================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
------------------------------------
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
November 19, 2002
------------------------------------
BBVA Banco Frances S.A.
(Exact name of registrant as specified in its charter)
BBVA Banco Frances S.A.
(Translation of registrant's name into English)
Reconquista 199, 1006
Buenos Aires, Argentina
(Address of principal executive office)
Indicate by check mark whether the registrant files or
will file annual reports under cover of Form
20-F or Form 40-F:
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes No X
--- ---
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A
================================================================================
BBVA Banco Frances S.A.
TABLE OF CONTENTS
Item
----
1. BBVA Banco Frances reports consolidated second quarter earnings for fiscal
year 2002 ...............................................................
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BBVA Banco Frances S.A.
Date: November 19, 2002 By: /s/ Maria Elena Siburu de Lopez Oliva
----------------------------------------
Name: Maria Elena Siburu de Lopez Oliva
Title: Investor Relations Manager
[GRAPHIC OMITTED] BBVA BANCO FRANCES
CONTACT:
Maria Elena Siburu de Lopez Oliva
Investor Relations Manager
Phone: (5411) 4341 5035
E-mail: [email protected]
Maria Adriana Arbelbide
Investor Relations
Phone: (5411) 4341 5036
E-mail: [email protected]
--------------------------------------------------------------------------------
November 18, 2002
BBVA BANCO FRANCES (NYSE; BFR.N; BCBA:FRA.BA; LATIBEX: BFR.LA) REPORTS
CONSOLIDATED SECOND QUARTER EARNINGS FOR FISCAL YEAR 2002
Executive summary
o Net income for the second quarter of fiscal year 2002 accounted for a $290
million loss as compared to a $37.6 million loss registered in the
previous quarter. The decrease in Net income is mainly explained by $222.2
million provision for loan losses accounted for during the present quarter
and by a $138.4 million provisioning related to lawsuits registered in
Other income/expenses. This last loss stems from the difference between
the $1.4 at which foreign currency deposits were converted into pesos plus
the CER adjustment and the free exchange rate at which successful legal
injunctions have to be paid back by the Bank.
o It is important to highlight that BBVA Banco Frances shows recurrent
positive Operating income before Provision for loan losses in the
post-crisis financial system.
o Management expects to make all necessary provisions during the present
fiscal year in order to comply with two main targets. The first one is
related to non-performing loans from the private sector. In that sense, on
top of the excess provisioning registered during the previous fiscal,
Banco Frances will continue with its provisioning policy during the
present fiscal year. The second target is related to the provisioning of a
significant part of the losses stemming from the refunding of deposits due
to legal injunctions.
o Significant losses in the present fiscal year will be covered by the
equity injections that will strengthen the Bank's capital base. During
December 2002, Banco Frances will conduct a capital increase mainly
through the capitalization of debt. BBVA, the Bank's main shareholder, has
publicly announced its intention to capitalize US$ 130 million of
subordinated debt issued by Banco Frances and a US$79.3 million loan
granted by BBVA on April 4, 2002.
-1-
o On May 13, 2002, BBVA Banco Frances sold its equity interest in BBVA Banco
(Uruguay) to BBVA for a total amount of US$ 55 million.
o The Board of Directors expects to find in year 2003 the necessary stable
environment for business development.
Second quarter of Fiscal Year 2002
As anticipated in our first quarter earnings release, the dire economic
scenario persisted through the June quarter, with economic activity bottoming
out in the second quarter. Gross domestic product (GDP) contracted 13.6% in the
second quarter over the same quarter in 2001, but increased 0.9% over the first
quarter. Unemployment reached a record high of 21.5 % in May 2002. Similarly,
currency data show that the peso continued its depreciation trend in June,
losing 6.3% of its value to the US$, following a 16.9% deterioration in May.
Such weakening currency together with the lack of definitions on the economic
policy front and an unsolved negotiation with the International Monetary Fund
(IMF) brought about a drop in international reserves to US$9.8 billion at the
end of June and a significant outflow of deposits.
The crisis in the financial system deepened with an approx. $9 billion drop in
total deposits, peaking interest rates, the marked depreciation of the peso,
increasing inflation and operating results still negatively affected by two
unsolved imbalances: a) exchange rate differences in the refunding of deposits
via lawsuits and, b) substitution of the CER (Stabilization Index) for the CVS
(Salaries' variation Index) adjustment in mortgage loans and certain personal
and pledge loans. Furthermore, lack of liquidity in the financial system, the
disruption of the chain of payments in the private sector and the persistent
recession fueled the rise in non-performing loans.
Liquidity remained under pressure, although stabilizing by the beginning of the
third quarter. Short-term liquidity was menaced by currency devaluation, which
fostered depositors to seek to place their savings in a safer haven. As
mentioned in the March press release, during the June quarter Banco Frances
received financial support from its main shareholder, BBVA, to face such
short-term liquidity needs. During April 2002 BBVA granted the Bank an approx.
