##### Table of Contents

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**
 
**

**FORM 20-F**

 

**
 
**

(Mark One) 

 

**or**

 

**for the fiscal year ended December 31, 2011**

**or**

 

**for the transition period from                     to                     **

**or**

 

**Date of the event requiring this shell company report.**

**Commission file number: 001-32827**

**BANCO MACRO S.A.**

**(Exact Name of Registrant as Specified in its Charter)**

**Macro Bank, Inc.**

**(Translation of registrant’s name into English)**

**Argentina**

**(Jurisdiction of incorporation or organization)**

**Sarmiento 447, City ofBuenos Aires, Argentina**

**(Address of registrant’s principal executive offices)**

 

**
 
**

**Jorge Scarinci**

**Financial and Investor Relations Manager**

**Banco Macro S.A.**

**401 Sarmiento, 3th Floor**

**Buenos Aires—C1041AAI, Argentina**

**Telephone: (+54-11-5222-6730)**

**Facsimile: (+54-11-5222-7826)**

**(Name, telephone, e-mail and/or facsimile member and address of company contact person)**

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

 

 

**
 
**

 

 

**
 
**

**Securitiesregistered or to be registered pursuant to Section 12(g) of the Act:**

**None**

**Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:**

**9.75% Fixed/Floating Rate Non-Cumulative Junior Subordinated Bonds Due 2036**

**8.50% Notes Due 2017**

**10.750% Argentine Peso-Linked Notes Due 2012**

Indicate the number ofoutstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 

**11,235,670 Class A ordinary shares, par value Ps. 1.00 per share**

**573,249,498 Class B ordinary shares, par value Ps. 1.00 per share**

 

**
 
**

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past90 days:    Yes  x    No   ̈

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

Largeaccelerated filer  x                 Acceleratedfiler   ̈                 Non-accelerated filer   ̈

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

 

If “Other has been checked in response to the previous question, indicate by check mark whichfinancial statement item the registrant has elected to follow: 

Indicate by check mark which financial statement item theregistrant has elected to follow:  Item 17   ̈    Item 18  x

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

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 23 or 15(d) of theSecurities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court.    Yes   ̈    No   ̈

*Please send copies of notices and communications from the Securities andExchange Commission to:*

 

 

 

 

Table of Contents
**Table of Contents**

 

PART I 
   4  
Item 1. Identity of Directors, Senior Management and Advisers
   4  
Item 2. Offer Statistics and Expected Timetable
   4  
Item 3. Key Information
   4  
Item 4. Information on the Bank
   19  
Item 4A. Unresolved Staff Comments
   66  
Item 5. Operating and Financial Review and Prospects
   67  
Item 6. Directors, Senior Management and Employees
   81  
Item 7. Major Shareholders and Related Party Transactions
   91  
Item 8. Financial Information
   93  
Item 9. The Offer and Listing
   95  
Item 10. Additional Information
   96  
Item 11. Quantitative and Qualitative Disclosure About Market Risk
   112  
Item 12. Description of Securities Other Than Equity Securities
   114  
PART II
   115  
Item 13. Defaults, Dividend Arrearages and Delinquencies
   115  
Item 14. Material Modifications to the Rights of Security Holders and Use ofProceeds
   115  
Item 15. Controls and Procedures
   115  
Item 16A. Audit Committee Financial Expert
   116  
Item 16B. Code of Ethics
   116  
Item 16C. Principal Accountant Fees and Services
   117  
Item 16D. Exemptions from the Listing Standards for Audit Committees
   117  
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
   117  
Item 16F. Change in Registrant’s Certifying Accountant
   118  
Item 16G. Corporate Governance
   118  
PART III
   120  
Item 17. Financial Statements
   120  
Item 18. Financial Statements
   121  
Item 19. Exhibits
   121  
 
1 

Table of Contents
**Certain defined terms**

In this annual report, we use the terms “the registrant,” “we,” “us,” “our” and the “Bank” to refer to Banco Macro S.A. and its subsidiaries, on aconsolidated basis. References to “Banco Macro” refer to Banco Macro S.A. on an individual basis. References to “Class B shares” refer to shares of our Class B common stock and references to “ADSs” refer to American depositary sharesrepresenting our Class B shares, except where the context requires otherwise. References to our “2036 Notes” refer to our 9.75% Fixed/Floating Rate Non-Cumulative Junior Subordinated Bonds due 2036. References to our “2017 Notes”refer to our 8.50% Notes due 2017. References to our “2012 Notes” refer to our 10.750% Argentine Peso-Linked Notes due 2012. 

Theterm “Argentina” refers to the Republic of Argentina. The terms “Argentine government” or the “government” refer to the federal government of Argentina, the term “Central Bank” refers to the *Banco Centralde la República Argentina,* or the Argentine Central Bank, the term “Superintendency” refers to the *Superintendencia de Entidades Financieras y Cambiarias* or the Superintendency of Financial and Exchange Entities, the term“CNV” refers to the *Comisión Nacional de Valores,* or the Argentine Securities Commission, the term “BCBA” refers to the *Bolsa de Comercio de Buenos Aires,*or the Buenos Aires Stock Exchange, the term“MAE” refers to the “*Mercado Abierto Electrónico,*” or the Electronic Open Market, the term “AFIP” refers to the *Administración Federal de Ingresos Públicos* or the Argentine TaxAuthority, the term “IGJ” refers to the *Inspección General de Justicia,* or Public Registry of Commerce and the term “ANSES” refers to the *Administración Nacional de la Seguridad Social* or NationalSocial Security Agency. 

The terms “U.S. dollar” and “U.S. dollars” and the symbol “US$” refer to the legalcurrency of the United States. The terms “peso” and “pesos” and the symbol “Ps.” refer to the legal currency of Argentina. “U.S. GAAP” refers to generally accepted accounting principles in the United States,“Argentine GAAP” refers to generally accepted accounting principles in Argentina and “Central Bank Rules” refers to the accounting and other regulations of the Central Bank. The term “GDP” refers to gross domesticproduct and all references in this annual report to GDP growth are to real GDP growth. 

The term “CER,” or benchmark stabilizationcoefficient, is an index issued by the Argentine government which is used to adjust value of credits and deposits. This index is based on the consumer price index published by the National Institute of Statistics and Census (“INDEC”).

**Presentation of certain financial and other information. Accounting practices**

We maintain our financial books and records in pesos and prepare and publish our consolidated financial statements in Argentina in conformity with Central Bank Rules, which differ in certain significantrespects from U.S. GAAP and, to a certain extent, from Argentine GAAP. Our consolidated financial statements contain a description of the principal differences between Central Bank Rules and Argentine GAAP. Under Central Bank Rules, our financialstatements were adjusted to account for the effects of wholesale-price inflation in Argentina for the periods through February 28, 2003. For the periods subsequent to February 28, 2003, the inflation adjustments were no longer applied toour financial statements under Central Bank Rules. 

Our consolidated financial statements consolidate the financial statements of thefollowing companies: 

 
• 
Banco del Tucumán S.A. (“Banco del Tucumán”) 

 
• 
Banco Privado de Inversiones S.A. (“Banco Privado”) 

 
• 
Macro Bank Limited (an entity organized under the laws of Bahamas) 

 
• 
Macro Securities S.A. Sociedad de Bolsa 

 
• 
Macro Fiducia S.A. (former Sud Inversiones & Análisis S.A.) 

 
• 
Macro Fondos S.G.F.C.I.S.A. 

In August 2006 we acquired Nuevo Banco Bisel S.A. (“Nuevo Banco Bisel”). The results of operations of Nuevo Banco Bisel are consolidated withours from August 11, 2006 through August 18, 2009, date on which it merged with and into us. 

On September 20, 2010 we acquiredBanco Privado. Our results of operations for the year ended December 31, 2010 consolidate the results of Banco Privado from the date of the acquisition. 

Our audited consolidated financial statements as of and for the three years ended December 31, 2011 included in this annual report have been reconciled to U.S. GAAP. See note 32 to our auditedconsolidated financial statements as of and for the three years ended December 31, 2011 for a reconciliation of our financial statements to U.S. GAAP. 

Our financial statements in conformity with Central Bank Rules are sent on a monthly basis to the Central Bank and are published on its website www.bcra.gob.ar. In addition, we also file quarterlyand annual financial statements with the Central Bank, the CNV and the BCBA. 

 
2 

Table of Contents
**Rounding**

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures thatprecede them. 

**Market position**

We make statements in this annual report about our competitive position and market share in, and the market size of, the Argentine banking industry. Wehave made these statements on the basis of statistics and other information from third-party sources that we believe are reliable. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect,we have not independently verified the competitive position, market share and market size or market growth data provided by third parties or by industry or general publications. 

**Our internet site is not part of this annual report**

We maintain an Internet site atwww.macro.com.ar. Information contained in or otherwise accessible through this website is not a part of this annual report. All references in this annual report to this Internet site are inactive textual references to this URL, or“uniform resource locator” and are for your informational reference only. 

**Cautionary statement concerning forward-lookingstatements**

This annual report contains certain statements that we consider to be “forward-looking statements”. We have basedthese forward-looking statements largely on our current beliefs, expectations and projections about future events and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report,could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things: 

 
 • 
changes in general economic, business, political, legal, social or other conditions in Argentina and worldwide; 

 
 • 
effects of the global financial markets and economic crisis; 

 
 • 
deterioration in regional business and economic conditions; 

 
 • 
inflation; 

 
 • 
fluctuations and declines in the exchange rate of the peso; 

 
 • 
changes in interest rates which may adversely affect financial margins; 

 
 • 
government regulation (including tax regulations); 

 
 • 
adverse legal or regulatory disputes or proceedings; 

 
 • 
credit and other risks of lending, such as increases in defaults by borrowers and other delinquencies; 

 
 • 
increase in the provisions for loan losses; 

 
 • 
fluctuations and declines in the value of Argentine public debt; 

 
 • 
decrease in deposits, customers loss and revenue losses; 

 
 • 
competition in banking, financial services and related industries and the loss of market share; 

 
 • 
cost and availability of funding; 

 
 • 
technological changes, changes in consumer spending and saving habits, and inability to implement new technologies; and 

 
 • 
the risk factors discussed under “Item 3.D—Risk factors”. 

The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,”“forecast” and similar words are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans,competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements speak only as of the date they were made, and we undertake no obligation toupdate publicly or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors. In light of the risks and uncertainties described above, the forward-looking events andcircumstances discussed in this annual report might not occur and are not guarantees of future performance. 

 
3 

Table of Contents
Sections of this annual report that by their nature contain forward-looking statements include, but are notlimited to, Item 3. “Key Information,” Item 4. “Information on the Bank, Item 5. “Operating and Financial Review and Prospects” and Item 11. “Quantitative and Qualitative Disclosure About MarketRisk”. 

**PART I**

**Item 1. Identity of Directors, Senior Management and Advisers**

Not applicable. 

**Item 2. Offer Statistics and Expected Timetable**

Not applicable. 

**Item 3. Key Information**

**A. Selected Financial Data**

The followingtables present summary historical consolidated financial data for each of the periods indicated. You should read this information in conjunction with our consolidated financial statements and related notes, and the information under Item 5.“Operating and Financial Review and Prospects” included elsewhere in this annual report. 

We have derived our selected consolidatedfinancial data for the years ended December 31, 2010 and 2011 from our audited consolidated financial statements included in this annual report. We have derived our selected consolidated financial data for the years ended December 31,2007, 2008 and 2009 from our audited consolidated financial statements not included in this annual report and it was restated for comparative purposes. 

On August 18, 2009 Nuevo Banco Bisel merged with and into us and we therefore ceased consolidating its results of operations. As a result of the merger with Nuevo Banco Bisel, we made certainreclassifications in Banco Macro’s consolidated financial statements for the years ended December 31, 2008 and 2007, in order to make them comparable to Banco Macro’s current consolidated financial statements. 

Additionally, during 2010 we acquired Banco Privado and we consolidated our results with the results of operations of this entity from September 20,2010. 

Solely for the convenience of the reader, the reference exchange rate for U.S. dollars as of December 31, 2011, as reported by theCentral Bank was Ps. 4.3032 to US$1.00. See Item 10. “Additional Information—Exchange Controls” for additional information regarding peso/U.S. dollar exchange ratios. 

