter. The tests were successful and we will extend the experience to other territories.

The sale of insurance policies for companies continued, mainly in the SMEs and Middle-market segments through specialists.

In order to maintain adequate coverage levels for the clients, the insured amounts continued to be adjusted for the different types of insurance.

A campaign was also launched for insuring against ATM robbery in the Premium segment, which resulted in strong growth of the product’s penetration in that segment.

A new record was established in the sale of insurance through ATMs and efforts will be made to expand the range of products offered.

We also provide advisory services to our clients for the selection of adequate coverage of risks related to life, personal accidents and home and ATM robbery, within a range of products offered by certain insurance companies.

Additionally, as part of our overall business, we hold 12.22% of the capital stock of BBVA Consolidar Seguros S.A., with BBVA holding the remaining shares of the company.

In 2015 the Bank continued along the path marked by the regulatory modifications that changed the direction of the business.

The design of a new business model for the management of investors’ portfolios, presented as a target for the year, is still pending resolution by the regulatory body.

We made progress in adapting systems for this new segment, aside from a series of successful tests with simulated portfolios.

The year ended up with changes in the foreign-exchange area which are expected to redefine the industry, orienting it toward a longer-term investment profile, although this transition is likely to be gradual. The Bank works in order to stay ahead of this scenario by developing products adapted to the needs of our clients..

During 2015, Argentina’s mutual investment funds industry continued on a path marked by regulatory changes that altered the orientation of the business.

According to provisional data compiled by the Chamber of Mutual Investment Funds (CAFCI), the industry ended the year with assets under management of Ps.212,529.9 million, up Ps.80,219.5 million from December 31, 2014, or an increase of 60.6%.

This increase was led by the market-funds segment, which ended the year totaling Ps.160,880.3 million, a 66.1% increase. Noteworthy in this category were the fixed-income funds, which increased by Ps.43,833.2 million, or 65.4%, to a total of Ps.110,817 million at December 31, 2015.

In the meantime, the fixed-term deposit funds reached the end of 2015 with a total of Ps.51,649.7 million in assets under management, an increase of Ps.16,215.9 million, or 45.8%.

At December 31, 2015, the assets managed by BBVA Francés Asset Management amounted to Ps.8,845.8 million, an increase of Ps.2,273.7 million, or 34.6% over the previous year, with a 4.2% participation in the Mutual Investment Funds market.

In the fixed-term funds category managed by the Bank, FBA Renta Pesos ended 2015 with Ps.2,559.5 million of assets under management, an increase of Ps.43.9 million, or 1.8% over the preceding year.

Regarding the market funds, we experienced an increase of Ps.2,229.8 million or 55% during 2015. These funds ended the year with Ps.6,286.3 million in assets under management, and a market share of 3.9%.

In this last category, the growth of the FBA Ahorro Pesos fund stood out, which went up Ps.1,766.1 million (+47.8%), to end the year with Ps.5,458.8 million in assets under management.

Revenue from services generated by the company reached Ps.111,998.7 million in 2015, 163.1% higher than in 2014.

At December 31, 2015 the company had registered with the C.N.V. eight managed funds whose situation at such date was as follows:

As of December 31, 2015, our mutual funds had the following equity volumes:

Source: see Note 13.2. to our Consolidated Financial Statements.

As in previous years, the Company paid particular attention to the evolution of the international economic and financial situation, the behavior of the currencies market and the performance of prices as regards crude oil and other commodities. Within the local context, the monitoring of activity, inflation and public spending levels was intensified.

The year ended with changes in foreign exchange regulations, which are expected to redefine the industry and orient it towards a longer-term investment profile, even if such transition is expected to be gradual. The Bank aims to keep ahead of the new scenario by developing products adapted to the needs of our clients. For 2016, mutual investment funds are expected to constitute an efficient alternative for different types of investment, leading us to believe that the industry outlook is favorable.