US$160 million loan, and later, in May 2002, BBVA acquired the Banks' equity
interest in BBVA Banco (Uruguay) for a total amount of US$55 million. The Bank
also received loans from the Central Bank due to its past participation in the
restructuring process of the Argentine financial system, and the loans received
from BBVA, the US$ 55 million sale of Banco Frances' share in BBVA Banco
(Uruguay) and the capitalization process approved by the last Ordinary and
Extraordinary Shareholders' Meeting held on August 7, 2002 - whereby BBVA will
capitalize debt for a total amount of approx. US$ 209 million.
As for medium-term liquidity, the Argentine Government has launched two
exchange plans offering depositors in the Argentine banking system the
opportunity to exchange their rescheduled deposits for newly issued government
bonds. These two voluntary exchange regimes represented a starting point for
the rebuilding of a new financial system, reducing liquidity risk in the system
stemming from the rescheduling of deposits. In the first plan ended on June 30,
22% of total rescheduled deposits in the financial system were exchanged for
Government Bonds; Banco Frances attained a higher performance of approx. 30%.
The second plan, scheduled to end in October, was extended by the Ministry of
Economy for another 30 banking days (Regulation 558 of October 31, 2002)
Results of financial operations during the second quarter have been negatively
impacted by an increase in the average cost of funds, which reduced the net
interest margin. Results of financial operations during the second quarter have
been negatively impacted by a sharp increase in interest rates. Part of the
reason behind the turnaround in deposits has been the high interest rates
offered by banks, at around 60% annually
-2-
on a 30-day certificate of deposit as compared to 10% during the previous
quarter. Similarly, interest rates on Central Bank's assistance peaked from an
average of 15% in the March quarter to an average of 60% in the June quarter.
Mandatory inflation adjustment in financial statements had an adverse effect on
financial institutions' results, which worsened in the second quarter due to
the higher wholesale price index (WPI) - 46.2% in the June quarter vs 34.3% in
the previous quarter.
The other stage in the present crisis is asset quality, which strongly
accelerated its negative trend during the second quarter. The decrease in the
operating results of financial institutions stemmed largely from high
provisioning.
The Business:
Banco Frances' business activities have contracted following the Argentine
financial crisis. The Bank has redefined its business strategy as well as the
products and services that it offers to its clients. Banco Frances believes
that it will take time to restore depositors' confidence and to rebuild a new
financial system with no restrictions on the use of cash. Until the
intermediation business recovers, the Bank's banking activities will most
likely be limited to providing certain traditional commercial banking services
which include the management of means of payment (with emphasis on electronic
means), the provision of bank accounts for transactional purposes and operation
of credit cards, transactional deposit taking, the provision of credit
facilities limited to overdrafts on demand accounts and credit-card financing.
The Bank will also develop alternative financial products to replace the
traditional intermediation business.
Since the first quarter of 2002 the Bank began to redefine its operating
structure to adjust to the new business profile including branch closures and
headcount reduction. During the second and third quarter this process was
accelerated; the Bank closed branches and further reduced the number of more
employees, implementing strict rationalization measures. Staff was reduced by
approximately 430 people during the first semester. As of the date of the
present press release the Bank has merged 40 branches.
Presentation of Financial Information
It is important to note that:
o following the devaluation of the peso and an increase in inflation, the
Argentine Exchange Commission (CNV) and the Central Bank of Argentina
mandated inflation adjustment in all financial statements. According to
generally accepted accounting principles in Argentina, financial
statements are to be restated to reflect the overall effect of inflation
on the purchasing power of the peso using coefficients based on the
general wholesale price index (WPI) published by the National Institute of
Statistics and Surveys. Inflation adjustment is mandatory whenever the
index exceeds the 8% per year level established by the Argentine
Federation of Professional Councils in Economic Sciences. During the June
2002 quarter WPI grew by 46.2%. It is worth mentioning that the current
crisis has distorted relative prices in the economy. Banco Frances
estimates for FY 2002 an increase of 40% in the CPI as compared to an
increase of 124% in the WPI, a 290% devaluation and no increase in
salaries. There are no records of such a gap between the WPI and the CPI
in the Argentine inflation adjustment system. This, together with the
devaluation effect, is distorting the Financial Statements of Banco
Frances and the present fiscal year Net income, with a WPI adjustment,
which does not reflect relative prices in the economy. However, it is
important to bear in mind that the inflation adjustment regulations
provide for an increase in Net Worth in the same amount that is reflected
as a cost in the Profit and Loss Statement.
-3-
o Accordingly and for the sake of comparison, information for previous
quarters has been restated in constant Argentine pesos as of June 30,
2002.
o all foreign currency transactions accounted for at a free exchange rate as
of June 30 have been translated into Argentine pesos at the exchange rate
of Ps. 3.80 = US$ 1.00 quoted by Banco Nacion Argentina on that date.
o information in this press release consolidates only banking activities on
a line by line basis. The Bank's interest in the Consolidar Group is
accounted for by the equity method; the holdings and results are included
in Investments in other companies and Income from equity investments,
respectively. Similarly and for the sake of comparison, following the sale
of BBVA Banco (Uruguay), figures as of March 2002 and June 2001 are
presented in this press release including the Bank's interest in BBVA
Banco (Uruguay) by the equity method.
