GRUPO FINANCIERO GALICIA S.A. ANNUAL REPORT 19 TH FISCAL YEAR JANUARY 2017 / DECEMBER 2017

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1 GRUPO FINANCIERO GALICIA S.A. ANNUAL REPORT 19 TH FISCAL YEAR JANUARY 2017 / DECEMBER 2017

2 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 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 503 points of contact with customers, including traditional branches and e-banking facilities, together with other 257 service centers that correspond to regional credit-card companies. Banco Galicia customers also have access to telephone-banking services and to bancogalicia.com and Galicia Móvil. 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

3 FINANCIAL HIGHLIGHTS December 31, In millions of Pesos, except as stated otherwise For the Fiscal Year Net Income 8,329 6,018 4,338 Average Shares Outstanding (in millions) 1,333 1,300 1,300 Earnings per Share (1) At Year-end Assets 341, , ,748 Loans, Net 197, ,452 98,345 Deposits 203, , ,039 Shareholders Equity 39,300 20,353 14,485 Shares Outstanding (in millions) 1,427 1,300 1,300 Book Value per Share Selected Ratios (%) Return on Average Shareholders Equity (1) Return on Average Assets (2) Financial Margin (3) Shareholders Equity to Total Assets Market Share (4) (%) Deposits from the Private Sector Loans to the Private Sector Exchange Rate Pesos per U.S. Dollar (1) Calculated based on net income. (2) Net Income plus Non-controlling Interests, divided by Average Total Assets. (3) Financial income less financial expenses, divided by average interest-earning assets. (4) 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 2017

4 LETTER FROM THE CHAIRMAN To our Shareholders, I am pleased to address you in order to submit the Annual Report related to the 19th fiscal year of Grupo Financiero Galicia S.A. as of December 31, In 2017, international markets were marked by the uncertainty over the actions to be taken by the new president of the United States during his first term in office. There were positive expectations as to the tax reform which was enacted only towards the end of the year but concerns about the potential increase in protectionism and fiscal deficit. Investors were also alert for the decisions of the major central banks worldwide, which initiated a monetary normalization process by increasing their benchmark rates. Global growth in 2017 was 3.7% compared to 3.2% in 2016, with good growth expectations for 2018, though at a slightly lower level, due to potential geopolitical conflicts, or the emergence of new protectionist and nationalist trends that might affect foreign trade. At the domestic level, the Argentine economy began the recovery path, with activity growth at around 2.9% in 2017, according to private consulting firms. The market consensus estimates economic growth will stand at 3.2% in 2018, with the ensuing positive effect on employment. The net income for the fiscal year ended December 31, 2017 amounted to Ps. 8,329 million, 38.4% higher than Ps. 6,018 million recorded in fiscal year ended December 31, About 83% of this income was attributable to Banco Galicia and its subsidiary Tarjetas Regionales, supplemented by the interest in other subsidiaries of the Group, basically in the insurance business through Sudamericana Holding and in the FIMA mutual funds through Galicia Administradora de Fondos. During the year, we recorded financial income in the amount of Ps. 689 million, derived from the yield of the proceeds from the issuance of shares by Grupo Galicia in late September, until the capitalization of the Bank, which will be discussed below. Net income for the fiscal year represented a return on average assets of 3.52% and a return on average shareholders equity of 30.91%. As of December 31, 2017, the Bank s total credit exposure to the private sector amounted to Ps. 224,249 million, an annual increase of 42.5%. In turn, deposits grew to Ps. 203,578 million, with a 33.9% increase resulting from a rise in deposits in Pesos (31.9%) and foreign currency (37.9%). Banco Galicia's estimated market share in total loans to the private sector was 10.1%, a similar level to that achieved the previous year, while the Bank s estimated market share in deposits from the private sector was 10.3%, as compared to 10.0% the previous year. With an investment of over US$ 130 million, in late March Banco Galicia opened up Galicia Square, a building located in the Chacarita neighborhood, City of Buenos Aires, which was fully built under sustainability standards, featuring green areas in 30% of the building structure. Also during the year, the Bank increased its distribution network by 27 branches in the City of Buenos Aires, the Province of Buenos Aires and other 6 provinces to be closer to our existing and future customers. As concerns the financial system's regulatory framework, the Argentine Central Bank continued fostering competition among banks and eliminating distorting regulations. In November 2017, it decided to gradually eliminate the so-called Financing Line for Production and Financial Inclusion, created by the former administration. Accordingly, in December 2018 the obligation of maintaining balances related to this line will no longer be enforceable. Since 2018, banks will be required to apply the International Financial Reporting Standards (IFRS). Our interim financial statements for fiscal year 2017 include a note disclosing the positive adjustments to Banco Galicia s and Grupo Financiero Galicia s Shareholders Equity as a result of this change. On the other hand, through a private agreement entered into by chambers of commerce, banks and buyers of credit cards, effective since April 1, 2017, there was a voluntary and progressive reduction Grupo Financiero Galicia Annual Report Fiscal Year

