Date: 7/8/2021 Form: 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]
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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

 

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

of the Securities Exchange Act of 1934

 

 

For the month of July, 2021

 

Commission File Number: 001-12568

 

 

Banco BBVA Argentina S.A.

(Exact name of Registrant as specified in its charter)

BBVA Argentina Bank S.A.

(Translation of registrant’s name into English)

 

111 Córdoba Av., C1054AAA

Buenos Aires, Argentina

(Address of principal executive offices)

 

 

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

 

Form 20-F

X

  Form 40-F
 

 

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

 

Yes
 
  No

X

 

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

 

Yes
 
  No

X

 

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

 

Yes
 
  No

X

 

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

 
 
 


 

Banco BBVA Argentina S.A.

 

 

TABLE OF CONTENTS

 

 

Item

 
   
1. Financial Statements as of March 31, 2021.
   
   

 

 
 

 

SIGNATURES

 

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

 

    Banco BBVA Argentina S.A.
Date:      July 8, 2021   By: /s/ Ernesto R. Gallardo Jimenez
        Name: Ernesto R. Gallardo Jimenez
        Title: Chief Financial Officer

 

 

 

 

 

 

BANCO BBVA ARGENTINA S.A.

CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021

 

 
 

 

Banco BBVA Argentina S.A.

 

 

TABLE OF CONTENTS

 

Condensed interim financial statements for the three-month period ended March 31, 2021, comparatively presented.

 

Consolidated Condensed Statement of Financial Position

Consolidated Condensed Statement of Income

Consolidated Condensed Statement of Other Comprehensive Income

Consolidated Condensed Statement of Changes in Shareholders’ Equity

Consolidated Condensed Statement of Cash Flows

Notes

Exhibits

 

Independent auditors’ report on the review of the consolidated condensed interim financial statements

 

 

Separate Condensed Statement of Financial Position

Separate Condensed Statement of Income

Separate Condensed Statement of Other Comprehensive Income

Separate Condensed Statement of Changes in Shareholders’ Equity

Separate Condensed Statement of Cash Flows

Notes

Exhibits

 

Independent auditors’ report on the review of the separate condensed interim financial statements

 

Supervisory Committee’s Report

 

Reporting Summary

 

 

 
 
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CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
AS OF MARCH 31, 2021 AND DECEMBER 31, 2020
(stated in thousands of pesos)
                 
                 
                 
   Notes and Exhibits    03.31.21   12.31.20  
     
 ASSETS                 
                 
 Cash and deposits in banks  7   195,734,964   171,811,092  
                 
 Cash      65,937,072    70,293,873  
 Financial institutions and correspondents       129,797,892     101,517,219  
  Argentine Central Bank (BCRA)       125,693,668    97,347,863  
  Other in the country and abroad        4,104,224   4,169,356  
                 
 Debt securities at fair value through profit or loss  8     4,871,695   1,064,876  
                 
 Derivatives  9     2,475,616   4,380,030  
                 
 Repo transactions   10   30,469,729    55,559,168  
                 
 Other financial assets   11   13,818,687    11,345,757  
                 
 Loans and other financing   12   284,651,671   315,724,785  
                 
Non-financial government sector      460    577  
Argentine Central Bank (BCRA)        -    6,783  
Other financial institutions        1,986,508   1,982,547  
Non-financial private sector and residents abroad       282,664,703     313,734,878  
                 
 Other debt securities   13    135,069,138     136,225,588  
                 
 Financial assets pledged as collateral   14   16,644,591    20,233,091  
                 
 Current income tax assets   15 a)      1,361,051   550  
                 
 Investments in equity instruments   16     2,278,267   2,882,615  
                 
 Investments in associates   17     1,584,645   1,628,975  
                 
 Property and equipment   18   37,640,901    38,142,107  
                 
 Intangible assets   19     1,907,255   1,755,173  
                 
 Deferred income tax assets        4,185,490   5,990,238  
                 
 Other non-finacial assets   20     8,999,951    10,080,803  
                 
 Non-current assets held for sale   21   255,203    255,203  
                 
 TOTAL ASSETS      741,948,854   777,080,051  
                 
                 
Notes and exhibits are an integral part of these consolidated financial statements.

 

 
 
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CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
AS OF MARCH 31, 2021 AND DECEMBER 31, 2020
(stated in thousands of pesos)
                 
                 
                 
   Notes and Exhibits    03.31.21   12.31.20  
     
 LIABILITIES                 
                 
 Deposits   22 and Exhibit H     507,819,555     540,167,048  
                 
Non-financial government sector        6,581,683   6,357,459  
Financial sector        179,222   973,263  
Non-financial private sector and residents abroad       501,058,650     532,836,326  
                 
 Derivatives  9   398,819    213,135  
                 
 Other financial liabilities   24   44,913,135    44,307,716  
                 
 Financing received from the BCRA and other financial institutions   25     9,773,040    10,872,877  
                 
 Corporate bonds issued   26     1,022,205   1,320,173  
                 
 Current income tax liabilities   15 b)      1,588,512   4,204,095  
                 
 Provisions   27 and Exhibit J  10,465,789    12,960,983  
                 
 Deferred income tax liabilities        73,056   44,435  
                 
 Other non-financial liabilities   28   45,988,625    45,795,460  
                 
 TOTAL LIABILITIES       622,042,736     659,885,922  
                 
                 
                 
 EQUITY                 
                 
 Share capital   30   612,710    612,710  
 Non-capitalized contributions      29,804,660    29,804,660  
 Capital adjustments      21,134,417    21,134,417  
 Reserves      97,514,629    97,514,629  
 Retained earnings       (34,375,541)     (46,848,249)  
 Other accumulated comprehensive income/(loss)       (167,203)   88,128  
 Income for the period/year        3,008,738    12,472,708  
 Equity attributable to owners of the Parent       117,532,410     114,779,003  
 Equity attributable to non-controlling interests        2,373,708   2,415,126  
                 
 TOTAL EQUITY       119,906,118     117,194,129  
                 
 TOTAL LIABILITIES AND EQUITY       741,948,854     777,080,051  
                 
Notes and exhibits are an integral part of these consolidated financial statements.

 

 
 
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CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE-MONTH INTERIM PERIODS ENDED MARCH 31, 2021 AND 2020
(stated in thousands of pesos)
                 
                 
                 
   Notes and Exhibits    Accumulated as of 03.31.21   Accumulated as of 03.31.20  
     
                 
 Interest income    31     36,705,270    35,109,437  
 Interest expense  32    (15,157,306)     (11,656,241)  
                 
 Net interest income      21,547,964    23,453,196  
                 
 Commission income  33    7,678,002   7,704,207  
 Commission expenses  34   (4,322,852)    (5,028,327)  
                 
 Net commission income        3,355,150    2,675,880  
                 
 Net income from financial instruments at fair value  35    1,600,451   1,411,355  
 through profit or loss       
 Net income (loss) from write-down of assets at amortized cost and at  36     (33,001)    (1,045,472)  
 fair value through OCI         
 Foreing exchange and gold gains/(losses)  37    895,594   1,764,949  
 Other operating income  38    1,546,703   1,482,072  
 Loan loss allowance      (1,913,789)    (2,315,708)  
                 
 Net operating income      26,999,072    27,426,272  
                 
 Personnel benefits  39   (5,840,252)    (6,332,572)  
 Administrative expenses  40   (5,331,600)    (5,121,007)  
 Depreciation and amortization  41   (1,069,028)    (1,173,705)  
 Other operating expenses  42   (4,647,578)    (4,438,624)  
                 
 Operating income      10,110,614    10,360,364  
                 
 Income (loss) from associates and joint ventures        (29,322)     39,331  
 Gain (loss) on net monetary position      (7,550,605)    (5,344,950)  
 Income before income tax        2,530,687    5,054,745  
                 
 Income tax   15 c)     436,633    (3,087,576)  
                 
 Net income for the period        2,967,320    1,967,169  
                 
 Net income for the period attributable to:               
 Owners of the Parent       3,008,738   1,926,631  
 Non-controlling interests        (41,418)     40,538  
                 
Notes and exhibits are an integral part of these consolidated financial statements.

 

 
 
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EARNINGS PER SHARE
AS OF MARCH 31, 2021 AND 2020
(stated in thousands of pesos)
               
 Accounts      03.31.21   03.31.20
   
               
 Numerator:               
               
 Net income attributable to owners of the Parent      3,008,738   1,926,631
 Net income attributable to owners of the Parent adjusted to reflect the effect of dilution    3,008,738   1,926,631
               
 Denominator:           
               
 Weighted average of outstanding common shares for the period    612,710,079   612,683,684
 Weighted average of outstanding common shares for the period adjusted to reflect the effect of dilution    612,710,079   612,683,684
               
 Basic earnings per share (stated in pesos)        4.9105   3.1446
 Diluted earnings per share (stated in pesos) (1)        4.9105   3.1446

 

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

 

 
 
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 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME 
FOR THE THREE-MONTH INTERIM PERIODS ENDED MARCH 31, 2021 AND 2020
 (stated in thousands of pesos) 
           
           
           
    Accumulated as of 03.31.21   Accumulated as of 03.31.20  
           
 Net income for the period      2,967,320     1,967,169  
           
 Other comprehesive income components to be reclassified to income/(loss) for the period: 
           
 Share in Other Comprehensive Income from associates and joint ventures at equity method 
 Loss for the period on the Share in OCI from associates and joint ventures at equity method     (5,450)     (24,594)  
      (5,450)   (24,594)  
           
 Income or loss on hedge instruments - cash flow hedge           
 Loss on hedge instruments for the period      -    (2,496)  
 Income tax      -     546  
      -     (1,950)  
           
 Profit or losses from financial instruments at fair value through OCI           
 Income/(Loss) for the period on financial instruments at fair value through OCI    (436,993)    3,246,454  
 Reclassification adjustment for the period    33,001    1,045,472  
 Income tax     158,319   (1,036,346)  
     (245,673)     3,255,580  
           
 Other comprehesive income components not to be reclassified to income/(loss) for the period: 
           
 Income or loss on equity instruments at fair value through OCI (IFRS 9, paragraph 5.7.5) 
 Loss for the period on equity instruments at fair value through OCI     (4,483)     (22,212)  
 Income tax      275     6,687  
      (4,208)   (15,525)  
           
 Total Other Comprehensive Income for the period     (255,331)     3,213,511  
           
 Total Comprehensive Income      2,711,989     5,180,680  
           
           
 Total comprehensive income:           
 Attributable to owners of the Parent     2,753,407    5,141,119  
 Attributable to non-controlling interests      (41,418)   39,561  
           
Notes and exhibits are an integral part of these consolidated financial statements.          

 

 
 
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CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE-MONTH INTERIM PERIODS ENDED MARCH 31, 2021 AND 2020
(stated in thousands of pesos )
                                           
    2021   2020
    Share   Non-capitalized       Other Comprehensive Retained                  
    Capital   contributions       Income   Earnings                  
    Outstanding shares   Share premium       Losses on financial instruments at fair value through OCI Other           Total equity attributable to owners of the Parent   Total equity attributable to non-controlling interests   Total   Total
                   Unappropriated retained earnings        
        Adjustments to equity                
Transactions           Legal reserve Optional reserve        
                                           
Restated balances at the beginning of the year  612,710    29,804,660    21,134,417   145,842 (57,714)   25,446,286 72,068,343  (33,243,553)    115,910,991    2,415,126   118,326,117     118,836,739
                                           
Adjusted income from previous years (see Note 2.b)  -     -     -     -   -     -   - (1,131,988)    (1,131,988)    -   (1,131,988)   -
                                           
Impact of the implementation of the financial reporting framework established by the BCRA -  IFRS 9, paragraph 5.5  -     -     -     -   -     -   -  -     -    -    -    (2,188,839)
                                           
Adjusted balance at the beginning of the year  612,710    29,804,660    21,134,417   145,842 (57,714)   25,446,286 72,068,343  (34,375,541)    114,779,003    2,415,126   117,194,129     116,647,900
                                           
Total comprehensive income for the period                                        
 - Net income for the period    -     -     -     -   -     -   -  3,008,738     3,008,738     (41,418)    2,967,320   1,967,169
 - Other Comprehensive Income for the period  -     -     -    (245,673)   (9,658)     -   -  -    (255,331)    -   (255,331)   3,213,511
                                           
Difference derived from the impact of the implementation of the financial reporting framework established by the BCRA -  IFRS 9, paragraph 5.5. Group “C” financial institutions  -     -     -     -   -     -   -  -     -    -    -     (2,775)
                                           
Balances at fiscal period end     612,710 #  29,804,660    21,134,417    (99,831)  (67,372) #  25,446,286  72,068,343  (31,366,803) #  117,532,410     2,373,708   119,906,118     121,825,805
                                           
Notes and exhibits are an integral part of these consolidated financial statements.
 
 
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CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE-MONTH INTERIM PERIODS ENDED MARCH 31, 2021 AND 2020
(stated in thousands of pesos)
         
Accounts   03.31.21   03.31.20
       
 Cash flows from operating activities       
         
 Income before income tax    2,530,687     5,054,745
         
 Adjustment for total monetary income for the period      7,550,605     5,344,950
         
 Adjustments to obtain cash flows from operating activities:   81,187   (3,245,794)
 Depreciation and amortization   1,069,028    1,173,705
 Loan loss allowance   1,913,789    2,315,708
 Effect of foreign exhange changes on cash and cash equivalents      (772,912)     (6,405,118)
 Other adjustments    (2,128,718)     (330,089)
         
 Net increases from operating assets:  (4,529,044)    (92,356,663)
  Debt securities at fair value through profit or loss  (20,369,447)     (6,269,208)
  Derivatives   1,904,414    1,608,385
  Repo transactions    25,089,439     (4,567,178)
  Loans and other financing    (4,993,919)   (34,721,526)
  Non-financial government sector    117   (126)
  Other financial institutions  (1,234)     (2,156,155)
  Non-financial private sector and residents abroad    (4,992,802)   (32,565,245)
  Other debt securities   752,239   (27,581,648)
  Financial assets pledged as collateral   2,190,493     (1,281,010)
  Investments in equity instruments   333,766    281,952
  Other assets    (9,436,029)   (19,826,430)
         
 Net increases from operating liabilities:    42,765,454     65,607,335
 Deposits    30,085,780     49,062,120
  Non-financial government sector   224,224    436,525
  Other financial institutions    (246,030)    373,894
  Non-financial private sector and residents abroad    30,107,586     48,251,701
 Liabilities at fair value through profit or loss    -     (893,127)
 Derivatives   185,684     (4,252,404)
 Other liabilities    12,493,990     21,690,746
         
 Income tax paid    (2,319,100)     (531,729)
         
Total cash flows generated by / (used in) operating activities     46,079,789   (20,127,156)

 

 
 
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CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE-MONTH INTERIM PERIODS ENDED MARCH 31, 2021 AND 2020
(stated in thousands of pesos)
         
Accounts   03.31.21   03.31.20
         
 Cash flows from investing activities       
         
 Payments:  (729,277)   (538,719)
Purchase of property and equipment, intangible assets and other assets    (707,175)     (538,719)
Other payments related to investing activities   (22,102)     -
         
 Collections:    299,098     272,566
Other collections related to investing activities   299,098    272,566
         
 Total cash flows used in investing activities  (430,179)   (266,153)
         
 Cash flows from financing activities       
         
 Payments:  (1,575,279)   (2,926,244)
  Non-subordinated corporate bonds    (256,106)     (1,865,655)
  BCRA  (6,603)   (690)
  Financing from local financial institutions    (1,032,050)     (773,329)
  Leases      (280,520)     (286,570)
         
 Collections:    -     1,070,702
  Issue of equity instruments    -    1,070,702
         
 Total cash flows used in financing activities  (1,575,279)   (1,855,542)
         
 Effect of exchange rate changes on cash and cash equivalents     772,912    6,405,118
 Gain/loss on net monetary position of cash and cash equivalents  (20,923,371)   (15,437,889)
         
 Total changes in cash flows    23,923,872    (31,281,622)
 Restated cash and cash equivalents at the beginning of the year (Note 7)    171,811,092   240,288,199
 Cash and cash equivalents at fiscal period-end (Note 7)    195,734,964   209,006,577
         
Notes and exhibits are an integral part of these consolidated financial statements.

 

 
 
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NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF MARCH 31, 2021
(Stated in thousands of pesos)

 

 

1.General information
1.1.Information on Banco BBVA Argentina S.A.

 

Banco BBVA Argentina S.A. (hereinafter, either “BBVA Argentina”, the “Entity” or the “Bank”) is a corporation (“sociedad anónima”) incorporated under the laws of Argentina, operating as a universal bank with a network of 247 national branches.

Since December 1996, BBVA Argentina is part of the global strategy of Banco Bilbao Vizcaya Argentaria S.A. (hereinafter, either “BBVA” or the “Parent”), which directly and indirectly controls the Entity, by holding 66.55% of the share capital as of March 31, 2021.