SECOND QUARTER EARNINGS
------------------------------------------------------------------------------------------------
% Change Qtr ended
Condensed Income Statement (1) 06/30/02 vs.
in $ thousands except income per Quarter ended Qtr ended
share, income per ADS and -------------------------------- ---------------------
percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
------------------------------------------------------------------------------------------------
Net Financial Income 183,900 401,174 320,486 -54.16% -42.62%
Provision for loan losses (222,160) (224,427) (81,676) -1.01% 172.00%
Net income from services 71,233 97,847 138,491 -27.20% -48.56%
Administrative expenses (131,566) (189,930) (235,381) -30.73% -44.11%
Operating income (98,593) 84,664 141,920 216.45% -169.47%
Income (loss) from equity investments 12,529 92,430 20,534 -86.44% -38.98%
Income (Loss) from Minority interest 9,457 14,296 (991) -33.85% --
Other income/expenses (253,217) (94,046) (1,873) 169.25% --
Inflation adjustment 41,116 (130,619) -- -131.48% --
Income tax (1,188) (4,278) (49,645) -72.24% -97.61%
Net income for the period (289,894) (37,555) 109,945 -671.92% -363.67%
Net income per share (2) -1.38 -0.18 0.52 -671.92% -363.67%
Net income per ADS (3) -4.15 -0.54 1.57 -671.92% -363.67%
------------------------------------------------------------------------------------------------
(1) Exchange rate: 3.8 Ps. = 1 US$
(2) Assumes 209,631,892 ordinary shares outstanding.
(3) Each ADS represents three ordinary shares.
------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March, 2002 and June, 2001
figures, respectively.
Net income for the second quarter of fiscal year 2002 accounted for a $290
million loss as compared to a $37.6 million loss registered in the previous
quarter. Operating income as of the present quarter shows a decrease in Net
financial income and net Income from services, partly compensated by lower
Administrative expenses and a slight decrease in Provision for loan losses. The
gain accounted for in Income/loss from Equity Investments is mainly explained
by the results of the Consolidar Group and of BBVA Banco (Uruguay).
-4-
-------------------------------------------------------------------------------------------------
% Change Qtr
ended 06/30/02
Quarter ended vs. Qtr ended
---------------------------------------------------------
in $ thousands except percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
-------------------------------------------------------------------------------------------------
Return on Average Assets (1) -6.71% -0.79% 1.88% 747.56% -456.89%
Return on Average Shareholders'
Equity (1) -55.43% -7.38% 20.53% 651.49% -370.07%
Net fee Income as a % of Operating
Income 38.35% 19.61% 30.17% 95.59% 27.10%
Net fee Income as a % of Administrative
Expenses 54.14% 51.52% 58.84% 5.10% -7.98%
Adm. Expenses as a % of Operating
Income(2) 51.57% 38.06% 51.28% 35.49% 0.55%
-------------------------------------------------------------------------------------------------
(1) Annualized
(2) Adm.Expenses / Net financial income + Net income from services
-------------------------------------------------------------------------------------------------
Net financial Income:
The decrease in Net financial income of the June 2002 quarter - $ 183,900 - as
compared to the March 2002 quarter - $401,174 - is mainly explained by a
decrease in the intermediation volume in real terms and by a negative effect
related to the difference between the devaluation and the WPI affecting assets
and liabilities of Banco Frances Cayman, which is included in the Net financial
margin. As of June 2002 the devaluation and WPI reached 26.7% and 46.17%,
respectively; as compared to 200% and 34.4%, respectively for the March 2002
quarter. As for interest spread, although the level of interest rate increased
as compared to the previous quarter - 34.24% vs. 3.01% -, the CER adjustment
also showed a sharp increase from 19.51% to 77.07%. The interest rate gap in
Banco Frances positively impacted the average spread of the present quarter.
Total loan portfolio:
The chart below shows the composition of the loan portfolio in monthly
balances.
-------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
-----------------------------------------------------------
in $ thousands except percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
-------------------------------------------------------------------------------------------------
Net total loans 8,555,544 11,776,405 9,675,216 -27.35% -11.57%
Advances 625,570 1,216,238 1,512,726 -48.57% -58.65%
Notes discounted and purchased 57,040 150,977 865,853 -62.22% -93.41%
Consumer Mortgages 592,265 1,019,942 1,537,767 -41.93% -61.49%
Personal loans 274,037 466,386 882,180 -41.24% -68.94%
Credit cards 153,053 256,284 498,711 -40.28% -69.31%
Secured with chattel mortgages 23,149 54,982 58,610 -57.90% -60.50%
Loans to financial sector 38,486 467,120 522,150 -91.76% -92.63%
Loans to public sector 5,164,318 7,172,209 2,030,925 -28.00% 154.28%
Other 2,773,342 2,389,091 2,151,749 16.08% 28.89%
Less: Allowance for loan losses (1,145,716) (1,416,824) (385,455) -19.13% 197.24%
-------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March 2002 and June 2001
figures, respectively.
