1. business and industrial
2. company
3. annual report

GRUPO FINANCIERO GALICIA S.A.
ANNUAL REPORT
16TH FISCAL YEAR: JANUARY 2014 / DECEMBER 2014
Grupo Financiero Galicia S.A.
Grupo Financiero Galicia S.A. (hereinafter “Grupo Financiero Galicia”) was constituted in
1999, as a financial services holding company organized under the laws of Argentina. Its most
important asset is the 100% interest in Banco de Galicia y Buenos Aires S.A. (hereinafter
“Banco Galicia” or “the Bank”).
Founded in 1905, Banco Galicia is one of the largest private-sector banks in the Argentine
financial system, and one of the leading providers of financial services in the country. In its
capacity as a universal bank, and through affiliated companies and various distribution
channels, Banco Galicia offers a full spectrum of financial services to more than 7.9 million
customers, both individuals and corporations. Banco Galicia operates one of the most
extensive and diversified distribution networks among private-sector banks in Argentina,
offering more than 425 points of contact with customers, including traditional branches and ebanking facilities, together with other 297 service centers that correspond to regional creditcard companies and 95 that belong to Compañía Financiera Argentina S.A. (“Compañía
Financiera Argentina” or “CFA”). Banco Galicia customers also have access to telephonebanking services and to bancogalicia.com and Galicia Móvil, the first financial Internet portal
and the first payment service through cellular telephone, respectively, established by a bank in
Argentina. Furthermore, Banco Galicia is the Argentine leading bank in terms of importance on
social networks.
Contents
 Financial Highlights
 Letter from the Chairman
 Board of Directors and Executive Officers
 Annual Report
 The Argentine Economy, the Financial System and the Insurance Industry
 Review of Operations
 Aspects related to Corporate Organization, Decision Making, Internal Control, and
Compensation Policy for Directors and Officers
 Management’s Discussion and Analysis
 Report on the Degree of Compliance with the Code on Corporate Governance
Grupo Financiero Galicia Annual Report Fiscal Year 2014 1
FINANCIAL HIGHLIGHTS
December 31,
In millions of Pesos, except as stated otherwise
2014
2013
2012
3,338
1,300
2.57
1,824
1,261
1.47
1,336
1,241
1.08
107,314
66,608
64,666
10,246
1,300
7.88
83,156
55,265
51,395
6,947
1,300
5.34
63,458
42,593
39,945
4,870
1,241
3.92
39.07
3.85
13.56
9.55
32.47
2.91
12.75
8.35
32.12
2.80
12.11
7.67
8.79
8.78
9.20
8.78
9.11
9.03
8.552
6.518
4.917
For the Fiscal Year
Net Income
Average Shares Outstanding (in millions)
Earnings per Share (1) (2)
(1)
At Year-end
Assets
Loans, Net
Deposits
Shareholders’ Equity
Shares Outstanding (in millions)
Book Value per Share (2)
(1)
Selected Ratios (%)
Return on Average Shareholders’ Equity
Return on Average Assets (2)
Financial Margin (3)
Shareholders’ Equity to Total Assets
Market Share
(2)
(4)
(%)
Deposits from the Private Sector
Loans to the Private Sector
Exchange Rate
Pesos per U.S. Dollar
(1)
(2)
(3)
(4)
In fiscal year 2013, 58.9 million share increase is included in the calculation as from September 1, 2013 related to the merger
with Theseus S.A. and Lagarcue S.A.
Calculated based on net income.
Financial income less financial expenses, divided by average interest-earning assets.
The market share corresponds to deposits and loans in the Argentine market and is calculated based on daily information on
deposits and loans in the Argentine financial system, prepared by the Argentine Central Bank using end-of-month balances.
2 Grupo Financiero Galicia Annual Report Fiscal Year 2014
LETTER FROM THE CHAIRMAN
To our Shareholders,
I am pleased to address you in order to submit the Annual Report related to the 16 th Fiscal
Year of Grupo Financiero Galicia S.A. as of December 31, 2014.
In 2014, the international environment was characterized by a lower volatility in international
financial markets, a global U.S. Dollar value appreciation and a decline in the prices of
commodities, which caused a deterioration in the exchange terms in our region. This situation
adversely affected Argentina and, in addition to certain domestic imbalances, determined a
weak performance of the economic activity.
For 2015, the economic scenario will be mainly influenced by the expectations raised by the
electoral process and its possible impact on the exchange rate, tax and monetary policy. The
international environment could also have effects as a result of the pressures on the region’s
currencies and on the prices of commodities, especially soybean and oil. At the same time, it
will be very important to follow the evolution of the Brazilian economy, Argentina’s main
business partner.
In fiscal year 2013, Grupo Financiero Galicia recorded profits for Ps. 3,338 million, higher than
Ps. 1,824 million obtained in fiscal year 2013. This profit was mainly the result of Grupo
Financiero Galicia S.A.’s interest in Banco Galicia, our main subsidiary.
The higher consolidated income for the period primarily resulted from the increase in net
financial income (+38%) and net income from services (+34%), which exceeded the increase
in administrative expenses (+24%), thus reflecting an improvement in the efficiency ratio.
The credit exposure to the private sector exceeded Ps. 79,000 million, showing a 20%
increase during the fiscal year. Meanwhile, deposits reached Ps. 64,666 million, showing a
26% increase. The Bank’s estimated market share as of December 31, 2014 was 8.8% both
in loans to the private sector and in deposits from the private sector.
These excellent results of our main subsidiary were better than expected at the beginning of
2014, as a result of an effective expense control program, along with a very good
performance of the portfolio quality and the passion for meeting the customers’ needs within a
challenging economic environment and increasing regulatory pressures.
In this respect, during the fiscal year, new quotas were established for financing under credit
lines for the productive investment, maximum interest rates were fixed to grant personal loans
and minimum interest rates were fixed for certain individuals’ time deposits. Limits were set
on the position in foreign currency, increasing the contribution banks should make to SEDESA
and minimum capital requirements. Also, the obligation to require the Argentine Central Bank’s
authorization for higher commissions was established. For these reasons, we should redouble
our efforts to keep a profitability that allows us to increase the regulatory capital in line with
the loans increase and, therefore, Argentina’s economic activity.
During the fiscal year, the process whereby Grupo Financiero Galicia reached the 100%
interest in Banco Galicia was completed by withdrawing Bank’s shares from the public
offering. This allows finishing a stage that began in 2000, which was intended to rationalize
costs and streamline operations, as well as to enable all the Bank’s shareholders to take part
in those supplementary and akin businesses to the strictly banking business that the Bank is
limited to carrying out by itself or through equity investments in other companies.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 3
In turn, the insurance business, in which the company takes part through its subsidiary
Sudamericana Holding S.A., continued showing a favorable evolution, generating income for
Ps. 234 million, a 31% increase as compared to the previous fiscal year, mainly resulting from
a 33% rise in the volume of premiums.
Grupo Financiero Galicia’s Board of Directors will propose the Shareholders’ Meeting to pay
dividends in cash for Ps. 100 million.
To conclude, on behalf of the Company’s Board of Directors and on my own behalf, I would
like to thank over 12,000 employees for their commitment, enthusiasm and effort, suppliers
for their support, the shareholders for the ongoing trust and customers, focus of our decisions,
for their loyalty.
Eduardo J. Escasany
Chairman of the Board of Directors
Autonomous City of Buenos Aires, March 10, 2015
4 Grupo Financiero Galicia Annual Report Fiscal Year 2014
GRUPO FINANCIERO GALICIA S.A.
BOARD OF DIRECTORS
Eduardo Escasany
Chairman
Pablo Gutiérrez
Vice-Chairman
Abel Ayerza
Federico Braun
Juan M. Cuattromo
Antonio Garcés
C. Enrique Martin
Luis Oddone
Silvestre Vila Moret
Directors
María O. Hordeñana de Escasany
Sergio Grinenco
Alejandro Rojas Lagarde
Luis Monsegur
Alternate Directors
SUPERVISORY SYNDICS’ COMMITTEE
Norberto D. Corizzo
Luis A. Diaz
Enrique M. Garda Olaciregui
Syndics
Miguel N. Armando
Fernando Noetinger
Horacio Tedin
Alternate Syndics
EXECUTIVE OFFICERS
Pedro Richards
Managing Director
José L. Gentile
Chief Financial and Accounting Officer
Grupo Financiero Galicia Annual Report Fiscal Year 2014 5
BANCO DE GALICIA Y BUENOS AIRES S.A.
BOARD OF DIRECTORS
Sergio Grinenco
Chairman
Pablo Gutiérrez
Vice-Chairman
Guillermo J. Pando
Secretary Director
Luis M. Ribaya
Raúl H. Seoane
Pablo M. Garat
Ignacio A. González
Directors
Enrique García Pinto
C. Enrique Martin
Juan C. Fossatti
Augusto R. Zapiola Macnab
Oscar J. Falleroni
Alternate Directors
SUPERVISORY SYNDICS’ COMMITTEE
Enrique M. Garda Olaciregui
Norberto D. Corizzo
Luis A. Díaz
Syndics
Fernando Noetinger
Miguel N. Armando
Horacio Tedin
Alternate Syndics
EXECUTIVE OFFICERS
Chief Executive Officer
Retail Banking Division Manager
Wholesale Banking Division Manager
Financial Division Manager
Comprehensive Corporate Services Division Manager
Organizational Development and Human Resources Division
Manager
Credit Division Manager
Planning Division Manager
Risk Management Division Manager
Institutional Relations Division Manager
Legal Advisory Division Manager
Audit Division Manager
Anti-Money Laundering Unit Division Manager
Compliance Division Manager
Board of Directors Secretariat
6 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Daniel Llambías
Fabián Kon
Juan Sarquís
Pablo León Castro
Gastón Bourdieu
Rafael Bergés
Marcelo Poncini
Bruno Folino
Juan L'Afflitto
Pablo Firvida
María Elena Casasnovas
Omar Severini
Claudia Estecho
Carlos Dieta
Patricia Lastiry
SUDAMERICANA HOLDING S.A.
Sebastián Pujato
Chief Executive Officer
GALICIA ADMINISTRADORA DE FONDOS S.A.
SOCIEDAD GERENTE DE FONDOS COMUNES DE INVERSION
Alejandro Villarroya
Chairman
TARJETAS REGIONALES S.A.
Miguel Peña
Chief Executive Officer
COMPAÑÍA FINANCIERA ARGENTINA S.A.
Diego Rivas
Chief Executive Officer
GALICIA WARRANTS S.A.
Santiago Pasman
Chief Executive Officer
Grupo Financiero Galicia Annual Report Fiscal Year 2014 7
ANNUAL REPORT
The Board of Directors submits to the Shareholders for their consideration, the Annual Report,
the Financial Statements and the Supervisory Syndics Committee’s Report for the 16 th fiscal
year of Grupo Financiero Galicia S.A. as of December 31, 2014.
8 Grupo Financiero Galicia Annual Report Fiscal Year 2014
The Argentine Economy, the Financial System and the Insurance Industry
The Argentine Economy
Year 2014 was characterized by the low volatility in the international financial markets.
However, the gradual withdrawal from the U.S. Federal Reserve monetary stimulus, along with
a marked decline in the prices of commodities and, particularly, oil, had an adverse impact on
the value of higher risk assets. Whereas the stock exchanges of developed countries
improved, on average, by 2%, stock exchanges of emerging markets dropped by almost 5%.
Once the Federal Reserve’s asset purchase program was completed, the consolidation of the
U.S. economy recovery laid the foundations for the market to speculate about a rise in the
reference rate. These expectations made the prices of commodities fall by about 18% and,
especially, the oil price, which decreased by 46% in 2014. The better economic outlook in
developed countries, in general oil importers, along with a higher expected return on bonds of
those countries, caused a turnaround of capital flows in emerging markets and a high pressure
on their currencies. In contrast with this capital movement, a drop of around 80 basis points
(“b.p.”) was noted in the interest rate of 10-year U.S. bonds, which ended 2014 with a return
of about 2.2%.
In connection with the global activity level, developed economies grew at an estimated 1.8%
rate in 2014, being worth noting the United States of America and the United Kingdom, with a
2.2% and 3.2% growth, respectively. Europe would have ended 2014 with a 0.8% increase
in its product, resuming the positive trend after a 0.4% drop in 2013. Additionally, the
emerging economies decelerated their pace of expansion, as they grew by 4.4% in 2014, as
compared to 4.7% in 2013.
In brief, during 2014, the international environment was characterized (especially towards the
second part of the year) by a more expensive U.S. Dollar globally, a moderate turnaround of
the capital flow in emerging economies and a deterioration in the exchange terms of the
region. In this regard, the prices of Argentina’s major export products ended the year with an
average 10% decrease, when compared to 2013, according to the Commodity Index prepared
by the Argentine Central Bank.
From the domestic standpoint, 2014 was a year in which the economy absorbed certain
deterioration from the international environment and a partial readjustment of relative prices
locally. Both factors determined a weak performance of the economic activity in general.
Some private estimates reflect a contraction of about 2.5% in 2014, a figure that is in
contrast with the 3.2% expansion in 2013. Although the activity level dropped throughout the
year, it was worse during the second half of the year, which would have a negative drag
higher than 1% for 2015. It is noteworthy that the economic activity figures prepared by the
Argentine Institute of Statistics and Census (“INDEC”) would be compatible with a nil growth
of the Gross Domestic Product (GDP) in 2014, although there is no information available yet
regarding the fourth quarter of the year.
The general weakness of the economic activity began having a negative impact on
employment dynamics. The unemployment rate increased from 6.4% of the economically
active population for the fourth quarter of 2014 to 6.9% for the same quarter of 2013.
In monetary terms, the main monetary aggregates kept a moderate pace, standing again below
the nominal growth of the economy. The monetary base ended the year with an annual 22.5%
expansion, 1.3 percentage points (p.p.) below the 2013 growth. Particularly, this monetary
aggregate increased by Ps. 85,368 million, which is almost exclusively due to the increased
Grupo Financiero Galicia Annual Report Fiscal Year 2014 9
financing to the National Treasury (Ps. 161,508 million) and, to a lesser extent, foreign
currency purchases (Ps. 48,334 million), unlike what happened in 2013, when the Argentine
Central Bank was a clear seller of foreign currency. In addition, repo transactions decreased by
Ps. 26,809 million, while transactions related to Argentine Central Bank Bills and Notes
(Lebacs and Nobacs, respectively) decreased by Ps. 94,639 million. This trend was reflected
in the performance of the private-sector M2 (money in circulation and deposits in savings and
checking accounts that belong to the private sector), which grew 25.6%, as compared to the
24.6% growth recorded in 2013. Moreover, total M2 (including deposits from the public
sector) ended 2014 with a 29.5% growth, after increasing by 27.1% annually in 2013.
In relation to the changes in domestic interest rates, they evolved at the pace of the monetary
policy decisions made during the first months of the year. Although interest rates on time
deposits ended the year at levels similar to those of December 2013, the increase noted
during the first half reflected the exchange stress in late 2013 and early 2014, and the
increase in Argentine Central Bank’s reference rates for the first months of 2014. During the
second half, the exchange stability and the banks’ restored liquidity allowed alleviating the
pressure on market rates. Particularly, Badlar rate reached a maximum 26.3% in April during
the year, whereas its average value stood at near 20% in December.
The reference exchange rate established by the Argentine Central Bank increased from Ps.
6.518 to Ps. 8.552 per U.S. Dollar between December 30, 2013 and December 30, 2014,
equivalent to a 31.2% depreciation; while the average exchange rate increased from Ps.
6.319 to Ps. 8.550.
Inflation in 2014 was 23.9%, as measured by the National and urban Consumer Price Index
(IPCNu, as per its initials in Spanish) of the Argentine Institute of Statistics and Census (INDEC
as per its initials in Spanish), above the 10.9% reported by the Consumer Price Index (“CPI”)
of the INDEC in the previous year. In turn, the Domestic Wholesale Price Index (IPIM as per its
initials in Spanish) recorded a 28.3% increase. It is noteworthy that there are also private
estimates of inflation that determine a rate considerably higher than the one mentioned above.
In the fiscal area, tax revenues, including social security, accumulated an annual marked
36.3% increase in 2014, as compared to the inter-annual 25.9% expansion in 2013. On the
other hand, primary expenditures increased by 43.4% on an annual basis in 2014. As a result,
the Argentine public sector recorded a primary deficit amounting to Ps. 38,562 million,
equivalent to 0.9% of the Gross Domestic Product (“GDP”), which entails a decline as
compared to the primary deficit amounting to Ps. 22,479 million in 2013 (0.7% of GDP). After
interest payments for Ps. 71,158 million, the financial deficit amounted to Ps. 108,720
million, equivalent to 2.5% of GDP.
Regarding the external sector, during 2014, the balance of payments on current account
would have reached a deficit amounting to about US$ 5,500 million (the accumulated deficit
for the third quarter of the year amounted to US$ 3,266 million). In this regard, the estimated
deficit for the year would represent a slight decline as compared to that recorded in 2013,
which amounted to US$ 4,786 million. The imbalance would represent 1 p.p. measured in
terms of GDP. This decline was partly due to a decrease in the year’s balance of trade surplus,
the positive balance of which amounted to US$ 6,687 million, US$ 1,317 million lower than
the amount reached in 2013.
Exports decreased by 11.9%, as compared to the previous year, due to the near 9.8% decline
in volumes, reinforced by a 2.5% drop in prices. This decline in the volumes exported
represents a significant drop, as compared to the 3% increase noted in 2013.
10 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Imports showed a strong contraction, as compared to the previous year, as they decreased by
about 11.4% annually, after increasing by 8.3% in 2013. This contraction was due to a
decline of about 12% in the volumes acquired, partially moderated by a 1% rise in prices. The
purchases of automotives and parts were the two items that decreased most, 49% and 21%,
respectively.
Within this environment, the non-financial private sector’s capital account (as per estimates
made by the single free exchange market or MULC as per its initials in Spanish) posted a net
foreign currency outflow of US$ 237 million in 2014, as compared to a net inflow of US$
2,290 million in 2013. As of December 30, 2014, the Argentine Central Bank’s international
reserves amounted to US$ 31,443 million, US$ 843 above what was noted in late 2013.
The Financial System
Within this framework, the financial intermediation evolved at a slower pace, which was
reflected by the loans-to-private-sector to GDP ratio, an indicator of the financial system’s
depth, which decreased by 1.0 p.p. during the year and stood at 13.3%.
Total loans to the private sector increased by 20.0%, as compared to late 2013, reaching Ps.
591,064 million. Loans that increased the most were consumer credit lines, made up of loans
through credit cards and personal loans, which increased by 26.9%, reaching Ps. 239,892
million at year-end. As regards short-term commercial loans, mainly made up of overdrafts and
promissory notes, they grew by 18.9%, amounting to Ps. 164,091 million. Collateral loans
increased by 2.9%, with a final balance of Ps. 32,761 million, whereas mortgage loans
increased by 8.7%, to Ps. 48,688 million. In turn, loans to the public sector accounted for
8.3% of total assets as of November 2014 (the last information available), decreasing 0.5
percentage points inter-annually.
The financial system’s total deposits increased 30.0% during the year, reaching Ps. 967,753
million. Deposits from the non-financial private sector increased 31.6%, amounting to Ps.
711,747 million, whereas deposits from the public sector reached Ps. 253,753 million,
representing a 25.4% growth. Within deposits from the private sector, transactional deposits
grew 34.8%, reaching Ps. 370,328 million, while time deposits increased 28.4%, reaching Ps.
316,448 million.
The average interest rate paid by private banks in December for time deposits in Pesos of up
to 59 days was 21.37%, with an increase of 186 b.p. inter-annually, while in the case of
lending rates, that applicable to overdrafts was 30.80% (+321 b.p. during the year) and to
promissory notes, 24.20% (+182 b.p. during the year).
In November 2014, financial institutions increased their liquidity levels (in relation to total
deposits) when compared to the prior year, with an average rate of 26.4%. In financial
standing terms, the Argentine financial system’s net worth increased by Ps. 47,695 million,
what represents a 40.8% growth. The system’s profitability was equivalent to 4.2% of total
assets (+1.1 p.p.), while return on shareholders’ equity was 33.6% (+6.1 p.p.).
During the first 11 months of the year, income from interest and income from services
represented 5.8% and 4.3% of total assets, respectively. In turn, administrative expenses
increased from 7.1% to 7.4% of total assets, while provisions for loan losses remained
unchanged at 1.0% of total assets.
The non-accrual loan portfolio to the non-financial private sector reached 2.0% in November
2014, 0.3 p.p. above when compared to the same month of the previous year. The coverage
Grupo Financiero Galicia Annual Report Fiscal Year 2014 11
of the private-sector non-accrual loan portfolio with allowances remained at 140%, a level
similar to the prior year’s.
As to the financial system's structure, as of November 30, 2014, the financial system was
composed of 81 financial institutions, considering both banks and non-banking institutions. Of
such total, 65 were banks, of which 53 were private banks. Also, of the latter, 33 were
domestic-owned private banks and 20 were foreign-owned banks. Government-owned banks
were 12 and non-banking financial institutions were 16.
The concentration of the financial system, measured by the market share of private sector
deposits of the ten leading banks, reached 75.9% as of November 30, 2014, a similar
percentage to the one recorded in the same month of 2013.
Based on information as of September 2014 (the last information available), the Argentine
financial system’s banks employed a total of 105,816 people, representing a 0.7% increase
during the year.
The Insurance Industry
During 2014, the insurance market’s production amounted to Ps. 108,900 million, 28.4%
higher than the production level in 2013, measured at current values.
Out of total production, 80% relates to P&C insurance, among which insurance for
automotives (45%) and workers’ compensation (52%) stand out, 18% to life and personal
insurance, where the most important one is group life insurance (68%), followed by individual
life (14%) and personal accidents (14%), and the remaining 2% relates to retirement
insurance.
Outlook
An economic and financial scenario marked by electoral process is expected in 2015. The
evolution of expectations regarding the next administration’s economic policy actions will have
an essential role throughout the year. The foreign exchange market might continue reflecting
the need to manage the scarcity of foreign currency, which might continue affecting the
evolution of the economic activity and employment. The possibility that during the year the
economy achieves certain penetration into the international capital market represents an
opportunity and would also allow stabilizing expectations in the months nearer the fourth
quarter’s political transition. The international environment might contribute certain volatility as
long as there is a more intense pressure on the currencies of the region and the exchange
terms.
Although export prices would be, on average, below what was noted in 2014, crop production
expectations are optimistic, even exceeding last year’s production. On the other hand, the
modest growth outlook for the Brazilian economy (Argentina’s main business partner) would
less boost exports and the domestic industry (particularly the automotive industry).
As regards the risks at the domestic level, what stands out is the difficulty to maintain positive
growth rates within an environment with a marked restriction on foreign currency and the
effects foreign exchange dynamics could have on economic expectations, particularly in the
months preceding presidential elections.
12 Grupo Financiero Galicia Annual Report Fiscal Year 2014
In turn, the financial system would continue increasing intermediation with the private sector,
but with nominal growth rates for loans and deposits that are similar to those in 2014,
although more moderate than in previous years.
In financial standing terms, net results help maintain minimum capital levels according to Basel
Committee regulations. The Argentine Central Bank’s new organic charter grants an increased
power to the monetary authority with respect to whom the credit is granted, what could have
a negative impact on the financial margin. Commissions, which generate income from services
and are significant within operating income, shall continue to be subject to the approval by the
Argentine Central Bank, both with regard to their type and price. At the same time, and aimed
at improving operating efficiency, financial institutions shall continue working on the control of
administrative expenses.
Portfolio quality indicators could marginally suffer some deterioration in 2015, even though
coverage of the non-accrual loan portfolio shall be kept within prudential levels.
To conclude, we consider that the financial system, which has excellent fundamental
indicators, would have a positive financial result in 2015, even though the macroeconomic
environment in the short- and mid-term shall be a key factor for its future evolution.
The outlook for 2015 of the insurance market does not anticipate major changes, with
production growth levels near those recorded in 2014. Financial income is expected to play a
leading role in insurance companies’ results of operations, thus offsetting the technical losses
recorded by the major lines in the market.
The market growth driving engine, the automobile industry, will likely adjust its trend to the
decrease in license plate registrations and the lower rise in prices of units, as compared to
2014. Workers’ compensation insurance will continue increasing its claim costs and the
associated expenses, in line with the higher level of court proceedings related thereto, with an
impact on the business’s technical results of operations.
Theft, homeowners and office package insurance lines are expected to grow at a higher rate
than the market’s average; the demand for individual life insurance and retirement insurance at
the active stage will remain at similar levels to those in 2014, and group life insurance will
grow in line with salary increases.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 13
Review of Operations
Grupo Financiero Galicia S.A.
Banco de Galicia y Buenos Aires S.A.
Wholesale Banking
Retail Banking
Consumption
Financial Division
Risk Management
Credit
Comprehensive Corporate Services
Organizational Development and Human Resources
Sudamericana Holding S.A.
Galicia Administradora de Fondos S.A.
Sociedad Gerente de Fondos Comunes de Inversión
Galicia Warrants S.A.
Net Investment S.A.
14 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Review of Operations
Grupo Financiero Galicia
Grupo Financiero Galicia’s corporate purpose is exclusively related to financial services and
investment.
Grupo Financiero Galicia’s strategy is to continue establishing itself as one of Argentina’s
leading comprehensive financial services companies while continuing to strengthen Banco
Galicia’s position as one of Argentina’s leading banks. Its main objective is to create value for
its shareholders within a framework of sustainable management that considers the social
context and the impact on the environment.
On September 10, 2013, Grupo Financiero Galicia, as merging company, entered into a
Preliminary Merger Agreement, for the total assets and liabilities of Lagarcué S.A. and Theseus
S.A., as merged companies.
At Grupo Financiero Galicia’s Extraordinary Shareholders’ Meeting held on November 21,
2013, the aforementioned documents were approved, as well as the exchange ratio and the
capital increase by Ps. 58,857,580, through the issuance of 58,857,580 ordinary book-entry
Class “B” shares, with a face value of Ps. 1 and one vote per share, entitled to take part in the
distribution of profits as from the fiscal year commenced on January 1, 2013.
On December 18, 2013, the Final Merger Agreement was signed. Therefore, Grupo Financiero
Galicia incorporated the aforementioned companies by absorption in force as from September
1, 2013. Accordingly, a total of 25,454,193 Class “B” shares of the controlled company,
Banco Galicia, representing 4.5% of the capital stock, owned by Lagarcué S.A. and Theseus
S.A. were incorporated. Consequently, Grupo Financiero Galicia held 560,199,603 shares of
Banco Galicia, representing 99.6% of the Company’s capital stock and votes. As of December
31, 2012, it held 533,814,765 shares, representing 94.9% of the capital stock and votes.
On February 27, 2014, the Board of Directors of the National Securities Commission (CNV)
gave its consent to the merger by absorption of Grupo Financiero Galicia with Lagarcué S.A.
and Theseus S.A., and to Grupo Financiero Galicia’s capital increase, ordering its registration.
On February 25, 2014, the Board of Directors decided to make the unilateral statement of
willingness to acquire all the remaining shares of Banco Galicia held by third parties, which
amounted to 2,123,962 shares. The price was set at Ps. 23.22 per share, which was
approved by the CNV’s Board of Directors on April 24, 2014. In compliance with effective
regulations, Grupo Financiero Galicia made the publications required and deposited the amount
related to the total remaining shares outstanding of Banco Galicia held by third parties. On
August 4, 2014, the above-mentioned statement of willingness to acquire was executed by
public deed.
In addition, on April 15, 2014, the Board of Directors approved the purchase of 19,000 shares
representing 95% of Galicia Administradora de Fondos S.A. Sociedad Gerente de Fondos
Comunes de Inversión’s capital stock (hereinafter “Galicia Administradora de Fondos” or
“GAF”) from Banco Galicia in the amount of Ps. 39,481,302.
The following is a description of the subsidiary companies’ operations during the fiscal year.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 15
Banco Galicia
Wholesale Banking
The Bank granted several credit lines throughout the country to finance from working capital
to mid- and long-term investment projects.
The offer of Peso and U.S. Dollar-denominated medium- and long-term financing continued
being improved through a broad offer of agreements with domestic and international agencies,
such as the Inter-American Development Bank (IDB), Fondo Tecnológico Argentino (FONTAR)
and BICE (Banco de Inversión y Comercio Exterior – Bank for Investment and Foreign Trade),
among others. Additionally, the benefits of all subsidized credit lines or lines with special
conditions offered by the national and provincial public sector were offered to customers.
In addition to the investment of the productive sector in capital goods, through the Credit Line
for the Productive Investment (“Productive Line”), the Bank disbursed more than Ps. 5,300
million for approximately 5,900 loans to finance investment projects and more than 58,000
check discount transactions. It is noteworthy that over 80% of the above-mentioned amount
relates to financing for Micro-, Small- and Medium-sized Companies (MiPyMEs, as per its
initials in Spanish).
e-platform
Banco Galicia’s e-platform for companies is made up of Galicia Office, Interbanking and
SWIFT, channels that meet the needs of several corporate customers.
In Galicia Office, the volumes transacted increased by 51% when compared to the previous
fiscal year.
During 2014, the new version of the channel, Galicia Office 3.0, built on four focal points was
implemented: design, usability, functionality and security.
This implementation, along with improvements to menus, accesses and several functionalities,
continued enhancing processes and our customers’ Internet transactions. Visits were made to
different areas of the country to communicate emerging news about the product-channel.
During the fiscal year, the Bank optimized its platform to broaden the time to send payments
and continue growing in mass transfer sending through the Interbanking clearing house. The
volumes transacted increased by 32%, as compared to 2013.
The transactional growth of SWIFT stood at 195%, as compared to the previous year, a very
significant percentage because it is a new market product at the first development stages.
Transactional products, investments and insurance
During 2014, we sought to consolidate ourselves as the bank that offers treasury solutions to
companies and we focused on developing new products that would allow us to differentiate
from the rest. The introduction of the new Payments Menu, with a self-service scheme for the
delivery of checks for payments to suppliers, the functionality of online sale of checks, which
allows our customers to sell us checks from their office through Galicia Office, and the
enabled view of checks for payment to suppliers for non-customers through our e-banking
stand out among the news.
16 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Once more, we exceeded Bureau Veritas’s requirements regarding the certification of
Cobranza Integrada Galicia (Galicia Integral Collection) and our Portal de Cobros (Collections
Portal).
Through the specialized investment and insurance management, improvements were achieved
as regards the spread to attract different corporate segments and in the swap and futures
businesses with more than 17 companies and a volume higher than Ps. 200 million. In
addition, the insurance goals set were attained, giving rise to commissions higher than Ps. 2
million.
Finally, actions aimed at creating increased efficiency in cash management began during
2014.
Large-Corporations Banking
During the fiscal year, the Bank maintained its leading position and consolidated its presence
in the segment, achieving the first place in the Business to Business perceived quality ranking
created by Mercado Magazine. This was attained thanks to an effective commercial planning,
the improvement in the service offering and the implementation of a differentiated advisory
model, what allows the Bank to be close to its customers, meeting their different needs.
The constant search for tailor-made solutions, through the ongoing financial support and the
cash management service offering, made it possible for the Bank to increase its treasury
volumes more than 60% when compared to the previous fiscal year.
During the year, the Bank strengthened its position in the market of syndicated loans and
corporate debt issuances under the public offering system (Negotiable Obligations and
Financial Trusts), leading more than 75 transactions, thus doubling the number of transactions
conducted during 2013.
Regarding the Foreign Trade business, the differentiated service model for this segment was
reinforced in order to provide a quicker and tailor-made professional service. Therefore, traded
volumes increased more than 45%.
Companies
During the fiscal year, the Companies segment managed to keep, as in previous years, the
leadership in the City of Buenos Aires and Greater Buenos Aires.
The Service Model based on closeness, specialization and integrated equipment to serve
companies whose revenues range from Ps. 70 million to Ps. 700 million p.a. continued
consolidating and expanded throughout the country, reaching a total of 19 Corporate Banking
Centers. The synergy with the network of branches, supplemented with a team of
professionals specialized in Foreign Trade, Treasury Solutions, the Agricultural Sector and
Companies at each center, is focused on a comprehensive service that is tailor-made to each
business, with decentralized and regional decision and resolution.
The high financing of investment projects in the two tranches of 2014 of the Productive Line
stood out, managing to support countless projects, new entrepreneurships and restructuring of
productive plants.
We also kept the leadership in financing working capital by means of the purchase of checks,
among others, with an active participation in applying the Productive Line.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 17
The companies in the segment increased their cross-selling again and their transactional level
through the usual channels and primarily by highly joining Galicia Office and receiving its
services.
Agricultural Sector
For the ninth year in a row, according to the annual survey of ICASA/Mora y Araujo
Consultant for Chacra Magazine that establishes the best positioned brands in this sector,
Banco Galicia was ranked first among private banks.
Tarjeta Galicia Rural (TGR) held a market share above 37% in the specific card business in this
segment, with a 36% increase in the sales volume, as compared to 2013, and more than 95
agreements at zero rate with leading companies in the sector, which seek to maximize the
offer of services to agricultural companies. Multiple financing offers to finance the agricultural
campaign were noteworthy among the business activities carried out in the fiscal year,
structuring loans that best suit each producer’s needs, especially developing capital market
transactions for the segment.
During the fiscal year, the twelfth edition of the Excelencia Agropecuaria La Nación - Banco
Galicia Award (La Nación-Banco Galicia’s Agricultural Excellence Award), with more than 211
jobs submitted, was achieved, and Banco Galicia - Revista Chacra a la Gestión Solidaria del
Campo Award (Banco Galicia-Chacra Magazine’s Rural Solidarity Award) and CAPA-Banco
Galicia Award to the agricultural journalism were granted.
Like in prior fiscal years, the Bank supported the research and outreach activities of
Universidad Austral, with active participation receiving delegations. The Bank also continued
supporting the activities of the Fundación Producir Conservando, and continued supporting the
work of Asociación Argentina de Productores en Siembra Directa (Argentine Association of
No-till Farming) (Aapresid, as per its initials in Spanish) with the purpose of spreading the
agriculture certified in Argentina, as well as different activities promoted by Consorcios
Regionales de Experimentación Agrícola (Agricultural Experimentation Regional Consortiums)
(CREA, as per its initials Spanish) for the sector.
Non-financial Public Sector
The Foreign Trade tools campaign continued during 2014.
Through a business campaign aimed at Automotive Property Registries, a 50% market share
was achieved at national level, generating a new source of income and transactional deposits,
as well as a source of customers to generate new payroll direct deposit.
We also implemented the time deposit that can be canceled before maturity for public sector
customers and we continued with the implementation of collections and payments products,
aligned with the strategy to generate more transactional deposits.
Capital Markets and Investment Banking
During the fiscal year, Banco Galicia successfully increased the Peso-denominated negotiable
obligation issuance (“NOs”) and the financial trust issuance, mainly concentrated on corporate
customers.
The Bank took part in the issuance of 41 Peso-denominated NOs for different segments,
totaling Ps. 10,732 million. Furthermore, the Bank issued 19 financial trusts, totaling Ps.
18 Grupo Financiero Galicia Annual Report Fiscal Year 2014
2,832 million, and took part in the placement of 3 issuances of Sub-sovereign Bonds for a
total of Ps. 1,927 million (in equivalent Pesos).
To improve the financing strategy of affiliated companies: Tarjeta Naranja S.A. (“Tarjeta
Naranja”), Tarjetas Cuyanas S.A. (“Tarjetas Cuyanas”), and Compañía Financiera Argentina,
the Bank also took part in the arrangement and placement of negotiable obligations for Ps.
2,557 million. It also took part as arranger and dealer of negotiable obligations issued by
Grupo Financiero Galicia for Ps. 430 million.
As regards syndicated and structured loans, the Bank strengthened its leadership in the
structured financing of the main companies. It has performed new and more transactions with
some of the main companies in the country, and has taken part in the syndicated loan of the
highest amount in the local market of the last 10 years. The revenues of the segment
increased by about 40%, as compared to 2013.
Over 30 transactions were structured along with the main banks operating in the local market
in an aggregate amount that exceeded Ps. 4,000 million, out of which the Bank disbursed
about Ps. 1,900 million, including 8 transactions under the Productive Line for about Ps. 600
million.
Furthermore, Banco Galicia took part again in the M&A business (mergers and acquisitions)
after several years, as financial advisor in the sale of a majority shareholding of a company
within the telecommunications sector, in a transaction that exceeded US$ 20 million.
Moreover, the valuation of a construction company in Peru was made, the first advisory
service abroad that has been provided by the sector since 2001.
Another noteworthy issue is that over 35% of total transactions were performed with
customers who have never operated with the sector.
Foreign Trade
The foreign trade volume (imports + exports) in 2014 amounted to US$ 12,023 million,
which accounts for 9% of the balance of trade.
The participation of customers who perform foreign trade transactions through Galicia Office
increased by 36%, reaching 64%.
In 2014, adjustments were made to the e-platform, improving aspects that allow providing a
dynamic, fast and safe tool to operate from the office. An action related to the migration of
operations to Galicia Office was performed along with the Foreign Trade Center.
Within the LEAN program, improvements continued being deployed in the process mirroring
the foreign trade operating system with the different segments, seeking increased efficiency
and customer service.
Twelve seminars on exchange regulations updates in different marketplaces of the country
took place, attended by 566 people from all segments, which allowed us to be close to our
customers with customized advisory services. We also continued with the training at schools
of Corporate Officers (“OFES” as per its acronym in Spanish) and different sectors of Head
Office.
