Mercantil Servicios Financieros, C.A. Financial Report Second Quarter 2013

Transcription

1 Mercantil Servicios Financieros, C.A. Financial Report Second Quarter Mercantil Servicios Financieros (Mercantil). Second Quarter Caracas Stock Exchange (MVZ.A & MVZ.B); Level 1 ADR: MSFZY & MSFJY Caracas, July 30,. Mercantil Servicios Financieros (Mercantil) reports its earnings for the quarter ended 30,. Summary Net Income: Mercantil posted Bs 1,432 million (US$ 228 million) 1 in net income in 2Q, 64.0% up on the Bs 873 million (US$ 204 million) 1 registered in 2Q Semi-annual net income totaled Bs 3,471 million (US$ 583 million) 1, reflecting Bs 1,803 million (108.0%) year-on-year growth from Bs 1,669 million (US$ 389 million) 1. Net earnings per share in 2Q were Bs 14.44, US$ (Bs 8.80, US$ in 2Q 2012). Net earnings per share in 1H were Bs 35.01, US$ (Bs in 1H 2012, US$ 3,92 1 ). ROE and ROA in 2Q reached 32.1% and 3.4%, respectively (29.8% and 3.2% in 2Q 2012). In 1H, these indicators were 38.9% and 4.2%, respectively (28.4% and 3.1% in 2H 2012). Class "A" and "B" share prices closed at Bs 360 each, compared with Bs 210 and Bs 202 as of March and Bs and Bs 80 as of 2012, respectively. The main variations in net quarterly income are: Net Interest Income Bs 3,065 million (US$ 488 million) 1 in 2Q, representing Bs 1,117 million (57.3%) year-on-year growth from Bs 1,948 million (US$ 454 million) 1, mainly due to the increase in financial assets and liabilities. The financial intermediation ratio (loans to deposits) was 68.6% at the close of 2Q (77.5% at 30, 2012). Loan Portfolio Provision registered Bs 442 million (US$ 70 million) 1 in expenditure, reflecting Bs 180 million (68.7%) growth compared to Bs 262 million (US$ 61 million) in 2Q This provision represents 3.1% of the gross loan portfolio (3.3% at 30, 2012) and covers 360.9% of past-due and nonperforming loans (260.4% at 30, 2012). Commissions and other income totaled Bs 1,196 million (US$ 190 million) 1. in 2Q, reflecting a Bs 349 million (41.2%) year-on-year increase from Bs 847 million (US$ 197 million) 1, due mainly to Bs 336 million growth of income from financing insurance policies, commissions on credit and debit cards, as well as commissions on customer operations, among others, in addition to Bs 13 million growth of earnings from securities trading. Insurance premiums, net of claims reached Bs 298 million (US$ 47 million) 1, Bs 45 million (17.8%) up from Bs 253 million (US$ 59 million) 1 in 2Q Net earned premiums during the quarter reached Bs 2,373 million and reflected Bs 904 million (61.5%) year-on-year growth. Personnel and Operating Expenses reached Bs 2,613 million (US$ 416 million) 1, Bs 862 million (49.3%) up from Bs 1,751 million (US$ 408 million) 1 in 2Q 2012, due to increases of Bs 207 million (24.4%) in personnel expenses, Bs 133 million (50.6%) in expenses for contributions to regulatory entities, and Bs 521 million (81.4%) in expenses for commissions for using the point-of-sale network, ATMs and other banking facilities. Personnel and operating expenses are affected by inflation in Venezuela which averaged 39.6% over the last 12 months, as well as by the effect of devaluation on expenses in Venezuela, and conversion of the expenses of the overseas subsidiaries. The efficiency ratio measured by calculating Operating Expenses as a percentage of average assets, was 5.0% in, versus 5.3% in Summary of the Financial Statements and Ratios 2 (In millions of Bolivars, except percentages) March 2012 Jun. 13 vs. Mar. 13 Jun. 13 vs. Jun. 12 QUARTERLY RESULTS % % Net Interest Income 3,065 2,591 1, Allowance for losses on loan portfolio Commissions and other income 1,196 1, (37.8) 41.2 Insurance premiums, net of claims Salaries and Operating Expenses 2,613 2,359 1, Net Income Quarter 1,432 2, (29.8) 64.0 Net Income Semester 3,471 1, KEY FINANCIAL INDICATORS Income per share Quarter Bs / share (29.8) 64.0 Income per share Semester Bs / share Market price A share Market price B share Book value per share Net Income (quarter) / Average Assets (ROA) 3.4% 5.2% 3.2% (34.6) 6.3 Net Income (quarter) / Average Equity (ROE) 32.1% 47.9% 29.8% (32.9) 7.7 Net Income (semester) / Average Assets (ROA) 4.2% 3.1% 35.5 Net Income (semester) / Average Equity (ROE) 38.9% 28.4% Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control in place in Venezuela since February See Appendix III Summary of the Financial Statements and Ratios (in Dollars). 1

2 Assets: In 2Q total assets were up Bs 17,278 million (10.2%) compared to the previous quarter, reaching Bs 186,117 million (US$ 29,617 million) 1, and representing Bs 68,498 million, (58.2%) year-on-year growth. The variations for this item, taken individually by subsidiary, are as follows: Mercantil Banco Universal registered Bs 15,043 million (12.9%) quarter-over-quarter growth in 2Q and Bs 50,433 million (62.1%) growth compared to Mercantil Commercebank registered Bs 280 million (4.2%) quarter-over-quarter growth and Bs 244 million (3.6%) year-on-year growth. Mercantil Seguros registered Bs 463 million (5.7%) quarter-over-quarter growth and Bs 2,904 million (51.5%) year-on-year growth. Loan Portfolio During 2Q, total loans increased Bs 9,091 million (10.1%) quarter-over-quarter to Bs 99,122 million (US$ 15,773 million) 1, and Bs 28,243 million (39.8%) year-on-year. The variations for this item, taken individually by subsidiary, are as follows: Mercantil Banco Universal registered Bs 7,305 million (12.0%) growth in 2Q and Bs 16,153 million (31.1%) compared to Mercantil Commercebank registered Bs 261 million (6.0%) quarter-over-quarter growth and Bs 436 million (10.4%) year-on-year growth. Deposits: In 2Q, total deposits registered Bs 13,669 million (10.1%) quarter-over-quarter growth to Bs 149,066 million (US$ 23,721 million) 1, and Bs 54,453 million (57.6%) year-on-year growth. The variations for this item, taken individually by subsidiary, are as follows: Mercantil Banco Universal registered Bs 12,408 million (12.3%) quarter-over-quarter growth and Bs 47,798 million (60.7%) year-on-year growth. Mercantil Commercebank registered Bs 67 million (1.2%) quarter-over-quarter growth and Bs 29 million (0.5%) year-on-year growth. Shareholders Equity: Totaled Bs 19,679 million (US$ 3,132 million) 1 representing Bs 1,818 million (10.2%) quarter-over-quarter growth from Bs 17,861 million (US$ 2,842 million) 1 and Bs 7,409 million (60.4%) year-on-year growth. This variation can be attributed mainly to Bs 1,432 million in net income for the period and an increase of Bs 369 million from adjusting investments available for sale to their market value. Capital Ratios: Mercantil s equity to assets ratio at 30, is 10.6% and its equity to risk-weighted assets ratio 19.0%, based on the standards of the National Securities Superintendency-SNV, for its abbreviation in Spanish (10.4% and 18.2% at 30, 2012). Mercantil Banco Universal, in accordance with the requirements of the Superintendency of Banking Sector Institutions (SUDEBAN, for its abbreviation in Spanish), has an equity to assets ratio of 11.3% and an equity to risk-weighted assets ratio of 19.6% at 30, (9.5% and 15.0% at 30, 2012). Mercantil Commercebank, N.A., based on the standards of the U.S. Office of the Comptroller of the Currency (OCC), at 30, the equity to assets ratio is 10.3% and the equity to risk-based assets ratio 16.2% (9.5% and 17.3% at 30, 2012). The equity ratios of Mercantil and its subsidiaries exceed the regulatory minimums. Summary of the Financial Statements (In millions of Bolivars, except percentages) March 2012 Jun. 13 vs. Mar. 13 Jun. 13 vs. Jun. 12 % % Cash and due from banks 29,764 30,444 15,079 (2.2) 97.4 Investment Portfolio 51,122 42,624 27, Loan Portfolio, Net 99,122 90,031 70, Other assets 6,110 5,740 4, TOTAL ASSETS 186, , , ASSETS UNDER MANAGEMENT 42,453 39,031 28, Deposits 149, ,397 94, Financial Liabilities 4,844 3,523 2, Other Liabilities 12,528 12,058 8, Shareholders Equity 19,679 17,861 12, TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 186, , , Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control in place in Venezuela since February

3 Table of contents Page Contribution of subsidiaries 4 Market share 5 Credit Ratings 5 Management discussion and analysis 6 Operating Income Net Interest Income 6 Loan Portfolio Provision 7 Total Commissions and Other Income 8 Insurance Premiums, Net of Claims 8 Total Operating Expenses 9 Balance Sheet Liquidity 10 Investment Portfolio 11 Financial Intermediation Activity Loan Portfolio 13 Deposits 14 Total Assets 15 Financial Obligations 16 Shareholders Equity 16 Capital Ratios 16 Assets and Liabilities in Foreign Currency 17 Summary of Subsidiaries performance according to their Regulatory Accounting Standards 18 Private Banking and Wealth Management 21 Corporate Events New Measures announced for the Venezuelan Economy Awards and Acknowledgements Global Economic Climate 23 U.S. Economic Climate 24 Venezuelan Economic Climate 25 Appendix I: Summary of the accounting principles used to prepare the financial statements 27 Appendix II: Financial statements Mercantil Servicios Financieros, C.A. 28 Appendix III: Summary of the Financial Statements and Ratios (in Dollars) 33 Appendix IV: Consolidated Loan Portfolio by Classification 34 Appendix V: Regulatory percentage of Mercantil Banco Universal loans by economic sector and interest rates 35 Appendix VI: Summary of Financial Indicators Mercantil Servicios Financieros 36 Appendix VII: Financial statements Mercantil Banco Universal 38 Appendix VIII: Financial statements Mercantil Commercebank Holding Corporation 40 Appendix IX: Financial statements Mercantil Seguros 42 Appendix X: Key Macroeconomic Indicators