These consolidated condensed interim financial statements include the Entity and its subsidiary companies (collectively referred to as the “Group”).

 

The financial statements of the subsidiaries were prepared as of the same dates and for the same periods as those of Banco BBVA Argentina S.A. The financial statements of PSA Finance Argentina Compañía Financiera S.A. and Volkswagen Financial Services Compañía Financiera S.A. were prepared considering the financial reporting framework set forth by the Argentine Central Bank (BCRA) for Group "C" financial institutions, without considering the model established in paragraph 5.5. “Impairment” of IFRS 9 until fiscal years beginning on or after January 1, 2022, as stated in Note 2 to these consolidated condensed interim financial statements.

 

The Entity's subsidiaries are listed below:

 

– BBVA Asset Management Argentina S.A. Sociedad Gerente de Fondos Comunes de Inversión: corporation incorporated under the laws of Argentina as an agent for the management of mutual funds.

 

– Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings) “Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings)”: corporation incorporated under the laws of Argentina undergoing liquidation proceedings. On December 4, 2008, Law No. 26425 was enacted, providing for the elimination and replacement of the capitalization regime that was part of the Integrated Retirement and Pension System, with a single pay-as-you go system named the Argentine Integrated Retirement and Pensions System (SIPA). Consequently, Consolidar A.F.J.P. S.A. ceased to manage the resources that were part of the individual capitalization accounts of affiliates and beneficiaries of the capitalization regime of the Integrated Retirement and Pension System, which were transferred to the Guarantee Fund for the Sustainability of the Argentine Retirement and Pension Regime as they were already invested, and the Argentine Social Security Office (ANSES) is now the sole and exclusive owner of those assets and rights. Likewise, on October 29, 2009, the ANSES issued Resolution No. 290/2009, whereby retirement and pension fund managers interested in reconverting their corporate purpose to manage the funds for voluntary contributions and deposits held by participants in their capitalization accounts had 30 business days to express their intention to that end. On December 28, 2009, based on the foregoing and taking into consideration that it is impossible for Consolidar A.F.J.P. S.A. to comply with the corporate purpose for which it was incorporated, it was resolved, at a Unanimous General and Extraordinary Shareholders’ Meeting to approve the dissolution and subsequent liquidation of that company effective as of December 31, 2009.

 

– PSA Finance Argentina Compañía Financiera S.A. (“PSA”): a financial company incorporated under the laws of Argentina engaged in the granting of pledge loans; and

 

– Volkswagen Financial Services Compañía Financiera S.A. (“VWFS”): a financial company incorporated under the laws of Argentina engaged in the granting of pledge loans.

 
 
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Argentine Capital Markets Law No. 26831, enacted on December 28, 2012 and amended by Law No. 27440 dated May 11, 2018, subsequently regulated through General Resolution No. 622/13 and General Resolution No. 731/2018 issued by the Argentine Securities Commission (CNV), establishes in section 47 that agents have an obligation to register with the CNV, to act in the market in any of the capacities set forth in such law. On September 9 and 19, 2014, the Entity was registered as an Agent for the Custody of Mutual Funds under No. 4 and as a Comprehensive Clearing and Settlement Agent under No. 42. On August 7, 2014, the subsidiary BBVA Asset Management Argentina S.A. Sociedad Gerente de Fondos Comunes de Inversión was registered as a Mutual Fund Agent under No. 3.

 

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

 

1.2.Economic context

 

The Bank continues to operate in a complex economic context, signaled by the persistence of high levels of inflation although economic activity level has been recovering since the second half of 2020, amidst the ongoing health emergency. This scenario is accompanied by volatile financial variables, including, among others, a country risk indicator which has increased even after the successful renegotiation of the sovereign debt last year, as well as the imputed exchange rates impacting the outstanding public debt denominated in foreign currency.

 

Against this backdrop, by means of Decree No. 1042/2020, the Executive Branch extended the effectiveness of the Public Emergency, Social Solidarity and Productive Revival Law (the “Economic Emergency Law”) for one additional year, until December 31, 2021, declaring Argentina in economic, financial, administrative, social security, energy, public health and social emergency.

 

On the fiscal front, in December 2020, the Argentine Government and the provinces (excluding the Autonomous City of Buenos Aires) agreed upon a new Fiscal Consensus empowering jurisdictions to set turnover tax rates, without the caps established in the 2017 Fiscal Consensus. Concerning income tax, a bill was submitted to the Congress which, if approved, would increase the income tax rate for large corporations, including the Bank, from 30% to 35%.

 

As regards foreign exchange matters, on December 30, 2019, the BCRA published Communication “A” 6856 establishing the effectiveness of the provisions made known through Communication “A” 6770, as amended, whereby, among other measures, it provided that the BCRA's previous consent will be required to access the foreign exchange market for the remittance of profits and dividends, payment of services to foreign related companies, and early payment of financial debts (principal and interest) over three business days before their due date. As of the date of these financial statements, the BCRA issued further regulations imposing new restrictions to access the exchange market.

 

Furthermore, the Argentine Government is in the process of negotiating its foreign debt with its main creditors, including the International Monetary Fund and the Paris Club.

 

1.3.COVID-19

 

On March 11, 2020, the World Health Organization designated the Coronavirus (COVID-19) outbreak as a pandemic, due to its fast pace of proliferation across more than 150 countries. Most governments took restrictive measures to contain the spread, including, without limitation, social distancing, confinement, lockdowns, and restrictions to the free movement of people, closure of governmental and private facilities, other than those deemed essential (i.e., heath, food, fuel and communication facilities), border closures, and drastic reductions in transportation by air, sea, railroad and land.

 

 
 
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As for Argentina, where the Entity operates, on March 12, 2020, Executive Decree No. 260/2020, as amended, was issued, declaring the country in health emergency in order to cope with the crisis brought about by the COVID-19. On March 19, 2020, Executive Decree No. 297/2020 was issued, mandating social and preventive lockdown measures, effective from March 20, 2020 through November 8, 2020, pursuant to successive extensions established by subsequent Decrees published in the Official Gazette. By means of Decree No. 875/2020 dated November 7, 2020, the Executive Branch established mandatory social preventive distancing measures, subsequently extended until May 30, 2021 for people residing in or moving around urban agglomerations and districts or provinces, to the extent they meet the epidemiological and health parameters therein set forth.

 

The measures adopted by the Executive Branch originally led to the slowdown or suspension of most non-essential activities carried out by individuals and, as such, have had significant impact on the economy at the national, regional and global levels, due to the disruption or slowdown of supply chains, coupled with rising economic uncertainty, as evidenced by the increased volatility in asset prices and exchange rates, and a decline in long-term interest rates. Then, due to the epidemiological evolution in different regions of the country, the restrictive measures progressively became more flexible, allowing to gradually resume economic and personal activities.

 

On March 11, 2021, the Executive Branch passed Decree No. 167/2021 extending until December 31, 2021 the term of the health emergency declared by means of Law No. 27541 and subsequently extended by Decree No. 260/2020, as amended.  On April 8, 2021, the Executive Branch issued Decree No. 235/2021, amended by Decree No. 241/2021 dated April 16, 2021, imposing overall prevention measures, including capacity restrictions on business, industrial, commercial and service activities, limiting the use of enclosed areas up to 50% of their total capacity.

 

In an effort to address the challenges brought about by the pandemic, the BCRA took several measures primarily aimed at facilitating credit access by economic players, including, without limitation:

a)eased calculation of days in arrears and suspension of certain mandatory reclassification provisions for purposes of the financial system's debtors classification and allowance assessment, according to the BCRA's rules and regulations. Communication “A” 7245 dated March 25, 2021 establishes the schedule by which days in arrears for debtors classification will increase. Effective since June 1, 2021, debtors will have to be classified according to preexisting arrears criteria;
b)maximum limit on positions held by entities in Bills issued by the BCRA (LELIQs);
c)obligation for financial institutions to grant credit facilities to micro, small and medium enterprises (MSMEs) at an annual nominal interest rate of 24% to cover working capital requirements or to pay for wages. Since November 6, 2020, the extension of such credit lines is voluntary;
d)obligation for financial institutions to automatically extend the payment term of credit card outstanding balances until September 30, 2020, offering payment plans of up to 9 installments, at an annual interest rate of up to 40% and with a three-month grace period;
e)for mortgage and pledge loans adjustable by UVA (that is, according to the changes in the CPI), by means of Decrees No. 319/2020 and 767/2020, the Argentine government suspended hikes in outstanding installments until January 2021. In addition, an 18-month convergence period will commence in February 2021, in order for installments to gradually reach ordinary levels, without the impact of the suspended hikes. The difference between the payments made pursuant to contractual conditions and those arising from the suspension will be payable in new installments not to exceed the amount of the originally agreed-upon ones upon expiration of the original contractual term;
f)suspended hikes in fees and commissions (related to savings accounts, credit cards, checking accounts and safety boxes) from November 5, 2020 with maximum percentages allowed by the BCRA. Such percentages shall be communicated to the BCRA at least 30 days prior to date scheduled to inform the user, and they shall only be applied 60 days after users have been informed;
g)ceiling rates on credit card revolving financing facilities and floor rates on time deposits;
h)obligation for financial institutions to grant credit facilities to customers and non-customers at a regulatory interest rate of 24% for the purchase of Argentine-sourced capital goods, health-care providers and companies which had no access to bank loans. Since November 6, 2020, the extension of such credit lines is voluntary;
 
 
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i)obligation for financial institutions to grant credit to businesses under the Employment and Production Emergency Assistance Program (the “Program”) at a regulatory interest rate of 15%;
j)under such Program, financial institutions will be required to grant zero-interest rate credit facilities in pesos (15% of such rate to be subsidized by the Federal Productive Development Fund or FONDEP, for its Spanish acronym) for taxpayers under the simplified tax regime and self-employed workers engaged in cultural activities, and applying for them until December 31, 2020; and
k)from October 16, 2020 to September 30, 2021, large financial institutions, including the Bank, are required to maintain outstanding balances under the “Financing line for productive investments of MSMEs” to finance investment projects, working capital and discount of financial instruments equivalent, at least, to 7.5% of non-financial private sector deposits.

 

In addition, the distribution of profits by financial institutions was suspended until June 30, 2021.

 

The events described in the preceding Notes 1.2. and 1.3. impact the Entity's operations, while also affecting the calculation of expected credit losses under IFRS 9 and the valuation of debt instruments issued by the public sector (given their new conditions, such as lower rates, longer term and different currency), by decreasing the financial margin and restricting the Entity's ability to charge fees and commissions on certain activities (withdrawal of funds from ATMs, transactions carried out at the branch through MSMEs).

 

As of March 31, 2021, minimum capital and minimum cash surpass the minimum thresholds required by the BCRA, with no deficiencies in these ratios being expected for the following twelve months.

 

The Entity's Management monitors the development of these events on an ongoing basis in order to define the potential actions to be taken and identify their impact on its financial position.

 

2.Basis for the preparation of the Financial Statements

 

These consolidated condensed interim financial statements as of March 31, 2021 and for the three-month period ended on that date, were prepared in accordance with the reporting framework set forth by the BCRA that requires supervised entities to submit financial statements prepared pursuant to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), with the following exceptions (“financial reporting framework set forth by the BCRA”):

a)Impairment of financial assets

Pursuant to Communication “A” 6847 issued by the BCRA, the Entity has applied the expected loss model set forth under paragraph 5.5. of IFRS 9, except for debt instruments issued by the non-financial government sector which were excluded from the scope of such standard. If the Entity had applied the impairment model established in paragraph 5.5. of IFRS 9, its shareholders' equity as of March 31, 2021 and December 31, 2020 would have been reduced by 4,665,450 and 5,001,733, respectively, net of the deferred tax effect.

In addition, on March 19, 2020, the BCRA issued Communication "A" 6938—which term was subsequently extended by Communication “A” 7181 dated December 17, 2020— deferring the application of the impairment model set forth in paragraph 5.5 of IFRS 9 until fiscal years beginning on or after January 1, 2022 for Group "C" institutions (institutions consolidated by the Bank), which would remain subject to the impairment model established by the BCRA through Communication "A" 2950, as amended. Such model requires that financial institutions recognize an allowance for loan losses based on the minimum guidelines set forth by the BCRA.

 
 
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b)Measurement of the remaining investment held in Prisma Medios de Pago S.A.

By means of Memorandum No. 7/2019 dated April 29, 2019, the BCRA established the accounting treatment to be applied to the remaining investment held by the Entity in Prisma Medios de Pago S.A. recognized under “Investments in Equity Instruments” as of March 31, 2021 and December 31, 2020 (see Note 16 to these consolidated condensed interim financial statements).

Additionally, the Bank recognized an adjustment to previous years’ profits, in compliance with the BCRA’s requirement. Consequently, in accordance with Memorandum No. 8/2021 dated March 22, 2021, that is, subsequent to the financial statements as of December 31, 2020, the Bank was required to adjust the fair value recognized in respect of its equity interest in Prisma Medios de Pago S.A. as of December 31, 2020.

For disclosure purposes only, such adjustment had an impact on the items “Investments in Equity Instruments” by 1,617,126 (decrease) and “Unappropriated retained earnings” by 1,131,988 (net decrease in deferred income tax) in the comparative consolidated condensed statement of financial position and in the comparative consolidated condensed statement of changes in shareholders’ equity as of December 31, 2020.

In determining the valuation of such equity interest, the Bank followed the guidelines set out under applicable standards, also considering a valuation report as of December 31, 2020 issued by independent appraisers.

c)Uncertain tax positions

The BCRA issued Memorandum No. 6/2017 dated May 29, 2017 regarding the treatment to be given to uncertain tax positions. Had the IFRS treatment regarding uncertain tax positions been applied, liabilities would have decreased by 4,261,279 and 6,152,634 as of March 31, 2021 and December 31, 2020, respectively.

The exceptions described above imply a deviation from IFRS.

 

As this is an interim period, the Entity has opted to present condensed information, pursuant to the guidelines of IAS 34 “Interim Financial Information”; therefore, not all the information required for the preparation of complete financial statements under IFRS is included. Therefore, these financial statements should be read jointly with the financial statements as of December 31, 2020. However, explanatory notes of events and transactions that are material for understanding any changes in the financial position as from December 31, 2020 are included.

 

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

 

These financial statements have been approved by the Board of Directors of Banco BBVA Argentina S.A. on May 26, 2021.

 

3.Functional and presentation currency

 

The Bank considers the Argentine Peso as the functional and presentation currency. All amounts are stated in thousands of pesos, unless otherwise stated. All the periods and the fiscal year reflected in these financial statements are exposed in constant currency as of March 31, 2021.

Adoption of IAS 29

IAS 29 requires that the financial statements of an entity whose functional currency is that of a hyperinflationary economy be stated in the measuring unit current at the reporting period end. IAS 29 provides certain qualitative and quantitative guidelines to determine the existence of a hyperinflationary economy. Accordingly, hyperinflation shall be deemed to exist where the last three years' cumulative inflation approaches or exceeds 100%. In Argentina, consensus has been reached among local professional associations in that, as from July 1, 2018, the Argentine economy should be regarded as hyperinflationary based on the guidelines established in IAS 29.

 
 
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By means of Communication “A” 6651, as amended, the BCRA mandated the retroactive application of IAS 29 to fiscal years beginning on or after January 1, 2020.

Entities should rely on the following price indexes for such purposes:

·for items subsequent to December 2016: Consumer Price Index (CPI) compiled by the Argentine Institute of Statistics and Census (“INDEC”), and
·for items previous to December 2016: The price index released by the Argentine Federation of Professional Councils of Economic Sciences (FACPCE).

Under IAS 29, assets and liabilities which are not stated in the measuring unit current at the end of the reporting period should be restated by applying the price index. The restated value of a non-monetary item is reduced when it exceeds its recoverable value.

The Entity recognized the impact of the adoption of IAS 29 at the beginning of the first year of application under Unappropriated retained earnings. All items of the Consolidated Statements of Income and Other Comprehensive Income are restated into the measuring unit current at the reporting period end. The gain or loss on net monetary position is recognized in the Consolidated Statement of Income under “Gain (loss) on net monetary position,” except for gains or losses related to investments in equity instruments at fair value through profit or loss, which are recognized in real terms under “Net income from financial instruments at fair value through profit or loss” in the Consolidated Statement of Income.

The Bank prepares its financial statements based on the historical cost approach, and has applied the guidelines of IAS 29 as follows:

a)the Statement of Financial Position as of December 31, 2020 was restated into the measuring unit current as of March 31, 2021;
b)the Statements of Income, Other Comprehensive Income, Changes in Shareholders' Equity and Cash Flows as of March 31, 2020 were restated into the measuring unit current as of March 31, 2021, calculating and separately disclosing the gain or loss on net monetary position;
c)The Entity recalculated the balance of Other comprehensive income as of December 31, 2020 and Other comprehensive income for the period as of March 31, 2020, availing of the option set forth in Communication "A" 7222 issued by the BCRA, which allowed for the early adoption of Communication "A" 7211, repealing the provisions of Communication "A" 6849 concerning the recognition of monetary losses associated with positions carried at fair value through OCI;
d)the Statement of Financial Position as of March 31, 2021 was restated;
e)the Statements of Income, Other Comprehensive Income, Changes in Shareholders' Equity and Cash flows for the period ended March 31, 2021 were restated, calculating and separately disclosing the gain or loss on net monetary position.