Galicia Comex, our specialized Foreign Trade specialized site, continues consolidating with
more than 17,000 monthly visits, becoming a referent page in the market.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 19
Retail Banking
(1)
Retail Banking continued consolidating its business strategy differentiated by segment,
focusing on the significant High-Income, Business and PyMEs segments. The Move service,
the value proposal for the young people segment, began being marketed during 2014,
searching for the massive attraction of new customers at a low cost, and positioning the Bank
as a leader in this new segment.
The Bank also continued to take the lead in payroll direct deposit, increasing by 3.8% the
number of customers, as compared to 2013, what allowed increasing its market share.
The Retail Banking Division’s customer base grew 7% during 2014, exceeding 2 million
customers.
Segments
During 2014, in order to continue creating a differentiating experience focused on the
customer, the development of the value proposal was strengthened for the Business and
PyMEs segment and the leadership in the High-Income segment was consolidated.
The Business and PyMEs segment achieved a 13% increase in the customer base. The most
important business achievements were the 9% increase in payroll accounts and, at credit
level, the placement of the Productive Line for over Ps. 1,100 million in the segment.
In turn, the Galicia Éminent service showed an interannual growth of 11%. In a strong
competitiveness situation, as a result of the segment attractiveness, Galicia Éminent managed
to be ranked first as to the service assessment according to the studies carried out by private
consulting firms and kept its leadership in premium credit card consumption throughout the
year, as per the information furnished by Visa and Mastercard.
In 2014, the new Move service received the first award to the Latin-American Financial
Innovation granted by FELABAN CLAB 2014, highlighting the technology and innovation as
support to business strategies.
In general income, customers were addressed by differentiating them into subsegments. First,
for the Medium-High Income we worked on relaunching the Prefer value proposal, which gave
rise to an increase in the consumption and satisfaction level. As regards Medium Income, we
worked hard on implementing a contact policy to develop customers who established
relationships through indirect channels and who became increasingly important during this
year.
Furthermore, we worked on the efficiency by reviewing the profitability of channels and
migrating transactions among channels, always taking into account the customers’
preferences or habits.
Business Intelligence
The Business Intelligence Division implemented the contact policy in the process of acquiring
customers and/or products, communicating benefits, fostering the use of different channels for
the purpose of improving the activation and cross-selling from their joining. In terms of
relational communication, there was a 72% growth, as compared to 2013.
(1) The figures in this section relate to the Bank individually, without consolidation with the regional credit-card
companies or with CFA.
20 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Focus was placed on the business intelligence service of the Wholesale Banking in the second
half of the year. This synergy allowed adopting the best practices of both banking services
and creating increased efficiency in the use of resources, increasing the volume of contacts to
customers from the area.
Private Banking
Private Banking offers distinctive and professional financial services to individuals with medium
to high-sized net worth, through the management of their investments and the provision of
financial advisory services. Private Banking offers its customers a wide range of domestic
financial investment alternatives, such as deposits, FIMA mutual funds, government and
corporate securities, shares and trusts where the Bank acts as a dealer.
One of the Private Banking premises, in line with the Bank's strategy to differentiate from
competitors through service quality, is the preferential treatment of its customers. In this
regard, the service has highly-trained officers, an investment center that operates from 8 a.m.
to 6 p.m., a wide network of Éminent officers, exclusive spaces for service at branches and
the sixteenth floor of the tower located in Presidente Perón 430.
In 2014, Galicia Banca Privada (Galicia Private Banking) achieved again the recertification of its
Service Model under ISO 9001.
Deposits
In December 2014, the average balance of total retail deposits reached Ps. 34,679 million.
Peso-denominated deposits grew by 27%, reaching Ps. 31,129 million, of which Ps. 17,576
million correspond to transactional deposits and Ps. 13,553 million to time deposits. This was
reflected by a better breakdown, as transactional deposits represent 56.5% of total deposits.
U.S. Dollar-denominated deposits amounted to US$ 3,550 million, US$ 1,835 million of which
correspond to demand deposits and US$ 1,714 million to time deposits.
As regards channels for raising time deposits, Home Banking was the one that increased the
most, with a 72% growth and reaching an average amount of Ps. 2,477 million in December.
Cards and Promotions
The credit and debit cards business continued growing strongly during 2014, with a 40%
increase in purchases, as compared to 2013, and over 210 million transactions during the
year, what represents a 5% growth. The share in the banking payment means market was
12.3%.
During the fiscal year, Banco Galicia issued over 370,000 basic cards and 330,000 additional
cards, totaling 4 million cards. With 2,500 business agreements, the Bank grants benefits to
its customers at 12,000 stores of different industries throughout the country.
Through the Program to Encourage Consumption and Production of Goods and Services called
“AHORA 12” (NOW 12 Installments), a consumption amounting to Ps. 556 million was
financed from its beginning in September to year-end.
Quiero! Fidelity Program (I Want!)
Grupo Financiero Galicia Annual Report Fiscal Year 2014 21
Quiero!, the program of benefits that rewards customers for their relation with the Bank and
the use of bank products, was able to consolidate its position in its fourth year, and reached
more than 682,000 customers subscribed by December 31, 2014.
Throughout 2014, the growth of Quiero! program was stronger as it became the Bank’s
umbrella of benefits. As from this year, all the promotions are only for those subscribed to the
program, which capitalizes the value of the Quiero! brand even more, reaching the customer
with a single and much more comprehensive offer.
Since its launch, the program achieved greater penetration in high-income customers, who
benefited from their higher cross-selling, balances and spending. For instance, it is worth
highlighting that, in High-Income and Private Banking segments, the program’s penetration
exceeds 75%. The penetration ratios and excellent acceptance, value and use indicators in the
Retail Banking income should be also highlighted, given the variety of benefits and the shorter
redemption times offered, as compared to other programs.
Apart from the customers’ recognition, market research by independent agencies confirmed
again that both our customers and those of our competitors are well acquainted with the
Quiero! program, and that it is considered the best program of benefits in the financial system.
Customers who have already made exchanges are even better acquainted with it.
While Quiero! consolidated year after year as a value offer for customers, it also allowed
Banco Galicia to advance towards higher efficiency in the use of the investment in benefits,
achieving a lower impact on the income statement, and allocating resources to the customers
from priority segments based on the income recorded.
Insurance
Banco Galicia’s Insurance business continued with its ongoing growth during 2014. With over
1.4 million current property and personal insurance policies, Banco Galicia is still one of the
main financial institutions in this business, offering a wide range of products.
Always focused on meeting the new market demands and offering a suitable product for each
customer’s profile and need, this year the Bank introduced new products to the offer, such as
the Mobile Technology Protection Insurance and additional home insurance coverage, which,
along with the remaining portfolio of current products, allow the Bank to continue being one of
the leading banks as regards Insurance Banking.
In connection with property insurance, the behavior
coverage is noteworthy, which doubled their stock, as
turn, individuals’ insurance products grew significantly
Insurance (Life), which already exceeded 40,000 current
of young products providing theft
compared to the previous period. In
as well, especially Family Protection
policies.
Personal Loans
During 2014, the personal loans portfolio increased by Ps. 166 million, as compared to the
previous year. The development of alternative channels was consolidated, especially within
the Home Banking channel, and towards year-end at ATMs, in addition to branches and
telephone channels.
Eighty per cent of loans were automatically granted within the sale channel.
22 Grupo Financiero Galicia Annual Report Fiscal Year 2014
It is also worth mentioning that in June 2014 a new Argentine Central Bank’s regulation
became effective, which establishes maximum rates to grant personal loans (1).
Publicity, Promotion and Image
It was a very intense year in terms of communication, adding new competitors with important
savings and benefits campaigns, and different launches of distinctive services for the HighIncome segment. Banco Galicia sought to reinforce the value of closeness to people and
communicate material contents to our customers and prospects: all the benefits the Bank
offers.
With a new format of hidden cameras, real life became a studio. “Marcos” and “Claudia”, the
couple playing the leading roles of the advertising campaign, were among people at shopping
malls, airports and even a plane. Real and spontaneous dialogues were created in this
interaction, confirming popularity and closeness to the public. The 2014 communication
creativity and strategy received a Silver Effie award in the Financial Services category and a
Buenos Anuncios – Gold award in the Services Category. Banco Galicia’s advertising
campaigns continue using humor, with a clear and simple language, and, especially, having
maintained its effectiveness during recent years.
The business was also supported with an intended communication and a huge digital bet upon
launching Move, which offers a proposal related to new trends and the needs of the young
people segment. It appeared for the first time at the end of 2013 in selected universities,
showing a great potential to be developed during 2014.
As regards the Business and PyMEs sector, communication was maintained through different
messages aimed at strengthening the Bank’s position, and the Bank took part in important
events and fairs to increase feedback from and contact with current and potential customers,
such as the renowned event Buenos Negocios (Good Businesses) Meeting, which is highly
valued by the segment, with the possibility of being broadcasted live through the community
of entrepreneurs and Pymes: buenosnegocios.com.
Nowadays, over one million customers find social networks a means to communicate with the
Bank quickly, effectively and frankly, finding immediate answers to their queries and needs.
Within social networks, new services with innovative channels were added, as for instance
Galicia Responde on Facebook and Fbanking, an application that makes it possible for
customers to conduct transactions without leaving the social networks.
With regard to online business actions, new high-impact formats were implemented in mass
media, which made Banco Galicia’s trademark and products more visible. Banco Galicia
constantly adapts to this challenge by working in the digital area through actions aimed at the
creation of loyalty, such as tutorial campaigns and applications launched during the year.
These services help improve the relationship with customers, such as the Galicia Mobile
application for cell phones, which allows users to perform transactions with the Bank and get
to know the benefits from their mobile devices, and participate in online media to consolidate
the Bank’s positioning in the Internet and the best communication channels for customers.
The consistency and quality of the messages have placed the Bank in the first position as
regards brand awareness.
Branches
(1) Argentine Central Bank’s Communiqué “A” 5590 dated June 10, 2014. Interest rates on credit transactions.
Financing subject to interest rate regulation by the Argentine Central Bank.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 23
During 2014, Banco Galicia consolidated the LEAN Sucursales (Branches) methodology
primarily focused on the customer’s experience. We worked on four focal points that leverage
the idea of transforming the network into a forum to contact customers and make them loyal,
strengthening the multichannel marketing to provide more options to our customers in their
transactions. The distribution, elimination and centralization of tasks allowed increasing 70
commercial officers exclusively dedicated to the PyME and Éminent segments.
Aligned with this strategy, we continued with a plan for the investment in works, which
implemented 6 movements, 7 remodelings, 48 image changes and 20 changes to branches’
lobbies. Six Middle-Market Banking Service Centers were added and a Bank at Work was
opened, which allowed being closer to our PyMEs. The pieces of equipment added to Red
Galicia 24 amounted to 370. Two branches (Cañuelas and Cutral Có), which were part of the
expansion plan, were also finished.
Additionally, the first Collections and Payments center was created to handle large cash
volume transactions, creating a safe and dynamic environment both for customers and
employees. During 2015, these centers will continue being expanded, generating collection
and payment nodes.
The branch network’s breakdown by geographical location is as follows:
Geographic Area
Number of Branches
City of Buenos and Greater Buenos Aires
Rest of the Province of Buenos Aires
Santa Fe
Córdoba
Mendoza
Chubut
Entre Ríos
Río Negro
Tucumán
Corrientes
La Pampa
Misiones
San Luis
Tierra del Fuego
Catamarca
Chaco
Formosa
Jujuy
La Rioja
Neuquén
Salta
Santa Cruz
Santiago del Estero
San Juan
152
34
16
15
9
5
4
3
3
2
2
2
2
2
1
1
1
1
1
1
1
1
1
1
Total
261
During 2014, the Bank continued spreading the customer’s experience throughout the
organization, consolidating the NPS (Net Promoter Score) methodology in Éminent, Galicia
Negocios y Pyme (Galicia Business and Pyme) and PyMEs PES (small-sized companies). The
outcome of the work performed was reflected in the annual benchmarks made by private
24 Grupo Financiero Galicia Annual Report Fiscal Year 2014
consulting firms, where Banco Galicia was the most recommended one by customers in the
above-mentioned segments.
High-Income Segment surpassed the second one by 12 percentage points (“p.p.”) and
increased its NPS by 10 p.p., as compared to 2013. In turn, Galicia Business and Pyme
segment was far from the second one by 22 p.p. and Pyme PES achieved the first position, 7
p.p. above its immediate follower.
Alternative Channels
Alternative Channels are, in addition to the branches, a service, transactions and sales channel
focused on individual and corporate customers. They include Red Galicia 24, Home Banking,
bancogalicia.com portal, Galicia Servicios Móviles, the Retail Sales Unit (UVM, as per its
initials in Spanish) and the Commercial Planning area of the Customers Contact Center.
In 2014, the Indirect Channels Division was created, whose mission is to develop internal and
external channels to attract new customers and market Consumer Banking products. The area
is made up of the Retail Sales Unit (especially focused on cross-selling and attraction of
customers focused on salaries), Indirect Sales Channel (focused on attracting customers
through sellers o retailers with mass capacity of potential distribution, allowing an increase in
the capillarity of points of sale) and Commercial Planning of Telephone Banking (focused on
attracting customers and cross-selling through internal and external call centers). During the
year, the new division attracted 33% of the Bank’s new customers.
Red Galicia 24 and Self-Service Terminals
Banco Galicia has one of the most extensive networks throughout the country. At the end of
2014, the Bank had 1,684 self-service pieces of equipment (853 ATMs and 831 terminals),
distributed throughout branches, banks at work and other locations, such as gas stations,
hypermarkets and shopping malls.
During the fiscal year, Banco Galicia consolidated the installation of smart terminals
throughout its branch network.
The main advantages of this new technology are online crediting, the convenience and
extended times to make deposits, the payment of cards, and the reduction in processing times
and paper use, since it is no longer necessary to use envelopes to make deposits and
payments.
Home Banking
The number of Home Banking service users increased 18% during 2014. This channel
processed 28 million monetary transactions and more than 356 million queries during the
same period. In 2014, we introduced the possibility of making queries on benefits, discounts
and rebates obtained for purchases with Galicia cards.
For the sixth consecutive year the Bank was ranked first in the benchmarking report of
financial institutions (benchmarking of Home Banking sites in Argentina and the world, May
2014) prepared by TBI consulting company.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 25
Galicia Servicios Móviles
Galicia Servicios Móviles application for smart phones simplifies the access to services from
cell phones. With the right design to fit the screen of these devices, customers may perform
queries, make investments, transfer money, pay bills or cards, apart from conducting
transactions with their Project Accounts. Over the last few months, a new version, which
includes the possibility of making queries about benefits (Move, Quiero!) and exchanging
points, among other functions, was made available to customers.
Consumption
Through its regional credit-card companies (Tarjeta Naranja S.A. and Tarjetas Cuyanas S.A.)
and Compañía Financiera Argentina, Banco Galicia offers financing for the consumption of
low- and medium-income customer segments.
Regional Credit Card Companies
In the fiscal year, regional credit-card issuing companies, Tarjeta Naranja S.A. and Tarjetas
Cuyanas S.A. (the “regional credit card companies”), subsidiaries of Banco Galicia through
Tarjetas Regionales S.A., behaved as contemplated in the budget.
Average monthly statements issued amounted to 2.9 million, 3.3% above the previous year’s
average. The managed loan portfolio reached Ps. 19,919 million at fiscal year-end, with a
33.2% increase during the year and our customers’ consumption increased by 51.4%, to Ps.
55,663 million, as a result of 160 million purchase transactions, higher than the 17.8%
related to 2013 transactions.
Despite the GDP and domestic consumption deceleration, there was a moderate growth in
statements and a significant increase in turnover and transactions. It should be taken into
account that in 2014 the restrictive policy regarding the business expansion, the selectivity in
granting credit and in expanding the customer base due to a rise in the funding cost remained
unchanged.
Considering Argentine Central Bank’s last information available as of September 2014 about
financial and non-financial institutions, regional credit card companies had an 18.5% market
share in authorized cards and a 15.8 % market share in consumption; both indicators
improved by 0.2%, as compared to the same period in the previous year.
In the branch network there were no significant variations in the number of service centers
although there were improvement and modernization changes. In the case of Tarjeta Naranja,
the corporate building in the city of Córdoba, called “Casa Naranja” (Orange House), of almost
20,000 m2 is expected to be opened in April 2015. In the case of Tarjetas Cuyanas, two new
branches were opened, one in the city of Tucumán and the other in Lavalle (Mendoza). The
companies have 261 service centers in the aggregate throughout the country.
In turn, the staff of Tarjeta Naranja and Tarjetas Cuyanas at fiscal year-end totaled 4,968
employees, a 6% decrease when compared to the previous fiscal year.
From the standpoint of the funding of transactions, priority was given to the issuance of
negotiable obligations, which entailed a saving in the financing cost when compared to bank
loans. In addition, longer terms were obtained, which allowed offering customers longer
financing term plans.
26 Grupo Financiero Galicia Annual Report Fiscal Year 2014
In commercial terms, regional credit card companies’ mainstays for success continue being
closeness to the customer and store, and quality in customer service and services. From the
advertising point of view, Tarjeta Naranja’s presence as official sponsor of Argentina’s
National Soccer Team in 2014 Brazil World Cup (fourth year) stood out with major impact,
even from the social and solidarity viewpoint with the “Un gol, un potrero” (One Goal, One
Soccer Field) program.
The growth in demand for magazines issued along with account statements continued during
the fiscal year. Accordingly, “Convivimos” and “Cima” reached one million subscribers, with a
high and increasing penetration in the total account statements.
Furthermore, the launching of “Naranja Online”, which significantly changes the
www.tarjetanaranja.com.ar website, with technology changes, new functionalities and
designs, and the consolidation of e-commerce websites with increasing sales, in terms of
transactions and amounts, www.tiendanaranja.com and www.preciosbajos.com, should be
highlighted.
Tarjeta Naranja continued standing out as a leader of the Argentine financial sector, with more
than 1,250,000 Facebook friends, while Tarjeta Nevada has over 200,000 Facebook friends.
This is an essential channel to provide customer services, chat with the community, share
news, benefits and promotional campaigns.
Tarjeta Naranja was ranked second in Great Place to Work, among the best companies with
the best work environment in the country and Tarjetas Cuyanas was ranked 16 th, with the
recognition by organizers.
During the fiscal year, regional credit card companies kept similar arrears ratios despite the
economy deterioration, showing a successful credit risk and recovery management.
During the year, the LEAN methodology continued improving cost-efficiency, focused on the
ongoing optimization of processes, and enhancing the customer’s experience, thus ensuring
the quality of products and services.
Tarjetas Regionales S.A.’s net income, in accordance with Argentine Central Bank’s
accounting standards, amounted to Ps. 762 million, increasing by 26% and keeping high ratios
of return on capital and on assets (29.2% and 5.3%, respectively).
Compañía Financiera Argentina - CFA
The company is a non-banking financial institution, regulated by the Argentine Central Bank,
leader in the consumer personal loans to low- and medium-income customer segment, and
competes with government- and privately-owned banks.
As of December 31, 2014, customers reached 440,000. The staff was made up of 1,112
employees and had 59 branches and 36 points of sale throughout the country. CFA’s net
income amounted to Ps. 113 million as of fiscal year-end, Ps. 26 million lower than that in
2013.
The net operating income for the fiscal year amounted to Ps. 1,173 million, an increase
amounting to Ps. 153 million, as compared to 2013, mainly due to the increase in the credit
card portfolio. The growth has been partially offset with the higher funding cost generated by
the rise in wholesale rates.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 27
CFA had a material increase in the Provision for Loan Losses for the fiscal year, amounting to
Ps. 370 million, as compared to Ps. 253 million in 2013. The lower income was also highly
influenced by extraordinary expenses due to an administrative reorganization.
As of fiscal year-end, the loan portfolio, net of allowances for loan losses, amounted to Ps.
2,726 million, representing a decrease, as compared to the previous fiscal year, due to the
changes in the offer of products the Company implemented to adjust to the impact of
Communiqué “A” 5590, which established a cap on the lending rate for personal loans as
from June 2014.
The shareholders’ equity amounted to Ps. 1,123 million as of fiscal year-end, as compared to
Ps. 1,010 million in fiscal year 2013.
The company will continue concentrating its efforts on keeping the leadership position
achieved in the consumer loans market, adjusting its transactions to the new regulatory
conditions, focusing on increasing efficiency levels through operating processes reengineering,
consolidating “anchor” products (Credit Card and Benefit Account), which allow keeping the
business relationship with our customers beyond the settlement of the effective credit
assistance and thus cutting down granting and raising costs, and consolidating the funding
strategy began some years ago through the capital market share.
Financial Division
The Financial Division includes the Financial Operations, Banking Relations, Assets and
Liabilities Management, and Information Management and Support areas. Additionally, this
Division is the main distribution channel for the FIMA mutual funds and takes part in the
trading business through Galicia Valores S.A. (“Galicia Valores”).
Financial Operations
The Financial Operations Division is responsible for, among other things, managing liquidity
and the different financial risks of Banco Galicia, based on the parameters determined by
Banco Galicia’s Board of Directors. It manages positions in foreign currency and government
securities, and it also acts as intermediary and distributes financial instruments for its own
customers (institutional investors) and corporate customers and individuals. It takes part in
different markets in its capacity as agent of the Mercado Abierto Electrónico (“MAE”) and as
member of the Rosario Futures Exchange (“ROFEX”), Financial Products Division. Through
Galicia Valores, this division offers customers the possibility to conduct transactions at the
Buenos Aires Stock Exchange.
Within the framework of Capital Markets Law 26831, the Bank was authorized by the National
Securities Commission (“CNV”) to act as settlement and clearing agent and trading agent –
comprehensive (“ALyC y AN - Integral”), and was added as member of Mercado de Valores de
Buenos Aires S.A. (“MERVAL”).
In 2014, the Bank adjusted its internal processes and IT systems to the regulatory
requirements of the above-mentioned law, and CNV’s regulations.
The total volume traded in the stock market amounted to Ps. 580,765 million, which
accounted for a 67% increase, as compared to 2013. Galicia Valores contributed with a total
of Ps. 38,336 million, recording an 88% increase, as compared to the previous year.
The volume traded in the foreign exchange market continued decreasing as a result of foreign
exchange restrictions. In the wholesale market, the total volume traded among banks in the
28 Grupo Financiero Galicia Annual Report Fiscal Year 2014
MAE decreased by 14%, as compared to 2013, from US$ 58,200 million to US$ 49,900
million, whereas the volume traded by the Bank decreased by 18%, from US$ 5,050 million in
2013 to US$ 4,143 million in 2014, keeping the third position in the ranking. Regarding the
futures market, Banco Galicia fell in MAE’s ranking, from the third to the fourth place, and it
was ranked second in ROFEX. In both markets, Banco Galicia traded a total volume of US$
7,026 million, 37% less than the US$ 11,110 traded in 2013. The foreign trade volume
transacted amounted to US$ 12,600 million, a 25% lower than that in 2013. In addition, U.S.
Dollar trading transactions significantly increased as a result of loosening foreign exchange
restrictions, from US$ 74 million in 2013 to US$ 600 million in 2014.
The total volume traded in fixed income through the MAE evidenced a 14% increase, from
US$ 107,219 million to US$ 122,440 million. Banco Galicia climbed to the first place in the
annual ranking, with an 18% increase, as compared to the previous year, reaching US$
16,320 million traded and a 13% market share.
Banking Relations
The Banking Relations Division is responsible, at international level, for managing the Bank’s
business relationships with correspondent banks, international credit agencies, official credit
banks and, at domestic level, with banks, financial companies, exchange houses, brokerage
firms and other entities that carry out related activities.
As it happened in previous fiscal years, bilateral meetings were held with the most active
correspondent banks from abroad, through which the Bank channeled the different products
and services offered to its customers. The steady and adequate offer of credit lines in the
correspondent banking segment and IFC and IDB helped us meet letters of credit and standby
letters of credit confirmation requests, as well as the financing needs related to customer
export transactions. Latin America, especially Brazil, continued holding a considerable share of
the commercial activity, followed by Southeast Asia (mainly China), the European Union, and
to a lesser extent, North and Central America.
Additionally, Banco Galicia continued strengthening relationships and analyzing the different
business opportunities with multilateral agencies and official credit banks, such as the IFC, the
IDB, the FMO, the Proparco, the National Economic and Social Development Bank (BNDES, as
per initials in Spanish), the Andean Development Corporation (CAF, as per its initials in
Spanish) and the Inter-American Investment Corporation (IIC), among others, with the purpose
of consolidating its leadership in this segment.
At the domestic level, the Bank continued analyzing and identifying business opportunities,
with financial institutions, placing much emphasis on being the most chosen brand, always
within a framework of reciprocity and long-term steady relationships.
Assets and Liabilities Management
The Assets and Liabilities Management Division is in charge of preparing and analyzing
information aimed at managing the mismatches inherent in banking activities, maintaining the
exposure within the policies determined by Banco Galicia’s Board of Directors.
The Bank’s activities include the provision of support to the Asset-Liability Committee (ALCO)
through the analysis and quantification of the risks associated with different business
hypotheses and market scenarios, as well as the follow-up of liquidity policies and currency
mismatches, whether due to regulations of the Argentine Central Bank or else Banco Galicia’s
operations, and the assessment of the Funding Unit’s results of operations through a transfer
pricing method so as to assess the profitability of each business unit, isolating them from the
rate, term and currency risk exposure.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 29
Risk Management
The Risk Management Division is responsible for managing the Bank’s and the subsidiaries’
risks in a comprehensive manner and follows international best practices. It is independent
from other business areas, since it reports directly to the Bank’s General Division. This
approach goes along with a high level of commitment from all the Bank's governance bodies,
which strengthens the idea of an independent management but, at the same time, involved in
the business decisions and oriented towards the risk profile, using state-of-the-art tools and
systems for identifying, measuring, monitoring and mitigating each and every risk faced by the
Bank.
The mission of the Division comprises the following activities: (i) Actively and comprehensively
manage and monitor the risks taken by Banco Galicia and its subsidiaries, ensuring compliance
with internal policies and regulations in force; (ii) keep the Board of Directors totally abreast of
the risks that the Bank faces, proposing how to deal with them; (iii) help strengthen a risk
management culture that provides a global view of business, by fully understanding the risks
taken; (iv) design and suggest policies and procedures to mitigate and control risks; (v)
quantify the capital required by each business and recommend the General Division its
allocation to the risk taken and the profitability expected; and (vi) escalate dispensations from
risk internal policies to the Bank’s General Division, as appropriate, together with a compliance
plan.
The Division’s responsibilities include: (i) Ensure contingency plans are in place for risks posing
a threat to business continuity; (ii) recommend the most suitable methodologies for the Bank
to measure identified risks; (iii) guarantee that the launching of any new product includes a
previous assessment of potential risks involved; and (iv) provide technical support and assist
Management Divisions in relation to global risk management.
This Management Division handles financial, operational, credit, reputational and strategic
risks.
The Compliance Division, which reports to the Board of Directors, was created in 2014 and its
mission - applicable to the Bank, its affiliated companies and individuals - consists in
monitoring compliance with the laws, regulations and internal policies in order to prevent
financial and/or criminal penalties and minimize reputational impact. It is an independent role
that coordinates and assists in identifying, providing advice on, monitoring, reporting and
warning about compliance risks.
On the other hand, there is a division dealing with Prevention and Control of Money
Laundering and Funding of Terrorist Activities, which also reports to the Board of Directors. As
regards control and prevention of this risk, Banco Galicia complies with the regulations set
forth by the Argentine Central Bank and with Law No. 25246, as amended and supplemented,
with respect to the concealment and laundering of assets from illegal activities. The Financial
Information Unit (“UIF”, as per its initials in Spanish), under the jurisdiction of the Ministry of
Justice, is in charge of the analysis, treatment and transmission of the information subject
matter of this risk.
Banco Galicia has policies, procedures and control structures in place related to the features of
the various products offered, which help monitor transactions in order to identify unusual or
suspicious transactions and report them to the UIF. The Anti-Money Laundering Unit (“UAL”,
as per its initials in Spanish) is in charge of managing this risk, through the implementation of
control and prevention procedures as well as the communication thereof to the rest of the
organization through the drafting of the corresponding handbooks and the training of all
employees.
30 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Banco Galicia has appointed a Director responsible for the management of this risk, and has
created a Committee in charge of planning, coordinating and enforcing the compliance with
the policies set by the Board of Directors (see “Aspects related to Corporate Organization,
Decision Making, Internal Control, and Compensation Policy for Directors and Officers”). The
basic principle on which the regulations regarding prevention and control of money laundering
are based is in line with the “know your customer” policy in force worldwide. The
management of this risk is regularly reviewed by the internal and external audit.
Risk Management-related Governance Bodies
The bodies mentioned below are part of the internal control structure involved in terms of
definition, assessment and control of the risks taken by the Bank: Risk Management
Committee, Asset-Liability Committee (ALCO), Crisis Committee, Financial Committee –
Consumer Banking, Financial Risk Committee, Operational Risk Committee, Legal Risk
Committee, Wholesale Credit Risk Committee, Retail Credit Risk Committee, Consumer
Financing and Health & Safety Committee.
Credit
The Credit Division’s mission is to assure quality of loan portfolio through the origination of
businesses and the optimization of loan recovery strategies in accordance with standards of
best practices.
This Division performs the following functions: credit granting, preventive management,
tracking down and classification of customers, together with recovery of past-due loans.
In order to have timely information and a flexible and efficient structure that helps respond and
adjust to the current macro and microeconomic variables, the above-mentioned functions, both
for companies and for individuals, are under the charge of the Divisions that report directly to
the Area, thus looking for a more efficient decision-making process.
The Division has specific sectors for complex businesses: banks, capital market and agribusiness. In addition, there is an area for the review and analysis of sectors by activity and
environmental risk.
The analysis and granting in relation to the individuals portfolio are made on a centralized basis
by the Individuals Credit Approval Division.
Applications for these products, such as credit cards, checking account overdrafts and
secured or unsecured personal loans, are automatically assessed through computerized credit
scoring systems that take into account different criteria to determine the customer’s credit
background and repayment capacity, as well as through granting guidelines based on the
customer's credit history within the financial system (which is verified against the information
provided by a company that furnishes credit information) or with Banco Galicia (credit
screening).
Credit approval of corporate loan portfolio is carried out through two specialized teams: the
Corporate Credit Approval Division and the Credit Analysis Division.
Before approving a loan, Banco Galicia performs an assessment of the potential borrower and
his/her financial condition. Credits exceeding certain amounts are analyzed by credit line and
customer. For credits below certain amounts, the Bank uses automated risk assessment
systems that provide financial and non-financial information on the borrower, and that perform
Grupo Financiero Galicia Annual Report Fiscal Year 2014 31
projections on the financial statements and generate automatic warnings about situations that
may indicate an increase in the risk.
Banco Galicia performs its risk assessment based on the following factors:
Qualitative Analysis
Economic and Financial Risk
Economic Risk of the Sector
Environmental Risk
Assessment of the corporate borrower’s creditworthiness
performed by the officer in charge of the account based on
personal knowledge.
Quantitative analysis of the borrower’s balance sheet amounts.
Measurement of the general risk of the financial sector where the
borrower operates (based on internal and external statistical
information).
Environmental impact analysis (required for all investment projects
of significant amounts).
Loans are approved by the Corporate Approval Division and Credit Risk Analysis Division,
pursuant to authorization levels, except loans exceeding certain amount and loans granted to
(domestic or foreign) financial institutions and to related customers; these loans are approved
by the Credit Committee.
The Strategy and Planning Division is in charge of the strategic vision of the area defining
efficiency ratios and action plans, proposing alternatives that contribute to the ongoing
improvement and ensure compliance with the goals set.
It is also responsible for ensuring the regulatory compliance, as established by regulatory
agencies, and reviewing and proposing changes to internal policies, both as regards credit
granting and preventive management and recovery of past-due loans. This area constantly
interfaces with the Risk Management Division.
The Customer Credit Recovery Division’s main role is to reduce the deterioration of the
portfolio under management and pursue customers’ reinsertion in the commercial line. It is also
responsible for the preventive management in charge of the primary reorganization of the
Bank’s portfolio through strategic models of behavior that help anticipate non-performing
credit customers.
The Portfolio Recovery Division covers the court and out-of-court proceedings of customers
within the individuals and companies portfolio to maximize the portfolio recovery. In addition,
it provides advice on legal aspects to the Credit Division.
Comprehensive Corporate Services
There follows a description of the main activities carried out by the Departments in the Area.
Organization
Three years ago Banco Galicia set out to change key processes by implementing the LEAN
methodology in order to improve customer service, reduce process times and increase
productivity. The processes implemented in 2014 were Companies Loan Origination, Branches
and Foreign Trade, completing those already operating under this model – Claim and Post-sale
Management, Customer Contact Center, Retail Loan Origination – and thus deepening the
customer’s view and end-to-end vision in the Bank’s key processes, being referents in the
region in applying the LEAN methodology.
Focus was placed on improving efficiency through different projects carried out: The central
filing of documentation was outsourced, branches’ operating tasks were eliminated, increasing
32 Grupo Financiero Galicia Annual Report Fiscal Year 2014
the business focus, and a new management model was implemented to optimize expenses
(“GIE”) with automated controls prior to their disbursement, which allowed obtaining large
savings.
This was supplemented with the development of other projects that leveraged the
improvement in the income and service quality, such as the redesign of the Payment to
Suppliers Center, which allowed adding a new self-service system that gives rise to operating
efficiency, reduces customer service times and places us in the market with a distinctive
product. As regards the Insurance Banking model, a multi-company quoting system was
introduced, which allowed increasing the offer of seven products of Galicia Seguros and a
leading company for the priority segment. New abilities were generated to increase the sale of
products in the service areas of the Customer Contact Center and credit cards at third-party
companies and stores upon the first contact with the customer.
Engineering and Maintenance
The Engineering and Maintenance Division continued with the image change plan, reaching 73%
of the branch network with the Bank’s new image. Works were performed for two openings in
the districts of Cutral Có and Cañuelas, 7 remodeling, 6 moving and works were performed at
lobbies and to introduce the new image.
Movements amounted to 380 between replacements and additions of automated banking
equipment, and additional physical and electronic protections were implemented in the neutral
positions of ATMs in the City of Buenos Aires and Greater Buenos Aires.
Corrective maintenance was carried out in air-conditioning fixtures, decks, marquees and closed
circuit television system (“CCTV”), and preventive maintenance plans continued in the building
premises to reduce operating contingencies.
In connection with the Green Building, the stage of concrete building works at the Leiva Tower
and up to floor 6 of the Corrientes Tower was completed. The installation of elevators is in
progress at both towers. The contracts and subcontracts related to the premises were managed,
according to the expected schedule.
Management and Security
Focused on the Bank’s customers, the Management and Security Division based its strategy
on four pillars:
 Efficiency: Progress was made in improving the purchasing management, seeking a long-term
and mutual relationship with suppliers, integrating them with the commercial areas.
 Comprehensive Expense Management: SCI’s annual expenses increased by 29.4% and
investments were 15.6% higher than those in 2013. Budgets were met. Among these matters
the most important are the reduction in the suppliers database to focus on opportunities and
the extension of the branches’ pre-established rental terms, which increased from 1 to 3, 5
and 10 years.
 Branches’ Security: New preventive measures were taken to protect our customers,
employees and assets, both within and beyond banking hours.
 Our People’s Skills: In line with the Bank’s strategy, we encouraged staff turnover inside and
outside the division. Moreover, we carried out a comprehensive communication plan within the
Division and towards other Bank’s divisions.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 33
Information Security
During 2014, the Information Security group focused on improving the technological
infrastructure applied to security matters and the systems to protect electronic channels. In
this regard, investments were made in acquiring new software to control and monitor Internet
events, work on assuring our banking core system in SAP was conducted and different
solutions were implemented to validate our customers’ operations through Galicia Office
channel. Likewise, other projects were started to increase security levels within the Home
Banking channel, by using a cutting-edge tool.
Operations
During 2014, the Operations Division focused on deepening the closeness to customers
through simpler and more efficient processes, developing leaders’ management skills and
implementing business projects.
Regarding the relationship with customers, 14 million contacts were received, out of which 4
million were served by officers of the Customer Contact Center, complying with the service
level.
In this search for simpler processes, the analysis and implementation of all sale and post-sale
transactions in all Retail and Wholesale segments was centralized in the division, complying
with the service levels established. Additionally, over 15 million checks were processed.
In relation to the Foreign Trade service, the Middle Office role, which provides further advice
to customers, and distinctive service cells were created by segment. These and other
measures implemented through LEAN allowed Banco Galicia to be one of the top-of-mind
banks chosen by customers, according to the syndicated survey.
Regarding business projects, service models were implemented at the Customer Contact
Center to fully meet our customers’ needs (both service and business ones). Additionally, the
large deposits collections center was opened, seeking to provide our customers with further
security, while minimizing the amount and cost of cash movement. With respect to the
storage of documents, the management of one of the general filing warehouses was
outsourced. A new service model was also implemented at the Payment to Suppliers Center,
reducing customers’ waiting time by 70% and making the channel ready for a future growth.
Systems
The Division has continued with the project to change the banking core system and, within
this environment, completed the development, configuration and implementation of the new
application of savings accounts, which enabled the migration of 2 million savings accounts to
SAP and the launching of the new hoarding account requested by the Argentine Government.
It began the checking accounts project and implemented the first release, a milestone that
allowed opening and operating the first checking accounts (with reduced functionality) on the
new core system.
During 2014 and within the framework of the “Big Data” project, the division achieved the
implementation of a new technology to analyze information called SAP HANA, which allows
processing large volumes of information with immediate response times.