5 in credit card and debit card fees, subsequently endorsed by the Argentine Central Bank. Furthermore, according to an agreement with the Argentine Commission of Competence Defense (Comisión Nacional de Defensa de la Competencia), the controlling banks of Prisma Medios de Pagos S.A. the Visa-credit-card processing company will be required to sell that company in As concerns Galicia Seguros, we continued consolidating the Group's comprehensive insurance business, focused on the development of new commercial capabilities which allowed us to change the company's turnover mix in the face of the removal of the credit card life insurance though maintaining leading positions in home and theft lines of insurance. We also completed the project to upgrade the company's IT platform in order to face the growth and challenges posed by the digital transformation. Galicia Administradora de Fondos recorded net income for Ps. 450 million, 128% higher than the Ps. 197 million recorded in the previous year, derived from fees associated to FIMA funds. Total assets under management increased by 82% when compared to the close of the previous fiscal year, reaching, as of December 31, 2017, a total volume under management of Ps. 67,973 million, which accounts for a 12.4% market share (an annual increase of 80 basis points compared to 2016). At the customer level, consumer accounts experienced a substantial increase and we expect to see sustained growth in assets under management. Another highlight for the year was the issuance of shares in an aggregate amount of US$ million million Class B shares with a face value of US$ 5 each completed early in October, with large demand from institutional investors. In turn, on December 27, 2017, Grupo Financiero Galicia made a capital contribution to Banco Galicia in the amount of Ps. 10,000 million, which will provide the Bank increased capacity to meet the growing demand for loans. In order to streamline our activities and focus on our core businesses, during the year Banco Galicia sold its entire equity interests in Tarjetas del Mar (60%) and Aguas Cordobesas (10.8%). In addition, as a subsequent event to year-end, on February 2, 2018, we completed the sale of Compañía Financiera Argentina and Cobranzas y Servicios to the Galeno Group, for a total consideration of Ps. 1,064 million. Furthermore, on October 23, 2017, Grupo Financiero Galicia settled upon maturity its last outstanding notes, for an aggregate amount of Ps million, which marked the conclusion of the debt arrangement initiated during fiscal year In 2017, there were also significant highlights in connection with our credit-card business through Tarjetas Regionales: (i) Grupo Financiero Galicia acquired 6% of the Non-controlling interest in Tarjetas Regionales in an aggregate amount of US$ 49 million, which transfer was completed in January 2018; (ii) effective since October 1, 2017, Tarjeta Naranja absorbed Tarjetas Cuyanas' assets and liabilities, and (iii) the Bank consummated a reorganization process pursuant to which a portion of its assets, specifically, its 77% equity interest in Tarjetas Regionales, was spin-off for subsequent inclusion in the Group's balance sheet effective since January 1, I am convinced that this corporate reorganization, coupled with our investment in digital technologies and branches, developing and enhancing products and services to offer a distinctive experience to our customers, will position us better in the face of the financial system s great potential for growth, a crucial aspect for the expansion of the Argentine economy. We are proud to have attained outstanding outcomes at the Group level in the Great Place to Work 2017 survey: Banco Galicia and Tarjeta Naranja were positioned 1st and 2nd, respectively, in the ranking of the best companies to work at with over 1,000 employees, while Galicia Seguros ranked 3rd among the best companies to work at with 251-1,000 employees. We seek to continue on the growth path and to become Argentina's largest business group in the financial sector. To such end, customers should remain at the core of all our decisions, by offering them a distinctive experience. In this way, we will continue creating value for our shareholders, always within the framework of sustainable management, oriented to the public good and environmentally friendly. 4 Grupo Financiero Galicia Annual Report Fiscal Year 2017

6 Grupo Financiero Galicia s Board of Directors will propose the Shareholders Meeting to pay dividends in cash for Ps. 1,200 million. To conclude, on behalf of Grupo Financiero Galicia s Board of Directors, I would like to thank the shareholders for their continued support, the employees of the Group s companies for their effort and commitment, the suppliers for their dedication, and customers for their loyalty. Eduardo J. Escasany Chairman of the Board of Directors Autonomous City of Buenos Aires, March 8, 2018 Grupo Financiero Galicia Annual Report Fiscal Year