In applying IAS 29 to the Statement of Financial Position, the Bank has relied on the following methodology and criteria:

a)Non-monetary assets and liabilities were restated by applying the price index from their date of recognition. The restated amounts were written down to their recoverable values, applying the relevant IFRS, where appropriate.
b)Monetary assets and liabilities were not restated.
c)Assets and liabilities contractually related to changes in prices, such as index-linked securities and loans, were measured on the basis of the related contract.
d)The measurement of investments accounted for under the equity method was based on associates' and joint businesses' information prepared in accordance with IAS 29.
e)Deferred income tax assets and liabilities were recalculated on the basis of the restated amounts.
 
 
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In applying IAS 29 to the Statements of Income, Other Comprehensive Income and Cash Flows, the Bank has relied on the following methodology and criteria:

a)All items of the Statements of Income, Other Comprehensive Income and Cash Flows were restated into the measuring unit current at March 31, 2021.
b)The gain or loss on net monetary position is recognized in the Statement of Income (with the exceptions mentioned above regarding investments in equity instruments measured at fair value).
c)Gains or losses on cash and cash equivalents are disclosed in the Statement of Cash Flows separately from the cash flows from operating, investing and financing activities, as a reconciling item between cash and cash equivalents at the beginning of the year and at period-end.
4.Accounting estimates and judgments

Significant judgments made by Management in the application of accounting policies as well as the premises and estimates on uncertainties as of March 31, 2021 were the same as those described in Note 4.1. and 4.2. to the consolidated financial statements as of December 31, 2020.

In addition, the Group applies the same methodologies for the assessment of fair values and the same criteria for the classification of fair value levels as those described in Note 4.3. to the consolidated financial statements as of December 31, 2020.

 

5.Significant accounting policies

In preparing these consolidated condensed interim financial statements, the Entity applied the same accounting policies as those relied on in preparing its financial statements as of December 31, 2020.

5.1 Comparative information

The Consolidated Condensed Statement of Financial Position as of March 31, 2021 is comparatively presented with the prior year, while the Consolidated Condensed Statements of Income, Other Comprehensive Income, Changes in Shareholders' Equity, and Cash Flows, and their related notes for the three-month period ended March 31, 2021, are comparatively presented with the balances of the same period of the prior year.

Comparative information was restated at year-end currency as described in Note 3.

Certain reclassifications were also made:

- reclassifications as of March 31, 2020 in compliance with the provisions of Communication "A" 7211, in order to disclose the figures on a consistent basis; and

- changes derived from adjustments to prior years’ profits or losses, as described in Note 2.b).

The modification of the comparative information does not imply changes in the decisions taken based thereon.

5.2 Change in business model

 

Since January 1, 2021, there was a change in the Entity's business model associated with the valuation of holdings of fixed income instruments with a remaining maturity of over 90 days at the time of acquisition and which, as provided for by the BCRA, are allowed to be used to meet minimum cash or reserve requirements.

 

Previously, these securities were considered under the HTC&S (Held to Collect and Sell) business model and measured at fair value through OCI, in line with Management’s plan to hold these financial instruments to meet minimum cash or reserve requirement, and also to sell them, considering that the BCRA’s requirement would be temporary in light of the prevailing economic conditions.

 

In 2020, the BCRA extended the requirement to hold these instruments to meet minimum cash or reserve requirement, leading the Bank’s Management to reconsider the business model for these financial assets.

 

 
 
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As mentioned in the first paragraph, fixed income instruments, regardless of their form of adjustment, issued by the federal, provincial or municipal government or by the BCRA (monetary regulation instruments) will be considered under the HTC (Held to Collect) business model and measured at amortized cost.

 

As of March 31, 2021, the Entity reclassified 15,002,705 to amortized cost.

 

In addition, for information purposes only, the fair value and the profit through total comprehensive income as of March 31, 2021 would have amounted to 15,263,250 and 260,545, respectively, if these financial assets had not been reclassified.

6.Changes to accounting policies and new IFRS issued but not yet effective

Pursuant to Communication “A” 6114 issued by the BCRA, as the new IFRS are approved, or the current IFRS are modified or repealed and, once such changes are adopted by the Argentine Federation of Professional Councils of Economic Sciences (FACPCE) by means of Notices of Adoption, the BCRA shall issue a statement announcing its approval for financial institutions. In general, early adoption of an IFRS shall not be allowed, unless specifically admitted when adopted.

The following new or amendments to the current IFRS are effective as from the fiscal year beginning on January 1, 2022. Early adoption is permitted. These amendments were not early adopted by the Group in these consolidated condensed interim financial statements.

New standard or amendment Effective as from
Loss-making Contracts. Cost of Fulfilling a Contract (Amendment to IAS 37) January 1, 2022
Annual Improvements to IFRS 2018-2020 January 1, 2022
Property, Plant and Equipment — Proceeds before Intended Use (Amendment to IAS 16) January 1, 2022
Reference to the Conceptual Framework (Amendments to IFRS 3) January 1, 2022
IFRS 17 Insurance Contracts and Amendments to IFRS 17 January 1, 2023
Classification of Liabilities as Current or Non-current (Amendment to IAS 1) January 1, 2023
Definition of accounting estimates (Amendment to IAS 8) January 1, 2023
Disclosure of accounting policies (Amendments to IAS 1 and IFRS Practice Statement 2) January 1, 2023
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be determined

 

The Group considers these new standards or amendments will not have a material impact on its consolidated condensed interim financial statements.

7.Cash and deposits in banks

Breakdown in the Consolidated Condensed Statement of Financial Position and the balance of cash and cash equivalents calculated for the purposes of the preparation of the Consolidated Condensed Statement of Cash Flows is as follows:

     03.31.21     12.31.20 
         
BCRA - Current account     125,693,668     97,347,863
Cash    65,937,072     70,293,873
Balances with other local and foreign institutions   4,104,224    4,169,356
  TOTAL   195,734,964   171,811,092

 
 
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8.Debt securities at fair value through profit or loss

 

     03.31.21     12.31.20 
         
Government securities   4,844,172    1,033,884
Private securities - Corporate bonds    27,523     30,992
  TOTAL    4,871,695    1,064,876

 

9.Derivatives

 

Bank:

 

In the ordinary course of business, the Bank carried out foreign currency forward transactions with daily or upon-maturity settlement of differences, with no delivery of the underlying asset and interest rate swap transactions. These transactions do not qualify as hedging pursuant to IFRS 9 - “Financial Instruments”.

 

The aforementioned instruments are measured at fair value and were recognized in the Consolidated Condensed Statement of Financial Position in the item “Derivative instruments”. Changes in fair values were recognized in the Consolidated Condensed Statement of Income in “Net income/(loss) from financial instruments at fair value through profit or loss”.

 

As of March 31, 2021, the Bank has accounted for premiums on put options taken in respect of the Bank's right to sell its equity interest in Prisma Medios de Pago S.A. to the buyer (Al Zenith (Netherlands) B.V. – Note 16) as of December 30, 2021. Such equity interest was measured at fair value as determined by Management, based on a report prepared by independent appraisers (Note 43).

 

Breakdown is as follows:

 

Assets

     03.31.21     12.31.20 
         
Debit balances linked to foreign currency forwards pending settlement in pesos   1,293,616    3,044,927
Premiums on put options taken - Prisma Medios de Pago S.A.   1,182,000    1,335,103
  TOTAL    2,475,616    4,380,030

  

Liabilities

     03.31.21     12.31.20 
         
Credit balances linked to foreign currency forwards pending settlement in pesos                    398,819                     213,135
Saldos acreedores vinculados con permutas de tasa de interés variable por fija                              -                               -
                                                        TOTAL                   398,819                   213,135

 

The notional amounts of the forward transactions and foreign currency forwards, stated in US Dollars (US$) and in Euros as applicable, as well as the base value of interest rate swaps are reported below:

    03.31.21   12.31.20
         
Foreign currency forwards        
         
   Foreign currency forward purchases - US$   760,818   1,011,403
   Foreign currency forward sales - US$   749,810   978,794
   Foreign currency forward sales - Euros   7,590   6,834

 

 
 
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10.Repo transactions

 

Breakdown is as follows:

 

Reverse repurchase transactions

     03.31.21     12.31.20 
Amounts receivable for reverse repurchase transactions of BCRA Liquidity Bills with the BCRA    30,469,729     55,559,168
Montos a cobrar por operaciones de pases de títulos públicos con entidades no financieras   -    -
  TOTAL     30,469,729     55,559,168

 

 

11.Other financial assets

 

The breakdown of other financial assets is as follows:

     03.31.21     12.31.20 
Measured at amortized cost        
         
Other receivables   5,419,298    5,499,183
Receivables from sale of ownership interest in Prisma Medios de Pago S.A. (Note 16.1)   2,941,287    2,950,409
Financial debtors from spot transactions pending settlement   3,733,256    1,258,743
Non-financial debtors from spot transactions pending settlement   7,579   117,752
Other     216,595   155,674
      12,318,015    9,981,761
         
Measured at amortized cost through profit or loss        
         
Mutual funds   1,791,506    1,662,517
     1,791,506    1,662,517
         
Allowance for loan losses (Exhibit R)    (290,834)     (298,521)
         
  TOTAL     13,818,687     11,345,757

 

 
 
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12.Loans and other financing

 

The Group keeps loans and other financing under a business model for the purpose of collecting contractual cash flows. Therefore, it measures loans and other financing at amortized cost. Below is a breakdown of the related balance:

     03.31.21     12.31.20 
         
Credit cards     119,676,106   129,370,764
Consumer loans    30,552,237     31,763,072
Loans for the prefinancing and financing of exports    19,568,943     18,049,709
Discounted instruments    18,577,997     21,593,395
Mortgage loans    18,330,373     18,914,805
Unsecured instruments    13,711,039     16,606,453
Overdrafts    13,191,045     19,666,430
Pledge loans    11,637,905     12,890,417
Loans to personnel   2,316,604    2,408,108
Other financial institutions   2,238,404    2,640,554
Receivables from finance leases   2,136,974    2,109,326
Instruments purchased   1,037,192    1,117,898
Non-financial government sector     460   577
BCRA   -    6,783
Other financing    46,088,130     53,413,131
    299,063,409   330,551,422
         
Allowance for loan losses (Exhibit R)   (14,411,738)   (14,826,637)
  TOTAL   284,651,671   315,724,785

 

Finance leases

 

The Group as lessor entered into finance lease agreements related to vehicles and machinery and equipment. The following table shows the total gross investment of the finance leases (leasing) and the current value of the minimum payments to be received thereunder:

 

    03.31.21   12.31.20
    Total investment Current value of minimum payments   Total investment Current value of minimum payments
Term    
             
Up to 1 year     1,171,532   756,142     1,244,764   841,334
From 1 to 2 years     794,590   517,811     776,340   521,265
From 2 to 3 years     551,830   389,999     473,983   338,363
From 3 to 4 years     407,581   305,849     310,084   233,233
From 4 to 5 years     169,109   167,173     214,409   175,131
             
TOTAL     3,094,642   2,136,974     3,019,580   2,109,326
             
Principal       2,072,983       2,044,825
Interest accrued      63,991      64,501
TOTAL       2,136,974       2,109,326

 

The breakdown of loans and other financing according to credit performance (determined as per the criteria set forth by the BCRA in the debtor classification regulations) and guarantees received are presented in Exhibit B. The information on concentration of loans and other financing is presented in Exhibit C. The reconciliation of the information included in that Exhibit to the carrying amounts is shown below:

 
 
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     03.31.21     12.31.20 
         
Total Exhibits B and C     304,033,985   339,018,565
Plus:        
 BCRA   -    6,783
 Loans to personnel   2,316,604    2,408,108
  Interest and other items accrued receivable from financial assets with
  credit value impairment
  -   158,445
Less:        
Allowance for loan losses (Exhibit R)   (14,411,738)   (14,826,637)
Adjustments for effective interest rate    (2,999,111)     (3,022,995)
Corporate bonds    (298,175)     (326,836)
Loan commitments    (3,989,894)     (7,690,648)
         
Total loans and other financing   284,651,671   315,724,785

  

As of March 31, 2021 and December 31, 2020, the Group holds the following loan commitments booked in off-balance sheet accounts according to the financial reporting framework set forth by the BCRA:

 

     03.31.21     12.31.20 
         
Overdrafts and receivables agreed not used   1,097,767   927,414
Guarantees granted   1,444,031   846,180
Liabilities related to foreign trade transactions    12,718     71,632
Secured loans   1,435,378    5,845,422
     3,989,894    7,690,648

 

Risks related to the aforementioned loan commitments are assessed and controlled within the framework of the Group's credit risks policy (Note 47.1 to the consolidated financial statements as of December 31, 2020).

 

Financing line for productive investments – 2020 and 2021 Quota

 

As mentioned in Note 1.3, the BCRA established a financing line for productive investments of MSMEs (MiPyMEs, as per its Spanish acronym) aimed at financing CAPEX and/or the construction of the facilities needed for the production and/or marketing of goods and/or services, financing working capital and discounting deferred checks and other instruments, and other special eligible facilities allowed by applicable laws.

 

The facilities should be granted as part of the 2020 and 2021 Quota, pursuant to the following conditions:

 

  2020 Quota 2021 Quota

Amount to be granted

 

At least, the equivalent to 7.5% of the monthly average of daily balances of non-financial private sector deposits in pesos in September 2020 At least, the equivalent to 7.5% of the monthly average of daily balances of non-financial private sector deposits in pesos in March 2021
Calculation of applications Between 10.16.2020 and 03.31.2021 Between 04.01.2021 and 09.30.2021
Currency Pesos
Minimum term At the time of disbursement, the credit facilities shall have an average term of at least 24 months, but the total term shall not be of less than 36 months. No minimum term will apply to credit facilities aimed at financing working capital and discount of deferred checks and other instruments.
Maximum interest rate Capped at an annual nominal fixed rate of 30% for investment projects, and at an annual nominal fixed rate of 35% for other purposes.

 

As of March 31, 2021, the total amount disbursed by the Entity under the 2020 Quota amounts to 39,279,053 and the simple average of daily balances for financing arrangements effective from October 16, 2020 to March 31, 2021 amounts to 25,291,147. Accordingly, the Entity has achieved the quota of 19,730,132, as required by the BCRA under Communication “B” 12161.

 
 
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As per Communication “B” 12164, the total amount to be disbursed by the Entity in respect of the 2021 Quota amounts to 24,449,302.

 

13.Other debt securities

 

13.1Financial assets measured at amortized cost

 

     03.31.21     12.31.20 
         
Government securities    15,002,705    -
Corporate bonds under credit recovery transactions    29     94
      15,002,734    94
         
Allowance for loan losses - Private securities (Exhibit R)   (29)   (94)
         
  TOTAL     15,002,705    -

 

13.2Financial assets measured at fair value through OCI

 

     03.31.21     12.31.20 
         
BCRA Liquidity Bills    97,734,769   101,533,511
Government securities    22,062,852     34,397,371
Private securities - Corporate bonds     268,847   294,807
         
    120,066,468   136,225,689
         
Allowance for loan losses - Private securities (Exhibit R) (1)   (35)     (101)
         
  TOTAL   120,066,433   136,225,588

 

(1) Disclosed in this item in accordance with the chart of accounts set forth by the BCRA.

 

14.Financial assets pledged as collateral

 

The breakdown of the financial assets pledged as collateral as of March 31, 2021 and December 31, 2020 is included below:

     03.31.21     12.31.20 
         
Guarantee trust - Government securities at fair value through OCI (2) 5,630,752    7,838,893
BCRA - Special guarantee accounts (Note 51) (1) 4,002,391    5,143,636
Guarantee trust - USD (4) 3,838,483    3,966,143
Deposits as collateral (3) 3,172,965    3,284,419
  TOTAL     16,644,591     20,233,091

 

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

 

(2)Set up as collateral to operate with ROFEX, BYMA and MAE on foreign currency forward transactions and futures contracts. The trust fund consists of government securities.

 

(3)Deposits pledged as collateral for activities related to credit card transactions in the country and abroad, leases and futures contracts.

 

(4)The trust is composed of dollars in cash as collateral for activities related to the transactions of Mercado Abierto Electrónico S.A. (MAE) and Bolsas y Mercados Argentinos SA (BYMA).
 