4 Contribution of the Subsidiaries 30, MERCANTIL SERVICIOS FINANCIEROS (1) (In millions of Bolivars and Dollars (2), except percentages) Shareholders Equity: Bs. 19,679 (US$ 3.132) Shareholders Equity (3) (3) (3) (3) Mercantil Mercantil Bank Mercantil Mercantil Banco Universal Commercebank Overseas Seguros Merinvest Bs. 8,368 US$ 1,949 Bs. 2,631 US$ 613 Bs. 764 US$ 178 Bs. 1,794 US$ 418 Bs. 89 US$ 21 Others Bs. 155 US$ 36 Main Activity Venezuelan Universal Bank U.S. Domestic Bank & Brokerage International Banking Insurance In Venezuela Investment banking, mutual funds, trading & brokerage Other Minor Investments Main Subsidiaries Mercantil Mercantil Bank Commercebank N.A. (Schweiz) AG. Mercantil Mercantil Bank and Commercebank Trust Limited Investment Services (Islas Caiman) (MCIS) Mercantil Bank Mercantil (Curacao) NV Commercebank Trust Mercantil Bank Company (MCTC) (Panamá) S.A. Mercantil Merinvest, Casa de Bolsa, C.A. Mercantil Servicios de Inversión, C.A. Mercantil Sociedad Administradora de Entidades de Inversión Colectiva, C.A. Mercantil Capital Markets (Panamá) In millions of Bs. (1) Total Total Assets 129,893 43,734 3,661 8, ,117 % Assets 69.8% 23.5% 2.0% 4.4% 0.0% 0.3% 100.0% Investments 31,191 12,602 1,135 5, ,122 Loans (Net) 68,033 28,944 2, ,122 Deposits 112,893 33,146 3, ,066 Contribution Income net: Quarter 1, (24) (65) 1,432 Semester 2, (26) (58) 3,471 Assets under Management 24,150 10,680 2, ,711-42,453 In millions of US$ (2) Total Assets 20,670 6, , ,617 Investments 4,965 2, ,136 Loans (Net) 10,825 4, ,773 Deposits 17,965 5, ,721 Contribution Income net: Quarter (4) 42 0 (10) 228 Semester (4) 77 3 (9) 583 Assets under Management 3,843 1, ,756 Number of Employees 7, , ,835 1 Financial data presented in accordance with SNV standards (see Appendix I). Figures net of elimination of inter-company transactions. 2 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February See Summary of Subsidiaries performance according to their Regulatory Accounting Standards (page 18). 4

5 Market Share Positioning Commercial and Universal Private Bank's Market Share Venezuela Mercantil Banco (1) Mercantil Seguros (2) U.S. Mercantil Commercebank (3) Tourism Loans % Industrial Loans % Agricultural Loans % Morgtgage Loans under the mortgage Debtor Law (Ley Especial del Deudor Hipotecario) % Microcredits Loans % Gross Loans % Savings Deposits % Total Deposits % Total Deposits + Other Demand Liabilities % Total Assets % Trust % Net Premiums % Total Deposits % (1) Source: Summary of Unconsolidated Financial Statements Published in National newspapers. (2) Source: Venezuelan Superintendency of Insurance at May 31,. (3) Source: Federal Deposit Insurance Corporation (FDIC), to the Florida Stated U.S. at 30, 2012, total number of institutions: 292 in Florida Credit Ratings Fitch Ratings Clave (*) Mercantil Servicios Financieros National Ratings Long-term Short-term Rating for Unsecured Bonds ( Long-term in local currency) Rating for Commercial Paper (Short-term in local currency) AA(Ven) F1+(Ven) A2 A1 A2 A1 Mercantil Banco Universal National Ratings Long-term AA+(Ven) Short-term F1+(Ven) International Ratings Long-term (Foreign and local currency) B+ Short-term (Foreign and local currency) B Viability b+ Mecantil Commercebank Florida Bancorp y Mercantil Commercebank N.A. Long-term Deposit (Mercantil Commercebank,N.A. only) Long-term Short-term Viability BB+ BB B bb (*) A credit rating agency in Venezuela 5

6 (Million of Bs) Management Discussion and Analysis Operating Income (In millions of Bolivars and millions of US$, except percentages) Quarter Semester Ended on Ended on US$ 1 Jun Bolivars % 2012 Bolivars % Net Interest Income 488 3,065 1,948 1, ,656 3,669 1, Allowance for Losses on Loan Portfolio Net Financial Margin 417 2,623 1, ,070 3,225 1, Commissions and Other Income 190 1, ,121 1,695 1, Insurance Premiums, Net of Claims Operating Income 655 4,117 2,786 1, ,724 5,348 3, Net Interest Income In 2Q, net interest income was Bs 3,065 million (US$ 488 million) 1, 57.3% higher than the Bs 1,948 million (US$ 454 million) 1 registered in 2Q 2012, due to a higher volume of financial assets and liabilities. Interest income was Bs 4,278 million, which reflects a 56.4% year-on-year increase, resulting on from 50.5% growth of income from the loan portfolio on the one hand, and 84.0% growth of income from the investment portfolio on the other. Financial expenses totaled Bs 1,213 million, up 54.1% compared to 2Q The financial intermediation ratio (loan to deposits) was 68.6% at the close of 2Q, 77.5% at the close of Mercantil Banco Universal, reached Bs 2,667 million in interest income, 61.3% up from Bs 1,653 million in 2Q 2012, mainly due to a higher volume of financial assets and liabilities. The financial intermediation ratio was 61.4% in and 75.3% in Mercantil Commercebank, N.A., reached US$ 35 million in net interest income, similar to the 2Q 2012 figure. The Bank holds a significant portion of its assets (US$ 2,176 million, 31%) in short term investments and securities issued by the U.S. government or U.S. governmentbacked agencies. This high level of liquidity has continued to allow the Bank ample flexibility to increase its credit operations. In 1H, net interest income was Bs 5,656 million (US$ 950 million) 1, 54.2% more than the Bs 3,669 million (US$ 855 million) 1 obtained in 1H Mercantil's net interest margin (net interest income to average financial assets) at 30, was 8.5% compared to 8.1% the previous year. Evolution of Net Interest Income 3,500 3, % 8.6% 8.5% 8.4% 8.5% 9.0% 8.5% 2, % 2, % 1, % 1, % 500-1,948 2,230 2,502 2,591 3,065 IIT2012 IIIT2012 IVT2012 IT IIT 6.0% 5.5% Net Interest Income Net Interest Income / Average Financial Assets 1 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

7 Loan Portfolio Provision In 2Q, expenses totaled Bs 442 million (US$ 70 million) 1, Bs 180 million (68.7%) more than the Bs 262 million (US$ 61 million) 1 registered in 2Q Mercantil Banco Universal registered Bs 435 million in loan portfolio provisions in 2Q (Bs 226 million in 2Q 2012), aimed mainly at provisions related to the commercial, construction and agricultural sector and the result of loan portfolio growth during the quarter. Mercantil Commercebank, N.A. did not register any loan portfolio provision expenditure in 2Q, and the year-on-year variation was US$ 8 million. This brings the accumulated allowance to Bs 3,193 million (US$ 508 million) 1 at 30, and represents 3.1% of gross loans (3.3% at 30, 2012). The provision covers 360.9% of past-due and nonperforming loans (260.4% at 30, 2012). In 1H, loan portfolio provision expenditure was Bs 586 million (US$ 98 million) 1, 32.0% higher than Bs 444 million (US$ 104 million) 1 in the first half of Evolution of Loan Portfolio and Asset Quality Ratios (Millions of Bs) 110, ,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, % 3.3% 3.3% 3.1% 3.1% 1.3% 1.1% 0.9% 1.0% 0.9% IIQ2012 IIIQ2012 IVQ2012 IQ IIQ Gross Loans Past Due and Non-Performing Loans Past Due and Non-Performing Loans / Gross Loans Allowance for Losses on Loan Portfolio / Gross Loans 3.0% 3.4% 3.8% 4.2% 4.4% 4.0% 3.6% 3.2% 2.8% 2.6% 2.4% 2.2% 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

8 Total Commissions and Other Income In 2Q, commissions and other income totaled Bs 1,196 million (US$ 190 million) 1, Bs 349 million (41.2%) up from Bs 847 million (US$ 197 million) 1 registered in 2Q 2012, primarily due to: Bs 322 million (43.7%) growth of earnings from commissions on debit and credit cards, insurance policy financing, other commissions on customer operations, and other income. Bs 15 million (60.9%) increase in earnings from the recovery of loans recorded as write-offs in previous periods. Bs 13 million (15.1%) growth of earnings from securities trading activities. In 1H, commissions and other income totaled Bs 3,121 million, reflecting Bs 1,426 million (84.2%) year-on-year growth, due mainly to a Bs 718 million (574.4%) increase registered in exchange rate differences using the new exchange rate set by the Venezuelan Central Bank for the valuation of assets and liabilities in foreign currency, which went from Bs /US$1 to Bs 6,2842/US$1, an increase of Bs 112 million (35.0%) in income from securities trading, and Bs 596 million (47.7%) growth of income from financing insurance policies, commissions on debit and credit cards, as well as commissions on customer operations, among others. Insurance Premiums, net of Claims In 2Q, insurance premiums, net of commissions, reinsurance and claims, totaled Bs 298 million (US$ 47 million) 1, reflecting 17.8% year-onyear growth from Bs 253 million (US$ 59 million) 1. This improvement is attributable to the automobile insurance business. Net earned premiums for 2Q amounted to Bs 2,373 million (US$ 378 million) 1, reflecting Bs 904 million (61.5%) year-on-year growth. The main contributors to this variation were the Group Health (75.6%) and Automobile (56.6%) businesses. At May 31,, Mercantil Seguros was the country s second largest insurance company in terms of net collected premiums, with 12.0% of the insurance market. Claims during 2Q totaled Bs 1,784 million (US$ 284 million) 1, up Bs 701 million (64.8%) compared to Bs 1,082 million (US$ 252 million) in 2Q The claims ratio was 65.6% as of (62.1% as of 2012). The technical result was Bs 48 million (US$ 8 million) 1, similar to the Bs 54 million (US$ 13 million) 1 registered in 2Q At the close of 1H, insurance premiums, net of commissions, reinsurance and claims, totaled Bs 533 million (US$ 90 million) 1, up 24.5% compared to 1H Net collected premiums were Bs 4,472 million (US$ 751 million) 1, representing an increase of Bs 1,367 million and 44.0% compared to 1H This growth was mainly attributable to the Automobile (40.3%) and Individual Health (50.6%) insurance businesses. The volume of claims rose Bs 1,020 million (46.3%) to Bs 3,223 million (US$ 542 million) 1, compared to 1H % 70% 60% 50% 40% 30% 20% 10% 0% 18.5% 1.3% IIQ 2012 Net Earned Premiums (12 months change) Composition of Total Income Bs. 3,048 million US$ 710 million % 20% 13% 80.2% 14.1% 1.4% IIQ 84.5% Banking Insurance Asset Management IIQ 2012 IIIQ 2012 IVQ 2012 IQ May Insurance Market Bs. 4,560 million US$ 725 million 1 67% 22% 9% 3% 2% IIQ 2012 IIQ Net Interest Income Commissions on Transactions, Insurance Premiums net and Other Losses and Other Income Income on Sales Investment Securities Composition of Total Income by Business Segments Mercantil 1 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

