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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
December 13, 2002
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BBVA Banco Frances S.A.
(Exact name of registrant as specified in its charter)
BBVA Banco Frances S.A.
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(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
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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
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If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A
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BBVA Banco Frances S.A.
TABLE OF CONTENTS
Item
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1. Press Release dated December 11, 2002 titled "BBVA Banco Frances
(NYSE; BFR.N; BCBA:FRA.BA; LATIBEX: BFR.LA) Reports Consolidated
Third 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: December 13, 2002 By: /s/ Maria Elena Siburu de Lopez Oliva
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Name: Maria Elena Siburu de Lopez Oliva
Title: Investor Relations Manager
[BBVA LOGO] 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]
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December 11, 2002
BBVA BANCO FRANCES (NYSE; BFR.N; BCBA:FRA.BA; LATIBEX: BFR.LA) REPORTS
CONSOLIDATED THIRD QUARTER EARNINGS FOR FISCAL YEAR 2002
Executive summary
o Net income for the third quarter of fiscal year 2002 accounted for a
$622.2 million loss. During the present quarter Banco Frances continued
with its high provisioning policy, implemented since December last year on
anticipating the present crisis. Management expects to continue with such
policy and make all necessary loan loss provisions during the present
fiscal year. In that sense, during this third quarter the Bank accounted
for a $202.3 million provision for loan losses.
o Operating income before Provision for loan losses, which had a recurrent
positive behavior in the post-crisis period, was negatively impacted by
the shrinkage in the Net financial margin during the third quarter. High
interest rates fostering an increase in the cost of funds during July and
August, together with a decrease in the CER adjustment (Stabilization
index) and currency appreciation had a negative effect in the Net
financial margin. Management expects such effect to reverse in the near
future, on the back of a more stable environment that would normalize
macroeconomic variables (inflation and devaluation) and interest rates to
more reasonable comparative levels.
o Administrative expenses decreased 10.5% and 49.8% as compared to the June
2002 and September 2001 quarter. Furthermore, the Bank continues its
strong commitment towards cost control with the implementation of a cost
rationalization plan in place during the present fiscal year.
o The losses of present fiscal year will be covered by equity injections
that will strengthen the Bank's capital base. During the present month,
Banco Frances will conduct a capital increase mainly through the
capitalization of debt. BBVA, the Bank's main shareholder, has publicly
announced its intention to capitalize US$ 130 million of subordinated debt
issued by Banco Frances and a US$79.3 million loan granted by BBVA on
April 4, 2002.
-1-
The value of the subordinated senior debt was set at US$58.10 per US$100
NV, on the back of the valuation reports issued by BDO and KPMG. On
assuming a $3.55 per 1US$ exchange rate, the resulting capital increase of
this debt capitalization transaction should amount to approximately $743
million.
o Total deposits at Banco Frances, on excluding rescheduled deposits, showed
a constant and sustained increase during the present quarter. The
quarterly increase was 20%, mainly driven by a significant 52% raise in
time deposits.
o The Board of Directors expects to find in year 2003 the necessary stable
environment for business development.
Third quarter of Fiscal Year 2002
The path to recovery remains difficult. Aside from export and import
substitution sectors, activity in the domestic-demand oriented sectors of the
economy remained flat, or even had a negative behavior, mainly due to a lack of
financing. EMI industrial production index, which has grown for four
consecutive months so far this year, increased 1.6 % over the previous quarter
although it is still 9.2 % below the third quarter of 2001. Monetary stability
has stopped the conversion of pesos into dollars. The FX market reflected this
change in expectations and the Central Bank reserves reached U$S9.4 billion at
the end of September (an increase of U$S570 million over the lows hit in early
August). On top of that, expectations that Argentina would reach an agreement
with the International Monetary Fund brought about a return of confidence.
Pressure on the financial system has eased off during the third quarter.
Figures of total deposits have been distorted by the decrease stemming from the
first exchange plan and the payment of legal injunctions. However, on
considering time deposits of less than 90 days term as the reflection of
depositors' behavior, it can be seen an important increase of $5.3 billion. The
stability of the system is still threatened by the rescheduled deposits that
have not been swapped and pending legal injunctions. The first voluntary
exchange - offering depositors in the Argentine banking system the opportunity
to exchange their rescheduled deposits for newly issued government bonds
attained a 22% acceptance level in the financial system, while the second swap
- ending on December 12, 2002 - is not being as successful as expected mainly
due to the lack of a judicial definition. However, fears of a massive run did
not materialize after the lifting of the restrictions set by the so-called
corralon, last October, and most recently, in December, when the Ministry of
Economy removed all restrictions on sight accounts. As of October 1, deposit
holders with savings up to $7,000 could withdraw funds freely. Nonetheless, the
recent stability of the currency and high interest rates prompted the majority
of deposit holders to keep their funds in fixed term deposits. Similarly, last
December 2 the Ministry of Economy removed all restrictions on cash withdrawals
on demand accounts and deposits continue to show a positive behavior.