 
   **Year Ended December 31,**    **2007**  **2008**  **2009 (1)**  **2010 (1)**  **2011**    
**(in thousands of pesos, except for number of shares,**

**net income per share and dividends per share)**
 
**Consolidated Income Statement**
      
**Central Bank Rules:**
      
Financial income
   1,890,422    3,029,860    3,860,452    3,728,438    4,698,648  
Financial expense
   (805,265)   (1,342,062)   (1,511,607)   (1,330,170)   (1,718,721) 
Gross intermediation margin
   1,085,157    1,687,798    2,348,845    2,398,268    2,979,927  
Provision for loan losses
   (94,717)   (297,606)   (197,512)   (215,040)   (273,224) 
Service charge income
   662,326    891,700    1,050,275    1,324,541    1,969,173  
Service charge expense
   (150,282)   (172,401)   (226,599)   (285,365)   (428,021) 
Administrative expenses
   (997,466)   (1,270,002)   (1,522,420)   (1,917,314)   (2,488,510) 
Other income
   183,525    188,450    121,977    167,523    190,560  
Other expense
   (98,915)   (103,328)   (158,294)   (89,540)   (105,839) 
Minority Interest in subsidiaries
   (2,083)   (3,354)   (5,092)   (6,868)   (10,111) 
Income Tax
   (92,345)   (261,207)   (659,250)   (365,775)   (657,858) 
Net income
   495,200    660,050    751,930    1,010,430    1,176,097  
Net income per share (2)
   0.72    1.00    1.26    1.70    1.98  
Dividends per share (3)
   0.25    0.25    0.35    0.85    0.00  
Dividends per share in US$ (3)
   0.08    0.07    0.09    0.21    0.00  
Number of outstanding shares (in thousands)
   683,979    608,437    594,485    594,485    584,485  
**U.S. GAAP: (4)**
      
Net income before extraordinary items
   385,537    631,171    993,769    865,215    1,198,411  
Extraordinary Gain
      
Less: Net income attributable to the non-controlling interest
   (1,497)   (2,928)   (7,484)   (5,943)   (8,380) 
Net income attributable to the controlling interest
   384,040    628,243    986,285    859,272    1,190,031  
Net income per share before extraordinary item(s)
   0.56    0.95    1.66    1.45    2.02  
Total net income per share (5)
   0.56    0.95    1.66    1.45    2.01  
Weighted average number of outstanding shares (in thousands)
   683,952    658,124    595,634    594,485    593,220  
 
(1)See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2011. (2)Net income in accordance with Central Bank Rules divided by weighted average number of outstanding shares. (3)Includes cash dividends approved by the shareholders’ meetings for each of such fiscal years, if any. (4)See note 32 to our audited consolidated financial statements for the year ended December 31, 2011 for a summary of significant differences between Central BankRules and U.S. GAAP. (5)Net income in accordance with U.S. GAAP divided by weighted average number of outstanding shares. 
 
4 

Table of Contents   **As of December 31,** **Consolidated Balance Sheet**     **2007**  **2008**  **2009**  **2010 (1)**  **2011** **Central Bank Rules:**     **(in thousands of pesos)** 
**Assets**
        
Cash and due from banks and correspondents
     3,117,426    3,523,897    5,016,192    5,202,004    6,172,446  
Government and private securities
     3,914,536    4,708,649    6,901,041    7,030,074    4,396,862  
Loans:
        
to the non-financial government sector
     732,481    744,507    206,484    336,430    336,189  
to the financial sector
     161,702    80,423    90,916    155,701    343,282  
to the non-financial private sector and foreign residents
     9,335,656    10,893,376    11,247,452    15,932,882    24,238,011  
Allowances for loan losses
     (220,422)   (438,348)   (448,045)   (514,910)   (599,224) 
Other assets
     2,682,167    2,917,768    3,845,198    5,382,226    6,554,560  
Total assets
     19,723,546    22,430,272    26,859,238    33,524,407    41,442,126  
Average assets
     17,691,769    21,865,952    23,964,067    28,078,290    35,042,459  
**Liabilities and shareholders’ equity**
        
Deposits:
        
from the non-financial government sector
     1,774,121    3,937,961    3,613,924    5,216,109    5,836,211  
from the financial sector
     13,310    22,438    14,052    15,776    17,731  
from the non-financial private sector and foreign residents
     11,803,718    11,867,958    14,964,890    18,175,508    23,313,136  
Other liabilities from financial intermediation and other liabilities
     2,813,065    3,157,646    4,222,152    5,224,974    6,750,362  
Provisions
     101,333    83,004    88,275    105,830    112,816  
Subordinated corporate bonds
     490,695    521,681    572,473    598,470    647,753  
Items pending allocation
     1,644    2,105    3,987    7,399    6,981  
Minority interest in subsidiaries
     12,640    15,568    20,684    27,499    37,584  
Total liabilities
     17,010,526    19,608,361    23,500,437    29,371,565    36,722,574  
Shareholders’ equity
     2,713,020    2,821,911    3,358,801    4,152,842    4,719,552  
Average shareholders’ equity
     2,461,668    2,778,572    3,055,736    3,733,181    4,400,739  
**U.S. GAAP: (2)**
        
Shareholders’ equity attributable to the controlling interest
     2,222,361    2,221,199    3,269,875    3,754,434    4,325,759  
Non-controlling interests
     12,640    15,568    23,052    28,995    37,375  
Shareholders’ equity
     2,235,001    2,236,767    3,292,927    3,783,429    4,363,134  
 
(1)See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2011. (2)See note 32 to our audited consolidated financial statements for the year ended December 31, 2011 for a summary of significant differences between Central BankRules and U.S. GAAP. 
 
   **As of and for the year ended December 31,** **Selected consolidated ratios:**  **2007**   **2008**   **2009 (1)**   **2010 (1)**   **2011** 
**Profitability and performance**
          
Net interest margin (%) (2)
   6.85     7.93     12.56     11.15     10.93  
Fee income ratio (%) (3)
   37.90     34.57     30.90     35.58     39.79  
Efficiency ratio (%) (4)
   57.08     49.23     44.79     51.50     50.28  
Ratio of earnings to fixed charges (excluding interest on deposits) (5)
   4.28x     6.00x     10.65x     11.42x     14.37x  
Ratio of earnings to fixed charges (including interest on deposits) (6)
   1.88x     1.80x     2.06x     2.24x     2.32x  
Fee income as a percentage of administrative expense (%)
   66.40     70.21     68.99     69.08     79.13  
Return on average equity (%)
   20.12     23.76     24.61     27.07     26.72  
Return on average assets (%)
   2.80     3.02     3.14     3.60     3.36  
**Liquidity**
          
Loans as a percentage of total deposits (%)
   75.27     74.03     62.09     70.17     85.43  
Liquid assets as a percentage of total deposits (%) (7)
   53.11     51.40     60.60     51.87     35.67  
**Capital**
          
Total equity as a percentage of total assets (%)
   13.76     12.58     12.51     12.39     11.39  
Regulatory capital as a percentage of risk-weighted assets (%)
   26.81     22.95     27.38     24.74     18.26  
**Asset Quality**
          
Non-performing loans as a percentage of total loans (%) (8)
   1.55     2.64     3.25     2.11     1.51  
Allowances as a percentage of total loans
   2.15     3.74     3.88     3.13     2.40  
Allowances as a percentage of non-performing loans (%) (8)
   138.77     141.81     119.45     148.90     159.16  
Differences due to court orders (*Amparos)* as a percentage of equity (%)
   3.72     1.26     1.50     1.32     1.08  
**Operations**
          
Number of branches
   427     416     408     404     414  
Number of employees
   7,914     7,973     7,863     8,209     8,459  
 
5 

Table of Contents(1)See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2011. (2)Net interest income divided by average interest earning assets. (3)Service charge income divided by the sum of gross intermediation margin and service charge income. (4)Administrative expenses divided by the sum of gross intermediation margin and service charge income. (5)For the purpose of computing the ratio of earnings to fixed charges excluding interest on deposits, earnings consist of income before income taxes plus fixed charges;fixed charges excluding interest on deposits consist of gross interest expense minus interest on deposits. (6)For the purpose of computing the ratio of earnings to fixed charges including interest on deposits, earnings consist of income before income taxes plus fixed charges;fixed charges including interest on deposits is equal to gross interest expense. (7)Liquid assets include cash, cash collateral, repos, LEBACs and NOBACs (considered cash equivalents under Central Bank Rules), interbanking loans and overnight loans tohighly rated companies. (8)Non-performing loans include all loans to borrowers classified as “3- troubled/medium risk,” “4-with high risk of insolvency/high risk,”“5-irrecoverable” and “6-irrecoverable according to Central Bank Rules” under the Central Bank loan classification system. 
**B. Capitalization and Indebtedness**

Not applicable. 

**C. Reasons for the Offer and Use of Proceeds**

Not applicable. 

**D. Risk Factors**

*You should carefully consider the risks described below with all of the other information included in the annual report before deciding to invest in our Class B shares or our ADSs or our notes. If anyof the following risks actually occurs,it may materially harm our business and our financial condition and results of operations. As a result, the market price of our Class B shares or our ADSs or our notes could decline and you could lose part orall of your investment.*

*Investors should carefully read this annual report in its entirety. They should also take into account andevaluate, among other things, their own financial circumstances, their investment goals, and the following risk factors.*

**Risksrelating to Argentina**

**Argentina’s current growth may not be sustainable**

The Argentine economy has experienced significant volatility in recent decades, with periods of low or negative growth, high inflation and currencydevaluation. During 2001 and 2002, Argentina went through a period of severe political, economic and social crisis. Although the economy has recovered significantly since then, uncertainty remains as to whether the current growth is sustainable,since it has depended, to a significant extent, on favorable exchange rates, high commodity prices and excess capacity. 

The Argentine economyshowed a growth of 8.9% in 2011. This trend might be affected by the following reasons: 

 
• 
incomplete normalization of the financial systems of the main developed economies; 

 
• 
abrupt changes in the monetary and fiscal policies of the main economies worldwide; 

 
• 
reversal of capital flows due to domestic and international uncertainty; 

 
• 
the payment capacity of the Argentine public sector and the possibilities of procuring international financing; 

 
• 
increase in inflation affecting competitiveness and economic growth; 

 
• 
poor development of the credit market; 

 
• 
insufficient levels of investment; 

 
• 
evolution of the exchange rate; 

 
6 

Table of Contents• 
increase in public expenditure affecting the economy and the fiscal accounts; 

 
• 
possible reduction or reversal in the trade balance; 

 
• 
significant decrease in prices of main commodities exported by Argentina; 

 
• 
restrictions on imports or exports; 

 
• 
wage and price controls; and 

 
• 
political and social tensions 

Substantially all our operations, properties and customers are located in Argentina. As a result, our business is to a very large extent dependent upon the political, social and economic conditionsprevailing in Argentina. 

**The Argentine economy could be adversely affected by economic developments in the global markets**

Financial and securities market in Argentina are influenced, to varying degrees, by economic and market conditions in other global markets. 

The crisis in the United States in 2008 and the recession and fiscal deficits in Euro-zone countries have caused a downturn in the world’s maineconomies. Liquidity restrictions in the financial systems of these countries that started during the second semester of 2008 caused a credit squeeze that resulted in a sharp fall in the global economy. The depth, extension and speed of the creditsqueeze generated a rapid response by the countries of the G20 through monetary and fiscal expansive policies designed to avoid a long and violent depression. 

In that sense, the recession in the second semester of 2008 and the first semester of 2009 was short but severe. Both the United States economy and the European Union economy recovered, although suchrecovery was fueled by a bold step-up in public sector spending and expansive monetary policies, including, placements of sovereign debt by European countries in significant amounts, creating uncertainties regarding repayment capacity and potentialdifficulties in public financing. As a consequence, several European countries, such as Ireland, Greece, Portugal, Spain, the United Kingdom and Italy, have revealed significant macroeconomic imbalances. 

On August 5, 2011, Standard & Poor’s downgraded the debt instruments issued by the United States and on January 13, 2012,Standard & Poor’s downgraded the instruments of nine European countries including France and Italy. Financial markets have reacted adversely curtailing the ability of certain of these countries to refinance their outstanding debt.

In addition, the current instability in several Middle East and African countries, as well as natural disasters, such as the 2011 earthquakeand tsunami in Japan could have a negative impact in the global economy. 

Global economic downturns and related instability have had, and maycontinue to have, a negative effect on economic growth in Argentina. A prolonged slowdown in economic activity in Argentina would adversely affect our business, financial condition and results of operations. 

**The financial systems of the main developed economies remain subject of uncertainty and might cause a reversal of the capital flows**

Domestic as well as international uncertainty impacts adversely on Argentina’s ability to attract capital. Continued or worsening disruption andvolatility in the global financial markets could have a material adverse effect on the Argentine financial market. 