 
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15.Income Tax:

 

a)Current income tax assets

 

     03.31.21     12.31.20 
         
Income tax assets   1,283,000   -
Advances   78,051   550
    1,361,051   550

 

b)Current income tax liabilities
     03.31.21    12.31.20
         
Income tax provision   10,267,307   11,745,870
Advances   (8,663,605)   (7,524,236)
Collections and withholdings     (15,190)     (17,539)
      1,588,512     4,204,095

 

c)Income tax expense

 

Breakdown of income tax benefit / (expense):

 

    03.31.21    03.31.20 
         
Current tax     2,428,596   (5,669,886)
Deferred tax   (1,991,963)     2,582,310
    436,633    (3,087,576)

 

The income tax benefit for the period ended March 31, 2021 includes the impact of the full calculation of the 2021 inflation adjustment for tax purposes and the sixths corresponding to the years 2019 and 2020 on a pro rata basis, as well as the reversal of the provision required by the BCRA, as mentioned in the section “Income tax– Inflation adjustment for tax purposes. Fiscal years 2016, 2017 and 2018” in this Note.

 

The Bank’s effective tax rate for the period ended March 31, 2020 was 61%.

 

Pursuant to IAS 34, income tax is recognized in interim periods based on the best estimate of the weighted average effective income tax rate expected by the Entity for the full fiscal year.

 

Law No. 27468 amended the transition rules set out by Law No. 27430 regarding the application of the inflation adjustment for tax purposes under the Income Tax Law, establishing that such adjustment will be applicable for fiscal years beginning on and after January 1, 2018, provided the changes in the Consumer Price Index (CPI), calculated from the beginning to the end of the fiscal year, are in excess of fifty five per cent (55%) during the first fiscal year, thirty per cent (30%) during the second fiscal year, and fifteen per cent (15%) during the third fiscal year. According to such law, one third of the resulting inflation adjustment, whether gain or loss, shall be recognized during that fiscal year, with the remaining two thirds being computed, in equal parts, over the two immediately following fiscal years.

 

The Social Solidarity and Productive Revival Law – published in the Official Gazette on December 23, 2019 - maintains the inflation adjustment mechanism set out under Title VI of the Income Tax Law (ITL). Nevertheless, one sixth of the resulting inflation adjustment amount for the first and second fiscal years beginning on or after January 1, 2019 should be recognized during that fiscal year, with the remaining five sixths being computed, in equal parts, over the five immediately following fiscal years.

 

Therefore, the above-described deferral is only applicable to fiscal years 2019 and 2020. If no further changes are introduced to applicable laws and regulations, in fiscal year 2021, the inflation adjustment for tax purposes shall be fully calculated, considering that, as of the date of these financial statements, the 100% inflation guideline for the 36 months prior to December 31, 2021 would have been accomplished, in view of the estimated 29% inflation rate for 2021 forecasted in the Budget Law. Therefore, Management has included the total estimated tax loss from inflation in the provision for income tax, considering the index published in March.

 
 
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Furthermore, the Social Solidarity and Productive Revival Law provides for the discontinuance of the application of the 25% income tax rate established under section 86, subsection d), of Law No. 27430 until fiscal years beginning on and after January 1, 2022. For as long as the application of such rate remains suspended, the income tax rate will amount to 30%. Accordingly, the application of the 13% income tax rate on dividend distributions has also been discontinued for the same fiscal years. Such rate has been set at 7%.

 

-Income tax– Inflation adjustment for tax purposes. Fiscal years 2016, 2017 and 2018

 

On May 10, 2017, May 10, 2018 and May 13, 2019, and based on related case law, the Entity approved the filing of actions for declaratory judgment of unconstitutionality under section 39 of Law No. 24073, section 4 of Law No. 25561, section 5 of Decree No. 214/02 issued by the Argentine Executive, Law No. 27468 and any other regulation whereby the inflation adjustment mechanism provided for under Law No. 20628, as amended, is considered not applicable due to the confiscatory effect in the specific case, for fiscal years 2016, 2017 and 2018. Consequently, the Entity filed its income tax returns for those fiscal years taking into consideration the effect of those restatement mechanisms.

 

The net impact of this measure is an adjustment to the income tax assessed for the fiscal year ended December 31, 2016 in the amount of 1,185,800, for fiscal year ended December 31, 2017, in the amount of 1,021,519, and for fiscal year ended December 31, 2018, in the amount of 3,239,760.

 

Through Memorandum No. 6/2017 dated May 29, 2017, the BCRA, without resolving on the decisions adopted by the Entity's authorities or the Entity's right regarding the action filed, in its capacity as issuer of accounting standards, requested the Entity to record a provision for contingencies included in “Liabilities” in an amount equivalent to the income recorded, as it considers that “a reassessment of the income tax by applying the inflation adjustment is not addressed by the BCRA regulations”.

 

In response to this Memorandum, the Entity filed the related answer and confirmed its position by providing the relevant supporting documentation. Notwithstanding the foregoing, the Entity recorded the requested provision in the “Provisions” account under liabilities and in “Other operating expenses” in the Statement of Income, pursuant to the accounting standards prescribed by the regulator for this case.

 

As a result of the assessment made and based on the opinion of its legal and tax advisors, the Entity considers that it is highly likely for the Entity to obtain a final favorable judgment supporting the idea that this period's income tax shall be assessed including the inflation adjustment for tax purposes, based on the confiscatory nature of the rate that would result from not applying said adjustment in the fiscal years ended December 31, 2018, 2017 and 2016.

 

In addition, on June 8, 2020, the Federal Court on Administrative Matters (JCAF 12-23) ruled upon the action for declaratory judgment filed on May 12, 2017, upholding the complaint and thus declaring that the prohibition to apply the inflation adjustment mechanism for the purposes of the income tax return filed by the Bank for fiscal period 2016 is not applicable to the instant case.

 

The appeals filed against the judgment were granted on August 6, 2020, and the case was submitted to the Appellate Court for consideration. On December 9, 2020, the Federal Appellate Court on Administrative Matters (Courtroom II) dismissed the appeals, thus confirming the judgment rendered by the court of original jurisdiction. The tax authorities (AFIP) filed an extraordinary appeal against the judgment, but then withdrew it through a writ filed on February 1, 2021. Accordingly, the judgment rendered by the Appellate Court in favor of the Bank's interests became final.

Accordingly, the Bank reversed the provision set up for fiscal year 2016 at the request of the BCRA, recognizing a benefit in the first quarter of 2021 in the amount of 1,185,800.

 
 
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As stated in Note 2, the recognition of the provision for contingencies required by the BCRA for the rest of the tax periods under discussion (2017 and 2018) means a deviation from IFRS.

 

-Income tax – Requests for refund. Fiscal years 2013, 2014 and 2015

 

Regarding fiscal years 2013, 2014 and 2015, the Entity assessed income tax without applying the inflation adjustment for tax purposes, consequently a higher tax was paid in the amounts of 264,257, 647,945 and 555,002 for those periods (in nominal values).

 

Based on the grounds stated above, on November 19, 2015, an administrative action requesting a refund for periods 2013 and 2014 was filed, and the related judicial action was filed on September 23, 2016 for both periods, given that no answer was received at the administrative level.

 

In turn, on April 4, 2017, a request for refund was filed in relation to the higher amount of tax paid for fiscal year 2015. Likewise, on December 29, 2017, the related judicial action was filed for this fiscal year.

 

On October 21, 2020, we were notified that Court of First Instance on Administrative Matters No. 1 rendered judgment upholding the request for refund made by the Bank for fiscal year 2014. The tax authorities (AFIP) filed an appeal against such judgment before the Appellate Court.

 

On November 10, 2020, the Court of First Instance rendered judgment sustaining BBVA's complaint, thereby ordering the tax authorities to refund the amount of 264,257 paid in excess of the income tax liability for fiscal year 2013, plus accrued interest. The tax authorities filed an appeal against the judgment, which is still pending.

 

On April 27, 2021, the Appellate Court rendered judgment in favor of the Bank concerning the refund of income tax for fiscal year 2014. In its judgment, the Appellate Court substantially confirmed the judgment rendered by the Court of First Instance on the merits, upholding the confiscatory nature of the tax.

 

Pursuant to the financial reporting framework set forth by the BCRA, the Entity does not recognize any assets in relation to contingent assets derived from the actions filed.

 

-    Income tax– Inflation adjustment for tax purposes. Fiscal year 2019

 

As concerns fiscal year 2019, the Entity assessed its income tax liability applying the inflation adjustment for tax purposes according to the terms of Social Solidarity and Productive Revival Law – published in the Official Gazette on December 23, 2019 - which maintains the inflation adjustment mechanism set out under Title VI of the Income Tax Law. Nevertheless, one sixth of the resulting inflation adjustment amount should be recognized during that fiscal year, with the remaining five sixths being computed, in equal parts, over the five immediately following fiscal years. Such deferral has been recognized as a deferred tax asset.

 

On August 21, 2020, the Bank filed a request for refund pursuant to the provisions of the first paragraph of section 81 of Law No. 11683 (compiled text in 1998, as amended) to recover the amount of 4,528,453 (in nominal values).

 

Pursuant to the financial reporting framework set forth by the BCRA, the Entity does not record assets in relation to contingent assets derived from the actions filed.

 

16.Investments in equity instruments

 

Investments in equity instruments for which the Group has no control, joint control or a significant influence are measured at fair value through profit or loss and at fair value through other comprehensive income. Breakdown is as follows:

 
 
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16.1 Investments in equity instruments through profit or loss

 

     03.31.21     12.31.20 
         
Prisma Medios de Pago S.A.(1)   1,979,393    2,522,552
Private securities - Shares of other non-controlled companies     269,349   327,872
         
  TOTAL    2,248,742    2,850,424

  

 

(1)This balance is related to the amount of 10,805,542 shares held in Prisma Medios de Pago S.A., representing 5.44% of such company’s capital stock. Said investment was measured at fair value estimated by Management based on a report prepared by independent appraisers as of December 31, 2020, net of the valuation adjustment mandated by the BCRA in Memoranda No. 7/2019 and No. 8/2021 and the collection of dividends. The accounting criteria applied as stated above constitutes a deviation from IFRS.

 

On February 1, 2019, 2,344,064 registered, common shares with a nominal value of $ 1 each and one vote per share, owned by the Bank in Prisma Medios de Pago S.A. was transferred to AI Zenith (Netherlands) B.V. (company related to Advent International Global Private Equity).

 

In accordance with the provisions of the Offer for the purchase of those shares by AI Zenith (Netherlands) B.V., and accepted by the Bank, the total estimated price adjusted was USD 78,265,273, out of which, on February 1, 2019, the Bank received USD 46,457,210, and the unpaid balance shall be deferred over the following 5 (five) years and settled as follows: (i) 30% of that amount shall be paid in pesos, adjusted by CER (UVA) at an annual nominal rate of 15% and (ii) 70% in US Dollars at an annual nominal rate of 10 %.

 

On July 22, 2019, the Entity completed the assessment of the selling price of the shares. Such price amounts to USD 76,947,895.33. The gap between the final price and the estimated price was discounted from the outstanding balance; therefore, the Bank did not have to return the funds it had received. The sale conditions included a put option whereby the Bank is entitled to sell the remaining shares in Prisma Medios de Pago S.A. to the purchaser on December 30, 2021 (see Note 9).

 

The other payment conditions have remained unaltered.

 

16.2 Investments in equity instruments through other comprehensive income

 

     03.31.21     12.31.20 
         
Banco Latinoaméricano de Exportaciones S.A.    28,143     30,741
Other   1,382    1,450
  TOTAL   29,525   32,191

 

17.Investments in associates

 

     03.31.21     12.31.20 
         
Rombo Compañía Financiera S.A.     793,035   855,021
BBVA Consolidar Seguros S.A.     527,349   503,069
Interbanking S.A.     186,849   186,851
Play Digital S.A.      77,412     84,034
TOTAL    1,584,645    1,628,975

 

 
 
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18.Property and equipment

 

     03.31.21     12.31.20 
         
Real estate    26,521,197     26,368,789
Furniture and facilities   5,333,172    5,560,608
Right of use of leased real estate (Note 29)   2,826,543    2,999,070
Machinery and equipment   2,025,681    2,418,128
Constructions in progress     844,570   730,699
Vehicles    89,738     64,813
  TOTAL     37,640,901     38,142,107

 

19.Intangible assets

 

     03.31.21     12.31.20 
         
Licenses - Software   1,907,255    1,755,173
  TOTAL    1,907,255    1,755,173

 

20.Other non-financial assets

 

     03.31.21     12.31.20 
         
Prepayments   4,598,965    4,998,167
Investment properties   2,125,139    2,135,112
Tax advances   1,450,350    1,769,752
Advances to suppliers of goods     341,735   354,464
Other miscellaneous assets     338,209   312,462
Assets acquired as security for loans    17,744     17,979
Advances to personnel    15,461   427,021
Other     112,348     65,846
  TOTAL    8,999,951     10,080,803

 

Investment properties include real estate leased to third parties. The average term of lease agreements is 6 years. Subsequent renewals are negotiated with the lessee. The Group has classified these leases as operating leases, since these arrangements do not substantially transfer all risks and benefits inherent to the ownership of the assets. The rental income is recognized under “Other operating income” on a straight-line basis during the term of the lease.

 

21.Non-current assets held for sale

 

It includes certain groups of real property assets located in the Argentine Republic, which the Bank’s Board of Directors agreed to sell in the short term.

 

     03.31.21     12.31.20 
         
Property and equipment held for sale     255,203   255,203
         
  TOTAL    255,203    255,203

 

 
 
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22.Deposits

 

The information on concentration of deposits is disclosed in Exhibit H. Breakdown is as follows:

 

     03.31.21     12.31.20 
         
Non-financial government sector   6,581,683    6,357,459
Financial sector     179,222   973,263
Non-financial private sector and residents abroad     501,058,650   532,836,326
 Checking accounts     103,036,416   127,166,601
 Savings accounts     216,305,614   232,600,771
 Time deposits     144,305,423   135,620,317
 Investment accounts    32,366,193     31,519,206
 Other   5,045,004    5,929,431
  TOTAL   507,819,555   540,167,048

 

23.Liabilities at fair value through profit or loss

 

No transactions were accounted for in this period.

 

 

24.Other financial liabilities

 

     03.31.21     12.31.20 
         
Obligations from financing of purchases    25,370,422     28,314,143
Collections and other transactions on behalf of third parties   4,926,440    4,574,955
Lease Liabilities (Note 29)   2,981,124    3,332,934
Receivables from spot purchases pending settlement   2,933,946   163,789
Payment orders pending credit   2,785,959    2,144,536
Credit balance for spot purchases or sales pending settlement   1,839,700   950,442
Commissions accrued payable    31,647     46,923
Other   4,043,897    4,779,994
  TOTAL     44,913,135     44,307,716

 

25.Financing received from the BCRA and other financial institutions

 

     03.31.21     12.31.20 
         
Local financial institutions   7,870,781    8,930,766
Foreign financial institutions   1,877,921    1,909,934
BCRA    24,338     32,177
  TOTAL    9,773,040     10,872,877

 

 
 
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26.Corporate bonds issued

 

Below is a detail of corporate bonds in force as of March 31, 2021 and December 31, 2020 of the Bank and its subsidiaries:

 

Detail   Issuance date   Nominal value   Maturity date   Annual nominal rate   Payment of interest   Outstanding securities as of 03.31.2021   Outstanding securities as of 12.31.2020
                             
                             
                             
Classes 5 - 8 - 9 Volkswagen Financial Services    02.27.2019   1,086,556   03.30.2023   UVA+ 9.24% (class 5 ) / UVA (class 8 ) / Fixed rate (class 9)   Quaterly               949,999            1,271,461
     
                             
                Total Consolidated Principal   949,999   1,271,461
                Consolidated Interest Accrued   72,206   48,712
                Total Consolidated Principal and Interest Accrued   1,022,205   1,320,173

 

Definitions:

 

UVA RATE: it is a measurement unit updated on a daily basis as per CER, according to the consumer price index.

 

27.Provisions

 

     03.31.21     12.31.20 
         
         
Provisions for reorganization (Exhibit J)   1,997,871    2,291,997
Provision for contingent commitments (Exhibits J and R)   1,419,050    1,541,349
Provisions for termination plans (Exhibit J)     141,946   160,332
For administrative, disciplinary and criminal penalties (Note 56 and Exhibit J)   5,000    5,648
Other contingencies (Exhibit J)   6,901,922    8,961,657
For reassessment of income tax due to adjustment for inflation (Note 15.c)   4,261,279    6,152,634
Provision for commercial lawsuits   2,082,246    2,211,541
Provision for labor lawsuits     268,845   283,403
Provision for tax lawsuits     187,870   206,648
Other     101,682   107,431
  TOTAL     10,465,789     12,960,983

 

It includes the estimated amounts to pay highly likely liabilities which, in case of occurrence, would generate a loss for the Entity.

 

The breakdown of and changes in provisions recognized for accounting purposes are included in Exhibit J. However, below is a brief description:

 

-Reassessment of income tax due to the application of the inflation adjustment: it reflects the provision required by the BCRA through Memorandum No. 6/2017 dated May 29, 2017, as it was considered that the reassessment of the income tax by applying the inflation adjustment is not addressed by the current regulations. The Bank has answered the BCRA memorandum and evidenced the validity of the recognition timely made and has requested that it be reviewed. Notwithstanding the foregoing, the provision requested by the BCRA was set up.