7 GRUPO FINANCIERO GALICIA S.A. BOARD OF DIRECTORS Eduardo J. Escasany Chairman Pablo Gutiérrez Vice-Chairman Abel Ayerza Federico Braun Antonio R. Garcés Daniel A. Llambías C. Enrique Martin Pedro A. Richards Silvestre Vila Moret Directors Sergio Grinenco Alejandro Rojas Lagarde Augusto R. Zapiola Macnab Alternate Directors SUPERVISORY SYNDICS COMMITTEE Norberto D. Corizzo Enrique M. Garda Olaciregui José Luis Gentile Syndics Miguel N. Armando Fernando Noetinger Horacio Tedin Alternate Syndics EXECUTIVE OFFICERS Pedro A. Richards Chief Executive Officer José L. Ronsini Chief Financial and Accounting Officer 6 Grupo Financiero Galicia Annual Report Fiscal Year 2017

8 BANCO DE GALICIA Y BUENOS AIRES S.A. BOARD OF DIRECTORS Sergio Grinenco Chairman Raúl H. Seoane Vice-Chairman Guillermo J. Pando Secretary Director María Elena Casasnovas Juan Carlos L Afflitto Pablo M. Garat Ignacio A. González Directors Enrique García Pinto C. Enrique Martin Augusto R. Zapiola Macnab Alternate Directors SUPERVISORY SYNDICS COMMITTEE Norberto D. Corizzo Enrique M. Garda Olaciregui José Luis Gentile Syndics Miguel N. Armando Fernando Noetinger Horacio Tedin Alternate Syndics Grupo Financiero Galicia Annual Report Fiscal Year

9 EXECUTIVE OFFICERS Chief Executive Officer Retail Banking Division Manager Wholesale Banking Division Manager Financial Banking Division Manager Comprehensive Corporate Services Division Manager Organizational Development and Human Resources Division Manager Planning Division Manager Risk Manager Customer Experience Division Manager Audit Division Manager Compliance and Money Laundering Prevention Manager Fabián Kon Germán Ghisoni Marcelo Iraola Pablo León Castro María Marcela Fernie Rafael Bergés Bruno Folino Diego Rivas Flavio Dogliolo Claudio Scarso Teresa Piraino SUDAMERICANA HOLDING S.A. Sebastián Gutierrez Chief Executive Officer GALICIA ADMINISTRADORA DE FONDOS S.A. Ezequiel Rosales Chairman TARJETAS REGIONALES S.A. Miguel Peña Chief Executive Officer COMPAÑÍA FINANCIERA ARGENTINA S.A. Pablo Caputto 1 Chief Executive Officer GALICIA WARRANTS S.A. Santiago Pasman Chief Executive Officer 1 Chief Executive Officer until February 2, 2018, date on which the sale of Compañía Financiera Argentina S.A. was completed. 8 Grupo Financiero Galicia Annual Report Fiscal Year 2017

10 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 19 th fiscal year of Grupo Financiero Galicia S.A. as of December 31, Grupo Financiero Galicia Annual Report Fiscal Year