It is important to bear in mind that Public sector loan portfolio will decrease
with the payment of the acquisition of the necessary bonds (BODEN 2012 and
2013) to be delivered to those depositors who have
-5-
bonds (BODEN 2012 and 2013) to be delivered to those depositors who have
changed their rescheduled deposits for government bonds in the June and October
exchange plans. Banco Frances' will reduce its exposure to the Public Sector in
$778 million ($980.5 million including interest and CER adjustment) due to the
first exchange plan.
Government and Private Securities
The following chart shows total exposure of the Bank in government and private
securities as of June 30, 2002, including repurchase agreement transactions.
Investment accounts include the Bono Patriotico -previously included in the
Trading accounts - for a total amount of US$ 202 million, restated in pesos at
the $3.8/US$ exchange rate. The remaining holdings were converted into pesos at
$1.4/US$ and adjusted by CER.
-------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
----------------------------------------------------------
in $ thousands except percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
-------------------------------------------------------------------------------------------------
Holdings 1,716,783 2,216,854 5,349,533 -22.56% -67.91%
Trading 123,731 1,265,812 96,546 -90.23% 28.16%
Liquidity Requirements -- -- -- -- --
Investment Accounts 788,877 12,806 4,063,411 6060.10% -80.59%
Investment Accounts( RML) -- -- 277,665 -- -100.00%
Other fixed income securities 804,175 938,235 911,910 -14.29% -11.81%
Repurchase Agreements 43,076 51,539 864,198 -16.42% -95.02%
B.C.R.A. (Reverse repo) -- -- -- -- --
Trading (Reverse repo) -- -- -- -- --
Investment Accounts (reverse repo) 43,076 51,539 863,974 -16.42% -95.01%
Trading (Reverse repo) -- -- 224 -- -100.00%
Net Position 1,759,859 2,268,393 6,491,396 -22.42% -72.89%
Trading 123,731 1,265,812 96,770 -90.23% 27.86%
Investment Accounts 831,953 64,345 5,205,051 1192.95% -84.02%
Investment Accounts (RML) -- -- 277,665 -- -100.00%
Other fixed income securities 804,175 938,235 911,910 -14.29% -11.81%
-------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March 2002 and June 2001
figures, respectively.
N.B: The present chart does not include the Compensatory bond - BODEN 2012 -
for US$ 619 MM that is accounted for in Other banking receivables until its
accrediting
Net Position as of June 2002 includes $ 408.2 million of Private Bonds
Income from Securities and short term investments
Net income from securities and short-term investment decreased 31.6% and 57.1%
in real terms as compared to the quarters ended March 31, 2002 and June 30,
2001, respectively. The decrease in income from trading accounts was
compensated by the increase in income from investment accounts related to the
reclassification during the present quarter of the Bono Patriotico from Trading
account into Investment account. The income on Other fixed income securities
decreased following market quotations.
-6-
-------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
----------------------------------------------------------
in $ thousands except percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
-------------------------------------------------------------------------------------------------
Income from securities and short-term
investments 51,519 75,294 120,034 -31.58% -57.08%
Trading account 6,278 20,114 11,488 68.79% -45.35%
Investment account 21,102 1,993 92,487 958.81% -77.18%
Other fixed income securities 24,139 53,187 16,059 -54.61% 50.32%
CER adjustment 19,461 15,494 -- 25.60% --
CER adjustment -- -- -- -- --
CER adjustment 6,429 2,953 -- -117.71% --
CER adjustment 13,032 12,541 -- -3.92% --
-------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March 2002 and June, 2001
figures, respectively.
Funding Sources:
-------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
-----------------------------------------------------------
in $ thousands except percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
-------------------------------------------------------------------------------------------------
Total deposits 7,154,618 11,814,540 14,713,495 -39.44% -51.37%
Current accounts 1,375,141 2,665,119 1,094,890 -48.40% 25.60%
Saving accounts 638,034 1,991,443 3,348,374 -67.96% -80.94%
Time deposits 1,600,759 1,300,347 10,164,376 23.10% -84.25%
Rescheduled deposits 3,447,565 5,644,304 -- -38.92% --
Other 93,119 213,327 105,854 -56.35% -12.03%
-------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March, 2002 and June, 2001
figures, respectively.
Total deposits decreased 39.4% and 51.4% as compared to March 2002 and June
2001 quarters. The decrease is mainly related to some $778 million rescheduled
deposits ($980.5 million including interest and CER adjustment) which were
exchanged for government bonds in the June exchange plan.
The following charts shows the evolution of deposits in nominal terms.
-------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
-----------------------------------------------------------
in $ thousands except percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
-------------------------------------------------------------------------------------------------
Total deposits 7,154,618 8,082,557 7,495,863 -11.48% -4.55%
Current accounts 1,375,141 1,823,260 557,797 -24.58% 146.53%
Saving accounts 638,034 1,362,385 1,705,846 -53.17% -62.60%
Time deposits 1,600,759 889,593 5,178,292 79.94% -69.09%
Rescheduled deposits 3,447,565 3,861,378 -- -10.72% --
Other 93,119 145,941 53,928 -36.19% 72.67%
-------------------------------------------------------------------------------------------------
-7-
Other Funding Sources:
-------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
-----------------------------------------------------------
in $ thousands 06/30/2002 03/31/2002 06/30/2001 03/31/2002 06/30/2001
-------------------------------------------------------------------------------------------------
Lines from other banks 2,300,493 3,518,552 1,470,509 -34.62% 56.44%
Negotiable Obligations 570,000 1,177,729 588,297 -51.60% -3.11%
Subordinated Debt 661,596 1,064,916 467,505 -37.87% 41.52%
Total other funding sources 3,532,089 5,761,198 2,526,312 -38.69% 39.81%
-------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March 2002 and June 2001
figures, respectively.