 

-Provisions for reorganization: Consistent with the goal of further aligning the organizational structure with the corporate strategy during the current year, achieving efficiency gains and streamlining the decision-making process across all work teams.

 

-Contingent commitments: it reflects the credit risk arising from the assessment of the degree of compliance of the beneficiaries of unused overdrafts, unused credit card balances, guarantees, sureties and other contingent commitments for the benefit of third parties on behalf of customers, and of their financial position and the counter guarantees supporting those transactions.
 
 
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-Termination benefit plans: for certain terminated employees, the Bank (fully or partially) bears the cost of private health care plans for a certain period after termination. The Bank does not cover any situations requiring medical assistance, but it only makes the related health care plan payments.

 

-Administrative, disciplinary and criminal penalties: administrative penalties imposed by the Financial Information Unit, even if there were court or administrative measures to suspend payment and regardless of the status of the disciplinary proceedings.

 

-Other: it reflects the estimated amounts to pay tax, labor and commercial claims and miscellaneous complaints.

 

In the opinion of the Group’s Management and its legal advisors, there are no significant effects other than those stated in these financial statements, the amounts and repayment terms of which have been recorded based on the current value of those estimates, considering the probable date of their final resolution.

 

Contingent liabilities have not been recognized in these financial statements and are related to 119 claims brought against the Bank, including civil and commercial claims, all of which have arisen in the ordinary course of business. The estimated amount of such claims amounts to 22,760, of which a cash outflow of approximately 3,355 is expected for the next 9 months. These claims are primarily related to leasing claims and petitions to secure evidence. The Group's Management and legal advisors consider that the probability that these cases involve cash disbursements is possible but not probable and that the potential cash disbursements are not material.

 

28.Other non-financial liabilities

 

Breakdown is as follows:

 

     03.31.21     12.31.20 
         
Cash dividends payable (Note 30)    14,500,000     16,378,171
Miscellaneous creditors    12,127,015     10,564,613
Other collections and withholdings   5,864,092    5,832,811
Advances collected   5,170,750    5,122,999
Short-term personnel benefits   5,043,169    5,698,263
Other taxes payable   1,895,961    1,084,975
Social security payment orders pending settlement     495,305   112,206
Long-term personnel benefits     393,701   444,697
For contract liabilities     370,336   452,287
Other     128,296   104,438
  TOTAL     45,988,625     45,795,460

 

29.Leases

 

The Group as lessee

 

Below is a detail of the amounts related to the rights of use under leases and lease liabilities in force as of March 31, 2021:

 

Rights of use under leases

 

    Initial           Depreciation   Residual
    value as of           Accumulated     For the   Accumulated   value as of
Account   01.01.21   Increases   Decreases   as of 01.01.21     Period (1)   at period-end   03.31.21
                               
Leased real property    4,614,388   138,800    95,633   1,615,318      217,466   1,831,012     2,826,543
                               
(1) See Note 41

 

 
 
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Lease liabilities

 

Future minimum payments for lease agreements are as follows:

 

  In foreign currency   In local currency   03.31.21   12.31.20
               
Up to one year   106,821   6,616     113,437    202,347
               
From 1 to 5 years 1,430,915   124,613     1,555,528    2,208,007
               
More than 5 years 1,297,602   14,557     1,312,159    922,580
               
            2,981,124    3,332,934

 

Interest and exchange rate difference recognized in profit or loss

 

          03.31.21   03.31.20
Other operating expenses            
Interest on liabilities from finance lease (Note 42)   (89,296)     (109,163)
               
               
Exchange rate difference            
Exchange rate gain/(loss) from finance lease      998,762     (123,400)
               
               
Other expenses              
Leases (Note 40)          (684,409)     (448,841)

 

 

30.Share Capital

 

Breakdown is as follows:

Shares   Share capital
Class Quantity Nominal value per share Votes per share   Shares outstanding Pending issuance or distribution Paid-iUn (1)
Common 612,710,079 1 1   612,615 95 612,710

 

(1) Registered with the Public Registry of Commerce.

 

Banco BBVA Argentina S.A. is a corporation (sociedad anónima) incorporated under the laws of Argentina. The shareholders limit their liability to the shares subscribed and paid in, pursuant to the Argentine Companies Law (Law No. 19550). Therefore, and pursuant to Law No. 25738, it is reported that neither foreign capital majority shareholders nor local or foreign shareholders shall be liable in excess of the above-mentioned capital contribution for obligations arising from transactions carried out by the financial institution.

 

On April 24, 2019, the Shareholders’ Meetings of BBVA Argentina and BBVA Francés Valores S.A. approved the merger of both entities, effective since October 1, 2019. Prior to the merger, BBVA Argentina owned a 95% interest in the capital stock and votes of BBVA Francés Valores S.A.

 

 
 
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On October 9, 2019, the CNV issued Resolution No. 20484/2019 concerning the merger of BBVA Francés Valores S.A. into the Bank. As such, the Bank was authorized to issue 50,441 common book-entry shares, with a nominal value of $1 and entitling to one (1) vote each, to be delivered to BBVA Francés Valores S.A.'s minority shareholders.

 

As of the date of these consolidated condensed interim financial statements, the merger and the ensuing capital stock increase are in the process of being registered with the Argentine Supervisory Board of Companies (I.G.J.).

 

On May 15, 2020, the Ordinary and Extraordinary Shareholders’ Meeting was held, approving the partial release of the optional reserve for future distribution of earnings, in order to appropriate 2,500,000 (2,823,823 in restated amounts) to the payment of cash dividends, subject to the BCRA's previous consent.

 

On November 20, 2020, a General Extraordinary Shareholders’ Meeting was held. At such meeting, shareholders resolved to proceed with the partial release of the optional reserve for future distribution of earnings in the amount of 12,000,000 (13,554,348 in restated amounts) and a supplementary dividend for the same amount was considered, in order to increase the cash dividend approved by the al Ordinary and Extraordinary Shareholders’ Meeting held on May 15, 2020. All the aforementioned issues are subject to the prior authorization of the BCRA (see Note 48).

 

On April 20, 2021, the Ordinary and Extraordinary Shareholders’ Meeting was held. At such meeting, the shareholders resolved to:

 

·Allocate 33,243,566 (29,431,352 in nominal values) from the optional reserve for future distribution of earnings to offset the negative balance of Unappropriated retained earnings as of December 31, 2020.

 

·Approve the partial release of the optional reserve for future distribution of earnings to allocate 7,000,000 to the payment of cash dividends, subject to the BCRA’s previous consent.

 

 

31.Interest income

 

     03.31.21     03.31.20 
         
Interest on government securities   9,770,625    8,913,458
Interest on credit card loans   5,309,437    6,584,476
Interest on other loans   3,460,758    2,433,012
Premiums on reverse repurchase transactions   3,117,896    1,040,910
Stabilization Coefficient (CER) clause adjustment   3,065,868     37,672
Acquisition Value Unit (UVA) clause adjustment   3,009,485    3,416,137
Interest on instruments   2,737,107    3,626,358
Interest on consumer loans   2,578,927    2,867,981
Interest on overdrafts   1,786,316    3,584,634
Interest on pledge loans   1,012,420   849,896
Interest on mortgage loans     316,443   452,137
Interest on loans for the prefinancing and financing of exports     197,815   446,094
Interest on finance leases     172,403   159,559
Interest on loans to the financial sector     144,848   497,083
Interest on private securities    23,437    2,220
Other   1,485   197,810
  TOTAL     36,705,270     35,109,437
 
 
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32.Interest expenses

 

     03.31.21     03.31.20 
         
Interest on time deposits    12,000,333    9,200,559
Interest on checking accounts deposits   1,829,738   318,813
Acquisition Value Unit (UVA) clause adjustment     563,868   291,183
Interest on interfinancial loans     479,384   395,289
Interest on other liabilities from financial transactions     187,560    1,343,904
Interest on savings accounts deposits    96,209     96,502
Other     214    9,991
  TOTAL     15,157,306     11,656,241

 

 

33.Commission income

 

     03.31.21     03.31.20 
         
From credit cards   3,300,032    2,568,637
Linked to liabilities   3,069,069    4,107,836
From insurance     385,528   395,595
Linked to loans     443,040   284,883
From foreign trade and foreign currency transactions     385,423   297,176
Linked to securities    93,188     49,421
From guarantees granted   1,722   659
  TOTAL    7,678,002    7,704,207

 

34.Commission expenses

 

     03.31.21     03.31.20 
         
For credit and debit cards   3,574,303    4,186,558
For payment of salaries     183,489   266,645
For digital sales services     156,022   159,188
For foreign trade transactions    79,636     49,873
For Latam Pass   -    -
For promotions    29,786     41,246
Linked to transactions with securities   4,418   789
Other commission expenses     295,198   324,028
  TOTAL    4,322,852    5,028,327

 

 

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

 

     03.31.21     03.31.20 
         
Income from government securities     605,057    1,326,892
Income from foreign currency forward transactions   1,193,741   328,983
Income from private securities    (200,834)     33,522
Income from corporate bonds   2,487     23,714
Income/(loss) from interest rate swaps   -     32,768
Income/(loss) from loans   -     (332,359)
Resultado por opciones de compra tomadas   -    -
Other   -     (2,165)
  TOTAL    1,600,451    1,411,355
 
 
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36.Net (loss) from writing-down assets carried at amortized cost and at fair value through OCI

 

     03.31.21     03.31.20 
         
(Loss) from sale of government securities   (33,001)     (1,045,472)
  TOTAL    (33,001)   (1,045,472)

 

37.Foreign exchange and gold gains (losses)

 

     03.31.21     03.31.20 
         
Income from purchase-sale of foreign currency   1,257,974    1,349,669
Conversion of foreign currency assets and liabilities into pesos    (362,380)   415,280
  TOTAL    895,594    1,764,949

 

38.Other operating income

 

     03.31.21     03.31.20 
         
Adjustments and interest on miscellaneous receivables     576,872   355,926
Rental of safe deposit boxes     285,213   296,253
Loans recovered     230,778   231,586
Allowances reversed    73,438   125,782
Debit and credit card commissions    60,823   105,982
Punitive interest    31,323     81,739
Income from initial recognition of government securities    11,446    -
Impuesto a las ganancias - Ajuste por inflación impositivo - Ejercicios Fiscales 2017 y 2018 (Nota 15.c)   -    -
Other operating income     276,810   284,804
  TOTAL    1,546,703    1,482,072

 

 

39.Personnel benefits

 

     03.31.21     03.31.20 
         
Salaries   3,716,176    3,811,150
Social security withholdings and collections   1,029,209    1,120,777
Other short-term personnel benefits     884,903    1,139,845
Personnel compensation and bonuses     103,727   134,353
Personnel services     106,237   126,447
  TOTAL    5,840,252    6,332,572
 
 
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40.Administrative expenses

 

     03.31.21     03.31.20 
         
Taxes   1,250,278    1,243,036
Maintenance and repair costs     624,369   610,132
Armored transportation services     763,807   394,632
Rent (Note 29)     684,409   448,841
Administrative expenses     383,532   490,844
Electricity and communications     267,504   317,733
Other fees     226,985   342,685
Security services     193,040   156,966
Advertising     201,512   255,189
Insurance    66,115     60,656
Representation and travel expenses     39,779     41,420
Stationery and supplies    17,793     27,091
Fees to Banks Directors and Supervisory Committee   9,823     29,099
Other administrative expenses     602,654   702,683
  TOTAL    5,331,600    5,121,007

 

41.Depreciation and amortization

 

     03.31.21     03.31.20 
         
Depreciation of property and equipment     804,710   894,431
Amortization of rights of use of leased real property (Note 29)     217,466   208,293
Amortization of intangible assets    36,892     58,073
Depreciation of other assets   9,960     12,908
  TOTAL    1,069,028    1,173,705

 

 

42.Other operating expenses

 

     03.31.21     03.31.20 
         
Turnover tax   3,042,986    2,485,191
Reorganization expenses (Exhibit J)     261,212     15,085
Other allowances (Exhibit J)     264,548    1,003,454
Initial loss of loans below market rate     291,846   249,366
Contribution to the Deposit Guarantee Fund (Note 50)     205,813   177,155
Interest on liabilities from leases (Note 29)    89,296   109,163
Claims    28,297     36,002
Other operating expenses     463,580   363,208
  TOTAL    4,647,578    4,438,624
 
 
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43.Fair values of financial instruments

 

a)            Assets and liabilities measured at fair value

The fair value hierarchy of assets and liabilities measured at fair value as of March 31, 2021 is detailed below:

 

   

Accounting

balance

 

Total fair

value

 

Level 1 fair

value

 

Level 2 fair

value

 

Level 3 fair

value

                     
Financial assets                    
                     
Debt securities at fair value through profit or loss    4,871,695    4,871,695     4,844,172   27,523     -
Derivative instruments    2,475,616    2,475,616    -    1,293,616    1,182,000
Other financial assets    1,791,506    1,791,506     1,791,506   -     -
Other debt securities   120,066,433    120,066,433   17,800,856    102,265,577     -
Financial assets pledged as collateral    5,630,752    5,630,752     4,583,992    1,046,760     -
Investments in equity instruments    2,278,267    2,278,267     269,349   29,525    1,979,393

 

The fair value hierarchy of assets and liabilities measured at fair value as of December 31, 2020 is detailed below:

 

    Accounting balance  

Total fair

value

 

Level 1 fair

value

 

Level 2 fair

value

 

Level 3 fair

value

                     
Financial assets                    
                     
Debt securities at fair value through profit or loss    1,064,876    1,064,876     612,179    452,697     -
Derivative instruments    4,380,030    4,380,030    -    3,044,927    1,335,103
Other financial assets    1,662,518    1,662,518     1,662,518   -     -
Other debt securities   136,225,588    136,225,588     2,065,549    134,160,039     -
Financial assets pledged as collateral    7,838,894    7,838,894     133,844    7,705,050     -
Investments in equity instruments    2,882,615    2,882,615     327,872   32,191    2,522,552
                     
                     
Financial liabilities                    
                     
Derivative instruments   213,135    213,135    -    213,135     -

 

The fair value of a financial asset or liability is the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date.

 

The most objective and usual reference of the fair value of a financial asset or liability is the price that would be paid in an orderly, transparent and deep market, that is to say, its quoted or market price.

 

If it is not possible to obtain a market price, a fair value is determined using best market practice quoting techniques, such as cash flows discount based on a yields curve for the same class and type of instrument, or if there is no market curve with the same characteristics of the bond, the technical value is calculated or the latest market price plus interest accrued until the valuation date is considered (whichever is more representative for the security).

 

In line with the accounting standard, a three-level classification of financial instruments is established. This classification is mainly based on the observability of the necessary inputs to calculate that fair value, defining the following levels:

 

 
 
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·Level 1: Financial instruments valued using quoted prices in an active market. Active market means a market in which transactions take place with sufficient frequency and volume to provide reference prices on an ongoing basis.

 

·Level 2: Financial instruments that do not have an active market, but that may be valued through market observable input.

 

·Level 3: Valuation using models where variables obtained from unobservable market input are used.

 

Financial assets at fair value mainly consist of BCRA Liquidity Bills and Argentine Treasury Bills, together with a minor share in Argentine Government Bonds and Corporate Bonds. Likewise, financial derivatives are classified at fair value, which include futures and foreign currency NDF (non-delivery forwards), put options, and interest rate swaps.

 

b)            Transfers between hierarchy levels

b.1) Transfers from Level 1 to Level 2

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

  03.31.21   12.31.20
       
Argentine Bond in Pesos adjusted by CER due 2021 -   70,821

The bond was transferred because it had not been listed on the market the number of days necessary to be considered Level 1.

b.2) Transfers from Level 2 to Level 1.

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

  03.31.21   12.31.20
       
Argentine Bond in Pesos adjusted by CER due 2021 70,043   -
Treasury Bonds in Pesos adjusted by CER 1.20% Due 03-18-2022 3,833,361   -
Treasury Bonds in Pesos adjusted by CER 1.50% Due 03-25-2024 7,259,868   -
Treasury Bonds in Pesos adjusted by CER 1.40% Due 03-25-2023 4,598,909   -

The transfer is due to the fact that the bonds were listed on the market the number of days necessary to be considered Level 1

b.3) Valuation techniques for Levels 2 and 3

The valuation techniques used for Level 2 securities require market observable input: the last quoted market price (Mercado Abierto Electrónico – MAE), the terms of the bond issue as detailed in the respective offering memorandum or, in the particular case of bonds adjustable for the BADLAR rate published at the BCRA's web site, the spot discount curve in pesos, US dollars, CER, the yield curve in pesos arising from ROFEX futures, the yield curve in pesos arising from futures traded by ICAP Broker, and the spot selling exchange rate published by Banco de la Nación Argentina (BNA). Below is a detail of valuation techniques for each financial product:

 

Fixed Income

The determination of fair value prices set forth by the Bank for fixed income consists in considering the reference market prices of MAE.