Operating results of financial institutions continued to show the negative
impact of a further deterioration in asset quality, with the rise in large
corporations' non-performance that prompted a higher provisioning.
As for the financial margin, net interest margin reduced during the present
quarter. It is important to bear in mind that financial margin is impacted not
only by interest rates but also by devaluation, inflation and CER adjustment.
During the present quarter CER adjustment (Stabilization index) reached 9.77%
as compared to 19.21% during the previous quarter while currency appreciated
from $3.8/US$ as of June 2002 to $3.7/US$ by the end of the third quarter.
Interest rates, following the peak observed during the second quarter, began to
decrease by the end of the third quarter.
As of January 2001 financial statements are to be adjusted by inflation. The
September quarter figure raised the accumulated wholesale price increase to
121.4% from 96.3 % in June, while the accumulated increase in consumer prices
rose from 30.5 % in June to 39.7 % in September.
-2-
The Business:
The Argentine financial crisis prompted the shrinkage of business activities.
Accordingly, Banco Frances has redefined its business strategy as well as the
products and services that it offers to its clients. The rebuilding of a new
financial system with no restrictions on the use of cash, on the back of
restoring depositors' confidence, will take time. 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
personnel reduction. During the second and third quarters this process was
accelerated; the Bank closed branches and further reduced the number of
employees, implementing strict rationalization measures. Staff was reduced by
approximately 790 people during the first nine-month period. As of the date of
the present press release the Bank has merged 70 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
September 2002 quarter WPI grew by 12.81%.
The current crisis has distorted relative prices in the economy. Banco
Frances estimates for FY 2002 an increase of 42% in the CPI as compared to
an increase of 119% in the WPI, a 260% 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 consider 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.
o accordingly and for the sake of comparison, information for previous
quarters has been restated in constant Argentine pesos as of September 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. 3.73 = 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
-3-
comparison, following the sale of BBVA Banco (Uruguay), figures as of
September and December 2001 are presented in this press release including
the Bank's interest in BBVA Banco (Uruguay) by the equity method.
THIRD QUARTER EARNINGS
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% Change Qtr ended
Condensed Income Statement (1) Quarter ended 09/30/02 vs. Qtr ended
in $ thousands except income per share, income per ---------------------------------------------------------------------
ADS and percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
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Net Financial Income (128,193) 207,458 364,268 -161.79% -135.19%
Provision for loan losses (202,338) (250,619) (105,077) -19.26% 92.56%
Net income from services 54,333 80,358 127,838 -32.39% -57.50%
Administrative expenses (132,790) (148,419) (264,426) -10.53% -49.78%
Operating income (408,988) (111,222) 122,603 -267.72% -433.59%
Income (loss) from equity investments 2,955 14,134 12,389 -79.10% -76.15%
Income (Loss) from Minority interest 4,804 10,669 (715) -54.97% -771.70%
Other income/expenses (243,989) (285,654) (70,728) -14.59% 244.97%
Inflation adjustment 23,215 46,383 - -49.95% -
(220) (1,340) (7,896) -83.59% -97.22%
Income tax
Net income for the period (622,222) (327,030) 55,653 -90.26% -1218.05%
Net income per share (2) -2.97 -1.56 0.27 -90.26% -1218.05%
Net income per ADS (3) -8.90 -4.68 0.80 -90.26% -1218.05%
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(1) Exchange rate: 3.73 Ps. = 1 US$
(2) Assumes 209,631,892 ordinary shares outstanding.
(3) Each ADS represents three ordinary shares.
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Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
Net income for the third quarter of fiscal year 2002 accounted for a $622.2
million loss as compared to a $327 million loss registered in the previous
quarter. Operating income as of the present quarter was negatively impacted by
shrinkage in the net financial income while the Bank continued with the high
provisioning policy regarding loan losses and losses related to the payment of
legal injunctions. 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).
