BANCO PATAGONIA S.A.
MINUTES OF BOARD MEETING No. 2548 (02.18.09):
A meeting of the Board of Directors of BANCO PATAGONIA S.A. was held on February 18, 2009 at the offices located at Tte Gral Juan D. Perón 500, City of Buenos Aires. The undersigned Directors were present at the meeting. Also present was Ms. María Soledad Sampayo Cau, CPA, on behalf of the Statutory Audit Committee. At 04.30 p.m. a quorum was present, and the President stated that the meeting, having been duly convened, was ready to proceed with business and discuss the following Agenda: ------
1. Consideration of Financial Statements corresponding to the Company's fiscal year beginning on January 1 and ending on December 31, 2008, the Independent Auditors' Report and the Statutory Audit Committee's Report.
2. Consideration of the Annual Report corresponding to fiscal year ended as of December 31, 2008.
3. Consideration of Management Report under CNV Regulations, Chapter XXIII, 11.6.
4. Consideration of Financial Statements as of 12.31.08 for presentation in Brazil.
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ITEM NO. 1: Consideration of Financial Statements corresponding to the Company's fiscal year beginning on January 1 and ENDING ON December 31, 2008, the Independent Auditors' Report and the Statutory Audit Committee's Report. To present this item on the Agenda, the President, Mr. Jorge Guillermo Stuart Milne, informed that Banco Patagonia S.A. balance sheet corresponding to the Company's 85th fiscal year, ended on December 31, 2008, and the related statements of income, of changes in shareholders' equity and cash flows, and their equivalents, and the Consolidated Financial Statements for the fiscal year ended as of that date, with their corresponding notes and exhibits, had been distributed in advance to the Directors and Statutory Auditors, under regulations in force. The President updated the attendees that under BCRA (Central Bank of Argentina) standards, the balance sheet, statement of income, statement of changes in shareholders' equity and cash flows, and their equivalents, as of December 31, 2008, and the Exhibits that specify so, are presented with comparative balances as at end of prior year.
The President next stated that the documents to be discussed in the meeting result from the entries made on the Company's accounting books, kept in accordance with current legal regulations, and from supporting documents. Considering the above and the fact that the officers present at the meeting are familiar with the above-mentioned documents, the President proposed that transcription of said documents in the Minutes was omitted and that said documents were approved.
Extensive discussion ensued on several aspects related to the information included in the above-mentioned Financial Statements, after which the motion was unanimously approved.
The President next proposed that, within legal terms, the Call to Shareholders' Meeting could be discussed at another Board Meeting. After brief discussion, and upon motion duly made, seconded and unanimously adopted, the President's proposal was approved.------
ITEM NO. 2: CONSIDERATION OF THE LETTER TO THE SHAREHOLDERS CORRESPONDING TO THE FINANCIAL YEAR ENDED ON DECEMBER 31, 2008: The President then explained that the Financial Statements corresponding to the 85th fiscal year ended on 12.31.2008 having been approved, the Letter to the Shareholders for the year ended as of that date should be considered.
Therefore, the President presented the Letter to the Shareholders to the Board for consideration and stated that the Directors and Statutory Auditors were familiar with the contents thereof since the document had been distributed in advance. Next, the President proposed that the Letter to the Shareholders be considered as read and approved, and fully included in the Minutes of the meeting.
After extensive discussion, the Letter to the Shareholders was unanimously approved as per the following text:
n BANCO PATAGONIA S.A.
n 2008 ANNUAL REPORT
To Shareholders,
In compliance with legal and statutory provisions in force, the Board of Directors of Banco Patagonia S.A. submits the documentation corresponding to the 85th corporate financial year ending on December 31, 2008 to the Shareholders for their consideration, which consists of: Annual Report, Balance Sheet, Profit and Loss Statement, Statement of Changes in Shareholders’ Equity, Statement of Cash Flows, and their equivalents, as well as the complementing notes, annexes and Chart I, Profit Distribution Project, Independent Auditors’ Report, and Report of the Supervisory Committee.
n CONTENTS
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1 n ECONOMIC AND FINANCIAL SYSTEM CONTEXT
n Economic Perspective.
n Argentine Financial System.