 

 
 
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For Argentine Treasury Bonds and Bills, prices are captured from MAE. If bonds have not been traded in the last 10 business days, a theoretical valuation is made, discounting cash flows using the pertinent discount curve.

 

Liquidity bills issued by the BCRA without quoted prices in MAE on the last day of the month were assigned a theoretical value, discounting cash flows using the monetary policy rate.

 

Finally, corporate bonds were measured at their market prices prevailing on the last 10 business days in MAE, where available. In the absence of market prices, these securities were assigned a theoretical value, based on the last market price available, plus accrued interest. In the absence of market prices since their issuance, they are valued by technical value.

 

SWAPS

 

For swaps, the theoretical valuation consists in discounting future cash flows using the interest rate, according to the curve estimated on the basis of fixed-rate peso-denominated bonds and bills issued by the Argentine Government.

 

Non-Delivery Forwards

 

The theoretical valuation of NDFs consists in discounting the future cash flows to be exchanged pursuant to the contract, using a discount curve that will depend on the currency of each cash flow. The result is then calculated by subtracting the present values in pesos, estimating the value in pesos based on the applicable spot exchange rate, depending on whether the contract is local or offshore.

 

For local peso-dollar swap contracts, cash flows in pesos are discounted using the yield curve in pesos resulting from the prices of ROFEX futures and the US dollar spot selling exchange rate published by BNA. Cash flows in US dollars are discounted using the Overnight Index Swap (OIS) international dollar yield curve. Then, the present value of cash flows in dollars is netted by converting such cash flows into pesos using the US dollar spot selling exchange rate published by BNA.

 

For local peso-euro swap contracts, cash flows in pesos are discounted using the yield curve in pesos resulting from the prices of ROFEX futures and the US dollar spot selling exchange rate published by BNA. Cash flows in euros are discounted using the yield curve in euros. Then, the present value of cash flows in euros is netted by converting such cash flows into pesos using the euro spot selling exchange rate published by BNA.

 

For offshore peso-dollar swap contracts, cash flows in pesos are discounted using the yield curve in pesos resulting from market quoted forward prices sourced from ICAP and the US dollar spot selling exchange rate published by BNA. Cash flows in dollars are discounted using the OIS yield curve. Then, the present value of cash flows in dollars is netted by converting such cash flows into pesos using the Emerging Markets Traders Association (EMTA) US dollar spot exchange rate.

 

Investments in Equity Instruments

 

The fair value of the equity interest held in Prisma Medios de Pago S.A.—classified as Level 3—was determined by the Bank’s Management with the input of the valuation report prepared by an independent appraiser, who relied on a future discounted cash flow method embracing an income approach, net of the valuation adjustment required by the BCRA in Memoranda No. 7/2019 and No. 8/2021 and net of the collection of dividends (Note 2.b) and (Note 16).

 

The most relevant unobservable inputs include:

 

·Pro forma EBITDA and Free cash flow (primarily determined on the basis of the expected changes in the level of transactions and fees);
·Minority discount rate (equivalent to 1 / (1 + control premium) -1);
·WACC - Weighted Average Cost of Capital of Prisma Medios de Pago S.A.; and
·g = terminal value growth factor.

 

 
 
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Below is a detail of the sensitivity analysis related to the valuation of the remaining 49% interest in Prisma Medios de Pago S.A. held by the shareholders. Sensitivity is related to the following two variables: WACC and “g” level (growth factor for future cash flows after 2023 which determines the terminal value):

 

 

Value of 49% equity interest + minority discount (9.09%) – in millions of pesos
     (g – annual)
    2.00% 3.00% 4.00%
         
WACC 97.5% 31,209.4 32,968.0 35,046.4
100.0% 30,813.9 32,547.3 34,592.0
102.5% 30,435.2 32,135.0 34,154.5

 

The valuation scenario considers a WACC equals to 100% and a "g" level of 3%.

 

Premiums on Put Options

 

The Group has classified the put option taken in respect of its equity interest in Prisma Medios de Pago S.A. as Level 3, since the fair value of such put option was based on unobservable significant data. The income (loss) from the asset measured at fair value on the basis of unobservable input is booked under Net income / (loss) from financial instruments carried at fair value through profit or loss.

 

These instruments were measured using a valuation technique based on the binomial option pricing model. This model involves creating a comparable portfolio under the same conditions as the put, considering several scenarios. The pricing model factors in the Company's projected cash flows and financial indebtedness as of year-end (34 months as of the date of the contract closing date). Expected cash flows are discounted using the WACC discount rate.

 

Some of the most relevant observable input used in the pricing model include:

-Monthly volatility (sensibility to volatility ranging from 10%, 12%, 15% and 20%).
-Notional exercise price. This price is seven times the expected EBITDA for the third year. This EBITDA is calculated considering the expected cash flows and financial indebtedness, based on Cash and Banks and Short-term investments, and financial indebtedness projected as of the option exercise date.

 

Any potential substantial change in any of the aforementioned unobservable input may increase or decrease the put option estimated fair value.

 

The table below shows the sensitivity analysis for the valuation of the put option per share, based on the implicit volatility level and the notional exercise price of the share:

 

Sensitivity – in US$
    Volatility
    10.0% 12.0% 15.0% 20.0%
           
EBITDA 95% 1.08 1.16 1.26 1.42
100% 1.26 1.31 1.42 1.59
105% 1.43 1.48 1.58 1.75

 

The valuation scenario considers EBITDA at 100% and volatility at 12%, with a fair value equal to 1,182,000 (1,335,103 in restated values) based on the position held by the Entity in Prisma Medios de Pago S.A.

 
 
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b.4) Reconciliation of opening and ending balances of Level 3 assets and liabilities at fair value

The following table shows a reconciliation between opening balances and ending balances of Level 3 fair values:

 

          03.31.21   12.31.20
               
Balance at the beginning of the fiscal year                     3,857,655              3,952,407
Investments in equity instruments – Prisma Medios de Pago S.A.                                -                    808,870
Derivative instruments - Put option taken - Prima Medios de Pago S.A.                                -                    561,376
Dividends collected                   (266,099)               (510,860)
Monetary gain (loss) generated by assets at fair value                   (430,163)               (954,138)
               
Balance at fiscal period-end       3,161,393   3,857,655

c)                 Fair value of Assets and Liabilities not measured at fair value

Below is a description of methodologies and assumptions used to assess the fair value of the main financial instruments not measured at fair value, when the instrument does not have a quoted price in a known market.

·         Assets and liabilities with fair value similar to their accounting balance

In case of financial assets and financial liabilities maturing in less than one year, it is considered that the accounting balance is similar to fair value. This assumption also applies for deposits, because a significant portion thereof (more than 99% considering contractual terms and conditions) have a residual maturity of less than one year.

·         Fixed rate financial instruments

The fair value of financial assets was assessed by discounting future cash flows from market rates at each measurement date for financial instruments with similar characteristics, adding a liquidity premium (unobservable input) that expresses the added value or additional cost necessary to dispose of the asset.

·         Variable rate financial instruments

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

The fair value hierarchy of assets and liabilities not measured at fair value as of March 31, 2021 is detailed below:

    Accounting balance   Total fair value   Level 1 fair value   Level 2 fair value   Level 3 fair value
                     
Financial assets                    
                     
Cash and deposits in banks   195,734,964    (1)    -     -     - 
Repo transactions   30,469,729    (1)    -     -     - 
Other financial assets   12,027,181    (1)    -     -     - 
Other debt securities    15,002,705   15,263,250    -    15,263,250    - 
Loans and other financing                    
 Non-financial government sector    460    (1)    -     -     - 
 BCRA    -     (1)    -     -     - 
 Other financial institutions   1,986,508   1,460,074    -     -    1,460,074
 Non-financial private sector and residents abroad   282,664,703   281,983,644    -     -    281,983,644
Other debt securities    15,002,705   15,263,250    -    15,263,250    - 
Financial assets pledged as collateral   11,013,839    (1)    -     -     - 
                     
Financial liabilities                    
                     
Deposits   507,819,555   503,739,591    -    1,554,505   502,185,086
Other financial liabilities   44,913,135    (1)    -     -     - 
Financing received from the BCRA and other financial institutions   9,773,040   10,141,386    -    7,638,843   2,502,543
Corporate bonds issued   1,022,205   1,023,879    -    1,023,879    - 
(1)The fair value is not reported as it is considered similar to its accounting value.

 

 
 
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The fair value hierarchy of assets and liabilities not measured at fair value as of December 31, 2020 is detailed below:

    Accounting balance   Total fair value   Level 1 fair value   Level 2 fair value   Level 3 fair value
                     
Financial assets                    
                     
Cash and deposits in banks   171,811,092    (1)    -     -     - 
Repo transactions    55,559,168    (1)    -     -     - 
Other financial assets    9,683,239    (1)    -     -     - 
Loans and other financing                    
 Non-financial government sector   577    (1)    -     -     - 
 BCRA    6,783    (1)    -     -     - 
 Other financial institutions    1,982,547   1,366,949    -     -    1,366,949
 Non-financial private sector and residents abroad   313,734,878   310,880,124    -     -    310,880,124
Otros títulos de deuda    -     -     -     -     - 
Financial assets pledged as collateral    12,394,197    (1)    -     -     - 
                     
Financial liabilities                    
                     
Deposits   540,167,048   535,168,456    -    1,895,153   533,273,303
Other financial liabilities    44,307,716    (1)    -     -     - 
Financing received from the BCRA and other financial institutions    10,872,877   11,148,995    -    5,436,744   5,712,251
Corporate bonds issued    1,320,173   1,285,018    -    1,285,018    - 

 

(1) The fair value is not reported as it is considered similar to its accounting value.

 

44.Segment reporting

 

Basis for segmentation

 

As of March 31, 2021 and December 31, 2020, the Group determined that it has only one reportable segment related to banking activities, based on information reviewed by the chief operating decision maker. Most of the transactions, properties and customers of the Group are located in Argentina. No customer has generated more than 10% of the Group's total revenues.

 
 
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The following table shows relevant information on loans and deposits by business line as of March 31, 2021 and December 31, 2020:

 

Group (banking activity) (1)     03.31.21   12.31.20
             
             
Loans and other financing       284,651,671   315,724,785
Corporate banking (2)       26,313,144   37,446,267
Small and medium companies (3)       90,463,801   99,468,848
Retail       167,874,726   178,809,670
             
Other assets       457,297,183   461,355,266
TOTAL ASSETS       741,948,854   777,080,051
             
Deposits       507,819,555   540,167,048
Corporate banking (2) (3)       88,642,412   102,906,776
Small and medium companies (2) (3)       111,649,761   114,696,009
Retail       307,527,382   322,564,263
             
Other liabilities       114,223,181   119,718,874
TOTAL LIABILITIES       622,042,736   659,885,922

 

(1)It includes BBVA Asset Management Argentina S.A. Sociedad Gerente de Fondos Comunes de Inversión. Consolidar AFJP (undergoing liquidation proceedings), PSA Finance Argentina Cía. Financiera S.A. and Volkswagen Financial Services Compañía Financiera S.A.
(2)It includes Financial Sector.
(3)It includes Government Sector.

 

The information related to the operating segment (the Group's banking activity) is the same as that presented in the Consolidated Condensed Statement of Income, considering that it is the measure used by the Entity's highest authority in making decisions on the allocation of resources and performance evaluation.

 

45.Subsidiaries

 

Below is the information on the Bank's subsidiaries:

Name Registered office (country) Interest as of
03.31.21 12.31.20

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

Argentina

53.8892 %

53.8892 %

PSA Finance Argentina Cía. Financiera S.A.    Argentina 50.0000 % 50.0000 %
Volkswagen Financial Services Compañía Financiera S.A.

Argentina

51.0000 %

51.0000 %

BBVA Asset Management Argentina S.A. Sociedad Gerente de Fondos Comunes de Inversión   

Argentina

100.0000 %

100.0000 %

 

 
 
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46.Related parties

 

a)     Parent

The Bank's parent is Banco Bilbao Vizcaya Argentaria.

 

b)    Key Management personnel

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

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

b.1) Remuneration of key management personnel

The Group's key management personnel received the following compensations:

  03.31.21   03.31.20
Fees 7,324   26,902
Total 7,324   26,902

 

b.2) Profit or loss from transactions and balances with key management personnel

  Balances as of   Profit or loss
  03.31.21 12.31.20   03.31.21 03.31.20
Loans          
Credit cards 4,086 5,619   312 411
Overdrafts - 34   - -
Loans 1,173 1,344   54 81
           
Deposits          
Deposits 29,517 36,905   246 86

Loans are granted on an arm’s length basis. As of March 31, 2021, and as of December 31, 2020, balances of loans granted are classified under normal performance according to the debtor classification rules issued by the BCRA.

 

b.3) Profit or loss and balances with related parties (except key Management personnel)

Parent  Balances as of       Profit or loss 
 03.31.21   12.31.20       03.31.21   03.31.20 
             
Cash and deposits in banks  2,006,505  1,319,596     
Financial assets pledged as collateral (2)  23,916     
Other financial assets(2)  -  2,407     
Other non-financial liabilities  7,424,082  7,976,502       331,837   132,973 
Derivative instruments (Liabilities)(1)  1,872  13,123       34,976  - 33,868 
             
Off-balance sheet balances            
             
Securities in custody  52,641,601  71,192,048     
Derivative instruments 385,786  1,044,814     
Sureties grantes  3,226,431  3,000,842      1,769  866 
Guarantees received  3,481,463  4,207,805     

 

 
 
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Subsidiaries  Balances as of       Profit or loss 
 03.31.21   12.31.20       03.31.21   03.31.20 
             
Loans and other financing  3,798,484  4,918,822       496,752   513,024 
Other financial assets 915   200     
Deposits 141,104   344,790       893   1,698 
Non-financial liabilities 23   26       90   1,606 
Financing received  -       10,592 
Other operating income  -      2,399   2,395 
             
Off-balance sheet balances            
             
Securities in custody  1,791,506  1,662,518     
Sureties granted 281   317     

 

 

Associates  Balances as of       Profit or loss 
 03.31.21   12.31.20       03.31.21   03.31.20 
             
Cash and deposits in banks 417  1,055     
Loans and other financing  72,768  81,831       290,027   431,587 
Debt securities at fair value through profit or loss  5,190  5,861       535   20,115 
Other financial assets  73,320  82,817     
Deposits 587,850   694,249      1,756   3 
Financing received 598,139  1,001,969      4,486   2,967 
Derivative instruments (Liabilities)  -      - 32,891 
Corporate bonds issued  -       1,787 
Other operating income  -       11,097   11,684 
             
Off-balance sheet balances            
             
Securities in custody  1,428,883  1,712,513       864  696 
Guarantees received  14,204  16,044     
Sureties granted 484   500      187 

 

Transactions have been agreed upon on an arm’s length basis. As of March 31, 2021 and December 31, 2020, balances of loans granted are classified under normal performance according to the debtor classification rules issued by the BCRA.

 

47.Financial instruments risks

 

47.1 Risk policies of financial instruments

 

In these consolidated condensed financial statements, the Bank has applied the same risk policies of financial instruments as in the preparation of its financial statements as of December 31, 2020.