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% Change Qtr ended 09/30/02
Quarter ended vs. Qtr ended
-------------------------------------------------------------------------
in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
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Return on Average Assets (1) -15.33% -6.71% 0.99% 128.63% -1647.29%
Return on Average Shareholders'Equity (1) -131.05% -55.43% 10.07% 136.41% -1401.99%
Net fee Income as a % of Operating Income -73.56% 27.92% 25.98% -363.47% -383.17%
Net fee Income as a % of Administrative
Expenses 40.92% 54.14% 48.35% -24.43% -15.37%
Adm. Expenses as a % of Operating Income (2) -179.79% 51.57% 53.73% -448.64% -434.59%
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(1) Annualized
(2) Adm.Expenses / Net financial income + Net income from services
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-4-
Net financial Income:
During the September 2002 quarter Net financial income was negatively impacted
by a decrease in the average spread of the Bank due to higher interest rates
which fostered an increase in the cost of funds during July and August (from
34.2% in the previous quarter to 43.5% in the present quarter) combined with a
decrease in the CER adjustment - from an annual 77.07% level in the second
quarter to 38.76% as of the third quarter. Furthermore, currency appreciation
from $3.8/US$ by the end of June 2002 to $3.73/US$ as of the end of the present
quarter, had also a negative effect over the financial margin. Management
expects such effect to reverse in the near future, on the back of a more stable
environment that would normalize macroeconomic variables (inflation and
devaluation) and interest rates to more reasonable comparative levels.
Total loan portfolio:
The chart below shows the composition of the loan portfolio in monthly
balances.
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% Change Qtr ended
Quarter ended 09/30/02 vs. Qtr ended
--------------------------------------------------------------------------------
in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
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Net total loans 8,876,221 9,651,518 10,113,168 -8.03% -12.23%
Advances 466,485 705,706 1,432,712 -33.90% -67.44%
Notes discounted and purchased 20,753 64,347 752,294 -67.75% -97.24%
Consumer Mortgages 546,336 668,135 1,715,176 -18.23% -68.15%
Personal loans 233,058 309,141 904,121 -24.61% -74.22%
Credit cards 138,791 172,659 520,644 -19.62% -73.34%
Secured with chattel mortgages 18,138 26,114 58,868 -30.54% -69.19%
Loans to financial sector 108,536 43,416 875,240 149.99% -87.60%
Loans to public sector 5,367,688 5,825,872 2,291,260 -7.86% 134.27%
Other 3,215,108 3,128,610 2,031,068 2.76% 58.30%
Less: Allowance for loan losses (1,238,672) (1,292,483) (468,215) -4.16% 164.55%
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Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
Total loans to the Public sector including CER adjustment and interest amounts
to $6.9 billion. Total exposure including loans and bond portfolio amounts to
aprox. $10 billion as of September 30, 2002.
It is important to consider 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 exchanged their rescheduled
deposits for government bonds in the June and October exchange plans. Banco
Frances will reduce its exposure to the Public Sector by $778 million ($1018.4
million including interest and CER adjustment) due to the first exchange plan;
the second exchange plan is expected to end in December 12.
Government and Private Securities
The following chart shows total exposure of the Bank in government and private
securities as of September 30, 2002, including repurchase agreement
transactions. The increase in total bond portfolio as compared to the previous
quarter is mainly related to the accrediting of 70% of the compensatory bond.
The Investment accounts include the Bono Patriotico - previously included in
the Trading accounts - for a total amount of US$ 202 million, restated in pesos
at the $3.73/US$ exchange rate. The remaining holdings were converted into
pesos at $1.4/US$ and adjusted by CER.
-5-
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% Change Qtr ended
Quarter ended 09/30/02 vs. Qtr ended
-------------------------------------------------------------------------------
in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
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Holdings 2,611,644 1,936,705 6,675,641 34.85% -60.88%
Trading 105,063 139,581 1,770,507 -24.73% -94.07%
Liquidity Requirements - - - - -
Investment Accounts 79,883 889,933 3,673,196 -91.02% -97.83%
Investment Accounts( RML) - - 323,198 - -100.00%
Compensatory bond 1,596,103 - - - -
Other fixed income securities 830,595 907,190 908,739 -8.44% -
Repurchase Agreements 753,129 48,594 260,832 1449.84% 188.74%
B.C.R.A. (Reverse repo) - - - - -
Trading (Reverse repo) - - - - -
Investment Accounts (reverse repo) 753,129 48,594 260,832 1449.84% 188.74%
Trading (Reverse repo) - - - - -
Net Position 3,364,773 1,985,299 6,936,473 69.48% -51.49%
Trading 105,063 139,581 1,770,507 -24.73% -94.07%
Investment Accounts 833,012 938,527 3,934,029 -11.24% -78.83%
Investment Accounts (RML) - - 323,198 - -100.00%
Compensatory bond 1,596,103 - - - -
Other fixed income securities 830,595 907,190 908,739 -8.44% -8.60%
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Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
N.B: The present chart includes 70% of the Compensatory bond - BODEN 2012. The
remaining 30% is accounted for in Other banking receivables until its
accrediting Net Position as of June 2002 includes $ 362 million of Private
Bonds
Income from Securities and short term investments
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% Change Qtr ended 09/30/02
Quarter ended vs. Qtr ended
-------------------------------------------------------------------------------
in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
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Income from securities and short-term
investments 35,690 58,119 219,168 -38.59% -83.72%
Trading account 4,986 6,953 5,388 28.28% -7.45%
Investment account 18,987 15,724 189,576 20.75% -89.98%
Other fixed income securities 11,717 35,442 24,204 -66.94% -51.59%
CER adjustment 19,276 21,953 - -12.19% -
CER adjustment - - - - -
CER adjustment 5,237 7,252 - 27.79% -
CER adjustment 14,040 14,701 - 4.50% -
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Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
Net income from securities and short-term investment decreased 38.6% and 83.7%
in real terms as compared to the quarters ended June 30, 2002 and September 30,
2001, respectively.