9 Total Operating Expenses (In millions of Bolivars and US$, except percentages) Quarter Semester Ended on Ended on US$ 1 Jun Bolivars % 2012 Bolivars % Operating Income 655 4,117 2, ,724 5,348 3, Operating Expenses Salaries and Employee Benefits 168 1, ,991 1, Other Operating expenses 248 1, ,980 1,899 1, Taxes Current and Deferred (91) (55.8) Net Income 0 (1) 0 (1) (2) (1) (1) Operating Income 228 1, ,471 1,669 1, In 2Q, operating expenses totaled Bs 2,613 million (US$ 416 million) 1, a 49.2% year-on-year increase from Bs 1,751 million (US$ 408 million) 1. This increase is mainly due to: Bs 207 million in personnel expenses, reflecting a year-on-year rise of 24.4%. The increase in expenses includes the application of wage increase policies, as well as the effect of enforcing the provisions of the new Labor Law passed in May Assets per employee at Mercantil Banco Universal rose from Bs 11.5 million in 2012 to Bs 17.9 million in. At Mercantil Seguros, net earned premiums per employee went from Bs 1.0 million in 2012 to Bs 1.5 million in. In the case of the overseas business, the assets per employee indicator remained similar at US$ 8.7 million in. Bs 133 million (50.6%) increase in expenses for contributions to regulatory agencies. Bs 42 million (64.4%) growth of expenses for taxes and contributions. Bs 480 million (83.5%) rise in expenses for commissions for using the point-of-sale and ATM network and other facilities. In 1H, operating expenses totaled Bs 4,971 million, 44.6% up from Bs 3,437 million in 1H 2012, mainly due to increases of Bs 453 million in Personnel Expenses and Bs 1,080 million in Other Operating Expenses; the latter reflected a Bs 119 million rise in depreciation expenses, property and equipment expenses, amortization of intangibles and others; a Bs 277 million increase in contributions to regulatory agencies and Bs 684 million growth of expenses from commissions for using the point-of-sale and ATM network, taxes, contributions, transfers and communications, and other expenses. The efficiency ratio measured by calculating operating expenses as a percentage of average assets, was 5.0% in, versus 5.3% in The ratio of operating income to total income was 44.9% in, versus 50.4% in Personnel and operating expenses are affected by inflation in Venezuela averaging 39.6% over the last 12 months, as well as by the effect of devaluation on expenses in Venezuela, and conversion of the expenses of overseas subsidiaries. Total Operating Expenses Quarters (In millions of Bolivars) 1, Δ +34.8% Δ +49.2% 2, Δ +10.7% 2,613 1, IIQ 2012 IQ IIQ Salaries and employee benefits Other operating expenses Fees paid to regulatory agencies Depreciation, Property and equipment, Amortization of intangibles and others expenses Efficiency Ratios and Inflation in Venezuela 57.7% 51.0% 44.3% 37.7% 31.0% 24.3% 17.7% 11.0% 50.4% 49.8% 5.3% 21.3% 5.5% 18.0% 47.7% 5.4% 20.1% 41.3% 5.0% 25.1% 44.9% 39.6% 5.0% IIQ 2012 IIIQ 2012 IVQ 2012 IQ IIQ Inflation in Venezuela Operating Expenses / Average Assets Operating Expenses / Total Income 6.1% 5.9% 5.7% 5.5% 5.3% 5.1% 4.9% 4.7% 4.5% 1 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

10 Balance Sheet The principal balance sheet variations during 2Q are reviewed below and commented on with respect to the prior quarter. The main year-onyear variations are also indicated for comparison purposes. Summary of Balance Sheet and Assets under Management (In millions of Bolivars and Dollars, except percentages) US$ 1 March Jun. 13 vs. Mar. 12 Jun. 13 vs. Jun. 12 Jun Bolivars % Bolivars % Cash and due from banks 4,737 29,764 30,444 15,079 (680) (2.2) 14, Investment Portfolio 8,136 51,122 42,624 27,638 8, , Loan Portfolio, Net 15,773 99,122 90,031 70,879 9, , Total Assets 29, , , ,619 17, , Deposits 23, , ,397 94,613 13, , Shareholders Equity 3,132 19,679 17,861 12,271 1, , Assets under Management 6,756 42,453 39,031 28,060 3, , Liquidity At the close of 2Q, total cash and due from banks (cash and the reserve ratio in Venezuela) plus investments in time deposits and placements which are included in the investment portfolio reached Bs 33,872 million (US$ 5,390 million) 1, similar to the Bs 34,872 million (US$ 5,549 million) recorded in the previous quarter 1. Compared to 30, 2012, cash and due from banks plus investments in time deposits and placements grew Bs 18,126 million (115.1%), from 15,746 million to Bs 33,872 million. Liquidity (In millions of Bolivars) 34,872 Δ % 17,403 18,431 15,746 Δ -2.9% 13,041 6,582 33,872 11,333 8, ,428 4,108 IIQ 2012 IQ IIQ Cash and Due from Banks - Legal Reserves Legal Reserves Investments in Time Deposits and Placements The liquidity ratio calculated by dividing total cash and due from banks by deposits was 20.0%. and the ratio calculated by dividing total cash and due from banks and investments by deposits was 54.3%, compared with 22.5% and 54.0% in March, and 15.9% and 45.2% at the close of 2Q Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

11 Investment Portfolio At the close of 2Q, the investment portfolio totaled Bs 51,122 million (US$ 8,136 million) 1, up Bs 8,498 million (19.9%) from Bs 42,624 million (US$ 6,784 million) 1 in 1Q. This growth is observed mainly in investments issued by the Venezuelan state, state-owned companies and decentralized entities to fund the construction of low-income housing. Compared to 30, 2012, the investment portfolio grew Bs 23,483 million (85.0%) from Bs 27,638 million to Bs 51,122 million. The variations for this item, taken individually by subsidiary, are as follows: 27,638 Investments Portfolio (In million of Bolivars) Δ +85.0% 42,624 Δ % 51,122 (In millions, except percentages) March Abs. % Jun Mar. Jun. Mercantil Banco Universal Bs. 32,325 24,302 8, Mercantil Seguros Bs. 5,909 5, Mercantil Commercebank, N.A. US$ 2,005 1, Investments by maturity and yield at the close of 2Q are broken down as follows: Trading Available for Sale Investments by Maturity and Yield (In millions of Bolivars, except percentages) Held to Maturity Shares Time Deposits and Placements Restricted Investments Years Bs. 2 Bs. 2 % 4 Bs. 3 % 4 Bs. 2 Bs. 2 % Bs. 2 % 4 TOTAL Bs. Less Than 1 1, , , ,970 From 1 to 5 7, , ,257 Over 5 8, , ,824 US$ Less Than From 1 to 5 7 1, ,989 Over , , ,445 13, ,108 1,106 51,122 1 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control in place in Venezuela since February Registered at Market Value 3 Amortized cost 4 The yield of securities is based on amortized cost at the end of the period. Yield is calculated by dividing income from (including Premium amortization or discounts) by amortized cost or market value. 5 Bs. 3,380 million are Venezuelan Central Bank placements with maturity under 30 days. 6 Consists of Repos with the Venezuelan Central Bank with maturity under 30 days 11

12 Investments at the close of 2Q, by company, issuer and currency, are broken down as follows: Breakdown of Investments by Issuer and Currency at 30, (In millions of Bolivars and Dollars, except percentages) Venezuelan Central Bank US Government US Gov. Guaranteed Agencies Int I Private Venezuelan Government and Public Entities Venezuelan Private Total Bs Bolivars Mercantil Banco Universal 4,076 26, ,779 Mercantil Seguros & Others 4, ,272 Total Bs. 4, , ,051 Total US Dollars US$ 1 Mercantil Banco Universal Mercantil Commercebank Florida Bancorp 1, ,006 Mercantil Seguros & Others Total US$ - 1, ,398 Breakdown % 8.0% 13.9% 10.2% 3.0% 63.5% 1.5% 100.0% 1 Dollar figures given for reference purposes only and are translated at the closing exchange rate. See Exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February Bs million include US$ indexation clause Government bonds issued by the Venezuelan State account for 0.99 times Mercantil's equity and 10.47% of its assets (0.9 and 9.2%, respectively in March ). At Mercantil Banco Universal, these securities represent 1.04 times the equity and 10.52% of the assets (1.0 and 9.1%, respectively in March ). Mercantil holds 3.3% of the public debt securities in national and foreign currency issued by the Venezuelan nation according to official figures obtained from the Ministry of Planning and Finance at March 31,. At 30, the Mercantil, C.A. Banco Universal subsidiary, in line with a regulation issued by the executive, purchased Bs 13,114 million in Agricultural Bonds, Mortgage Bonds and Participation Certificates. These represent 42.1% of the bank's investment portfolio and 1.1 times its shareholders' equity (Bs 8,639 million representing 36.7% of its investment portfolio and 0.8 times its shareholders' equity at March 31, ). Breakdown of Investments by Issuer 2012 March 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Venezuelan Central Bank US Government Private Venezuelan Government and Public Entities US Gov. Guaranteed Agencies 12

13 Financial Intermediation Activity Loan Portfolio At the close of 2Q, the loan portfolio totaled Bs 99,122 million (US$ million) 1, 10.1% more than the Bs 90,031 million (US$ 14,327 million) 1 registered in the previous quarter. Compared to 30, 2012, the loan portfolio expanded Bs 28,243 million (39.8%) from Bs 70,879 million to Bs 99,122 million. As of 30,, consumer and commercial loans account for 59.3% of the loan portfolio which totaled Bs 60,665 million, reflecting 11.3% quarter-overquarter growth and 46.6% year-on-year growth. Loan Portfolio (In million of Bolivars) 70,879 Δ % 90,031 Δ % 99,122 The variations for this item, taken individually by subsidiary, are as follows: (In millions, except percentages) March Abs. % Jun Mar. Jun. Mercantil Banco Universal Bs. 68,032 60,727 7, Mercantil Commercebank, N.A. US$ 4,606 4, The ratio of past-due and nonperforming loans to gross loans was 0.9% (1.0% at March ). The ratio by subsidiary is as follows: Mercantil Banco Universal 0.7% compared with 0.9% for the Venezuelan financial system. Mercantil Commercebank, N.A. 1.1%, down from 1.5% at the close of the previous quarter. Nonperforming loans to gross loans was 1.2% (1.8% at March 31, ). At 30,, 98.6% of Mercantil s loan portfolio is outstanding. The allowance for losses on loan portfolio covers 360.9% of past-due and nonperforming loans (306.4% at March 31, ); this indicator is 545.8% at Mercantil Banco Universal (496.1% at March 31, ) and 122.1% at Mercantil Commercebank (105.2% at March 31, ). The analysis of Mercantil's main subsidiaries and their positioning in the market are shown on Pages 5 and 18. Annex IV shows the distribution of the loan portfolio, broken down by economic activity, maturity, country and type of risk. The regulatory percentage of Mercantil Banco Universal loans by economic sector and interest rates is shown in Annex V. Loan Portfolio by Business Segment (In millions of bolivars) SME's Large Corporation Individuals 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, % 31% 29% 31% 33% 26% 26% 24% 24% 24% 47% 45% 43% 43% 44% Jun Sep Dec Mar. Jun. 1 Dollar figures given for reference purposes only and are translated at the closing exchange rate. See Exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