 

47.2   Exposure to credit risk and allowances

 

Below is the exposure to credit risk and allowances, measured in accordance with IFRS 9 as per BCRA (expected loss model, except for non-financial government sector's financial assets) as of March 31, 2021 and December 31, 2020:

 

 
 
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Exposure at default -
Credit Investment
Stage 1 Stage 2 Stage 3   Total
  Collective Individual Collective Individual  
Balances as of 12.31.20  262,351,581  39,491,542  4,802,295  3,088,991  2,821,225    312,555,634
               
Inter-stage transfers:              
From stage 1 to stage 2 (26,544,539)  26,262,726  -  -  -   (281,813)
From stage 2 to stage 1  10,403,275 (10,191,291)  (9,797)  -  -    202,187
From stage 1 or 2 to stage 3 (349,968)  (2,394,616) (74,077)  2,808,461  74,376    64,176
From stage 3 to stage 1 or 2  49,247  184,323  - (415,759) (96,234)   (278,423)
Changes without inter-stage transfers  (7,775,972)  (9,756,768)  2,038,128  174,145  148,732   (15,171,735)
New originated financial assets  67,052,742  5,615,963  1,001,730  34,258  367,243    74,071,936
Reimbursements (47,315,886)  (7,457,174) (760,011) (172,395) (422,381)   (56,127,847)
Write-offs  1  12  - (502,254) (10,759)   (513,000)
Foreign exchange differences  1,305,481  1,030,139  263,214  14  67,914    2,666,762
Inflation adjustment (29,626,803)  (4,676,750) (545,158) (465,017) (331,670)   (35,645,398)
               
Balances as of 03.31.21  229,549,159  38,108,106  6,716,324  4,550,444  2,618,446    281,542,479

 

Exposure at default -
Credit Investment
Stage 1 Stage 2 Stage 3   Total
  Collective Individual Collective Individual  
Balances as of 12.31.19  258,004,888  28,145,961  2,671,718  5,850,367  5,837,145    300,510,079
               
Inter-stage transfers:              
From stage 1 to stage 2 (101,480,544)  101,935,958  147,114  -  -    602,528
From stage 2 to stage 1  66,400,183 (64,362,085) (45,487)  -  -    1,992,611
From stage 1 or 2 to stage 3 (704,020)  (6,394,352)  (2,249,805)  8,147,288  2,308,269    1,107,380
From stage 3 to stage 1 or 2  845,840  855,585  (1,598)  (1,987,918) (42,436)   (330,527)
Changes without inter-stage transfers (55,493,945) (10,058,996)  4,232,090  2,654,198  (3,765,225)   (62,431,878)
New originated financial assets  418,981,670  23,923,273  1,508,605  603,623  7,116,279    452,133,450
Reimbursements (251,132,800) (28,455,029) (731,142)  (5,757,864)  (4,222,570)   (290,299,405)
Write-offs  -  9  -  (4,866,590)  (4,271,306)    (9,137,887)
Foreign exchange differences  9,275,107  5,434,938  627,706  43,837  825,383    16,206,971
Inflation adjustment (82,344,798) (11,533,720)  (1,356,906)  (1,597,950) (964,314)   (97,797,688)
               
Balances as of 12.31.20  262,351,581  39,491,542  4,802,295  3,088,991  2,821,225    312,555,634

 

Exposure at default -
Contingent
Stage 1 Stage 2 Stage 3   Total
  Collective Individual Collective Individual  
Balances as of 12.31.20  65,086,163  5,414,690 115,292 9,554  558    70,626,257
               
Inter-stage transfers:              
From stage 1 to stage 2  (4,353,071)  4,013,140  -  -  -   (339,931)
From stage 2 to stage 1  2,100,854  (1,862,762) (288)  -  -    237,804
From stage 1 or 2 to stage 3 (25,424) (21,916)  -  35,941  -   (11,399)
From stage 3 to stage 1 or 2  3,463  3,626  -  (6,964)  -    125
Changes without inter-stage transfers  457,776  72,668  235,650  (2,625) (536)    762,933
New originated financial assets  12,358,803  441,561  81,155  213  -    12,881,732
Reimbursements (11,592,166) (507,615) (16,304) (792)  -   (12,116,877)
Write-offs  -  -  -  (2)  -    (2)
Foreign exchange difference  451,654  31,995  15,937  -  -    499,586
Inflation adjustment  (7,356,662) (737,573) (17,759)  (1,417) (22)    (8,113,433)
               
Balances as of 03.31.21  57,131,390  6,847,814 413,683 33,908  -    64,426,795

 

Exposure at default -
Contingent
Stage 1 Stage 2 Stage 3   Total
  Collective Individual Collective Individual  
Balances as of 12.31.19  68,910,388  7,261,952 215,252 50,295  8    76,437,895
               
Inter-stage transfers:              
From stage 1 to stage 2 (16,054,067)  14,929,947  -  -  -    (1,124,120)
From stage 2 to stage 1  11,179,571  (9,997,580) (141)  -  -    1,181,850
From stage 1 or 2 to stage 3 (40,305) (53,011) (713)  52,992  1,684   (39,353)
From stage 3 to stage 1 or 2  69,545  19,243  9 (68,144) (450)    20,203
Changes without inter-stage transfers  5,321,927 (903,609) (134,447)  (6,873) (578)    4,276,420
New originated financial assets  38,336,951  3,568,411  111,985  2,624  -    42,019,971
Reimbursements (23,431,499)  (7,620,276) (28,024) (15,432) (40)   (31,095,271)
Write-offs  -  -  - (62)  (7)   (69)
Foreign exchange difference  961,670  265,585  12,347  -  -    1,239,602
Inflation adjustment (20,168,018)  (2,055,972) (60,976)  (5,846) (59)   (22,290,871)
               
Balances as of 12.31.20  65,086,163  5,414,690 115,292 9,554  558    70,626,257

 

 
 
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Allowances - Credit Investment Stage 1 Stage 2 Stage 3   Total
  Collective Individual Collective Individual  
Balances as of 12.31.20  5,851,150  4,142,908 452,542  2,551,849  1,760,040    14,758,489
               
Inter-stage transfers:              
From stage 1 to stage 2  (1,110,527)  2,821,672  -  -  -    1,711,145
From stage 2 to stage 1  243,540  (1,030,130)  (5,101)  -  -   (791,691)
From stage 1 or 2 to stage 3 (30,748) (883,797)  (5,573)  1,775,160  6,840    861,882
From stage 3 to stage 1 or 2  3,090  20,319  - (271,522) (49,721)   (297,834)
Changes without inter-stage transfers (610,080) (843,404)  60,682  346,291  43,128    (1,003,383)
New originated financial assets  2,809,970  1,311,811  91,605  26,506  202,810    4,442,702
Reimbursements  (2,013,526) (882,596) (76,137) (131,567) (246,305)    (3,350,131)
Write-offs  -  -  - (423,260) (10,753)   (434,013)
Foreign exchange difference  37,931  57,615  22,043  15  38,924    156,528
Inflation adjustment (659,311) (502,072) (50,194) (336,407) (197,393)    (1,745,377)
               
Balances as of 03.31.21  4,521,489  4,212,326 489,867  3,537,065  1,547,570    14,308,317

 

Allowances - Credit Investment Stage 1 Stage 2 Stage 3   Total
  Collective Individual Collective Individual  
Balances as of 12.31.19  5,702,874  2,770,962 275,361  4,271,583  4,576,386    17,597,166
               
Inter-stage transfers:              
From stage 1 to stage 2  (3,119,417)  11,382,294  30,274  -  -    8,293,151
From stage 2 to stage 1  1,921,582  (6,481,063)  (5,240)  -  -    (4,564,721)
From stage 1 or 2 to stage 3 (39,424)  (2,062,503) (713,773)  4,783,203  1,183,897    3,151,400
From stage 3 to stage 1 or 2  22,068  83,697  (1,576)  (1,162,816) (43,143)    (1,101,770)
Changes without inter-stage transfers  (1,811,042) (178,425)  922,790  4,331,603  (2,976,904)    288,022
New originated financial assets  13,366,350  2,879,187  162,805  360,677  7,151,886    23,920,905
Reimbursements  (9,020,362)  (3,774,358) (88,378)  (5,021,923)  (3,781,882)   (21,686,903)
Write-offs  -  -  -  (3,857,802)  (4,385,385)    (8,243,187)
Foreign exchange difference  461,039  564,809  91,922  37,482  804,194    1,959,446
Inflation adjustment  (1,632,518)  (1,041,692) (221,643)  (1,190,158) (769,009)    (4,855,020)
               
Balances as of 12.31.20  5,851,150  4,142,908 452,542  2,551,849  1,760,040    14,758,489

 

 

Allowances - Contingent Stage 1 Stage 2 Stage 3   Total
  Collective Individual Collective Individual  
Balances as of 12.31.20  1,107,135 406,216 18,197 8,334 1,467    1,541,349
               
Inter-stage transfers:              
From stage 1 to stage 2 (102,388)  304,108  -  -  -    201,720
From stage 2 to stage 1  36,009 (151,188)  (1,587)  -  -   (116,766)
From stage 1 or 2 to stage 3 (535)  (4,776)  -  26,680  -    21,369
From stage 3 to stage 1 or 2  95  308  -  (5,753)  -    (5,350)
Changes without inter-stage transfers (115,017) (50,991)  14,605  (1,847)  (1,378)   (154,628)
New originated financial assets  258,425  38,473  7,982  195  -    305,075
Reimbursements (176,139) (31,676)  (1,051) (645)  -   (209,511)
Write-offs  -  -  -  (2)  -    (2)
Foreign exchange difference  12,229  1,701  1,300  -  -    15,230
Inflation adjustment (121,540) (54,424)  (2,283)  (1,100) (89)   (179,436)
               
Balances as of 03.31.21 898,274 457,751 37,163 25,862  -    1,419,050

 

Allowances - Contingent Stage 1 Stage 2 Stage 3   Total
  Collective Individual Collective Individual  
Balances as of 12.31.19 823,947 514,630 17,266 36,925  234    1,393,002
               
Inter-stage transfers:              
From stage 1 to stage 2 (377,958)  1,406,485  -  -  -    1,028,527
From stage 2 to stage 1  306,710 (884,011) (288)  -  -   (577,589)
From stage 1 or 2 to stage 3  (2,077)  (8,200)  (1,145)  33,929  2,868    25,375
From stage 3 to stage 1 or 2  2,189  1,643  61 (47,558) (874)   (44,539)
Changes without inter-stage transfers  170,935 (87,769) (591)  (3,215) (77)    79,283
New originated financial assets  934,534  249,299  13,794  2,321  -    1,199,948
Reimbursements (521,622) (653,440)  (4,001) (10,029) (181)    (1,189,273)
Write-offs  -  -  - (51) (145)   (196)
Foreign exchange difference  34,439  11,926  1,451  -  -    47,816
Inflation adjustment (263,962) (144,347)  (8,350)  (3,988) (358)   (421,005)
               
Balances as of 12.31.20  1,107,135 406,216 18,197 8,334 1,467    1,541,349

 

 
 
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Measurement of expected credit loss

 

IFRS 9 requires determining the expected credit loss (ECL) of a financial instrument in a way that reflects an unbiased estimate, the time value of money and a forward looking perspective (including the economic forecast).

COVID-19 Impact

During the pandemic-related lockdown, the BCRA and the government issued several communications and decrees, pursuant to which customers within the portfolio of non-card financings benefitted from the deferral of unpaid installments from April 2020 up to the final maturity date of the loan.

The table below summarizes the loan portfolio affected by the aforementioned measures and the related impact on contractual cash flows:

Affected portfolio

 

  Loss from changes in contractual cash flows
  2020

 

2021

UVA-indexed mortgage loans 18,714,585   (509,618)

(2,964)

UVA-indexed pledge loans 382,626   (8,040)

(160)

 

Concerning credit cards, outstanding balances as of April 2020 and September 2020 were required to be rescheduled in nine equal and consecutive installments, with a three-month grace period. The due date deferral did not result in stage improvements in any case.

The parameters of the ECL measurement model were not affected. The credit quality ratios did not exhibit signs of impairment as a result of the aid measures adopted by the local authorities. There were no relevant impacts on ECLs directly associated with the COVID-19 pandemic and the lockdown.

 

48.Restrictions to the payment of dividends

Pursuant to the provisions in the regulation in force issued by the BCRA, financial institutions shall annually set aside 20% of the year's profits to increase legal reserves.

Furthermore, pursuant to the requirements in General Resolution No. 622 issued by the CNV, the Shareholders’ Meeting considering the financial statements with accumulated gains shall specifically provide for the allocation thereof.

Specifically, the mechanism to be followed by financial institutions to assess distributable balances is defined by the BCRA through the regulations in force on the “Distribution of earnings,” provided that there are no records of financial assistance from that entity due to illiquidity or shortfalls as regards minimum capital requirements or minimum cash requirements, and other sort of penalties imposed by specific regulators, which are deemed to be material, and/or where no corrective measures had been implemented, among other conditions.

It is worth noting that, on September 20, 2017, the BCRA issued Communication “A” 6327, which provides that financial institutions shall not distribute earnings generated upon the first-time adoption of IFRS, and shall create a special reserve which may only be reversed for capitalization or to absorb potential losses of the item “Unappropriated retained earnings.”

In addition, the Group shall maintain a minimum capital after the proposed distribution of earnings.

On August 30, 2019 and January 31, 2020, the BCRA issued Communications “A” 6768 and “A” 6886, which set forth that as from August 30, 2019, financial institutions are required to have the BCRA’s authorization to distribute their profits allocated to the payment of dividends.

 
 
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Finally, since March 19, 2020, by means of several extensions, the BCRA suspended the distribution of profits by financial institutions until June 30, 2021 (Communication "A" 7181).  The payment of dividends will be resumed when the aforementioned suspension is overruled and when such payment is formally approved by the BCRA.

49.Restricted assets

As of March 31, 2021 and December 31, 2020, the Group has the following restricted assets:

a)The Entity applied the following assets as security for loans agreed under the Global Credit Program for micro, small and medium enterprises granted by the Inter-American Development Bank (IDB).
  03/31/2021 12/31/2020
Argentine Treasury Bond adjusted by CER Maturity 2023 31,130 31,855
Argentine Treasury Bond adjusted by CER Maturity 2024 72,150 72,855
  103,280 104,710

 

b)Also, the Entity has accounts, deposits and trusts applied as guarantee for activities related to credit card transactions, with automated clearing houses, transactions settled at maturity, foreign currency futures and leases in the amount of 16,644,591 and 20,233,091 as of Mach 31, 2021 and December 31, 2020, respectively (see Note 14).

 

50.Deposits guarantee regime

The Entity is included in the Deposits Guarantee Fund Insurance System of Law No. 24485, Regulatory Decrees No. 540/95, No. 1292/96, No. 1127/98 and No. 30/18 and Communication “A” 5943 issued by the BCRA.

That law provided for the incorporation of “Seguros de Depósitos Sociedad Anónima” (SEDESA) to manage the Deposits Guarantee Fund (DGF). Pursuant to the changes introduced by Decree No. 1292/96, the shareholders of such company will be the BCRA, with at least one share, and the trustees of the trust with financial institutions in the proportion determined by the BCRA for each, based on their contributions to the DGF.

That company was incorporated in August 1995, and as of December 31, 2020 the Entity holds 8.1960% of the corporate stock (Communication “B” 12152 of the BCRA).

 

The Deposits Guarantee Insurance System, which is limited, mandatory and for valuable consideration, has been created for the purpose of covering bank deposit risks in addition to the deposits privileges and protection system set forth by the Financial Institutions Law.

 

The guarantee covers the refund of any principal amount paid plus interest accrued up to the date of revocation of the authorization to operate, or until the date of suspension of the entity by application of Section 49 of the Articles of Organization of the BCRA, if this measure had been adopted previously, without exceeding the amount of four hundred and fifty thousand pesos. In case of transactions in the name of two or more people, the guarantee shall be distributed on a pro-rata basis among them. In no case shall the total guarantee per person exceed the aforementioned amount, regardless of the number of accounts and/or deposits.

 

 

In addition, it is set forth that financial institutions shall monthly contribute to the DGF an amount equivalent to 0.015% of the monthly average of daily balances of the items listed in the related regulations.

 

 
 
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As of March 31, 2021 and December 31, 2020, the contributions to the Fund have been recorded in the item “Other operating expenses - Contributions to the deposits guarantee fund” in the amounts of 205,813 and 177,155, respectively.

On February 28, 2019, the Argentine Central Bank issued Communication “A” 6654 setting forth an increase in the guarantee from Ps. 450,000 to Ps. 1,000,000, effective March 1, 2019. Furthermore, on April 16, 2020, the Argentine Central Bank issued Communication “A” 6973 whereby it increased such amount to Ps. 1,500,000, effective May 1, 2020.

 

51.Minimum cash and minimum capital requirements

51.1 Minimum cash requirements

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

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

Items   03.31.21   12.31.20
         
Balances at the BCRA        
BCRA – current account – not restricted    125,127,155    97,077,751
BCRA – special guarantee accounts – restricted (Note 11)    4,002,391    5,143,636
BCRA – social security special accounts – restricted   439,157    - 
     129,568,703    102,221,387
         
Argentine Treasury Bond in pesos at 22% fixed rate. Maturity May 2022    15,002,705    16,354,601
         
Liquidity Bills – BCRA    97,734,769    101,528,279
         
TOTAL    242,306,177    220,104,267

 

The balances disclosed are consistent with those reported by the Bank.

51.2 Minimum capital requirements

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

Minimum capital requirements   03.31.21   03.31.20
         
Credit risk    29,877,388    30,906,666
Operational risk    9,871,660    10,059,780
Market risk   177,211   714,146
         
Paid-in    107,629,501    108,815,888
Surplus    67,703,242    67,135,296

 

52.Compliance with the provisions of the Argentine Securities Commission – minimum shareholders’ equity and cash contra-account

According to CNV’s General Resolution No. 622/13, as amended by CNV’s General Resolution No. 821/19, the minimum shareholders’ equity required to operate as “Settlement and Clearing Agent - Comprehensive” shall be equal to 470,350 UVAs adjusted by CER, Law No. 25827. As concerns the cash contra-account, the amount to be paid shall be equal to no less than fifty per cent (50%) of minimum shareholders' equity.

 

As of March 31, 2021, the cash contra-account includes Argentine Treasury Bonds adjusted by CER and maturing in 2024, deposited with the account opened at Caja de Valores S.A., named “Depositor

 
 
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1647 Brokerage Account 5446483 BBVA Banco Francés minimum cash contra-account.” As of March 31, 2021 and December 31, 2020, the Bank’s Shareholders’ Equity exceeds the minimum amount imposed by the CNV.