Changes shown in the chart above are affected by the difference in the exchange
rate of dollar denominated liabilities. Foreign currency funding sources,
expressed in dollars, are shown in the chart bellow. The decrease in Negotiable
Obligations is related to the payment of a US$50 million senior debt which came
due during May.
-------------------------------------------------------------------------------------------------
% Change Qtr ended
Other dollar funding sources Quarter ended 06/30/02 vs. Qtr ended
-----------------------------------------------------------
in $ thousands 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
-------------------------------------------------------------------------------------------------
Lines from other banks 601,927 591,148 683,053 1.82% -11.88%
Negotiable Obligations 150,000 200,000 234,574 -25.00% -36.05%
Subordinated Debt 152,153 154,424 178,173 -1.47% -14.60%
Total other funding sources 904,080 945,572 1,095,800 -4.39% -17.50%
-------------------------------------------------------------------------------------------------
Asset Quality:
-------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
------------------------------------------------------------
in $ thousands except percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
-------------------------------------------------------------------------------------------------
Nonaccrual loans (1) 505,791 613,871 498,635 -17.61% 1.44%
Allowance for loan losses 1,145,716 1,416,824 385,455 -19.13% 197.24%
Nonaccrual loans/net total loans 5.21% 4.65% 4.96% 12.05% 5.19%
Allowance for loan losses/
nonaccrual loans 226.52% 230.80% 77.30% -1.86% 193.03%
Allowance for loan losses/
net total loans 11.81% 10.74% 3.83% 9.97% 208.25%
-------------------------------------------------------------------------------------------------
(1) Nonaccrual loans include all loans to borrowers classified as "Problem", "deficient
Servicing", "High Insolvency Risk", "difficult Recovery", "Irrecoverable" and "Irrecoverable for
Technical decision" according to the new Central Bank debtor classification system.
-------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March 2002 and June 2001
figures, respectively.
-8-
During the present quarter asset quality further deteriorated. The
non-performing risk peaked, reaching mainly triple A companies, with dollars
denominated debt in the international markets and with peso denominated
tariffs. Banco Frances anticipated the crisis during FY 2001, accounting for
$659.6 million of excess provisioning, in constant pesos as of June 2002.
During the present quarter part of that provisioning was applied and the Bank
completed the necessary provisioning with some $222.2 million additional
provisions made during the present quarter. The Non-performing ratio provided
in this press release is information included in the Bank's MIS for
internal purposes; there are still pending regulations from the Central Bank in
order to calculate the definite Non Performing ratio. The ratio increased from
4.96% and 4.65% as of June, 2001 and March, 2002 to 5.21% as of the present
quarter. The coverage ratio - Allowance for loan losses / Total non-performing
loans - moved from to 226.5% as of June, 2002 from 77.30% as of June 2001.
The following chart shows the evolution of Allowance for loan losses:
----------------------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
-------------------------------------------------------------------
in $ thousands except percentages 06/30/02 03/31/02 06/30/01 03/31/02 06/30/01
----------------------------------------------------------------------------------------------------------------
Balance at the beginning of the quarter 1,416,824 1,120,782 354,793 26.41% 299.34%
Increase in constant currency 214,247 784,888 81,676 -72.70% 162.31%
Decrease in constant currency (36,518) (70,684) (51,013) -48.34% -28.41%
Exchange rate difference (448,835) (418,162) 0 7.34% --
Balance at the end of the quarter 1,145,718 1,416,824 385,455 -19.13% 197.24%
----------------------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March 2002 and June, 2001
figures, respectively.
Income from services net of other operating expenses
----------------------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
--------------------------------------------------------------------
in $ thousands except percentages 06/30/2002 03/31/2002 06/30/2001 03/31/2002 06/30/2001
----------------------------------------------------------------------------------------------------------------
Net income from services 71,233 97,847 138,491 -27.20% -48.56%
Service charge income 80,267 111,912 161,551 -28.28% -50.31%
Service charges on deposits accounts 31,536 48,613 55,111 -35.13% -42.78%
Credit and operations 15,774 24,217 28,083 -34.86% -43.83%
Insurance 2,104 3,281 3,749 -35.88% -43.88%
Capital markets and securities activities 3,542 6,236 37,940 -43.21% -90.67%
Fees related to Foreign trade 3,242 2,198 3,933 47.48% -17.58%
Other fees 24,070 27,366 32,735 -12.05% -26.47%
Services Charge expense (9,034) (14,065) (23,060) -35.77% -60.83%
----------------------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March 2002 and June, 2001
figures, respectively.