-6-
Funding Sources:
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% Change Qtr ended
Quarter ended 09/30/02 vs. Qtr ended
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in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
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Total deposits 6,822,416 8,071,132 15,303,059 -15.47% -55.42%
Current accounts 1,353,321 1,551,298 1,993,624 -12.76% -32.12%
Saving accounts 486,266 719,767 2,334,845 -32.44% -79.17%
Time deposits 2,432,896 1,805,818 10,855,046 34.73% -77.59%
Rescheduled deposits 2,371,636 3,889,202 - -39.02% -
Other 178,297 105,048 119,545 69.73% 49.15%
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Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
Total deposits decreased 15.5% and 55.4% as compared to June 2002 and September
2001 quarters. The decrease is mainly related to the first exchange plan ended
in July and the payment of legal injunctions. The $1,018.4 million rescheduled
deposits, as of July 31, to be exchange for government bonds - Boden 2012 - is
accounted for in Other banking liabilities ($1,081.8 million as of September
30) until the swap becomes effective.
The following chart shows the evolution of deposits in nominal terms, with a
20% increase in sight accounts and time deposits (on excluding rescheduled
deposits), showing a significant 52% growth in time deposits. It is important
to mention that Total deposits at Banco Frances, on excluding rescheduled
deposits, showed a constant and sustained increase during the present quarter.
Deposits increased $82 million in July, $452 million in August and $150 million
in September.
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% Change Qtr ended
Quarter ended 09/30/02 vs. Qtr ended
-----------------------------------------------------------------------------------
in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
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Total deposits 6,822,416 7,154,618 6,910,927 -4.64% -1.28%
Current accounts 1,353,321 1,375,141 900,329 -1.59% 50.31%
Saving accounts 486,266 638,034 1,054,426 -23.79% -53.88%
Time deposits 2,432,896 1,600,759 4,902,185 51.98% -50.37%
Rescheduled deposits 2,371,636 3,447,565 - -31.21% -
Other 178,297 93,119 53,987 91.47% 230.26%
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As previously mentioned, on December 2, 2002 the Ministry of Economy removed
all restrictions on cash withdrawals on demand accounts and there was neither a
massive withdrawal nor a conversion into dollars.
-7-
Other Funding Sources:
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% Change Qtr ended
Quarter ended 09/30/02 vs. Qtr ended
-------------------------------------------------------------------------------
in $ thousands 09/30/2002 06/30/2002 09/30/2001 06/30/2002 09/30/2001
-----------------------------------------------------------------------------------------------------------------------------
Lines from other banks 2,264,149 2,595,188 1,008,303 -12.76% 124.55%
Negotiable Obligations 559,005 643,018 663,658 -13.07% -15.77%
Subordinated Debt 645,216 746,347 527,393 -13.55% 22.34%
Total other funding sources 3,468,370 3,984,553 2,199,355 -12.95% 57.70%
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Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
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.
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% Change Qtr ended
Other dollar funding sources Quarter ended 09/30/02 vs. Qtr ended
-------------------------------------------------------------------------------
in $ thousands 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
-----------------------------------------------------------------------------------------------------------------------------
Lines from other banks 604,578 601,927 423,169 0.44% 42.87%
Negotiable Obligations 150,000 150,000 299,711 0.00% -49.95%
Subordinated Debt 157,033 152,153 178,173 3.21% -11.86%
Total other funding sources 911,611 904,080 901,053 0.83% 1.17%
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Asset Quality:
-----------------------------------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 09/30/02 vs. Qtr ended
----------------------------------------------------------------------------
in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
-----------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans (1) 804,629 570,583 583,314 41.02% 37.94%
Allowance for loan losses 1,238,672 1,292,483 468,215 -4.16% 164.55%
Nonaccrual loans/net total loans 7.95% 5.21% 5.51% 52.58% 44.30%
Allowance for loan losses/nonaccrual loans 153.94% 226.52% 80.27% -32.04% 91.79%
Allowance for loan losses/net total loans 12.25% 11.81% 4.42% 3.69% 176.75%
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(1) Nonaccrual loans include all loans to borrow ers 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.