14 Deposits At the close of 2Q deposits reached Bs 149,066 million (US$ 23,721 million) 1, representing a quarter-over-quarter increase of Bs 13,669 million (10.1%) compared to Bs 135,397 million (US$ 21,545 million) 1. Compared to 30, 2012, deposits grew Bs 54,453 million (57.6%) from Bs 94,613 million to Bs 149,066 million. Deposits (In million of Bolivars) Δ % 135, ,066 Checking accounts were the main component of total deposits which totaled Bs 91,710 million, up 12.6% from the previous quarter, and represented 61.5% of total deposits. Savings deposits increased Bs 2,432 million (5.4%) and time deposits Bs 946 million (11.1%) compared to the previous quarter. 94,613 Δ +10.1% The variations for this item, taken individually by subsidiary, are as follows: (In millions, except percentages) March Abs. % Jun Mar. 13 Jun. Mercantil Banco Universal Bs. 113, ,863 12, Mercantil Commercebank, N.A. US$ 5,447 5, The financial intermediation (loan to deposit) ratio remained unchanged compared to the previous quarter, at 68.6%. The analysis of Mercantil's main subsidiaries and their positioning in the market are shown on Pages 5 and 18. Breakdown Deposits by Business Segment (In millions of bolivars) Individuals Large Corporation SME's 150, , , ,000 90,000 75,000 60,000 45,000 30,000 15, % 55% 56% 52% 52% 23% 21% 23% 24% 20% 25% 24% 24% 24% 23% Jun Sep Dec Mar. Jun. 1 Dollar figures given for reference purposes only and are translated at the closing exchange rate. See Exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

15 Total Assets At the close of 2Q total assets registered 10.2% growth to Bs 186,117 million (US$ 29,617 million) 1, up Bs million compared to Bs 168,839 million (US$ 26,869 million) 1 in the previous quarter. This is the result of the combined behavior of the investment portfolio and the loan portfolio, which grew Bs 8,498 million and Bs 9,091 million respectively. The ratio of performing assets to total assets was 82.6%, up Bs 18,022 million (13.3%) on the previous quarter. Compared to 30, 2012, assets grew Bs 68,498 million (58.2%) from Bs 117,619 million to Bs 186,117 million. The variations for this item, taken individually by subsidiary, are as follows: Total Assets Consolidated (In million of Bolivars) Δ +58.2% 117, ,839 Δ +10.2% 186,117 (In millions, except percentages) March Abs. % Jun Mar. Jun. Mercantil Banco Universal Bs. 131, ,668 15, Mercantil Seguros Bs. 8,546 8, Mercantil Commercebank, N.A. US$ 6,973 6, The analysis of Mercantil's main subsidiaries and their positioning in the market are shown on Pages 5 and 18. The loan portfolio remained the principal component (53.3%) of the total assets, and the investment portfolio increased its share to 27.5%, while total cash and due from banks at the end of the quarter accounted for 16.0%. Assets Distribution Total Bs. 186,117 million (US$ 29,617 million) 1 Composition of Assets (In millions of Bolivars) Breakdown of Assets by Sudsidiaries (In millions of Bolivars) Investment Portfolio 27% Cash and Due from Banks 16% Loan Portfolio, Net 53% Venezuelan Central Bank 2% Venezuelan Govermment 17% US Govermment. 4% Private Sector 1% US Govermment Guaranteed Agencies 3% Other Assets 4% Mercantil Banco Universal 69.8% Mercantil Commercebank 23.5% Mercantil Seguros 4.4% Others Countries 2.0% Other Subsidiaries (Venezuela) 0.3% 1 Dollar figures given for reference purposes only and are translated at the closing exchange rate. See Exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

16 Financial Obligations At the close of 2Q, total financial obligations were 5,663 million (US$ 902 million) 1, up 31.1% compared to Bs 4,320 million (US$ 788 million) 1 in the previous quarter, while obligations increased 96.9% compared to 30, 212. March 2012 (In million of bolivars and dollars) Bs. Bs. Bs. Publicly Traded Debt Securities Issued by Mercantil Subordinated debt Other Financial Liabilities * 4,844 3,523 2,361 5,663 4,320 2,876 * Includes liabilities under repurchase agreements with BCV, funds received for special financing programs, liabilities with credit cards, letters of credit and securities loan agreements. Shareholders Equity At the close of 2Q, shareholder's equity reached Bs 19,679 million (US$ 3,132 million) 1, 10.2% up on the previous quarter's Bs 17,861 million (US$ 2,842 million) 1 and 60.4% more than the Bs 12,271 million (US$ 2,862 million) 1 registered in 2Q The 2Q variation is mainly due to Bs 1,432 million in net income for the period and a Bs 369 million increase as a result of adjusting investments available for sale to their market value. 12,271 Evolution of Shareholders Equity (In million of Bolivars) Δ +60.4% 17,861 Δ +10.2% 19,679 Jun Mar. Jun. Capital Ratios Mercantil s equity to assets ratio at 30, is 10.6% and its equity to risk-weighted assets ratio is 19.0%, based on the standards of the National Securities Superintendency-SNV (10.4% and 18.2% at 30, 2012). Capital Structure Mercantil Banco Universal, in accordance with the requirements of the Superintendency of Banking Sector Institutions (SUDEBAN), the equity to assets ratio at 30, is 11.3% and its equity to risk-weighted assets ratio is 19.6% (9.5% and 15.0% at 30, 2012). Mercantil Commercebank, N.A., based on the standards of the U.S. Office of the Comptroller of the Currency (OCC), at 30,, the equity to assets ratio is 10.3% and the equity to risk-based assets ratio is 16.2%, (9.5% and 17.3% at 30, 2012). The equity ratios of Mercantil and its subsidiaries exceed the regulatory minimums. Capital Stock 2% Capital Reserve 1% Share Premium 1% Traslation Adjustments of net Assets of Subsidiaries Abroad 15% Retained Earnings 75% Unrealized Gain fron Adjustments of Investments to Market Value 6% 1 Dollar figures given for reference purposes only and are translated at the closing exchange rate. See Exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

17 Assets and Liabilities in Foreign Currency Assets by Currency Mercantil s assets and liabilities in foreign currency amounted to US$ 8,170 million and US$ 6,738 million respectively at 30,. The estimated effect of each Bs 0.10/US$1 increase on the exchange rate of Bs /US$ at 30, would be an increase of Bs 817 million in assets and Bs 143 million in equity, Bs 31 million of which would be recorded as income for the period. Bs. 117,619 million (US$ 27,420 million 1 ) % Bs. 186,117 million (US$ 29,617 million 1 ) 72.4% 29.0% 27.6% Bolivars US$ At 30,, Mercantil s shareholders equity was Bs 19,679 million, equivalent to US$ 3,132 million 1, which is partially covered in U.S. dollars by the following net assets: Allocation by Company: Assets US$ 1, % Mercantil Commercebank Florida Bancorp and Subsidiaries (43%) Other Foreing Subsidiaries (9%) Subsidiaries in Venezuelan (40%) Overseas Branch and Agencies (8%) 80% 60% 40% 20% 0% Cash and Due from Banks (Foreing Banks), 29.3% Loan Portfolio & Other Assets, 2.7% Assets by subsidiaries in Venezuela (40%) US Treasuries, 2.7% US$ denominated bonds issued by the Venezuelan government, 26.4% Principal and Interest Covered Bonds (Ticc) (*), 38.9% 1 Dollar figures given for reference purposes only and are translated at the closing exchange rate. See Exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February * Issued in US$ or under indexation clause (see Investment Portfolio, page 11) 17

18 Summary of Subsidiaries performance according to their Regulatory Accounting Standards Mercantil Banco Universal Mercantil Banco Universal s total assets grew Bs 14,600 million (12.6%) compared with March. During 2Q, net loans grew Bs 7,305 million (12.0%) and total deposits increased Bs 12,631 million (12.3%) compared with 1Q, reaching Bs 68,032 million and Bs 115,451 million, respectively. Loan portfolio quality remains very favorable, with a 0.7% ratio of past-due and nonperforming loans to gross loans compared to 0.9% for the Venezuelan financial system as a whole. The loan portfolio provision covers 545.8% of past-due and nonperforming loans (496.1% at March 31, ). At 30,, the Mercantil Banco Universal subsidiary ranks third in the Venezuelan private financial system in terms of total assets with 11.7% of the market. The leading institution has a 14.9% share and Venezuela s four main banks account for 52.2% of the country s financial system. It is also the leading bank in the private financial system in terms of manufacturing loans, with 14.9% of the market. The bank ranks second in terms of gross loans and mortgage, tourism and Mercantil C.A., Banco Universal Consolidated (In millions of Bs and US$) agricultural loans with market shares of 14.2%, 8.5%, 12.9% and 14.0%, respectively. Mercantil is Venezuela's leading bank in terms of savings deposits with 20.4% of the market. Shareholders Equity registered Bs 1,802 million (17.5%) quarter-over-quarter growth to Bs 12,081 million. This growth mainly includes net quarterly income of Bs 1,246 million and a Bs 557 million increase due to the adjustment of investments available for sale to their market value. The equity to assets ratio as of 30, is 11.3% (minimum requirement 8%) and the equity to risk-weighted assets ratio, according to the standards of the Superintendency of Banking Sector Institutions in Venezuela, is 19.6% (minimum requirement 12%). In 2Q, the Bs 1,246 million in net earnings reflected Bs 588 million (89.4%) year-on-year growth, mainly due to a Bs 994 million rise in net interest income as a result of higher financial assets and liabilities; Bs 509 million in net income from commissions on credit and debit cards and other income; Bs 208 million increase in loan portfolio provisions; rises of Bs 642 million in personnel and operating expenses; Bs 132 million in contributions to regulatory agencies; and Bs 68 million in corporate income tax. In semi-annual terms, net earnings were Bs 2,346 million and represented Bs 1,022 million (77.2%) year-on-year growth. This growth is mainly associated with Bs 1,644 million increase in net interest income; Bs 882 million growth of net income from commissions on credit and debit cards and other income; a Bs 190 million increase in loan portfolio provisions, a Bs 1,049 million increase in personnel expenses, and a Bs 266 million rise in contributions to regulatory agencies. US$ Jun. Jun. Mar. Jun Total Assets 20, , ,984 80,969 Investments Portfolio 4,970 31,235 23,656 13,160 Loan Portfolio 10,826 68,032 60,727 51,879 Deposits 18, , ,820 71,714 Shareholders Equity 1,922 12,081 10,279 7,049 Income net Quarter 198 1,246 1, Income net Semester 394 2,346 1,324 Historic figures in accordance with the standards of the Venezuelan Superintendency of Banking Sector Institutions (SUDEBAN). Evolution of Net Interest Income 3,000 2,500 2,000 1,500 1, % 4.5% 11.0% 11.1% 4.4% 4.2% 10.2% 10.9% 3.8% 3.7% 1,694 1,890 2,236 2,182 2,687 IIQ 2012 IIIQ 2012 IVQ 2012 IQ IIQ Net Interest Income Net Interest Margin Operating Expenses / Average Total Assets 13.0% 11.0% 9.0% 7.0% 5.0% 3.0% 1.0% Evolution of Gross Loans Portfolio Venezuela 20.0% 16.0% 12.0% 8.0% 4.0% 0.0% 16.0% 12.3% 16.7% 15.7% 15.7% 9.1% 6.8% 11.9% 4.2% 14.5% 5.7% 4.9% 14.2% 7.5% 6.4% IIQ 2012 IIIQ 2012 IVQ 2012 IQ IIQ Venezuelan Financial System Mercantil Market Share 17.0% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 18

