Economic Environment

The Argentine economy continued to show strong growth during April and May 2011. On average, the Monthly Estimator of Economic Activity (EMAE) grew 1.8% compared to the first quarter of the year.

Inflation, as measured by the Greater Buenos Aires Consumer Price Index (which is used to calculate the CER adjustment for some sovereign assets) increased 2.3% q/q (9.7% y/y) in the second quarter accumulating 4.6% during the first half of 2011.

The primary fiscal surplus of the national public sector was AR $6,047 million during the second quarter of 2011, an increase of 24.8% compared to the previous quarter. Total public sector revenues grew 18.5% q/q in 2Q11 while fiscal expenditures grew at a slightly lower rate of 18.1% q/q. Important taxes, such as VAT and Income tax were the main contributors to higher fiscal results, increasing 37% y/y and 33.1% y/y, respectively, in 2Q11; above Total Tax Revenues which increased 30.2% y/y in 2Q11. Transfers to the private sector continued to grow at a higher rate (41.4% y/y in 2Q11) while total fiscal spending (increased 35.0% y/y over the same period).

The accumulated trade balance in the second quarter of 2011 ended with a surplus of US$ 3.999 million, 123.7% higher than the first quarter of 2011, but 25.1% below the balance obtained in the second quarter of 2010.

The Argentine Central Bank (BCRA) intervention in the FX market was a net purchase of US$ 2,409 million during the second quarter of the year, and increase of 3.7% compared to 1Q11. The exchange rate (BCRA reference rate) closed at AR$ 4,111 per U.S. dollar on June 30, 2011, an increase of 1.4 % compared to March 31, 2011. The stock of international reserves increased by US$ 397 million during the second quarter, totaling at US$ 51,695 million at June, 30, 2011.

The Badlar rate at private banks averaged 11.28% in the last month of 2Q11, an increase of only 12 BP compared to the average of March 2011. The liquidity of the financial systems continued to be relatively high during the quarter, leading to a low volatility of the Badlar rate.

Total deposits in the financial system increased 6.7% on average in the second quarter of 2011 compared to the first quarter of 2011. Private sector deposits grew 7.8 % in the same period, slightly higher than the quarterly growth of 1Q11. While private sector loans showed a higher increase of 8.9% during the same period. Both private sector deposits and loans showed s small decrease in

growth rate compared to their performance during the first quarter of 2011.

The Bank

BBVA Francés remains one of the leaders in the Argentine financial system, implementing its long-term strategic plan and adapting it to different market conditions.

The Bank develops its business model by placing the customer as the center of the relationship; through strategic guidance that allow it to maximize the benefit for both: Bank and client. To that end, the Bank constantly searches for closer relationships with its customers, in order to anticipate and be ready to satisfy their needs. Thus, BBVA Francés maintains it strategy, based on the continuous improvement of its distribution channels and products, in order to provide the best customer experience.

The Bank remains focused on growth in the retail and middle market segments by implementing commercial measures that allowed it to significantly expand significantly the volume of financing, while maintaining a strict risk policy, thus permitting it to retain the best asset quality ratio in the financial system.

BBVA Francés launched a new personal loans campaign, “Préstamos Simple” that seeks to convey the idea of a simple, easy and accessible product. In June, sales channels reached a record in the number of personal loans sold, duplicating the portfolio volume compared to the same month in 2010, wining 11 basis points in marker share in the quarter.

Given its strategic priority of continuous support to the productive sector, BBVA Francés re-launched new lines in loans and leasing lines with fixed and variable rates, for small and medium-size companies aimed at investment projects, working capital, and pre-financing of exports. The product was well received among its customers. Furthermore, with the goal of improving the quality of service to clients, the electronic banking Francés Net Cash was updated, adding greater information and access, better answers to frequently questions, new manuals and quick guides.

Presentation of Financial Information

BBVA Francés total net income reached $ 197.0 million in the second quarter of 2011. There were no significant variations from both the previous quarter and the second quarter of 2010.

Net interest income grew 4.0% in the quarter and 20.7% in the last twelve months.

Non-recurring income from public bonds’ valuations in the analyzed quarters registered losses of similar quantity.

During the second quarter of 2011, the Bank’s allowances policy was modified, as a consequence of the periodic monitoring it makes of the loan portfolio behavior and the type of financings.