-9-
Net income from Services decreased 27.2% and 48.6%, in constant pesos as of
June 2002, as compared to March 2002 and June 2001 quarter, respectively. It is
important to bear in mind that figures as of the March 2002 and the June 2001
quarters were restated using the WPI of approx. 46.2% and 96.3%. Therefore,
Income from services reflects a slight positive trend caused mainly by fees
related to foreign trade and by Other fees -including fees related to loan
cancellations.
Net income from services increased 10.3% in nominal terms, as compared to the
previous quarter
As explained in the March press release, Banco Frances was prepared to take
advantage of the explosive demand of banking services such as current and
saving accounts and payment cards and of alternative channels such as ATM's
and internet and telephone banking. Improvements in information technology,
continuous investment in technology and the restructuring of the sales force
and distribution network based on business segments and specialization enabled
the Bank to focus its efforts on providing such services. As of June 30, 2002
the Bank has a deposit customer base of approximately 235,000 current accounts
and 2,450,000 saving accounts, compared to 183,000 and 1,850,000, respectively,
as of June 2001.
It is important to note that fees related to foreign currency sales and
purchases are not accounted for in Net income from services but in Net
financial income. As of June 2002 such fees amounted to approx.$13 million,
compared to $43.9 million as of March 2002.
Administrative expenses
----------------------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 06/30/02 vs. Qtr ended
--------------------------------------------------------------------
in $ thousands except percentages 06/30/2002 03/31/2002 06/30/2001 03/31/2002 06/30/2001
----------------------------------------------------------------------------------------------------------------
Adminitrative expenses (131,566) (189,930) (235,381) -30.73% -44.11%
Personnel expenses (65,300) (99,408) (128,531) -34.31% -49.20%
Electricity and Communications (5,225) (8,462) (9,094) -38.25% -42.54%
Advertising and Promotion (3,755) (4,340) (9,031) -13.47% -58.42%
Honoraries (3,380) (4,534) (6,854) -25.46% -50.69%
Taxes (3,595) (6,709) (8,378) -46.42% -57.09%
Organization and development expenses (15,506) (18,545) (18,033) -16.39% -14.01%
Amortizations (7,706) (10,821) (11,591) -28.79% -33.52%
Other (27,100) (37,110) (43,868) -26.98% -38.23%
----------------------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 and 1.962882 for March, 2002 and June, 2001
figures, respectively.
Administrative expenses fell 30.7% and 44.1%, in constant pesos as of June
2002, with respect to the March 2002 and the June 2001 quarters. Structure
costs became a key issue for the Bank with strict savings plans in force. In
light of the new business approach, the Bank implemented a restructuring plan,
including personnel reduction of approximately 320 people during the second
quarter. Personnel expenses decreased 34.3% - 1.7% in nominal terms - as
compared to the previous quarter while Organization and development expenses
show the impact of the provisions for severance payments and Other expenses
include a higher insurance cost.
As of June 30, 2002, the Bank had 4,625 employees - including consolidated
companies in Argentina - and a network of 304 branches plus 40 Credilogros
offices.
-10-
Other Income/expenses:
Other Income/expenses for the second quarter of fiscal year 2002 accounted for
a $253.2 million loss. Such loss is mainly due to the refunding of deposits
during this quarter of approximately $467 million and US$52 million related to
legal injunctions. The gap between the $1.4 at which foreign currency deposits
were converted into pesos plus the CER adjustment and the free exchange rate at
which injunctions had to be paid caused a loss of approx. $138.4 million, as
compared to $48.2 million posted during the previous quarter.
This loss, which has not yet been compensated by the National Government,
continued during the September quarter, although at a lower pace. There was a
decrease in the number of legal injunctions submitted for collection and the
amount of legal injunctions paid out by Banco Frances in the third quarter
decreased to approximately $293 million and US$4 million.
Income from equity investments
Income from equity investments sets forth net income from related companies not
required to be consolidated and, as previously explained, net income from the
Bank's interest in BBVA Banco (Uruguay). As previously mentioned the Consolidar
Group is included in this account. As of June 30, 2002, the Consolidar Group
registered a $15 million loss as compared to a $34 million loss and a $16
million gain accounted for in the March 2002 and June 2001 quarters,
respectively.
Capitalization:
Following the changes in regulations as of January 2002, the presentation of
the information on minimum capital requirement, set by the Central Bank, was
suspended. The Bank believes that such regulation will change due to the
aforementioned changes, including inflation and CER adjustment, among others.
Therefore, the charts on capital adequacy are not included in the present press
release.
The Ordinary and Extraordinary Shareholders' Meeting, held on August 7, 2002,
approved, among others issues, a capital increase of up to 1,250 million
shares, to be issued in exchange for cash or other eligible assets. The Board
of Directors will determine the terms and conditions of the issuance. As of the
moment of the present press release this capital increase is in the process of
having necessary approvals.
Recent developments
o On October 31, 2002 a US$150 million FRN issued by Banco Frances in
October 2000 and subscribed by a syndicate of 11 international banks,
matured. The Bank paid 5% and refinanced 95% of its capital with the
issuance of a new FRN for a total amount of US$142.5 million. The new FRN
will amortize US$7.5 million capital in 180 days term and the remaining
capital in October 2003; it pays quarterly interest at Libor +220 b.p.