In such scenario, the Company will continue to work in order to expand the offer of products and contribute to an improved management of investors’ risks.

International Operations

Since the Argentine Crisis began at the end of 2001, access to international markets for Argentine companies has been quite limited. Notwithstanding this constraint, we have been able to assist our clients with traditional foreign trade services, including letters of credit, collections, bank drafts, fund transfers and foreign currency transactions.

Business Area Financial Information

The following table shows assets and income derived from the business areas for the fiscal years ended December 31, 2015, 2014 and 2013:

C. ORGANIZATIONAL STRUCTURE

Banco Bilbao Vizcaya Argentaria S.A. (BBVA)

As of December 31, 2015, BBVA owned approximately 76% of our capital stock.

BBVA is the result of a merger by absorption of Argentaria and Banco Bilbao Vizcaya, S.A., formerly Spanish retail banking, asset management and insurance providers, into Banco Bilbao Vizcaya Argentaria, S.A. The merger was approved by the shareholders of both institutions on December 18, 1999. As of December 31, 2015, BBVA, through its subsidiaries, has a presence in 9 Latin American countries, United States, Mexico, several countries throughout Europe and Turkey.

BBVA is a global financial group, organized in six geographical business segments: (i) Banking Activity in Spain, (ii) Real Estate Activity in Spain, (iii) Mexico, (iv) South America, (v) the United States and (vi) Eurasia. In addition to these geographical business areas, BBVA has a separate “Corporate Center” segment. This segment handles certain general management functions. Some of the benefits we receive from the BBVA Group are:

Subsidiaries and affiliates of BBVA Francés

In 2015 the local securities market was affected by political developments; surveys, political analyses and the partial results of a series of elections, all of which conducted to market volatility.

The main market indicators ended the year up 35%. Nevertheless, the index that only includes Argentine companies (M.AR) recorded a 60% increase. Such difference was a result of the downward trend experienced by both Petróleo Brasileiro APBR (-60%) and Tenaris TS (-8.7%).

At the end of 2015, the market capitalization of domestic shares was Ps.729,048 million, 43.2% higher than at December 31, 2014 (with a total of 87 companies).

Against this context, the securities markets had a strong performance, with the bonds index (IAMC) recorded a 53% increase (the largest since 2009). This is the result of a change in the political scenario and developments regarding the remaining defaulted debt leading to better expectations for the placement of new debt, a greater control of public spending and lower inflation.

In this scenario, since the enactment of Law 26,831 and RG 622/13 CNV, Francés Valores S.A. (“Francés Valores”) was devoted to providing the service of purchasing and selling negotiable securities and other authorized securities and investments directly to clients. Since January 1, 2015 the transactions with securities through BBVA Francés, as promoter of Francés Valores, were canceled in accordance with the new market regulations.

For this reason, the current transactions and the operating income of Francés Valores were reduced, limiting its management activities to investing assets in its portfolio, but keeping its operational capacity and the search for new commercial and business opportunities. In this context, the net income for 2015 was Ps.17 million, mainly generated by the revaluation of its own investments and the minimum operative expenses required in order to maintain the company with full capacity to operate.

As of December 31, 2015, the assets managed by BBVA Francés Asset Management (“Francés AM”) amounted to Ps.8,845.8 million, an increase of Ps.2,273.7 million, or 34.6%, over the previous year, with a 4.2% market share in the mutual investment funds market.

Between December 2014 and 2015 the average assets managed by Francés AM increased by Ps.3.8 million, or 55%, from Ps.6.6 million to Ps.10.5 million.

In the fixed-term funds category managed by Francés AM, FBA Renta Pesos ended the year with assets under management of Ps.2,559.5 million, an increase of Ps.43.9 million, or 1.8%, from 2014.

With respect to market funds, Francés AM experienced an increase of Ps.2,229.8 million, or 55%, during the year. These funds ended the year with a Ps.6,286.3 million, and a market share of 3.9%.