The first development using it was the query on Benefits and Promotions, which allows
providing our customers with the new functionality to inquire about the detail of discounts
earned by virtue of our different promotions.
34 Grupo Financiero Galicia Annual Report Fiscal Year 2014
The tasks related to tests on applications being carried out have been reorganized, organizing
a new sector with new skills, gaining efficiency and quality. This allowed extending these
practices to new sectors and a higher number of projects, attaining the goals set in them.
The Division developed and implemented the Transactional Solution to Arrears and allowed
adding the Vendors loans from Galicia Office. In addition, the types of guarantee Guaranty,
Surety, Security and Assignment of Time Deposit were enabled.
In order to increase sales within different channels, the Division worked on a tool that allows
people’s online assessment and thus enables to attract potential sales related to customers or
prospects upon the first contact. This made it possible for the Telemarketing Inbound sector to
be a new sales channel, among other things, thus giving it a commercial role.
Finally, in order to comply with the new Capital Markets Law, the Division worked on
customizing the different systems involved in these operations. Material changes were made
to the inflow of customers’ orders through channels, the recording of transactions, the
collection of market fees and collection of commissions, the information offered to customers
about their operations and, basically, the Division developed a specific module for the
customers’ orders to be executed in the market offering the best price.
Organizational Development and Human Resources
Being one of the best companies to work for is one of Banco Galicia’s strategic mainstays and
entails a long-term commitment to people management. Likewise, the changes in the
organization over the last few years, standardizing its performance (organizational structure,
values, mission, evaluation systems, Human Resources practices, work environment
management), provided a firm platform to install the organizational culture management as a
core practice in developing skills, which internally strengthen the employee’s experience to
extend to the customer’s experience.
An analysis of the current culture, with its strengths, weaknesses, threats and opportunities,
and the needs of the business strategy was submitted in 2014. This allowed determining the
challenges posed by the Galicia culture for the 2015-2020 period and defining an action
framework for leaders, who foster the people’s development and drive their teams towards
new goals. We defined that the leaders’ style and values are decisive for the desired culture.
Their management and promotion will be the focal points of the Organizational Development
and Human Resources area for the coming years.
The culture plan focused on the defined challenges posed by ways of working will begin being
executed in 2015. Each of the following values will be managed: closeness, commitment,
enthusiasm and innovation, and the leader as an example for the organization. This is an area
global leading companies manage and the Bank, in its pursue to be the best private bank in the
country, includes it among its strategic priorities.
The ongoing management of the work environment is a key driver to achieve it and,
accordingly, during 2014 we continued encouraging action plans for work environment
management, and we worked by placing focus on leaders.
As evidence of the work performed by the whole organization, we reached 74% in the last
work environment survey results and achieved the seventh place in the Great Place to Work
ranking of the best companies to work for in Argentina. We also received a special mention as
to the Inspirar (Inspire) practice.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 35
Internal Communication
New initiatives were carried out and some existing initiatives were improved during 2014, with
the purpose of being more and better communicated.
Our classic internal magazine, Notigal, which allows us to reflect the most social contents of
the organization, migrated to a digital format strengthening our commitment towards the
environment and our innovative spirit. This new feature of the channel allowed us to include
audios and videos to experience all the Bank’s activities and news even more.
The “Conociéndonos cada día más” (Getting to Know Each Other More Every Day) program
(initiative in which branches’ and central areas’ employees interact with the area managers
and the Chief Executive Officer) has been in place for more than four years in a row and over
3,000 employees throughout the country have taken part therein. This year we completed the
tour of meetings with the branch network. More than 50 meetings were held throughout the
country.
We launched Todo oídos (All Ears), Banco Galicia’s first micro-radio program. This is a space
created to carry the customer’s views and the employees’ thoughts to the whole Bank on a
monthly basis. Its purpose is to listen thereto to learn from experiences and encourage the
internal discussion forum to trigger innovative ideas that may bring solutions to the challenges
posed day after day and awaken the ability to overcome difficulties.
Considering the need to reduce the number of e-mails leaders receive and for the purpose of
providing them with key information so that they may share it with their teams and, thus,
leverage their role of communicators, we implemented Líder al Día (Up-to-Date Leader), a
channel that consolidates in a single weekly e-mail the most important business and Human
Resources matters, with special focus on branches. This channel replaced the mass sending eCompany summary.
Managing the change
The managing the change Department supported employees with regard to the main projects
with impact on the organization.
We implemented internal communication and team management actions in SAP during the
saving accounts migration. We received a Gold Eikon award for this work, which was granted
to the “Trasplantando el corazón del Banco” (Transplanting the Bank’s Heart) campaign.
In Payments Menu, a project to optimize companies’ treasury services, we supported
employees in the implementation of several initiatives that allowed reducing overwork at
branches and encouraging customers’ self-service.
We also helped change the Insurance Banking Model, which optimizes the officers’ commercial
role, integrating the specialization of Galicia Seguros’ advisors and leaving post-sale in the
hands of each insurance company.
At the same time, we internally worked on redefining our services, which allowed us to meet
the increasing demand for projects (37 managed during 2014). We also focused on the team’s
specialization and other companies’ benchmark. Additionally, we began sharing experiences
and best practices with Tarjeta Naranja’s Human Resources and Change Management team,
assisting in integrating Grupo Galicia’s companies.
36 Grupo Financiero Galicia Annual Report Fiscal Year 2014
+Beneficios (+Benefits)
The internal benefits program, +Beneficios, which was designed to support employees, arose
only four years ago and is currently consolidated as the best in the financial market.
Divided into four large mainstays, +Salud (+Health), +Futuro (+Future), +Bienestar (+Wellbeing) and +Bip, the program provides benefits throughout the country, reaching employees
of all ages and geographic areas with benefits specially thought to meet the needs of each of
them.
+Health: It continued innovating with respect to care and promotion of healthy habits, and
launched a voluntary blood donation campaign carried out jointly with Hospital Garrahan.
+ Future: The access to life insurance with a 50% discount and accounting and tax advisory
services was facilitated in 2014 to broaden the current offer of benefits.
+Well-being carried out actions, such as the delivery of school supplies and informative
lectures focused on preventing addictions in its mission that the Bank’s employees attain a
sound balance between work and personal life.
+ Bip: It moved the national soccer final matches to the city of Rosario, consolidating its
focus on permanently providing spaces for integration and entertainment.
+Benefits: All matches were projected as part of the celebration of the Soccer World Cup.
Those in which Argentina’s Soccer Team played in business hours, big screens were installed
for all the employees to be able to enjoy them.
Innovation Program
During 2014, we continued working to strengthen the Bank’s innovative culture. The program
based its actions on three mainstays:
 Development of the Innovate Skill: Through different training actions, over 950 employees
acquired innovation methodology tools, which allowed them to be more innovative in their
daily tasks. We included two innovation schools and six exclusive workshops among training
actions for the members of the Community of Leaders, who had at least one experience with
the methodology.
 Expert Referents’ Training: We created the role of Innovation Drivers and Leaders. A group of
60 employees from different areas and hierarchies to whom we provide tools to become
referents and experts of the methodology. Each of them facilitated a project or activity under
the methodology of Galicia innovation process.
 Consolidation of the Proceso de Innovación Galicia (PIG, as per its initials in Spanish) (Galicia
Innovation Process): We used the PIG to manage 9 projects from different areas that engaged
80 employees and in relation to which at least 9 initiatives were implemented, as well as
others being implemented.
All these initiatives and those carried out over the last three years involved 40% of the Bank’s
employees, with 93 initiatives implemented and more than 10 being implemented.
We also received four national and international acknowledgements. The first award to
financial innovation granted by FELABAN for the Move segment and the first award to the
Human Resources innovation granted by Meta 4 for the brain school, among them. Moreover,
we exhibited the Innovation case at four universities.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 37
Jobs
Twelve young professionals were hired for different central areas, with an innovative selection
process.
In order to strengthen the selection process and achieve efficiency therein (particularly
distance recruiting), we carried out most of distance interviews through videoconference.
Continuing with the Employing Brand consolidation, we took part in 11 job fairs, out of which
3 were Web-based and 8 were face-to-face at different universities.
For the “Experiencia Galicia” (Galicia’s Experience) Program, the Recruiting Day took place,
where we received about 400 young students and carried out the selection process through
individual introductions and a role-playing game.
Through the PDA tool, we created the Service Officer position for the Customer Contact
Center and used it in the selection process.
Training
In line with the Bank’s strategic focal points and performance goals, employees were offered a
series of training courses that allow a better performance of their duties. The main projects
were as follows:
As part of the “Pasión por el cliente” (Passion for the Customer) program, we invited the
members of the Community of Leaders to take part in the Customer Day 2 experience in order
to experience work within channels that have direct contact with customers. Experience may
take place at branches or at the Customer Contact Center.
The “Circuito Éminent” (Éminent Circuit) program was launched to contribute to the
development and training of officers from the Éminent segment. The main goal was to
reinforce the most significant matters that have an impact on its management: business
methodology, investments and interview methodology.
We continued supporting the different SAP project deployment stages.
Under the concept of knowledge pills, a set of small modules was made for each of the
impacted systems in order to achieve a quick method to gain and transfer knowledge, which
allows supporting the migration acceleration process by branch.
During the second half, we worked hard on raising awareness of the importance of
transactional deposits. An online course was developed for all the Bank’s employees, matters
were included in the induction through a dynamic and disruptive activity, and the Hot Teams
methodology was included in Managers Training Schools and in the ongoing training of
Éminent officers.
As to the training of central areas, in 2014, the Professional Development School offered a
catalogue of courses on soft skills to leverage the development of the different competencies
of our employees. This program was greatly related to the performance evaluation, since it is a
tool with which each employee may choose to take part in those activities that are related to
the aspects to be considered in their performance evaluations.
The Bank also continued with the Training Schools, which offer programs aimed at branch
network employees.
38 Grupo Financiero Galicia Annual Report Fiscal Year 2014
During 2014, over 250 new employees were welcomed to the Bank with a dynamic,
interactive and entertaining orientation session format, with the purpose of conveying our
values and generating in new employees a sense of enthusiasm and commitment to the Bank.
Development
In order to provide more development and internal transfer opportunities, the Bank continued
strengthening Oportunidades Galicia (Galicia Opportunities). Through this tool 190 internal job
postings were published, covering 87% thereof.
We strengthened the opening and synergy with all the companies of Grupo Financiero Galicia
and its subsidiaries, including them within the process. Thus, we provided all the employees
with an opportunity for development and both internal transfer and transfer among affiliated
companies. In addition, we continued reinforcing the spreading of job postings by mail and the
Intranet.
The “Renombrar” (Rename) program arose as a response to the need of having a differential
value proposal for young talents, according to their demands and interests. This new model
allows us to improve the development policy, increasing promotion instances and the
recognition of seniority faster and more effectively. During 2014, the first 22 promotions were
made.
The Upward Feedback Survey (EUF, as per its initials in Spanish) (upward feedback survey
that employees answer in relation to the perception they have about their boss/manager’s
management as leader) has been extended, reaching all Banco Galicia’s leaders (Branch
Managers in the branch network, and from middle management to the Chief Executive Officer
in central areas).
Quality Assurance
During the fiscal year, the Bank continued spreading the customer’s experience throughout the
organization, leveraged by the results of several satisfaction surveys in all the segments, and
through the enlargement of the Net Promoter Score (NPS, as per its initials in Spanish)
methodology for the service of Éminent, Business and Pymes, and PyMEs Pes (small-sized
companies) segments in the branch network, and beginning to apply them to the Wholesale
and Financial Banking and at the Customer Contact Center.
Also, the entire Bank’s Community of Leaders continued making phone calls to customers and
actively participating in the NPS methodology.
In the last four-month period of the year, studies were conducted to assess the satisfaction
and recommendation level of customers from the different segments regarding the banks with
which they operate. We obtained extraordinary results from these studies. In all of them Banco
Galicia was ranked first considering the NPS, with significant difference with respect to the
second one in the cases of High-Income, Agricultural, Business and PyMEs and Financial
Banking, and shared in the case of Massive Income, PES, Corporate and Middle-market. This
swells us with pride, but also requires us to continue improving our customers’ experience day
after day.
To make the entire organization’s customer-oriented approach stronger, in 2014 NPS was
established as KPI (Key Performance Indicator) of the Bank’s main divisions, leveraging by
indicators the whole institution’s work on improving the customer’s experience.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 39
Regarding the “customer’s experience” concept, we continued with the Internal Customer
Program assessing the NPS and the satisfaction level of the Bank's employees with the
internal services received, broadening once more the number of central departments assessed,
and increasing the goal in order to raise the degree of commitment to service. This assessment
allows identifying opportunities for improvement in internal processes that eventually have an
impact on customer service.
We continued with the spreading of “Pasión por el Cliente” (Passion for the Customer)
program, with two forums in which the members of the Community of Leaders took part.
These meetings are intended to raise awareness, modify habits and spread the customeroriented philosophy throughout the organization. We focus on the managerial level as leader
with regard to changes, we share other companies’ good practices and success cases and we
invite our customers to participate in order to know their perception about the service. We
also made six replications of these forums to convey these concepts to middle management
and the rest of the organization.
In 2014, the processes certified in previous years under ISO 9001 were revalidated: Warrants,
Leasing, Galicia Administradora de Fondos, Private Banking Service Model and Cobranza
Integrada Galicia (Galicia Integrated Collection) and its Portal. We also started the procedures
for the internal certification of the Éminent service model and training in the branch network.
We internally worked on training different operating teams, this time individually, and a larger
community of leaders for these projects, which favored the exchange of experiences and
learning.
Quality took part in different Process Monitoring teams (Retail Loan Origination, Wholesale
Loan Origination, Post-sale, CCC Services, Customer Retention, Branch Services, Foreign
Trade Operations) contributing its view of the customer’s experience in all work tables.
The Bank maintained its adherence to the Code of Banking Practices, an initiative fostered by
several Argentine Bank Associations, with the purpose of contributing to guaranteeing the
rights of users of financial services and products. It further tries to guarantee the transparency
in the data provided by financial institutions to their customers, and the bonds between the
institutions that provide financial services and the community those institutions belong to.
All these programs allow the Bank to work continuously on improving its customers’
experience and on the search for being the best private bank in Argentina: Customers seeing
their expectations being exceeded and recommending the Bank's services to others, and
employees who are increasingly satisfied and proud of working at Banco Galicia.
Corporate Social Responsibility
At Banco Galicia, the sustainability strategy is integrated into the business strategy. The Bank
fosters a triple management, including the economic growth, the social equity and the
environmental care, which adds value to our stakeholders. From the Sustainability
Management, we define policies and programs that have an impact across the organization.
We foster a social investment model focused on programs that cause a real and positive
impact on communities under three core focal points of work: (i) Education: where we focus
on encouraging Higher Education and Financial Education; (ii) Work Promotion: through training
courses for entrepreneurs and Pymes, and access to credit by promoting microfinance; (iii) and
Health: through training in child malnutrition prevention and implementation of improvements
at hospitals and health centers. We consider these matters to be key pillars to foster social
integration, to build a fair society and to develop our country.
40 Grupo Financiero Galicia Annual Report Fiscal Year 2014
We encourage environment care driving an integrated environmental management strategy
that contemplates an efficient use of natural resources, focusing on the rational consumption
of electric power and paper. We calculate our corporate carbon footprint, we carry out
awareness initiatives and environmental preservation and we grant credit lines that favor the
minimization of the impact on the environment. We adhere to the Equator Principles and we
are members of UNEFI.
By means of the Corporate Volunteering Program, we strengthened our employees’ solidarity
initiatives through infrastructure and equipment improvement projects for the benefit of
welfare institutions in which 3,000 persons per year take part.
Our Sustainability Report, which was awarded a prize on recurring occasions because of being
considered among the best reports in Argentina, is a management and communication tool
that systematizes and measures our economic, social and environmental performance. The
Report not only makes the Bank’s communication and performance transparent with respect to
our stakeholders, but also provides us a single opportunity to show that banks are a true
positive exchange factor we contribute to improving society and listening to their needs to
turn them into solutions as a true social player. We use the international guidelines of the
Global Reporting Initiative (GRI), reaching the maximum application level, ISO 26000,
AA1000SES, AA1000AS, Global Compact, Advanced COP and IBASE Social Balance Sheet.
Sudamericana Holding
Grupo Financiero Galicia holds 87.5% of the company’s capital stock and Banco Galicia owns
the remaining 12.5% of the shares.
This investment in the insurance business is part of Grupo Financiero Galicia’s general plan to
strengthen its position as leader in providing financial services.
In turn, Sudamericana Holding is the controlling company of Galicia Seguros S.A. (property
and life insurance), Galicia Retiro Compañía de Seguros S.A. (retirement insurance) and Galicia
Broker Asesores de Seguros S.A. (insurance broker). Additionally, Sudamericana Holding holds
39% (indirectly) of Nova Re Compañía Argentina de Reaseguros S.A. (local reinsurer).
Total insurance production of the aforementioned insurance companies amounted to Ps. 1,762
million during 2014, 33% higher than the volume of premiums of the previous year.
This increase in insurance production was recorded mainly for Galicia Seguros, with Ps. 439
million more premiums written than in the same period of the previous fiscal year. As regards
Galicia Seguros’ business transactions, the focus was placed on continuing to increase the
company’s turnover and sales, which in 2014 amounted to Ps. 509 million of annualized
premiums. This represented a 29% growth when compared to the previous year, thus
increasing the insurance policy laps ratio and extending the types of coverage offered.
Galicia Retiro Compañía de Seguros S.A. continues with an action plan aimed at effectively
administering the current business and keeping a proactive analysis on the evolution of market
conditions in order to assess whether to re-launch voluntary retirement products, both
individual and group. Within the current economic framework, measures aimed at complying
with the goals established in the Business Plan defined will continue during 2015.
As in the last years, Galicia Seguros S.A. will continue the vertical growth of business through
Banco Galicia’s and regional credit card companies’ channels, as well as the development of
the existing alternative sales channels by means of the launching of new products and the use
Grupo Financiero Galicia Annual Report Fiscal Year 2014 41
of new points of contact and sales, and the analysis of feasibility of underwriting insurance in
new property insurance lines in order to mitigate companies’ risks. Additionally, it will continue
maintaining its goals of: (i) boosting the business with products supplementary to the main
businesses of Banco Galicia and its subsidiaries, adjusting to each of their segments; (ii)
expanding the sale of insurance to companies; (iii) make management effective to support the
growth of the business volume, implementing the update of the management system (Visual
Time); (iv) consolidating the insurance position for individuals, taking advantage of the
synergies with Galicia companies group and developing the attraction of new customers in the
market through additional channels; (v) keeping the efforts to restrict the level of expenses
and obtaining the estimated profitability; and (vi) fostering a very good work environment and
be eligible as an excellent company to work for by the staff .
Galicia Broker Asesores de Seguros S.A. will continue focusing on and boosting its growth in
the area of business related to the corporate sector, offering its customers professional
advisory services that will allow them to find the most appropriate insurance and companies in
each case, in order to contribute to the main goal of growing with appropriate profitability
levels. On the other hand, the company will continue moving forward so as to maintain
operating systems updated to continue gaining ground as regards efficiency and in developing
systems that allow online interaction with sales channels, streamlining the carrying out of new
businesses, easing the monitoring of transactions and providing management information.
Galicia Administradora de Fondos
Galicia Administradora de Fondos’ shareholders (management agent of collective investment
products corresponding to mutual funds) are Grupo Financiero Galicia, which holds 95% of
shares and Galicia Valores S.A., Banco Galicia’s subsidiary, which holds the remaining 5%.
GAF manages FIMA mutual funds. Banco Galicia distributes the mutual funds to several
customer segments through its broad distribution channel network (branches, e-banking,
telephone banking), while it acts as a custodian of the assets that make up the funds, in its
role as custodial agent of collective investment products corresponding to mutual funds. This
company manages investments and determines the market value of mutual fund units on a
daily basis.
The assets of each mutual fund are invested in a variety of instruments, such as bonds,
negotiable obligations, trusts, shares, time deposits, among others, according to the
investment purpose of each mutual fund.
During the fiscal year, the mutual funds market increased its volume by 82%, mainly of bond
funds, closing the year with a Ps. 132,328 million total balance.
FIMA funds equity increased by 79% when compared to the close of the previous fiscal year,
reaching, as of December 31, 2014, a volume of funds managed of Ps. 11,885 million, which
accounts for a 9% market share.
This increase in volume mainly took place in the institutional and corporate customers
segments, particularly regarding FIMA Ahorro Pesos and FIMA Ahorro Plus. It is worth noting
the 638% growth of FIMA Abierto Pymes fund and the 195% growth of FIMA PB Acciones
fund.
Regarding internal development, Galicia Administradora de Fondos renewed ISO 9001:2008
quality standard certification for all its processes, which include asset management,
transactions and business support.
42 Grupo Financiero Galicia Annual Report Fiscal Year 2014
During the fiscal year, and being the new Capital Markets Law in full force and effect, the
Company’s Bylaws were amended, eliminating the limitation with regard to the sole corporate
purpose. This allows the company to carry out other activities, such as portfolio management.
These changes allow foreseeing a possible growth with new products, for which purpose the
registration as custodian and advisor agent was requested from the CNV to be ready for new
businesses management.
Additionally, two new regulations, Fima Gestión I and Fima Mix I, have been filed in view of a
possible demand in 2015.
In 2014, ESCO’s Visual Fondos installment calculation system was implemented. It is used by
75% of the mutual funds industry, and showed an excellent performance and yield. The
versatility of this tool allows not only managing mutual funds, but also the possibility of
managing investment portfolios.
During the fiscal year, Galicia Administradora de Fondos optimized the financial performance
of its liquid assets. In this regard, investments were made in the same FIMA mutual funds it
manages.
As regards credit ratings, Moody’s Latin America Calificadora de Riesgo S.A. granted the FIMA
funds the following ratings: FIMA Premium “Aaa”, FIMA Ahorro Pesos “Aa”, FIMA Ahorro Plus
“Aa”, FIMA Renta Pesos “A”, FIMA Renta Plus “A”, FIMA Capital Plus “A”, FIMA Pymes “A”
and FIMA PB Acciones “Ef-3”.
The outlook for 2015 foresees an ongoing increase in mutual funds and the development of
business related to that activity within the framework of the new Capital Markets Law, such
as advisory services and management of discretional investment portfolios.
Galicia Warrants S.A.
Its shareholders are Grupo Financiero Galicia, with an 87.5% stake in this company, and
Banco Galicia, with the remaining 12.5%
This is a leading company in the industry of certificates of deposit and warrants. This
company has been conducting transactions since 1994, supporting medium and large
companies in regard to the custody of stocks. Its main purpose is to enable its customers
access to credit and financing, which are secured by the property kept under custody. Galicia
Warrants S.A.’s main customers belong to the agricultural, industrial and agro-industrial
sectors, as well as exporters and retailers.
The volume of operations for 2014 was higher than that for 2013, which entailed a 49%
increase in income from services, as a result of the increase in the customer portfolio and the
volumes of goods under custody. The sectors that demanded this financial instrument the
most were regional economies, mainly those related to agriculture and agroindustry.
Income from services for the fiscal year reached Ps. 43 million, whereas net income amounted
to Ps. 13 million.
The Company will continue focusing on providing customers with the best service, tailoring it
to their needs. This will enable a sustained growth and an expectation about a more
aggressive development for the coming years.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 43
Net Investment S.A.
Grupo Financiero Galicia owns an 87.5% stake in Net Investment S.A., while the remaining
12.5% stake is held by Banco Galicia. Net Investment was created to carry out Internet
business transactions. Within the framework of the Board of Directors’ search for new
business alternatives, the shareholders decided to amend the corporate purpose to be able to
have an interest in other companies that carry out related, accessory and/or else
supplementary activities.
The outlook for 2015 is related to the possibility of carrying out the business alternatives and
opportunities that are being analyzed by the Board of Directors.
44 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Aspects related to Corporate Organization, Decision Making, Internal Control,
and Compensation Policy for Directors and Officers
Composition and Functions of the Board of Directors
The Ordinary Shareholders’ Meeting held on April 29, 2014, fixed the number of directors in
nine and in four the number of alternate directors.
The composition of the Board of Directors is as follows:
Name
Eduardo J. Escasany
Pablo Gutiérrez
Abel Ayerza
Federico Braun
C. Enrique Martin
Luis O. Oddone
Silvestre Vila Moret
Antonio R. Garcés
Juan Miguel Cuattromo
María O. Hordeñana de Escasany
Sergio Grinenco
Alejandro M. Rojas Lagarde
Luis S. Monsegur
Position
Chairman
Vice-Chairman
Director
Director
Director
Director
Director
Director
Director
Alternate Director
Alternate Director
Alternate Director
Alternate Director
Expiration of Term
04/15/2016
04/15/2016
04/19/2015
04/29/2017
04/19/2015
04/15/2016
04/29/2017
04/19/2015
04/29/2015
04/29/2017
04/29/2017
04/29/2017
04/19/2015
The Board of Directors meets formally once a month and each time circumstances so require
it. It is responsible for the establishment of general guidelines related to asset and liability
management, the approval of business plans, economic and financial budgets, investment
plans, and proposals for development of new businesses.
Corporate Organization
Grupo Financiero Galicia is directed by two management divisions.
GENERAL DIVISION: Its main function consists in implementing the policies defined by Grupo
Financiero Galicia’s Board of Directors, as well as suggesting to the Board of Directors the
application of plans, budgets and company organization. This division is also in charge of
supervising the Financial & Accounting Division, assessing the attainment of goals and the
performance of the company. It as well takes part in the Board of Directors of subsidiaries.
FINANCIAL AND ACCOUNTING DIVISION: It is mainly responsible for the assessment of
investment alternatives, thus suggesting whether to invest or divest holdings in different
companies or businesses. It also plans and coordinates the company’s administrative services
and financial resources in order to guarantee its proper management. This division also aims at
meeting requirements set by several controlling authorities, complying with information and
internal control needs and budgeting purposes. Furthermore, it is in charge of planning,
preparing, coordinating, controlling and providing financial information to the stock exchanges
where the Company’s shares are listed and to regulatory bodies.
This division also has the following committees:
Grupo Financiero Galicia Annual Report Fiscal Year 2014 45
DISCLOSURE COMMITTEE: This Committee is made up of Grupo Financiero Galicia’s
Managing Director, the Chief Financial and Accounting Officer and two supervisors from the
Financial and Accounting Division. At least one of the members of this Committee takes part
in the meetings held by the "Disclosure Committee", created for the same purposes at the
main subsidiaries. Among others, it has the authority to invite the executives in charge of
other areas of the Company and/ or affiliated companies, as it deems convenient, to attend
the meetings held by the Committee. This Committee was created in 2002 with the purpose
of complying with what is recommended by the Sarbanes-Oxley Act of 2002 of the United
States of America, since Grupo Financiero Galicia is a listed company on the NASDAQ Capital
Market. The above-referred Law was passed in order to provide a more stringent regulatory
framework regarding information and corporate responsibilities, both for companies in the
United States of America as well as foreign companies that act or participate in U.S. markets.
Among its responsibilities, the following stand out: monitoring the Company’s internal control,
reviewing the financial statements and other information published, preparing the reports for
the Board of Directors on the activities carried out by the Committee, controlling the activities
performed by internal audit, executing and implementing the necessary measures to comply
with the certifications required by Sections 906, 302 and 404 provided by the Sarbanes-Oxley
Act, monitoring the modifications introduced in order to extend the application of the
provisions of the Sarbanes-Oxley Act to the Company’s main affiliated companies, and
interacting with the Company’s Audit Committee. It is worth noting that this Committee's
operations have been adapted to comply with domestic laws currently represented by Capital
Markets Law No. 26831 and regulations issued by the CNV, so as to be able to help with
tasks that are regulated by such laws. At present, this Committee performs significant
activities on the administrative and information areas that serve the Board of Directors and the
Company’s Audit Committee in the development of their functions. This way, the Company
contributes to the transparency of information provided to the stock exchanges were its
shares are listed.
AUDIT COMMITTEE: This Committee was created as a body with no executive functions,
which purpose is to provide the Company’s Board of Directors with assistance in overseeing
the financial statements, as well as in the task of controlling Grupo Financiero Galicia and its
subsidiaries and companies it owns a stake in. This Committee complies with the provisions
set forth by Capital Markets Law No. 26831 and regulations issued by the CNV, which require
that companies that make a public offering of shares should form an Audit Committee, and
develop a charter with regulations for its operation Furthermore, it is worth noting this
Committee has been created in compliance with the requirements of the Sarbanes-Oxley Act.
Among the activities it carries out, the following are worth noting: the annual planning of the
Committee’s activities and the allocation of means for its operation; the evaluation on the
independence, working plans and performance of External Audit and the assessment of plans
and performance of Internal Audit; evaluation of the internal control in force at the Company
(which, furthermore, complies with the provisions of Section 404 of the Sarbanes-Oxley Act)
and at its main subsidiaries, and, as part of that, the accounting and administrative system’s
operation; the assessment on the use of information policies on risk management at the
Company’s main subsidiaries; assessment on the reliability of financial information submitted
to the regulators and markets where the Company lists its shares; evaluation of standards of
conduct through the analysis of legal and regulatory provisions being in force and set forth in
the Code of Ethics established by the Company, mainly with regard to transparency, conflict
of interests, reliability and the appropriate disclosure of accounting information and other
significant events, as well as the protection of the Company’s net worth; the analysis of
related party transactions for the cases established by Capital Markets Law No. 26831; and
the analysis of whether conditions are reasonable and of compliance with the General Program
for the Issuance of Negotiable Obligations outstanding.
46 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Supervisory Syndics’ Committee
In line with what is set forth in the Corporations Law, corporate bylaws provide for a
Supervisory Syndics' Committee consisting of three regular members (syndics) and three
alternate members (alternate syndics). In accordance with the applicable Argentine law, the
Supervisory Syndics' Committee is responsible for controlling the Company's management, for
which its members examine books and documentation when they deem it convenient and at
least every three months. At least one of the members attends the meetings of the Board of
Directors. Unlike directors, syndics and alternate syndics cannot have management functions.
The syndics are responsible for, among other things, preparation of a report to shareholders
analyzing the Company’s financial statements and Annual Report for each fiscal year.
Alternate syndics act in the temporary or permanent absence of a syndic. The syndics and the
alternate syndics are elected for a one-year term by the shareholders at their Annual General
Meeting.
Compensation Policy for Directors and Officers
The policy for compensation applied by Grupo Financiero Galicia and its controlled companies
is, essentially, the same, and it consists in arranging salary levels in order of importance based
on a system that describes and assesses tasks by factors (Hay System). The purpose is to pay
compensation amounts similar to those observed in the domestic market for functions with the
same hierarchy and responsibilities. Managers receive a fixed compensation and may receive a
variable fee based on individual performance. This policy for compensation envisages the
possibility of having access to retirement insurance and there are no option plans.
Independent directors and members of the Audit Committee are paid a fix fee based on the
functions they carry out. Compensation for the members of the Board of Directors shall be
considered by the Shareholders’ Meeting once the fiscal year has ended.
Policy on Dividends
Grupo Financiero Galicia’s policy for the distribution of dividends envisages the following,
among other factors: (i) the obligatory nature of establishing a legal reserve, (ii) the company’s
financial condition and its indebtedness, (iii) the requirements of controlled companies, and (iv)
that the profits recorded in the financial statements are realized and liquid profits, a
requirement of Section 68 of the Corporations Law so that it is possible to distribute them as
dividends. The proposal to distribute dividends arising from such analysis has to be approved
at the Shareholders' Meeting that discusses the Financial Statements corresponding to each
fiscal year.
Composition and Functions of Banco Galicia’s Board of Directors
The Ordinary Shareholders’ Meeting held on April 29, 2014, fixed the number of directors in
seven and in five the number of alternate directors.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 47
The composition of the Board of Directors is as follows:
Name
Sergio Grinenco
Pablo Gutierrez
Guillermo J. Pando
Luis M. Ribaya
Raúl H. Seoane
Pablo M. Garat (1)
Ignacio A. González (1)
Enrique García Pinto (2)
C. Enrique Martin
Juan C. Fossatti (2)
Augusto R. Zapiola Macnab
Oscar J. Falleroni
(2)
Position
Chairman
Vice-Chairman
Secretary Director
Director
Director
Director
Director
Alternate Director
Alternate Director
Alternate Director
Alternate Director
Alternate Director
Expiration of Term
12/31/2014
12/31/2016
12/31/2014
12/31/2016
12/31/2016
12/31/2015
12/31/2015
12/31/2015
12/31/2014
12/31/2014
12/31/2015
12/31/2015
(1) In accordance with National Securities Commission (CNV) regulations, and pursuant to the criteria adopted by said
entity, Messrs. Pablo M. Garat and Ignacio A. González are Independent Directors.
(2) In accordance with CNV regulations, and pursuant to the criteria adopted by the CNV, Messrs. Enrique García
Pinto, Augusto R. Zapiola Macnab and Juan Carlos Fossati are Independent Alternate Directors. They shall replace
the Independent Directors in the case of a vacancy.
Banco Galicia’s Board of Directors formally meets at least twice a week and informally every
day, is in charge of Banco Galicia's general management and takes all the necessary decisions
to fulfill said task.
Members of Banco Galicia’s Board of Directors also serve in the following committees:
RISK MANAGEMENT COMMITTEE: This Committee is composed of five Directors, the Chief
Executive Officer, the Managers of the Risk Management Division and Planning Division and
the Internal Audit Manager. It is in charge of approving risk management strategies, policies,
processes and procedures, with the related contingency plans, establishing the specific limits
for each risk exposure and approving, when appropriate, the temporary limit excesses and
becoming aware of each risk position and compliance with policies. The Committee meets at
least once every two months. Its resolutions are summarized in writing in minutes.
CREDIT COMMITTEE: This Committee is composed of seven Directors, the Chief Executive
Officer and the Managers of the Credit and Risk Management Divisions. The Managers of the
Wholesale Banking, Retail Banking and Financial Divisions shall attend the meetings as long as
the bank account pending approval by this committee corresponds to any of the abovementioned divisions. It is in charge of approving and granting ratings and loans to
customers/groups which risk level is greater than 2.5% of the Bank’s computable regulatory
capital as of last December, with annual updating. The Committee meets at least once every
week. Approved operations are recorded in signed and dated minutes.
ASSET-LIABILITY COMMITTEE (ALCO): Five Directors, the Chief Executive Officer, the Retail
Banking Manager, the Wholesale Banking Manager, the Financial Division Manager, the Risk
Management Division Manager and the Planning Division Manager are members of this
Committee. It is in charge of analyzing the evolution of Banco Galicia’s business from a
financial point of view, in regard to fund raising and different assets placement. It is also in
charge of the follow-up and control of liquidity, interest rate and currency mismatches. This
Committee is in charge of analyzing, together with the business divisions, measures in
connection with the management of interest rate, currency and maturity mismatches, with the
goal of maximizing financial and foreign-exchange results within risk and capital use policies.
48 Grupo Financiero Galicia Annual Report Fiscal Year 2014
This Committee is also responsible for suggesting changes to these policies, if necessary, to
Banco Galicia’s Board of Directors. The Committee meets at least once a month. Its
resolutions are summarized in writing in minutes.
INFORMATION TECHNOLOGY COMMITTEE: This Committee is composed of three Directors,
the Chief Executive Officer, the Comprehensive Corporate Services Division Manager and the
IT Department Manager. This Committee is in charge of supervising and approving the
development plans of new systems and their budgets, as well as supervising these systems’
budget control. It is also responsible for approving the general design of the systems’
structure, the main processes thereof and the systems implemented, as well as monitoring the
quality of the Bank’s systems, within the policies established by Banco Galicia's Board of
Directors. The Committee meets at least once every three months. It can hold extraordinary
meetings in case there is any issue that requires urgent consideration. Its resolutions are
summarized in writing in minutes.
AUDIT COMMITTEE: In accordance with the Argentine Central Bank’s regulations, Banco
Galicia formed an Audit Committee composed of two Directors and the Internal Audit
Manager. This Committee is in charge of supervising the adequacy and conformity, as well as
the effective functioning, of the internal control systems so as to reasonably ensure the
effectiveness and efficiency of operations, the reliability of accounting and financial
information, compliance with the laws and regulations in force and compliance with the goals
and the strategy set forth by the Board of Directors. The Committee meets at least once a
month. Its resolutions are entered in minutes, which are transcribed in signed books.
COMMITTEE FOR THE CONTROL AND PREVENTION OF MONEY LAUNDERING AND FUNDING
OF TERRORIST ACTIVITIES: It is composed of two Directors, the Chief Executive Officer, the
Manager in charge of the Anti-Money Laundering Unit (UAL), the Internal Audit Manager, and
the Managers of the following Divisions: Risk Management, Credit, Financial, Wholesale
Banking, Retail Banking and Comprehensive Corporate Services. The Syndics can be invited to
attend any meeting called by this Committee. In compliance with the regulations set forth by
the Argentine Central Bank, Messrs. Guillermo J. Pando and Raúl H. Seoane, Directors, have
been appointed as the Bank’s officers responsible for the control and prevention of money
laundering and funding of terrorist activities. Likewise, the Financial Division Manager is the
officer in charge of financial intermediation transactions. This Committee is responsible for
planning, coordinating and enforcing compliance with the policies on the issue established and
approved by Banco Galicia’s Board of Directors. The Committee is scheduled to meet at least
once every two months and its resolutions must be registered in a minutes book.