This transaction extends for one year, the term of the only outstanding
senior debt of Banco Frances in the international markets. The Bank
attained the approval of the CNV as well as the Central Bank's
authorization for the transfer of funds related to this FRN. It is the
intention of Banco Frances intends to make a formal proposal of the
restructuring of such debt, consistent with current markets' needs, before
its final maturity.
-11-
Conference call
A conference call to discuss this first quarter earnings will be held on
Tuesday, November 19, at 3:00 p.m. New York time - 5:00 p.m. Buenos Aires time.
If you are interested in participating please dial (719) 457 2733 at least 5
minutes prior to our conference. Confirmation code: 651194. If you are
interested in receiving the tape on this conference call, please call to (719)
457 2840.
Internet: This press release is also available in http://www.bancofrances.com.ar
------------------------------
-12-
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 for March, 2002 and December, 2001 figures and a
WPI of 1.962882 for June, 2001 figures.
Banco Frances S.A. and subsidiaries (Grupo Consolidar: by the equity method)
ASSETS: 06/30/02 03/31/02 12/31/01 06/30/01
Cash and due from banks 254,322 474,438 1,574,237 3,065,613
Government Securities 1,352,676 1,841,810 1,185,282 4,928,985
- Investment account 788,878 12,806 8,295 3,918,698
- Trading account 20,261 1,138,826 552,481 466,587
- Reverse repurchase agreements
w/Central Bank -- -- -- --
- Unlisted 526,360 671,478 608,270 520,912
- Private Securities 17,177 18,700 16,237 22,789
Loans 8,555,544 11,776,405 12,832,480 9,675,216
- Advances and Promissory notes 625,570 1,216,238 1,322,370 1,512,726
- Notes discounted and purchased 57,040 150,977 681,791 865,853
- Secured with mortgages 592,265 1,019,942 1,459,681 1,537,767
- Secured with chattel mortgages 23,149 54,982 57,989 58,610
- Personal loans 274,037 466,386 749,493 882,180
- Credit cards 153,053 256,284 478,284 498,711
- Loans to financial sector 38,486 467,120 715,757 522,150
- Loans to public sector 5,164,318 7,172,209 6,717,750 2,030,925
- Other 1,460,298 1,855,923 1,576,514 2,061,073
Less: Unaccrued interest (4,717) (9,666) (40,967) (23,943)
Plus: Accrued interest and exchange
differences receivable 1,317,761 542,835 234,602 114,619
Less: Allowance for loan losses (1,145,716) (1,416,824) (1,120,784) (385,455)
Other banking receivables 3,263,899 4,115,338 995,073 2,786,831
- Compensatory Bond 2,374,700 2,726,688 -- --
- Other 889,199 1,388,651 995,073 2,786,831
Investments in other companies 201,464 464,588 373,024 390,297
Intangible assets 212,754 217,798 249,398 276,914
Other assets 928,086 923,673 948,033 863,813
---------- ---------- ---------- ----------
Total assets 14,768,745 19,814,051 18,157,528 21,987,670
========== ========== ========== ==========
LIABILITIES: 06/30/02 03/31/02 12/31/01 06/30/01
Deposits 7,154,618 11,814,540 12,076,991 14,713,495
- Demand deposits 1,375,141 2,665,119 2,698,354 1,094,890
- Saving accounts 638,034 1,991,443 4,149,625 3,348,374
- Time deposits 1,600,759 1,300,347 4,701,997 10,164,376
- Rescheduled deposits 3,447,565 5,644,304 -- --
- Other deposits 93,119 213,327 527,014 105,854
Other banking Liabilities 4,828,878 4,708,545 3,360,499 4,454,009
Subordinated debt 601,596 705,326 334,169 349,733
Other liabilities 193,077 320,600 482,259 379,290
Minority interest 31,269 40,730 55,041 38,920
---------- ---------- ---------- ----------
Total liabilities 12,809,438 17,589,741 16,308,958 19,935,446
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total stockholders' equity 1,959,307 2,224,310 1,848,570 2,052,225
---------- ---------- ---------- ----------
========== ========== ========== ==========
Total liabilities and
stockholders' equity 14,768,745 19,814,051 18,157,528 21,987,670
========== ========== ========== ==========
-13-
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 for March, 2002 and December, 2001 figures and a
WPI of 1.962882 for June, 2001 figures.