2 n HISTORY
3 n BANK MANAGEMENT
n Planned trading policy and relevant aspects of the business, financial, and investing planning.
n Aspects related to the organization, the decision-making, and the internal control system of the Bank.
n Dividend policy.
n Compensation of the Board of Directors and compensation policy for management offices.
n RETAIL COMMERCIAL AREA
n DISTRIBUTION
n Branch network
n Electronic Channels
n Alternative Sale Channels
n Payroll Services
n INDIVIDUALS
n Transactional Products
v Credit and Debit Cards
v Accounts and Packages
n Lending Products
v Personal Loans
v Pledged Loans
n Products to Attract Funds
v Deposits
v Insurance
n PYME – Small and Medium Sized Company
n CORPORATE COMMERCIAL AREA
n METROPOLITAN AREA
n PROVINCES
n AGRO-BUSINESSES
n CORPORATE AND TRANSACTIONAL PRODUCTS
n ADMINISTRATION AND FINANCE AREA
n FINANCE
n Financial Transaction Desk
n Financial Entities, Financial Companies that are neither Banks nor Institutions
n Institutional Relations and Correspondent Banks
n Safekeeping Department
n PUBLIC SECTOR
n CAPITAL MARKET
n HUMAN RESOURCES
4 n ANALYSIS OF SHAREHOLDERS’ EQUITY AND OF PROFIT AND LOSS STATEMENT
5 n MAIN CHANGES IN RULES
6 n CORPORATE SOCIAL RESPONSIBILITY
7 n SUBSIDIARIES
n PATAGONIA INVERSORA S.A. MUTUAL FUND MANAGER COMPANY
n PATAGONIA VALORES S.A. STOCK BROKING COMPANY
n BANCO PATAGONIA (URUGUAY) S.A.I.F.E.
8 n RELEVANT FACTS
n Program on the acquisition of treasury stock.
9 n PROFIT DISTRIBUTION PROJECT
01n ECONOMIC AND FINANCIAL SYSTEM CONTEXT
n Economic Perspective
The Argentine economy had a complex year, both due to the worsening of the “sub-prime” crisis in USA, and its
correlate in the economic slowdown which affected the leading developed countries. Despite the logical deceleration of the economic expansion speed, which was even more obvious during the last months of the year, Argentina managed to keep the growing path started in 2003. Pursuant to the last known official data, for 2008 third quarter, the GDP increased by 6.5% on an inter-annual basis, by showing a 7.5% accumulated growth during the first nine months of the year. Regarding the industrial manufacturing, the last data provided by the National Institute of Statistics and Censuses (INDEC) show a 4.6% growth on an inter-annual basis during November, pursuant to the data of the Monthly Estimator of Economic Activity (EMAE).
Regarding its monetary policy applied, the Central Bank of the Republic of Argentina (BCRA) performed its established program again. The means of payment (M2) average balance experienced in the fourth quarter an inter-annual 18.9% growth rate, lower than that of nominal product. However, it is important to highlight that the private M2 ended the year under the range established in the program, by showing an annual increase of hardly 8.4%. The uncertainty caused by the above-mentioned factors was the main reason of the less growth of this monetary aggregate. Regarding the evolution of prices, the official data of the INDEC shows a 7.24% annual inflation.
When it comes to tax, during 2008 the primary outcome in the National Non-Financial Public Sector achieved exactly the budgetary aim since ARS 32,528.7 millions have been recorded, which is equal to the 3.15% of the GDP. The economic slowdown affected mainly the final income of December, when a primary deficit of ARS 3,563.3 million was recorded, against the deficit of ARS 1,200 millions of the last month of year 2007. Tax resources with higher increase during the year were withholdings (+76%), Social Security (+44.8%), and VAT (+28%). However, withholdings won more participation within the total collection, to the detriment of Income Tax and VAT. Moreover, there is an increase in the tax pressure, which, measured by the relation between collection and GDP, would reach a 26%.
2008 was a year that began with growing doubts about the real scope to the "sub-prime" crisis in USA. Unfortunately, the worst predictions came true and the crisis, which firstly only affected the US financial sector, finally affected the real economy and plunged the leading developed countries into a recession of uncertain duration. This crisis derived in the disappearance of some American investment banks, as they were then known, which were acquired by different commercial banks. Moreover, the American government instructed a large increase in the public spending, mainly for the rescue of big banks and insurance companies. On the other hand, the Federal Reserve implemented a drastic flexibility of the monetary policy, by diminishing the level of the “fed funds” rate to a range of 0%- 0.25%, and opening new liquidity assistance windows, in order to try to revive the credit.
Global stock markets showed sharp drops, and this was not alien to the Merval index, which lost 49.82% during the whole year. Government securities were also punished, apart from the bonus of new rules implemented in the market about operating methods for purchase and sale of foreign currency.