DISCLOSURE COMMITTEE: This Committee is composed of five Directors (two of whom are
independent ones), the Chief Executive Officer, the Managers of the Planning Division and the
Risk Management Division, the Internal Audit Manager, the Accounting Division, the Asset and
Liabilities Management, the Institutional Relations Department and Legal Advisory Managers,
and the Person in Charge of Market Relations. The Syndics can be invited to attend any
meeting called by this Committee. A member of the Committee that was created for the same
purpose by Grupo Financiero Galicia also attends the meetings held by this Committee.
Likewise, the Committee may call officers from Banco Galicia's different divisions whenever it
may deem necessary. This Committee was created to comply with the provisions of the U.S.
Sarbanes-Oxley Act. The Committee will meet every three months or as long as there are
issues that require consideration. Its resolutions are summarized in writing in minutes.
HUMAN RESOURCES COMMITTEE: It is composed of two Directors, the Chief Executive
Officer and the Organizational Development and Human Resources Manager. It is in charge of
the appointment, transfer, turnover, development, headcount and compensation of the
personnel included in salary levels 9 and above (Hay System). It is also in charge of assessing
Grupo Financiero Galicia Annual Report Fiscal Year 2014 49
and approving the policies set by Banco Galicia's Board of Directors with regard to incentives,
respecting the definitions provided for by the Risk Management Committee, in order to ensure
an appropriate risk assumption by the assessed parties. It shall also approve the payment of
incentives together with the Managers of the Risk Management and Planning Divisions. The
Committee meets every six months or whenever there are issues that require consideration. Its
resolutions are summarized in writing in minutes.
PLANNING AND MANAGEMENT CONTROL COMMITTEE: This Committee is composed of five
Directors, the Chief Executive Officer, the Managers of the Risk Management Division and
Planning Division and the Internal Audit Manager. The Syndics can be invited to attend any
meeting called by this Committee. It is in charge of analyzing, defining and following up the
consolidated balance sheet and income statement, and carrying out the quarterly budgetary
follow-up by Division. Furthermore, it is in charge of approving, together with the
Organizational Development and Human Resources Manager, compliance levels that shall be
used in the assessment of staff and of the budgeted amount for the payment of annual
incentives. The Committee meets at least once every month. Its resolutions are summarized in
writing in minutes.
SEGMENTS AND BUSINESS MANAGEMENT COMMITTEE: This Committee is composed of
three Directors, the Chief Executive Officer, the Division Managers, the Department Managers
and those officers whose participation is deemed convenient and who are especially called
upon. It is in charge of analyzing, defining and following up businesses and segments. The
Committee will meet at least once every three months. Its resolutions are summarized in
writing in minutes.
CRISIS COMMITTEE: This Committee is composed of five Directors and the Chief Executive
Officer. The Committee may call those officers whose participation is deemed relevant. It is in
charge of evaluating the situation upon facing a liquidity crisis and deciding the steps to be
implemented to tackle it. The Committee shall meet when convened by Banco Galicia’s Board
of Directors and shall hold sessions as may be required until the liquidity crisis ends. Its
resolutions are summarized in writing in minutes.
FINANCIAL COMMITTEE – CONSUMER BANKING: This Committee is composed of two
Directors, the Chief Executive Officer, the Financial Division and Risk Management Managers,
and the Financial Operations and Capital Markets Managers. The Committee is also composed
of Tarjetas Regionales S.A.’s Chief Executive Officer and Financial Manager and Compañía
Financiera Argentina S.A.’s Financial Manager. The members of the Committee may request
the presence of officers from other areas or from the Companies if matters warrant so. It is in
charge of analyzing the financial evolution and the funding needs of consumer financing
companies, as well as analyzing the portfolio and liquidity evolution and the related policies,
and assessing the funding alternatives. It shall meet at least every two months. Its resolutions
are summarized in writing in minutes.
On a monthly basis, Banco Galicia’s Board of Directors is informed of the actions taken by the
Committees, which are written down in minutes.
Banco Galicia’s Corporate Organization
On August 31, 2009, Mr. Daniel Llambías, accountant, was appointed Banco de Galicia's
Chief Executive Officer by decision of the Board of Directors. The Chief Executive Officer is in
charge of implementing the strategic goals established by Banco Galicia’s Board of Directors,
and coordinating the Managers of the Bank’s Divisions, reporting to Banco Galicia's Board of
Directors.
50 Grupo Financiero Galicia Annual Report Fiscal Year 2014
At fiscal year-end, the following Divisions report to Banco Galicia’s Chief Executive Officer:
RETAIL BANKING DIVISION: This Division is responsible for designing, planning and
implementing the vision, strategies and goals for the Retail Banking’ businesses and for each
customer segment and distribution channel. It is as well in charge of the definition and control
of this Division’s business goals. The following departments report to this Division: Private
Banking, Segments, Products and Publicity, Branches, Operating Supervision of Branches and
Planning and Retail Planning.
WHOLESALE BANKING DIVISION: This Division is responsible for designing, planning and
implementing the vision, strategies and goals for the Wholesale Banking’ businesses and for
each customer segment (corporate, medium-sized companies, agricultural companies and
public-sector companies) and product. It is as well in charge of the definition and control of
this Division’s business goals. The following departments report to this Division: Largecorporations Banking and Middle-market Banking, Agribusiness Sector, Public Sector,
Wholesale Products and Marketing, Capital Markets and Investment Banking, and Corporate
Banking Centers.
FINANCIAL DIVISION: This Division is responsible for planning and managing the correct use
of financial resources and other Treasury’s goals, providing the appropriate funding for Banco
Galicia’s businesses, establishing and applying the Bank’s deposit-raising and funding policies
within the parameters established by Banco Galicia’s risk policies. It also manages short-term
resources and the investment portfolio, ensuring the correct conduction of transactions. The
following departments report to this Division: Asset and Liabilities Management, Financial
Operations, Banking Relations and Information Support and Management.
RISK MANAGEMENT DIVISION: The Division is responsible for analyzing risks in all of its
areas: financial, operational, credit, reputational and strategic, ensuring compliance with
internal policies and applicable regulations; keeping Banco Galicia’s Board of Directors abreast
of the risks to which the Bank is exposed and proposing the coverage thereof; and designing
and proposing policies and procedures for risk control and mitigation, administering the
process that shall be used to assess the relationship between own resources available and
resources necessary to maintain an appropriate risk profile. The following departments report
to this Division: Wholesale Risk, Retail Risk, Consumer Risk, Financial Risk, Operational Risk
and Development and Administration of Models.
CREDIT DIVISION: This Division is responsible for developing and proposing the strategies for
credit and credit-granting policies, as well as managing and monitoring credit origination
processes, follow-up and control thereof, and the recovery of past-due loans. This aims at
ensuring the quality of the loan portfolio, cost and time efficiency, and recovery optimization,
thus minimizing loan losses and optimizing efficiency in processes and business credit
granting. The following departments report to this Division: Credit Analysis, Corporate Credit
Approval, Consumer Credit, Consumer Credit Recovery, Portfolio Recovery and Credit Strategy
and Planning.
COMPREHENSIVE CORPORATE SERVICES DIVISION: This Division is responsible for
designing, planning and implementing the strategies for the IT, Organization, Operations,
Purchase of Goods and Services and Infrastructure Divisions, and the maintenance thereof. It
is as well in charge of Banco Galicia’s physical safety and information, with the purpose of
ensuring and maintaining the logistic support for its operations and activities. The following
departments report to this Division: Operations, IT, Organization, Engineering and
Maintenance, Information Security and Management and Security.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 51
ORGANIZATIONAL DEVELOPMENT AND HUMAN RESOURCES DIVISION: This Division is in
charge of designing, planning and implementing Human Resources strategies, as well as
defining and controlling management goals of Banco Galicia’s human resources with the
purpose of ensuring homogeneous practices, availability of qualified and motivated personnel
and a proper work environment. The following departments report to this Division: Human
Resources Management, Human Resources Advisory, Internal Communications and Culture,
Talent Management, Compensations, Quality Assurance and Sustainability.
STRATEGIC PLANNING DIVISION: This Division is responsible for planning, coordinating and
controlling the development and maintenance of budget, management planning and control,
and accounting and tax activities. The following departments report to this Division:
Accounting, Tax Advisory, Management Control, Efficiency Control, Research and
Consolidation and Analysis.
LEGAL ADVISORY DEPARTMENT DIVISION: This Department Division is responsible for
providing advisory services and determining the steps to be taken for Banco Galicia’s business
conduction under the regulations in force, with the purpose of ensuring the legitimacy thereof
and avoiding loss of rights, indemnifications and/or penalties.
INSTITUTIONAL RELATIONS DEPARTMENT DIVISION: This Department Division is responsible
for creating and proposing institutional communication strategies and managing and controlling
press activities, as well as developing the institutional image, providing advice to the different
areas. It is as well responsible for planning, preparing, coordinating, controlling and submitting
financial information to institutional investors, both domestic and international analysts and
credit rating companies. It also assesses the materials published by analysts, carrying out a
follow-up of their opinions, as well as those of shareholders and investors in general.
The following department divisions report to Banco Galicia’s Board of Directors:
INTERNAL AUDIT DEPARTMENT DIVISION: This Department Division is responsible for
assessing and monitoring the effectiveness, conformity and efficiency of internal control
systems with the purpose of ensuring compliance with applicable laws and regulations.
ANTI-MONEY LAUNDERING UNIT DEPARTMENT DIVISION: This Department Division is
responsible for coordinating and monitoring compliance with the policies established by Banco
Galicia's Board of Directors on control and prevention of money laundering and funding of
terrorist activities in order to minimize reputational risks, thus ensuring compliance with
applicable regulations and international standards.
COMPLIANCE DIVISION: Its mission is to ensure compliance with applicable laws, regulations
and internal policies of the Bank, coordinating the appropriate tasks to avoid the imposition of
penalties due to legal or regulatory violations and the suffering of financial or reputational
losses.
Banco Galicia’s Supervisory Syndics’ Committee
Banco Galicia’s Bylaws provide for a Supervisory Syndics' Committee consisting of three
Regular Syndics and three Alternate Syndics. Pursuant to the Corporations Law and the
Argentine Central Bank regulations, the regular and alternate Members of the Supervisory
Syndics’ Committee are responsible for controlling that Banco Galicia’s administration is in
accordance with applicable regulations. Syndics and Alternate Syndics do not partake in
business management and cannot have managerial functions of any kind. They are in charge,
among other tasks, of the preparation of a report to the shareholders regarding the financial
statements for each fiscal year. The Syndics and the Alternate Syndics are elected at the
52 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Annual Ordinary Shareholders’ meeting for a one-year term, and they can be reelected.
Alternate Syndics act in the temporary or permanent absence of one or more Syndics.
Policy for Compensation of Directors and Officers of Banco Galicia
Banco Galicia's Bylaws set forth that the Shareholders’ Meeting can establish that an incentive
compensation be paid to Banco Galicia’s Board of Directors, when applicable, in the amount
approved by the Shareholders' Meeting. Such amount cannot exceed six percent (6%) of the
Bank's net income before income tax or any other tax that may replace it.
Section 25, sub-section 2, of Banco Galicia’s Bylaws establishes that one of the powers and
duties of Banco Galicia’s Board of Directors is to determine, whenever it so deems convenient
to corporate interests, whether its members shall perform technical or administrative duties
within the Company and receive remuneration for such activities, with such remuneration
having to be reported at the Shareholders’ Meeting. In such cases, compensation for the
relevant directors set by the Shareholders’ Meeting shall be charged to general expenses.
Banco Galicia's Board of Directors sets the policy for compensation of the Bank’s personnel.
Managers receive a fixed compensation and they may also receive a variable compensation
based on their performance.
Five of the Directors are Banco Galicia’s employees, and they establish institutional policies
and control the execution thereof. Therefore, they receive fixed compensation and are entitled
to variable compensation based on their performance, provided that these additional payments
do not exceed the standard payments made by similar entities in the Argentine financial
system, a provision that is applicable to Managers as well.
The policy for compensation envisages the possibility of having access to retirement
insurance. The Bank does not maintain any options plans.
The Shareholders’ Meeting must approve the compensation of Banco Galicia’s Board of
Directors after the close of the fiscal year.
During the fiscal year, provisions were established to cover the variable compensations of
Banco Galicia’s Board of Directors and managers for the fiscal year.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 53
Management’s Discussion and Analysis
Selected Financial Information
Consolidated Assets and Liabilities
Income Statement
Risk Management
Credit Risk
Financial Risks
Operational Risk
Regulatory Capital
Capital and Reserves and Proposed Distribution of Profits
54 Grupo Financiero Galicia Annual Report Fiscal Year 2014
MANAGEMENT’S DISCUSSION AND ANALYSIS
In the following analysis of Grupo Financiero Galicia S.A.'s financial condition and results of
operations, data for Grupo Financiero Galicia S.A. is consolidated, on a line-by-line basis, with
the financial statements of the companies it controls directly or indirectly, as explained in the
Notes to the Consolidated Financial Statements, unless there is clarification to the contrary.
Grupo Financiero Galicia’s consolidated financial statements, as well as the figures expressed
in the tables in this report, correspond to Grupo Financiero Galicia S.A., Banco de Galicia y
Buenos Aires S.A. consolidated(1), Net Investment S.A., Galicia Warrants S.A., Sudamericana
Holding S.A. and its subsidiaries, and Galicia Administradora de Fondos.
Due to the fact that Banco de Galicia y Buenos Aires S.A. is Grupo Financiero Galicia’s main
equity investment, a financial institution subject to the Argentine Central Bank Regulations,
and pursuant to the regulations of the CNV (text amended in 2013), the Company has
adopted the valuation and disclosure criteria applied by Banco de Galicia y Buenos Aires S.A.,
which in some significant aspects differ from Argentine GAAP.
By means of Communiqué “A” 3671 dated July 25, 2002, the Argentine Central Bank
established that, for the valuation of foreign currency balances, financial institutions had to
use the reference exchange rate published by the Argentine Central Bank. Therefore, all assets
and liabilities in foreign currency were valued using that exchange rate which, at the end of
fiscal year 2012, was of Ps. 4.9173 per U.S. Dollar, at the end of fiscal year 2013 was of Ps.
6.5180 per U.S. Dollar, and at the end of fiscal year 2014 was of Ps 8.5520 per U.S. Dollar.
Grupo Financiero Galicia’s fiscal year closes every December 31, as well as the fiscal year of
the companies it controls either directly or indirectly, except for Sudamericana Holding S.A.
and its subsidiaries, whose fiscal year closes every June 30.
(1)
Banco de Galicia y Buenos Aires S.A. consolidates its financial statements with Banco Galicia Uruguay S.A. (under liquidation
proceedings), Galicia Cayman S.A. (until September 30, 2014, and merged with the Bank from October 1), Tarjetas Regionales S.A.
and its subsidiaries, Tarjetas del Mar S.A., Galicia Valores S.A., Galicia Administradora de Fondos (until March 31, 2014, since in April
it was sold to Grupo Financiero Galicia), Compañía Financiera Argentina S.A. and Cobranzas & Servicios S.A.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 55
SELECTED FINANCIAL INFORMATION
In millions of Pesos, except as stated otherwise
2014
2013
December 31,
2012
19,860
13,076
9,129
10,321
6,170
3,941
9,539
6,906
5,188
2,411
1,776
1,347
5,699
4,239
3,200
1,238
905
652
9,221
7,428
5,774
(230)
(209)
(186)
213
124
117
503
295
275
5,330
3,056
2,125
1,992
1,232
789
3,338
1,824
1,336
16,959
12,560
8,345
10,010
3,987
3,627
66,608
55,265
42,593
107,314
83,156
63,458
64,666
51,395
39,945
32,402
24,814
18,643
10,246
6,947
4,870
92,510
69,844
54,416
12.11
11.74
11.42
Consolidated Income Statement
Financial Income
Financial Expenses
Net Financial Income
Provision for Loan Losses
Net Income from Services
Income from Insurance Activities
Administrative Expenses
Minority Interest
Income (Loss) from Equity Investments
Miscellaneous Income / (Loss), Net
Income Before Taxes
Income Tax
Net Income
Consolidated Balance Sheet
Cash and Due from Banks
Government and Corporate Securities
Loans, Net
Assets
Deposits
Other Liabilities (1)
Shareholders’ Equity
Average Assets
Balance Sheet Items Denominated in Foreign Currency (%)
Assets
Liabilities
13.61
13.71
14.29
(1) It includes, mainly, debts with stores due to purchase transactions, liabilities with other international banks and entities, and debt
securities.
56 Grupo Financiero Galicia Annual Report Fiscal Year 2014
SELECTED FINANCIAL INFORMATION (cont.)
In millions of Pesos, except as stated otherwise
Selected Ratios (%)
Profitability and Efficiency
Net Yield on Average Interest-Earning Assets (1)
Financial Margin (2)
Interest Spread, Nominal Basis (3)
Return on Average Assets (4)
Return on Average Shareholders’ Equity (5)
Administrative Expenses as a Percentage of Net Operating Income (6)
Net Income from Services as a Percentage of Net Operating Income(6)
Net Income from Services as a Percentage of Administrative Expenses
Capital
Shareholders' Equity as a Percentage of Total Assets
Tangible Shareholders' Equity(7) as a Percentage of Total Assets
Total Liabilities as a Multiple of Shareholders' Equity
Liquidity
Cash and Due from Banks as a Percentage of Total Deposits
Loans, Net, as a Percentage of Total Assets
Loan Portfolio Quality
Past-due Loan Portfolio(8) as a Percentage of Total Loans
Non-accrual Portfolio(9) as a Percentage of Loans to the Private Sector
Allowance for Loan Losses as a Percentage of
Total Loans (Excluding Interbank Loans)
Non-accrual Loan Portfolio (9) as a Percentage of Total Loans
(Excluding
Interbank Loans)
Allowance for Loan Losses as a Percentage of
Non-accrual Loans(9)
Inflation and Exchange Rate
Wholesale Inflation (10) (11)
Exchange Rate Variation (12)
CER (13)
(1)
(2)
(3)
(4)
(5)
(6)
December 31,
2012
2014
2013
14.42 %
13.56
10.13
3.85
39.07
60.51
37.40
61.80
13.77 %
12.75
10.43
2.91
32.47
66.65
38.03
57.07
14.14
12.11
11.38
2.80
32.12
68.84
38.15
55.42
%
9.55 %
7.87
9.47 x
8.35 %
6.63
10.97 x
7.67
5.96
12.03
%
24.44
66.46
20.89
67.12
%
%
26.23
62.07
2.61 %
3.57
2.69 %
3.57
2.53
3.37
3.79
3.76
3.94
3.59
3.62
3.40
105.78
103.80
115.85
x
28.27 %
14.76 %
13.13 %
31.21
32.55
14.27
24.34
10.53
10.55
Net interest earned divided by average interest-earning assets (average interest-bearing assets). For a description of net interest
earned, see the “Interest-Earning Assets-Net Yield and Spread” table.
Financial Income less Financial Expenses divided by average interest-earning assets.
It represents the difference between the average nominal interest rates earned on interest-earning assets and the average
nominal interest rates paid on interest-bearing liabilities.
Net Income plus Minority Interests, divided by Average Total Assets.
Net Income divided by Average Shareholders' Equity.
Net Operating Income: Financial Income minus Financial Expenses plus Net Income from Services.
(7)
(8)
(9)
(10)
Tangible Shareholders’ Equity is defined as Shareholders’ Equity minus Intangible Assets.
Past-due loans consist of principal or interest amounts which have been 91 days or more past due.
For a description of non-accrual loans, see “Risk Management - Credit Risk - Asset Quality of the Loan Portfolio”.
In accordance with the variation of the Domestic Wholesale Price Index in Argentina (the WPI, or IPIM as per its initials in
Spanish).
(11) Source: Instituto Nacional de Estadística y Censos (Argentine Institute of Statistic and Census, INDEC).
(12) Variation of the exchange rates of the Peso vis-à-vis the U.S. Dollar.
(13) Reference Stabilization Coefficient (Coeficiente de Estabilización de Referencia, based on the CPI).
Grupo Financiero Galicia Annual Report Fiscal Year 2014 57
Physical Data
2014
2013
December 31,
2012
5,374
5,487
5,734
5,232
5,668
6,109
1,112
1,170
1,233
242
224
193
16
13
14
36
41
44
12,012
12,603
13,327
261
261
257
207
204
198
59
59
59
527
524
514
Deposit Accounts
Banco de Galicia y Bs. As. S.A.
Compañía Financiera Argentina S.A.
2,849,895
2,618,269
2,437,269
156,533
149,390
159,811
Total Deposit Accounts
3,006,428
2,767,659
2,597,080
Employees
Banco de Galicia y Bs. As. S.A.
Regional Credit-card Companies
Compañía Financiera Argentina S.A.
Sudamericana Holding S.A.
Galicia Administradora de Fondos S.A.
Other Companies
Total Employees
Branches
Banco de Galicia y Bs. As. S.A.
Regional Credit-card Companies
Compañía Financiera Argentina S.A.
Total Branches
CONSOLIDATED ASSETS AND LIABILITIES
Assets
The structure and main components of Grupo Financiero Galicia’s consolidated assets as of
December 31, 2014, and as of the same date of the two previous years were as follows:
Assets
2014
In millions of Pesos
Cash and Due from Banks
Government and Corporate Securities
Loans, Net
Other Assets
Total
16,959
10,010
66,608
13,737
107,314
%
15.8
9.3
62.1
12.8
100.0
2013
12,560
3,987
55,265
11,344
83,156
%
15.1
4.8
66.5
13.6
100.0
December 31,
2012
%
8,345
3,627
42,593
8,893
63,458
13.2
5.7
67.1
14.0
100.0
Cash and Due from Banks
The item “Cash and Due from Banks” includes cash for Ps. 4,369 million, balances held at the
Argentine Central Bank for Ps. 12,466 million and balances held in correspondent banks for
Ps. 124 million. The balance held at the Argentine Central Bank is computable for meeting the
minimum cash requirements.
Government and Corporate Securities
The following table shows the components of the item “Government and Corporate
Securities” in terms of cash holdings and net position (cash holdings plus forward purchases
and spot purchases pending settlement, less forward sales and spot sales pending settlement).
58 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Government and Corporate Securities – Holdings and Net Position
December 31, 2014
Spot Transactions
Pending Settlement
Forward Transactions
Holdings
In millions of Pesos
Government Securities
Holdings Recorded at Cost plus Yield
Pesos
U.S. Dollars
Holdings Recorded at Fair Market Value
Pesos
U.S. Dollars
Instruments issued by the Argentine Central Bank
Pesos
Total Government Securities
Listed and Unlisted Corporate Debt Securities
Total Government and Corporate Securities
(1) They include securities used as collateral.
(2) They include government securities deposits.
Purchases
(1)
Sales(2)
Purchases
Net
Position
Sales
30
287
-
-
-
-
30
287
1,480
966
21
-
(90)
-
5
2
(1)
(35)
1,415
933
7,247
10,010
10,010
465
486
486
(16)
(106)
(106)
94
101
101
(76)
(112)
(112)
7,714
10,379
10,379
As of December 31, 2014, the Company’s net position in government and corporate securities
amounted to Ps. 10,379 million.
The amount of government securities at cost plus yield issued in Pesos, for Ps. 30 million,
mainly corresponds to provincial debt securities. In U.S. Dollars, the amount stands at Ps. 287
million, and mainly corresponds to debt securities of the province of Entre Ríos and Bono
Argentino de Ahorro para el Desarrollo Económico (BAADE - Argentine Bond for Economic
Development).
The net position of government securities measured at fair market value in Pesos corresponds,
mainly, to National Government Bonds due 2016, 2017 and 2019, for Ps. 374 million, Ps.
785 million and Ps. 190 million, respectively. In U.S. Dollars, the position includes debt
securities of the provinces of Neuquén, Chubut, Buenos Aires and Mendoza, among others.
In turn, the position for securities issued by the Argentine Central Bank includes Lebac for Ps.
7,714 million.
Loans
As of December 31, 2014, total consolidated loans amounted to Ps. 66,608 million and,
representing 62.1% of total assets, continued to be the Company’s most important asset.
The category “Loans, Net” in the “Assets” table was made up of the following as of the
indicated dates:
Loans, Net
In millions of Pesos
2014
To the Non-Financial Public Sector
To the Financial Sector
To the Non-Financial Private Sector
Residents Abroad
Total
2013
December 31,
2012
15
13
26
191
627
354
66,141
54,038
41,934
261
587
279
66,608
55,265
42,593
For more information, see “Risk Management-Credit Risk”.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 59
Other Assets
The category “Other Assets” mainly includes the following items:
Other Assets
In millions of Pesos
2014
2013
December 31,
2012
Other Receivables Resulting from Financial Brokerage
Receivables from Financial Leases
Equity Investments in Other Companies
Miscellaneous Receivables
Bank Premises and Equipment, Miscellaneous Assets and Intangible
Assets
Others (1)
6,798
5,696
4,418
1,048
1,128
849
52
89
76
1,760
1,162
935
3,759
3,062
2,462
320
207
153
13,737
11,344
8,893
Total
(1) It includes, among others, assets related to the insurance activity.
Exposure to the Argentine Public Sector
As of December 31, 2014, Grupo Financiero Galicia’s total exposure to the public sector
amounted to Ps. 11,261 million. Not taking into consideration the debt securities issued by the
Argentine Central Bank, the exposure amounted to Ps. 3,547 million, equal to 3.3% of total
assets. As of December 31, 2013, such exposure amounted to Ps. 2,861 million, representing
3.4% of total assets. The increase in exposure to the public sector during the last twelve
months was due to the purchase of government securities, among them National Government
Bonds due 2016, 2017 and 2019.
Exposure to the Public Sector(*)
In millions of Pesos
Government Securities – Net Position
Held for Trading
Bonar 2015
Lebac - Nobac
Loans
Secured Loans and Other Loans
Other Receivables Resulting from Financial Brokerage
Participation Certificates and Trust Securities
Others
Total
2014
2013
December 31,
2012
10,379
4,298
3,995
2,665
1,351
186
-
392
558
7,714
2,555
3,251
15
13
26
15
13
26
867
1,105
1,001
830
1,079
997
37
26
4
11,261
5,416
5,022
(*) It does not include deposits with the Argentine Central Bank, since these are assets through which the Bank complies with the
minimum cash requirements set up by such entity.
Exposure to the Private Sector
The following table shows Banco Galicia’s total exposure to the private sector. Such caption
includes all the balance sheet and memorandum account items that represent a credit
exposure to the private sector: Loans, receivables from financial leases, debt securities and
other financing, such as guarantees granted and unused balances of loans granted, as well as
current balances at the dates indicated of loans duly transferred to the different trusts.
60 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Exposure to the Private Sector
In millions of Pesos
Loans
Receivables from Financial Leases
Securities
Other Financing (1)
Total Loans
Trust Assets(2)
Total
2014
2013
December 31,
2012
69,208
1,066
724
7,877
57,408
1,150
888
6,355
44,303
867
186
5,824
78,875
65,801
51,180
141
79,016
65,801
51,180
(1) It includes guarantees granted, unused balances of loans granted and some items under Other Receivables Resulting from
Financial Brokerage.
(2) CFA Trust I Financial Trust.
As of December 31, 2014, the Bank’s total exposure to the private sector amounted to Ps.
79,016 million, an annual increase of 20%.
Total loans include Ps. 16,104 million corresponding to regional credit-card companies and Ps.
3,016 million corresponding to CFA.
In 2014, loans to the private sector grew mainly in large corporations (32%, equivalent to Ps.
2,082 million), individuals (24%, equivalent to Ps. 7,661 million) and small- to medium-sized
companies (PyMES) (14%, equivalent to Ps. 2,450 million). As regards economic sectors, the
growth of loans granted to the consumer sector (25%, equivalent to Ps. 8,027 million), the
manufacturing industry (20%, equivalent to Ps. 1,535 million) and the agricultural and
livestock sector (14%, equivalent to Ps. 1,018 million) is worth noting. (See “Risk
Management - Credit Risk – Loan Portfolio”).
Funding and Liabilities
The main sources of funds are deposits from the private sector, lines of credit extended by
local banks and entities, international banks and multilateral credit agencies, repo transactions
mainly related to government securities, mid- and long-term debt securities placed in the
international capital market and debts with stores due to credit card transactions.
The structure and main components of Banco Galicia’s consolidated liabilities as of December
31, 2014, and as of the end of the two previous fiscal years were as follows:
Grupo Financiero Galicia Annual Report Fiscal Year 2014 61
Liabilities and Shareholders’ Equity
2014
In millions of Pesos
Deposits
Checking Accounts
Savings Accounts
Time Deposits
Others
Other Interest, Exchange Rate Differences Payable and CER
Adjustment
Credit Lines
Subordinated and Unsubordinated Debt Securities
Other Liabilities (3)
Shareholders’ Equity
Total
(1)
2013
%
December 31,
2012
%
64,666
15,755
16,897
30,730
722
60.3
14.7
15.8
28.6
0.7
51,395
12,394
11,801
26,185
574
61.8
14.9
14.2
31.5
0.7
39,945
9,916
9,478
19,694
577
62.8
15.6
14.9
31.0
0.9
562
1,848
0.5
1.7
441
2,153
0.5
2.5
280
2,111
0.4
3.4
7
1,113
727
1.0
0.7
6
1,462
685
1.7
0.8
4
1,133
546
1.8
0.9
1
10,176
20,378
10,246
9.5
19.0
9.5
7,612
15,048
6,947
9.2
18.1
8.4
428
5,467
11,065
4,870
0.7
8.6
17.5
7.7
(1)
Argentine Central Bank
Local Banks(2)
International Banks and Credit Entities
Repurchase Agreement and Reverse Repurchase
Agreement Transactions
%
107,314
100.0
83,155
100.0
63,458 100.0
(1) Each item includes principal, interest accrued, exchange rate differences and premiums payable, as well as CER adjustment,
where applicable.
(2) It includes credit line granted by the IDB (Inter-American Development Bank) through the Secretariat of Industry and Commerce.
(3) It includes debts with stores due to credit card transactions, collections on account of third parties in Pesos and U.S. Dollars,
miscellaneous obligations and allowances, among others.
Deposits
As of December 31, 2014, total consolidated deposits amounted to Ps. 64,666 million,
representing 60.3% of total funds (including shareholders’ equity).
During the fiscal year, total consolidated deposits increased 25.8%, mainly as a consequence
of the 26.8% increase in deposits from the private sector of Banco Galicia.
Maturity of Deposits as of December 31, 2014, pursuant to their Term (1)
U.S. Dollardenominated
% of
Amount
Total
Peso-denominated
In millions of Pesos
% of
Total
Amount
Checking Accounts and Other Demand Deposits
Savings Accounts
Time Deposits Maturing
Total
% of
Total
Amount
15,755
26.6
-
-
15,755
24.6
14,088
23.8
2,809
58.3
16,897
26.4
28,811
48.6
1,919
39.8
30,730
47.9
8,161
13.8
694
14.4
8,855
13.8
From 31 to 59 days
11,862
20.0
299
6.2
12,161
19.0
From 60 to 89 days
4,334
7.3
237
4.9
4,571
7.1
From 90 to 179 days
2,571
4.3
343
7.1
2,914
4.6
From 180 to 365 days
1,288
2.2
317
6.6
1,605
2.5
595
1.0
29
0.6
624
0.9
628
1.0
94
1.9
722
1.1
373
0.6
83
1.7
456
0.7
From 31 to 59 days
-
-
-
-
-
-
From 60 to 89 days
-
-
-
-
-
-
2
-
-
-
2
-
From 180 to 365 days
136
0.2
-
-
136
0.2
More than 365 days
117
0.2
11
0.2
128
0.2
59,282
(1) Only Principal. It does not include CER adjustment or else interest.
100.0
4,822
100.0
64,104
100.0
Up to 30 days
More than 365 days
Other Deposits Maturing
Up to 30 days
From 90 to 179 days
Total
The above-mentioned chart shows that the highest concentration of maturities for time
deposits was in the terms up to 59 days, representing 68.4% of total time deposits. At fiscal
62 Grupo Financiero Galicia Annual Report Fiscal Year 2014
year-end, the average term for the raising of non-adjusted Peso- and U.S. Dollar-denominated
time deposits was approximately 43 days.
U.S. Dollar-denominated deposits, for Ps. 4,822 million, represented 7.5% of total deposits.
Local Banks and Entities
As of December 31 2014, credit lines granted by local banks and entities amounted to Ps.
1,113 million. This amount (principal plus interest) mainly corresponds to Ps. 1,036 million for
financing received from local banks by the regional credit-card companies, Ps. 3 million for call
loans received by the Bank and the regional credit-card companies, Ps. 61 million received
from the BICE, and Ps. 13 million for the credit line granted by the IDB through the Secretariat
of Industry and Commerce.
International Banks and Credit Entities
As of December 31, 2014, loans granted by international banks and credit entities amounted
to Ps. 727 million. This amount (principal plus interest) represents U.S. Dollar-denominated
debt subject to foreign law, of which, mainly, Ps. 322 million correspond to a credit line
granted by the IDB through the Secretariat of Industry and Commerce, Ps. 190 million
correspond to prefinancing and foreign trade transactions, Ps. 58 million correspond to a credit
line received from the IFC, Ps. 14 million to debt with international banks and credit entities,
Ps. 80 million received from the FMO, and Ps. 63 million received from Proparco.
Debt Securities
The following table shows the Bank’s consolidated debt securities as of December 31, 2014:
Debt Securities
(*)
In millions of Pesos, except for rates (%)
Currenc
y
Maturity Date
Annual Interest Rate
(%)
Balances as
of
12.31.2014
Grupo Financiero Galicia
- Class V Series I Negotiable Obligations
(1)
Pesos
07-31-2015
Badlar + 425 b.p.
- Class V Series II Negotiable Obligations
(2)
Pesos
01-31-2017
Badlar + 525 b.p.
78
- Class VI Series I Negotiable Obligations
(3)
Pesos
04-23-2016
Badlar + 325 b.p.
140
Pesos
10-23-2017
Badlar + 425 b.p.
110
05-04-2018
8.75%
2,555
01-01-2019
16.00%
1,913
Past due
-
- Class VI Series II Negotiable Obligations
(4)
102
Banco de Galicia
- Class I Negotiable Obligations
- Subordinated Negotiable Obligations
- Others
U.S.
Dollars
U.S.
Dollars
U.S.
Dollars
(5)
(6)
(7)
7
Tarjetas Cuyanas
- Class XII Series II Negotiable Obligations
(8)
Pesos
05-07-2015
Badlar + 420 b.p.
172
- Class XIII Series I Negotiable Obligations
(9)
Pesos
08-17-2015
Badlar + 400 b.p.
174
Pesos
05-16-2015
Badlar + 300 b.p.
54
Pesos
05-16-2016
Badlar + 415 b.p.
144
Pesos
08-03-2015
Badlar + 240 b.p.
133
Pesos
08-01-2016
Badlar + 340 b.p.
117
Pesos
10-31-2015
Badlar + 315 b.p.
156
Pesos
10-31-2016
Badlar + 400 b.p.
114
U.S.
Dollars
01-28-2017
9.00%
Pesos
02-09-2015
Badlar + 375 b.p.
115
Pesos
06-04-2015
Badlar + 450 b.p.
152
- Class XIV Series I Negotiable Obligations (10)
- Class XIV Series II Negotiable Obligations (11)
- Class XV Negotiable Obligations
(12)
(13)
- Class XVI Negotiable Obligations
- Class XVII Negotiable Obligations
- Class XVIII Negotiable Obligations
(14)
(15)
Tarjeta Naranja
- Class XIII Negotiable Obligations
(16)
- Class XXII Series II Negotiable Obligations
- Class XXIII Series II Negotiable Obligations
(17)
(18)
1,715
Grupo Financiero Galicia Annual Report Fiscal Year 2014 63
Debt Securities
(*)
In millions of Pesos, except for rates (%)
(19)
- Class XXIV Series I Negotiable Obligations
(20)
- Class XXIV Series II Negotiable Obligations
(21)
- Class XXV Series I Negotiable Obligations
Balances as
of
12.31.2014
Currenc
y
Maturity Date
Annual Interest Rate
(%)
Pesos
08-26-2015
Badlar + 400 b.p.
170
Pesos
02-26-2017
Badlar + 500 b.p.
33
Pesos
04-30-2015
Badlar + 289 b.p.
80
- Class XXV Series II Negotiable Obligations
(22)
Pesos
04-30-2016
Badlar + 415 b.p.
164
- Class XXVI Series I Negotiable Obligations
(23)
Pesos
07-11-2015
Badlar + 260 b.p.
138
- Class XXVI Series II Negotiable Obligations
(24)
Pesos
07-11-2016
Badlar + 399 b.p.
160
- Class XXVII Series I Negotiable Obligations
(25)
Pesos
10-03-2015
Badlar + 272 b.p.
164
Pesos
10-03-2016
Badlar + 395 b.p.
150
124
- Class XXVII Series II Negotiable Obligations
(26)
Compañía Financiera Argentina S.A.
- Class X Series II Negotiable Obligations
(27)
Pesos
04-17-2015
Badlar + 425 b.p.
- Class XI Series I Negotiable Obligations
(28)
Pesos
01-11-2015
Badlar + 297 b.p.
50
147
- Class XI Series II Negotiable Obligations
(29)
Pesos
10-16-2015
Badlar + 430 b.p.
- Class XII Series I Negotiable Obligations
(30)
Pesos
06-20-2015
Badlar + 247 b.p.
50
- Class XII Series II Negotiable Obligations
(31)
Pesos
09-24-2016
Badlar + 400 b.p.