11 The Argentine Economy, the Financial System and the Insurance Industry The Argentine Economy In 2017, the international markets were marked by two factors that guided the course of expectations. First, part of the focus was placed on Donald Trump's first year of administration, the new president of the United States, and particular attention was paid to his tax reform proposal. Second, the actions of the main central banks in the world: the Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England. In turn, the U.S. Dollar depreciated against the currencies of its main business partners, noting a substantial decline in the index dollar of 10.3%, due to the important appreciation of the Euro (+14%) in A sustained improvement in several indicators of Eurozone countries translated into their currency strength. As regards the world activity level, and according to the "World Economic Outlook" prepared by the IMF, we noted how the recovery and growth process consolidates, with a rise in the global output from 3.2 in 2016 to 3.7% in The contribution of advanced economies was 2.3%: 2.4% in the Eurozone, 2.3% in the USA and 1.8% in Japan. Meanwhile, emerging markets stood at 4.7%, with the giants China (+6.8%) and India (+6.7%) on the top. In addition, the recovery of the region is noteworthy, which changed from a 0.7% decline in 2016 to a 1.3% increase in 2017 and good future outlook ( %; %). In turn, and strongly leveraged by the expectations raised, the equity had a good performance in In the United States, the main stock exchange indicators showed important increases. The Nasdaq climbed by 27%, as well as Dow Jones +24% and S&P %, whereas in Japan and Europe rises were 19% and 7%, respectively. In turn, emerging markets also showed good results: rises in U.S. Dollars stood at 47% for Argentina, 46% for Chile, 34% in the case of Peru, 25% for Brazil, 14% for Colombia and 12% in Mexico. In this environment, and in the face of such U.S. Dollar depreciation globally, commodities marked an incipient 0.5% increase, with sharp drops until June and a later recovery in the second half of the year. Among the several sectors, movements were heterogeneous, with rises led by industrial metals (aluminum +35%, copper +32%, nickel +26%), followed by gold (+12.5%). In turn, oil achieved rises near 12% (the WTI crude ended the year at US$ 60.4/barrel) showing the effects of the agreement to reduce production reached by Russia and OPEC members. Finally, the main decreases were determined by corn (-9.7%) and soy (-5.1%), whereas wheat managed to escape the trend, with a 5.5% increase. At the local level, Argentina began the path of consolidation of the economic growth that, after a decline in the activity noted in 2016 (-2.2%), showed a better performance during 2017, with a positive impact on the outlook for Private estimates reflect a growth of the economic activity of about 2.9% in 2017, whereas GDP data prepared by the National Institute of Statistics and Census (INDEC) would show a similar result, with a 2.8% growth (data until Q3 accumulate a 1.4% progress). In terms of the labor market, the improvement noted in the economic activity had an impact on the employment dynamics. According to the last data available, the unemployment rate decreased from 8.5% of the economically active population for the third quarter of 2016 to 8.3% for the third quarter of In the monetary sphere, the main monetary aggregates decelerated their pace, standing below the nominal growth of the economy. By fiscal year-end, the monetary base recorded a 21.8% annual expansion, 9.9 percentage points (p.p.) below the growth recorded in Particularly, this monetary aggregate increased by Ps. 179,450 million, which are mainly due to currencies purchased by the Argentine Central Bank (the Central Bank or the B.C.R.A. ) from the National Treasury (Ps. 271,708 million), and the increase in financing to the National Treasury (Ps. 150,000 million). This expansion was partially offset by the placement of Argentine Central Bank Bills and Notes ( Lebacs and Nobacs, respectively) for Ps. 225,364 million and a Ps. 25,043 million increase in repo transactions. This trend was not 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 37.0% this year, as compared to the 32.2% growth in On the other hand, total M2 (including deposits from the public sector) ended 2017 with a 25.7% growth, after increasing by 30.3% annually in the previous year. 10 Grupo Financiero Galicia Annual Report Fiscal Year 2017

12 In relation to the changes in domestic interest rates, they evolved along with change expectations in prices and the foreign exchange market. During the first half of the year, with high inflation levels that the Argentine Central Bank sought to contain under the framework of a contractive monetary policy, the policy rates allowed for market rates at relatively high levels. This resulted in a downward pressure on the exchange rate, which remained relatively steady during the first six months of the year (depreciating by +4.7%), whereas in the last part of the year depreciation accelerated (+12.1%). Particularly, the Badlar rate ended the year at 23.3%, compared to 19.9% in December The reference exchange rate established by the Argentine Central Bank increased from Ps to Ps per U.S. Dollar between December 30, 2016 and December 29, 2017 (equivalent to a 18.4% depreciation); while the average exchange rate increased from Ps in 2016 to Ps per U.S. Dollar in According to private estimates, inflation in 2017 was about 26.6% inter-annually, considerably below the 2016 levels (37.7% inter-annually). Particularly, in 2017, the national CPI published by INDEC showed a 24.8% growth inter-annually, whereas the CPI of the City of Buenos Aires (IPCBA, as per its initials in Spanish) decreased to 26.1% inter-annually from 41.0% inter-annually shown last year. In the fiscal area, tax revenues, including social security, recorded a growth of 22.6% inter-annually compared to a 36.3% growth inter-annually in In turn, primary expenditures increased by 21.8%, at least 16.4 p.p. less than in Thus, the Argentine public sector achieved a primary deficit of Ps. 404,142 million, equivalent to 3.9% of GDP. This figure entailed an improvement, as compared to the primary deficit in the same period of 2016 (4.5% of GDP), amounting to Ps. 359,382 million. After interest payments for Ps. 224,907 million, the financial deficit amounted to Ps. 629,050 million, equivalent to 6.1% of GDP. Regarding the external sector, during 2017, the foreign exchange balance current account published by the Argentine Central Bank (cash basis) reached a deficit amounting to US$ 17,052 million, higher than the deficit registered in 2016, which amounted to US$ 15,574 million. The current account deficit, measured in terms of GDP, stood at about 3% in 2017, remaining relatively steady as compared to that shown in The deterioration noted in nominal terms basically resulted from lower net income from assets (US$ 4,028 in 2017, as compared to US$ 8,093 million in 2016) and higher net expenses from services (US$ 10,847 in 2017, as compared to US$ 9,004 million in 2016). Particularly, revenues for collections of exports of goods amounted to US$ 58,600 million in 2017, which showed a 0.9% increase, as compared to the level noted in the prior year, although still below those recorded prior to This poor performance was related to the decline in the oil seeds, oils and cereals sector, which showed collections for exports amounting to US$ 26,635 million, 3% lower than that recorded in the previous year. Additionally, we noted lower income from foreign advances and prefinancing, which totaled US$ 8,540, showing an inter-annual drop of 36%. On the other hand, payments of imports of goods of the foreign exchange balance amounted to US$ 54,572 million, there being an inter-annual increase of 9.2% (about US$ 4,584 million). In sectorial terms, the increase in the payments of imports was noted in the main activity sectors, with higher impact on the manufacturing industry and the automotive sector. Within this environment, the non-financial private sector s capital account (as per estimates made by the single free exchange market or MULyC as per its initials in Spanish) posted a net foreign currency outflow of US$ 4,617 million, a figure compared to a net foreign currency inflow of US$ 3,160 million in As of December 29, 2017, the Argentine Central Bank s international reserves amounted to US$ 55,055 million, US$ 15,747 million higher than those at the end of Grupo Financiero Galicia Annual Report Fiscal Year