19 Mercantil Commercebank, N.A. At 30,, total assets amounted to US$ 6,997 million, reflecting US$ 272 million (4.1%) quarter-over-quarter growth from US$ 6,724 million and 3.4% year-on-year growth. The loan portfolio was US$ 4,608 million, up 6.1% compared to the previous quarter's level of US$ 4,342 million and 10.6% more than in 2Q Commercial and industrial loans grew 24.7% compared to At 30,, the Bank holds US$ 2,176 million (31.0% of total assets) mainly in short-term investments and bonds issued or guaranteed by the U.S. government or U.S. government-backed agencies. Deposits and investments sold under repurchase agreement totaled US$ 5,496 million at the close of, which reflects quarter-over-quarter growth of 1.2% and 0.4% year-on-year growth. Assets Quality Ratios 8% 6% 4% 2% 0% 31.30% 4.88% 3.84% 23.41% 3.77% 2.82% 2.85% 18.71% 15.56% 2.52% 1.94% 1.84% 12.23% 1.19% IIQ 2012 IIIQ 2012 IVQ 2012 IQ IIQ NA(w/o Commitments) /Total Lns. Total Class Lns /Total Lns. Total Class+OREO /Tier 1+ALLL 1.63% 40% 32% 24% 16% 8% 0% Mercantil Commercebank N.A. Consolidated (In millions of US$) Jun. Mar. Jun Total Assets 6,997 6,724 6,765 Investments Portfolio 2,176 2,170 2,385 Loan Portfolio 4,608 4,342 4,166 Deposits 5,465 5,407 5,433 Investments Sold under Repurchase Agreements Shareholders Equity Income net Quarter Income net Semester Figures presented according to accounting principles generally accepted in the United States (USGAAP ) Nonperforming assets (non-interest earning loans and assets received in lieu of payment) fell US$ 15 million during the quarter and US$ 105 million compared to Nonperforming assets accounted for 1.0% of total assets, 0.3% down on the previous quarter. The ratio of nonperforming loans to total loans fell from 1.8% in 1Q to 1.2% in 2Q. At 30,, the Bank s equity totaled US$ 719 million, down US$ 8 million (1.1%) quarter-over-quarter, mainly due to US$ 9 million in quarterly income and a US$ 17 million decline from adjusting availablefor-sale investments to their market value. At 30,, the equity to assets ratio is 10.3% and the equity to risk-based assets ratio is 16.2% (9.5% and 17.3% at 30, 2012), based on the standards of the Office of the Comptroller of the Currency (OCC). In 2Q, net income was US$ 9 million, representing US$ 2 million (24.3%) year-on-year growth and attributable mainly to a US$ 8 million reduction in the loan portfolio provisioning requirement and a US$ 1 million (24.5%) increase in corporate income tax expenditure to US$ 5 million in the second quarter of. In semi-annual terms, net income of US$ 19 million reflects a US$ 6 million (42.3%) year-on-year increase. This growth is attributed mainly to the US$ 16 million reduction in the loan portfolio provisioning requirement and US$ 3 million (42.3%) increase in tax expenditure to US$ 11 million at the close of the first half of. 19

20 Mercantil Seguros 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% In 2Q, premium income registered 61.5% growth to Bs 2,373 million from Bs 1,470 million at the close of 2Q At the close of May, this subsidiary was the country s second insurance company in terms of net collected premiums, with a market share of 12.0% Total Assets stood at Bs 8,040 million at 30, reflecting 7.6% quarter-over-quarter growth. The Company s registered Bs 2,498 million in equity, meeting the statutory solvency requirements in place. The figures presented include all the mandatory and voluntary reserves required to guarantee the company s operations, including outstanding claims reserves and end-of-period payments. Evolution of Net Collected Premiums and Technical Result 1, % 1,563 2, % 33.1% ,099 2, % 12.4% IIQ 2012 IIIQ 2012 IVQ 2012 IQ IIQ Premiums Received Net Technical Result Technical Result / Total Income Mercantil Seguros C.A. Consolidated (In million of Bs. and US$) US$ Jun. Jun. Mar. Jun Total Assets 1,280 8,040 7,475 5,506 Investments suitable for representing Technical Reserves 945 5,938 4,534 3,488 Investments not-suitable for representing Technical Reserves 165 1,035 1,898 1,322 Shareholders Equity 398 2,498 2,163 1,628 Income net Quarter Income net Semester Premiums Received Net Quarter 378 2,373 2,099 1,470 Premiums Received Net Semester 751 4,472 3,105 Historic figures in accordance with the standards of the Venezuelan Superintendency of Insurance Activity (Sudeseg, for its abbreviation in Spanish) At 30,, the company s investment portfolio was Bs 6,973 million (8.4% up on the previous quarter). Total investments representing technical reserves reached Bs 5,938 million (31.0% higher than the figure for the previous quarter and 70.2% more than at the close of 2012), while liquidity levels amply meet all the statutory requirements on commitments towards policyholders, insurance brokers and reinsurers. In 2Q, the technical result closed at Bs 48 million, with a combined operating ratio of 97.7%. Net quarterly income in 2Q rose to Bs 322 million (62.0% more than in 2Q 2012). The claims ratio was 65.6% (62.1% in 2012). In semi-annual terms, the technical result closed at Bs 91 million, with a combined operating ratio of 97.6%. The net technical result for 1H was Bs 514 million, 67.1% higher than in 1H The claims ratio improved to 65.7% at the end of the first half of (63.0% at 30, 2012). 20

21 Private Banking and Wealth Management The private banking and wealth management business is comprised of: trust services, securities brokerage, mutual fund and portfolio management services. Net assets under management recorded off-balance sheet at 30, reached Bs 42,453 million (US$ 6,756 million) 1, representing a 8.8% quarter-over-quarter increase and 51.3% year-on-year growth. They are broken down as follows: TOTAL ASSETS UNDER MANAGEMENT (In millions of Bolivars and Dollars, except percentages) March 2012 Jun. 13 vs. Mar.13 % Jun. 13 vs. Jun. 12 % Trust Funds 16,380 15,104 11, Mutual Fund 1,456 1, Brokerage 10,365 9,592 5, Financial Advisory 2,914 2,675 1, Custody of Securities Trading 11,338 10,358 9, Total Private Banking and Wealth Management Bs. 42,453 39,031 28, Total Private Banking and Wealth Management US$ 6, , , Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February During the second quarter of, the trust fund managed Bs 16,380 million in assets, which reflects quarter-over-quarter growth of 8.4% and yearon-year growth of 46.2%. At 30,, Mercantil's trust fund ranked second in the private banking sector and fourth in the fiduciary market in Venezuela. At the close of, Mercantil maintained its position as Venezuela's mutual fund industry leader. Mutual fund assets under management grew 11.9% and 50.6% compared to the previous quarter and 2012, respectively, reaching Bs 1,456 million. Mercantil offers its clients investment products and services (as broker-dealers and investment advisers) in global financial markets. At the close of, the total value of client assets was Bs 13,279 million, 8.2% up on the close of March 2012 (up 93.6% year-on-year). 21

22 Corporate Events Alejandro González Sosa retired as Executive President of Mercantil Alejandro González Sosa retired from his position as Executive President of Mercantil Servicios Financieros following an outstanding 32-year career with the institution. Alejandro leaves taking with him a myriad of memories and a wealth of experience accumulated from working with so many people whose input over the years contributed to his brilliant career which melds seamlessly with our corporation's history. As a board member of Mercantil Servicios Financieros and Mercantil Banco, he will retain his links to the organization and follow its evolution closely. Mercantil Capital Markets (Panamá) demonstrates its faith in Latin American capital markets Mercantil Servicios Financieros opened Mercantil Capital Markets (Panamá), an investment management and securities company specializing mainly in Latin American capital markets, created to provide its clients with investment opportunities through a range of quality products and services spanning securities trading, mutual funds, interest income financing, indexed financial asset operations and securities custody management. Mercantil Capital Markets (Panamá) has innovative attributes such as remote affiliation and an online financial information module. These can both be accessed from its website: Mercantil Banco Universal and Mercantil Seguros signed Collective Bargaining Agreement Mercantil Banco Universal and Mercantil Seguros signed their Collective Bargaining Agreements for a three-year period and will benefit over 8,900 employees. Negotiations evolved within a respectful and constructive environment that has characterized relations between the Unions, National Federation of Workers and the companies. The new Collective Bargaining Agreements include a series of improvements in terms of health, education, family security and socioeconomic benefits. These include an increase in insurance cover for Hospitalization, Surgery and Maternity, a new post-vacation bonus, increase in educational aid for the children of employees sons and more further education scholarships for both employees and their children, among others. Mercantil Seguros launched Twitter account In, Mercantil Seguros opened a new communication channel to inform its customers via Twitter about the products, services and activities will work in perfect conjunction with the channels already used by the company, one of which is its website Mercantil Bank (Schweiz) AG celebrates its 25th anniversary In May 1988, Mercantil Bank (Schweiz) AG began its operations in Zurich, Switzerland under the name BMS Finanz AG, an organization dedicated to private banking and trade finance activity between Latin America, Europe, North America and Asia. In February 2000 it obtained a license to operate as a commercial bank and became the first Latin American bank to settle in Switzerland. Mercantil's presence through Mercantil Bank (Schweiz) AG in Zurich, Switzerland, one of the most significant financial centers in the world, is an important step towards achieving its goal to serve its customers in important global markets, particularly in the areas of Private Banking and Wealth Management. During the past 25 years, the professionalism and dedication of the employees of Mercantil Bank (Schweiz) have strengthened the brand's reputation and customer loyalty to become a recognized provider of banking and investment services in Switzerland for its customers. Among the reasons for the institution's success are its high quality and professionalism, the efficiency and experience of its customer service, product and back office teams, its robust central system, and management's ability to anticipate customers' needs and exceed their expectations in terms of service. The commitment of its staff towards service is fundamental in that the institution's business strategy is focused on Private Banking and Wealth Management. Mercantil Merinvest's Web presence Mercantil Merinvest, a subsidiary of Mercantil Servicios Financieros, launched its website Mercantil Merinvest is the company within the Mercantil Services Financieros group that provides investment banking activity in the Venezuelan market. It includes: Mercantil Merinvest Casa de Bolsa, which is the securities company founded in 1989, and Mercantil Sociedad Administradora de Entidades de Inversión Colectiva, C.A., which since 1995 has had a successful track record as a mutual fund administrator in Venezuela. The website contains financial information and a description of the investment products available, such as: Portafolio Mercantil de Inversión, Plan Crecer Mercantil, Cuenta Corretaje de Inversión. Mercantil Commercebank s Mobile Banking application and Mobile Check Deposit In May, Mercantil Commercebank launched its new mobile banking application Mercantil Mobile for personal accounts, offering customers a convenient, easy and secure way to bank on the go. The application is available for iphone, ipod touch and Android mobile devices. Mercantil Mobile features include view accounts activity in real time, deposit checks using the camera on your mobile device (Mobile Check Deposit), and transfer funds between Mercantil Commercebank accounts. Customers can also search for transactions by category and locate Mercantil Commercebank Banking Center or ATM, anytime, anywhere. 22