An abrupt change in theeconomic policies of the developed countries or changes in domestic policy might reverse the flow of capitals towards Argentina. Such changes would negatively impact the liquidity of the local market and our business and results of operations.

**Argentina’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms andpublic policies and foster economic growth**

In the first half of 2005, Argentina restructured part of its sovereign debt that had been indefault since the end of 2001. The Argentine government announced that as a result of the restructuring, it had approximately US$126.6 billion in total outstanding debt remaining. Of this amount, approximately US$19.5 billion are defaulted bondsowned by creditors who did not participate in the restructuring. Some bondholders in the United States, Italy and Germany have filed legal actions against Argentina, and holdout creditors may initiate new suits in the future. 

The Argentine government cancelled all of its pending debt with the IMF on January 3, 2006. 

On September 2, 2008, by means of Decree No. 1,394, Argentina announced its decision to pay its debt to its creditor nations members of theParis Club. At the same time, by means of a press release issued on September 18, 2008, the Paris Club announced that it accepted Argentina’s decision. However, negotiations came to a halt due to the international financial crisisaffecting economies worldwide at such time and remain delayed. Argentina resumed negotiations in December 2010. However, as of the date of this annual report, the Argentine government has not yet cancelled such debt. Indeed, negotiations in thisrespect remain stagnant. 

 
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On February 2, 2009, by means of Joint Resolutions 8/2009 and 5/2009 of the Secretariat of Economy andthe Secretariat of Finance of the National Ministry of Economy and Public Finances, launched the local tranche of the exchange of certain liabilities due between 2009 and 2012 (See Item 5.A “Operating Results”) for new bonds. Thegovernment announced that 97% of the holders had accepted such exchange proposal, representing Ps. 15.1 billion of an aggregate domestic tranche of the debt due in 2009, 2010 and 2011 for a total of Ps. 15.6 billion. The new bonds delivered underthe exchange are due as from 2014. 

Afterwards, on November 18, 2009, the Argentine Federal Congress approved a suspension of the“lock law” (which was supposed to prevent the government from reopening the defaulted sovereign debt exchange offer), and therefore Argentine government was allowed to reopen the exchange offer to holdouts. On May, 2010, Argentina launcheda new exchange offer for the debt that had not been included in the restructuring carried out in 2005. The results of the exchange offer were announced in June 2010 with 67% of the holdouts having accepted. 

In addition, various creditors have organized themselves into associations to engage in lobbying and public relations concerning Argentina’s defaulton its public indebtedness. Such groups have over the years unsuccessfully urged passage of federal and New York state legislation directed at Argentina’s defaulted debt and aimed at limiting Argentina’s access to the U.S. capital markets.Although neither the United States Congress nor the New York state legislature adopted such legislation, we can make no assurance that legislation or other political actions designed to limit Argentina’s access to capital markets will not takeeffect. 

Argentina’s past default and its failure to completely restructure its remaining sovereign debt and fully negotiate with theholdout creditors may prevent Argentina from re-entering the international capital markets. Furthermore, Argentina’s inability to access the international capital markets in the medium and long term could have an adverse impact on our ownability to access international credit markets. In addition, financing from multilateral financing institutions may be limited or not available. 

Litigation initiated by holdout creditors may result in material judgments against the Argentine government and could result in attachments of or injunctions relating to assets of Argentina that thegovernment intended for other uses. As a result, the Argentine government may not have all the necessary financial resources to implement reforms and foster growth, which could have a material adverse effect on the country’s economy, andconsequently, our business, financial condition and results of operations. 

**Argentina is subject to litigation by foreign shareholders ofArgentine companies, which have resulted and may result in adverse judgments or injunctions against Argentina’s assets and limit its financial resources**

Foreign shareholders of certain Argentine companies have filed claims in excess of US$17 billion in the International Center for the Settlement of Investment Disputes (“ICSID”), alleging thatcertain Argentine government measures are inconsistent with the fair and equitable treatment standards set forth in various bilateral investment treaties to which Argentina is a party and claiming damages compensation. To date, the ICSID hasrendered decisions adverse to Argentina in several cases, such as (i) “Aguas del Aconquija S.A.,” in which the tribunal ordered Argentina to pay US$105 million to Compañía de Aguas del Aconquija S.A. and VivendiUniversal in relation to the termination of a water concession contract entered into with the Province of Tucumán; an annulment request was rejected on August 10, 2010; (ii) “CMS Gas Transmission Company,” in whichthe tribunal ordered Argentina to pay US$133.2 million plus interest, Argentina appealed the decision which was partially annulled, but the amounts to be paid by Argentina remained unchanged; and (iii) “LG&E Energy Corporation,”in which the tribunal ordered Argentina to pay US$57.4 million plus interest, the plaintiff requested a supplemental award for additional damages which was rejected and both parties have filed annulment requests which are currently suspended;(iv) “Azurix Corporation,” in which Argentina was ordered to pay US$165.2 million plus interest and Argentina filed an action for annulment against this decision, which was rejected in September 2009; (v) “ContinentalCasualty Company,” in which Argentina was ordered to pay US$2.8 million plus interest, and both parties have requested the annulment of the award; and (vi) “Suez, Sociedad General de Aguas de Barcelona S.A”., and “InterAguasServicios Integrales del Agua S.A.” and “Suez, Sociedad General de Aguas de Barcelona, S.A.” and “Vivendi Universal, S.A.,” in which the tribunal declared that Argentina violated the fair and equitable treatment protection,but the award’s monetary aspect was deferred to a later phase in the proceedings. 

Furthermore, under the United Nations Commission onInternational Trade Law (“UNCITRAL”) arbitration rules, arbitration tribunals have ordered Argentina (i) in December 2007, to pay US$185 million to British Gas (shareholder of Argentine gas company Metrogas); and (ii) in November2008, to pay US$53.5 million to National Grid plc (shareholder of Argentine electricity transportation company Transener). Argentina filed with the U.S. District Court for the District of Columbia a petition to vacate both awards. The annulmentrequest of the British Gas proceeding was granted in January 2012, while the National Grid plc annulment request was rejected by a lower court. 

Litigation, as well as ICSID and UNCITRAL claims against the Argentine government, have resulted in material judgments and may result in new materialjudgments against the government, and could result in attachments of or injunctions relating to assets of Argentina that the government intended for other uses. As a result, the Argentine government may not have all the necessary financial resourcesto implement reforms and foster growth, which could have a material adverse effect on the country’s economy, and consequently, our business, financial condition and results of operations. 

 
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**Governmental intervention in the economy could affect Argentina’s economic growth.**

During the last two years, the Argentine government has been increasing its direct intervention in the economy and in private sector businesses

Moreover, on April 16, 2012 the Argentine government sent a bill to Congress to declare of public interest and subject to expropriation 51%of Class D Shares of YPF S.A., a publicly-held oil company, indirectly controlled by Repsol, a spanish company. In addition, the Argentine government has intervened the management of YPF S.A. for a period of thirty (30) days. 

The intervention of companies by the Argentine government may have an adverse impact on the level of foreign investment in Argentina, the access ofArgentine companies in the international capital markets and Argentina’s commercial and diplomatic relations with other countries. 

Inthe future, the level of governmental intervention in the economy may continue, which may have adverse effects on Argentina’s economy and, in turn, our business, results of operations and financial condition. 

**Suspension of tariff preferences for Argentine products made by the United States due to failure to comply with ICSID awards, may lead to similarmeasures by other trading partners**

The United States has announced the suspension of Argentina from the US Generalized System ofPreferences (GSP) under which Argentine exports enjoyed preferential tariffs, due to Argentina’s failure to comply with ICSID awards related to US companies. 

This decision may lead to similar measures by other trading partners, in a scenario of repeated complaints from various countries against import restrictions implemented by Argentina. 

A suspension of export preferences may have an adverse effect on exported volumes, affecting the trade balance and, consequently, would adversely impactArgentina’s economy and, therefore, our business, financial condition and results of operations. 

**Exchange controls and capital inflowand outflow restrictions have limited, and can be expected to continue to limit, the availability of international credit and may impair our ability to make payments on our obligations**

Since 2002, Argentina has imposed exchange controls and transfer restrictions substantially limiting the ability of companies to retain foreign currency or make payments abroad. In June 2005, thegovernment issued Decree No. 616/2005, which established new controls on capital inflows that could result in reduced availability of international credit, including the requirement that 30% of all funds remitted to Argentina remain depositedin a domestic financial institution for one year without yielding interest. Some of the original restrictions have been subsequently eased, including those requiring the Central Bank’s prior authorization for the transfer of funds abroad inorder to pay principal and interest on debt obligations. 

In addition, during the second half of 2011, the Argentine government strengthenedcertain restrictions on the sale of foreign currency and on the creation of foreign assets belonging to residents. For example, the Central Bank issued regulations reducing the terms for the mandatory settlement of foreign financial indebtedness andaccess to the local foreign exchange market for prepayment of interest. Furthermore, new AFIP regulations require that all foreign exchange transactions be registered with AFIP, and that the formation of any off-shore assets by Argentine residentsbe approved by AFIP. The Argentine government may impose or increase exchange controls or transfer restrictions in the future, among other things, in response to capital flight or a significant depreciation of the peso. 

Additional controls could have a negative effect on the economy and our business if imposed in an economic environment where access to local capital isconstrained. Furthermore, in such event, the imposition of future restrictions on the transfers of funds abroad may impede our ability to transfer dividends to ADS holders or interest or principal payments to the holders of our notes. 

**A decline in the international prices for Argentina’s main commodity exports or a climate disaster could have an adverse effect onArgentina’s economic growth**

Argentina’s financial recovery from the 2001-2002 local crisis occurred in a context of priceincreases for Argentina’s commodity exports, such as soy. High commodity prices have contributed to the increase in the Argentine exports since the third quarter of 2002 as well as in tax revenues from export withholdings. 

The prices of commodities that Argentina exports decreased during the 2008 global economic crisis and may decline in the future. In addition, adverseweather conditions can affect production of commodities by the agricultural sector. These circumstances would have a negative impact on the levels of government revenues and the government’s ability to service its sovereign debt, and couldeither generate recessionary or inflationary pressures, depending on the Government’s reaction. Either of these results would adversely impact Argentina’s economy growth and, therefore, our business, financial condition and results ofoperations. 

 
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**High inflation may adversely affect the Argentine long-term credit markets as well as the Argentineeconomy in general**

Since 2007 the inflation index has been extensively discussed in the Argentine economy. The intervention of theArgentine government in the INDEC and the change in the way the aforementioned inflation index is measured has resulted in disagreements between the government and private consultants as to the actual annual inflation rate. 

The inflation rates according to the INDEC were 7.7%, 10.9% and 9.5% for 2009, 2010 and 2011, respectively. For the first two months of 2012 the INDECreported an inflation rate of 1.7%. Uncertainty surrounding future inflation rates has slowed the rebound in the long-term credit market. Private estimates, on average, refer to annual rates of inflation in excess of those published by INDEC.

In the past, inflation has materially undermined the Argentine economy and the government’s ability to create conditions that wouldpermit stable growth. High inflation may also undermine Argentina’s foreign competitiveness in international markets, with the same negative effects on the level of economic activity and employment. In addition, high inflation may undermine theconfidence in Argentina’s banking system in general, which would negatively and materially affect our business volumes and potentially affect our lending activities. 

**Significant devaluation of the peso against the U.S. dollar may adversely affect the Argentine economy**

Despite the positive effects of the real depreciation of the peso on the competitiveness of certain sectors of the Argentine economy, it has also had a far-reaching negative impact on the Argentineeconomy and on the financial condition of businesses and individuals. The devaluation of the peso has had a negative impact on the ability of Argentine businesses to honor their foreign currency-denominated debt, has led to very high inflationinitially, significantly reduced real wages, had a negative impact on businesses whose success is dependent on domestic market demand, such as utilities and the financial industry, and adversely affected the government’s ability to honor itsforeign debt obligations. 

If the peso devalues significantly, all of the negative effects on the Argentine economy related to suchdevaluation could recur, with adverse consequences to our business, financial condition and results of operations. In addition, such devaluation could affect client’s confidence, as well as loan demand. 

**Significant appreciation of the peso against the U.S. dollar may adversely affect the Argentine economy**

A substantial increase in the value of the peso against the U.S. dollar also presents risks for the Argentine economy. The appreciation of the pesoagainst the U.S. dollar negatively impacts the financial condition of entities whose foreign currency-denominated assets exceed their foreign currency-denominated liabilities. 