Banco Frances S.A. and subsidiaries (Grupo Consolidar: by the equity method)
INCOME STATEMENT 06/30/02 03/31/02 12/31/01 06/30/01
Financial income 1,500,156 1,877,326 580,051 604,682
- Interest on Cash and Due from Banks 739 2,229 7,557 13,575
- Interest on Loans Granted to the
Financial Sector 1,500 889 3,996 3,408
- Interest on Overdraft 57,326 44,004 45,957 36,824
- Interest on Collateralized Loans 19,855 37,401 52,487 48,462
- Interest on Credit Card Loans 13,884 19,305 19,117 24,685
- Interest on Other Loans 76,256 161,973 262,074 310,728
- Income from securities and short term
investments 51,519 75,294 95,879 120,034
- Interest on Government guaranteed loans
Decreet1387/01 169,759 90,366 52,982 --
- From Other Banking receivables 5,558 7,010 2,110 12,977
- CER 1,273,411 359,364 -- --
- Other (169,650) 1,079,490 37,891 33,989
Financial expenses (1,316,256) (1,476,152) (334,895) (284,196)
- Interest on Current Account Deposits (118,156) (18,462) (18,021) (819)
- Interest on Saving Account Deposits (2,333) (3,156) (5,476) (10,174)
- Interest on Time Deposits (134,426) (60,479) (237,854) (193,497)
- Interest on Other Banking Liabilities (32,417) (52,013) (39,401) (39,986)
- Contributions to the deposit guarantee
fund -- -- (7,463) (6,444)
- Mandatory contributions and taxes on
interest income (12,066) (16,072) (8,633) (11,181)
- CER (671,605) (287,548) -- --
- Other (345,253) (1,038,422) (18,047) (22,096)
Net financial income 183,900 401,174 245,156 320,486
Provision for loan losses (222,160) (224,427) (763,928) (81,676)
Income from services, net of other
operating expenses 71,233 97,847 132,801 138,491
Inflation adjustment 52,785 (122,138) -- --
Administrative expenses (131,566) (189,930) (244,591) (235,381)
- Personnel expenses (65,300) (99,408) (135,928) (140,429)
- Directors and Syndics' Fees (169) (88) (540) (1,849)
- Other Fees (3,210) (4,447) (4,177) (5,005)
- Advertising and Publicity (3,755) (4,340) (10,945) (9,031)
- Taxes other than income tax (3,595) (6,709) (8,201) (8,378)
- Other Operating Expenses (46,729) (60,734) (67,121) (60,716)
- Other (8,807) (14,205) (17,680) (9,973)
Inflation adjustment (27,639) (28,980) -- --
Income (loss) from equity investments 12,529 92,430 54,953 20,534
Net Other income (253,217) (94,046) 249,761 (1,873)
Inflation adjustment 15,970 20,499 -- --
Income (loss) from minority interest 9,457 14,296 1,223 (991)
---------- ---------- ---------- ----------
Income before tax (288,707) (33,276) (324,625) 159,590
---------- ---------- ---------- ----------
Income tax (1,188) (4,278) 80,614 (49,645)
========== ========== ========== ==========
Net income (289,894) (37,555) (244,012) 109,945
========== ========== ========== ==========
-14-
Figures of previous quarters were restated in constant pesos as of June 30,
2002, using a WPI of 1.461733 for March, 2002 and December, 2001 figures and a
WPI of 1.962882 for June, 2001 figures
Banco Frances S.A. and subsidiaries (Grupo Consolidar consolidated on a line by line basis)
ASSETS 06/30/02 03/31/02 12/31/01 06/30/01
Cash and due from banks 278,846 508,907 1,625,021 3,070,470
Government Securities 1,555,022 2,090,676 1,321,080 5,996,120
Loans 9,084,130 12,334,344 13,728,501 9,847,341
Other banking receivables 3,278,531 4,123,451 1,001,568 2,810,103
Investments in other companies 36,360 280,119 156,395 165,318
Other assets 1,313,732 1,375,999 1,459,049 1,347,609
-------------------------------------------------------------
TOTAL ASSETS 15,546,621 20,713,496 19,291,615 23,236,960
=============================================================
LIABILITIES 06/30/02 03/31/02 12/31/01 06/30/01
Deposits 7,011,925 11,628,548 11,908,285 14,693,487
Other banking liabilities 4,842,846 4,716,779 3,365,917 4,475,100
Other liabilities 1,583,602 1,969,738 1,962,077 1,803,908
Minority interest 148,941 174,122 206,766 212,241
-------------------------------------------------------------
TOTAL LIABILITIES 13,587,314 18,489,186 17,443,045 21,184,736
-------------------------------------------------------------
-------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,959,307 2,224,310 1,848,570 2,052,225
-------------------------------------------------------------
-------------------------------------------------------------
STOCKHOLDERS' EQUITY + LIABILITIES 15,546,621 20,713,496 19,291,615 23,236,960
=============================================================
NET INCOME 06/30/02 03/31/02 12/31/01 06/30/01
Net Financial Income 703,737 166,876 216,068 370,896
Provision for loan losses (222,160) (224,427) (754,673) (81,676)
Net Income from Services 110,459 156,309 214,196 242,977
Inflation adjustment (254,713) (453,333) -- --
Administrative expenses (161,663) (236,652) (262,855) (289,337)
Inflation adjustment (2,531) (18,845) -- --
Net Other Income (742,584) 322,001 274,309 (57,234)
Inflation adjustment 229,551 278,709 -- --
Income (loss) from minority interest 46,581 (8,064) (25,845) (12,335)
-------------------------------------------------------------
Income before tax (293,322) (17,427) (338,801) 173,293
-------------------------------------------------------------
Income tax 3,428 (20,128) 94,790 (63,348)
-------------------------------------------------------------
Net income (289,894) (37,555) (244,012) 109,945
=============================================================
-15-