On June 30, 2011, net income from services maintained the upward trend of the last quarters, increasing 12.9% compared to the previous quarter and 37.6% compared to the second quarter of 2010.

Administrative expenses remained at similar level to those of the previous quarter; whereas they increased 20.5% compared with the same quarter a year ago.

Other/Income expenses registered an increase during the quarter mainly due to higher recovered credits.

Income tax, in the second quarter of 2011 reflected the fiscal impact of the sale of Consolidar Seguros de Retiro S.A; while the quarter ended June 30, 2010 included tax adjustments in the fiscal valuation of public bonds.

Net Financial Income

The significant increase in the private sector loan portfolio is reflected in higher interest income, generating an increase in net financial income of 12.0% and 42.1% compared to the previous quarter and the same quarter of 2010, respectively.

Income from public and private bonds includes non-recurring income originated by variations of their valuation. In the analyzed periods such results registered a loss of approximately AR$ 70 million for the quarters.

Income related to foreign currency exchange showed an improvement over the previous quarter and the same quarter of 2010.

Income from Public and Private Securities

Beginning on March 1, 2011, according to Central Bank Communication A 5180, the presentation criteria on which public assets were registered changed, rendering the “available for sale” category no longer valid, consequently, the unrealized valuation difference generated by such portfolio was recorded in the income statement.

In the analyzed periods, the results includes the losses originated by the decrease in valuations for an amount of approximately AR$ 70 million per quarter.

It is important to highlight that the first quarter of 2011 registered a gain of AR$ 37 million from the sale of public bonds, whereas during the second quarter lower income from bills and notes issued by the Central Bank, was recorded due to decreased holdings. The same occurred compared with the second quarter of 2010.

Net Income from Services

Net income from services increased 12.9% during the second quarter of 2011 and 37.6% compared to the same quarter of 2010.

The increased activity in credit lending, as a result of increased consumption was reflected in higher credit card fees and insurance compared to the previous quarter. Additionally, service charge expenses also grew as a result

of promotions associated with credit and debit card purchases.

During the month of May, specific fees were registered attributed capital markets and securities advisory services.

Compared to the second quarter of 2010, the variations are mainly due to growth in the same segments in addition to higher fees related to foreign trade and currency exchange.

Administrative Expenses

Administrative expenses did not registered a significant variation compared to the previous quarter, and increased 20.5% compared to the second quarter of 2010.

As of March 31, 2011, personnel expenses included provisions associated with the increase in salaries and social security expenses. Such increase results to be remunerative beginning on May 2011, so the quarter

registered a decrease of 7.1%. Compared to the same quarter of 2010 it grew 14.2%.

Growth in general expenses compared to the previous quarter was mainly due to:

- An increase in advertising and promotion expenses, due to the “Préstamo Simple” campaign launched during the quarter and of

- Higher taxes generated by:

a. higher bank transactions tax related to the payment of cash dividends –for fiscal year 2010.

b. the payment of stamp taxes related with the Consolidar Retiro’ Share Purchase Agreement.

Similarly, general expenses also increased compared to the second quarter of 2010, mainly due to increases in:

As of June 30, 2011, the Bank and its subsidiaries (except the Consolidar Group) had 4,629 employees. The branch’ office network totaled 267 offices, including 240 consumer branch offices and 27 branch offices specializing in the middle-market segment. The corporate banking included 7 business units grouped by industry. Complementing its distribution network, the Bank has 15 in-company branches, 4 branch offices for large corporate and institutional clients and 2 points of sale, 650 ATM’s and 690 quick deposit boxes (QDBs).

Other Income / Expenses

Other income/expenses totaled a gain of AR$ 22.2 million during the second quarter of 2011, mainly due to recovered credits, partially offset by provisions for other contingencies.

Income from Equity Investments

Income from equity investments sets forth net income from related companies that are not consolidated. During the second quarter of 2011, a gain of AR$ 38.5 million was recorded, mainly due to BBVA Frances’ stake in the Consolidar Group, including the proceeds form the sale of Consolidar Seguros de Retiro S.A.

Total Public Sector Exposure

According to Central Bank Communication “A 5180”, dated March 1, 2011, the presentation criteria for public bonds and Central Bank instruments was modified.