In this last category stood out the growth of the FBA Ahorro Pesos fund, up Ps.1,766.1 million (47.8%), to end the year with Ps.5,458.8 million in managed funds.

Commissions generated by Francés AM in 2015 amounted to Ps.111,998.7 million, 163.1% more than in 2014.

Grupo Consolidar comprises Consolidar A.F.J.P. S.A, (Administradora de Fondos de Jubilaciones y Pensiones, under liquidation proceedings) and BBVA Consolidar Seguros S.A., where BBVA Francés had stakes of 53.89% and 12.22%, respectively as of December 31, 2015.

Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings)

Law No. 26,425 was enacted on December 4, 2008. It abolished the capitalization system that was part of the Integrated Pension and Retirement System (Sistema Integrado de Jubilaciones y Pensiones) which was merged into and substituted by a single public distribution system called SIPA (Sistema Integrado Previsional Argentino, i.e. Argentine Integrated Pension System). As a consequence, Consolidar A.F.J.P. S.A. no longer managed the resources in the individual capitalization accounts of its members, who were beneficiaries of the Argentine Integrated Pension System. These funds were transferred to the Sustainability Guarantee Fund of the Argentine Pension System in the same form as they were invested, and the Argentine Social Security Administration (ANSES) became the only and single holder of its assets and rights.

On October 29, 2009 the ANSES issued Resolution No. 290/2009 granting pension and retirement fund managers the possibility of reconverting their corporate purpose to manage funds consisting of voluntary contributions and deposits of the members in their respective capitalization accounts. Interested companies had 30 business days to express their interest.

In view of all of the above, on December 28, 2009, and bearing in mind that it was impossible for Consolidar A.F.J.P. S.A. to maintain the corporate purpose for which it had been organized, the company held a Unanimous Special Shareholders Meeting. The resolution of this meeting was to dissolve and subsequently wind-up the company as of December 31, 2009. It was understood that this was the best alternative to preserve in the best possible way the creditors’ and shareholders’ interests. At the same time, and in accordance with the terms of the Argentine Corporations Law, the Shareholders’ Meeting resolved to appoint accountants Messrs. Gabriel Orden and Rubén Lamandia, to liquidate Consolidar A.F.J.P. S.A. These accountants are the legal representatives of the Company as of December 31, 2009 and are working in order to wind it up. As of this date, they are taking all necessary steps to carry out the liquidation of Consolidar A.F.J.P. S.A.

On January 28 2010, the dissolution of Consolidar A.F.J.P. S.A. (in liquidation) was registered with the IGJ, as were the names of the appointed liquidators.

The General and Special Shareholders’ Meeting of Consolidar A.F.J.P S.A. (undergoing liquidation proceedings) approved on October 19 2009 a voluntary reduction of the corporate capital by Ps.75 million, which was approved by the Office of Corporations on January 11, 2010. Subsequently, on January 19, 2010, all capital contributions were transferred to the shareholders, in accordance with the above-mentioned reduction.

BBVA Francés, as shareholder, requested that Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings) submit a request for negotiations with the Argentine Ministry of Economy and Public Finance (Ministerio de Economía y Finanzas Públicas de la Nación) and the Argentine Social Security Administration (Administración Nacional de la Seguridad Social). This was done in accordance with the terms of Law No. 26,425 in order to find solutions to the consequences of implementation of the Law. This request was filed by Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings) on June 11, 2010.

In turn, on December 7, 2010, Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings) filed a complaint for damages against the Federal government and the Ministry of Labor, Employment and Social Security at the Contentious-Administrative Federal Court number 4, Secretariat number 7, under case number 40,437/2010. The claim was confirmed by BBVA Francés as controlling shareholder of the company. On July 15, 2011 Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings) and BBVA Francés filed an additional motion to determine the amount of damages. On March 9, 2012, the Court ordered the service of process to the National State.