13 The Financial System Total loans to the private sector in the financial system amounted to Ps. 1,602,851 million in December 2017, which represents a 51.5% increase, as compared to the same month of Mortgage loans were those that increased the most, with a 110.9% increase in the last 12 months, amounting to Ps. 133,826 million at year-end, whereas collateral loans increased by 69.7% in the same period, reaching Ps. 93,670 million. Commercial loans, made up of overdrafts in checking account and notes (promissory notes and purchased/discounted notes), grew 53.2%, totaling Ps. 639,148 million as of December 31, In turn, consumer credit lines, made up of loans through credit cards and personal loans, amounted to Ps. 653,630 million, a 40.5% increase. Total deposits in the financial system amounted to Ps. 2,424,746 million at the end of December 2017, which represents a 27.7% increase, as compared to December 31, Deposits from the non-financial private sector increased by 29.0% annually, amounting to Ps. 1,947,269 million, whereas deposits from the public sector reached Ps. 477,477 million, representing a 22.7% growth. Within deposits from the private sector, transactional deposits grew 32.1%, reaching Ps. 1,164,522 million, while time deposits increased by 23.2%, reaching Ps. 720,603 million. The average interest rate paid by private banks in December for time deposits in Pesos of 30 up to 44 days was 21.5%, with an increase of 270 basis points (b.p.) inter-annually, while in the case of lending rates, those applicable to checking account overdrafts were 34.2% (+316 b.p.) and to promissory notes, 25.3% (+177 b.p.). Including data as of November 2017, financial institutions decreased their liquidity levels (in relation to total deposits) when compared to the same month last year, a ratio that stood at 26.2% (-10.4 b.p.). Considering Lebacs, liquidity decreased to 41.4%, as compared to 50.2% in November In financial standing terms, the Argentine financial system s net worth increased by Ps. 98,938 million during the year, reaching Ps. 390,423 million, which implies a 33.9% growth. As of November 2017, the system s profitability was equivalent to 3.0% of total assets (-0.7 p.p.), while return on shareholders equity was 25.7% (-4.0 p.p.). As of November 2017, income from interest and income from services amounted to 5.0% and 3.6% of total assets, respectively. In turn, administrative expenses decreased to 7.3% of total assets (-0.2 p.p.), while provisions for loan losses amounted to 1.0% of total assets (more than the 0.8% registered in 2016). The non-accrual loan portfolio to the non-financial private sector reached 1.87% in November 2017, thereby leading to a slight increase of 1.81% last year. The coverage of the private-sector nonaccrual loan portfolio with allowances reached 136%, 4 p.p. below As to the financial system's structure, as of August 31, 2017, the financial system was composed of 78 financial institutions: 63 banks, 50 of these were private banks -33 domestically-owned and 17 foreign-owned- and 13 government-owned banks, in addition to 15 non-banking financial institutions. The concentration of the financial system, measured by the market share of private sector deposits of the ten leading banks, reached 78.0% as of August 31, 2017, 103 b.p. higher than the percentage recorded in the same month of Based on information as of June 2017, the last information available, the Argentine financial system employed a total of 109,991 people, representing a 0.3% increase from June 30, Grupo Financiero Galicia Annual Report Fiscal Year 2017