23 New Measures announced for the Venezuelan Economy The Ministry of Finance and the Venezuelan Central Bank issued an Exchange Agreement on forex auctions under the Complementary System for Foreign Currency Administration (SICAD). The Ministry of Finance and the Venezuelan Central Bank (BCV, for its abbreviation in Spanish) issued an Exchange Agreement on special auctions of foreign exchange to be regulated through SICAD (for its abbreviation in Spanish). The auctions may take place with positions held by: i) individuals and legal entities belonging to the private sector, ii) the Republic, and iii) the Venezuelan Central Bank. Individuals and legal entities are eligible to buy or sell currency under SICAD through full-service banks and microfinance banks. The Venezuelan Central Bank will announce the terms and conditions of the calls and the special auctions. Foreign currency will be paid out to the bidders by the authorized institutions after receiving notification from the Venezuelan Central Bank of the results of the amounts awarded through the auctions. Individuals may purchase foreign currency for: i) Expenses incurred for travel abroad, ii) Expenses incurred for overseas studies, iii) Expenses related to expenses incurred for healthcare, scientific research, sports, culture and other urgent cases, and iv) Payment of goods required for the provision of professional services. Legal entities may purchase foreign currencies for the purposes stipulated in the calls for auction related to imports of goods and services for strategic sectors, or for specific economic regions. Awards and Acknowledgements Mercantil Servicios Financieros included on The Banker magazine s ranking of "Top 500 Banking Brands" The Banker magazine included Mercantil Servicios Financieros among the world's Top 500 Banking Brands. Compared to 2012, Mercantil Servicios Financieros rose 43 positions to 312. It is also 97th on the list of the 300 fastest growing institutions in terms of market value rated according to the compound annual growth rate over the last 6 years. It is the only Venezuelan company in this ranking. Mercantil Banco Universal selected as Venezuela s Best Trade Finance Bank. Global Finance magazine awarded Mercantil Banco Universal as the Best Consumer Trade Finance Bank in Venezuela. Global Finance's selection process took into consideration the volume of transactions, range of global coverage, customer services, competitiveness in prices, development of new businesses, and technological innovation. Mercantil Banco Universal and Mercantil Seguros among the 100 most outstanding brands in In May, Gerente magazine which specializes in financial and corporate affairs, published the results of its survey of the 100 brands that executives prefer in Venezuela. Six hundred executives from difference sectors of the Venezuelan economy took part in the survey. Mercantil Banco Universal is the leading bank for the sixth consecutive year in the banking sector with 30% of preference and Mercantil Seguros is the second insurance company with 20% of preference. Global Economic Climate The threats and challenges that loomed over global economic growth and stability during the first quarter have not disappeared. The recession in Europe continues to affect the course of global economic activity and a number of specific issues are still to be resolved in the countries of the European periphery. Moreover, new challenges to global financial markets have arisen during the second quarter as a result of a still uncertain reversal of the Fed's monetary policy and visibly slower growth of the emerging countries. The global economy is, however, still showing some signs of improvement with the reduction of financial tensions and more stable economic growth in the United States. The Federal Reserve's proposed solution, along with doubts over the ability of the emerging economies (especially China) to grow, brought about a change in markets towards the end of the second quarter. The Fed's announcement that it might reduce bond purchase towards the end of if macroeconomic conditions continue to evolve favorably, took financial markets by surprise. Initially there was a widespread upturn in volatility worldwide which affected the emerging economies in particular. Capital flows to emerging markets showed signs of a reduction, stock market prices fell and growth expectations in these economies are no longer as strong as they were following an apparent slowdown in the second quarter. A noteworthy depreciation of currencies in some Latin American, African and Asian economies versus the dollar has revived fears over the sustainability of the current account deficit in some of those economies. That is certainly the case with South Africa, Turkey and India, and it makes them more vulnerable to capital flight. Nor have recent spates of socio-political instability in Brazil or Turkey helped. In Turkey, the internal conflicts faced by the government and society, along with the impact of the Fed, have highlighted those countries' weakest points: strong dependence on external capital flows (essential for funding a current account deficit of around 6%) and inflationary tensions. Brazil, also affected by manifestations of popular discontent, has little room for fiscal or monetary maneuver smoothen both social tensions and the complex macroeconomic situation faced due to rising inflation and an incipient upturn in growth. 23

24 IIQ08 IIIQ08 IVQ08 IQ09 IIQ09 IIIQ09 IVQ09 IQ10 IIQ10 IIIQ10 IVQ10 IQ11 IIQ11 IIIQ11 IVQ11 IQ12 IIQ12 IIIQ12 IVQ12 IQ13 IIQ13 The Chinese economy, with 7.7% economic growth reported in the first quarter of, possibly slowed down in the second quarter as a result of its banking system's temporary liquidity crunch. In Russia, first quarter growth of 1.6% seems to have repeated itself in the second quarter with a tendency for industrial production to drop and scant enthusiasm in private investment (even though unemployment is still falling, reaching 5.2% in May). Lastly, given its global importance, India's economic growth has also been slowing down. From 4.7% growth in the first quarter, India faced problems in the industrial sector with 2.3% growth in April. India, among the major emerging countries, is the one that has accumulated the highest current account and fiscal imbalances and is facing a difficult political consensus to drive forward its structural reforms. Treasury Rate 10 Years Source: Bloomberg U.S. Economic Climate By contrast with the still somber outlook in the Eurozone and the slowdown perceived in some emerging economies, during the second quarter the U.S. economy continued to grow, dissipating any threat of a slump. The best news this quarter was in relation to private consumer spending, retail sales in particular, closing May with a year-on-year increase of 4.3%. The ratio of inventories held by chains of wholesale businesses reported in April and May fell 0.1 and 0.5 respectively, which is consistent with a higher sales volume. Higher consumer spending, in the first quarter is confirmed by the consumer confidence index reported by the University of Michigan which registered 84.1 points in (versus 78.6 points in 2012). Increased consumer confidence was also reflected by the strength of consumer credit which in May reached US$ 19.6 billion, a 5.8% rise compared to May The expansion of economic activity in the second quarter was reflected by improvements in the job market. Although unemployment closed at the same level as the first quarter (7.6%), on average, each month 195,000 jobs were created. Although job creation in the public sector is still falling, increased jobs in the private sector has more than offset this fall. In this environment where a recovery in the job market seems robust, there is nevertheless a degree of uncertainty over the calendar the Fed has established to bring its monetary policy back on track gradually. On 19, the president of the Federal Reserve proposed a possible calendar for withdrawal from the securities purchase programs that would begin towards the end of and end in mid 2014, provided the development of the job market is still positive. Specifically, the Fed made the end of the program conditional upon an improvement in the rate of unemployment from 7%; and subsequent interest hikes dependent on an employment rate of 6.5%. A more conservative fiscal policy and the need to maintain some type of growth incentive, partially explain the Federal Reserve's monetary policy to keep short-term interest rate anchored (at 0.13%). The stance of the monetary authorities can also partly be explained by low inflationary pressures shown by the U.S. economy. In the second quarter, annualized inflation may close around 1.5%, which is below its 2012 level. In the real estate market there are still clear signs of a recovery. In May, 28.6% more homes were built and sales of new homes picked up in April May and, reaching more than 497,000 homes per annum (against an average of 366,000 in 2012) and sales of existing homes reached 5,080,000 equivalent to 15.2% growth in one year. All of this has contributed to a continuous improvement in hous prices. In April, the Case-Shiller home price index showed that prices in 20 cities had risen 12% year-on-year. 4.6% 4.3% 4.0% 3.7% 3.4% 3.1% 2.8% 2.5% 2.2% 1.9% 1.6% 1.3% 1.0% 24