In this connection, on May 13, 2013, the judge in charge ordered the commencement of the trial stage. The Company is collecting and submitting all witness, documentary and expert proof and on May 28, 2013 it accompanied the examinations and the statements of its witnesses. There have been no further updates on the case since then.

BBVA Consolidar Seguros S.A.

BBVA Seguros operates in fire, mixed family and comprehensive insurance, civil liability, theft, personal accidents, umbrella life and other insurance risks.

During 2015, it achieved a level of issued premiums of Ps.1,496.3 million, which represents a growth rate of 42% with respect to the previous year. This increase was due to our strategy for combining an ample variety of products with multiple channels of distribution and attention, all of which are based on segmentation of client’s needs. Accidents paid reached Ps.204.5 million in 2015, that is to say, an increase of 14% over its issued premiums.

Within the framework of the “Plan Estratégico Nacional de Seguros” (PLANES), and by Resolution SSN 37.163 dated October 22, 2012, the General Regulations for the Insurance Activity were amended for the purpose of redirecting an important part of the insurance companies’ investments to the productive sector of the Argentine economy. The new clause (k), point 35.8.1 of the Regulations for the Insurance Activity established a range of percentages on total investments, excluding real property, which the companies must assign to certain productive investments.

Clause (k) states that the investments must consist of debt securities, financial trusts, deferred checks sponsored by Reciprocal Guarantee Companies (all of them authorized for listing), as well as mutual funds (FCI) PyME or FCI productive of regional economies and infrastructure, and of technological innovation projects, assets or other negotiable securities whose finality is the financing of productive or infrastructure projects at medium and long term in the Republic of Argentina.

For 2016, the plan for BBVA Seguros will be to continue expanding its main lines of business, in particular personal accidents, umbrella life, life, debit balance, family integral and combined and other risks, based on offering products to satisfy in a differential manner the needs of its main clients.

The shares of PSA Finance are divided in equal parts between BBVA Francés and Banque PSA Finance, a subsidiary of PSA Peugeot Citroën S.A., with headquarters in France.

PSA Finance’s main business is focused on providing secured loans for the purchase and leasing of new Peugeot and Citroën vehicles. It also offers financing to purchase second-hand cars (for clients suggested by the official concessionaries’ networks), as well as other financial products and services linked to the purchase, maintenance and insurance of vehicles.

The motor car industry in Argentina closed the year with a total of 622,000 vehicle licenses, 4.9% less than 2014.

The year 2015 has been difficult for Peugeot and Citroën , mainly due to restrictions imposed on the importation of cars and car parts, which caused a reduction in PSA Finance’s market share greater than the overall market decline. The market share of PSA Finance went from 15.1% in 2014 to 11.7% in 2015.

In spite of this adverse environment, PSA Finance reached a market penetration of 18.3%, in the market for transactions involving newly-issued vehicle licenses, for both brands, an increase of 2.4 percentage points with respect to 2014. This was mainly the result of the close cooperation between PSA Finance, the motor car terminal and the network of concessionaries.

The company has successfully managed this adverse environment and achieved a total of 16,923 financed transactions in 2015, including secured loans for new, second-hand and leased cars, for a total value of Ps.1,565 million.

As of December 31, 2015, the portfolio of 51,999 clients reached a valuation of Ps.2,195 million, 1.8% below the figure at the end of 2014.

Regarding product offerings, in 2015, as in previous years, PSA Finance maintained a working strategy of jointly embracing the Peugeot and Citroën brands, paying particular attention to the launching of so-called financial product campaigns at subsidized rates. This has softened the impact of a contraction in financing.

Furthermore, intensive work was made in relation to the network of concessionaries, focused on the concept of fidelity and maintaining diversified product offerings, with an eye on the competitors. Thanks to this, 99% of the concessionaries in the Peugeot Citroën commercial network continue to work with PSA Finance, with the result that 85.4% of all financed sales involved a loan from PSA Finance.