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Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
Allowance for loan losses include $63.96 million provisions related to the
exchange rate difference of certain foreign trade loans still not converted
into pesos
-8-
During the present quarter asset quality further deteriorated, with emphasis in
triple A companies, some of which hold dollar denominated debt in the
international markets and have peso denominated tariffs. Accordingly and
following the Bank's high provisioning policy, Banco Frances accounted for a
$202 million provision 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 5.51% and 5.21% as of September, 2001 and June, 2002 to 7.93% as
of the present quarter. The coverage ratio - Allowance for loan losses / Total
non-performing loans - moved to 153.97% as of September, 2002 from 80.27% as of
September 2001.
It is important to highlight that due to the severe present crisis certain risk
assets such as corporate senior debt purchased and guarantees granted by the
Bank fall into the non-performing category. Accordingly, on considering Total
Financing, the non-performing ratio reaches 10.30% as of September 30, 2002,
with a coverage ratio of 96.2% - on excluding $63.96 million of provisions
related to the exchange rate difference of certain foreign trade loans still
not converted into pesos. Management expects to continue with its provisioning
policy in the last quarter of present fiscal year.
The following chart shows the evolution of Allowance for loan losses, which do
not include allowances related to Other banking receivables:
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% 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
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Balance at the beginning of the quarter 1,292,486 1,598,321 462,617 -19.13% 179.39%
Increase in constant currency 126,406 241,692 107,971 -47.70% 17.07%
Decrease in constant currency (29,639) (41,196) (74,373) -28.05% -60.15%
Exchange rate difference (150,581) (506,331) - -70.26% -
Balance at the end of the quarter 1,238,672 1,292,486 496,215 -4.16% 149.62%
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Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
The increase in constant pesos includes a $163.4 million loan loss provision
registered during the quarter and a provision for the exchange rate difference
of certain foreign trade loan portfolio converted into pesos. During the
present quarter some $37.98 million of such provision have been reversed.
Income from services net of other operating expenses
Net income from Services decreased 32.4% and 57.5%, in constant pesos as of
September 2002, as compared to June 2002 and September 2001 quarter,
respectively. It is important to consider that figures as of the March 2002 and
the June 2001 quarters were restated using the WPI of approx. 12.8% and 121.4%.
Comparing figures in nominal terms, Net income from services decreased 14.4%
and 3.9% as compared to the June 2002 and September 2001 quarters,
respectively. Fees related to foreign trade and insurance grew 55.7% and 11.8%,
respectively, in nominal terms, as compared to the previous quarter. Such
growth was more than offset by lower fees related to service charges on deposit
account, credit card transactions and other fees. The decrease in credit card
fees is explained by lower consumption and by the elimination of the VISA
reserve fund fee. Other fees decreased 12% - in nominal values - as compared to
the previous quarter mainly due to the deceleration on the rhythm of loan
cancellations, which was
-9-
particularly high in the previous quarter. As for service charges on deposit
accounts, the decrease is mainly explained by a reduction in the use of
overdrafts.
Government measures implemented by the end of 2001 and the beginning of the
present fiscal prompted a massive demand of banking services. 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.
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 September 2002 such fees amounted to approx. $11
million, compared to $14.7 million as of June 2002.