14 The Insurance Industry During 2017, the insurance market s production amounted to Ps. 272,217 million, 29% higher than the production level in Out of total production, 82% relates to P&C insurance, among which insurance for automotives (43%) and workers compensation (35%) stand out, 16% to life and personal insurance, where the most important one is group life insurance (65%), followed by individual life (15%) and personal accidents (14%), and the remaining 2% relates to retirement insurance. Outlook In early 2018, Argentina managed to cover one third of its financing needs for the year, after returning to the international markets in As to the foreign exchange market, in an environment of increasing demand for foreign currency, flows from financial issues represent the main offer of foreign currency, which makes the exchange rate moderately volatile. The foreign currency would remain relatively steady until the second quarter of the year, when most of agricultural exports are usually settled. About the monetary policy, after a difficult 2017 especially in terms of interest rates the contractionary trend may continue until the market s inflationary expectations are brought into line with the Argentine Central Bank s objectives (adjusted). In the fiscal area, after a year when the goal set by the Treasury was overfulfilled, we expect to continue focusing on gradually reestablishing the balance of public accounts in the mid-term. Improvements on the employment, together with a moderate increase in real salaries and better outlook for exports, would focus on the continuity of the activity growth for In turn, the financial system will continue increasing the intermediation with the private sector, where mortgage loans will lead growth, also driven by different changes in effective regulations the government is carrying out, and that will lead to a more deregulated financial system, creating the bases for increased competitiveness and efficiency, in line with Latin American banks. The low leveraging level regionally compared at companies and families, as well as the lower levels of use of banking services evidence the Argentine financial institutions potential. In financial standing terms, net results will help maintain capitalization levels according to Basel Committee regulations. The current macroeconomic policy has favored the valuation of assets and banks have begun expanding their capital by subscribing shares in the market. The conditions for this trend to continue in 2018 are given. Income from services will still be significant within operating income, whereas the banks will continue working on administrative expenses in order to improve the operating efficiency. Portfolio quality indicators have been a strength over the last few years despite the modest economic growth and both the non-accrual loan portfolio and its coverage with allowances have been kept in similar figures. The market consensus estimates a 3.2% economic growth for 2018 (Market Expectations Survey - REM as per its initials in Spanish), a situation that will help maintain the non-accrual loan portfolio and the cost of credits at low levels. To conclude, the financial system, which has excellent fundamental indicators, would have positive returns in 2018, with a mid- and long-term macroeconomic environment with renewed and promising expectations. Regarding the insurance market, the outlook and approach for 2018 are dissimilar, according to the insurance line involved. The automotive sector continues with strong technical losses as a result of insufficient premiums due to the competitive aggressiveness to attract or keep the market. Accordingly, the focus of insurance companies' management will be placed on designing strategies to gradually restore the technical underwriting margins, particularly in a low inflation environment that will result in lower Grupo Financiero Galicia Annual Report Fiscal Year

15 interest rates, which is estimated to moderate the financial income. However, it is expected to cover the above-mentioned technical loss deficit. Workers' compensation insurance continues with strong technical losses related to a high level of litigation that is estimated to evolve favorably in the case of the provinces that join the new Workers' Compensation Law. As regards property insurance with products for large-corporations and small- and medium-sized companies a clear growth in real terms is noted, as compared to the prior year, related to an increase in the economic activity. Life and retirement insurance have an important growth potential when comparatively analyzing their relative weight in other countries of the region or globally in general. The current local environment of low inflation trend and the short-term feasibility of broader tax benefits of group retirement and life insurance, as well as the reimplementation of the same type of benefit in individual retirement insurance predict an expected jump in production levels and the assets under the insurance companies' management. 14 Grupo Financiero Galicia Annual Report Fiscal Year 2017

16 Review of Operations Grupo Financiero Galicia S.A. Banco de Galicia y Buenos Aires S.A. Wholesale Banking Retail Banking Consumption (Tarjetas Regionales S.A. and Compañía Financiera Argentina 1 ) Financial Banking Division Customer Experience Risks Comprehensive Corporate Services Organizational Development and Human Resources Sudamericana Holding S.A. Galicia Administradora de Fondos S.A. Galicia Warrants S.A. Net Investment S.A. (Under Liquidation Proceedings) 1 On February 2, 2018, the sale of Compañía Financiera Argentina s shares was completed Grupo Financiero Galicia Annual Report Fiscal Year