In a context of market contraction, the work in the past few years has been focused on attaining certain profitability goals, and 2015 has been no exception. This has involved, as in previous years, developing a policy of optimization and containment of financial costs by carefully tracking market conditions on a regular basis in order to benefit from the best combination of funding alternatives at all times.

As a consequence, net income for PSA Finance was Ps.261 million in 2015, an increase of 22% over 2014.

Considering that 2016 will be a transition year, in a context that has witnessed a change of government together with a change of macroeconomic policies, the car industry foresees a scenario where registrations of new vehicles (licenses) will be in the vicinity of 600,000. PSA Finance expects to keep working to maintain its market share.

We have developed a system of excellence over the past years, placing the focus on the company’s strategy, fostering the development of market-competitive products and putting in the hands of Peugeot and Citroën concessionaires a set of tools for selling our financial products, with profitability as the key element. In 2016 we expect to continue on the same path.

Rombo Compañía Financiera (RCF) is the main financing company of the Renault concessionaries’ network, both for new and second-hand vehicles. In 2015 Renault achieved a 12.7% share of the car market. In an environment of strong competition it has managed to maintain its share and positioning based on the launching and renovation of models with the significant support of secured loans provided by its financial entity.

Although the industry as a whole was negatively affected by high interest rates combined with the limitation on imports, this negative impact was counterbalanced by good commercial management, mainly focused on improving penetration and fidelity within the network and with a particular emphasis on the control and management of commercial risk.

With this support, RCF financed a record 21,797 new vehicles in 2015 (compared to 13,804 in 2014) and 4,611 second-hand units (compared to 3,900 in 2014), a growth of 49%. Thus the aggregate value of financing transactions was Ps.2,914 million, an increase of 36% with respect to the Ps.2,138 million financed in 2014 and a level similar to that of 2013.

These levels allowed RCF to keep its position as one of the leading financial companies in the Argentine market, ranking as one of the most important companies based on the amount of granted loans and client fidelity.

The indicators that measure portfolio risk and quality have maintained relatively low values as compared to the company’s historical levels. The volume of non-performing loans increased from 2.6% in December 2014 to 1.4% at the close of 2015, mainly as a result of a significant increase in the loan portfolio.

Regarding financing, during 2015 two series of corporate bonds were issued for a total amount of Ps.342.4 million, with a total outstanding balance of Ps.520 million in corporate bonds at the end of the year. The 2015 issuances were the greatest in the company’s history. The amount of the program remained at Ps.1,000 million, and it was rated as “raAA” by Fix SCR S.A. Agente Calificadora de Riesgo and as “AA2.ar” by Moody’s.

Net income during 2015 was Ps.233.9 million, 10% lower than in 2014, due to a lower amount of transactions. It should be noted that our financial management was able to achieve significant savings in financing costs in a context of marked volatility and uncertainty, and was also able to quickly adapt the company’s structure to the new volume of transactions.

The following chart reflects our subsidiaries as of December 31, 2015:

The following information is related to our subsidiaries and affiliates as of December 31, 2015:

Equity Investments

The following are all positions that we hold in non-financial institutions where we own more than 2% of the invested companies’ equity as of December 31, 2015.

D. PROPERTY, PLANTS AND EQUIPMENT

BBVA Francés is domiciled in Argentina and has its principal executive offices at Reconquista 199, C1003ABB Buenos Aires, Argentina. The principal executive offices, which we own, are approximately 16,000 square meters in area.

At December 31, 2015, our branch network consisted of 251 retail branches, of which 112 were located in properties that we own and 139 were located in properties leased to us. The branches are located throughout all of the 23 Argentine provinces as well as the City of Buenos Aires.