25 Venezuelan Economic Climate Economic activity During the second quarter of, persistent doubts over Europe's economic performance have counteracted upward pressure on the principal prices of crude oil caused by the political crisis in Egypt and positive economic indicators in the United States. As in the previous quarter, despite oil prices topping US$ 100/barrel, less currency being available from the Foreign Currency Administration System (CADIVI, for its abbreviation in Spanish) and the fact that no resources have been transferred from the Venezuelan Central Bank (BCV) to the National Development Fund (FONDEN, for its abbreviation in Spanish), the Central Bank's level of international reserves declined during the second quarter. On the fiscal front, central government's s performance during the second quarter was marked by a slowdown in public spending. On the monetary front there was a moderate improvement in money circulating in the economy, explained mainly by the decline in the amount of foreign currency assigned by CADIVI and the absence of an alternative mechanism for allocating foreign currency following the elimination of the Transactions System for Foreign Currency Denominated Securities (SITME, for its abbreviation in Spanish) at the beginning of February, despite the net restrictive effect of Open Market Operations on payment systems. Under this condition, a speed up in the growth of domestic prices was observed. Oil Sector, Reserves The price of the Venezuelan oil basket averaged US$ 100/barrel in the second quarter, down 3.6% compared to the previous quarter and 3.3% less than in Venezuelan oil production averaged 2,757 mbd in the second quarter, down a little more than 100 mbd compared to the previous quarter. However, it increased 17.6% compared to 2012 (explained largely by the method used by Bloomberg since August 2012 to gather data from OPEC which, in the case of Venezuela, comes from secondary sources since no official data is available). Nonetheless, international reserves shrank US$ 1,353 million compared to the first quarter and registered an accumulated decline of US$ 4,139 million compared to the end of 2012, closing at US$ 25,748 million in. Monetary Policy In the fiscal area, primary spending by the National Treasury reached Bs 97.9 billion, representing a decline of almost 10% compared to the previous quarter, despite having a 12.6% year-on-year grow. Discounting the high level of inflation for the period, this represents a decline of 15.4%, which contrasts clearly with the real growth of 21.7% in the second quarter of In the area of the national debt, assignments of Government Bonds and Treasury Bills totaled Bs 55.3 billion which, together with shorter maturities, resulted in Bs 45.1 billion net positive domestic indebtedness, 1.8 times the figure registered in the same period of In the money market, money in the hands of the public (M2) increased 17.9% in the second quarter, 100 basis points above the 16.9% increase reported in 2Q With respect to the handling of the monetary policy, in the second quarter the Venezuelan Central Bank was more actively involved in open market operations than in the same period of last year. However, longer maturities meant that the net effect of open market operations on payment systems expanded Bs 4.6 billion, 15% above the expansion registered in the second quarter of

26 IIQ08 IIIQ08 IVQ08 IQ09 IIQ09 IIIQ09 IVQ09 IQ10 IIQ10 IIIQ10 IVQ10 IQ11 IIQ11 IIIQ11 IVQ11 IQ12 IIQ12 IIIQ12 IVQ012 IQ13 IIQ13 Inflation As far as domestic prices are concerned, domestic inflation reached 15.1% accumulated to the second quarter, which is almost three times the variation in 2Q 2012 (3.8%). Broken down by group, the highest above-average price increases were in: Food and Non-Alcoholic Beverages (22.2%) and Restaurants and Hotels (15.3%). According to the eleven geographical locations comprising the National Consumer Price Index, the cities that underwent higher-than-the-national-average price adjustments (15.1%) were: Valencia (17%), Rest of the Country(15,5%), Maracay, Maracaibo (15,3%) y Puerto La Cruz- Barcelona (15,2%). Monetary Liquidity (M2) and Monetary Base (BM) (Annual Var.) Source: Central Bank of Venezuela and Own Calculation M2 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Monetary Liquidity Monetary Base BM 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0% 0.0% 26

27 APPENDIX I Summary of the Accounting Principles used to prepare the Financial Statements Financial statements are presented in accordance with the accounting standards of the National Securities Superintendency (SNV), in bolivars. A summary of some of the main accounting principles applied is given below: Investment Portfolio Securities Held for Trading - Unrealized gains or losses resulting from differences in market value due to market fluctuations are included in the results for the period. Available for Sale Securities Recorded at their market value. Unrealized gains or losses resulting from differences in market value and exchange rate fluctuations are included in shareholders equity. Held to Maturity Securities Recorded at their acquisition cost, adjusted for amortization of premiums or discounts. For all portfolio investments, permanent losses in market value are recorded as a charge to income in the period in which they occur. Permanent investments are investments that represent 20% to 50% stock ownership. Those greater than 50% are recorded as an equity interest and consolidated, except when control is likely to be temporary. Loan Portfolio Loans are classified as overdue 30 days after their maturity. Allowances for losses on loan portfolio are determined through a collectibility assessment that quantifies the amount to be set aside for each loan. These assessments take into account such aspects as economic conditions, credit risk by customer, credit history and the collateral received. When evaluating loans for small amounts of the same nature, these are grouped together to determine provisions. Recognition of income and expenditure Income, costs and expenses are recorded as they are earned or incurred. Interest earned on loan portfolios is recorded as income when collected. Fluctuations in the market value of derivatives are recognized in income in the period in which they occur. Insurance premiums are recorded as income when earned. Consolidation The consolidated financial statements include the accounts of Mercantil and its more than 50%-owned subsidiaries and other institutions in which Mercantil has a controlling interest. See the main subsidiaries on Page 4 and the reconciliation of their accounting standards with SNV standards on Pages 38, 40, 42. Inflation Adjustment According to SNV standards, Mercantil s financial statements, as of December 31, 1999 must be presented in historic figures. Since then Mercantil has ceased to adjust for inflation in its primary financial statements. As a result, fixed and other assets are shown at their inflation-adjusted value up to December 31, The market value determined by independent assessments is higher than adjusted cost for inflation indicated above. New additions are being recorded at their acquisition value. Differences between the accounting standards of the Superintendency of Banking Sector Institutions in Venezuela (SUDEBAN) and US GAAP The main accounting differences for the reconciliation of items under SNV and SUDEBAN for Mercantil Servicios Financieros are: Amortization of premiums or discounts of securities carried out on a straight-line basis under SUDEBAN standards and in accordance with the constant amortization rate under SNV standards. Under SNV standards, the effects of exchange fluctuations are included in the results for the period, with the exception of exchange fluctuations from available-for-sale investments and the stock trading portfolio which are included in shareholders' equity. Under SUDEBAN standards, all fluctuations are recorded in the results, with the exception of exchange fluctuations from the stock trading portfolio and the fluctuations which, as provided by the SUDEBAN exception, must subsequently be included in income when authorized by SUDEBAN. The main accounting differences for Mercantil Servicios Financieros between the above mentioned SNV standards and SUDEBAN standards are: Deferred Income Tax: US GAAP allows deferred tax to be recognized for the total amount of loan portfolio loss allowances, while SNV standards only allow recognition of allowances for loans classified as high risk and unrecoverable. Provision for assets received in lieu of payment: SNV standards stipulate a 100% allowance for real property received in lieu of payment after one year from the date of incorporation; under US GAAP no amortization deadlines are established. (See SNV - USGAAP earnings reconciliation, Page 40). 27

28 APPENDIX II MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED BALANCE SHEET UNAUDITED FIGURES (In millions of Bolivars and Dollars, except percentages) US$ 1 March Jun. 13 vs. Mar. 13 Jun. 13 vs. Jun. 12 Jun Bolivars % Bolivars % CASH AND DUE FROM BANKS Cash 311 1,956 2,076 1,238 (120) (5.8) Venezuelan Central Bank 3,820 24,003 25,121 11,174 (1,118) (4.5) 12, Venezuelan Banks and Other Financial Institutions (245) (85.4) Foreign and Correspondent Banks 234 1,472 1,588 1,127 (116) (7.3) Allowance for Cash and Due from Banks 365 2,291 1,372 1, ,737 29,764 30,444 15,079 (680) (2.2) 14, INVESTMENT PORTFOLIO Investments in Trading Securities (87) (81.3) (55) (73.3) Investments in Securities Available for Sale 5,163 32,445 28,339 21,298 4, , Investments in Securities Held to Maturity 2,136 13,420 8,978 4,827 4, , Share Trading Portfolio (2) (8.3) Investments in Time Deposits and Placements 654 4,108 4, (320) (7.2) 3, Restricted Investments 176 1, ,136 51,122 42,624 27,638 8, , LOAN PORTFOLIO Current 16, ,876 91,432 71,971 9, , Rescheduled Past Due Litigation (104) (44.6) (137) (51.5) 16, ,315 92,924 73,288 9, , Allowance for Losses on Loan Portfolio (508) (3,193) (2,893) (2,409) (300) 10.4 (784) ,773 99,122 90,031 70,879 9, , INTEREST AND COMMISSIONS RECEIVABLE 197 1,235 1, LONG-TERM INVESTMENTS (65) (31.0) (15) (9.4) ASSETS AVAILABLE FOR SALE PROPERTY AND EQUIPMENT 174 1, OTHER ASSETS 558 3,505 3,373 2, , TOTAL ASSETS 29, , , ,619 17, , Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

29 APPENDIX II MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED BALANCE SHEET UNAUDITED FIGURES (In millions of Bolivars and Dollars, except percentages) US$ 1 March Jun. 13 vs. Mar. 13 Jun. 13 vs. Jun. 12 Jun Bolivars % Bolivars % DEPOSITS Non-interest Bearing 6,934 43,575 39,108 27,471 4, , Interest-Bearing 7,660 48,135 42,311 28,606 5, , Savings Deposits 7,614 47,850 45,418 29,817 2, , Time Deposits 1,513 9,506 8,560 8, DEPOSITS AUTHORIZED BY THE VENEZUELAN SECURITIES AND EXCHANGE COMMISSION 23, , ,397 94,613 13, , Publicly Traded Debt Securities Issued FINANCIAL LIABILITIES 771 4,844 3,523 2,361 1, , INTEREST AND COMMISSION PAYABLE OTHER LIABILITIES 1,857 11,657 11,219 7, , SUBORDINATED DEBT TOTAL LIABILITIES 26, , , ,342 15, , MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES SHAREHOLDERS EQUITY Paid in Capital Capital Inflation Adjustment Share Premium Capital Reserves Translation Adjustments of net Assets of Subsidiaries Abroad 476 2,993 2,992 1, , Retained Earnings 2,343 14,726 13,277 9,407 1, , Shares repurchased and held by Subsidiaries (1) (7) (7) (4) (3) 75.0 Repurchased Shares Restricted for Employee Stock Option Plan (8) (49) (49) (49) Unrealized Gain (Loss) from Adjustment on Investments Available For Sale to Market Value 207 1, TOTAL SHAREHOLDERS EQUITY 3,132 19,679 17,861 12,271 1, , TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 29, , , ,619 17, , Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

30 APPENDIX II MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED INCOME STATEMENT UNAUDITED FIGURES (In millions of Bolivars and Dollars, except percentages) Quarter Semester Ended on Ended on US$ 1 Ended on Jun Bolivars % 2012 Bolivars % Income from Cash and Due from Banks Income from Investment Securities , Income from Loan Portfolio 540 3,391 2,253 1, ,430 4,278 2, INTEREST INCOME 681 4,278 2,735 1, ,977 5,189 2, Interest for Demand and Savings Deposits 182 1, ,193 1, Interest for Time Deposits Interest for Securities Issued by the Bank Interest on Financial Liabilities INTEREST EXPENSE 193 1, ,321 1, NET INTEREST INCOME 488 3,065 1,948 1, ,656 3,669 1, Provision for losses on loan portfolio NET FINANCIAL MARGIN 417 2,623 1, ,070 3,225 1, Trust Fund Operations Foreign Currency Transactions (9) (81.8) Commissions on Transactions Commissions on Letters of Credit and Guarantees Granted Equity in Long-Term Investments (4) (23) 20 (43) (215.0) 1 40 (39) (97.5) Exchange Gains and Losses Income (Loss) on Sale of Investment Securities Other Income , TOTAL COMMISSIONS AND OTHER INCOME 190 1, ,121 1,695 1, Total insures premiums, net of claims OPERATING INCOME 655 4,117 2,786 1, ,724 5,348 3, Salaries and employee benefits 168 1, ,991 1, Depreciation, Property and Equipment Expenses, Amortization of Intangibles and Others Fees paid to regulatory agencies Other operating expenses ,775 1, TOTAL OPERATING EXPENSES 416 2,613 1, ,971 3,437 1, INCOME BEFORE TAXES AND MINORITY INTEREST 240 1,505 1, ,753 1,911 1, Total Taxes (91) (55.8) Minority Interests 0 (1) 0 (1) (2) (1) (1) NET INCOME 228 1, ,471 1,669 1, NET INCOME US$ Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