199
- Class XIII Series I Negotiable Obligations
(32)
Pesos
09-05-2015
27.50%
128
Pesos
12-09-2016
Badlar + 440 b.p.
- Class XIII Series II Negotiable Obligations
(33)
Total
(*)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
75
9,783
Only principal (it does not include interest), net of eliminations when appropriate.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 425 b.p. Principal shall be fully paid upon maturity, on July 31, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 525 b.p. Principal shall be fully paid upon maturity, on January 31, 2017.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 325 b.p. Principal shall be fully paid upon maturity, on April 23, 2016.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 425 b.p. Principal shall be fully paid upon maturity, on October 23, 2017.
Interest shall be paid in cash, semiannually in arrears. Fixed rate of 8.75%. Principal shall be fully paid upon maturity, on May 4, 2018.
Interest payable in cash: 6% per annum from January 1, 2004 until (but not including) January 1, 2014, payable semiannually, on January 1 and
July 1 of each year, beginning on July 1, 2004. The annual interest rate will increase to 11% from that date until (but not including) January 1,
2019. Interest paid on additional subordinated negotiable obligations due 2019: 5% per annum from January 1, 2004, to be paid on January 1,
2014 and January 1, 2019. Principal is payable in full on January 1, 2019, unless the securities are previously redeemed at par plus accrued but
unpaid interest and additional amounts, if any, in whole or in part, at the Bank’s option, at any time.
The balance represents debt (9% negotiable obligations due 2003) not tendered by its holders in the exchange offered by the Bank to restructure its
foreign debt, which was completed in May 2004. Interest balance amounts to Ps. 8 million.
Interest shall be paid on a quarterly basis in arrears. Badlar rate +420 b.p. Principal shall be fully paid upon maturity, on May 7, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 400 b.p. Principal shall be fully paid upon maturity, on August 17, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 300 b.p. Principal shall be fully paid upon maturity, on May 16, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 415 b.p. Principal shall be fully paid upon maturity, on May 16, 2016.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 240 b.p. Principal shall be fully paid upon maturity, on August 3, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 340 b.p. Principal shall be fully paid upon maturity, on August 1, 2016.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 315 b.p. Principal shall be fully paid upon maturity, on October 31, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 400 b.p. Principal shall be fully paid upon maturity, on October 31, 2016.
Interest shall be paid semiannually, in January and July of each year, until maturity. Fixed rate in U.S. Dollars of 9%. Principal shall be paid in 3
equal and annual installments, starting from January 28, 2015 and until maturity on January 28, 2017.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 375 b.p. Principal shall be fully paid upon maturity, on February 9, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 450 b.p. Principal shall be fully paid upon maturity, on June 4, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 400 b.p. Principal shall be fully paid upon maturity, on August 26, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 500 b.p. Principal shall be fully paid upon maturity, on February 26, 2017.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 289 b.p. Principal shall be fully paid upon maturity, on April 30, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 415 b.p. Principal shall be fully paid upon maturity, on April 30, 2016.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 260 b.p. Principal shall be fully paid upon maturity, on July 11, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 399 b.p. Principal shall be fully paid upon maturity, on July 11, 2016.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 272 b.p. Principal shall be fully paid upon maturity, on October 3, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 395 b.p. Principal shall be fully paid upon maturity, on October 3, 2016.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 425 b.p. Principal shall be fully paid upon maturity, on April 17, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 297 b.p. Principal shall be fully paid upon maturity, on January 11, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 430 b.p. Principal shall be fully paid upon maturity, on October 16, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 247 b.p. Principal shall be fully paid upon maturity, on June 20, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 400 b.p. Principal shall be fully paid upon maturity, on September 24, 2016.
Interest shall be paid on a quarterly basis in arrears. Fixed rate of 27.5%. Principal shall be fully paid upon maturity, on September 5, 2015.
Interest shall be paid on a quarterly basis in arrears. Badlar rate + 440 b.p. Principal shall be paid in three installments, 33% on June 9, 2016, 33%
on September 9, 2016, and 34% on December 9, 2016.
From the total debt securities for Ps. 9,783 million at fiscal-year end, Ps. 6,190 million
corresponded to the U.S. Dollar-denominated debt pursuant to the following breakdown: Ps.
2,555 million for negotiable obligations issued by the Bank on May 4, 2011, Ps. 1,913 million
for subordinated negotiable obligations due 2019, and Ps. 1,715 million for negotiable
obligations due 2017 issued by Tarjeta Naranja in January 2011.
The difference with the total amount, for Ps. 3,593 million, corresponded to Pesodenominated debt for negotiable obligations issued by Grupo Financiero Galicia, the regional
credit-card companies and CFA.
64 Grupo Financiero Galicia Annual Report Fiscal Year 2014
The balance of securities issued in Argentine pesos increased Ps. 1,054 million as compared
to 2013 year-end, whereas U.S. Dollar-denominated debt increased Ps. 1,371 million, due to
quotation differences.
Other Liabilities
The category “Other Liabilities” mainly includes the following items:
Other Liabilities
In millions of Pesos
Other Liabilities Resulting from Financial Brokerage
Miscellaneous Liabilities (2)
Provisions
Unallocated Items(3)
Other Liabilities (4)
Minority Interest in Controlled Companies
(1)
2014
2013
December 31,
2012
15,443
11,225
7,891
3,381
2,476
1,774
366
443
468
40
15
9
367
287
221
781
602
702
Total
(1)
(2)
(3)
(4)
20,378
15,048
11,065
It mainly includes liabilities with stores in connection with credit-card transactions of Banco Galicia and the regional credit-card
companies.
It includes balances of tax debt, social security contributions to be deposited and sundry creditors.
It mainly includes balances among Banco Galicia’s branches for unallocated items corresponding to funds collected on account of
third parties.
It includes liabilities related to the insurance activity.
INCOME STATEMENT
During the fiscal year, Grupo Financiero Galicia's net income amounted to Ps. 3,338 million,
representing an 83% increase as compared to income amounting to Ps. 1,824 million in fiscal
year 2013.
This income was mainly the result of the equity investment in Banco Galicia, which recorded
income for Ps. 3,158 million in fiscal year 2014.
The increase in income, as compared to fiscal year 2013, was mainly the result of the
increase in net operating income(1) (37%), which was higher than administrative expenses
(24%), with the subsequent improvement of the efficiency ratio. The increase in net income
was accompanied by higher income from insurance activities, which grew 37%.
Net operating income for the fiscal year amounted to Ps. 15,238 million, Ps. 4,093 million
higher than in 2013. This positive evolution was due to an increase in the net financial income
for Ps. 2,633 million (38%) as well as higher net income from services for Ps. 1,460 million
(34%).
Net earnings per share for the fiscal year were Ps. 2.57, compared to Ps. 1.47 in fiscal year
2013. The return on average assets and the return on average shareholders’ equity for the
fiscal year were 3.85% and 39.07%, respectively, whereas in the previous fiscal year they
were 2.91% and 32.47%, respectively.
In fiscal year 2013, Grupo Financiero Galicia recorded net profits for Ps. 1,824 million,
compared to a Ps. 1,336 million profit for fiscal year 2012. The increase in income was
primarily due to the sustained increase in the volume of intermediation with the private sector,
(1)
Net financial income plus net income from services.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 65
which was mainly reflected in an increase of Ps 2,757 million in net operating income, offset
by increases of Ps. 1,654 million in administrative expenses and Ps. 429 million in provisions
for loan losses.
Net operating income for the fiscal year 2013 amounted to Ps. 11,145 million, a 33%
increase as compared to the Ps. 8,388 million recorded in the previous fiscal year. This
positive evolution was due both to a Ps. 1,718 million increase in the net financial income, as
well as higher net income from services for Ps. 1,039 million.
Financial Income
Financial income amounted to Ps. 19,860 million, showing a 52% increase compared to the
Ps. 13,076 million recorded in fiscal year 2013. This increase was the result of the increase in
the average volume of interest-earning assets and the higher average yield thereon.
Financial Income
In millions of Pesos
Income from Loans and Other Receivables Resulting from
Financial Brokerage and Premiums Earned on Reverse Repurchase
Agreement Transactions
Income from Government and Corporate Debt Securities, Net
Others (1)
2014
2013
December 31,
2012
16,211
11,369
8,010
2,448
939
962
1,201
768
157
Total
19,860
13,076
9,129
(1) It reflects net income from receivables from financial leases, premiums on foreign currency forward transactions, as well as CER
adjustment and, in fiscal year 2014, gain (loss) on quotation differences.
For the fiscal years indicated, the average balance of the Company’s interest-earning assets
and interest-bearing liabilities, as well as the yields on its interest-earning assets and the cost
of its interest-bearing liabilities, were as follows:
66 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Yield on Interest-Earning Assets and Interest-Bearing Liabilities
In millions of Pesos, except for rates (%)
Interest-Earning Assets
Government Securities
Loans
Other Interest-Earning Assets
Interest-Bearing Liabilities
Checking Accounts
Savings Accounts
Time Deposits
Debt Securities
Other Interest-Bearing Liabilities
Spread and Net Yield
Interest Spread, Nominal Basis (1)
Net Yield on Interest-Earning Assets (2)
Financial Margin (3)
December 31,
2012
Principal
Rate
Principal
2014
Rate
Principal
2013
Rate
70,349
26.66
54,160
23.03
42,837
21.31
8,760
21.16
4,156
14.33
5,248
13.28
59,072
27.49
47,912
24.01
35,197
22.85
2,517
26.54
2,092
17.77
2,392
16.17
52,081
16.53
39,779
12.60
30,922
9.93
1
-
1
-
1
-
10,186
0.20
8,078
0.18
6,669
0.16
30,229
21.80
23,257
16.22
16,711
13.38
8,976
16.54
6,351
13.70
4,751
11.51
2,689
19.19
2,092
16.97
2,790
9.89
10.13
10.43
11.38
14.42
13.77
14.14
13.56
12.75
12.11
(1) It represents the difference between the average nominal interest rate on interest-earning assets and the average nominal
interest rate on interest-bearing liabilities. Interest rates include CER adjustment.
(2) Net interest earned divided by average interest-earning assets (average interest-bearing assets). Interest rates include CER
adjustment.
Net interest earned corresponds to net financial income (financial income less financial expenses, as set forth in the income
statement), plus:
. financial fees, included in Income from Services - Related to Lending Transactions, in the Income Statement,
. contributions made to the Deposit Insurance Fund (FGD), included in Financial Expenses – Deposit Insurance Fund, in the
Income Statement and
. taxes on financial income, included in Financial Expenses – Others, in the Income Statement, less:
. Net income (loss) from corporate securities, included in Financial Income/Expenses – Income (loss) from Holding of
Government and Corporate Securities, in the Income Statement, and
. differences in the quotation of gold and foreign currency, included in Financial Income/Expenses – Differences in
Quotation of Gold and Foreign Currency, in the Income Statement, and
. premiums on foreign exchange forward transactions and adjustments on foreign exchange forward transactions, included
in Financial Income – Others, in the Income Statement.
Net interest earned also includes income that corresponds to government securities used as margin requirements of repurchase
agreement transactions. This income/loss is included in Miscellaneous Income (Loss) – Others, in the Income Statement. Income
(Loss) from Holding of Government Securities includes interest and income/loss resulting from variations in market quotations.
(3) Financial income less financial expenses, divided by average interest-earning assets.
The average yield on interest-earning assets was 26.66%, with a 363 basis points increase
during the year, due to the higher average interest rate of each of its components, mainly
government securities and loans to the private sector.
Average interest-earning assets increased by Ps. 16,189 million (30%), from Ps. 54,160
million to Ps. 70,349 million. Out of this growth, Ps. 11,160 million correspond to the
increase in the average loan portfolio, which amounted to Ps. 59,072 million, 23% above the
Ps. 47,912 million during fiscal year 2013. Out of the loans to the private sector (taking into
consideration final balances), the following growths are worth noting: Ps. 9,959 million in
credit cards (36%) and Ps. 2,981 million in promissory notes (22%).
This variation in loans was influenced by the “Credit Line for the Productive Investment”
program established by the Argentine Central Bank, which is aimed at financing specificpurposes and characteristics working capital and investment projects. In 2014, the Argentine
Central Bank established the 2014 quota to grant loans under the aforementioned program.
The amount allocated for this concept by Banco Galicia amounted to Ps. 2,151 million for the
first tranche and Ps. 2,750 million for the second tranche.
It is worth noting that, as of the end of fiscal year 2014, the Bank allocated the total amount
corresponding to the second tranche of the 2014 quota, having disbursed Ps. 9,744 million
Grupo Financiero Galicia Annual Report Fiscal Year 2014 67
since the creation of this credit line, out of which Ps. 6,867 million were outstanding as of
December 31, 2014.
As of December 31, 2014, the Bank’s estimated market share in the total loans to the private
sector, excluding the loans granted to the regional credit-card companies, was 8.78%, the
same loan market share than the previous year.
Market Share
(*)
2014
2013
December 31,
2012
Total Deposits
Deposits from the Private Sector
Deposits in Checking and Savings Accounts, and Time Deposits
6.64
6.92
6.75
8.79
9.20
9.11
9.06
9.47
9.39
Total Loans
Loans to the Private Sector
8.08
8.07
8.19
Percentages
8.78
8.78
9.03
(*) Banco Galicia and CFA within the Argentine market, based on daily information on deposits and loans prepared by the Argentine
Central Bank. End-of-month balances are used. Deposits and loans include only principal. Information related to regional credit-card
companies is not included.
The average interest rate on total loans was 27.49%, compared to 24.01% in fiscal year
2013.
The average interest rate on Peso-denominated loans to the private sector increased by 357
b.p., from 25.28% to 28.85%. The determination of each rate for the fiscal year was
influenced, among other items, by the granting of the Credit Line for the Productive
Investment (at a fixed annual rate of 17.50% for the first tranche of the 2014 quota, 19.50%
for the second tranche of the 2014 quota, 15.25% for the 2013 quota and 15.01% for the
2012 quota) and by Communiqué “A" 5590 of the Argentine Central Bank, which determined
limits to interest rates on personal loans, loans secured by a pledge and credit card loans.
The average interest rate on foreign currency loans to the private sector increased by 18 b.p.,
from 4.69% in fiscal year 2013 to 4.87% in the fiscal year.
The average position on government securities amounted to Ps. 8,760 million, higher than the
Ps. 4,156 million recorded in fiscal year 2013. This was the result of a Ps. 3,806 million
increase in the average position on Peso-denominated government securities and a Ps. 798
million increase in the average position on government securities in U.S. Dollars. This variation
was mainly due to higher balances of securities issued by the Argentine Central Bank and, to a
lesser extent, National Government Bonds due 2016, 2017 and 2019, and Provincial Treasury
Bills and Debt Securities.
The average yield on government securities increased by 683 basis points, from 14.33% in
2013 to 21.16% in the fiscal year, as a consequence of a higher average rate for Pesodenominated securities.
In this regard, the average rate in Pesos increased 886 basis points, from 15.13% in 2013 to
23.99% in 2014, mainly due to the higher average yield corresponding to Lebacs.
In turn, the rate on government securities in U.S. Dollars decreased by 346 basis points, from
6.80% to 3.34%, mainly due to the yield on Provincial Treasury Bills and Debt Securities.
The average portfolio of “Other Interest-Earning Assets” amounted to Ps. 2,517 million, 20%
higher than the Ps. 2,092 million recorded in fiscal year 2013, mainly due to the higher
average balance of financial investments made by the regional credit card companies, together
with higher reverse repurchase agreement transactions.
68 Grupo Financiero Galicia Annual Report Fiscal Year 2014
The average rate of said item increased by 877 basis points, from 17.77% to 26.54%, as a
result of the variation in the rate of Peso-denominated transactions, since such rate went up
from 18.14% to 27.67%. This increase mainly resulted from the higher yield on financial
investments, in line with the evolution of the financial system. Such yield was offset by the
decrease in the average foreign exchange rate, from 8.78% to 3.42%.
The category “Other Financial Income” recorded a Ps. 433 million increase, mainly influenced
by the higher income from forward transactions in foreign currency, from Ps. 578 million in
fiscal year 2013 to Ps. 830 million for this fiscal year. It also includes a gain (loss) on
quotation differences amounting to Ps. 13 million. It is made up of a gain amounting to Ps.
241 million from foreign exchange brokerage activities and a loss amounting to Ps. 228 million
due to the valuation of the net foreign currency position. In fiscal year 2013, there was a loss
on the quotation differences, which is disclosed in “Other Financial Expenses”.
Financial Expenses
Financial expenses for the fiscal year amounted to Ps. 10,321 million, showing a 67%
increase when compared to the Ps. 6,170 million recorded in 2013.
Financial Expenses
In millions of Pesos
2014
2013
December 31,
2012
Interest on Deposits
Negotiable Obligations
Contributions and Taxes
Others (1)
6,577
3,780
2,245
1,485
869
547
1,480
1,009
630
779
512
519
Total
10,321
6,170
3,941
(1) Including interest accrued on liabilities resulting from financial brokerage with international banks and entities, premiums payable
on repurchase agreements and, during fiscal years 2013 and 2012, gain (loss) on quotation differences.
The variation was the result of a 31% increase in the average balance of interest-bearing
liabilities, coupled with a 393 basis point increase in the average cost thereof.
Average interest-bearing liabilities amounted to Ps. 52,081 million, compared to Ps. 39,779
million in fiscal year 2013. This variation was mainly due to the Ps. 9,080 million increase in
total interest-bearing deposits (that rose from Ps. 31,336 million to Ps. 40,416 million) and
the Ps. 2,625 million increase in the average balance of debt securities (from Ps. 6,351 million
to Ps. 8,976 million).
Of the total average interest-bearing deposits, Ps. 37,140 million were Peso-denominated
deposits, and Ps. 3,276 million were U.S. Dollar-denominated, compared to Ps. 28,922 million
and Ps. 2,414 million, respectively, in fiscal year 2013. Average deposits in Pesos grew 28%,
with a 22% increase in deposits in savings accounts and a 31% increase in time deposits.
Average deposits in U.S. Dollars increased 36% during the fiscal year, mainly due to the
evolution of the exchange rate during the period.
Considering only private-sector deposits in checking and savings accounts and time deposits
raised by the Bank, the estimated deposit market share of the Bank in the Argentine financial
system decreased from 9.47% as of December 31, 2013, to 9.06% as of December 31,
2014.
The average rate on interest-bearing deposits (savings accounts and time deposits) was
16.35%, 426 basis points greater than the 12.09% average rate for the previous fiscal year.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 69
This was a consequence of the evolution of the interest rate on time deposits, which
accompanied the evolution of the financial system.
Peso-denominated deposits accrued a 17.70% average interest rate in fiscal year 2014, 466
basis points higher than the 13.04% average rate recorded in fiscal year 2013. In turn, the
rate of U.S. Dollar-denominated deposits was 1.07%, 36 basis points higher than the 0.70%
average rate recorded in fiscal year 2013.
The average balance of debt securities was Ps. 8,976 million, Ps. 2,625 million higher than
the Ps. 6,351 million for the previous fiscal year. This variation was mainly related to the
negotiable obligations issued by Tarjeta Naranja, Tarjetas Cuyanas, CFA S.A. and Grupo
Financiero Galicia, and the variation in the U.S. Dollar during the period.
The average rate for debt securities in fiscal year 2014 was 16.54%, while in the previous
fiscal year it had been 13.70%, mainly due to the increase in the interest coupon of Banco
Galicia’s subordinated Negotiable Obligations, pursuant to their issuance conditions.
The average balance of the caption “Other Interest-Bearing Liabilities” was Ps. 2,689 million,
with an average rate of 19.19%, while for fiscal year 2013 the average balance amounted to
Ps. 2,092 million and the average rate was 16.97%. This caption mainly includes Peso- and
U.S. Dollar-denominated debt with domestic and international banks and entities, and Pesoand U.S. Dollar-denominated obligations in connection with repurchase agreement transactions
of government securities. The Ps. 597 million increase stemmed from a higher balance of the
loans granted by international banks and credit entities.
In turn, the 222 basis points increase in the average rate of “Other Interest-bearing Liabilities”
was mainly due to Peso-denominated transactions, since the average rate rose from 23.28%
in 2013 to 31.97% in 2014, as a consequence, mainly, of the higher cost of funding
regarding loans granted by local financial institutions, operations that are mainly related to the
regional credit card companies. In the case of transactions in U.S. Dollars, the average rate
was 3.26%, 19 basis points lower than the 3.45% average rate for fiscal year 2013.
The item “Other Financial Expenses” amounted to Ps. 779 million, showing a Ps. 267 million
(52%) increase, mainly due to higher expenses related to forward transactions in foreign
currency. It is worth noting in fiscal year 2013 financial expenses included a gain (loss) on
quotation differences amounting to Ps. 152 million. It was made up of a loss amounting to Ps.
326 million due to the valuation of the net foreign currency position and a gain of Ps. 174
million from foreign exchange brokerage activities.
Net Financial Income
Net financial income for the fiscal year amounted to Ps. 9,539 million, and the corresponding
financial margin was 13.56%; while in fiscal year 2013 the corresponding figures were Ps.
6,906 million and 12.75%, respectively.
The net income for the fiscal year (excluding the gain (loss) on quotation differences and the
gain (loss) on forward transactions) amounted to Ps. 8,959 million, compared to a Ps. 6,480
million profit in the previous fiscal year, determining a 12.74% financial margin for this fiscal
year, in comparison to 11.96% the previous fiscal year. This variation was the result of a
higher volume of transactions, offset by the drop in the spread (defined as the difference
between the average nominal interest rate on interest-earning assets and the average nominal
interest rate on interest-bearing liabilities), from 10.43% in fiscal year 2013 to 10.13% in
fiscal year 2014.
70 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Interest-Earning Assets – Net Yield and Spread
In millions of Pesos, except for rates (%)
Total Average Interest-Earning Assets
Pesos
U.S. Dollars
Total
Net Interest Earned
Pesos
U.S. Dollars
Total
Net Yield on Interest-Earning Assets (1) (%)
Pesos
U.S. Dollars
Weighted-Average Yield
Interest Spread, Nominal Basis (2) (%)
Pesos
U.S. Dollars
Weighted-Average Yield
(*)
2014
2013
December 31,
2012
65,665
50,736
38,971
4,684
3,424
3,866
70,349
54,160
42,837
10,687
7,768
6,293
(540)
(308)
(236)
10,147
7,460
6,057
16.28
15.31
16.15
(11.53)
(9.00)
(6.10)
14.42
13.77
14.14
9.41
10.30
11.31
(2.79)
(1.56)
(0.12)
10.13
10.43
11.38
(*) Interest includes CER adjustment.
(1) Net Interest earned divided by average Interest-earning assets. See the “Yield on Interest-Earning Assets and Interest-Bearing
Liabilities” table.
(2) Interest spread, nominal basis, is the difference between the average nominal interest rate on interest-earning assets and the
average nominal interest rate on interest-bearing liabilities.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 71
Consolidated Average Nominal Yields and Rates for Assets and Liabilities
Pesos
In millions of Pesos, except for rates (%)
Average
Balance
December 31, 2014
Total
U.S. Dollars
Interest
Earned/
Paid
Average
Average
Nominal
Balance
Rate
Interest
Earned/
Paid
(*)
Average
Average
Nominal
Balance
Rate
Interest
Earned/
Paid
Average
Nominal
Rate
Assets
Government Securities
Loans
Private Sector
Public Sector
7,561
1,814
23.99
1,199
40
3.34
8,760
1,854
21.16
55,704
-
16,072
-
28.85
-
3,368
-
164
-
4.87
-
59,072
-
16,236
-
27.49
-
55,704
16,072
28.85
3,368
164
4.87
59,072
16,236
27.49
2,400
664
27.67
117
4
3.42
2,517
668
26.54
Interest-Earning Assets
65,665
18,550
28.25
4,684
208
4.44
70,349
18,758
26.66
Cash and Gold
Equity Investments in Other Companies
Other Assets
Allowances
7,838
2,123
7,451
(2,550)
-
-
6,499
534
325
(59)
-
-
14,337
2,657
7,776
(2,609)
-
-
Total Assets
80,527
-
-
11,983
-
-
92,510
-
-
Total Loans
Others
Liabilities and Shareholders’ Equity
Deposits
Checking Accounts
Savings Accounts
Time Deposits and Rescheduled
Deposits
8,722
20
0.23
1
1,464
-
-
1
10,186
20
0.20
28,418
6,555
23.07
1,811
35
1.93
30,229
6,590
21.80
Total Interest-Bearing Deposits
37,140
6,575
17.70
3,276
35
1.07
40,416
6,610
16.35
Debt Securities
Other Interest-Bearing Liabilities
3,110
1,492
811
477
26.08
31.97
5,866
1,197
674
39
11.49
3.26
8,976
2,689
1,485
516
16.54
19.19
Total Interest-Bearing Liabilities
41,742
7,863
18.84
10,339
748
7.23
52,081
8,611
16.53
Checking Accounts
Other Liabilities
Minority Interest
Shareholders’ Equity
14,432
14,789
629
8,543
-
-
686
1,350
-
-
-
15,118
16,139
629
8,543
-
-
Total Liabilities and Shareholders’ Equity
80,135
-
-
12,375
-
-
92,510
-
-
Spread and Net Yield (%)
Spread
Cost of Funds of Interest-Earning
Assets
Net Yield on Interest-Earning Assets
(*) Interest earned/paid includes CER adjustment.
72 Grupo Financiero Galicia Annual Report Fiscal Year 2014
9.41
(2.79)
10.13
11.97
16.28
15.97
(11.53)
12.24
14.42
Consolidated Average Nominal Yields and Rates for Assets and Liabilities
Pesos
In millions of Pesos, except for rates (%)
Average
Balance
December 31, 2013
Total
U.S. Dollars
Interest
Earned/
Paid
Average
Average
Nominal
Balance
Rate
Interest
Earned/
Paid
(*)
Average
Average
Nominal
Balance
Rate
Interest
Earned/
Paid
Average
Nominal
Rate
Assets
Government Securities
Loans
Private Sector
Public Sector
3,755
568
15.13
401
27
6.80
4,156
595
14.33
44,965
7
11,368
-
25.28
-
2,940
-
138
-
4.69
-
47,905
7
11,506
-
24.02
0.00
44,972
11,368
25.28
2,940
138
4.69
47,912
11,506
24.01
2,009
364
18.14
83
7
8.78
2,092
371
17.77
Interest-Earning Assets
50,736
12,300
24.24
3,424
172
5.04
54,160
12,472
23.03
Cash and Gold
Equity Investments in Other Companies
Other Assets
Allowances
6,344
1,446
5,671
(2,059)
-
-
3,467
263
625
(73)
-
-
9,811
1,709
6,296
(2,132)
-
-
Total Assets
62,138
-
-
7,706
-
-
69,844
-
-
Total Loans
Others
Liabilities and Shareholders’ Equity
Deposits
Checking Accounts
Savings Accounts
Time Deposits and Rescheduled
Deposits
7,140
15
0.20
1
938
-
-
1
8,078
15
0.18
21,782
3,755
17.24
1,475
17
1.15
23,257
3,772
16.22
Total Interest-Bearing Deposits
28,922
3,770
13.04
2,414
17
0.70
31,336
3,787
12.09
Debt Securities
Other Interest-Bearing Liabilities
2,153
1,426
430
332
19.96
23.28
4,198
666
440
23
10.48
3.45
6,351
2,092
870
355
13.70
16.97
Total Interest-Bearing Liabilities
32,501
4,532
13.94
7,278
480
6.60
39,779
5,012
12.60
Checking Accounts
Other Liabilities
Minority Interest
Shareholders’ Equity
11,264
10,895
711
5,618
-
-
464
1,113
-
-
-
11,728
12,008
711
5,618
-
-
Total Liabilities and Shareholders’ Equity
60,989
-
-
8,855
-
-
69,844
-
-
Spread and Net Yield (%)
Spread
Cost of Funds of Interest-Earning
Assets
Net Yield on Interest-Earning Assets
(*) Interest earned/paid includes CER adjustment.
10.30
(1.56)
10.43
8.93
15.31
14.02
(9.00)
9.25
13.77
Grupo Financiero Galicia Annual Report Fiscal Year 2014 73
Consolidated Average Nominal Yields and Rates for Assets and Liabilities
Pesos
In millions of Pesos, except for rates (%)
Average
Balance
December 31, 2012
Total
U.S. Dollars
Interest
Earned/
Paid
Average
Average
Nominal
Balance
Rate
Interest
Earned/
Paid
(*)
Average
Average
Nominal
Balance
Rate
Interest
Earned/
Paid
Average
Nominal
Rate
Assets
Government Securities
Loans
Private Sector
Public Sector
5,154
695
13.48
94
2
2.23
5,248
697
13.28
31,552
-
7,846
-
24.87
-
3,645
-
197
-
5.40
-
35,197
-
8,043
-
22.85
-
31,552
7,846
24.87
3,645
197
5.40
35,197
8,043
22.85
2,265
383
16.91
127
4
2.76
2,392
387
16.17
Interest-Earning Assets
38,971
8,924
22.90
3,866
203
5.23
42,837
9,127
21.31
Cash and Gold
Equity Investments in Other Companies
Other Assets
Allowances
4,350
851
4,435
(1,543)
-
-
2,799
265
527
(105)
-
-
7,149
1,116
4,962
(1,648)
-
-
Total Assets
47,064
-
-
7,352
-
-
54,416
-
-
Total Loans
Others
Liabilities and Shareholders’ Equity
Deposits
Checking Accounts
Savings Accounts
Time Deposits and Rescheduled
Deposits
5,395
11
0.19
1
1,274
-
-
1
6,669
11
0.16
15,125
2,222
14.69
1,586
14
0.91
16,711
2,236
13.38
Total Interest-Bearing Deposits
20,520
2,233
10.88
2,861
14
0.50
23,381
2,247
9.61
Debt Securities
Other Interest-Bearing Liabilities
1,032
1,153
186
212
18.03
18.39
3,719
1,637
361
64
9.70
3.91
4,751
2,790
547
276
11.51
9.89
Total Interest-Bearing Liabilities
22,705
2,631
11.59
8,217
439
5.35
30,922
3,070
9.93
8,922
7,972
569
4,160
-
-
615
1,256
-
-
-
9,537
9,228
569
4,160
-
-
44,328
-
-
10,088
-
-
54,416
-
-
Checking Accounts
Other Liabilities
Minority Interest
Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
Spread and Net Yield (%)
Spread
Cost of Funds of Interest-Earning
Assets
Net Yield on Interest-Earning Assets
(*) Interest earned/paid includes CER adjustment.
11.31
(0.12)
11.38
6.75
16.15
11.36
(6.10)
7.17
14.14
Provision for Losses on Loans and Other Receivables
Provisions for losses on loans and other receivables amounted to Ps. 2,411 million, exceeding
by Ps. 635 million the Ps. 1,776 million recorded in the previous fiscal year, an increase both
regarding corporations and individuals.
For further information on the asset quality of the portfolio, see “—Risk Management—Credit
Risk.”
Net Income from Services
The table below shows the evolution of the main components that make up net income from
services:
74 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Net Income from Services
In millions of Pesos
2014
2013
December 31,
2012
Credit Cards
Deposits
Credit-related Fees
Values for Collection
Foreign Trade
Safe Deposit Boxes
CFA
Collections
Financial Fees
Cash Management
Transportation of Valuables
Others (1)
Total Income
5,376
4,097
3,037
1,341
879
652
227
289
234
182
105
79
180
128
99
167
124
99
137
122
104
126
87
64
97
82
70
69
55
39
59
43
26
345
223
151
8,306
6,234
4,654
Total Expenses
2,607
1,995
1,454
Net Income from Services
5,699
4,239
3,200
(1) It includes, among others, fees from investment banking activities and asset management.
Net income from services amounted to Ps. 5,699 million, 34% higher than the Ps. 4,239
million recorded in fiscal year 2013. The evolution of business activity and the rise in prices
(complying with the procedures set forth by the Argentine Central Bank’s regulations) account
for the increases noted in all items.
The most significant increases took place in fees related to deposit accounts (53%) and credit
cards (31%).
Banco Galicia’s total deposit accounts amounted to 3 million as of December 31, 2014, 9%
higher than the same period the previous year.
Banco Galicia’s income from credit and debit card transactions, on an individual basis,
amounted to Ps. 2,219 million, a 32% increase over the Ps. 1,683 million recorded in the
previous fiscal year. This higher income was attributable not only to the greater number of
credit cards managed, but also to the greater average purchases made with such cards during
the year. The total number of credit cards managed by Banco Galicia (excluding those
managed by the regional credit-card companies and CFA) increased 14%, reaching 2.9 million
as of December 31, 2014, in comparison with 2.5 million as of December 31, 2013.
Income from services corresponding to the regional credit-card companies reached Ps. 3,157
million, 31% higher than the Ps. 2,414 million recorded in fiscal year 2013. This variation was
due to the increase in the purchases made with these credit cards during the fiscal year,
together with an increase in the number of credit cards. These companies managed 8.9 million
cards as of December 31, 2014, increasing by 7% as compared to December 31, 2013.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 75
Credit Cards
Number of credit cards, except for purchases
Visa
“Gold”
International
National
“Business”
“Corporate”
“Platinum”
Galicia Rural
MasterCard
“Gold”
Mastercard
Argencard
2014
2013
December 31,
2012
1,750,960
1,586,344
1,400,979
395,732
324,903
304,967
906,701
826,297
714,920
68,980
90,245
115,336
85,039
71,307
57,845
3,241
3,139
2,924
291,267
270,453
204,987
17,107
15,476
12,472
126,880
107,235
100,288
43,824
34,935
30,592
82,652
71,779
69,058
404
521
638
986,962
810,780
644,710
307,072
238,088
211,297
427,932
345,380
282,744
251,958
227,312
150,669
8,879,717
8,270,150
7,494,721
3,646,229
3,164,358
2,741,907
537,947
519,342
478,173
41,307
34,247
32,255
4,654,234
4,552,203
4,242,386
170,930
101,412
88,987
155,228
93,881
79,488
15,702
7,531
9,499
11,932,556
10,891,397
9,742,157
101,814
(1) It corresponds to Tarjeta Naranja S.A., Tarjetas Cuyanas S.A. and La Anónima.
75,925
52,804
American Express
“Gold”
International
“Platinum”
Regional Credit-card Companies
Visa
Mastercard
American Express
Regional Brands (1)
Compañía Financiera Argentina S.A.
Visa
Mastercard
Total
Total Amount of Purchases (in millions of Pesos)
Expenses from services increased by 31%, from Ps. 1,995 million in fiscal year 2013 to Ps.
2,607 million in 2014, mainly as a result of higher expenses related to credit and debit card
transactions and the Total Benefits program, together with higher gross income taxes.
Administrative Expenses
The following table shows the components of administrative expenses for the fiscal year 2014
and the two previous fiscal years:
Administrative Expenses
In millions of Pesos
2014
2013
December 31,
2012
Salaries and Social Security Contributions
Personnel Services
Directors’ and Syndics' Fees
Advertising and Publicity
Electricity and Communications
Expenses related to Bank Premises and Equipment (Depreciation
Charges and Leases)
Taxes
Others
4,549
3,681
2,785
150
128
158
85
64
50
414
383
359
249
217
192
466
376
281
851
608
436
2,457
1,971
1,513
Total Administrative Expenses
9,221
7,428
5,774
In 2014, administrative expenses amounted to Ps. 9,221 million, 24% higher from the Ps.
7,428 million recorded in the previous fiscal year.
76 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Salaries and social security contributions and expenses related to personnel services increased
23%, from Ps. 3,809 million in 2013 to Ps. 4,699 million in 2014, mainly due to the salary
increase agreed upon with unions.
The remaining administrative expenses amounted to Ps. 4,522 million in the fiscal year,
reflecting a 25% increase from the Ps. 3,619 million recorded in the previous fiscal year. This
increase resulted from the evolution of the costs related to the different services rendered to
Grupo Financiero Galicia.
Income (Loss) from Equity Investments
Income from equity investments in other companies for fiscal year 2014 amounted to Ps. 213
million, 72% higher than that for the previous fiscal year. This increase is mainly due to the
following: i) the income generated by the transfer made by the Bank to VISA Argentina S.A. of
its interest in Banelco S.A., for Ps. 40 million, and ii) the collection of higher dividends
corresponding to VISA Argentina S.A., for Ps. 17 million.
Income (Loss) from Insurance Activities
Income from insurance activities amounted to Ps. 1,238 million at the close of the fiscal year,
37% higher than the Ps. 905 million recorded for fiscal year 2013. This result was mainly due
to the increase in the volume of premiums written, as a consequence of the evolution of the
commercialization of property and life insurance.
Miscellaneous Income (Loss), Net
Miscellaneous net income recorded income of Ps. 503 million for the fiscal year, compared to
income (loss) of Ps. 295 million for the previous fiscal year.
This higher gain, amounting to Ps. 208 million, was due to higher loans recovered and penalty
interest for Ps. 80 million, together with a lower establishment of net allowances for Ps. 56
million.
Income Tax
The income tax charge during the fiscal year was Ps. 1,992 million, thus accounting for an
increase of Ps. 760 million as compared to fiscal year 2013.
RISK MANAGEMENT
The tasks related to risk information and internal control of each of the companies controlled
by Grupo Financiero Galicia are defined and carried out, rigorously, in each of them. This is
particularly strict in Banco Galicia, where the requirements to be complied with are stringent
as it is a financial institution regulated by the Argentine Central Bank, as will be explained in
detail below.