In particular, our results of operations are sensitive to changes in the Ps./US$ exchange rate because our primary assets and revenues are denominated in pesos while around 24% of our total assets and 22%of our total liabilities are denominated in foreign currencies. 

In addition, in the short term, a significant real appreciation of the pesowould adversely affect exports. This could have a negative effect on GDP growth and employment as well as reduce the Argentine public sector’s revenues by reducing tax collection in real terms, given its current heavy reliance on taxes onexports. This may have a material adverse effect in our business, our financial condition and results of operations. 

**The loss ofcompetitiveness by Argentine companies may reduce or reverse the foreign trade balance, affecting Argentina’s economic growth.**

In thecurrent Argentine economic context, with active fiscal and monetary policies and the resulting increase of prices, the multilateral real exchange rate has deteriorated, leading to a reduction of competitiveness of Argentine companies. Loss ofcompetitiveness may affect the foreign trade balance and therefore the economic growth. 

As a remedy, the Argentine government has assumedsubstantial control over foreign trade to preserve the foreign trade balance. These control measures may result in a shortage of inputs and spare parts and in production disruptions that may affect the growth of the economy and, as consequence,could affect our business, financial condition and results of operations. 

**High public expenditure could result in long lasting adverseconsequences for the Argentine economy**

During the last few years, the Argentine Government has substantially increased public expenditure.In 2011, public expenditure increased by 32% year over year. In the past, the Argentine government resorted to the Central Bank and to local financial institutions to source part of its funding requirements. We cannot assure you that the governmentwill not seek to finance its deficit by gaining access to the liquidity available in the local financial institutions. On that case, government initiatives that increase the exposure of local financial institutions to the public sector would affectour liquidity and assets quality and impact negatively on clients’ confidence. 

In addition, a further deterioration in fiscal accountscould negatively affect the government’s ability to access the international financing markets. 

 
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**Argentine government measures to preempt, or in response to, social unrest may adversely affect theArgentine economy**

Despite Argentina’s ongoing economic recovery and relative stabilization, the social and political tensions andhigh levels of poverty and unemployment continue. Future Argentine government policies to preempt, or in response to, social unrest may include expropriation, nationalization, forced renegotiation or modification of existing contracts, suspension ofthe enforcement of creditors’ rights, new taxation policies, including royalty and tax increases and retroactive tax claims and changes in laws and policies affecting foreign trade and investment. Such policies could destabilize the country andadversely and materially affect the economy, and thereby our business. 

**The amendment of the Central Bank’s Charter and theConvertibility Law may adversely affect the growth of the Argentine economy.**

On March 22, 2012, the Argentine Congress passed Law No.26,739, which amended the charter of the Central Bank (the “Central Bank’s Charter) and Law No. 23,298 (the “Convertibility Law”). This new law amends the objectives of the Central Bank (established in its charter) and removescertain provisions previously in force. Pursuant to the amendment, the Central Bank will focus on promoting monetary and financial stability as well as development with social equity. 

The principal amendment relates to the use of Central Bank reserves. Pursuant to this amendment, Central Bank reserves may be allocated to the payment of debt or to finance public expenses, which mayresult in increased inflation, affecting the Argentine economy growth. Likewise, this use of Central Bank reserves may result in Argentina being more vulnerable to external shocks, affecting the country’s capacity to overcome the effects of anexternal crisis. 

In addition, Law No. 26,739 includes an amendment of the criteria for compliance with the minimum cash requirement forbanks. The implementation of this amendment could affect financial institutions by forcing them to increase liquidity, with a potential adverse impact on credit supply, and therefore on the growth of the Argentine economy and on our business.

**Risks relating to the Argentine financial system**

**The health of Argentina’s financial system depends on a return of the long-term credit market, which is currently recovering at a relatively slow pace**

As a consequence of the 2008 global economic crisis, the banking industry in Argentina suffered a significant slowdown. This trend was reversed by the endof 2009. 

Although private sector financing increased in 2009 and the beginning of 2010, 2010 ended with lower expansion. In 2011, the loanportfolio growth rate increased significantly year over year. Loans to the private sector grew by approximately 9% in 2009, 37% in 2010 and 46% in 2011. 

In spite of the recovery of the credit activity, the long-term loans market (pledged loans and mortgage loans) is recovering at a slower pace. 

If longer-term financial intermediation activity fails to resume at substantial levels, the ability of financial institutions, including us, to generate profits will be negatively affected. Even thoughdeposits in the financial system and with us are having increased since mid-2002, most of these new deposits are either sight or very short-term time deposits, creating a liquidity risk for banks engaged in long-term lending, like us, and increasingtheir need to depend on the Central Bank as a potential liquidity backstop. 

**The health of the financial system depends upon the ability offinancial institutions, including us, to retain the confidence of depositors**

Despite the international crisis, total deposits with thefinancial system increased by 11% during 2009, by 28% during 2010 and by 31% in 2011. 

The average total deposits in terms of GDP represented31% during 2011, compared with 22.6% and 20.7% in average during 2010 and 2009. 

In spite of the increasing trend showed during previousyears, the deposit base of the Argentine financial system, including ours, may be affected in the future by adverse economic, social and political events. If there were a loss of confidence upon these events and, therefore, depositors once againwithdraw significant holdings from banks (as they did in late 2001 and early 2002 as a result of the measures then implemented by the Argentine government), there will be a substantial negative impact on the manner in which financial institutions,including us, conduct their business and on their ability to operate as financial intermediaries. International loss of confidence in the financial institutions may also affect sensibility of Argentine depositors. 

 
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**The asset quality of financial institutions, including us, may be affected by the exposure to publicsector debt**

Financial institutions have bonds of, and loans to, the Argentine federal and provincial governments as part of theirportfolios. Exposure to public sector of the financial system has decreased year after year, from a level of 48.9% in 2002 to 10.4% in 2011. Exposure to public sector debt as of December 31, 2011 represented approximately one quarter offinancings granted by the financial system to the private sector. 

To some extent, the value of the assets held by Argentine banks, as well astheir income generation capacity, is dependent on the Argentine public sector’s creditworthiness, which is in turn dependent on the government’s ability to promote sustainable economic growth in the long run, generate tax revenues andcontrol public spending. 

As of December 31, 2011, our exposure to the public sector, not including LEBACs (*Letras del BancoCentral*) and NOBACs (*Notas del Banco Central*), totaled approximately Ps. 1.3 billion, representing 3.1% of our total assets. 

**Our asset quality and that of other financial institutions may deteriorate if the Argentine private sector is affected by the international financialcrisis**

The capacity of many Argentine private sector debtors to repay their loans has deteriorated as a result of the internationaleconomic crisis, materially affecting the asset quality of financial institutions, including us. From the end of 2008, we had consistently established large allowances for loan losses to cover the risks inherent to our private loan portfolio.

During 2010 and 2011, the ratio of the non-performing private sector lending showed a great decline from the levels reported for 2009, with arecord minimum ratio of 2.1% as of December 31, 2010 and 1.4% as of December 31, 2011 for the financial system as a whole. Such improvements were reflected in both the consumer loan portfolio and the commercial portfolio. 

Our credit portfolio quality ratio and coverage ratio followed the financial system trend standing at 1.5% and 158.1% ratios, respectively, as ofDecember 31, 2011. 

However, the current improvement may not continue, and we will likely not succeed in recovering substantial portionsof loans that were provisioned. If Argentina’s recovery does not continue and the financial condition of the private sector deteriorates, we will experience an increase in our incidence of non-performing loans. 

**Class actions against financial entities for an indeterminate amount may adversely affect the profitability of the financial system**

Certain public and private organizations have initiated class actions against financial institutions in Argentina. The Argentine National Constitution andLaw No. 24,240 (the “Consumer Protection Law”) contain certain provisions regarding class actions. However, their guidance with respect to procedural rules for instituting and trying class action cases is limited. Nonetheless, bymeans of an ad hoc doctrine construction, Argentine courts have admitted class actions in some cases, including various lawsuits against financial entities related to “collective interests” such as alleged overcharging on products, appliedinterest rates, advice in the sale of public securities, etc. If class action plaintiffs were to prevail against financial institutions, their success could have an adverse effect on the financial industry and on our business. 

**Limitations on enforcement of creditors’ rights in Argentina may adversely affect financial institutions**

To protect debtors affected by the economic crisis, beginning in 2002 the Argentine government adopted measures that temporarily suspended proceedings toenforce creditors’ rights, including mortgage foreclosures and bankruptcy petitions. Such limitations have restricted creditors’ ability to collect defaulted loans. Most of these measures have been rescinded; however, we cannot assure youthat in an adverse economic environment the government will not adopt new measures in the future, which could have a material adverse effect on the financial system and our business. 

**The application of the Consumer Protection Law may prevent or limit the collection of payments with respect to services rendered by us**

The Consumer Protection Law sets forth certain rules and principles designed to protect consumers, which include our customers. The Consumer Protection Law was amended on March 12, 2008 by LawNo. 26.361 to expand its applicability and the penalties associated with violations thereof. 

Additionally, Law No. 25,065 (asamended by Law No. 26,010 and Law No. 26,361, the “Credit Card Law”) also sets forth several mandatory regulations designed to protect credit card holders. 

Both the involvement of the applicable administrative authorities at the federal, provincial and local levels, and the enforcement of the Consumer Protection Law and the Credit Card Law by the courts areincreasing. This trend has increased general consumer protection levels. In the event that we are found to be in violation of any provision of the Consumer Protection Law or the Credit Card Law, certain penalties and remedies could prevent or limitthe collection of payments due from services and financing provided by us and materially adversely affect our financial results and ability to meet our payment obligations. We cannot provide any assurance that judicial and administrative rulingsbased on the applicable regulation, or measures adopted by the enforcement authorities, will not increase the consumer protection given to debtors and other clients in the future, or that they will not favor the claims initiated by consumer groupsor associations. 

 
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**Future governmental measures and/or regulations may adversely affect the economy and the operations offinancial institutions**

The Argentine government has historically exercised significant influence over the economy, and financialinstitutions, in particular, have operated in a highly regulated environment. In the first quarter of 2012, the Central Bank’s Charter was amended resulting in an increase influence of government over the financial system. We cannot assure thatlaws and regulations currently governing the economy or the banking sector will not continue to change in the future, such as the recent regulations of minimum capital requirements of financial institutions, or that any changes will not adverselyaffect our business, financial condition and results of operations. 

As of the date of this report, three different bills to amend theFinancial Institutions Law No. 21,526 as amended (the “Financial Institution Law”) have been put forth for review in the Argentine Congress, seeking to amend different aspects of the Financial Institutions Law. A thorough amendment ofthe Financial Institutions Law would have a substantial effect on the banking system as a whole. If any such bill is passed, or any other amendment to the Financial Institutions Law is made, we cannot foresee what effects the subsequent changes inbanking regulations could have on financial institutions in general, and on our business, financial conditions and results of operations. 

**Argentina ́s insufficient or incorrect implementation of certain anti-money laundering recommendations may result in difficulties to obtainfinancing and attract direct foreign investments.**

In October 2010, the Financial Action Task Force (“FATF”) issued a report onAnti-Money Laundering and Combating the Financing of Terrorism in Argentina, including the evaluation of Argentina as of the time of the on-site visit (November 2009). This report states that since the latest evaluation, finalized in June 2004,Argentina had not made adequate progress in addressing a number of deficiencies identified at the time. 

Moreover, in February 2011,Argentina, represented by the Minister of Justice, attended the FATF Plenary in Paris, in order to present a preliminary action plan. FATF has granted an extension to implement changes. 

In compliance with recommendations made by the FATF on money laundering prevention, on June 1, 2011 the Congress enacted Law No. 26,683. Under this law, money laundering is now a crime *perse*, and self-laundering money is also considered a crime. 

However, the FATF will continue carrying out evaluations. Therefore, theoutcome of new evaluations could adversely affect Argentina’s ability to obtain financing from international markets and attract foreign investments. 

**Risks relating to us**

**Our target market may be the most adversely affected by economicrecessions**

Our business strategy is to increase fee income and loan origination in our target market, low- and middle-income individualsand small and medium-sized businesses. 

This target market is particularly vulnerable to economic recessions and, in the event of such arecession, growth in our target market may slow and consequently adversely affect our business. The Argentine economy as a whole, and our target market in particular, have not stabilized enough for us to be certain that demand will continue to grow.Therefore, we cannot assure you that our business strategy will in fact be successful. 