31 APPENDIX II MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED FIGURES (In millions of Bolivars) Quarter ended on Semester ended on CASH FLOWS FROM OPERATING ACTIVITIES Net income 1, ,471 1,669 Adjustments to reconcile net income to net cash provided Operating activities - Allowance for losses on the loan portfolio Depreciation and amortization Provision for interest receivable and other assets Gain on equity in long-term investment 23 (20) (1) (40) Minority interest expense Deferred Income Tax Provision for available for sale assets Accrual for employee termination benefits Payment of employee termination benefits (212) (85) (342) (153) Net change in operating assets and liabilities Interest and commissions receivables (94) (138) (340) (175) Interest and commissions payables Available for sale and other assets (260) (123) (1,102) (337) Other liabilities 560,382 (428) 561,299 1,252 Net cash provided by operating activities 562, ,179 3,126 CASH FLOWS FROM INVESTING ACTIVITIES Net change in investments securities (8,430) (3,071) (16,434) (4,272) Loans granted (10,866) (20,835) (41,964) (35,715) Loans collected 1,333 12,499 20,142 24,764 Additions to fixed assets, net of depreciation and write-offs (188) (73) (352) (100) Net cash flows from investing activities (18,150) (11,480) (38,608) (15,324) CASH FLOWS FROM FINANCING ACTIVITIES Net change in Deposits 13,669 8,748 34,460 12,779 Short-term financial liabilities 1,321 (359) 1,505 (584) Debt securities by Mercantil (58) 36 Subordinated debt Long-term financial liabilities received Long-term financial liabilities paid (25) (773) (20) (1,031) Cash dividends (559,906) (356) (559,906) (357) Net cash flows from financing activities (544,894) 7,895 (523,121) 11,829 CASH AND CASH EQUIVALENTS 1 Net increase for the period (1,025) (2,933) 2,450 (368) At the beginning of the period 34,866 18,570 31,390 16,005 At the end of the period 33,841 15,637 33,841 15, Includes: Cash and Cash Equivalents, Cash and Due from banks, Investments in time deposits and placements within 90 days maturity 31

32 APPENDIX II Capital stock MERCANTIL SERVICIOS FINANCIEROS, C.A. Statement of Shareholders Equity UNAUDITED FIGURES (In millions of Bolivars) Capital inflation adjustment Paid-in Surplus Capital Reserve s Translation adjustment of the assets In subsidiaries Abroad Retained earnings Shares repurchased held by subsidiaries Repurchased shares restricted for employee stock option plan Unrealized Gain (loss) from adjustments on investments Available for sale to market value Total Shareholders' Equity Balance as of 30, ,544 9,407 (4) (49) ,271 Net income Share repurchased 1 (3) (3) Unrealized income on Investments available for sale Translation effect of net assets in subsidiaries abroad 1 1 Balance as of September 30, ,545 10,394 (6) (49) ,333 Net income 1,508 1,508 Unrealized income on Investments available for sale Translation effect of net assets in subsidiaries abroad 5 5 Balance as of December 31, ,550 11,902 (7) (49) ,076 Net income 2,039 2,039 Cash dividends (664) (664) Unrealized income on Investments available for sale (31) (31) Translation effect of net assets in subsidiaries abroad 1,441 1,441 Balance as of March 31, ,992 13,277 (7) (49) ,861 Net income 1,432 1,432 Cash dividends Unrealized income on Investments available for sale Translation effect of net assets in subsidiaries abroad 1 1 Balance as of 30, ,993 14,726 (7) (49) 1,301 19,679 32

33 APPENDIX III MERCANTIL SERVICIOS FINANCIEROS, C.A. Summary of the Financial Statements and Ratios (In millions Dollars 1, except percentages and figures per share) March 2012 Jun. 13 vs. Mar. 12 Jun. 13 Vs. Jun. 12 % % Cash and due from banks 4,737 4,844 3,516 (2.2) 34.7 Investment Portfolio 8,136 6,784 6, Loan Portfolio Net 15,773 14,327 16, (4.5) Other assets TOTAL ASSETS 29,617 26,869 27, ASSET MANAGEMENT 6,756 6,211 6, Deposits 23,721 21,545 22, Financial Liabilities Other Liabilities 1,994 1,921 1, Shareholders Equity 3,132 2,842 2, TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 29,619 26,869 27, INCOME QUARTER Financial Margin Allowance for losses on loan portfolio Commissions and other income (44.4) (3.6) Insurance premiums, net of claims (20.3) Salaries and Operating Expenses (1.0) 2 Net Income - Quarter (37.2) 11.7 Net Income - Semester KEY FINANCIAL INDICATORS Income per share Quarter Bs/ share (37.2) 12.2 Income per share Semester Bs/ share Market price A share Market price B share Book value per share Net Income (quarter) / Average Assets (ROA) 3.4% 5.2% 3.2% (34.6) 6.3 Net Income (quarter) / Average Equity (ROE) 32.1% 47.9% 29.8% (32.9) 7.7 Net Income (semester) / Average Assets (ROA) 4.2% 3.1% 35.5 Net Income (semester) / Average Equity (ROE) 38.9% 28.4% Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February

34 APPENDIX IV MERCANTIL SERVICIOS FINANCIEROS, C.A. Consolidated Loan Portfolio by Classification (In millions of Bolivars, except percentages) By Economic Activity % March % 2012 % Commercial 44, % 39, % 30, % Consumer 13, % 12, % 8, % Agricultural 10, % 9, % 8, % Industrial 6, % 5, % 5, % Services 6, % 6, % 5, % Foreign trade 5, % 5, % 3, % Residential mortgage 4, % 4, % 3, % Car loans 2, % 2, % 2, % Construction 2, % 2, % 2, % Other 4, % 4, % 3, % 102, % 92, % 73, % % March % 2012 % By Maturity Up to six months 33, % 33, % 24, % Six months to one year 13, % 12, % 11, % One to two years 18, % 15, % 13, % Two to three years 11, % 9, % 7, % Three to four years 6, % 5, % 4, % Four to five years 6, % 5, % 4, % Over five years 11, % 10, % 7, % 102, % 92, % 73, % % March % 2012 % By Geographical Location of the Debtor Venezuela 71, % 63, % 54, % United States of America 19, % 18, % 11, % Mexico 1, % % % Colombia % % % Brazil 1, % 1, % 1, % Switzerland % % % Peru 1, % % % Other countries 5, % 5, % 3, % By Type of Risk 102, % 92, % 73, % % March % 2012 % Normal 99, % 89, % 70, % Potential % % 1, % Real 1, % 1, % 1, % High % % % Unrecoverable % % % 102, % 92, % 73, % 34

35 APPENDIX V Regulatory percentage of Mercantil Banco Universal loans by economic sector and interest rates Sector Agriculture Percentages of compliance Calculated on the average gross loans at 12/31/2012 and 12/31/2011, monthly compliance. Maximum per customer 5% of the current portfolio. It requires a minimum number of new clients. Additionally the portfolio must be quarterly classified between strategic a non-strategic sectors. The concentration in the strategic segment of the loan portfolio must not be less than 70% and medium and long-term credits less than 10% of the total agricultural loan portfolio. % of Compliance Reached % of Compliance required 24.1% % Interest Rates Set weekly by the Venezuelan Central Bank (BCV). At 06/30/ this is 13% Mortgage Calculated on the gross loan portfolio at 12/31/2012, distributed as follows: 6.0% in long term loans and 13.0% in short-term loans. Annual Compliance. 10.8% 1 - Set semi-annually by the Housing and Habitat Ministry. Set in accordance with family income of debtors, ranging between 4.66% and 10.66% Microcredits 3% Calculated on the gross loan portfolio at 12/31/2012. Monthly Compliance. 3.4% 3.0% Within minimum and maximum rates established by the Venezuelan Central Bank. At 06/30/ the rate cannot be higher than 24% Tourism It s calculated based on the average of the Loan Portfolio figures at year-end 2012 and Compliance must be reached by December 31, (1.5% semiannually). 2.2% 2.0% The Venezuelan Central bank establishes a preferential rate for the sector on a monthly basis. As of 30,, the rate is 10.12% and can be as low as 7.12% in some cases in accordance with the Law for Tourism Loans. Industrial Calculated on the gross loan portfolio at 12/31/2012. Monthly Compliance. 11.6% 10.0% Set by the Venezuelan Central Bank at 19%. 1 Includes Bs 1,757 million in Agricultural Bonds, attributable to mortgage portfolio growth 35

36 APPENDIX VI Summary of Financial Indicators Quarter Ended on Semester Ended on US$ Jun. 13 Jun. 13 Jun. 12 Jun. 13 Jun. 12 Net income in billions of Bolivars (millions of US$) 228 1, ,471 1,669 Mercantil s stock indicators Class A share: Number of outstanding shares 3 (Issued shares minus repurchased shares) 59,401,343 59,401,343 Market Price Average daily volume (# of shares) 3,066 8,601 Market Price / Book value per share Market Price / Period Net Earnings per share Dividends received in Cash / Market price A Class B share: Number of outstanding shares 3 (Issued shares minus repurchased shares) 42,813,618 42,813,618 Market Price Average daily volume (# of shares) 5,712 1,704 Market Price / Book value per share Market Price / Period Net Earnings per share Dividends received in Cash / Market price B Book value per share in Bs (Equity / # of outstanding shares) Total weighted outstanding shares 99,161,734 99,196,500 99,161,953 99,197,408 Earnings per share (Net Result/ weighted outstanding shares) Market Quote Mercantil Class A and Class B Shares vs. Caracas Stock Exchange (CSE) Index Composition of Net Income by Business Segments Price MVZ/A Adjusted CSE Price MVZ/B jun-12 sep-12 dic-12 mar-13 jun % 31.9% 1.5% 65.8% 80.2% 18.3% IIQ 2012 IIQ Banking Insurance Asset Management 1 Figures in US$ given for reference purposes only; Balance Sheet figures translated at the closing exchange rate and income at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February Issued shares minus repurchased shares. 3 Stock dividends paid are considered as issued shares for comparison purposes. 36