-----------------------------------------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 09/30/02 vs. Qtr ended
-------------------------------------------------------------------------------
in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
-----------------------------------------------------------------------------------------------------------------------------------
Net income from services 54,333 80,358 127,838 -32.39% -57.50%
Service charge income 64,290 90,504 155,661 -28.96% -58.70%
Service charges on deposits accounts 25,860 35,575 61,597 -27.31% -58.02%
Credit and operations 11,945 17,795 29,848 -32.87% -59.98%
Insurance 2,183 2,373 4,901 -8.04% -55.47%
Capital markets and securities activities 2,275 3,995 19,504 -43.05% -88.33%
Fees related to Foreign trade 4,761 3,657 4,172 30.17% 14.10%
Other fees 17,267 27,107 35,639 -36.30% -51.55%
Services Charge expense (9,957) (10,146) (27,823) -1.86% -64.21%
-----------------------------------------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
Administrative expenses
-------------------------------------------------------------------------------------------------------------------------------
% Change Qtr ended
Quarter ended 09/30/02 vs. Qtr ended
-------------------------------------------------------------------------------
in $ thousands except percentages 09/30/02 06/30/02 09/30/01 06/30/02 09/30/01
-------------------------------------------------------------------------------------------------------------------------------
Adminitrative expenses (132,790) (148,419) (264,426) -10.53% -49.78%
Personnel expenses (62,885) (73,665) (147,742) -14.63% -57.44%
Electricity and Communications (6,743) (5,894) (9,949) 14.39% -32.23%
Advertising and Promotion (5,279) (4,236) (10,534) 24.62% -49.88%
Honoraries (6,962) (3,813) (7,110) 82.61% -2.08%
Taxes (4,774) (4,055) (6,255) 17.73% -23.68%
Organization and development expenses (14,051) (17,492) (21,355) -19.67% -34.20%
Amortizations (6,655) (8,693) (12,876) -23.45% -48.32%
Other (25,442) (30,571) (48,605) -16.78% -47.66%
-------------------------------------------------------------------------------------------------------------------------------
Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 2,214328 for June, 2002 and September,
2001 figures, respectively.
-10-
Administrative expenses decreased 10.5% and 49.8%, in constant pesos as of
September 2002, with respect to the June 2002 and the September 2001 quarters.
Comparing figures in nominal terms, administrative expenses showed a 12.8%
increase as compared to the previous quarter. The increase in personnel
expenses is mainly explained by a government resolution that set an additional
$100 compensation to be paid by companies over the regular salaries until
January 2003, together with the provision for severance payments. Electricity
and communications and Organization and development expenses' increase is
related to the renegotiation of charges with suppliers providing foreign
currency services and the adjustment of local services, while Advertising and
promotion expenses is related to a renewed marketing effort.
In light of the new business approach, the Bank implemented a restructuring
plan, including personnel reduction of approximately 368 people during the
third quarter.
As of September 30, 2002, the Bank had 4,257 employees - including consolidated
companies in Argentina - and a network of 278 branches plus 40 Credilogros
offices.
Other Income/expenses:
Other Income/expenses for the second quarter of fiscal year 2002 accounted for
a $242 million loss. Such loss is mainly due to the refunding of deposits
during this quarter of approximately $293 million and US$4 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 which the Bank provisioned in
$91.6 million during the present quarter, totaling approx. $278 million so far
this year. As previously mentioned, this loss has not yet been compensated by
the National Government.
It is important to highlight that Other expenses include charges for
uncollectibility of other receivables and other allowances, which in turn
include provisions for granted non-used financing - most of it related to large
corporations - registered in the memo accounts. Following the classification of
large corporations into non-performing, the Bank had to provision that non-used
financing accounted for in the memo accounts. During the third quarter the Bank
provisioned $106.4 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 September 30, 2002, the Consolidar
Group registered a $1.7 million gain as compared to a $20.4 million loss and a
$17.5 million gain accounted for in the June 2002 and September 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 other 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
-11-
Directors will determine the terms and conditions of the issuance. As of the
moment of the present press release this capital increase has completed all
necessary approvals and subscription period is expected to commence in the
second half of December 2002.
Last December 5, 2002, the Board of Directors approved as an eligible asset a
loan granted by BBVA for a total amount of US$79,316,040.33 plus interests and
resolved to fix the number of shares to be offered in the coming capital
increase in up to 209,631,892 shares. Furthermore, on the back of the valuation
reports issued by BDO and KPMG and for the purpose of the capitalization, the
Board fixed the value of the eligible subordinated senior debt in US$58.10 for
each US$100 NV of the subordinated debt. The Board of Directors proposed the
subscription period to begin in December 17, 2002 and to be end in December 26,
2002.
Recent developments
Through Resolution 668/2 the Ministry of Economy established the end of all
restrictions on cash withdrawals on demand accounts, as of December 2002 -
Central Bank regulated the new measures through Communique "A" 3827.
Conference call
A conference call to discuss this third quarter earnings will be held on
Friday, December 13, at 11:00 a.m. New York time - 1:00 p.m. Buenos Aires time.
If you are interested in participating please dial (719) 457 2638 at least 5
minutes prior to our conference. Confirmation code: 733339. 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 September
30, 2002, using a WPI of 1.128101 and 1.648982 for June and March, 2002
figures, respectively and a WPI of 2.214328 for September, 2001 figures.