In line with the new regulation, holdings recorded in the available for sale category were reclassified in holdings booked at fair value and in central bank instruments line items.

Exposure to the public sector’s National treasury showed no significant variations compared to the previous quarter.

The Bank’s portfolio of Central Bank bills and notes decreased 30.9% during the second quarter of 2011; but increased 13.3% compared to the second quarter of 2010.

As of June 30, 2011, public sector national treasure assets represented 8.3% of the Bank’s total assets. Total exposure to BCRA bills and notes net of holdings linked to reverse repo transactions, represented 6.1% of the Bank’s total assets.

Total exposure to the public sector includes public debt of the national treasury through public securities, guaranteed loans and trustees, as well as, the BCRA bills and notes.

Loan Portfolio

As of June 30, 2011, the private sector loan portfolio totaled AR$ 18,4 billion, an increase of AR$ 2,1 billion or 12.5% compared to the previous quarter and of AR$ 6,7 billion or 57.7% compared to the second quarter of 2010.

During the second quarter of 2011, all segments maintained the growth rate of the previous quarters, showing an excellent performance. The small and medium-sized companies’ portfolio increased AR$ 475 million (12%), the large corporations segment increased AR$ 627 million (11%), and the retail segment increased $ 826.4 million (12%).

Growth in consumption was driven by the increase in personal loans, credit cards and car loans. In the corporate segment, the increase was due to higher financial loans and advances. In the middle market segment, growth is a result of an increase in discounted and purchased notes as well as loans that financed foreign trade operations and leasing.

Compared to the second quarter of 2010, the significant economic growth was reflected in the expansion recorded by the private loan portfolio, mainly as a consequence of the excellent performance of loans to individuals and to businesses. The middle market segment increased AR$ 1.9 billion (72%); the corporate segment increased AR$

Asset Quality

BBVA Francés maintained the best ratios in asset quality and coverage in the Argentine financial market, reflecting the effectiveness of the risk policy implemented by the Bank.

In line with this performance and as a result of the Bank’s periodic monitoring of the portfolio’ performance and types of financing, it modified its allowances’ policy

during the quarter to adapt it to the default and expected loss estimates.

As of June 30, 2011, the Bank’ asset quality ratio (non-performing loans over total loans) was 0.49%, while its coverage ratio (provisions over of non-performing loans) reached 426.6%.

The following table shows the evolution of provisions for loan losses, including charges relating to transactions

recorded under Other Receivables from financial intermediation.

Deposits

As of June 30, 2011, total deposits reached AR$ 26.2 billion, an increase of 8.5% and 29.9% compared with the previous quarter and to the first quarter of 2010, respectively.

During the first quarter of the year, both, sight deposits and time deposits registered growth, increasing 10.2% and 5.4%, respectively.

Compared with the same quarter in 2010, sight and time deposits grew 27.9% and 32.5%, respectively.

In terms of currency, deposits denominated in pesos, grew 8.9% in the second quarter of 2011 and 39.1% in the last twelve months. Meanwhile,, recurring deposits denominated in foreign currency increased 8.9% during the quarter ended June 30, 2011, and 27.1% in the last twelve months.

By the end of June 30, 2011, deposits denominated in foreign currency reached AR$ 5.6 billion (equivalent to US$ 1.4 billion), representing 21.4% of the Bank’s total deposits, maintaining a similar level to that of the previous quarter.

Other Funding Sources

As of June 30, 2011, other funding sources totaled AR$ 539.8 million, an increase of 32.0% compared with the

previous quarter, mostly due to the growth in dollar funding lines, intended to finance foreign trade operations.

In November 2010, PSA Finance issued Series 1 and 2 Notes for AR$ 50 billion and 20 billion, respectively. Both series were fully subscribed and the proceeds were allocated to the cancellation of short term debt taken by the company.

46% of the balances shown in the table below were denominated in foreign-currency by the end of June 2011.

Capitalization

As of June 30, 2011, the Bank’s total shareholder’s equity totaled AR$ 3.3 billion; representing an excess of AR$ 1.1 billion over the BCRA capital requirements. On the same

date, the capital ratio reached 14.7% of assets adjusted to risk.

During the second quarter, the Bank paid its shareholders a cash dividend of AR$ 804 million.