Apart from the applicable domestic regulations, Grupo Financiero Galicia, in its capacity as a
listed company on the markets of the United States of America, complies with the certification
of its internal controls pursuant to Section 404 of the Sarbanes Oxley Act (SOX). Corporate
risk management is monitored by the Audit Committee, which as well gathers and analyzes
the information submitted by the main controlled companies.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 77
As regards risks, Banco Galicia assumes a policy that takes into account several business and
operating aspects following the main guidelines of internationally renowned standards.
This is the vision of the internal structure, duties and roles are defined in their hierarchies and
resources are invested in monitoring and optimizing the risk management.
The Risk Management Committee is the body in charge of defining, assessing and controlling
the risks taken by the Bank and its subsidiaries.
The management of the different risks is decentralized in the Divisions that are directly
responsible for each of them.
The Risk Management Division is mainly responsible for actively and integrally monitoring and
managing the different risks Banco Galicia and its subsidiaries are exposed to, among other
functions.
Credit Risk
Credit risk stems from the possible losses that can be sustained due to the total or partial noncompliance with financial obligations taken on both with Banco Galicia and with consumption
financing affiliated companies by its customers or else counterparties.
The credit approval and credit risk analysis of the Bank and its subsidiaries is a centralized
process based on the concept of opposition of interests. This is achieved through the existing
division among the risk management, credit and origination functions both in retail and
wholesale businesses. This allows an ongoing and efficient monitoring of the quality of assets,
a proactive management of problem loans, aggressive write-offs of uncollectible loans, and a
conservative policy on allowances for loan losses.
Apart from that, it includes the follow-up of the models for measuring the portfolio risk at the
operation and customer levels, facilitating the detection of problem loans and the losses
associated therewith, what in turn allows the early detection of situations that could entail
some degree of portfolio deterioration and provides appropriate protection of the Bank’s
assets.
Within the framework of the Risk Management Committee (CAR, as per its initials in Spanish),
the Board of Directors approves the strategies, policies, procedures and controls related to the
comprehensive management of the Bank’s risks. In turn, the Wholesale Risk Management
Division, Retail Risk Management Division and Affiliated Companies Risk Management Division
verify compliance and assess credit risk on a continuous basis.
As an outstanding aspect we can mention that credit granting policies for retail banking and
consumption financing companies focus on automatic granting processes. These are based on
behavior analysis models. Additionally, Banco Galicia is strongly geared towards obtaining
portfolios with direct payroll deposit, which statistically have a better compliance behavior
when compared to other types of portfolios.
As for the wholesale banking, credit granting is based on analyses conducted on credit, cashflow, balance sheet, capacity of the applicant. These are supported by statistical rating
models.
The Bank has a review-by-sector policy, which determines the levels of review for the
economic activities belonging to the private-sector portfolio according to the concentration
78 Grupo Financiero Galicia Annual Report Fiscal Year 2014
they show with regard to the Bank’s total credit and/or computable regulatory capital (RPC, as
per its initials in Spanish).
Wholesale Risk Management Division, Retail Risk Management Division and Affiliated
Companies Risk Management Division also constantly monitor their portfolio through different
indicators (asset quality of the loan portfolio, the coverage of the non-accrual portfolio with
allowances, non-performance, roll rates, etc.), as well as the classification and concentration
thereof (through maximum ratios between the exposure to each customer, its own computable
capital (“RPC”) or regulatory capital, and that of each customer). The loan portfolio
classification, as well as its concentration control, are carried out following the regulations
provided for by the Argentine Central Bank.
Loan Portfolio
As of December 31, 2014, Banco Galicia’s loan portfolio before allowances for loan losses
amounted to Ps. 69,208 million, a 21% increase when compared to the previous fiscal yearend.
Breakdown of the Loan Portfolio
2014
In millions of Pesos
Principal and Interest
Non-Financial Public Sector
Local Financial Sector
Non-Financial Private Sector and Residents Abroad (1)
Overdrafts
Promissory Notes
Mortgage Loans
Collateral Loans
Personal Loans
Credit Card Loans
Placements in Banks Abroad
Others
Accrued Interest, Adjustment and Quotation Differences Receivable
Documented Interests
Total
(1)
December 31,
2013
2012
-
-
-
193
633
357
3,987
3,349
3,098
16,304
13,323
10,460
1,661
1,803
1,159
500
481
311
6,996
8,051
7,283
37,348
27,389
19,279
261
586
277
1,337
1,237
1,619
969
827
661
(348)
(271)
(201)
69,208
57,408
44,303
Allowance for Loan Losses
(2,615)
(2,129)
(1,732)
Total Loans
Loans with Guarantees
With Preferred Guarantees (2)
Other Guarantees
Total Loans with Guarantees
66,593
55,279
42,571
2,695
2,433
1,699
9,463
8,257
6,830
12,158
10,690
8,529
(1) Categories of loans above include:
- Overdrafts: short-term obligations drawn on by customers through overdrafts.
- Promissory notes: endorsed promissory notes, debentures and other promises to pay signed by one borrower or group of
borrowers and factored loans.
- Mortgage loans: loans granted to purchase or improve real estate and collateralized by such real estate, and commercial loans
secured by a real estate mortgage.
- Collateral loans: loans secured by collateral (such as cars or machinery) other than real estate.
- Personal loans: loans to individuals.
- Credit-Card loans: loans granted through credit cards to credit card holders.
- Placements in banks abroad: short-term loans to banks abroad and short-term loans granted by Galicia Uruguay to international
banks outside Uruguay.
- Other loans: loans not included in other categories.
(2) Preferred guarantees include mortgages on real estate property or pledges on movable property, pledges of Argentine government
securities, or gold or cash collateral.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 79
Loans to the private sector before allowances increased by 22%, as compared to the prior
fiscal year-end, as a result of an increase both in companies and individuals of 18% and 24%,
respectively.
Loans by Type of Borrower
December 31,
2012
%
2014
%
2013
%
8,590
20,514
29,104
12.4
29.6
42.0
6,508
18,064
24,572
11.3
31.5
42.8
6,257
12,785
19,042
14.1
28.9
43.0
39,649
455
69,208
(1) It includes domestic and international financial sector.
(2) Before allowances for loan losses.
57.3
0.7
100.0
31,988
848
57,408
55.7
1.5
100.0
24,609
652
44,303
55.5
1.5
100.0
In millions of Pesos, except for percentages
Large Corporations
Small and Medium-Sized Companies
Total Loans to Corporations
Individuals
Financial Sector (1)
Non-Financial Public Sector
Total (2)
Consumer loans still account for the greater part of the loan portfolio, which as of the fiscal
year-end represented 57.4% of total loan portfolio; thus increasing the ratio by 2.1% when
compared to the previous fiscal year, where same share had been 55.3%.
As for business activities, the most significant sectors were those of the Manufacturing,
Primary Production and Retail and Wholesale Trade sectors, with a total portfolio share of
13.4%, 13.9% and 8.6%, respectively.
The most significant growth was shown in the Primary Production sector, with a 26%
increase as compared to the previous fiscal year, and the Manufacturing Industry, that grew
20% as compared to previous fiscal year-end.
Loans by Economic Activity
In millions of Pesos, except for percentages
Financial Sector (1)
Services
Non-Financial Public Sector
Communications, Transportation, Health and
Others
Electricity, Gas, Water Supply and Sewage
Other Financial Services
Total Services
Primary Production Sector
Agriculture and Livestock
Fishing, Forestry and Mining
Total Primary Production Sector
Consumption
Retail Trade
Wholesale Trade
Construction
Manufacturing Sector
Food and Beverage
Transportation Materials
Chemicals and Oil
Other Manufacturing Industries
Total Manufacturing Sector
Others
Total
(2)
(1) It includes domestic and international financial sector.
(2) Before allowances for loan losses.
80 Grupo Financiero Galicia Annual Report Fiscal Year 2014
December 31,
2012
%
2014
%
2013
%
455
0.7
848
1.5
652
1.5
0
0.0
0
0.0
0
0.0
2,886
216
366
3,468
4.2
0.3
0.5
5.0
2,882
260
231
3,373
5.0
0.5
0.4
5.9
2,064
244
165
2,473
4.7
0.6
0.3
5.6
8,178
1,459
9,637
39,747
2,237
3,699
709
11.8
2.1
13.9
57.4
3.2
5.4
1.0
7,160
478
7,638
31,720
2,326
3,075
707
12.5
0.8
13.3
55.3
4.0
5.4
1.2
4,845
134
4,979
24,168
1,749
2,476
594
10.9
0.3
11.2
54.5
4.0
5.6
1.3
2,943
996
2,269
3,048
4.3
1.4
3.3
4.4
2,303
963
1,557
2,898
4.0
1.7
2.7
5.0
2,615
1,041
1,140
2,416
5.9
2.3
2.6
5.5
9,256
13.4
7,721
13.4
7,212
16.3
-
-
-
-
-
-
69,208
100.0
57,408
100.0
44,303
100.0
Asset Quality of the Loan Portfolio
The non-accrual portfolio as a percentage of total loans remained the same as in the prior
fiscal year, at 3.57%.
The coverage of the non-accrual loan portfolio with allowances increased from 103.80% as of
2013 fiscal year-end to 105.78% as of 2014 fiscal year-end.
Classification of the Loan Portfolio
2014
Amounts
Amounts
Not Yet
Past Due
Due
In millions of Pesos
Normal Situation
With Special Follow-up and Low
Risk
65,279
With Problems and Medium Risk
High Risk of Insolvency and High
Risk
Uncollectible
Uncollectible
Reasons
due
to
Amounts
Amounts
Not Yet
Past Due
Due
Total
December 31,
2012
2013
-
65,279
54,119
1,457
-
1,457
339
439
778
327
1,049
-
315
Amounts
Amounts
Not Yet
Past Due
Due
Total
-
54,119
41,791
1,238
-
1,238
311
415
726
1,376
197
724
315
-
402
Total
-
41,791
1,017
-
1,017
244
353
597
921
128
535
663
402
-
233
233
Technical
-
3
3
-
2
2
-
2
2
67,402
1,806
69,208
55,865
1,543
57,408
43,180
1,123
44,303
Total Non-Accrual Loan Portfolio (2)
666
1,806
2,472
508
1,543
2,051
372
1,123
(1) Before allowances for loan losses.
(2) Non-accrual loan portfolio is defined as the loan portfolio classified in the last four categories of the loan classification.
1,495
Total Loans
(1)
During 2014, the Bank established allowances for loan losses for Ps. 2,339 million, 71% of
which is related to the seasoning of the consumer portfolio, 18% to the commercial portfolio
and the remaining 11% to the increase in the portfolio in normal situation.
Direct charges to the income statement, net of recoveries, represented a gain of Ps. 181
million. The net charge to the income statement for the fiscal year was Ps. 2,157 million,
representing 3.65% of the average loan portfolio for the fiscal year.
Charge-offs against allowances for loan losses were Ps. 1,840 million.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 81
Analysis of the Asset Quality of Loan Portfolio
In millions of Pesos, except for ratios
Total Loans
(1)
2014
December 31,
2013
2012
69,208
57,408
44,303
50
39
13
59
58
29
2,363
1,954
1,453
Total Non-Accrual Loan Portfolio
Past-due Loan Portfolio
Non-Financial Public Sector
Local Financial Sector
Non-Financial Private Sector and Residents Abroad
Overdrafts
Promissory Notes
Mortgage Loans
Collateral Loans
Personal Loans
Credit Card Loans
Others
2,472
2,051
1,495
-
-
-
-
-
-
169
150
96
121
76
54
12
28
9
9
5
1
262
243
188
1,200
1,003
740
33
38
35
Total Past-Due Loan Portfolio
1,806
1,543
1,123
42
34
10
38
47
25
1,726
1,462
1,088
1,806
1,543
1,123
2,615
2,129
1,732
2.61
2.69
2.53
0.06
0.06
0.02
0.05
0.08
0.06
2.50
2.55
2.45
3.57
3.57
3.37
3.59
3.62
3.40
3.57
3.57
3.37
3.78
3.71
3.91
Non-accrual Loan Portfolio
With Preferred Guarantees
With Other Guarantees
Without Guarantees
Past-due Loan Portfolio
With Preferred Guarantees
With Other Guarantees
Without Guarantees
Total Past-Due Loan Portfolio
Allowance for Loan Losses
Ratios (%)
Past-due Loans as a Percentage of Total Loans
Past-due Loans with Preferred Guarantees as a Percentage of Total Loans
Past-due Loans with Other Guarantees as a Percentage of Total Loans
Past-due Loans without Guarantees as a Percentage of Total Loans
Non-accrual Loans as a Percentage of Total Loans
Non-accrual Loans as a Percentage of Total Loans (excluding Interbank
Loans)
Non-accrual Loans as a Percentage of Loans to the Private Sector
Allowance for Loan Losses as a Percentage of Total Loans
Allowance for Loan Losses as a Percentage of Total Loans (excluding
Interbank Loans)
Allowances for Loan Losses as a Percentage of Non-Accrual Portfolio
Non-Accrual Portfolio with Guarantees as a Percentage of Non-Accrual
Portfolio
Non-Accrual Portfolio as a Percentage of Past-due Portfolio
(1) Before allowances for loan losses.
82 Grupo Financiero Galicia Annual Report Fiscal Year 2014
3.79
3.76
3.94
105.78
103.80
115.85
4.41
4.73
2.81
136.88
132.92
133.13
Provisions for Loan Losses
2014
2013
December 31,
2012
59,094
47,964
35,213
2,129
1,732
1,284
2,327
1,701
1,343
(1)
-
(60)
(1,840)
(1,304)
(835)
2,615
2,129
1,732
2,339
1,701
1,295
(181)
(187)
(132)
(1)
-
(60)
2,157
1,514
1,103
2.81
2.33
2.00
3.65
3.16
3.13
In millions of Pesos, except for ratios
Total Loans, Average
(1)
Allowance for Loan Losses at the Beginning of the Fiscal Year
Changes in the Allowance for Loan Losses
Allowances for Loan Losses Made during the Fiscal Year
Reversals of Allowances for Loan Losses
Write-Offs (A)
Allowance for Loan Losses at Fiscal Year-End
Provisions Charged to Income during Fiscal Year
Allowances for Loan Losses Made(2)
Direct Write-Offs, Net of Recoveries (B)
Allowances for Loan Losses Reversed
Net Charge to the Income Statement
Ratios (%)
Charges-Offs (-A+B) as a Percentage of Average Total
Loans
Net Charge to the Income Statement as a Percentage of
Average Total Loans
(1) Before allowances for loan losses.
(2) It includes quotation difference corresponding to Galicia Uruguay.
Composition of Allowances for Loan Losses per Type of Loan
2014
In millions of Pesos, except for percentages
Amount
% (1)
% (2)
December 31,
2012
2013
Amount
% (1)
%
(2)
Amount
%
(1)
%
(2)
Non-Financial Public Sector
-
-
-
-
-
-
-
-
-
Local Financial Sector
Non-financial Private Sector and Residents
Abroad
-
-
0,28
-
-
1,10
-
-
0.80
Overdrafts
121
0.17
5.76
95
0.17
5.83
68
0.15
6.99
Promissory Notes
94
0.14
23.56
56
0.10
23.21
41
0.09
23.61
Mortgage Loans
13
0.02
2.40
11
0.02
3.14
4
0.01
2.62
Collateral Loans
5
0.01
0.72
3
-
0.84
1
0.01
0.70
Personal Loans
299
0.43
10.11
261
0.45
14.02
190
0.43
16.44
Credit Card Loans
759
1.10
53.96
676
1.18
47.71
461
1.04
43.52
-
-
0.38
-
-
1.02
-
-
0.63
19
0.02
2.83
22
0.04
3.13
15
0.03
4.69
1,305
1.89
-
1,005
1.75
-
952
2.15
-
Total
2,615
3.78
(1) Allowances for loan losses as a percentage of total loans.
(2) Loans charged in every line as a percentage of total loans.
100.00
2,129
3.71
100.00
1,732
3.91
100.00
Placements in Banks Abroad
Others
Unallocated
Total Credit
In accordance with the Argentine Central Bank’s methodology for the preparation of the
Statement of Debtor’s Status, total credit is defined as the sum of loans, certain accounts
under the balance sheet heading “Other Receivables from Financial Brokerage” that represent
credit transactions (such as unlisted negotiable obligations), the “Receivables from Financial
Leases” and the memorandum accounts “Guarantees Granted” and “Unused Balances of
Loans Granted”. Defined in this way, Banco Galicia’s consolidated credit portfolio, including
the portfolio of the regional credit-card companies and that of CFA, amounted to Ps. 78,912
million as of fiscal year-end.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 83
As of December 31, 2014, the ratio of the non-accrual loan portfolio to total credit remained
the same, at 3.17%. Furthermore, coverage of non-accrual loan portfolio with allowances was
106.79%, compared to the 104.17% in the previous fiscal year.
Credit
In millions of Pesos, except for ratios
Loan Portfolio Classification
Normal Situation
With Special Follow-up and Low Risk
With Problems and Medium Risk
High Risk of Insolvency and High Risk
Uncollectible
Uncollectible due to Technical Reasons
Total Loans
(1)
Non-Accrual Loan Portfolio (2)
With Preferred Guarantees
With Other Guarantees
Without Guarantees
Total Non-Accrual Loan Portfolio
Allowance for Loan Losses
Ratios (%)
Allowance for Loan Losses
as a Percentage of Total Loans
Non-Accrual Loan Portfolio as a Percentage of Total Loans
Allowance for Loan Losses
as a Percentage of Non-Accrual Loan Portfolio
Non-Accrual Loan Portfolio with Guarantees
as a Percentage of Non-Accrual Loan Portfolio
2014
2013
December 31,
2012
74,900
62,488
48,634
1,507
1,254
1,032
792
748
612
1,392
930
669
318
404
235
3
3
2
78,912
65,827
51,184
57
41
14
61
60
31
2,387
1,984
1,473
2,505
2,085
1,518
2,675
2,172
1,761
3.39
3.30
3.44
3.17
3.17
2.97
106.79
104.17
116.01
4.71
4.84
(1) Before allowances for loan losses.
(2) Non-accrual loan portfolio is defined as the loan portfolio classified in the last four categories of the loan classification.
2.96
Financial Risks
Financial risk is a phenomenon inherent to the financial brokerage activity. The exposure to the
different financial risk factors is a natural circumstance that cannot be completely avoided
without affecting the Bank’s long-term economic viability. However, the lack of management
with regard to risk exposures is one of the most significant short-term threats. Risk factors
need to be identified and managed within a specific policy framework that envisages the
profile and the level of risk the Bank’s Board of Directors has decided to take to achieve its
long-term strategic goals.
The following risk factors subject to management and control have been identified:
 Continuity and stability of the sources of funds (deposits, debt, credit lines, other sources
of funds).
 Market price of financial assets and/or derivative instruments listed on stock exchanges.
 Foreign currency exchange.
 Fluctuation in lending and borrowing interest rates.
 Credit risk from counterparties located in foreign jurisdictions.
 Regulatory restrictions on the remittance of financial instruments or else liquid funds to
counterparties from abroad to comply with obligations undertaken.
From this perspective, financial risk is defined as the possibility of sustaining losses due to
variations in the market price of listed financial assets and liabilities, fluctuations in market
interest rates, foreign currency exchange and changes in the Bank’s liquidity situation. Cross84 Grupo Financiero Galicia Annual Report Fiscal Year 2014
border, overseas foreign currency transfer risks and risk exposures in the Non-financial Public
Sector are included within financial risks.
Liquidity Risk
This risk has to do with not being able to meet contractual commitments and the operational
needs of the business without affecting market prices, attracting the attention of other market
players and compromising the counterparty’s credit quality.
Banco Galicia’s goal is to maintain an adequate level of liquid assets that allows it to meet
financial commitments at contractual maturity, take advantage of potential investment
opportunities and meet credit demand.
Liquidity risk management is carried out by applying an internal model that is subject to a
periodic review.
The liquidity policy sets forth limits that cover three areas of liquidity risk:
 Liquidity in Terms of Stock: A level of management liquidity was established as the excess
over legal minimum cash requirements, taking into consideration the characteristics and
behavior of Banco Galicia’s different liabilities. The liquid assets that make up such liquidity
were determined as well.
 Cash Flow Liquidity: gaps between the contractual maturities of consolidated financial
assets and liabilities are analyzed and monitored. There is a cap for the gap between
maturities, determined based on the gap accumulated against total liabilities permanently
complied with during the first year.
 Concentration of Deposits: The concentration of deposits is regulated in terms of the ten
leading customers and the following fifty customers; and a maximum limit with regard to
the share in deposits is determined individually.
With the purpose of monitoring and regulating possible concentrations of time deposits by
organisms decentralized from the national government, the Bank decided to determine specific
limits for these transactions, independently from the rest of Banco Galicia’s customers. In case
circumstantial excesses over the concentration limits determined occur, these lead to higher
requirements with regard to liquidity in terms of stock.
Furthermore, the liquidity policy is supplemented by the Liquidity Contingency Plan that
contemplates a set of early warnings to monitor liquidity evolution and possible business
actions in order to obtain extraordinary liquid resources to address the above-mentioned
situation.
Additionally, a stress test program was designed to regularly evaluate the liquidity capacity
specified by the policy, in order to address different scenarios, defined as extreme, according
to historical experience.
Liquidity Management (on an individual basis)
As of December 31, 2014, the liquidity structure of the Bank in Argentina was as follows:
Liquidity (Banco Galicia, on an unconsolidated basis)
In millions of Pesos
December 31, 2014
Legal Requirements
Management Liquidity
Total Liquidity (1)
11,465
12,563
24,028
(1) It does not include cash and due from banks of controlled companies.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 85
Legal requirements correspond to the minimum cash requirements for Peso- and U.S. Dollardenominated assets and liabilities as per the rules and regulations of the Argentine Central
Bank.
The assets computable for compliance with this requirement are the balances of the Peso- and
U.S. Dollar-denominated deposit accounts at the Argentine Central Bank and the escrow
accounts held at the Argentine Central Bank in favor of clearing houses.
Management liquidity, defined as a percentage over deposits and other liabilities, is made up
of the following items: Lebac, Bonar 2014, Bonar 2015, overnight placements in banks
abroad, net short-term interbank loans (call loans), technical cash and placements at the
Argentine Central Bank in excess of the necessary items to cover minimum cash requirements.
Liquidity Gaps
To analyze the flows and as a supplement to the above-mentioned analysis of liquidity in
terms of stock, the “Liquidity Gap” is prepared, showing the mismatches resulting from the
contractual maturity of consolidated financial assets and liabilities.
Liquidity Gap
In millions of Pesos
Assets
Cash and Due from Banks
Argentine Central Bank – Escrow Accounts
Overnight Placements in Banks Abroad
Loans – Public Sector
Loans – Private Sector
Government Securities
Negotiable Obligations and Corporate Securities
Financial Trusts
Other Financing
Receivables from Financial Leases
Others
Total Assets
Liabilities
Deposits in Savings Accounts
Demand Deposits
Time Deposits
Negotiable Obligations
International Banks and Credit Entities
Local Financial Institutions
Other Financing (1)
Total Liabilities
Asset / Liability Gap
Cumulative Gap
Ratio of Cumulative Gap to Cumulative Liabilities
Ratio of Cumulative Gap to Total Liabilities
Less than
One Year
1-5 Years
5-10 Years
December 31, 2014
Over 10
Total
Years
4,699
-
-
-
4,699
13,537
-
-
-
13,537
261
-
-
-
261
150
-
-
-
150
57,142
8,678
137
7
65,964
9,584
131
-
-
9,715
364
434
4
-
802
2,366
572
16
-
2,954
86
-
-
-
86
164
224
103
16
507
34
-
-
-
34
88,387
10,039
260
23
98,709
16,744
-
-
-
16,744
16,389
-
-
-
16,389
31,012
8
-
-
31,020
2,595
6,785
-
-
9,380
617
191
-
-
808
1,065
49
-
-
1,114
14,623
-
-
-
14,623
83,045
7,033
-
-
90,078
5,342
3,006
260
23
8,631
5,342
8,348
8,608
8,631
8,631
6.4%
9.3%
9.6%
9.6%
5.9%
9.3%
9.6%
9.6%
Principal plus CER adjustment. It does not include interest.
(1) It includes, mainly, debt with stores in connection with credit card operations, liabilities in connection with repurchase
agreement transactions and debt with domestic credit agencies and collections for third parties.
The table above is prepared taking into account contractual maturity. Therefore, all financial
assets and liabilities with no maturity date are included in the “Less than One Year” category.
86 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Banco Galicia must comply with a maximum limit for liquidity mismatches. This limit has been
established at -25% (minus 25%) for the ratio of cumulative gap to total liabilities within the
first year.
Currency Risk (Currency Mismatch)
Financial brokerage naturally involves the raising of funds and the subsequent use thereof.
Both funding (deposits and other alternative sources of financing) and the use of the funds in
loans and/or investments can be carried out in assets and liabilities denominated in different
currencies. This possible currency mismatch between liabilities and the use thereof on assets
generates a source of risk that arises from the variations in the different foreign currency
exchange rates. This risk is inherent to the structure of assets and liabilities per currency.
Currency risk is defined as the risk of incurring in equity losses as a consequence of variations
in the foreign currency exchange rates in which assets and liabilities (both on and off the
Balance Sheet) are denominated.
The policy framework currently in force establishes limits in terms of maximum net asset
positions (assets denominated in a currency which are higher than the liabilities denominated
in such currency) and net liability positions (assets denominated in a currency which are lower
than the liabilities denominated in such currency) for mismatches in foreign currency, as a
proportion of the Bank’s computable regulatory capital (RPC, as per its initials in Spanish), on
a consolidated basis.
Banco Galicia manages mismatches not only regarding assets and liabilities, but also covering
mismatches through the foreign currency futures market. Transactions in foreign currency
futures (U.S. Dollar futures) are carried out through MAE, ROFEX and with customers. These
transactions are subject to limits that take into consideration characteristics particular of each
trading environment.
The table below shows the composition of the Bank’s shareholders’ equity as of December
31, 2014, by currency and type of principal adjustment:
Composition of Shareholders’ Equity as of December 31, 2014
In millions of Pesos
Financial Assets and Liabilities
Pesos - Adjusted by CER
Pesos – Non-Adjusted
Foreign Currency (1)
Other Assets and Liabilities
Total Gaps
Adjusted for Forward Transactions Recorded in Memorandum
Accounts:
Financial Assets and Liabilities
Pesos - Adjusted by CER
Pesos- Non-Adjusted (2)
Foreign Currency (1) (2)
Other Assets and Liabilities
Total Adjusted Gaps
Assets
99,846
Liabilities
91,811
Gap
8,035
801
11
790
86,233
78,500
7,733
12,812
13,300
(488)
6,116
4,251
1,865
105,962
96,062
9,900
99,846
91,811
8,035
801
11
790
78,013
72,287
5,726
21,032
19,513
1,519
6,116
4,251
1,865
105,962
96,062
9,900
(1) Stated in Pesos, at the exchange rate of Ps. 8.5520 per U.S. Dollar.
(2) Adjusted for forward sales and purchases of foreign exchange, without delivery of underlying assets and recorded in
Memorandum Accounts.
As of December 31, 2014, considering the adjustments from forward transactions recorded
under memorandum accounts, Banco Galicia had net asset positions in foreign currency and
Pesos adjusted and non-adjusted by CER.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 87
The paragraphs below describe the composition of the different currency mismatches as of
December 31, 2014.
Peso-denominated Assets and Liabilities Adjusted by CER
At fiscal year-end, the Bank had a net asset position of Ps. 790 million, mainly made up of Ps.
788 million corresponding to the participation certificate in Galtrust I Financial Trust.
The limit established for the CER-adjusted mismatch is at 100% and at 25% of the Bank’s
RPC for the net asset position and the net liability position, respectively. At fiscal year-end,
the asset position in Pesos adjusted by CER accounted for 10.1% of the Bank’s RPC.
Foreign Currency Assets and Liabilities
The Bank’s assets denominated in foreign currency mainly comprised the following: (i) Cash
and balances held at the Argentine Central Bank and correspondent banks for Ps. 8,004
million; (ii) loans to the non-financial private sector and residents abroad for Ps. 2,800 million
(principal and interest, net of allowances), and (iii) government securities for Ps. 1,184 million.
The Bank’s liabilities denominated in foreign currency consisted mainly of: (i) Deposits for Ps.
4,825 million (principal, interest and quotation differences); (ii) Ps. 6,452 million of
subordinated and unsubordinated negotiable obligations issued by Banco Galicia and the
regional credit-card companies; (iii) debt with international banks and credit agencies for Ps.
504 million; and (iv) Ps. 1,017 million in connection with collections for third parties.
A net liability position of Ps. 488 million stemmed from the consolidated balance sheet.
Furthermore, forward transactions in foreign currency without delivery of the underlying asset
for a notional value of Ps. 2,007 million were recorded in memorandum accounts. Therefore,
as of that date, the Bank’s net position in foreign currency adjusted to reflect these
transactions was an asset position of Ps. 1,519 million, equivalent to US$ 178 million.
Banco Galicia has set limits as regards foreign-currency mismatches at -10% (minus 10%) of
the Bank’s RPC for its net asset position and its short position. At the end of the fiscal year,
Banco Galicia's net asset position in foreign currency represented 14.6% of its RPC.
Non-adjusted Peso-denominated Assets and Liabilities
The Bank’s non-adjusted Peso-denominated assets mainly comprised the following: (i) Loans to
the non-financial private sector for Ps. 63,602 million (principal plus interest, net of
allowances); (ii) cash and balances held at the Argentine Central Bank and correspondent
banks for Ps. 10,232 million (including the balance of escrow accounts); (iii) Ps. 7,096 million
corresponding to the holdings of securities issued by the Argentine Central Bank; (iv) Ps.
1,020 million corresponding to debt securities and participation certificates in various financial
trusts; and (v) Ps. 1,452 million corresponding to holdings of Bonar 2016, Bonar 2017, Bonar
2019 and others.
Banco Galicia’s non-adjusted Peso-denominated liabilities mainly comprised: (i) Deposits for Ps.
59,870 million (principal plus interest); (ii) liabilities with stores in connection with Banco
Galicia’s credit card activities and the regional credit-card companies for Ps. 10,893 million;
(iii) Ps. 3,304 million corresponding to negotiable obligations issued by regional credit-card
companies and CFA; and iv) Ps. 1,086 million in liabilities with local financial institutions
(almost all corresponding to the regional credit-card companies).
88 Grupo Financiero Galicia Annual Report Fiscal Year 2014
The net asset position in non-adjusted Peso-denominated assets and liabilities was of Ps.
5,726 million at fiscal year-end.
Other Assets and Liabilities
In the category “Other Assets and Liabilities”, the assets were mainly the following: (i) Bank,
premises and equipment, miscellaneous and intangible assets for Ps. 3,696 million; (ii)
miscellaneous receivables for Ps. 1,364 million; and (iii) equity investments in other companies
for Ps. 89 million. Liabilities mainly included the following: (i) Ps. 3,085 million recorded under
“Miscellaneous Liabilities”, and (ii) provisions for other contingencies for Ps. 352 million.
Interest Rate Risk (Balance Sheet Structural Risk)
Another distinctive and natural characteristic of financial brokerage is the existence of interestearning assets and interest-bearing liabilities with different maturities (or different rate
repricing periods) and interest rates that can be fixed or variable. This situation leads to a gap
or mismatch that arises from the balance sheet and measures the imbalance between fixedand variable-rate assets and liabilities, and results in the so-called interest-rate risk or else
Balance Sheet structural risk. A commercial bank can face the interest rate risk on both sides
of its balance sheet: With regard to the income generated by assets (loans and securities) and
the expenses related to the interest-bearing liabilities (deposits and others sources of funds).
The policy currently in force defines this gap as the risk that the financial margin and the
economic value of equity may vary as a consequence of fluctuations in market interest rates.
The magnitude of such variation is associated with the sensitivity to interest rates of the
structure of the Bank's assets and liabilities.
Aimed at managing and limiting the sensitivity of Banco Galicia's economic value and results
with respect to variations in the interest rate inherent to the structure of certain assets and
liabilities, the following caps have been determined:
 Limit on the net financial income for the first year.
 Limit on the net present value of assets and liabilities.
Limit on the Net Financial Income for the First Year
The effect of interest rate fluctuations on the net financial income for the first year is
calculated using the methodology known as scenario simulation. On a monthly basis, net
financial income for the first year is simulated in a base scenario and in a “+100 basis points”
scenario. In order to prepare each scenario, different criteria are assumed regarding the
sensitivity to interest rates of assets and liabilities, depending on the historical performance
observed of the different balance sheet items. Net financial income for the first year in the
“+100 basis points” scenario is compared to the net financial income for the first year in the
base scenario. The resulting difference is related to the annualized accounting net financial
income for the last calendar trailing quarter available, for Banco Galicia on a consolidated
basis, before quotation differences and CER adjustment.
The limit on a potential loss in the “+100 b.p.” scenario with respect to the base scenario
was established at 20% of the net financial income for the first year, as defined in the above
paragraph. At fiscal year-end, the negative difference between the net financial income for the
first year corresponding to the “+100 b.p.” scenario and that corresponding to the “base”
scenario accounted for 0.1% of the net financial income for the first year.
Limit on the Net Present Value of Assets and Liabilities
Grupo Financiero Galicia Annual Report Fiscal Year 2014 89
The net present value of assets and liabilities is also calculated on a monthly basis and taking
into account the assets and liabilities of Banco Galicia's consolidated balance sheet. The net
present value of the consolidated assets and liabilities, as mentioned, is calculated for a
“base” scenario in which the listed securities portfolio is discounted using interest rates
obtained according to yield curves determined based on the market yields of different
reference bonds denominated in Pesos, in U.S. Dollars and adjusted by the CER. Yield curves
for unlisted assets and liabilities are also created using market interest rates. The net present
value of assets and liabilities is also obtained for a second scenario where portfolios are
discounted at the rates of the aforementioned yield curves plus 100 basis points. It is worth
mentioning that, in order to prepare the second scenario, it is assumed that an increase in
domestic interest rates is not transferred to the yield curves of the portfolios in U.S. Dollars,
and that, in the case of portfolios adjusted by CER, said rates are considered as fixed rates. By
comparing the values obtained for each scenario, the difference between the present values of
shareholders’ equity in each scenario can be drawn.
The limit on a potential loss in the present value of shareholders’ equity resulting from a 100
basis points increase in interest rates regarding the base scenario was established at 3% of
the RPC. As of the fiscal year-end, a 100 b.p. increase in interest rates (as mentioned in the
paragraph above) resulted in a reduction in the present value of Banco Galicia's shareholders’
equity in comparison to the value calculated for the base scenario, equivalent to -0.7% (minus
0.7%) of the RPC.
The analysis made was based on deterministic methods, which take in consideration only the
aforementioned scenario. With the purposes of covering a larger number of scenarios, and
therefore, a greater variation range of the pertinent variables, during 2010 a Balance Sheet
Structural Risk Manager started being developed, which, with stochastic simulations, allows
covering a wider range of scenarios and generate results for a large variety of analyses.
One of the main applications of the manager is the estimation of the economic capital
consumption of the balance sheet structural risk. The manager will estimate the VaR (Value at
Risk) inherent to the Bank's assets and liabilities, based on the generation of a considerable
number of simulations of interest rates’ movements. The VaR is associated with specific levels
of likelihood of occurrence or degree of confidence.
In fiscal year 2014, the systematic evaluation of the economic capital continued, within a
comprehensive risk management framework as regards Banco Galicia.
Market Risk
The exposure to portfolios of listed financial instruments, whose value varies according to the
movement in their market prices, is subject to a specific policy framework that regulates the
risk of incurring a loss as a consequence of the variation of the market price of financial assets
whose value is subject to negotiation.
Brokerage transactions and/or investments in government securities, currencies, negotiable
obligations, derivative products and debt instruments issued by the Argentine Central Bank are
governed by the policy that limits the maximum tolerable losses in a given fiscal year.
In order to measure and monitor this source of risk, the model known as VaR is used, among
others. This model determines intra-daily, for the Bank individually, the possible loss that could
be generated by the positions in securities, derivative instruments and currencies under certain
parameters.
The parameters taken into consideration are as follows:
90 Grupo Financiero Galicia Annual Report Fiscal Year 2014
(i) A 95% - 99% degree of confidence.
(ii) VaR estimates are made for holding periods of one day and “n” days, where “n” is
defined as the number of days necessary to settle the position in each security.
(iii) In the case of new issuances, the available trading days are taken into consideration; if
there are not enough trading days or if there are no quotations, the volatility of bonds
from domestic issuers with similar risk and characteristics is used.
Likewise, the measurement method known as DVO1 (Dollar Value of One Basis Point) is also
applied to measure and monitor the trading of debt instruments issued by the Argentine
Central Bank and the brokerage of negotiable obligations.
Banco Galicia's policy requires that the Risk Management and Treasury Divisions agree on the
parameters under which the models work, and establishes the maximum losses authorized
both for securities, foreign-currency, Argentine Central Bank’s debt instruments and derivative
products in a fiscal year. Maximum losses were established in:
Risk
Currency
Fixed-Income
Interest Rate Derivatives
Policy on Limits
Ps. 35 million
Ps. 148 million
Ps. 10 million
Furthermore, the policy includes the regular carrying out of stress tests, which goal is to
assess the risk positions and their results, under adverse market conditions. Finally,
“contingency plans” were designed for each transaction, which include the actions to be
implemented in a critical scenario.
Cross-border Risk
It is the risk of incurring in equity losses as a consequence of the impairment or uncollectibility
of exposures (loans, positions in securities, equity investments, and liquidity) located in
international jurisdictions. It comprises risks generated by entering into transactions with
public or private counterparties residing abroad.