**Our controlling shareholders have the ability todirect our business and their interests could conflict with yours**

As of March 31, 2012, our controlling shareholders directly orbeneficially owned 10,258,305 Class A shares and 218,155,827 Class B shares in the aggregate. Although currently there is no formal agreement among them, together our controlling shareholders control virtually all decisions with respect to ourcompany made by shareholders. They may, without the concurrence of the remaining shareholders, elect a majority of our directors, effect or prevent a merger, sale of assets or other business acquisition or disposition, cause us to issue additionalequity securities, effect a related party transaction and determine the timing and amounts of dividends, if any. Their interests may conflict with your interests as a holder of class B shares, ADSs or notes, and they may take actions that might bedesirable to the controlling shareholders but not to other shareholders or holders of our notes. 

**We will continue to consider acquisitionopportunities, which may not be successful**

We have expanded our business primarily through acquisitions. We will continue to considerattractive acquisition opportunities that we believe offer additional value and are consistent with our business strategy. We cannot assure you, however, that we will be able to identify suitable acquisition candidates or that we will be able toacquire promising target financial institutions on favorable terms. Although to date all acquisitions have been authorized by the Central Bank and other relevant authorities, we can not assure you that any future acquisition will also be authorizedby these authorities. Additionally, our ability to obtain the desired effects of such acquisitions will depend in part on our ability to successfully complete the integration of those businesses. The integration of acquired businesses entailssignificant risks, including: 

 
 • 
unforeseen difficulties in integrating operations and systems; 

 
 • 
problems assimilating or retaining the employees of acquired businesses; 

 
 • 
challenges retaining customers of acquired businesses; 

 
 • 
unexpected liabilities or contingencies relating to the acquired businesses; and 

 
 • 
the possibility that management may be distracted from day-to-day business concerns by integration activities and related problem solving.

 
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**We depend on key personnel for our current and future performance**

Our current and future performance depends to a significant degree on the continued contributions of our senior management team and other key personnel,in particular Jorge Horacio Brito and Delfín Jorge Ezequiel Carballo, who is on leave of absence since November 7, 2011. Our performance could be significantly harmed if we fail to staff and retain key senior management or if we losetheir services and we are not able to locate or employ qualified replacements on acceptable terms. Should this occur our business, financial condition and results of operations may be adversely affected. 

**Increased competition and consolidation in the banking industry may adversely affect our operations**

We expect trends of increased competition in the banking sector, as banks continue to recover from the 2008 global economic crisis. Additionally, if thetrend towards decreasing spreads is not offset by increases in lending volumes, then resulting losses could lead to consolidation in the industry. We expect trends of increased consolidation to continue. Consolidation can result in the creation oflarger and stronger banks, which may have greater resources than we do. 

We expect that competition with respect to small and medium-sizedbusinesses is likely to increase. As a result, even if the demand for financial products and services from these markets continues to grow, competition may adversely affect our results of operations by decreasing the net margins we are able togenerate. 

**Reduced spreads between interest rates received on loans and those paid on deposits without corresponding increases in lendingvolumes could adversely affect our profitability**

The spread for Argentina’s financial system between the interest rates on loans anddeposits could be affected as a result of increased competition in the banking sector and the government’s tightening of monetary policy in response to inflation concerns. 

Since 2009, the interest rate spreads throughout the financial system have increased. This increase was sustained by a steady demand for consumer loans in recent years.

However, we cannot guarantee that this trend will continue unless increases in lending or additional cost-cuttings take place. A reverse of this trend insuch terms could adversely affect our profitability. 

**Our estimates and established reserves for credit risk and potential credit lossesmay prove to be inaccurate and/or insufficient, which may materially and adversely affect our financial condition and results of operations**

A number of our products expose us to credit risk, including consumer loans, commercial loans and other receivables. Changes in the income levels of ourborrowers, increases in the inflation rate or an increase in interest rates could have a negative effect on the quality of our loan portfolio, causing us to increase provisions for loan losses and resulting in reduced profits or in losses.

We estimate and establish reserves for credit risk and potential credit losses. This process involves subjective and complex judgments,including projections of economic conditions and assumptions on the ability of our borrowers to repay their loans. We may not be able to timely detect these risks before they occur, or due to limited resources or available tools, our employees maynot be able to effectively implement our credit risk management system, which may increase our exposure to credit risk. 

Overall, if we areunable to effectively control the level of non-performing or poor credit quality loans in the future, or if our loan loss reserves are insufficient to cover future loan losses, our financial condition and results of operations may be materially andadversely affected. 

**Changes in market conditions, and any risks associated therewith, could materially and adversely affect our financialcondition and results of operations**

We are directly and indirectly affected by changes in market conditions. Market risk, or the risk thatvalues of assets and liabilities or revenues will be adversely affected by variation in market conditions, is inherent in the products and instruments associated with our operations, including loans, deposits, securities, bonds, long-term debt andshort-term borrowings. Changes in market conditions that may affect our financial condition and results of operations include fluctuations in interest and currency exchange rates, securities prices, changes in the implied volatility of interestrates and foreign exchange rates, among others. 

**Differences in the accounting standards between Argentina and certain countries withhighly developed capital markets, such as the United States, may make it difficult to compare our financial statements and reported earnings with companies in other countries and the United States**

Publicly available corporate information about us in Argentina is different from and may be more difficult to obtain than the information available forregistered public companies in certain countries with highly developed capital markets, such as the United States. Except as otherwise described herein, we prepare our financial statements in accordance with Central Bank Rules, which differ incertain significant respects from U.S. GAAP and, to a certain extent, from Argentine GAAP. As a result, our financial statements and reported earnings are not directly comparable to those of banks in the United States. 

 
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**The instability of the regulatory framework, in particular the regulatory framework affecting financialentities, could have a material adverse affect in financial entities activities, including us.**

During 2011 a series of new regulationshave been issued, mainly regulating the foreign exchange market, capital requirements and dividend distribution for financial institutions. 

In this regard, the Central Bank, increased the capital requirements for financial institutions carrying out activities in Argentina, establishing aminimum capital level to mitigate operational risk. The Central Bank has stated that this new requirement is based on the credit risk policies under Basel II. 

Moreover, the Central Bank imposed new restrictions to the distribution of dividends, including a limitation on the maximum distributable amount of dividends which cannot exceed the excess in minimumregulatory capital, exclusively considering, to such end, a 75% incremental adjustment to the capital requirement; i.e. the capital remaining after the distribution of dividends must be sufficient to meet the regulatory capital requirement increasedby 75%. 

Changes in the regulatory framework could limit the ability of financial institutions, including us, to make long-term decisions,such as asset allocation decisions, that could cause uncertainty with respect to the future financial condition and results of operations. 

**Risks relating to our Class B shares and the ADSs**

**Holders of our Class B shares and the ADSs may not receive any dividends**

In 2003, theCentral Bank prohibited financial institutions from distributing dividends. In 2004, the Central Bank amended the restriction to require the Central Bank’s prior authorization for the distribution of dividends. We have consistently obtainedauthorization from the Central Bank to distribute dividends corresponding to fiscal years 2003 through 2010. Under new Central Bank Rules on distribution of dividends, the maximum distributable amount of dividends cannot exceed the excess in minimumregulatory capital, exclusively considering, to such end, a 75% incremental adjustment to the capital requirement; i.e. the capital remaining after the distribution of dividends must be sufficient to meet the regulatory capital increased by 75%. In2011 we did not reach the regulatory benchmark for dividend distribution. 

No assurance can be given that in the future we will be able toreach the regulatory benchmark, or that if so, the Central Bank will continue to grant us the authorization to distribute dividends by our shareholders at the annual ordinary shareholders’ meeting or that such authorization shall be for thefull amount of distributable dividends 

Additional regulatory and contractual restrictions exist which could affect the distribution ofearnings and are included in note 15 of our consolidated financial statements as of December 31, 2011. 

**Holders of our Class B sharesand the ADSs located in the United States may not be able to exercise preemptive rights**

Under Argentine Corporate Law No. 19,550 (the“Argentine Corporate Law”), if we issue new shares as part of a capital increase, our shareholders may have the right to subscribe to a proportional number of shares to maintain their existing ownership percentage. Rights to subscribe forshares in these circumstances are known as preemptive rights. In addition, shareholders are entitled to the right to subscribe for the unsubscribed shares remaining at the end of a preemptive rights offering on a pro rata basis, known as accretionrights. Upon the occurrence of any future increase in our capital stock, United States holders of Class B shares or ADSs will not be able to exercise the preemptive and related accretion rights for such Class B shares or ADSs unless a registrationstatement under the Securities Act is effective with respect to such Class B shares or ADSs or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect tothose Class B shares or ADSs. We cannot assure you that we will file such a registration statement or that an exemption from registration will be available. Unless those Class B shares or ADSs are registered or an exemption from registrationapplies, a U.S. holder of our Class B shares or ADSs may receive only the net proceeds from those preemptive rights and accretion rights if those rights can be sold by the depositary; if they cannot be sold, they will be allowed to lapse.Furthermore, the equity interest of holders of Class B shares or ADSs located in the United States may be diluted proportionately upon future capital increases. 

**Non-Argentine companies that own our Class B shares directly and not as ADSs may not be able to exercise their rights as shareholders unless they are registered in Argentina**

Under Argentine law, foreign companies that own shares in an Argentine corporation are required to register with IGJ, in order to exercise certainshareholder rights, including voting rights. If you own Class B shares directly (rather than in the form of ADSs) and you are a non-Argentine company and you fail to register with IGJ, your ability to exercise your rights as a holder of our Class Bshares may be limited. 

**You may not be able to sell your ADSs at the time or the price you desire because an active or liquid market maynot develop**

Prior to March 24, 2006, there has not been a public market for the ADSs or, in the case of our Class B shares, a marketoutside of Argentina. We cannot assure you that any market for our Class B shares or for the ADSs will be available or liquid or the price at which the Class B shares or the ADSs may be sold in that market. 

 
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**The relative volatility and illiquidity of the Argentine securities markets may substantially limit yourability to sell Class B shares underlying the ADSs at the price and time you desire**

Investing in securities that trade in emergingmarkets, such as Argentina, often involves greater risk than investing in securities of issuers in the United States, and such investments are generally considered to be more speculative in nature. The Argentine securities market is substantiallysmaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States, and is not as highly regulated or supervised as some of these other markets. There is also significantly greater concentration inthe Argentine securities market than in major securities markets in the United States. The ten largest companies in terms of market capitalization represented approximately 80% of the aggregate market capitalization of the BCBA as ofDecember 31, 2011. Accordingly, although you are entitled to withdraw the Class B shares underlying the ADSs from the depositary at any time, your ability to sell such shares at a price and time at which you wish to do so may be substantiallylimited. Furthermore, new capital controls imposed by the Central Bank could have the effect of further impairing the liquidity of the BCBA by making it unattractive for non-Argentines to buy shares in the secondary market in Argentina. 

**Our shareholders may be subject to liability for certain votes of their securities**

Our shareholders are not liable for our obligations. Instead, shareholders are generally liable only for the payment of the shares they subscribe. However, shareholders who have a conflict of interestwith us and who do not abstain from voting may be held liable for damages to us, but only if the transaction would not have been approved without such shareholders’ votes. Furthermore, shareholders who willfully or negligently vote in favor ofa resolution that is subsequently declared void by a court as contrary to Argentine Corporate Law or our bylaws may be held jointly and severally liable for damages to us or to other third parties, including other shareholders. 

**Our Class B shares or the ADSs might be characterized as stock in a “passive foreign investment company” for U.S. federal income taxpurposes**

The application of the “passive foreign investment company” rules to equity interests in banks such as us is unclearunder current U.S. federal income tax law. It is therefore possible that our Class B shares or the ADSs could be characterized as stock in a “passive foreign investment company” for U.S. federal income tax purposes, which could haveadverse tax consequences to U.S. holders in some circumstances. In particular, U.S. holders of our Class B shares or the ADSs generally would be subject to special rules and adverse tax consequences with respect to certain distributions made by usand on any gain recognized on the sale or other disposition of our Class B shares or the ADSs. Such U.S. holders might be subject to a greater U.S. tax liability than might otherwise apply and incur tax on amounts in advance of when U.S. federalincome tax would otherwise be imposed. A U.S. holder of our Class B shares or the ADSs might be able to avoid these rules and consequences by making an election to mark such shares to market (although it is not clear if this election is availablefor the Class B shares). U.S. holders should carefully read “Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Companies” and consult their tax advisors regarding the “passive foreigninvestment company” rules. 