17 Review of Operations Grupo Financiero Galicia S.A. 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 January 12, 2017, Grupo Financiero Galicia, together with its main subsidiary, Banco Galicia, decided to accept a purchase offer, made by Mr. Julio Alfredo Fraomeni and Galeno Capital S.A.U., for the entire interest in Compañía Financiera Argentina S.A. ( Compañía Financiera Argentina or CFA ). It should be noted that this transaction is regarded as beneficial as it will allow its main subsidiary, Banco Galicia, to improve the regulatory capital base pursuant to applicable regulations, to reallocate capital in order to provide credit support for priority segments, and to balance the Bank s credit exposure. On February 2, 2018, the sale of Compañía Financiera Argentina s and Cobranzas y Servicios shares was completed, with the transaction amounting to Ps. 1,064 million, in the aggregate. On May 16, 2017, the Board of Directors accepted an offer to sell 10,000 book-entry shares with a face value of Ps. 1 each, accounting for 1% of Galicia Valores S.A. s capital stock held by Compañía Financiera Argentina S.A. in an aggregate amount of Ps. 907 thousands. In August 2017, the Company accepted a series of irrevocable offers to sell the 6% equity interest in Tarjetas Regionales S.A. ( Tarjetas Regionales ), for a total consideration of US$ 49 million, the transfer of which was completed on January 5, In order to achieve more efficiency in the organization and administration of its direct and indirect investments, in October 2017, the Company s Board of Directors decided to initiate a corporate reorganization process between Grupo Financiero Galicia and Banco Galicia, involving the spin-off of a portion of the Bank s assets, including its 77% equity interest in Tarjetas Regionales S.A. to be included in the balance sheet of Grupo Financiero Galicia, by way of a spin-off followed by merger, effective January 1, On January 19, 2018, the Argentine Central Bank reported that were no considerations or objections to raise in connection with the corporate reorganization involving Banco Galicia and Grupo Financiero Galicia. Accordingly, Grupo Financiero Galicia acquired an equity interest of 83% in Tarjetas Regionales S.A. On October 23, 2017, Grupo Financiero Galicia settled its Class VI, Series II Notes, upon their maturity, in an aggregate amount of Ps million, which marked the conclusion of the debt arrangement initiated in At the Ordinary and Extraordinary Shareholders Meeting held on August 15, 2017, the shareholders approved a capital increase by issuing up to 150 million common book-entry class B shares, entitled to one vote and with a face value of Ps. 1 each. The primary offer period ended on September 26, 2017, as a result of which 109,999,996 Class B shares were acquired at US$ 5 each and were subscribed and paid in on September 29, The Company offered international subscribers an over-allotment right and, on October 2, 2017, awarded 16,500,004 additional Class B shares at US$ 5 each, which were issued and paid in on October 4, In December 2017, the Company completed the capital contribution in favor of its subsidiary Banco Galicia as per the resolution of the Board of Directors and the Shareholders Meeting held on December 14, 2017, in an aggregate amount of Ps. 10,000 million. The following is a description of the subsidiary companies operations during the fiscal year. 16 Grupo Financiero Galicia Annual Report Fiscal Year 2017