 

Furthermore, pursuant to the requirements of General Resolution No. 792 issued by the CNV on April 30, 2019, and effective as of the end of fiscal year ended December 31, 2019, mutual fund management companies’ minimum shareholders’ equity will be comprised by 150,000 UVAs plus 20,000 UVAs, per each additional mutual fund under management. As concerns the cash contra-account, the amount to be paid shall be equal to no less than fifty per cent (50%) of minimum shareholders' equity.

 

The subsidiary BBVA Asset Management Argentina S.A. Sociedad Gerente de Fondos Comunes de Inversión, as Mutual Funds Management Agent, met the CNV minimum cash contra-account requirements with 2,792,293 shares of FBA Renta Pesos Fondo Común de Inversión, in the amount of 48,938, through custody account No. 493-0005459481 held at Banco BBVA Argentina S.A. As of March 31, 2021 and December 31, 2020, the company's Shareholders’ Equity exceeds the minimum amount imposed by the CNV.

 

53.Compliance with the provisions of the Argentine Securities Commission – Documentation

The CNV issued General Resolution No. 629 on August 14, 2014 to introduce changes to its own rules governing the maintenance and safekeeping of corporate books, accounting records and business documentation. In this respect, it is reported that the Bank keeps the documentation that supports its operations for the periods still open to audit for safekeeping in Administradora de Archivos S.A. (AdeA), domiciled at Ruta 36 Km. 31.5, district of Florencio Varela, Province of Buenos Aires.

 

In addition, it is informed that a detail of the documentation delivered for safekeeping, as well as the documentation referred to in Art. 5. a.3), Section I of Chapter V of Title II of the CNV rules is available at the Bank’s registered office (2013 consolidated text and amendments).

 

54.Trust activities

On January 5, 2001, the Board of Directors of BCRA issued Resolution No. 19/2001, providing for the exclusion of Mercobank S.A.’s senior liabilities under the terms of section 35 bis of the Financial Institutions Law, the authorization to transfer the excluded assets to the Bank as trustee of the Diagonal Trust, and the authorization to transfer the excluded liabilities to beneficiary banks. On the same date, Mercobank S.A., as Settler, and the Bank, as Trustee, entered into an agreement to set up the Diagonal Trust in relation to the exclusion of assets as provided in the above-mentioned resolution. As of March 31, 2021 and December 31, 2020, the assets of Diagonal Trust amount to 2,427 and 2,742, respectively, considering their recoverable values.

 

In addition, the Entity, in its capacity as Trustee in the Corp Banca Trust, recorded the selected assets on account of the redemption in kind of participation certificates in the amount of 4,177 and 4,718 as of March 31, 2021 and December 31, 2020, respectively.

 

In addition, the Entity acts as Trustee in 12 non-financial trusts, in no case as personally liable for the liabilities assumed in the performance of the contract obligations. Such liabilities will be settled with and up to the full amount of the trust assets and the proceeds therefrom. The non-financial trusts concerned were set up to manage assets and/or secure the receivables of several creditors (beneficiaries) and the trustee was entrusted with the management, care, preservation and custody of the corpus assets until (i) noncompliance with the obligations by the debtor (settler) vis-a-vis the creditors (beneficiaries) is verified, when such assets are sold and the proceeds therefrom are distributed (net of expenses) among all beneficiaries, the remainder (if any) shall be delivered to the settler, or (ii) all contract terms and conditions are complied with, in which case all the trust assets will be returned to the settler or to whom it may be indicated. The trust assets totaled 374,479 and 403,059 as of March 31, 2021 and December 31, 2020, respectively, and consist of cash, creditors' rights, real estate and shares.

 
 
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55.Mutual funds

As of March 31, 2021 and December 31, 2020, the Entity holds in custody, as Custodian Agent of Mutual Funds managed by BBVA Asset Management Argentina S.A. Sociedad Gerente de Fondos Comunes de Inversión, time deposit certificates, shares, corporate bonds, government securities, mutual funds, deferred payment checks, BCRA instruments, Buenos Aires City Government Bills, ADRS, Buenos Aires Province Government Bills and repos for 51,386,263 and 31,902,639, which are part of the mutual fund portfolio and are recorded in debit balance memorandum accounts “Control – Other.”

 

The Mutual Fund assets are as follows:

 

MUTUAL FUNDS 03.31.21 (1) 12.31.20
     
FBA Renta Pesos 134,105,412 108,290,226
FBA Renta Fija Plus 5,076,732 491,681
FBA Ahorro Pesos 1,297,176 912,159
FBA Horizonte  622,848 720,237
FBA Calificado  491,824 633,441
FBA Acciones Argentinas  407,319 531,367
FBA Acciones Latinoamericanas  380,300 502,302
FBA Bonos Argentina  296,768 292,921
FBA Bonos Globales  203,646 227,320
FBA Renta Mixta 54,912 66,956
FBA Gestión I 29,516 30,997
FBA Horizonte Plus 28,653 35,271
FBA Retorno Total I 26,801 31,291
FBA Renta Publica I 1,747  1,834
FBA Renta Fija Local 1,746  1,834
FBA Renta Fija Dólar Plus 156,892
     
  143,025,400 112,926,729

 

(1) Not subject to quarterly review pursuant to CNV Resolution No. 873/2020.

 

The subsidiary BBVA Asset Management Argentina S.A. acts as a mutual fund manager, authorized by the CNV, which registered that company as a mutual fund management agent under No. 3 under Provision 2002 issued by the CNV on August 7, 2014.

56.Penalties and administrative proceedings instituted by the BCRA

According to the requirements of Communication “A” 5689, as amended, issued by the BCRA, below is a detail of the administrative and/or disciplinary penalties as well as the judgments issued by courts of original jurisdiction in criminal matters, enforced or brought by the BCRA of which the Entity has been notified:

 

Administrative proceedings commenced by the BCRA

 

·         “Banco Francés S.A. over breach of Law 19359.” Administrative Proceedings for Foreign Exchange Offense initiated by the BCRA notified on February 22, 2008 and identified under No. 3511, File No. 100194/05, on grounds of a breach of the Criminal Foreign Exchange Regime as a result of the purchase and sale of US Dollars through the BCRA in excess of the authorized amounts. These totaled 44 transactions involving the Bank's branches 099, 342, 999 and 320. The individuals/entities subject to these proceedings were Banco BBVA Argentina S.A. and the following Bank officers who served in the capacities described below at the date when the breaches were committed: (i) two Territory Managers, (ii) four Branch Managers, (iii) four Heads of Back-

 
 
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Office Management and (iv) twelve cashiers. On August 21, 2014, the court acquitted the individuals/entities above from all charges. The General Attorney’s Office filed an appeal and Room A of the Appellate Court with jurisdiction over Criminal and Economic Matters confirmed the Bank’s and the involved officers’ acquittal from all charges. The General Attorney’s Office filed an Extraordinary Appeal, which was granted and as of the date of these financial statements is being heard by the Supreme Court of Justice. The case has been called for resolution.

 

·         “Banco Francés S.A. over breach of Law 19359.” Administrative Proceedings for Foreign Exchange Offense initiated by the BCRA notified on December 1, 2010 and identified under No. 4539, File No. 18398/05 where charges focus on fake foreign exchange transactions, through false statements upon processing thereof, carried out by personnel from five branches in Mar del Plata, which would entail failure to comply with the client identification requirements imposed by foreign exchange rules and regulations through Communication “A” 3471, paragraph 6. The individuals/entities subject to these proceedings were Banco BBVA Argentina S.A., the five regular members of the Board of Directors and the following Bank officers who served in the capacities described below at the date when the breaches were committed: (i) the Retail Bank Manager, (ii) the Territory Manager, (iii) the Area Manager, (iv) a commercial aide to the Area Manager, (v) five Branch Managers, (vi) four Heads of Back-Office Management, (vii) five Main Cashiers and (viii) one cashier. To date, the case is being heard by Federal Court No. 3, Criminal Division of the City of Mar del Plata, under File No. 16377/2016. On June 21, 2017, the court sought to obtain further evidence on its own initiative ordering that a court letter should be sent to the BCRA for it to ascertain if the rules governing the charges brought in the Case File No. 18398/05 Proceedings No. 4539 have been subject to any change. The BCRA answered the request from the Court, stating that noncompliance with the provisions of Communication “A” 3471 would not currently be subject to any change that may imply a lesser offense. On September 30, 2019, the court of original jurisdiction rendered judgment against the Bank for its involvement in the transaction imposing a fine of US$ 592,000, while imposing the following fines to the following individuals involved:

 

- Pablo Bistacco and Graciela Alonso - US$ 61,000

- Nestor Bacquer and Hugo Benzan - US$ 76,831 and Euros 9,000

- Mariela Espinosa and Mario Fioritti - US$ 59,800 and Euros 11,500

- Liliana Paz and Alberto Gimenez - US$ 296,000 and Euros 28,000

- Jorge Elizalde and Elizabeth Mosquera - US$ 9,135

- Carlos Barcellini - US$ 4,000

- Carlos Alfonso - US$ 4,000

- Samuel Alaniz - US$ 4,000

- Julian Burgos - US$ 4,000

 

The Bank is jointly and severally liable for the aforementioned fines. The Bank's Directors Jorge Carlos Bledel, Javier D. Ornella, Marcelo Canestri and Oscar Castro and Territory Manager Oscar Fantacone and Jorge Allen were acquitted from all charges.

 

An appeal was filed on behalf of Banco BBVA Argentina S.A. and its employees asking for the reversal of the decision or otherwise significant reductions of the amounts involved.

 

The case was filed with the Federal Court of Appeals of Mar del Plata, Criminal department, and is awaiting judgment.

 

·         “BBVA Banco Francés S.A. over breach of Law 19359". Administrative Proceedings for Foreign Exchange Offense initiated by the BCRA notified on July 26, 2013 and identified under No. 5406, File No. 100443/12 where charges are concerned with fake foreign exchange transactions through false statements upon processing thereof incurred by personnel in Branch 087 - Salta -, which would entail a failure to comply with the client identification requirements imposed by foreign exchange rules and regulations through Communication “A” 3471, Paragraph 6. The individuals/entities subject to these proceedings were Banco BBVA Argentina S.A. and the following Bank officers who served in the capacities described below at the date when the breaches were committed: (i) the Branch Manager (ii) the Back Office Management Head, (iii) the Main Cashier and (iv) two cashiers. The trial period ended and the BCRA must send the file to Salta’s Federal Court. As of the date hereof, the case file has not been sent to court.

 
 
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·         “BBVA Banco Francés S.A. over breach of Law 19359". Administrative Proceedings for foreign exchange offense initiated by the BCRA, notified on December 23, 2015 and identified under No. 6684, File No. 100068/13. The proceedings were brought for allegedly having completed operations under Code 631 “Professional and technical business services” for ROCA ARGENTINA S.A. against the applicable exchange regulations (Communications “A” 3471, “A” 3826 and “A” 5264), involving the incomplete verification of the services provided. The individuals/entities subject to these proceedings were Banco BBVA Argentina S.A. and two of the Entity’s officers holding the positions described below: (i) the Foreign Trade Manager and (ii) an officer of the Area. The BCRA has decided that the trial period has come to an end. The case is being heard by Federal Court No. 2, in Lomas de Zamora, Province of Buenos Aires, Criminal Division, under File No. 39130/2017. On October 26, 2017, the Entity filed a request for retroactive application of the most favorable criminal law, as through Communication “A” 5264, whereby the restriction on foreign trade transactions was removed, the payment of services abroad was reinstated.

 

·         “Banco Francés S.A. over breach of Law 19359.” Administrative Proceedings for Foreign Exchange Offense initiated by the BCRA notified on March 15, 2021 and identified under No. 7545, File No. 381/22/21, on grounds of alleged breach of Communication “A” 6770 concerning operations carried out by MULTIPOINT S.A. and TELECENTRO S.A. (i) Multipoint S.A. objects to certain operations for an aggregate amount of U$S 800,000, claiming an alleged breach of Communication “A” 6770, Paragraph 11. Purportedly, three exchange operations would have been completed under code P8 (Other financial loans) in order to prepay a financial loan arising from a loan agreement entered into on April 5, 2019 with original maturity scheduled on April 5, 2021. Such agreement included an addendum executed on October 18, 2019, which amended the third clause of the agreement and which rescheduled the principal payment date to fall due on October 18, 2019. The BCRA believes it purports to an early payment of the loan, thus infringing the above-mentioned communication. (ii) TELECENTRO S.A. objects to an operation for an aggregate amount of U$S 185,724, for alleged breach of Communication “A” 6770, Paragraph 12, arguing that an operation under code B07 (sight payments for imported goods) was carried out to prepay, on October 24, 2019, a trade payable documented by means of two invoices with payment date due on October 29, 2019. The individuals/entities subject to these proceedings are Banco BBVA Argentina S.A. and two of the Entity’s officers holding the positions described below as of the date of the events: (i) the International Trade Manager and (ii) and an Area officer. The Entity has assumed the defense of the case and is preparing its answer to the charges.

 

The Group and its legal advisors estimate that a reasonable interpretation of the applicable regulations in force was made and do not expect an adverse financial impact from these cases.

 

57.Accounting records

As of the date of these consolidated financial statements, and as a result of the subsequent social lockdown and distancing measures the Argentine Government has been mandating since March 19, 2020 in the wake of the global pandemic unleashed by the COVID-19 described in Note 1.3., these consolidated condensed interim financial statements and the financial statements for the interim periods ended in March, June, September and December 2020 are pending transcription into the Financial Statements for Reporting Purposes book, while the accounting entries corresponding to January through December 2020 and January through March 2021 are in the process of being transcribed to the Journal.

  

58.Subsequent Events

On April 20, 2021, the General Ordinary and Extraordinary Shareholders’ Meeting was held, which approved the resolutions mentioned in Note 30 “Share Capital” to these consolidated condensed interim financial statements.

 

No other events or transactions have occurred between period-end and the date of these consolidated condensed interim financial statements which may significantly affect the Entity's financial position or results of operations as of March 31, 2021.

 

 

 
 
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              EXHIBIT B
               
               
CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO FINANCIAL PERFORMANCE
AND GUARANTEES RECEIVED CONSOLIDATED WITH SUBSIDIARIES
AS OF MARCH 31, 2021 AND DECEMBER 31, 2020
(stated in thousands of pesos)
 
               
               
Account   03.31.21   12.31.20
               
COMMERCIAL PORTFOLIO            
               
Normal performance       91,821,630    109,827,053
  Preferred collaterals and counter-guarantees "A"        977,006    1,178,808
  Preferred collaterals and counter-guarantees "B"        613,050   438,378
  No preferred collaterals and counter-guarantees       90,231,574    108,209,867
               
With special follow-up        3,267   266,673
Under observation        3,267   266,673
  Preferred collaterals and counter-guarantees "B"       -    863
  No preferred collaterals and counter-guarantees        3,267   265,810
               
Troubled       2,086,977    2,120,415
  No preferred collaterals and counter-guarantees       2,086,977    2,120,415
               
With high risk of insolvency       76    88
  No preferred collaterals and counter-guarantees       76    88
               
Uncollectible        304,233   371,047
  Preferred collaterals and counter-guarantees "A"        9,926   11,212
  Preferred collaterals and counter-guarantees "B"        160,188   181,401
  No preferred collaterals and counter-guarantees        134,119   178,434
               
TOTAL         94,216,183    112,585,276

 

 
 
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              EXHIBIT B
              (Continued)
               
CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO FINANCIAL PERFORMANCE
AND GUARANTEES RECEIVED CONSOLIDATED WITH SUBSIDIARIES
AS OF MARCH 31, 2021 AND DECEMBER 31, 2020
(stated in thousands of pesos)
               
               
Account   03.31.21   12.31.20
               
CONSUMER AND HOUSING PORTFOLIO            
               
Normal performance       205,727,514    223,816,467
  Preferred collaterals and counter-guarantees "A"        32,853   66,693
  Preferred collaterals and counter-guarantees "B"       31,412,133    31,570,245
  No preferred collaterals and counter-guarantees       174,282,528    192,179,529
               
Low risk       1,176,196   280,523
  Preferred collaterals and counter-guarantees "B"        44,053   25,387
  No preferred collaterals and counter-guarantees       1,132,143   255,136
               
Low risk - with special follow-up        68,851   75,021
  No preferred collaterals and counter-guarantees        68,851   75,021
               
Medium risk       1,466,672    1,117,280
  Preferred collaterals and counter-guarantees "A"        2,300   -
  Preferred collaterals and counter-guarantees "B"        13,680   65,310
  No preferred collaterals and counter-guarantees       1,450,692    1,051,970
               
               
High risk       1,042,415   841,675
  Preferred collaterals and counter-guarantees "B"        165,249   142,336
  No preferred collaterals and counter-guarantees        877,166   699,339
               
Uncollectible        336,154   302,323
  Preferred collaterals and counter-guarantees "A"       13    15
  Preferred collaterals and counter-guarantees "B"        78,815   65,872