**Risks relating to our notes**

**The notes are effectively subordinated to our secured creditors and our depositors**

Unlessotherwise specified, the notes rank at least *pari passu*in right of payment with all of our existing and future unsecured and unsubordinated indebtedness, other than obligations preferred by statute or by operation of law, including, withoutlimitation, tax and labor-related claims and our obligations to depositors. 

In particular, under Financial Institutions Law, all of ourexisting and future depositors will have a general priority right over holders of notes issued under our medium-term note program. The Financial Institutions Law provides that in the event of judicial liquidation or insolvency, all depositors wouldhave priority over all of our other creditors (including holders of notes), except certain labor creditors and secured creditors. Moreover, depositors would have priority over all other creditors, with the exception of certain labor creditors, tofunds held by the Central Bank as reserves, any other funds at the time of any revocation of our banking license and proceeds from any mandatory transfer of our assets by the Central Bank. 

We have issued and may also issue additional subordinated notes. In that case, in addition to the priority of certain other creditors described in the preceding paragraphs, subordinated notes will alsorank at all times junior in right of payment to certain of our unsecured and unsubordinated indebtedness. 

**Exchange controls andrestrictions on transfers abroad may impair your ability to receive payments on the notes**

In 2001 and 2002, Argentina imposed exchangecontrols and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments abroad. Since then, these restrictions have been substantially eased, including those requiring the Central Bank’sprior authorization for the transfer of funds abroad in order to pay principal and interest on debt obligations. However, Argentina may re-impose exchange controls and transfer restrictions in the future, among other things, in response to capitalflight or a significant depreciation of the peso. 

In such event, your ability to receive payments on the notes may be impaired. 

 
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**We may redeem the notes prior to maturity**

The notes are redeemable at our option in the event of certain changes in Argentine taxes and, if so specified, the notes may also be redeemable at our option for any other reason. We may choose to redeemthose notes at times when prevailing interest rates may be relatively low. Accordingly, an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the notes. 

**As a financial institution, any bankruptcy proceeding against us would be subject to intervention by the Central Bank, which may limit remediesotherwise available and extend the duration of proceedings**

If we are unable to pay our debts as they come due, the Central Bank wouldtypically intervene by appointing a reviewer, request us to file a reorganization plan, transfer certain of our assets and liabilities and possibly revoke our banking license and file a liquidation petition before a local court. Upon any suchintervention, noteholders’ remedies may be restricted and the claims and interests of our depositors and other creditors may be prioritized over those of noteholders. As a result, the noteholders may realize substantially less on their claimsthan they would in a bankruptcy proceeding in Argentina, the United States or any other country. 

**Holders of notes may find it difficult toenforce civil liabilities against us or our directors, officers and controlling persons**

We are organized under the laws of Argentina andour principal place of business (*domicilio social*) is in the City of Buenos Aires, Argentina. Most of our directors, officers and controlling persons reside outside the United States. In addition, all or a substantial portion of our assetsand their assets are located outside of the United States. As a result, it may be difficult for holders of notes to effect service of process within the United States on such persons or to enforce judgments against them, including any action basedon civil liabilities under the U.S. federal securities laws. Based on the opinion of our Argentine counsel, there is doubt as to the enforceability against such persons in Argentina, whether in original actions or in actions to enforce judgments ofU.S. courts, of liabilities based solely on the U.S. federal securities laws. 

**The ratings of the notes may be lowered or withdrawndepending on various factors, including the rating agency’s assessment of our financial strength and Argentine sovereign risk**

Independent credit rating agencies may assign credit ratings to the notes. The ratings of the notes reflect the relevant rating agency’s assessmentof our ability to make timely payment of principal and interest on the notes. Moreover, the methods of assigning ratings used by Argentine rating agencies may differ in important aspects from those used by the rating agencies in the United States orother countries. The ratings of the notes are not a recommendation to buy, sell or hold the notes, and the ratings do not comment on market prices or suitability for a particular investor. We cannot assure you that the ratings of the notes willremain for any given period of time or that the ratings will not be lowered or withdrawn. A downgrade in ratings will not be an event of default with respect to the notes. The assigned ratings may be raised or lowered depending, among other things,on the rating agency’s assessment of our financial strength as well as its assessment of Argentine sovereign risk generally, and any change to these may affect the market price or liquidity of the notes. 

**Risks relating to our 2036 Notes**

**Interest on the 2036 Notes may be limited to the extent we do not have sufficient Distributable Amounts**

No interest on the 2036 Notes will be due and payable in the event that the payment of such interest, together with any other payments or distributions(other than payments in respect of redemptions or repurchases) on or in respect of our Parity Obligations (including the notes) previously made or scheduled to be made during the Distribution Period in which such Interest Payment Date falls, wouldexceed our Distributable Amounts for such Distribution Period. Interest payments on the notes are non-cumulative such that if an interest payment is not made in full as a result of the limitation described in the preceding sentence, such unpaidinterest will not accrue or be due and payable at any time and, accordingly, holders of 2036 Notes will not have any claim thereon, whether or not interest is paid with respect to any other interest period. 

The Distributable Amounts available for payment of interest on the 2036 Notes on an interest payment date is based principally on our unappropriatedretained earnings from the prior year. Subject to certain limited exceptions, Argentine law does not restrict our shareholders from approving the payment of dividends to themselves out of our unappropriated retained earnings, and the indenturerelating to the notes does not restrict our ability to pay dividends unless interest on the notes has not been paid in full as scheduled. In addition, Distributable Amounts available for payment of interest on the 2036 Notes depends on the amount ofpayments or other distributions on or in respect of our Parity Obligations previously made or schedule to be made during the relevant Distribution Period. Although we do not currently have any Parity Obligations outstanding, the indenture relatingto the notes will not restrict our ability to issue Parity Obligations in the future. Accordingly, we cannot assure you that we will have sufficient Distributable Amounts to make interest payments on the 2036 Notes. 

**We may be prevented by the Central Bank or Argentine banking regulations from making interest or other payments on or in respect of the 2036 Notes**

No interest on the 2036 Notes will be due and payable on an Interest Payment Date in the event that we would be prevented from payinginterest on the notes on such Interest Payment Date as a result of (X) a general prohibition by the Central Bank on paying interest or making other payments or distributions on or in respect of our Parity Obligations (including the notes) or(Y) as provided in Communications “A” 4589 and “A” 4591 of the Central Bank or any successor regulations thereto, (a) we are subject to a liquidation procedure or the mandatory transfer of our assets by the Central Bankin accordance with Sections 34 or 35 bis of the Financial Institutions Law or successors thereto; (b) we are receiving financial assistance from the Central Bank (except liquidity assistance under the pesification rules pursuant to DecreeNo. 739/2003); (c) we are not in compliance with or have failed to comply on a timely basis with our reporting obligations to the Central Bank; or (d) we are not in compliance with minimum capital requirements (both on an individualand consolidated basis) or with minimum cash reserves (on average). 

 
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As a result of the 2001 Argentine crisis, all banks were prohibited by the Central Bank from payingdividends in 2002 and 2003. As the economy recovered, the Central Bank eased the prohibition but still requires prior authorization for the distribution of dividends by banks. Although the prohibition is no longer in effect, we cannot assureyou that, if confronted with a similar crisis, the Central Bank will not prevent banks from making interest payments on Parity Obligations, including the 2036 Notes. 

**The 2036 Notes are unsecured and subordinated and, in the event of our bankruptcy, the 2036 Notes will rank junior to our unsubordinated obligations and certain of our subordinated obligations**

The 2036 Notes constitute our unsecured and subordinated obligations. In the event of our bankruptcy, the 2036 Notes will rank junior toall claims of our unsubordinated creditors and certain of our subordinated creditors. By reason of the subordination of the notes, in the case of our bankruptcy, although the notes would become immediately due and payable at their principal amounttogether with accrued interest thereon, our assets would be available to pay such amounts only after all such creditors have been paid in full. We expect to incur from time to time additional obligations that rank senior to the notes, and theindenture relating to the notes does not prohibit or limit the incurrence of such obligations. 

Under Argentine law, our obligations under the2036 Notes will also be subordinated to certain statutory preferences such as tax and labor-related claims and our obligations to depositors. In particular, under the Financial Institutions Law, all of our existing and future depositors will have ageneral priority right over holders of notes. The Financial Institutions Law provides that in the event of our bankruptcy or insolvency, all depositors would have priority over all of our other creditors (including holders of notes), except certainlabor creditors and secured creditors. Moreover, depositors would have priority over all other creditors, with the exception of certain labor creditors, to funds held by the Central Bank as reserves, any other funds at the time of any revocation ofour banking license and proceeds from any mandatory transfer of our assets by the Central Bank. 

**If we do not satisfy our obligations underthe 2036 Notes, your remedies will be limited**

Payment of principal on the 2036 Notes may be accelerated only in certain events involvingour bankruptcy. There is no right of acceleration in the case of a default in the performance of any of our covenants, including a default in the payment of principal, premium or interest. 

**The U.S. federal income tax treatment of the 2036 Notes is unclear**

Because of certainfeatures of the 2036 Notes, the U.S. federal income tax treatment applicable to the 2036 Notes is uncertain. While we do not intend to treat the 2036 Notes as subject to the “contingent payment debt instrument” rules under U.S. federalincome tax regulations, it is possible that the U.S. Internal Revenue Service (“IRS”) could assert such treatment. If this assertion were successful, U.S. Holders (as defined in “Taxation—Material U.S. Federal Income TaxConsiderations”) generally would be required to include interest income on a constant yield basis at a rate that could differ from, and could at certain times be in excess of, the stated interest on the 2036 Notes. In addition, any gain on thesale of 2036 Notes derived by a U.S. holder would be treated as ordinary income rather than capital gain. 

It is also possible that the IRScould assert that the 2036 Notes should be treated as equity for U.S. federal income tax purposes. If this assertion were successful, U.S. holders could also be subject to adverse tax rules (including an interest charge on and ordinary incometreatment of any gain derived with respect to the notes) if it were also determined that we are a “passive foreign investment company” for U.S. federal income tax purposes. While we do not believe that we are currently a passive foreigninvestment company, the test for determining “passive foreign investment company” status is a factual one based upon a periodic evaluation of our assets and income and is unclear when applied to banking businesses such as our own. Thus wecannot provide any assurance that we will not be determined to be a “passive foreign investment company” as of the issuance of the 2036 Notes or in any future period. 

**Risks relating to our 2012 Notes**

**A devaluation of the Argentine peso will result in aloss of principal and interest in U.S. dollar terms, which could affect the value of our 2012 Notes**

Payments of principal, interest,additional amounts and any other amounts in respect of the notes are determined based on the Argentine peso equivalent (based on an initial exchange rate of Ps. 3.0794 = US$1.00) of the aggregate principal amount of the 2012 Notes then outstandingand converted into U.S. dollars based on an exchange rate on the second business day prior the applicable payment date. As a result, a devaluation of the Argentine peso will result in a loss of principal and a reduction in the effective interestrate in U.S. dollar terms. 

**In circumstances where we can satisfy our payment obligations in respect of the 2012 Notes by transferringArgentine pesos to accounts located in Argentina, you may not be able to obtain U.S. dollars or transfer funds outside Argentina**

If we areunable either to purchase U.S. dollars or to transfer funds outside Argentina in order to make a payment in respect of the notes, because of any legal or regulatory restriction or due to any other reason beyond our control, then we will be able tosatisfy such payment obligation in Argentine pesos and with transfers to accounts located in Argentina. In such event, you may not be able to obtain U.S. dollars at the applicable exchange rate under the notes or at all, and you may not be able tofreely transfer funds outside Argentina. 

 
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**Certain definitions**

“Parity Obligations” means (i) all claims in respect of our obligations, or our guarantees of liabilities, that are eligible to be computed as part of our Tier 1 capital under Argentinebanking regulations (without taking into account any limitation placed on the amount of such capital); and (ii) all claims in respect of any of our other obligations (including guarantees) that rank, or are expressed to rank, *pari passu*with the 2036 Notes. 

“Distribution Period” means, with respect to an Interest Payment Date, the period from and including the dateof our annual ordinary shareholders’ meeting immediately preceding such Interest Payment Date to but excluding the date of our annual ordinary shareholders’ meeting immediately following such Interest Payment Date. 