In order to regulate risk exposures in international jurisdictions, limits were established taking
into consideration the jurisdiction’s credit rating, the type of transaction and a maximum
exposure per counterparty.
The Bank defined its policy by setting maximum exposure limits measured as a percentage of
its RPC and taking into account if the counterparty is considered investment grade:
Grupo Financiero Galicia Annual Report Fiscal Year 2014 91
Risk
Required Credit Rating
Investment Grade
Not Investment Grade
-Jurisdictional Risk
- International Rating
- No limit
- Maximum limit: 5%
-Counterparty Risk
Agency
- International Banking
Relations
- Maximum limit: 15%
- Maximum limit: 1%
- Only foreign trade
- Credit Division
- The limit is distributed
between financial and
foreign trade
transactions, thus
absorbing local
counterparty margin
transactions
Overseas Foreign Currency Transfer Risk
With the purpose of mitigating the risk resulting from an eventual change in domestic laws
that may affect overseas foreign currency transfers, in order to meet incurred liabilities, a
policy was devised to set a limit for liabilities transferred abroad, as a proportion to total
consolidated liabilities. Such ratio was fixed in 15%.
As of December 31, 2014, exposure stood at 8.3% over total liabilities.
Risk Exposures in the Non-financial Public Sector
Risk exposures in the “Non-financial Public Sector” in federal, provincial and municipal
jurisdictions are regulated by a management policy set in the last quarter of fiscal year 2012.
The policy sets limits on risk exposures, establishing a “possible loss” (as a percentage of the
Bank’s RPC) associated with a given position, contemplating in its application the debt
instruments issued by the different jurisdictions and other possible vehicles of financing to the
Non-financial Public Sector. The policy is also supplemented by a limit that establishes that the
total position in the Non-financial Public Sector should not exceed a given percentage of the
Bank’s RPC.
The limits set are as follows:
-
The possible loss cannot exceed 4% of the Bank’s RPC.
The total position cannot exceed 70% of the Bank’s RPC.
Operational Risk
Banco Galicia adopts the definition of operational risk determined by the Argentine Central
Bank and the best international practices. Operational risk is the risk of losses due to the lack
of conformity or due to failure of internal processes, the acts of people or systems, or else
because of external events. This definition includes legal risk, but does not include strategic
and reputation risks.
Banco Galicia defined the framework for the operational risk management, which comprises
the financial institution’s policies, practices, procedures and structures for its proper
management.
The Risk Management Division, independent from the business or support units involved,
includes a specific unit that is responsible for the management of such risks. The duties of this
unit are, among others, to develop and monitor the operational risk management model,
inherent in the Bank’s products, activities, processes, systems and technology, aligned with
92 Grupo Financiero Galicia Annual Report Fiscal Year 2014
the regulations and best practices in force, organize the main necessary processes, provide
advice, training and support to divisions, ensure that the Bank’s contingency, recovery and
activity continuity plans are developed according to the size and complexity of its operations,
as well as the respective tests thereon.
The operational risk management is understood as the identification, assessment, monitoring,
control and mitigation of this risk. It is an ongoing process carried out throughout the Bank,
which fosters a risk management culture at all organization levels through an effective policy
and a program led by Senior Management.
Identification
The starting point of the operational risk management is the identification of risks and their
association with the controls established to mitigate them, considering internal and external
factors that may affect the process development. The results of this exercise are entered into
a log of risks, which acts as a central repository of the nature and status of each risk and
controls thereof.
Assessment
Once risks have been identified, the size in terms of impact, frequency and likelihood is
determined.
Monitoring
The monitoring process allows detecting and correcting the possible deficiencies in operational
risk management policies, processes and procedures or their update.
Risk Control and Mitigation
The control process ensures compliance with internal policies and analyzes risks and
responses to avoid, accept, mitigate or share them, by aligning them with the risk tolerance
defined.
The methodological approach adopted by the Bank includes several management tools.
Self-Risk Assessment
The self-risk assessment is a process to identify and assess existing risks, considering the
controls established to manage and mitigate them. The self-assessment is a critical component
of the operational risk management framework since the vulnerability of operations and
activities to risk can be verified based on this process. Assessment can be quantitative or
qualitative.
Operational Risk Map
The operational risk map allows viewing all the risks assessed within a matrix of colors that, at
first sight, points out those risks in a classification of high, very high, medium, low and very
low, for their later analysis and for the preparation of reports or action plans.
Risk Indicators
Risk indicators, which are risk assessment mechanisms based on thresholds set, are defined
by business and support area managers, and offer a fair basis to estimate the likelihood and
severity of one or more operational risk events.
Collection of Risk Events
It is the tool whereby material data about risk events detected are identified and logged
systematically. The collection of these events contributes to reducing incidents and the
amounts of losses, as well as improving the products service quality.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 93
The Bank has defined training strategies, together with the Organizational Development and
Human Resources Division, for the purpose of training and making all its employees aware of
the importance of the operational risk and its proper management. For training programs, the
Argentine Central Bank regulations and the definitions included in the Operational Risk Policy
are taken into account.
The Bank has also defined policies to mitigate risks derived from service outsourcing and a
code of conduct governing the relationship with suppliers.
The Bank also ensures that its operational risks are appropriately assessed before launching or
introducing new products, activities, processes or systems.
REGULATORY CAPITAL
Grupo Financiero Galicia, as well as the companies it controls, is regulated by the Corporations
Law. In Section 186, the law establishes the minimum capital amount of a corporation.
Through Decree 1331/12, which came into force on October 8, 2012, such amount was
determined to be Ps. 100,000.
Banco Galicia
With regard to regulatory capital, Banco Galicia must comply with the regulations set forth by
the Argentine Central Bank. These regulations are based on the Basel Committee
methodology, and establish the minimum capital a financial institution is required to maintain
in order to cover the different risks inherent to its business activity and incorporated into its
assets. Such risks mainly include: Credit risk, generated both by exposure to the private sector
and to the public sector; market risk, generated by positions in securities, foreign-currency and
CER; and interest-rate risk, generated by mismatches between assets and liabilities in terms of
interest-rate repricing. Originally, the minimum capital requirement stated by the new
regulations was 8% of risk-weighted assets, for exposure to both the private sector and the
public sector, with said requirement being lower depending on the existence of certain
guarantees in the case of private-sector assets and for certain liquid assets. Over time, the
Argentine Central Bank established modifications to the regulations, being the following the
most significant and recent ones.
As from February 1, 2012, the Argentine Central Bank established an additional capital
requirement for the operational risk coverage, equal to 15% of the annual average of financial
income and net income from services corresponding to the last 36 months before the
calculation date, excluding some items that are considered extraordinary or not closely related
to this risk.
Later, the Argentine Central Bank made some modifications to the determination of the
regulation on “Minimum Capital Requirements for Financial Institutions”, in force as from fiscal
year 2013. The main changes with regard to computable capital are as follows:


Computable regulatory capital is divided into Basic Shareholders’ Equity (Tier 1 Capital)
and Supplementary Shareholders’ Equity (Tier 2 Capital). Deductible Items start to be
mainly part of the Basic Shareholders’ Equity.
Results for the period are part of the Basic Shareholders’ Equity (previously they were
part of the Supplementary Shareholders’ Equity).
94 Grupo Financiero Galicia Annual Report Fiscal Year 2014


Supplementary Shareholders' Equity includes subordinated negotiable obligations and
100% of the allowances for loan losses on the portfolio in normal situation (previously
it was 50%).
Regardless of the reduction in their calculation by 20% per year starting five years
before their maturity, thanks to these new regulations subordinated negotiable
obligations shall be computed at 90% of their value, decreasing 10 percentage points
every 12 months.
The main changes with regard to the minimum capital requirements are as follows:





Loans in Pesos to the non-financial public sector: 0% (before: 8%).
Bank premises and equipment and miscellaneous assets: 8% (before: 10%).
Modification with regard to weights:
Family Mortgage Loans: from 50% to 35% over the 8%, if the amount does not
exceed 75% of the asset value.
Retail portfolio1: 75% over 8% (previously: 100% over 8%).
Minimum capital requirements must be met by the Bank, not only on an individual basis, but
also on a consolidated basis with its significant subsidiaries.
In the table below, Banco Galicia’s information on regulatory capital and compliance with
regulations on minimum capital requirements is consolidated with Tarjetas Regionales S.A. and
its subsidiaries, CFA and Banco Galicia Uruguay (in liquidation).
Regulatory Capital
(*)
In millions of Pesos, except for ratios
2014
2013
December 31,
2012
Shareholders’ Equity
9,899
6,741
4,904
Minimum Capital Requirements (a)
7,077
5,691
4,266
5,098
4,328
3,486
200
58
16
-
-
47
1,779
1,305
717
Loans, Fixed Assets, Public Sector and Other Assets
Market Risk Value
Interest-Rate Risk Value
Operational Risk
Computable Capital (b)
10,133
7,513
5,611
Tier One Common Capital
8,041
5,478
4,272
Tier Two Common Capital
2,020
1,805
1,314
72
230
25
Difference (b – a)
3,056
1,822
1,345
Total Risk Assets
63,690
52,605
43,092
Additional Capital per Market Variation
Ratios (%)
Shareholders’ Equity as a % of Total Consolidated Assets
9.34
8.20
7.81
Excess Over Required Capital as % of Required Capital
43.18
32.02
31.53
Total Capital Ratio
15.91
14.28
13.02
(*) In accordance with Argentine Central Bank regulations applicable at each date.
As of the close of the fiscal year, Banco Galicia’s computable capital exceeded in Ps. 3,056
million (43%) the minimum capital requirement, which was of Ps. 7,077 million. This excess
amount was of Ps. 1,822 million (32%) as of the close of fiscal year 2013.
The minimum capital requirement increased by Ps. 1,386 million when compared to fiscal year
2013. This variation was mainly attributable to the increase in the requirements related to the
Retail portfolio is made up of loans to individuals lower than Ps. 200,000 and loans to MiPyMEs (MicroPyMEs) up to
Ps. 6 million, as long as the agreed amount does not exceed 30% of income.
1
Grupo Financiero Galicia Annual Report Fiscal Year 2014 95
following: i) financing to the private sector: Ps. 770 million, due to the growth of its portfolio’s
balances, and ii) operational risk: Ps. 474 million.
Computable capital increased by Ps. 2,620 million when compared to fiscal year 2013, mainly
as a consequence of the following: i) an increase of Ps. 2,563 million in Tier 1 Common
Capital, mostly for the higher results recorded, offset by higher deductions as a consequence
of organization and development expenses, and ii) an increase in Tier 2 Common Capital for
Ps. 215 million.
Insurance Companies
The insurance companies controlled by Sudamericana Holding S.A. must meet the minimum
capital requirements set by the Argentine Superintendency of Insurance.
The abovementioned regulatory agency requires insurance companies to maintain a minimum
capital level based on: a) line of insurance; b) premiums and surcharges and c) claims. The
minimum required capital must then be compared to computable capital, defined as
shareholder’s equity less noncomputable assets. Noncomputable assets consist mainly of
deferred charges, pending capital contributions, proposed distribution of profits and excess
investments in authorized instruments.
As of December 31, 2014, the computable capital of the companies controlled by
Sudamericana Holding S.A. exceeded the minimum requirement of Ps. 267 million by Ps. 46
million.
Sudamericana Holding S.A. also holds Galicia Broker Asesores de Seguros S.A., company
dedicated to the brokerage in different lines of insurance that is regulated by the guidelines of
the Corporations Law.
CAPITAL AND RESERVES AND PROPOSED DISTRIBUTION OF PROFITS
As of the close of fiscal year ended December 31, 2014, balances corresponding to capital,
capital adjustment, premium for trading of shares in own portfolio and additional paid-in capital
totaled Ps. 1,797,990,556.43.
Profits recorded in fiscal year 2014 amounted to Ps. 3,337,790,091.13, which the Board of
Directors proposes to distribute as follows:
96 Grupo Financiero Galicia Annual Report Fiscal Year 2014
In Pesos
To Legal Reserve
To Cash Dividends
24,432,197.28
(1)
To Discretionary Reserve
100,000,000.00
3,213,357,893.85
(1) 7.69074235% with regard to 1,300,264,597 Class “A” and “B” ordinary shares with a face value of
Ps. 1 each.
(2) Pursuant to what is set forth in the last paragraph of the section incorporated by Act No. 25585 after
Section 25 of Act No. 23966, when decided, and in the cases that may correspond, the Company will be
restored the amounts corresponding to the tax on personal assets it paid for fiscal year 2014 in its capacity
as substitute taxpayer of the shareholders subject to the above-mentioned tax. Additionally, pursuant to
Section 4 of Act No. 26893, the Company shall withhold 10% for income tax from those shareholders
subject to the tax.
Should the foregoing proposal be approved, the composition of Grupo Financiero Galicia S.A.’s
shareholders’ equity, as of December 31, 2014, pursuant to the applicable regulations, would
be as follows:
In Pesos
Capital Stock
Capital Adjustment
Premium for Trading of Shares in Own Portfolio
1,300,264,597.00
278,130,755.47
605,682.08
Additional Paid-in Capital
218,989,521.88
Profit Reserves
Legal Reserve
315,679,070.49
Facultative Reserve
Total Shareholders’ Equity
8,032,754,260.43
10,146,423,887.35
Eduardo J. Escasany
Chairman of the Board of Directors
Autonomous City of Buenos Aires
March 10, 2015
This Annual Report contains statements regarding events which are currently anticipated to occur in the future, or
forward-looking statements. These forward-looking statements or projections reflect Grupo Financiero Galicia S.A.’s
opinions and expectations with respect to future events and their occurrence in general, as well as with respect to
particular events. As a result of factors not considered, which are unforeseen at the time of making such forwardlooking statements or which are out of Banco de Galicia y Buenos Aires S.A.’s control, actual results or their
consequences could differ significantly from those that are contemplated or estimated to occur in the future.
Shareholders and other readers of this Annual Report are cautioned not to place undue reliance on such forwardlooking statements or projections, which speak only as of their dates. Grupo Financiero Galicia S.A. assumes no
obligation to publicly update or revise any forward-looking statements or projections, whether as a result of new
information, future events or otherwise. Finally, shareholders and any other reader of this Annual Report must note
that this translation has been made from the original version written and expressed in Spanish, therefore, any matters
of interpretations should be referred to the original version in Spanish.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 97
REPORT ON THE CODE ON CORPORATE GOVERNANCE
The Board of Directors of Grupo Financiero Galicia S.A. (hereinafter “Grupo Financiero Galicia”) complies, in
every relevant respect, with the recommendations included in the Code on Corporate Governance as
Schedule IV to Title IV of the amended regulations issued by the National Securities Commission (Text
amended in 2013). The aforementioned is in accordance with what stems from the following “Response
Structure” table.
As a general introduction, it should be noted that, since its beginning, Grupo Financiero Galicia has
constantly shown respect for the rights of its shareholders, reliability and accuracy in the information
provided, transparency as to its policies and decisions, and caution with regard to the disclosure of strategic
business issues. Moreover, it should be said that all resolutions from the corporate bodies have been
adopted pursuant to Grupo Financiero Galicia S.A.’s corporate interest.
RESPONSE STRUCTURE – SCHEDULE IV
REPORT ON THE DEGREE OF COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE
Compliance
Total
(1)
Partial
(1)
Noncompli
ance
(1)
Report (2) or Explain (3)
PRINCIPLE I. MAKE THE RELATIONSHIP TRANSPARENT AMONG THE ISSUER, THE GROUP HEADED THEREBY
AND/OR OF WHICH IT IS A MEMBER AND ITS RELATED PARTIES
Recommendation I.1:
Ensure the disclosure by the
Management Body of the
policies applicable to the Issuer’s
relationship with the group
headed thereby and/or of which
it is a member and its related
parties.
X
Please answer if:
The Issuer has an internal rule or
policy for the authorization of
transactions among related
parties pursuant to Section 73 of
Act No. 17811, transactions
carried out with shareholders
and
members
of
the
management bodies, first-line
managers and syndics and/or
members of the Oversight
Committee,
within
the
98 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Pursuant to the provisions of Section 72 of the Capital Markets
Law, every act or contract the company carries out or else
enters into with a related party that involves a significant
amount shall be subject to previous consideration by the Audit
Committee, which shall issue a grounded opinion and shall
determine whether its terms are reasonably appropriate with
regard to ordinary and customary market conditions.
The term to issue such opinion is 5 (five) calendar days. If the
Board of Directors deems it necessary, it can request the
opinion be issued by independent audit firms. In case the
Audit Committee or else the independent audit firm believes
the transaction conditions are not considered reasonably
appropriate with regard to the market, under consideration by
the Board of Directors, the transaction shall be subject to the
prior approval by the Shareholders' Meeting. If the transaction
conditions are considered reasonably appropriate with regard
to ordinary and customary market conditions, the Board of
Directors submits the issue for its approval and discloses the
decision in minutes, indicating each Director’s vote. The report
of the Audit Committee and, if applicable, the reports of
independent audit firms, are made available for the
environment of the economic
group headed thereby and/or of
which it is a member. Specify the
main guidelines of the internal
rule or policy.
Recommendation I.2:
Ensure
the
existence
of
mechanisms that would prevent
conflicts of interests.
Please answer if:
Notwithstanding the regulations
in force, the Issuer has clear
policies and specific procedures
for
the
identification,
management and solving of
conflicts of interest that could
arise among the members of the
Management Body, first-line
managers and syndics and/or
members of the Oversight
Committee
regarding
their
relationship with the Issuer or
individuals related thereto.
Describe the most significant
aspects thereof.
consideration of shareholders at the Company’s registered
office, on the next business day after the corresponding
decision of the Board of Directors has been adopted. This is
informed to shareholders through the Financial Information
Highway (AIF as per its initials in Spanish) of the National
Securities Commission and the Market's Gazette.
X
Since it is a holding company, whose activity involves
managing its equity investments, assets and resources, it has a
limited personnel structure, what eases the identification,
control and solving of possible conflicts of interest.
In this regard, Grupo Financiero Galicia’s Code of Ethics sets
forth that all the Company’s employees are responsible for
avoiding acting on behalf of the Company in situations where
the employee and/or a close relative has any kind of personal
interest, and/or using the Company name improperly, and/or
accepting any kind of favors from any individual or entity with
which Grupo Financiero Galicia at present has or will have in
the future a business relationship, and/or taking personal
advantage from any business opportunity in which Grupo
Financiero Galicia was involved, and/or providing any of Grupo
Financiero Galicia’s competitors with any kind of assistance for
the benefit of its commercial activity. In the event any conflict
of interest arises due to employment reasons or of any other
kind, the Company’s employees shall immediately report the
situation to the person in charge of the Audit Committee.
Company’s employees shall not perform business or
professional activities at the same time as and similar to those
ones carried out for Grupo Financiero Galicia, which in any
way may compete with any of the Company’s businesses.
Those Company’s employees who have any influence on
Grupo Financiero Galicia’s business decisions, or any such
employee’s close relative shall not have a significant financial
interest; for example, as a shareholder or administrator, in any
of Grupo Financiero Galicia’s suppliers, without the prior
written consent by the Company’s Board of Directors. In the
event any employee or such employee’s close relative has any
significant financial interest in any of Grupo Financiero
Galicia’s competitors, such employee shall report the situation
to the person in charge of the Audit Committee. Company’s
executive officers, managers, professionals and technicians
who have undertaken any activity other than the one
performed at Grupo Financiero Galicia shall fully inform about
said activity to the person in charge of the Audit Committee.
Company’s employees shall not carry out civic or political
activities during business hours that may cause any conflict of
interests, since this may be understood as Grupo Financiero
Galicia’s participation in such activities. Pursuant to what is set
forth in its rules and regulations, the Audit Committee shall
intervene in cases of transactions where there are or may be
Grupo Financiero Galicia Annual Report Fiscal Year 2014 99
conflicts of interests regarding members of the Company's
governing bodies or controlling shareholders and, if applicable
pursuant to the regulations in force, shall submit the market
the pertinent information in due time.
Recommendation I.3:
Prevent the misuse of inside
information.
X
Please answer if:
Notwithstanding the regulations
in force, the Issuer has policies
and mechanisms that prevent
the misuse of inside information
by the members of the
Management Body, first-line
managers and syndics and/or
members of the Oversight
Committee,
controlling
shareholders or shareholders
that have a material influence on
the Issuer, professionals that
take part and the rest of the
individuals
mentioned
in
Sections 7 and 33 of Decree No.
677/01.
Describe the most significant
aspects thereof.
100 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Grupo Financiero Galicia has staff in charge of Investor
Relations, and the individuals who perform this function are in
no case authorized to provide information that may place the
person who requests such information in a privileged or
advantageous position in comparison to the other
shareholders or investors.
In this regard, the Code of Ethics provides for that no
accounting information that has not been already disclosed to
the public as regards Grupo Financiero Galicia or its affiliates
shall be released without the prior written approval by Grupo
Financiero Galicia’s Chief Financial and Accounting Officer.
Also, employees are not allowed to inform or use confidential
information obtained while he/she works for Grupo Financiero
Galicia for his/her own benefit or for third parties’ benefit,
such as trading Grupo Financiero Galicia’s securities or
securities of its potential commercial associates. Customers of
Grupo Financiero Galicia’s related companies rely on the fact
that their personal information was exclusively obtained with
commercial purposes. Consequently, employees shall adopt
the necessary measures to ensure confidentiality, integrity and
availability of such data and information. This comprises
identification of such data that have to be protected, adequate
levels of protection for such data, and access to such
protected data only by those people who must use them to
perform their functions. Any employee who has any
information due to his/her position or activity with respect to
a Company’s performance or businesses subject to a public
offering of securities, which has not been disclosed to the
market and that may affect in any way such securities’ price,
or that may affect trading transactions and negotiation of such
securities, shall be strictly reserved about that information.
Grupo Financiero Galicia’s employees or those people hired by
Grupo Financiero Galicia, such as the cases of external audit or
consulting services, shall refrain from using confidential
information for their own benefit or for third parties’ benefit.
Any employee shall be responsible for managing carefully
access passwords, and under no circumstance he/she is
allowed to inform them. Furthermore, employees shall refrain
from informing confidential information to another person
who then acquires or sells Grupo Financiero Galicia’s
securities, including put or call options on such securities
and/or trading securities from any other Company whose
value could be affected by Grupo Financiero Galicia’s
measures that have not been released to the public yet, as
well as put or call options on such securities.
PRINCIPLE II. LAY THE BASIS FOR A SOUND MANAGEMENT AND SUPERVISION OF THE ISSUER
Recommendation II. 1:
Ensure that the Management
Body assumes the management
and supervision of the Issuer and
its strategic orientation.
Please answer if:
II.1.1 The Management Body
approves:
X
With regard to the requirements, we inform the following:
II.1.1.1 The strategic or business
plan, as well as the annual
management goals and budgets;
X
The Board of Directors approves the annual budget and
monitors compliance therewith. Furthermore, in its capacity as
a holding company, Grupo Financiero Galicia receives the
business plans of the controlled companies and prepares a
consolidated business plan taking into consideration the goals
set, the business condition and the budgets submitted.
II.1.1.2
The
policy
on
investments (in financial assets
and
capital
goods),
and
financing;
X
The policy on investments (in financial assets and capital
goods) and financing is approved by the Board of Directors.
II.1.1.3 The policy on corporate
governance (compliance with the
Code on Corporate Governance);
X
Grupo Financiero Galicia monitors the application of the
corporate governance policies provided for by the regulations
in force through the Audit Committee and the Disclosure
Committee. There also exist matrices specially designed for
the verification of certain aspects such as internal controls,
independence of directors and regulatory updating.
II.1.1.4 Policy to select, assess
and
compensate
first-line
managers;
X
The policy to select, assess and compensate first-line
managers is defined and approved by the Board of Directors.
II.1.1.5
Policy
to
assign
responsibilities
to
first-line
managers;
X
The policy to assign responsibilities to first-line managers is
approved and monitored by the Board of Directors, which sets
the guidelines thereof.
II.1.1.6 Monitoring of succession
plans of first-line managers;
X
The monitoring of succession plans of first-line managers is the
responsibility of the Board of Directors. Taking into
consideration the limited personnel structure of the Issuer,
such plans are drawn up on an individual basis.
II.1.1.7 Policy on corporate social
responsibility;
X
The policies on corporate social responsibility are defined and
carried out by each of the operating companies.
II.1.1.8 Policy on comprehensive
risk management and internal
control, and fraud prevention;
X
The policies on risk management control, as well as any other
which purpose is to monitor internal information and control
systems, are defined within the framework of each of the
affiliated operating companies. Nonetheless, and in addition to
that, the Audit Committee and the Disclosure Committee
monitor the actions taken by the main controlled companies.
II.1.1.9 Policy on ongoing training
for the members of the
Management Body and the firstline managers;
X
Training of directors and managers, obviously to an extent that
cannot be compared to what is required in the case of
operating companies, is carried out pursuant to what the
Board of Directors deems necessary.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 101
If the Company has these
policies, describe the most
significant aspects thereof.
II.1.2 If deemed important,
include other policies applied by
the Management Body that have
not been mentioned before, and
specify the main aspects thereof.
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II.1.3 The Issuer has a policy
intended for ensuring the
availability
of
material
information for the Management
Body’s decision-making, and a
direct consultation way for
managerial staff, in a symmetric
manner for all of its members
(executive,
external
and
independent) and in advance,
that allows the appropriate
analysis of its contents. Specify.
X
The material information for the Board of Directors’ decisionmaking is put at the disposal of all of its members for their
consideration, in advance for the detailed analysis thereof,
with changes in the term pursuant to the scope and
complexity of such information. The Managing Director and
the Chief Financial and Accounting Officer are at the disposal
of the directors to answer questions related to the duties
assigned to them, or else to the reports prepared by them.
They even take part in the meetings convened by directors in
order to answer questions that could be raised when dealing
with issues they are responsible for.
II.1.4 Matters submitted for the
Management
Body's
consideration are accompanied
by an analysis of the risks
associated with the decisions
that could be adopted, taking
into consideration the business
risk level considered acceptable
by the Issuer. Specify.
X
The Board of Directors fully complies with the requirement of
having updated policies on risk control and management, in
line with the best practices. The tasks related to risk
information and internal control of each of the controlled
companies are defined and carried out, rigorously, in each of
them. This is particularly strict in the main controlled
company, Banco Galicia, where the requirements to be
complied with are stringent as it is a financial institution
regulated by the Argentine Central Bank. Apart from the
applicable domestic regulations, Grupo Financiero Galicia, in
its capacity as a listed company on the markets of the United
States of America, complies with the certification of its internal
controls pursuant to Section 404 of the Sarbanes Oxley Act
(SOX). Corporate risk management is monitored by the Audit
Committee, which as well gathers and analyzes the
information submitted by the main controlled companies.
X
The Board of Directors approves the annual budget and
monitors compliance therewith. Furthermore, in its capacity as
a holding company, Grupo Financiero Galicia receives the
business plans of the controlled companies and prepares a
consolidated business plan taking into consideration the goals
set, the business condition and the budgets submitted.
The Board of Directors strictly complies with the verification of
the implementation of strategies and policies, and of
compliance with the budget and operations plan, apart from
Recommendation II.2:
Ensure an effective business
management control.
Please answer if:
The Management Body verifies:
II.2.1 Compliance with the
annual budget and business
plan;
II.2.2 The first-line managers’
performance
and
their
compliance with the goals
X
102 Grupo Financiero Galicia Annual Report Fiscal Year 2014
assigned to them (the level of
intended profits versus the level
of profits achieved, financial
rating, accounting reporting
quality, market share, etc.).
Describe the most significant
aspects
of
the
Issuer’s
Management Control policy,
providing details of the methods
used and the frequency of the
monitoring carried out by the
Management Body.
Recommendation II.3:
Report the Management Body’s
performance evaluation process
and the related impact.
Please answer if:
II.3.1 Each member of the
Management Body complies
with the Corporate Bylaws and,
as the case may be, with the
Regulations
governing
the
Management Body’s operation.
Specify the main guidelines set
out in the Regulations. State the
degree of compliance with the
Corporate
Bylaws
and
Regulations.
II.3.2 The Management Body
discloses the results of its
performance considering the
goals set at the beginning of the
period, so that the shareholders
may assess the degree of
compliance with such goals,
which
contemplate
both
financial
and
non-financial
aspects.
Furthermore,
the
Management Body submits a
diagnosis about the degree of
compliance with the policies
mentioned in Recommendation
II, points II.1.1 and II.1.2. Specify
the main aspects covered by the
assessment conducted by the
General Shareholders' Meeting
on the Management Body’s
compliance with the goals set
and the policies mentioned in
Recommendation II, points II.1.1
monitoring, on a monthly basis, the divisions in all the aspects
provided for in the regulations.
X
Grupo Financiero Galicia’s directors strictly comply with the
duties and responsibilities imposed on them by the Corporate
Bylaws. In addition, all resolutions from the Board of Directors
are adopted pursuant to the Issuer’s corporate interest.
X
Pursuant to the legal structure of corporations in Argentina,
the Board of Directors can only explain its performance in
order that other bodies are able to assess it (the Supervisory
Syndics’ Committee or the Oversight Committee as bodies in
charge of supervising the corporate management, or else the
Shareholders’ Meeting, senior body with power to decide on
the issue). This is such in Argentine law that the Corporations
Law expressly prohibits in Section 241 that directors who are
shareholders take part in the voting regarding their
performance and responsibility. For that reason, Grupo
Financiero Galicia’s Board of Directors provides thorough
explanations in its Annual Report and answers all the
questions asked at the Shareholders' Meeting, but it refrains
from expressing an opinion on its performance in any form
whatsoever. The assessment is conducted by shareholders at
the Shareholders’ Meeting, taking as well into consideration
the informed opinion of the Supervisory Syndics’ Committee
(Grupo Financiero Galicia does not have an Oversight
Committee).
Grupo Financiero Galicia Annual Report Fiscal Year 2014 103
and II.1.2, mentioning the date
of the Shareholders’ Meeting
where such assessment was
disclosed.
Recommendation II.4:
That the number of external and
independent
members
represents
a
significant
proportion in the Issuer’s
Management Body.
Please answer if:
II.4.1
The
proportion
of
executive,
external
and
independent members (the
latter defined by the regulations
of this Commission) of the
Management Body corresponds
with
the
Issuer’s
capital
structure. Specify.
II.4.2 During the current year,
through a General Shareholders’
Meeting,
the
shareholders
agreed on a policy aimed at
having a proportion of at least
20% of independent members of
total
members
of
the
Management Body.
Describe the most significant
aspects of such policy and of any
shareholders’ agreement that
allows understanding how the
members of the Management
Body are appointed and during
which term. State whether the
independence of the members
of the Management Body has
been challenged during the year
and whether there have been
abstentions due to conflicts of
interests.
X
X
104 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Grupo Financiero Galicia complies with the appropriate
standards regarding total number of directors, as well as
number of independent directors. Its bylaws provide for the
flexibility necessary to adapt the number of members to the
possible variation of the conditions in which the company
carries out its activities. Generally, there are between three
and nine directors, as determined by the Shareholders’
Meeting in each opportunity. The Shareholders' Meeting can
also appoint alternate directors up to a maximum that shall be
equal to the number of regular directors appointed. In order to
guarantee the continuous performance of its corporate
business, the Board of Directors can be renewed partially, as
long as the number of candidates proposed is enough so that
shareholders may exercise their cumulative voting right. The
drawing-up of the corresponding bylaws has been adopted in
recent years, after careful studies had been carried out for the
good performance of the body.
The policy on the appointment of directors, both independent
and not independent, is the responsibility of the Shareholders’
Meeting. Grupo Financiero Galicia’s Board of Directors does
not take part in such decisions as its members have no
decision-making power at the Shareholders’ Meeting. At
Shareholders’ Meetings, the one who proposes the
appointment of candidates for directors (the same happens
with syndics) tells whether candidates are for one or the other
category. At present, of the eight directors that form the
Board of Directors, six are not independent and three are
independent. With regard to the independence of the
members of the Board of Directors, no challenges have taken
place during the last year.
Recommendation II.5:
Agree on the existence of
standards
and
procedures
inherent to the selection and
proposal of members of the
Management Body and first-line
managers.
Please answer if:
II.5.1 The Issuer has
Appointment Committee:
an
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II.5.1.1 Made up of at least three
members of the Management
Body, mostly independent ones;
II.5.1.2
Chaired
by
an
independent member of the
Management Body;
II.5.1.3 That has members who
prove to have adequate skills
and experience in human
resources
policies-related
matters;
II.5.1.4 That meets at least twice
a year;
II.5.1.5 Whose decisions are not
necessarily binding for the
General Shareholders’ Meeting,
but for consultation purposes as
regards the appointment of the
members of the Management
Body.
II.5.2 If there is an Appointment
Committee, it:
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-----
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Grupo Financiero Galicia understands that, within the
framework of the legal structure in Argentina and market
reality, it is not appropriate to create such a committee with
the duties mentioned in this item. It should be noted that,
unlike other legislations, under Argentine law the
Shareholders’ Meeting has the exclusive power to appoint
directors. Therefore, the recommendations regarding such a
Committee would not be binding and could be even abstract.
With regard to the appointment of first-line managers, the
Board of Directors considers it is not convenient to create an
Appointment Committee due to the reduced size of the
company, as was mentioned before.
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II.5.2.1. Verifies the
review and assessment
regulations and suggests
Management
Body
modifications necessary
approval;
II.5.2.2
Suggests
annual
of its
to the
the
for its
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the
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Grupo Financiero Galicia Annual Report Fiscal Year 2014 105
development of criteria (skills,
experience, professional and
ethical
reputation,
among
others) for the appointment of
new
members
of
the
Management Body and first-line
managers;
II.5.2.3 Identifies candidates for
members of the Management
Body to be proposed by the
Committee to the General
Shareholders’ Meeting;
II.5.2.4 Suggests members of the
Management Body that shall
take part in the different
committees of the Management
Body
pursuant
to
their
background;
II.5.2.5 Recommends that the
Chairman of the Board of
Directors is not also the Issuer’s
Managing Director;
II.5.2.6 Ensures the availability of
resumes of the members of the
Management Body and first-line
managers on the Issuer’s
website, where the duration of
the
members
of
the
Management Body’s office is
specified;
II.5.2.7 Verifies the existence of a
succession
plan
of
the
Management Body and of firstline managers.
II.5.3 If considered important,
include policies implemented by
the
Issuer’s
Appointment
Committee that have not been
mentioned in the preceding
point.
Recommendation II.6: Assess
whether it is advisable for
members of the Management
Body and/or syndics and/or
members of the Oversight
Committee to perform duties at
several Issuers.
Please answer if:
The Issuer sets a limit for the
members of the Management
Body and/or syndics and/or
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X
106 Grupo Financiero Galicia Annual Report Fiscal Year 2014
The Board of Directors is required to analyze whether it is
convenient that directors and/or syndics perform duties at
other institutions, or else it is irrelevant. This issue has been
analyzed by Grupo Financiero Galicia repeatedly. Due to the
fact that directors do not carry out full-time duties, and it is
enriching that they be acquainted with the Board dynamics in
other companies; limiting the number of institutions where
they can be members of the Board of Directors is not deemed
convenient.
members of the Oversight
Committee with regard to the
performance of duties at other
institutions that do not belong to
the economic group headed by
the Issuer and/or of which it is a
member. Specify such limit and
describe whether any violation
to such limit took place during
the year.
Recommendation II.7:
Ensure
the
training
and
development of members of the
Management Body and first-line
managers of the Issuer.
Please answer if:
II.7.1 The Issuer has ongoing
Training Programs related to the
existing needs of the Issuer for
the
members
of
the
Management Body and first-line
managers, which include matters
about
their
roles
and
responsibilities,
the
comprehensive business risk
management, specific business
knowledge and the related
regulations, the dynamics of
corporate
governance
and
corporate social responsibility
matters. In the case of the
members
of
the
Audit
Committee,
international
accounting, auditing and internal
control standards, as well as
specific
capital
market
regulations.
Describe the programs carried
out during the year and the
degree of compliance therewith.
II.7.2 The Issuer, through other
means not mentioned in II.7.1,
encourages the members of the
Management Body and first-line
managers to be constantly
trained so as to supplement their
education level, thus adding
value to the Issuer. State how
this is done.
X
------
As regards this item, the Board of Directors shall establish an
ongoing training program for its members and for the
management officers. Grupo Financiero Galicia, as an
exclusively holding company, does not need to implement and
have such a program as operating companies do.
Notwithstanding the foregoing, the Board of Directors
analyzes the specific needs on the issue.
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------------
The Issuer has no other alternative means to encourage
members of the Board of Directors and first-line managers to
be trained, as it does not deem it necessary.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 107
PRINCIPLE III. GUARANTEE AN EFFECTIVE POLICY TO IDENTIFY, ASSESS, MANAGE AND DISCLOSE THE BUSINESS RISK
Recommendation
III:
The
Management Body shall have a
policy on the comprehensive
business risk management and
monitors
its
appropriate
implementation.
Please answer if:
III.1 The Issuer has policies on
comprehensive business risk
(on compliance with strategic,
operating, financial, accounting
reporting, laws and regulations
goals, among others). Describe
the most significant aspects
thereof.
X
The Board of Directors fully complies with the requirement of
having updated policies on risk control and management, in
line with the best practices.
III.2
There
is
a
Risk
Management Committee inside
the Management Body or
General Division. Report on the
existence of manuals of
procedures and detail the main
risk factors that are specific to
the Issuer or its activity and the
mitigation
actions
implemented. If there is not
such a Committee, the risk
management supervision role
performed by the Audit
Committee shall be described.