---------------------------------------------------------------------------------------------------------------------------------
Banco Frances S.A. and subsidiaries (Grupo Consolidar: by the equity method)
ASSETS: 09/30/02 06/30/02 03/31/02 09/30/01
Cash and due from banks 891,913 286,901 535,213 2,785,292
Government Securities 2,267,994 1,525,955 2,077,747 6,329,933
- Investment account 1,675,987 889,934 14,447 5,337,726
- Trading account 4,574 22,856 1,284,710 268,288
- Reverse repurchase agreements w/Central Bank - - - -
- Unlisted 577,995 593,787 757,495 696,388
- Private Securities 9,438 19,377 21,095 27,531
8,876,221 9,651,518 13,284,971 10,113,168
Loans
- Advances and Promissory notes 466,485 705,706 1,372,039 1,432,712
- Notes discounted and purchased 20,753 64,347 170,317 752,294
- Secured with mortgages 546,336 668,135 1,150,597 1,715,176
- Secured with chattel mortgages 18,138 26,114 62,025 58,868
- Personal loans 233,058 309,141 526,131 904,121
- Credit cards 138,791 172,659 289,114 520,644
- Loans to financial sector 108,536 43,416 526,959 875,240
- Loans to public sector 5,367,688 5,825,872 8,090,974 2,291,260
- Other 1,484,376 1,647,364 2,093,668 1,879,829
Less: Unaccrued interest (432) (5,321) (10,905) (43,653)
Plus: Accrued interest and exchange
differences receivable 1,731,164 1,486,568 612,373 194,892
Less: Allowance for loan losses (1,238,672) (1,292,483) (1,598,320) (468,215)
Other banking receivables 2,209,401 3,682,008 4,642,516 2,167,010
Investments in other companies 228,753 227,272 524,103 426,767
Intangible assets 226,102 240,008 245,698 296,069
Other assets 1,105,682 1,046,975 1,041,997 825,470
---------- ---------- ---------- ----------
Total assets 15,806,066 16,660,636 22,352,245 22,943,711
========== ========== ========== ==========
LIABILITIES: 09/30/02 06/30/02 03/31/02 09/30/01
Deposits 6,822,416 8,071,132 13,327,991 15,303,059
- Demand deposits 1,353,321 1,551,298 3,006,523 1,993,624
- Saving accounts 486,266 719,767 2,246,548 2,334,845
- Time deposits 2,432,896 1,805,818 1,466,923 10,855,046
- Rescheduled deposits 2,371,636 3,889,202 6,367,343 -
- Other deposits 178,297 105,048 240,654 119,545
Other banking Liabilities 6,474,487 5,447,462 5,311,712 4,349,337
Subordinated debt 585,216 678,661 795,678 389,066
Other liabilities 305,589 217,810 361,670 486,581
Minority interest 30,291 35,275 45,947 44,623
---------- ---------- ---------- ----------
Total liabilities 14,217,999 14,450,340 19,842,999 20,572,666
---------- ---------- ---------- ----------
Total stockholders'equity 1,588,067 2,210,296 2,509,246 2,371,045
---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity 15,806,066 16,660,636 22,352,245 22,943,711
========== ========== ========== ==========
-13-
Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 1.648982 for June and March, 2002
figures, respectively and a WPI of 2.214328 for September, 2001 figures.
------------------------------------------------------------------------------------------------------------------------------
Banco Frances S.A. and subsidiaries (Grupo Consolidar: by the equity method)
INCOME STATEMENT 09/30/02 06/30/02 03/31/02 09/30/01
Financial income 729,737 1,692,329 2,117,812 753,228
- Interest on Cash and Due from Banks 1,628 834 2,515 16,723
- Interest on Loans Granted to the Financial 120 1,692 1,003 4,194
- Interest on Overdraft 46,869 64,670 49,641 50,887
- Interest on Collateralized Loans 16,168 22,398 42,193 57,214
- Interest on Credit Card Loans 13,349 15,662 21,778 26,131
- Interest on Other Loans 110,377 86,024 182,722 322,592
- Income from securities and short term 35,690 58,119 84,939 219,168
- Interest on Government guaranteed loans Decreet 1387/01 168,200 191,506 101,942 -
- From Other Banking receivables 7,301 6,269 7,909 556
- CER 588,066 1,436,536 405,399 -
- Other (258,030) (191,382) 1,217,773 55,763
Financial expenses (857,930) (1,484,871) (1,665,248) (388,960)
- Interest on Current Account Deposits (89,347) (133,292) (20,827) (12,739)
- Interest on Saving Account Deposits (978) (2,632) (3,560) (10,392)
- Interest on Time Deposits (208,061) (151,646) (68,227) (269,397)
- Interest on Other Banking Liabilities (32,537) (36,570) (58,676) (47,112)
-Contributions to the deposit guarantee fund - - - (6,953)
- Mandatory contributions and taxes on interest income (7,084) (13,612) (18,131) (10,782)
- CER (207,484) (757,639) (324,383) -