The scene for 2009 is very attached to the ups and downs of the international context and the answers at local level. Predictions of a long recession in developed countries render the economic measures taken by the country decisive, such as the boost for credit, the monetization of the financial system, and thus keeping consumption as the main factor of economy development.
Argentine Financial System
Upon the unfavorably international context and its impact on the local market, the answer of the Argentine financial system was to give priority to liquidity, a process that was accompanied by a growing portfolio dollarization. As an immediate consequence, there was an important increase in interest rates and adjustment of exchange rate. The rate of fixed-term deposits higher than a million pesos for terms ranging between 30 and 59 days (BADLAR) for private banks fluctuated between a minimum value of 7.75% in February and a maximum of 26.125% by the middle of November. The December monthly average was 19.0238% on a bearish basis, due to a strong injection of liquidity faced by the BCRA. During the year, the BCRA needed to authorize a new series of mechanisms to provide the financial system with liquidity, and therefore counteract the bullish pressure on interest rates. Such mechanisms included the repurchase of LEBAC and NOBAC, the decrease of the reserve requirement ratio in foreign currency, the unification of the minimum cash position for October and November, the increase in the proportion of cash in banks, admissible for the calculation of the integration of the reserve requirements, and the increase in the maximum limit available for active repurchase agreements at fixed rate, going from ARS 3,000 millions to ARS 10,000 millions.
On the other hand, the reference exchange rate diminished by 9.61%, ending the year in ARS 3.4537 per dollar. The involvement of the BCRA in a regime of "administered float" managed to hold back the pressure to a higher devaluation of the Peso, even though the external asset building exceeded USD 20,000 million during 2008. This amount was similar to the sum registered during 2001, but the financing of such dollarization was not to the detriment of the reserves of the BCRA, since that year the governing body managed to consolidate its volume in USD 47,000 millions, registering an increase in the year of around 2%.
The implementation of only one state regime of social security administration enacted by Law No. 26425 was the factor with higher impact on the evolution of peso-denominated deposits, going from nearly ARS 224,000 million by the end of September to a total of ARS 205,430 million at the end of the year. Despite this drop near the end of the year, the total of peso-denominated deposits showed a 7.50% annual increase. In relation to lending lines, private sector loans recorded a strong 21% increase in this year, ending the year in ARS $109,593 million and specially focusing in consumption lines.
02 HISTORY
The Controlling Shareholders launched into the banking business upon the creation of Banco Mildesa in 1988. In turn, our bank is a continuing party of a series of old banks in Argentina such as Banco de Río Negro, a leader in the Patagonia region, Banco Mercantil Argentino, a pioneer in Payroll Services, Banco Caja de Ahorro, a pioneer in incorporating the insurance business into the banking sector, these two last banks were merged with Banco Sudameris Argentina, and finally Lloyds TSB Bank plc Argentina branch, with more than 140 years in the country. The legacies of these and other institutions that are currently a part of our bank represent an asset of great value to our bank and a distinguishing competitive feature.
Summary
1976 The Controlling Shareholders begin doing business in the Argentine Financial system through different
specialized companies in the stock, OTC and exchange markets.
1979 The Controlling Shareholders create Cambio Mildesa.
1987 The Controlling Shareholders acquire Finagen Compañía Financiera, owned by Volkswagen Argentina.
1988 Finagen Compañía Financiera merges with Cambio Mildesa to become Banco Mildesa.
1996 Banco Mildesa acquires 85% of Banco de Río Negro corporate capital.
1997 Banco Mildesa and Banco de Río Negro merge to keep the name of the latter.
1998 Banco de Río Negro acquires nine branches of former Banco Almafuerte and a branch of the former Banco
Mayo.
2000 Banco de Río Negro changes its trade name by Banco Patagonia.
2001 Banco Patagonia (Uruguay) S.A.I.F.E., a Bank subsidiary, begins doing business in Uruguay.
2003 Banco Patagonia merges with Banco Sudameris Argentina and this, as a surviving institution, changes its trade name to Banco Patagonia Sudameris. In 2000, Banco Sudameris Argentina had acquired Banco Caja de
Ahorro. In 1999, Banco Caja de Ahorro had merged with Banco Mercantil Argentino.
2004 Banco Patagonia Sudameris takes on the assets, liabilities and staff of Lloyds TSB Bank plc Argentina Branch, which took in Banco de Tres Arroyos in 1998. Banco Patagonia Sudameris adopts name Banco Patagonia.