Also, specify the degree of
interaction
between
the
Management Body or its
committees and the Issuer’s
General Division in relation to
the comprehensive business
risk management.
X
The tasks related to risk information and internal control of
each of the controlled companies are defined and carried out,
rigorously, in each of them. This is particularly strict in the
main controlled company, Banco de Galicia y Buenos Aires
S.A., where the requirements to be complied with are
stringent as it is a financial institution regulated by the
Argentine Central Bank. Corporate risk management is
monitored by the Audit Committee, which as well gathers and
analyzes the information submitted by the main controlled
companies.
The Audit Committee also supervises the divisions with regard
to all aspects related to risk management.
X
Grupo Financiero Galicia’s Managing Director implements the
risk management policies established by the Board of
Directors, under the supervision of the Audit Committee.
X
Apart from the applicable domestic regulations, Grupo
III.3 There is an independent
function within the Issuer’s
General
Division
that
implements the comprehensive
risk management policies (Risk
Management Officer function
or equivalent one). Specify.
III.4
Comprehensive
risk
108 Grupo Financiero Galicia Annual Report Fiscal Year 2014
management
policies
are
permanently
updated
according to authoritative
recommendations
and
methodologies in the field.
State which.
III.5 The Management Body
reports
the
results
of
monitoring
the
risk
management performed jointly
with the General Division in the
financial statements and the
Annual Report. Specify the
main aspects of the above
disclosures.
Financiero Galicia, in its capacity as a listed company on the
markets of the United States of America, complies with the
certification of its internal controls pursuant to Section 404 of
the Sarbanes Oxley Act (SOX).
X
Grupo Financiero Galicia’s Board of Directors reports, through
a note to its consolidated financial statements, the tasks
carried out to monitor risk management. The main aspects
dealt with are the following: Financial risk, liquidity, currency
risk, interest rate risk, market risk, cross border risk, transfer
risk, credit risk, operational risk and risk regarding money
laundering and other illegal activities.
PRINCIPLE IV. SAFEGUARD THE INTEGRITY OF FINANCIAL INFORMATION WITH INDEPENDENT AUDITS
Recommendation IV:
Ensure the independence and
transparency of the duties the
Audit Committee and the
External Auditor are entrusted
with.
Please answer if:
IV.1 The Management Body,
when appointing the members
of the Audit Committee,
considering that most of them
shall be independent, assesses
whether it is advisable to be
chaired by an independent
member.
X
The Audit Committee is formed by three directors, two of
whom are independent directors. The Committee is chaired by
one of the independent directors.
IV.2 There is an internal audit
function that reports to the
Audit Committee or the
Management
Body’s
Chairperson and that is
responsible for assessing the
internal control system.
State whether the Audit
Committee
or
the
Management Body annually
assesses the performance of
the internal audit area and the
degree of independence of its
professional
work,
understanding as such that the
professionals in charge of such
function are independent from
X
The Audit Committee conducts an annual assessment of the
plans and performance of internal auditors, through the
analysis of their Methodology and Annual Work Plan,
meetings and reports.
In addition, it assesses the internal controls currently in force
at the Company and its main subsidiaries, and also it observes
the requirements set forth in Section 404 of the U.S. SarbanesOxley Act, — and the related administrative/accounting
system — through the analysis of the reports issued by both
internal and external auditors and the Supervisory Syndics’
Committee, the analysis of the Company’s compliance with
the certifications required by Sections 302 and 906 of the U.S.
Sarbanes-Oxley Act, performed by the Company’s Disclosure
Committee, as well as the interviews and clarifications made
by the subsidiaries’ officers.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 109
the other operating areas and
meet
independence
requirements with respect to
the controlling shareholders or
related entities that have a
material influence on the
Issuer.
Also specify whether the
internal
audit
function
performs its work in conformity
with
the
International
Standards for the Professional
Practice of Internal Auditing
issued by the Institute of
Internal Auditors (IIA).
IV.3 The members of the Audit
Committee annually assess the
suitability, independence and
performance of the external
Auditors appointed by the
Shareholders'
Meeting.
Describe the significant aspects
of the procedures used to
perform the assessment.
X
IV.4 The Issuer has a policy on
the turnover of the members
of the Supervisory Committee
and/or the External Auditor,
and, in the case of the latter, if
turnover includes the external
audit form or only natural
persons.
-------
The Audit Committee carries out an annual assessment of the
independence, work plans and performance of external
auditors, through the analysis of the different services
rendered, the reports issued, interviews carried out,
correspondence sent and received and reading of the
documentation requested by the Committee. Additionally, and
in compliance with the provisions set forth in the regulations
in force, the Audit Committee annually files with the National
Securities Commission a report on the Board of Directors’
proposals for the appointment of external auditors and the
compensation for directors, for each fiscal year.
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As regards syndics, the conclusion of the analysis is that such
rotation is neither useful nor convenient, mainly due to the
complexity of businesses to be controlled and the lengthy
period of time it would take a person acting as syndic for the
first time to start to understand such businesses. In
connection with External Auditors, the following are
applicable: Capital Markets Law, the amended regulations of
the National Securities Commission (Text amended in 2013),
the regulations applicable to external auditors’ firms of issuing
companies registered in the United States of America
(Securities Exchange Act of 1934, Section 10-A, Paragraph j. on
“Audit Partner Rotation”; Sarbanes-Oxley Act of 2002, Title II,
Section 203. “Audit Partner Rotation”; and the Code of Federal
Regulations, Title 17, Chapter II, Section 210.2-01, paragraph
(c)(6) of the Securities and Exchange Commission), and the
best practices existing in the area.
PRINCIPLE V. RESPECT THE SHAREHOLDERS’ RIGHTS
Recommendation V.1: Ensure
that the shareholders have
access
to
the
Issuer’s
information.
X
Please answer if:
110 Grupo Financiero Galicia Annual Report Fiscal Year 2014
One of the issues related to Grupo Financiero Galicia S.A.'s
policy on the transparency of information submitted to
shareholders is that, apart from Grupo Financiero Galicia’s
managers and executives, officers from all the companies that
form the holding group, particularly Banco de Galicia y Buenos
Aires, attend the Shareholders’ Meetings, with the purpose of
answering questions that may be raised by shareholders.
V.1.1 The Management Body
fosters periodic informative
meetings
with
the
shareholders, which take place
at the same time with the
presentation of the interim
financial statements. Specify
stating the number and
frequency of meetings held in
the course of the year.
V.1.2
The
Issuer
has
mechanisms for reporting to
investors and a specialized area
to answer inquiries. It also has
a website, which may be
accessed by shareholders and
other investors and which
allows an access channel for
them to establish contact
between them. Specify.
Recommendation V.2:
Encourage
the
participation
of
shareholders.
X
Grupo Financiero Galicia presents its financial statements to
the National Securities Commission, the Buenos Aires Stock
Exchange, the Córdoba Stock Exchange, MAE, Nasdaq and the
U.S. Securities and Exchange Commission. In addition, financial
statements are published on the Company’s website, where
shareholders may subscribe to the “E-Mail Alerts” system,
which allows them to be updated through e-mail regarding all
publications of financial statements, documents and
significant events. Informative meetings are held every time
an investor, or a group of investors, so requires.
Grupo Financiero Galicia has staff in charge of Investor
Relations. This department holds meetings and carries out
conference calls with shareholders and holders of other
securities, in which a director or senior officer participates.
This department is also available to answer any questions from
shareholders and investors. It is important to point out that
the individuals who perform this function are in no case
authorized to provide information that may place the person
who requests such information in a privileged or advantageous
position in comparison to the other shareholders or investors.
In addition, the company has its own website
(www.gfgsa.com) at the disposal of its shareholders. This
website can be freely accessed and is permanently updated.
This website is in line with the regulations in force; and legal,
accounting, statutory and regulatory information required is
available for the public. The website also has a channel for
queries.
X
active
all
Please answer if:
V.2.1 The Management Body
takes measures to encourage
the participation of all the
shareholders at the General
Shareholders’
Meetings.
Specify by differentiating the
measures required by law from
those voluntarily offered by the
Issuer to its shareholders.
V.2.2.
The
General
Shareholders' Meeting has
Regulations to govern its
operations, which ensure that
the information is available
well in advance for decisionmaking. Describe the main
guidelines thereof.
X
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In order to invite shareholders to the General Shareholders'
Meetings, the company makes publications at the Official
Gazette, La Nación newspaper, the Buenos Aires Stock
Exchange, Mercado Abierto Electrónico (MAE), Cordoba Stock
Exchange, the National Securities Commission, Nasdaq and the
U.S. Securities and Exchange Commission.
In this regard, it seems it is not necessary to offer additional
incentives aimed at promoting attendance to Shareholders’
Meetings, because during recent years attendance has been
approximately 75% of the capital stock, percentage considered
a very significant participation for a public company.
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Grupo Financiero Galicia believes the availability of
information for decision-making at Shareholders’ Meetings, on
the part of shareholders, is duly regulated by the Corporations
Law, the Capital Markets Law and the regulations set forth by
the National Securities Commission.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 111
V.2.3
The
mechanisms
implemented by the Issuer are
applicable so that the minority
shareholders propose matters
to be discussed at the General
Shareholders’ Meeting, in
conformity with the provisions
set out in effective regulations.
Specify the results.
X
V.2.4 The Issuer has policies to
encourage the participation of
the
most
significant
shareholders,
such
as
institutional investors. Specify.
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V.2.5 At the Shareholders'
Meetings, where members of
the Management Body are
proposed, the following is
informed prior to voting: (i)
each
candidate’s
position
regarding whether to adopt or
not a Code on Corporate
Governance; and (ii) the
grounds for such position.
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Recommendation V.3:
Ensure the principle of equity
between share and vote.
X
Please answer if:
The Issuer has a policy that
promotes the principle of
equity between share and vote.
State how the composition of
outstanding shares has been
changing during the last three
years.
Recommendation V.4: Establish
mechanisms of protection for
all
shareholders
against
takeovers.
Please answer if:
The Issuer adheres to the
system for the mandatory
acquisition of shares in a public
offering. Otherwise, specify
whether there are other
alternative systems, provided
for by the Bylaws, such as tag
along or others.
Recommendation V.5: Increase
Since its creation, Grupo Financiero Galicia has constantly
shown respect for the rights of shareholders. That is why
General Shareholders’ Meetings are convened and held in
strict compliance with the procedures set forth by the
Corporations Law, the Capital Markets Law, the regulations set
forth by the National Securities Commission, the regulations of
the stock exchanges on which its shares are listed and the
Corporate Bylaws. The procedure for minority shareholders to
exercise their right to include items in the agenda at
Shareholders' Meetings is regulated within such legal and
statutory framework. Furthermore, the company is controlled
by representatives of the National Securities Commission and
the stock exchanges, which verify whether the call for
Shareholders’ Meetings and the holding thereof are carried
out appropriately.
Grupo Financiero Galicia has no policies to encourage the
participation of institutional shareholders, since it believes
they are not necessary. The percentage of attendance and
participation has been very high during the last years.
The Code on Corporate Governance is discussed and approved
by Grupo Financiero Galicia's Board of Directors, for its
inclusion in the Annual Report for each fiscal year.
Consequently, its members agree with its contents and ratify
such adherence expressly, through the approval recorded in
minutes. To date, there have not been cases in which a
director of the company adopted a position different and/or
contrary to the adoption of the Code.
Grupo Financiero Galicia has a capital stock of $
1,300,264,597, divided into two classes of book-entry shares,
Class “A” shares, with a face value of $ 1 each and entitled to 5
votes per share, and Class “B” shares, with a face value of $ 1
each and entitled to 1 vote per share. In agreement with the
regulations set forth by the Law and by the Bylaws, each class
of shares grants the holders thereof the same rights.
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Once Capital Markets Law No. 26831 has become effective,
Grupo Financiero Galicia S.A. has been comprised in the public
offering system for acquisition and the system of residual
equity interests.
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Grupo
112 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Financiero
Galicia
has
a
capital
stock of
$
the percentage of outstanding
shares on capital.
1,300,264,597, divided into two classes of book-entry shares,
Class “A” shares, with a face value of $ 1 each and entitled to 5
votes per share, and Class “B” shares, with a face value of $ 1
each and entitled to 1 vote per share. In agreement with the
regulations set forth by the Law and by the Bylaws, each class
of shares grants the holders thereof the same rights. The
company’s equity structure is made up of 21.63% Class "A"
shares, 45.01% Class "B" shares and 33.36% ADRs (certificates
of deposit of Class "B” shares). Furthermore, something worth
noting is that Class "B" shares are authorized to be listed on
the Buenos Aires Stock Exchange, Córdoba Stock Exchange,
Mercado Abierto Electrónico (MAE) and Nasdaq of the United
States of America (through ADRs).
Please answer if:
The Issuer has a dispersed
share ownership of at least
20% for its ordinary shares.
Otherwise, the Issuer has a
policy for the increase of its
dispersed share ownership in
the market.
State which is the Issuer’s
percentage of dispersed share
ownership as a percentage of
capital stock and how it has
changed during the last three
years.
Recommendation V.6: Ensure
that there is a transparent
policy on dividends.
Please answer if:
V.6.1 The Issuer has a policy on
the distribution of dividends
provided in the Corporate
Bylaws and approved by the
Shareholders' Meeting. Such
policy
establishes
the
conditions to distribute cash
dividends or shares. If there is
such a policy, state the criteria,
frequency and conditions that
shall be met for the payment of
dividends.
V.6.2
The
Issuer
has
documented processes to
prepare the proposal for
allocation of the Issuer’s
Unappropriated
Retained
Earnings that result in legal,
statutory
and
voluntary
reserves, carry forwards to new
fiscal year and/or payment of
dividends.
Specify those processes and
detail the Minutes of the
General Shareholders’ Meeting
whereby the distribution of
dividends (in cash or shares)
was or was not approved, if
this is not provided in the
Corporate Bylaws.
X
X
Grupo Financiero Galicia’s policy for the distribution of
dividends envisages, among other factors, the obligatory
nature of establishing a legal reserve, the company’s financial
condition and its indebtedness, the business requirements of
affiliated companies, the regulations they are subject to and,
mainly, that the profits recorded in the financial statements
are, to a great extent, income from holdings and not realized
and liquid profits, a requirement of Section 68 of the
Corporations Law so that it is possible to distribute them as
dividends. The proposal to distribute dividends arising from
such analysis has to be approved at the Shareholders' Meeting
that discusses the Financial Statements corresponding to each
fiscal year.
In the Annual Report to the Financial Statements, Grupo
Financiero Galicia’s Board of Directors informs shareholders
about the balances corresponding to Capital, Capital
Adjustment and Premium for Trading of Shares in Own
Portfolio, and makes a proposal for the distribution of profits,
where the amount allocated to the distribution of dividends in
cash is indicated.
PRINCIPLE VI. KEEP A DIRECT AND RESPONSIBLE RELATION WITH THE COMMUNITY
Recommendation VI:
Provide the community with
the disclosure of matters
Grupo Financiero Galicia Annual Report Fiscal Year 2014 113
relating to the Issuer and a
channel
of
direct
communication
with
the
Company.
Please answer if:
VI.1 The Issuer has an updated
website of public access, which
does not only furnish material
information of the Company
(Corporate Bylaws, group,
members of the Management
Body, financial statements,
Annual Report, among others),
but it also gathers inquiries of
users in general.
VI.2 The Issuer issues an annual
Corporate Social Responsibility
Report, which is verified by an
independent External Auditor.
If any, state the legal or
geographic scope or coverage
thereof and where it is
available. Specify the standards
or initiatives adopted to carry
out its policy on corporate
social responsibility (Global
Reporting Initiative and/or the
Global
United
Nations
Compact, ISO 26.000, SA8000,
Development Goals for the
Millennium, SGE 21-Foretica,
AA 1000, Equator Principles,
among others).
X
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As informed in Principle V, Recommendation 1.2, the Company
has its own website (www.gfgsa.com) at the disposal of its
shareholders. This website can be freely accessed and is
permanently updated. This website is in line with the
regulations in force; and legal, accounting, statutory and
regulatory information is available for the public. Furthermore,
it has a channel of direct communication with the Company,
where any interested party can raise its concerns, which are
received and dealt with by Grupo Financiero Galicia.
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PRINCIPLE VII. COMPENSATE FAIRLY AND RESPONSIBLY
Recommendation VII:
Establish clear policies on the
compensation of the members
114 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Grupo Financiero Galicia has a reduced structure since it is a
holding company of a group, which main asset is the
controlling equity interest in Banco de Galicia, which currently
represents 100% of Banco Galicia’s capital stock.
Consequently, the Corporate Social Responsibility Report is
prepared by Banco de Galicia, which has already published its
tenth Sustainability Report, through which the Bank’s strategy
and management are disclosed, taking into consideration its
three areas: economic, social and environmental performance.
This report is of great importance for the Bank since it is a tool
that allows the Bank to document annual performance and
communicate progress and aspects to be improved and meet
the expectations of stakeholders with which the Bank
interacts, in a structured and ongoing manner. The report’s
intention is that readers be able to know the company’s
policies, practices and programs thanks to a clear reading, with
quantitative information of interest that leaves readers to
reflect on the importance of social players’ responsible
contribution to sustainable development. Since 2007,
internationally widely renowned guidelines and standards are
applied: The guidelines of the Social Balance of the IBASE for
the systematization of results with an economic value, the
AA1000SES Accountability standard as a basis for the dialogue
with stakeholders, the ISO 26000 standard on Social
Responsibility, the communication on progress (COP)
requirement with the commitment to the ten principles of the
United Nations Global Compact and the G4 Global Reporting
Initiative (GRI) guidelines with the Sector Supplement for
Financial Services. In regard to this last tool, the Sustainability
Report complies with the “In accordance” criteria and the
Comprehensive option.
The Sustainability Report is audited by PwC external auditors
and checked by the GRI organization through the “Materiality
Matters Check”.
Since 2007, the Bank has adhered to the Equator Principles
and since 2014, it forms part of the Executive Secretary of the
Global Compact Network Argentina.
of the Management Body and
first-line managers, with special
focus
on
establishing
conventional
or
statutory
limitations based on the
existence or inexistence of
profits.
Please answer if:
VII.1 The Issuer has
Compensation Committee:
a
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Grupo Financiero Galicia has no Compensation Committee,
and the Board of Directors considers it is not convenient to
create one due to the reduced size of the company. Due to its
nature, such a committee is common in big organizations.
VII.1.1 Made up of at least
three
members
of
the
Management Body, mostly
independent ones;
VII.1.2
Chaired
by
an
independent member of the
Management Body;
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VII.1.3 That has members who
prove to have adequate skills
and experience in human
resources
policies-related
matters;
VII.1.4 That meets at least
twice a year;
VII.1.5 Whose decisions are not
necessarily binding for the
General Shareholders’ Meeting
or
for
the
Oversight
Committee,
but
for
consultation
purposes
as
regards the compensation of
the
members
of
the
Management Body.
VII.2 If there is a Compensation
Committee, it:
VII.2.1 Ensures the existence of
a clear relation between
performance of the key
members of staff and their
fixed
compensation
and
variable compensation, taking
into consideration the risks
undertaken
and
the
management thereof;
VII.2.2 Controls that the
variable portion of the
compensation of the members
of the Management Body and
first-line managers is related to
the Issuer’s mid- and long-term
performance;
Grupo Financiero Galicia Annual Report Fiscal Year 2014 115
VII.2.3 Reviews the competitive
position of the Issuer’s policies
and
practices
regarding
compensation and benefits of
comparable companies, and
suggests changes in case they
are necessary;
VII.2.4
Defines
and
communicates the policy on
retention, promotion, layoff
and
suspension
of
key
members of staff;
VII.2.5 Informs the guidelines
to determine the retirement
plans of members of the
Management Body and firstline managers of the Issuer;
VII.2.6 Regularly informs the
Management Body and the
Shareholders’ Meeting about
the measures taken and
matters analyzed at its
meetings,
VII.2.7 Ensures attendance of
the
Chairman
of
the
Compensation Committee at
the General Shareholders’
Meeting
that
approves
compensation
to
the
Management Body so that it
explains the Issuer’s policy on
compensation to the members
of the Management Body and
first-line managers.
VII.3 If considered important,
include policies implemented
by the Issuer’s Compensation
Committee that have not been
mentioned in the preceding
point.
VII.4
If
there
is
no
Compensation
Committee,
explain how the duties
described in VII. 2 are
performed
within
the
Management Body itself.
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The Audit Committee expresses its opinion on whether
compensation proposals for Directors and top officers are
reasonable, taking into consideration market standards.
PRINCIPLE VIII. ENCOURAGE BUSINESS ETHICS
Recommendation VIII:
Ensure ethical behaviors at the
Issuer.
Please answer if:
116 Grupo Financiero Galicia Annual Report Fiscal Year 2014
VIII.1 The Issuer has a Business
Code of Conduct. State the
main guidelines and whether it
is publicly known. Such Code is
signed by, at least, the
members of the Management
Body and first-line managers.
Indicate whether its application
to suppliers and customers is
encouraged.
X
Grupo Financiero Galicia has a Code of Ethics, which is signed
by the members of the company, who agree with its contents
and commit to carrying out business with honesty,
responsibility and transparency.
Such Code is public and can be read by Shareholders and/or
any interested party on the company's website.
VIII.2
The
Issuer
has
mechanisms to receive any
unlawful or unethical behavior
reporting, either personally or
electronically, ensuring that
the information furnished is
aligned with the highest
confidentiality and integrity
standards, as well as the record
and conservation of the
information. State whether the
service to receive and assess
reporting is rendered by the
Issuer’s personnel or by
external and independent
professionals
for
further
protection of those who report
these events.
X
In Grupo Financiero Galicia’s website (www.gfgsa.com) there
is a “Contact us” link where stakeholders can fill a form
including their personal information and the reasons for their
inquiries or claims. Such form is immediately sent to two
employees experienced in dealing with inquiries and/or claims
from investors, for the analysis and solution thereof. The
process for the reception, analysis and solution of queries or
claims is carried out with the highest confidentiality and
integrity standards that are characteristic of Grupo Financiero
Galicia. Investors can also raise their concerns in person, at the
company’s registered office. In such a case, investors are
received by employees especially appointed for such purpose,
who try to answer questions completely and efficiently. In
case an immediate answer is not possible due to the need to
gather information and/or carry out an investigation, they are
requested to state how they want to be reached in order to
receive information on the result and, in due time, be sent the
answer requested.
X
Since its inception and to date, Grupo Financiero Galicia has
not received complaints or else reporting from investors,
whether in person or through the website. That is why there
are no precedents with regard to the Audit Committee’s level
of involvement in the solution of conflicts.
With regard to the process implemented by the company for
the management and solution of the reporting from investors,
please refer to Item VIII.2.
VIII.3 The Issuer has policies,
processes and systems to
manage
and
solve
the
reporting mentioned in point
VIII.2. Make a description of
the most significant aspects
thereof and indicate the Audit
Committee’s
degree
of
involvement in such solutions,
particularly in that reporting
associated with internal control
matters
for
accounting
reporting and as regards the
behaviors of the members of
the Management Body and
first-line managers.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 117
PRINCIPLE IX: BROADEN THE SCOPE OF THE CODE
Recommendation IX:
Foster
the
inclusion
of
provisions related to good
corporate governance practices
in the Corporate Bylaws.
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Please answer if:
The
Management
Body
assesses
whether
the
provisions of the Code on
Corporate Governance shall be
reflected, either partially or
completely, in the Corporate
Bylaws, including the general
and specific responsibilities of
the Management Body. State
which provisions are actually
included in the Corporate
Bylaws since the creation of
the Code to date.
The need to include certain corporate governance guidelines
in the corporate bylaws can be understood within the
framework of laws that are not as stringent as Argentine laws
with regard to the definition of the Board of Directors’ duties
and responsibilities. In Argentina, the Corporations Law, the
Capital Markets Law, the regulations set by the National
Securities Commission and, additionally, the variety of specific
regulations in other areas of law, provide for a very complete
framework and, therefore, any addition to the bylaws is
unnecessary.
(1) Mark with an X if applicable.
(2) In case of full compliance thereof, please state how the Issuer complies with the principles and recommendations of the Code on
Corporate Governance.
(3) In case of partial compliance or non-compliance, please indicate why and which steps the Issuer's Management Body plans to take
in order to include what it is not adopting in the next fiscal year or future fiscal years, if any.
Eduardo J. Escasany
Chairman of the Board of Directors
Autonomous City of Buenos Aires, March 10, 2015
118 Grupo Financiero Galicia Annual Report Fiscal Year 2014
REPORT OF THE SUPERVISORY SYNDICS’ COMMITTEE
To the Directors of
Grupo Financiero Galicia S.A.
Tte. Gral. Juan D. Perón 430 – Piso 25º
Autonomous City of Buenos Aires
1. In our capacity as members of the Supervisory Syndics’ Committee of Grupo
Financiero Galicia S.A., in accordance with the provisions of Section 294, Subsection 5
of the Corporations Law, we have performed an audit of the Annual Report, the
Inventory and the Balance Sheet of Grupo Financiero Galicia S.A. (the “Company”) as
of December 31, 2014, and the related Income Statement, Statement of Changes in
Shareholders’ Equity and Statement of Cash Flows for the fiscal year then ended, as
well as supplementary Notes 1 to 16 and Schedules A, B, C, D, E, G and H, which have
been submitted by the Company to our consideration. Furthermore, we have examined
the consolidated financial statements of Grupo Financiero Galicia S.A. and its
controlled companies for the fiscal year ended December 31, 2014, with Notes 1 to 39,
which are presented as supplementary information. The preparation and issuance of
those financial statements are the responsibility of the Company. Our responsibility is
to issue a report on said documents.
2. Our work was conducted in accordance with standards applicable to syndics in
Argentina. These standards require our examination to be performed in accordance with
the professional auditing standards applicable in Argentina and include verifying the
consistency of the documents reviewed with the information concerning corporate
decisions, as disclosed in minutes, and the conformity of those decisions with the law
and the bylaws insofar as concerns formal and documental aspects. For purposes of our
professional work, we have reviewed the work performed by the external auditors of the
Company, Price Waterhouse & Co. S.R.L., who submitted their audit report on
February 12, 2015. Said review included verifying the work plans and the nature, scope
and timing of the procedures applied and of the results of the audit performed by the
above-referred professionals. An audit requires auditors to plan and carry out the
auditing work in order to obtain reasonable assurance that the financial statements are
free of false statements or material errors, and express an opinion on the fairness of the
relevant information disclosed in the financial statements. An audit involves examining,
on a selective test basis, the evidence supporting the amounts and the information
disclosed in the financial statements, an assessment of the applied accounting standards
and significant estimates issued by the Company, as well as an evaluation of the general
presentation of the financial statements.
Given that it is not the responsibility of the Supervisory Syndics’ Committee to exercise
any management control, our examination did not extend to the business criteria and
decisions of the different areas of the Company, as these matters are the exclusive
responsibility of the Company’s Board of Directors. We also report that, in compliance
Grupo Financiero Galicia Annual Report Fiscal Year 2014 119
with the legality control that is part of our field of competence, during this fiscal year
we have applied the procedures described in Section 294 of Law No. 19550, which we
deemed necessary according to the circumstances.
In relation with the Annual Report, we report containing the information required by
Section 66 of the Corporations Law,and what as concerns our field of competence, the
numerical data are consistent with the accounting records of the Company and other
relevant documentation. Forecasts and projections about future events contained in that
documentation are the sole responsibility of the Board.
We believe that the work we performed provides a reasonable basis for our opinion.
3. The subsidiary Banco de Galicia y Buenos Aires S.A. has prepared its financial
statements following the valuation and disclosure criteria established by Argentine
Central Bank regulations, which have been taken as the basis for calculating the equity
method and preparing the consolidated financial statements of the Company. As
mentioned in Note 1.16. to the consolidated financial statements, those criteria for
valuing certain assets and liabilities and the regulations on financial reporting issued by
the control body differ from the professional accounting standards applicable in the
Autonomous City of Buenos Aires. Certain differences determined by the Company are
included in the aforementioned Note.
4. In our opinion, the financial statements of Grupo Financiero Galicia S.A. fairly present,
in all material respects, its financial condition as of December 31, 2014, and the results
of its operations, the changes in shareholders’ equity and the cash flows for the fiscal
year then ended, and the consolidated financial condition as of December 31, 2014, the
consolidated results of their operations and the consolidated cash flows for the fiscal
year then ended, in accordance with Argentine Central Bank regulations and, except for
what was stated in item 3 above, with professional accounting standards applicable in
the Autonomous City of Buenos Aires. In compliance with the legality control that is
part of our field of competence, we have no observations to make.
As regards the Annual Report and the report on the code of corporate government
corresponding to the fiscal year ended December 31, 2014, we have no observations to
make insofar as concerns our field of competence, and any assertion on future events is
the exclusive responsibility of the Company’s Board of Directors.
5. Furthermore, we report the following: a) the accompanying financial statements and the
corresponding inventory stem from accounting records kept, in all formal aspects, in
compliance with legal regulations prevailing in Argentina; b) as called for by the
amended text of the regulations of the National Securities Commission (text amended
in 2013) concerning the independence of external auditors as well as the quality of the
auditing policies applied by them and the Company’s accounting policies, the
abovementioned external auditor’s report includes a representation indicating that the
auditing standards in force have been observed, which standards include independence
requirements, and contains no observations relative to the application of said
professional accounting standards, except as mentioned in their report as concerns the
application of the rules issued by the Argentine Central Bank, which prevail over the
professional accounting standards; c) we have applied the procedures on asset
laundering and terrorism financing set forth in the corresponding professional
accounting standards issued by the Professional Council in Economic Sciences of the
120 Grupo Financiero Galicia Annual Report Fiscal Year 2014
Autonomous City of Buenos Aires; and d) we have read the Additional Information to
the Notes to the Financial Statements required by Title IV, Chapter III, Article 12 of the
amended text of the regulations of the National Securities Commission (text amended
in 2013), the Supplementary and Explanatory Statement by the Board of Directors, and
the Informative Review. We have no observations to make insofar as concerns our field
of competence, and any assertion on future events is the exclusive responsibility of the
Company’s Board of Directors.
Autonomous City of Buenos Aires, March 10, 2015.
Enrique M. Garda Olaciregui
Syndic
Supervisory Syndics´Committee
Grupo Financiero Galicia Annual Report Fiscal Year 2014 121
ADDITIONAL INFORMATION
 Evolution of Shares
 Ratings
 Comparative Information
122 Grupo Financiero Galicia Annual Report Fiscal Year 2014
EVOLUTION OF SHARES
Fiscal Year
2014
4th Q
3rd Q
2013
2nd Q
2012
1st Q
4th Q
3rd Q
2nd Q
1st Q
4th Q
Market Price
Class B Shares (in Pesos)
High
Low
Close
ADSs (in Dollars)
High
Low
Close
(2)
(1)
Buenos Aires Stock Exchange (BASE)
21.40
21.30
16.35
12.35
10.95
8.86
5.48
5.07
4.61
14.90
13.75
12.07
8.30
8.17
4.00
3.86
4.09
3.18
18.50
21.00
14.75
12.10
9.33
8.50
4.00
4.58
4.50
16.66
18.50
15.33
12.65
13.05
9.93
5.96
7.21
6.96
10.33
12.18
12.00
7.30
8.86
4.96
4.98
5.11
4.54
15.89
14.21
14.65
12.31
10.45
9.51
5.13
5.46
6.62
114,134
Nasdaq
Trading Volume (in Thousands)
BASE (1)
NASDAQ
57,155
89,653
83,415
65,856
107,176
129,541
79,288
80,662
263,745
467,673
397,724
254,305
399,332
248,915
45,623
71,848
85,003
320,900
557,326
481,139
320,161
506,508
378,456
124,911
152,510
199,137
Average Shares outstanding (in Thousands)
Primary
1,300,265 1,300,265 1,300,265 1,300,265
1,300,265
1,241,407
1,241,407
1,241,407
1,241,407
(2) (3)
Total
Earnings per Share (in Pesos)
Primary
Earnings per ADS (in Pesos)
Primary
0.679
0.716
0.533
0.639
0.482
0.432
0.291
0.241
0.297
6.79
7.16
5.33
6.39
4.82
4.32
2.91
2.41
2.97
(1) Source: Buenos Aires Stock Exchange. Prices: Floor trades at the close of each trading day, 72-hour term.
Volume data correspond to floor trades and trades carried through the “Computer Assisted Integrated Trading System” (Sistema Integrado de
Negociación Asistida por Computadora).
(2) Source: Nasdaq Capital Market. Prices at the close of each trading day.
(3) Expressed in equivalent shares (1 ADS = 10 shares).
Grupo Financiero Galicia Annual Report Fiscal Year 2014 123
LOCAL RATINGS
Grupo Financiero Galicia S.A.
Shares Ratings
Standard & Poor’s
Short-/Medium-Term Debt
1
(1)
Evaluadora Latinoamericana
AA-
Banco de Galicia y Buenos Aires S.A.
Institutional Rating
Standard & Poor’s
Medium-/Long-Term Debt
ra B+
(1) (2)
Standard & Poor’s
ra B+
Moody’s
Baa1.ar
Evaluadora Latinoamericana
Subordinated Debt
AA-
(1) (3)
Standard & Poor’s
ra B-
Moody’s
Ba2.ar
Evaluadora Latinoamericana
A+
Deposits
Standard & Poor’s – Long Term
Standard & Poor’s – Short Term
ra B+
ra B
Moody’s – National Currency
Baa1.ar
Moody’s – Foreign Currency
Ba2.ar
Fiduciary
Moody’s
TQ1(-).ar
Tarjeta Naranja S.A.
Medium-/Long-Term Debt
(1) (4)
Fitch Argentina
AA- (arg)
(1) (5)
Short-Term Debt
Fitch Argentina
A1 (arg)
Tarjetas Cuyanas S.A.
Long-Term Debt
(1) (6)
Fitch Argentina
AA- (arg)
(1) (7)
Short-Term Debt
Fitch Argentina
A1 (arg)
Compañía Financiera Argentina S.A.
Long-Term Debt
(1) (8)
Fitch Argentina
Short-Term Debt
AA- (arg)
(1) (9)
Fitch Argentina
A1+ (arg)
Deposits
Moody’s – National Currency
Baa2.ar
Moody’s – Foreign Currency
Ba2.ar
124 Grupo Financiero Galicia Annual Report Fiscal Year 2014
INTERNATIONAL RATINGS
Banco de Galicia y Buenos Aires S.A.
Medium-/Long-Term Debt
Standard & Poor’s
Moody’s
(1)
(1) (2)
CCC-
(1) (2)
Caa1
Tarjeta Naranja S.A.
Medium-/Long-Term Debt
(1) (10)
Fitch Argentina
B-
(1)
See “Management´s Discussion and Analysis —Funding and Liabilities”, “Debt Securities” table.
(2)
Class I Negotiable Obligations with maturity on 2018.
(3)
Negotiable Obligations with maturity on 2019.
(4)
Class XIII, Class XXII Series II, Class XXIII Series II, Class XXIV Series I y II, Class XXV Series II, Class XXVI Series II y Class
XXVII Series II Negotiable Obligations.
(5)
Class XXV Series I, Class XXVI Series I y Class XXVII Series I Negotiable Obligations.
(6)
Class XII Series II, Class XIII Series I, Class XIV Series II, Class XVI y Class XVIII Negotiable Obligations.
(7)
Class XIV Series I, Class XV y Class XVII Negotiable Obligations.
(8)
Class X Series II, Class XI Series II, Class XII Series II y Class XIII Series II Negotiable Obligations.
(9)
Class XI Series I, Class XII Series I y Class XIII Series I Negotiable Obligations.
(10) Class XIII Negotiable Obligations.
Grupo Financiero Galicia Annual Report Fiscal Year 2014 125
CORPORATE INFORMATION
OFFICES
Grupo Financiero Galicia S.A.
Tte. Gral. Juan D. Perón 430 25° Piso (C1038AAJ), Buenos Aires, Argentina
Telefax: (54 11) 4343-7528
Contact: Investor Relations
Telefax: (54 11) 4343-7528
[email protected]
www.gfgsa.com
LISTING
Grupo Financiero Galicia’s Class “B” ordinary shares are listed on the Buenos Aires Stock
Exchange, the Córdoba Stock Exchange and, under the form of ADRs (American Depositary
Receipts), on the Nasdaq Capital Market of the United States of America, under the ticker
symbol GGAL.
SHAREHOLDERS´ MEETING
The Ordinary and Extraordinary Shareholders’ Meeting to be held on April 29th, 2015, at
10:00 AM (first call), at Tte. Gral. Juan D. Perón 430, Basement-Auditorium, Buenos Aires,
Argentina.
REGISTRAR AND TRANSFER AGENT
Caja de Valores S.A.
25 de Mayo 362
(C1002ABH) Buenos Aires, Argentina
Telephone: (54 11) 4317-8900
DEPOSITARY BANK OF ADRS
The Bank of New York Company, Inc.
Shareholders Relations
P.O. Box 11258, Church Street Station
New York, NY 10286-1258
Telephone from the USA: 1-888-BNY-ADRs - (1-888-269-2377)
Telephone from other countries: 1-610-382-7836
e-mail: [email protected]
This constitutes an unofficial English translation of the original Spanish
document. The Spanish document shall govern all respects, including
interpretation matters. For further information please refers to our web page
www.gfgsa.com.
126 Grupo Financiero Galicia Annual Report Fiscal Year 2014