- Other (312,438) (389,480) (1,171,445) (31,585)
Net financial income (128,193) 207,458 452,565 364,268
Provision for loan losses (202,338) (250,619) (253,176) (105,077)
Income from services, net of other operating expenses 54,333 80,358 110,381 127,838
Inflation adjustment 42,670 59,547 (137,784) -
Administrative expenses (132,790) (148,419) (214,260) (264,426)
- Personnel expenses (62,885) (73,665) (112,142) (120,800)
- Directors and Syndics' Fees (275) (191) (99) (434)
- Other Fees (6,687) (3,622) (5,016) (6,670)
- Advertising and Publicity (5,279) (4,236) (4,896) (10,534)
- Taxes other than income tax (4,774) (4,055) (7,569) (6,255)
- Other Operating Expenses (44,928) (52,716) (68,514) (82,240)
- Other (7,962) (9,935) (16,025) (37,493)
Inflation adjustment (7,885) (31,179) (32,693) -
Income (loss) from equity investments 2,955 14,134 104,270 12,389
Net Other income (243,989) (285,654) (106,094) (70,728)
Inflation adjustment (11,570) 18,015 23,125 -
Income (loss) from minority interest 4,804 10,669 16,127 (715)
-------- -------- ------- ------
Income before tax (622,003) (325,690) (37,539) 63,549
-------- -------- ------- ------
Income tax (220) (1,340) (4,827) (7,896)
======== ======== ======= ======
Net income (622,222) (327,030) (42,366) 55,653
======== ======== ======= ======
------------------------------------------------------------------------------------------------------------------------------
-14-
Figures of previous quarters were restated in constant pesos as of September
30, 2002, using a WPI of 1.128101 and 1.648982 for June and March, 2002
figures, respectively and a WPI of 2.214328 for September, 2001 figures.
-------------------------------------------------------------------------------------------------------------------------------
Banco Frances S.A. and subsidiaries (Grupo Consolidar consolidated on a line by line basis)
ASSETS 09/30/02 06/30/02 03/31/02 09/30/01
Cash and due from banks 908,446 314,566 574,098 2,789,597
Government Securities 2,515,127 1,754,222 2,358,493 7,581,806
Loans 9,602,299 10,247,816 13,914,382 10,219,332
Other banking receivables 2,210,487 3,698,514 4,651,668 2,176,875
Investments in other companies 41,686 41,018 316,003 185,558
Other assets 1,524,688 1,482,022 1,552,266 1,380,142
-----------------------------------------------------------------------------
TOTAL ASSETS 16,802,733 17,538,159 23,366,909 24,333,310
=============================================================================
LIABILITIES 09/30/02 06/30/02 03/31/02 09/30/01
Deposits 6,655,191 7,910,160 13,118,173 15,187,431
Other banking liabilities 6,475,241 5,463,219 5,321,001 4,358,198
Other liabilities 1,920,114 1,786,463 2,222,063 2,189,180
Minority interest 164,120 168,020 196,427 227,456
-----------------------------------------------------------------------------
TOTAL LIABILITIES 15,214,666 15,327,863 20,857,663 21,962,265
-----------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,588,067 2,210,296 2,509,246 2,371,045
-----------------------------------------------------------------------------
STOCKHOLDERS'EQUITY + LIABILITIES 16,802,733 17,538,159 23,366,909 24,333,310
=============================================================================
NET INCOME 09/30/02 06/30/02 03/31/02 09/30/01
Net Financial Income (151,020) 793,887 188,253 399,786
Provision for loan losses (202,338) (250,619) (253,176) (105,077)
Net Income from Services 96,384 124,609 176,332 257,110
Inflation adjustment 708,232 (287,342) (511,405) -
Administrative expenses (164,376) (182,373) (266,967) (334,479)
Inflation adjustment (85,682) (2,856) (21,259) -
Net Other Income 162,110 (837,709) 363,249 (135,594)
Inflation adjustment (984,581) 258,957 314,411 -
Income (loss) from minority interest 1,637 52,548 (9,097) (10,489)
-----------------------------------------------------------------------------
Income before tax (619,634) (330,897) (19,659) 71,257
-----------------------------------------------------------------------------
Income tax (2,589) 3,867 (22,706) (15,604)
-----------------------------------------------------------------------------
Net income (622,222) (327,030) (42,366) 55,653
=============================================================================
-------------------------------------------------------------------------------------------------------------------------------
-15-