“Distributable Amounts” for a Distribution Period means the aggregate amount, as set out in our audited financial statements for our fiscalyear immediately preceding the beginning of such Distribution Period, prepared in accordance with Central Bank Rules and approved by our shareholders, of our unappropriated retained earnings minus: (i) required legal and statutory reserves;(ii) asset valuation adjustments as determined and notified by the Superintendency, whether or not agreed to by us, and the asset valuation adjustments indicated by our external auditor, in each case to the extent not recorded in such financialstatements; and (iii) any amounts resulting from loan loss or other asset valuation allowances permitted by the Superintendency including adjustments arising from the failure to put into effect an agreed upon compliance plan. For the avoidanceof doubt, the calculation of Distributable Amounts in respect of a particular Distribution Period shall be made prior to the appropriation or allocation of any amounts to any voluntary or contingent reserves and any dividends or distributions on anyJunior Obligations or Parity Obligations during such Distribution Period. 

 
**Item 4.****Information on the Bank**
**A. Historyand development of the Bank**

Our legal and commercial name is Banco Macro S.A. We are a financial institution incorporated onNovember 21, 1966 as a *sociedad anónima*, a stock corporation, duly incorporated under the laws of Argentina for a 99-year period and registered on March 8, 1967 with the Public Registry of Commerce of the City of BahíaBlanca, in the Province of Buenos Aires, Argentina under No. 1154 of Book 2, Volume 75 of *Estatutos*. We subsequently changed our legal address to the City of Buenos Aires and registered it with the IGJ on October 8, 1996 underNo. 9777 of Book 119, Volume A of *Sociedades Anónimas*. 

Our principal executive offices are located at Sarmiento 447,Buenos Aires, Argentina, and our telephone number is (+ 54-11-5222-6500). We have appointed CT Corporation System as our agent for service of process in the United States, located at 111 Eight Avenue, New York, New York, 10011. 

**Our history – Banco Macro S.A.**

Macro Compañía Financiera S.A. was created in 1977 as a non-banking financial institution. In May 1988, it received the authorization tooperate as a commercial bank and it was incorporated as Banco Macro S.A. Subsequently, as a result of the merger process with other entities, it adopted other names (among them, Banco Macro Bansud S.A.) and since August 2006, the name of “BancoMacro S.A.” 

Our shares have been publicly listed on the BCBA since November 1994, and since March 24, 2006, on the New York StockExchange (“NYSE”). 

Since 1994 we have been focused on the regional areas outside the City of Buenos Aires. Following this strategy,in 1996, we started to acquire entities as well as assets and liabilities resulting from the privatization of provincial and other banks. 

In2001, 2004 and 2006, Banco Macro acquired the control of Banco Bansud S.A., Nuevo Banco Suquía S.A. (“Nuevo Banco Suquía”) and Nuevo Banco Bisel, respectively. Such entities merged with us on December 2003, October 2007and August 2009, respectively. 

During the fiscal year ended December 31, 2006, we acquired 79.84% of the capital stock of Banco delTucumán and increased our participation to 89.93% of its capital stock during fiscal year 2007. 

Additionally, on September 20,2010, Banco Macro acquired 100% of the capital stock of Banco Privado. On December 20, 2010, Banco Macro sold 1% of the shares of Banco Privado to each of our subsidiaries Macro Fiducia S.A. and Macro Securities S.A. Sociedad de Bolsa.

The Bank currently offers traditional bank products and services to companies, including those operating in regional economies, as well as toindividuals, thus reinforcing the Bank’s objective to be a multi-services bank. 

In addition, Banco Macro performs certain transactionsthrough its subsidiaries, including mainly Banco del Tucumán, Banco Privado, Macro Bank Limited, Macro Securities S.A. Sociedad de Bolsa, Macro Fiducia S.A. and Macro Fondos S.G.F.C.I. S.A. 

 
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**Nuevo Banco Bisel**

In 2001, the run on bank deposits as a result of the economic crisis caused a liquidity crisis for the former Banco Bisel S.A. (“Banco Bisel”). Its controlling shareholder at the time decidednot to make additional contributions. As a result, the Central Bank suspended and then restructured Banco Bisel’s operations, creating the Nuevo Banco Bisel with certain of Banco Bisel’s assets and liabilities. The Central Bank then passeda resolution providing for the sale of Nuevo Banco Bisel and requiring that the purchaser committe to capitalize the bank. 

In August 2006, weacquired 100% of the voting rights and 92.73% of the capital stock of Nuevo Banco Bisel for Ps.19.5 million pursuant to an auction conducted by Banco de la Nación Argentina. In addition, as purchaser of Nuevo Banco Bisel, we were required toenter into a “Put and Call Options Agreement” with Seguro de Depósitos S.A. (SEDESA) regarding Nuevo Banco Bisel’s preferred shares. 

The acquisition transaction was approved by the Central Bank in August 2006 and by the antitrust authorities in September 2006. 

On May 28, 2007, we exercised our option to acquire Nuevo Banco Bisel’s preferred shares at an exercise price of Ps.66,240,000 plus an annual nominal 4% interest to be capitalized annually until payment thereof. Such price will be paid on the 15th anniversary of the acquisition of Nuevo Banco Bisel (i.e., August 11, 2021). 

Nuevo Banco Bisel has a strong presence in the central region of Argentina, especially in the province of Santa Fe, and the acquisition has added 158branches to our branch network. 

On March 19, 2009, we entered into a “Preliminary Merger Agreement” for the merger of NuevoBanco Bisel into us, retroactively effective as of January 1, 2009. On May 27, 2009, our shareholders and those of Nuevo Banco Bisel approved the merger of the latter into Banco Macro, which was subsequently approved by the BCBA, the CNVand the Central Bank, and registered with the IGJ on August 8, 2009. 

Macro Fiducia S.A. and Macro Securities S.A. Sociedad de Bolsareceived 1,147,887 common registered Class B shares of Banco Macro in exchange for their equity interest in the merged entity. The CNV and the BCBA authorized the public offering of such shares on July 29, 2009 and, during October 2009, suchentities proceeded to sell those shares to unrelated parties. 

**Banco Privado**

On March 30, 2010, we signed a share purchase agreement with the shareholders of Banco Privado, to purchase 100% of the shares of such entity. On September 9, 2010 the Central Bank issuedResolution 198/2010 stating that there were not objections for Banco Macro to acquire 100% of Banco Privado ́s capital stock and to transfer 1% to each of our subsidiaries Macro Fiducia S.A. and Macro Securities S.A Sociedad de Bolsa.

On September 20, 2010, 100% of the capital stock of Banco Privado was transferred to the Banco Macro, which paid US$23.3 million, out ofwhich, US$10.4 million is related to a guaranteed amount, as provided in the purchase agreement. As of such date, Banco Privado ́s assets and liabilities amounted to Ps. 403.7 million and Ps. 368.0 million respectively. 

On September 22, 2010, we made an irrevocable capital contribution of Ps.50 million to Banco Privado as provided in Resolution No. 443 of theSuperintendency dated September 15, 2010. 

On December 20, 2010, the Bank sold 1% of Banco Privado ́s shares to each of oursubsidiaries Macro Fiducia S.A. and Macro Securities S.A. Sociedad de Bolsa for a total aggregate amount of Ps.0.7 million. Consequently, as of December 31, 2011, Banco Macro held 98% of the capital stock and votes of Banco Privado. 

Banco Privado ́s integration enables us to serve a greater number of customers with our current structure, to complement lines of business, toexpand our credit card business, in particular in the city of Buenos Aires, and to achieve greater economies of scale by additionally providing Banco Privado with a more efficient financing structure and permitting its clients access to a networkwith a greater geographical coverage. 

At the date of this annual report, this acquisition remains subject to the approval of the NationalCommission of Competition Defense (the Argentine antitrust authority). 

For more information on Banco Privado, see note 3.7 to our auditedconsolidated financial statements as of and for the three years ended December 31, 2011. 

**Investment in property**

In 2011 we acquired from the Government of the City of Buenos Aires the real property located at Av. Eduardo Madero No. 1180, in the City of BuenosAires, for an aggregate amount of Ps. 110 million. 

For more information, see Item 4D. “Property, plants and equipment”. 

 
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**B. Business Overview**

We are one of the leading banks in Argentina. With the most extensive private-sector branch network in the country, we provide standard banking products and services to a nationwide customer base. Wedistinguish ourselves from our competitors by our strong financial position and by our focus on low- and middle-income individuals and small and medium-sized businesses, generally located outside of the City of Buenos Aires. We believe this strategyoffers significant opportunity for continued growth in our banking business. According to the Central Bank, as of December 31, 2011, we were ranked third in terms of private sector loans and equity and sixth in terms of deposits among banks.

As of December 31, 2011, on a consolidated basis, we had: 

 
 • 
Ps. 41,442.1 million (US$9,630.5 million) in total assets; 

 
 • 
Ps. 24,238.0 million (US$5,632.6 million) in loans to the non-financial private sector; 

 
 • 
Ps. 29,167.1 million (US$6,778 million) in total deposits; 

 
 • 
approximately 2.8 million retail customers and 0.1 million corporate customers that provide us with approximately 2.9 million clients;and 

 
 • 
approximately 1.1 million employee payroll accounts for private sector customers and provincial governments. 

Our consolidated net income for the year ended December 31, 2011 was Ps. 1,176.1 million (US$273.3 million), representing a return on averageequity of 26.7% and a return on average assets of 3.4%. 

In general, given the relatively low level of banking intermediation in Argentinacurrently, there are limited products and services being offered. We are focusing on the overall growth of our loan portfolio by expanding our customer base and encouraging them to make use of our lending products. We have a holistic approach to ourbanking business; we do not manage the Bank by segments or divisions or by customer categories, by products and services, by regions, or by any other segmentation for the purpose of allocating resources and assessing profitability. We offer savingsand checking accounts, credit and debit cards, consumer finance loans and other credit-related products and transactional services available to our individual customers and small and medium-sized businesses through our branch network. We also offer*Plan Sueldo* payroll services, lending, corporate credit cards, mortgage finance, transaction processing and foreign exchange. In addition, our *Plan Sueldo* payroll processing services for private companies and the public sector give usa large and stable customer deposit base. 

**Our competitive strengths**

We believe we are well positioned to benefit from the opportunities created by the improving economic and business environment in Argentina. Our competitive strengths include the following: 

 
 • 
Strong financial position. As of December 31, 2011 we had excess capital of Ps. 2,032.6 million (18.3% capitalization ratio). Our excesscapital is aimed at supporting growth, and consequently, a higher leverage of our balance sheet. 

 
 • 
Consistent profitability. As of December 31, 2011, we had obtained profitability for the last 40 consecutive quarters, being the only bank inArgentina to do so, with a return on average equity of 24.6%, 27.1% and 26.7% for 2009, 2010 and 2011, compared to 19.6%, 24.3% and 25.3% respectively, for the Argentine banking system as a whole. 

 
 • 
Our shareholders’ equity as of December 31, 2009, 2010 and 2011 as calculated under Central Bank Rules, was Ps. Ps.3,358.8 million,Ps.4,152.8 million and Ps. 4,719.6 million, respectively, and our shareholders’ equity under U.S. GAAP at December 31, 2009, 2010 and 2011 was Ps. 3,292.9 million, Ps.3,783.4 million and Ps. 4,363.1 million, respectively.

 
 • 
Strong presence in fast-growing target customer market. We have achieved a leading position with low- and middle-income individuals and among small andmedium-sized businesses, generally located outside of the City of Buenos Aires, which have been relatively underserved by the banking system. Based on our experience, this target market offers significant growth opportunities and a stable base ofdepositors. 

 
 • 
High exposure to export-led growth. Given the geographical location of the customers we target, we have acquired banks with a large number of branchesoutside of the City of Buenos Aires with the aim of completing our national coverage. The Bank ́s focus is particulary in some export oriented provinces. Most of these provinces engage in economic activities primarily concentrated in areas suchas agriculture, mining, cargo transportation, edible oils, ranching and tourism, which have been benefiting from the export-driven growth in the Argentine economy. 

 
 • 
Largest private-sector branch network in Argentina. With 414 branches, we have the most extensive branch network among private-sector banks inArgentina. We consider our branch network to be our key distribution channel for marketing our products and services to our entire customer base with a personalized approach. In line with our strategy, approximately 93% of these branches are locatedoutside of the City of Buenos Aires, whereas 81% of the total branches for the Argentine financial system as a whole are located outside this area, which we believe better positions us to focus on our target market. 

 
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Loyal customer base. We have a loyal customer base, as evidenced in part by the quick recovery of our deposit base after the 2001-2002 local crisis. Webelieve that our customers are loyal to us due to our presence in traditionally underserved markets and to our *Plan Sueldo* payroll services. We have benefited from Argentine regulations that require all employees to maintain *PlanSueldo* accounts for the direct deposit of their wages. In addition, we emphasize face-to-face relationships with our customers and offer them personalized advice. 