On July 10, 2013, BBVA Francés and Consultatio S.A. signed a sale and purchase agreement, under which the Bank acquired 23 of the 33 floors of the building under construction by Consultatio S.A., which will become the “BBVA Tower.” This is the largest corporate headquarters real estate development project in the country and is part of the plan designed in 2010 by BBVA Francés to unify its core areas, currently divided among 10 buildings in the City of Buenos Aires. The goal is to have a building with the highest construction and environmental standards that will allow the Bank’s staff to work together in the same area, thus achieving greater efficiency. The building is being developed according to the highest international environmental and sustainability standards and with the commitment of the BBVA Group to preserving the environment. The investment of approximately Ps.1,200 million has a payment schedule associated with the work progress of the project. To date, construction is progressing according to plan and projected for completion in 2016. As of December 31, 2015 the Bank had invested approximately Ps.1,340 million in the project.

E. SELECTED STATISTICAL INFORMATION

The following information is included for analytical purposes and should be read in conjunction with the Consolidated Financial Statements as well as “Item 5. Operating and Financial Review and Prospects”. This information has been prepared from our financial records, which are maintained in accordance with the regulations established by the Central Bank and do not reflect adjustments necessary to state the information in accordance with U.S. GAAP. See Note 25 to the Consolidated Financial Statements for a summary of the significant differences between Argentine Banking GAAP and U.S. GAAP.

The average balances of interest-earning assets and interest-bearing liabilities, including the related interest earned or paid, were calculated on a monthly basis in the case of the financial information of BBVA Francés and its subsidiaries. Average balances have been separated between those denominated in pesos and in dollars.

The nominal interest rate is the amount of interest earned or paid during the period divided by the related average balance.

The nominal average rates for each fiscal year were converted to average real rates as follows:

Where:

Rp: real average rate for Argentine peso-denominated assets and liabilities of BBVA Francés;

Rd: real average rates for dollar-denominated assets and liabilities of BBVA Francés;

Np: nominal peso average rate in peso-denominated assets and liabilities for the fiscal year;

Nd: nominal dollar average rate in dollar-denominated assets and liabilities for the fiscal year;

D: devaluation rate of the Argentine peso to the dollar for the fiscal year; and

I: Argentine inflation rate (“WPI”).

The formula for the average real rates for dollar-denominated assets and liabilities (Rd), when compared with the corresponding nominal rates, reflects the loss, or gain, in purchasing power of the dollar caused by the difference between peso devaluation and inflation in Argentina for each fiscal year.

Included in interest earned are the net gains on our portfolio of government securities and related differences in market quotations. We manage our trading activities in government securities as an integral part of our business. We do not, as a matter of practice, distinguish between interest income and gain or loss on our government securities portfolio. Non-accrual loans have been included in the related average loan calculation.

Negative interest rates in real terms occur in periods when the inflation rate exceeds the nominal interest rate in pesos or exceeds the combination of the nominal interest rate on dollar-denominated assets or liabilities and the devaluation rate.

The following illustrates the calculation of the real interest rate in pesos for a dollar-denominated asset yielding a nominal annual interest rate of 20% (Nd=0.20) using different combinations of devaluation and inflation rates. If devaluation is 15% per annum (D=0.15) and inflation runs at a rate of 25% per annum (I=0.25), the result is as follows:

which in this case means that, because inflation exceeds devaluation, the real interest rate in pesos is less than the nominal interest rate in dollars. In this example, if the devaluation rate had been 30% per annum, and the other assumptions had remained the same, then the real interest rate in pesos would have been 24.8% per annum, which is more than the nominal interest rate in dollars. If the inflation rate were to exceed 38% per annum, then the real interest rate in pesos on this dollar denominated asset would become negative.

Average Balance Sheets, Interest Earned on Interest-Earning Assets and Interest Paid on Interest-Bearing Liabilities

The following tables show average balances, interest amounts and real rates for our interest-earning assets and interest-bearing liabilities for the fiscal years ended December 31, 2015, 2014 and 2013.