 
 • 
Exclusive financial agent for four Argentine provinces. We perform financial agency services for the governments of the provinces of Salta, Jujuy,Misiones and Tucumán in northern Argentina. As a result, each provincial government’s bank accounts are held in our bank and we provide all their employees with *Plan Sueldo*accounts, giving us access to substantial low costfunding and a large number of loyal customers. 

 
 • 
Strong and experienced management team and committed shareholders. We are led by a committed group of shareholders who have transformed our bank from asmall wholesale bank to one of the strongest and largest banks in Argentina. Jorge Horacio Brito and Delfín Jorge Ezequiel Carballo, who is on leave of absence since November 7, 2011, have active senior executive roles in our managementand each possesses more than 20 years of experience in the banking industry. 

**Our strategy**

Our strengths position us to better participate in the coming years development of the financial system, which we believe will be stronger in our targetmarket of low- and middle-income individuals, small and medium-sized businesses and in the provinces outside the City of Buenos Aires, where we have a leading presence. 

Our goal is to promote the overall growth of the Bank by increasing our customer base, expanding our loan portfolio and generating more fee income from transactional services. We achieve this goal bymanaging the Bank on a holistic basis, focusing our growth strategy on the marketing and promotion of our standard banking products and services. We have pursued our growth strategy by acquiring banks throughout Argentina, which has enabled us tosignificantly expand our branch network and customer base. We make acquisition decisions in the context of our long-term strategy of focusing on low- and middle-income individuals, small and medium-sized businesses and to complete our nationalcoverage of Argentina, especially in provinces outside of the City of Buenos Aires. We have taken advantage of the opportunities presented by the Argentine financial system to move into new locations by acquiring banks or absorbing branches frombanks liquidated by the Central Bank. Our growth has been fueled by these acquisitions as well as organic growth, without the need to open or move branches. 

We intend to continue enhancing our position as a leading Argentine bank. The key elements of our strategy include: 

 
 • 
Focus on underserved markets with strong growth potential. We intend to continue focusing on both low- and middle-income individuals and small andmedium-sized businesses, most of which have traditionally been underserved by the Argentine banking system and are generally located outside of the City of Buenos Aires, where competition is relatively weaker and where we have achieved a leadingpresence. We believe that these markets offer attractive opportunities given the low penetration of banking services and limited competition. We believe the provinces outside of the City of Buenos Aires that we serve are likely to grow faster thanthe Argentine economy as a whole because their export-driven economies have benefited from the devaluation of the peso and higher prices for agricultural products and commodities. 

 
 • 
Further expand our customer base. We intend to continue growing our customer base, which is essential to increasing interest and fee-based revenues. Toattract new customers we intend to: 

 
 • 
Utilize our extensive branch network. We intend to utilize our extensive branch network, which we consider our key distribution channel, to market ourproducts and services to our entire customer base. We utilize a personalized approach to attract new customers by providing convenient and personalized banking services close to their homes and facilities. 

 
 • 
Offer medium- and long-term credit. We intend to capitalize on the increased demand for long-term credit that we believe will accompany the expectedeconomic growth in Argentina. We intend to use our strong liquidity and our capital base to offer a more readily available range of medium- and long-term credit products than our competitors. 

 
 • 
Focus on corporate banking customers, strengthening financing to the small business segment. 

 
 • 
Expand our share in the agricultural and livestock industry and those export-related activities. 

 
 • 
Expand *Plan Sueldo* payroll services. We will continue to actively market our *Plan Sueldo* payroll services, emphasizing the benefits ofour extensive network for companies with nationwide or regional needs. 

 
 • 
Offer personalized service. We offer our clients a menu of products and personalized, face-to-face advice to help them select the banking services thatbest respond to their needs. 

 
 • 
Expand the customer base in the City of Buenos Aires by opening new branches in this region. 

 
 • 
Strengthen our credit card market share by increasing promotion actions and benefits for clients. 

 
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Focus on efficiency and cost control. We intend to increase our efficiency creating new economies of scale, and reducing costs in connection with theintegration of merged entities (Banco Macro, Nuevo Banco Suquía and Nuevo Banco Bisel). We have been working on upgrading our information systems and other technology in order to further reduce our operating costs and to support largertransaction volumes nationally. We have completed the integration of Nuevo Banco Suquía during the second half of 2007 and the integration of Nuevo Banco Bisel during the second half of 2009. 

 
 • 
Extend existing corporate relationships to their distributors and suppliers. We have established relationships with major corporations in Argentina andwill focus our marketing efforts on providing services to their distributors, suppliers, customers and employees, including providing working capital financing and *Plan Sueldo* payroll services. 

 
 • 
Increase cross-selling. We plan to increase cross-selling of products and services to our existing clients. Since almost all of our clients have achecking and savings account, we have a significant opportunity to expand our relationships with them through other products such as credit cards, loans and insurance. For example, strong cross-selling opportunities lie with our retail clients, ofwhom only 27% currently have personal loans from us and only 35% currently have a credit card from us. 

**Our products andservices**

We provide our customers with a combination of standard products and services that is designed to suit individual needs. We havetwo broad categories of customers: retail customers which include individuals and entrepreneurs; and corporate customers, which include small, medium and large companies and major corporations. In addition, we provide services to four provincialgovernments. We offer a relatively narrow range of standard products, which are generally available to both our retail and corporate customers. We have a holistic approach to our banking business with a single commercial division responsible for allof our customers and our branch network; we do not manage the Bank by segments or divisions or by customer categories, by products and services, by regions, or by any other segmentation for the purpose of allocating resources or assessingprofitability. Our strategy is to grow our business, as demand for credit in Argentina increases, by focusing on cross-selling opportunities among our broad customer base. The following discussion of our business follows the broad customercategories of retail and corporate as a way to understand who our customers are and the products and services that we provide. 

**Retailcustomers**

***Overview***

Retail customers are individuals and entrepreneurs. We provide services to them throughout Argentina, in particular outside of the City of Buenos Aires,which has higher concentrations of low- and middle-income individuals who are traditionally underserved by large private banks. We serve our retail customers through our extensive, nationwide branch network. Approximately 93% of our branches arelocated outside of the City of Buenos Aires. 

We offer our retail customers traditional banking products and services such as savings andchecking accounts, time deposits, credit and debit cards, consumer finance loans (including personal loans), mortgage loans, automobile loans, overdrafts, credit-related services, home and car insurance coverage, tax collection, utility payments,automatic teller machines (“ATMs”) and money transfers. 

Our retail customers provide us with a key source of funding as well as asignificant interest and fee income. We believe that our large retail customer client base provides us with an excellent opportunity to expand the volume of our lending business. For example, of our retail customers, only 27% currently have apersonal loan from us and only 35% currently have a credit card, and we believe there is strong potential to increase these percentages. 

Ourefforts were aimed at strengthening relationships with our customers by offering them the products that are best suited to their needs and circumstances, based on our individualized, professional advice, which we believe is an important feature thatdistinguishes us in serving our target markets. 

We defined as our main goals for the retail bank: to consolidate the leading and competitiveposition of our personal loans portfolio; to increase our market share in the credit cards business, using this product as a tool to strengthen relations with the various customer segments; to improve credit quality ratios, to promote an atomizedtime deposit portfolio and to generate a strong and stable fee base. 

In 2010 market conditions improved and the demand for financing, mainlyconsumer loans, increased. During 2011, the demand for household financing continued to increase, mainly in terms of consumer loans (personal and credit card loans), allowing us to attain some of our strategic goals in this area. 

***Savings and checking accounts and time deposits***

We generate fees from providing savings and checking account maintenance, account statements, check processing and other direct banking transactions, direct debits, fund transfers, payment orders and bankdebit cards. In addition, our time deposits provide us with a strong and stable funding base. 

 
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During 2010 and 2011 we continued fostering the atomized development of funding sources and established asolid commission base. Our commercial and customer bonding actions enabled us to achieve growth in the deposit portfolio, above market levels, mainly due to an increase in time deposits of retail customers (less than 1 million) which intensifiedfunding atomization. 

We have incorporated statistical tools and models which will make more effective commercial actions, for the purpose ofimproving the utilization of our customers’ information. 

The following table reflects the number of retail accounts as ofDecember 31, 2009, 2010 and 2011: 

 
   
**Approximate number**

**of retail accounts**

**(as of December 31, of each year)**
 **Product**  **2009**   **2010**   **2011** 
**Savings**
      
Total savings accounts
   1,903,566     1,759,448     1,905,214  
*Plan Sueldo* (private sector)
   559,051     534,267     561,567  
*Plan Sueldo* (public sector)
   572,675     510,589     582,617  
Retirees
   400,114     382,872     424,905  
Open market
   371,726     331,720     336,125  
**Checking**
      
Checking accounts
   174,046     258,678     340,294  
**Electronic account access**
      
Debit cards
   1,420,971     1,550,806     1,694,305  
***Lending products and services***

We offer personal loans, document discounts, (housing) mortgages, overdrafts, pledged loans and credit card loans to our retail customers. 

We intend to continue to increase our retail lending by focusing our marketing efforts on underserved target markets such as the low- and middle-income individuals and to cross-sell our retail lendingproducts to our existing customers, particularly those who have savings and checking accounts with us because we provide payroll and pension services to their employers. 

We have developed a new product called “Rapicompra,” a credit line through which our clients can finance their purchases under convenient terms and conditions benefiting from agreements weentered with affiliated stores. This unique credit line provides us with an additional distribution channel by increasing our presence in strategic stores and enable us to increase personal loans granted. This system provides to our clients betterfinancing condition than credit cards, such as fix interest rates, and longer installment plans in a significant range of affiliated stores. 

In 2011, our retail loan portfolio grew by 59%; our market share for personal loans also increased, with the bank reaching the first position in thefinancial system based on the volume of its personal loans and credit card portfolios. 

During 2011 our growth in personal loans reached 56%,outperforming the financial system which grew by 46%. This growth was accompanied by a substantial increase in profitability. This performance allowed us to maintain our leading position and expand our market share to 16.0% in 2011 from 15.0% in2010. 

We are also one of the major credit card issuers, with approximately 1.5 million credit cards in circulation as ofDecember 31, 2011. One of our initiatives to expand lending is to encourage low- and middle-income customers to use credit cards for larger purchases. 

In 2011, our credit card products faced a series of challenges in the attempt of improving market share, as basis for an increase in the volume of business. As a consequence, our business strategy wasmodified, expanding promotion actions and benefits for clients, combining a nation-wide marketing campaign with increasing selling efforts at a regional level. Through this marketing strategies in 2011 we achieved an increase of ten times inconsumption in our credit card portfolio compared to 2010. 

During 2011, we offered products aimed at the higher-income segment complementedwith mass sales campaigns targeting new clients. As a result, the credit card portfolio grew by 98% in 2011 as compared to 2010, attaining a market share of 7.1%. 

As of December 31, 2009, 2010 and 2011, our retail loan portfolio (which we define here as loans to individuals and loans to very small companies in an amount up to Ps.20,000) was as follows:

 
   **Retail loan portfolio**    **(as of December 31, of each year)**    **(in millions of pesos and as percentage of retail loan portfolio)**    **2009**  **2010**  **2011** 
Overdrafts
   188.8     3.0%   214.8     2.4%   243.6     1.7% 
Documents (1)
   393.1     6.3%   545.1     6.0%   793.1     5.5% 
Pledged loans (2)
   151.3     2.4%   141.5     1.6%   243.7     1.7% 
Mortgage loans
   395.7     6.3%   433.0     4.8%   532.3     3.7% 
Personal loans
   4,052.6     64.7%   5,865.6     64.9%   9,129.0     63.8% 
Credit card loans
   897.0     14.3%   1,489.5     16.5%   2,956.5     20.6% 
Other
   184.1     2.9%   349.9     3.9%   436.1     3.0%   
 

 
   
 

 
  
 

 
   
 

 
  
 

 
   
 

 
 
**Total**
  ** ****6,262.6****  **  ** ****100.0****% ** ** ****9,039.3****  **  ** ****100.0****% ** ** ****14,334.3****  **  ** ****100.0****% **
 
*(1)**Factoring, check cashing advances and loans with promissory notes.**(2)**Primarily secured automobile loans.*
 
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The table below sets forth additional information related to our retail loan portfolio (which we define hereas loans to individuals and loans to very small companies in an amount up to Ps.20,000) as of December 31, 2011: 

 
   
**Retail loan portfolio (in pesos except where noted)**

**(as of December 31, 2011)**
    **Personal**