18 Banco de Galicia y Buenos Aires S.A. Wholesale Banking Corporate, Investment Banking and Capital Markets In 2017, Banco Galicia consolidated its leading position in the Corporate segment, both in local and multinational companies. These efforts were further strengthened by implementing a business model with strong focus on the loan and product offering, and by providing deeper advice to our customers. In addition, the demand for longer term credit increased, and the Bank participated in the major market transactions, with the ensuing 70% increase in its lending portfolio, while maintaining eligibility in terms of companies volume of transactions. In the Investment Banking and Capital Markets segment, the Bank structured different financing products tailor-made to corporate, SMEs (small- and medium-sized companies) and agricultural businesses. In this regard, the Bank organized more than 91 transactions, 21 syndicated and structured loans, and 70 issuances in the capital market, with a wide variety of products, including but not limited to, notes, short-term securities, bills and financial trusts. The most important transactions in Pesos are issuances of the automotive financial sector companies, such as Fiat, Toyota and Mercedes Benz, for more than Ps. 1,600 million, the companies related to Grupo Financiero Galicia, such as Tarjeta Naranja, Tarjetas Cuyanas and CFA, for more than Ps. 3,200 million and US$ 250 million and Banco Galicia itself by more than Ps. 4,300 million, issuances of government securities from the City of Buenos Aires, and the provinces of Buenos Aires, Neuquén and Río Negro for more than Ps. 39,400 million, and finally, the financial sector issuances for more than Ps.19,100 million. The most important transactions in U.S. Dollars include the repurchase of bonds issued by the City of Buenos Aires, with the subsequent issuance of a new bond in an aggregate amount of over US$ 400 million. In addition, the Bank acted as local placement agent in transactions issued abroad by Banco Galicia and Tarjeta Naranja. Syndicated transactions were structured for more than Ps. 2,800 million and more than US$ 290 million. Companies The customer portfolio is made up of companies from all over the country, with annual revenues ranging from Ps. 200 million to Ps. 1,500 million. This segment embraces all business activities, except for primary agricultural production. These customers have a dedicated and customized service model to offer them proposals tailored-made to their needs. These proposals are prepared by assigned business executives and specialists in foreign trade and treasury services distributed throughout 20 Corporate Banking Centers strategically located countrywide. These centers allow the Bank to specialize in regional economies and leverage synergies with local branches to deliver an enhanced experience to our customers. In 2017, we made available the financial banking customer service to offer advice to our customers on the most sophisticated lending and borrowing products. Advice by experts in specific products suitable to each treasury. Fast response. On-line service. Immediate response. Rates according to the company s size and market prices. Competitive exchange spread. Pricing and volume in the secondary market. Broad range of issuances in the primary market. Grupo Financiero Galicia Annual Report Fiscal Year

19 On the other hand, we continued enhancing our electronic platform Office Banking for our customers to be able to operate in a dynamic, simple and safe way. We managed to migrate 70% of time deposits and 17% of check purchases to our Office Banking platform, in addition to processing foreign trade operations, payments to suppliers and payroll. As regards customer loyalty, more than 70 events were organized throughout the country in an attempt at being closer to our customers, providing them with updates on politics and economy, foreign trade, product training and human resources. Agricultural Sector In this new favorable context for the sector, in terms of tax and business regulations, we anticipate an upturn in activity for customers, leading to a significant increase in the segment's revenues. Tarjeta Galicia Rural maintained its leading position in the market, holding a market share close to 53% within the cards issued by private banks, with a sales volume above Ps. 9,600 million. More than 80 agreements remained in force with leading companies in the sector, which seek to maximize the offering of products and services to agricultural companies. Among the business actions carried out during the fiscal year, we should highlight multiple offers to finance the agricultural campaign, structuring loans tailor-made to each producer and the financing of capital goods, such as agricultural machinery, vehicles and other investments in production implements, as well as the investment in the purchase and retention of female breeding stock for the growth of breeder herd through the Financing Line for Production and Financial Inclusion. During this fiscal year, crop loan funding in foreign currency further consolidated growth. We continued developing tools for regional economies adapted to the new market conditions. This new environment paved the way to provide a wide offer of long-term loans for investment projects, with an emphasis on renewable energies and energy efficiency, in addition to the possibility of settling leasing and collateral loans transactions in U.S. Dollars, thereby cementing the positive trend towards long-term financing. Throughout 2017, the fifteenth edition of the Excelencia Agropecuaria La Nación - Banco Galicia Award (La Nación-Banco Galicia s Agricultural Excellence Award), with more than 260 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 previous fiscal years, the Bank supported the research and outreach activities of Universidad Austral, with active participation receiving delegations, and developing the 3 Encuesta Sobre las Necesidades del Productor Agropecuario Argentino (Third Survey of Argentine Agricultural Sector Needs), in partnership with Universidad de Purdue (USA). The Bank also continued supporting the activities of the Fundación Producir Conservando, the activities of the Agronomy School of the University of Buenos Aires, 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, and the support to the Líderes (Leaders) training program. On the other hand, the Bank continued to actively participate in the advisory council of Confederaciones Rurales Argentinas (CRA) (Argentine Rural Confederations) and regional confederations, and supporting the Rural Societies in the interior of the country. It was also in close relationship of cooperation with Sociedad Rural Argentina (SRA), and provided support to the training program aimed to agricultural leaders of the Centro de Estudios e Investigación para la Dirigencia Agroindustrial (Study and Research Center for Agro-industry Management, CEIDA as per its initials in Spanish), in which a Bank s employee takes part annually. We kept the active presence in the board of the Asociación Argentina del Girasol (Sunflower Argentine Association) (ASAGIR as per its initials in Spanish), the association of the sunflower chain, and the cooperation with the other value chains of the main agricultural crops. In 2017, we continued building real synergies between Grupo Financiero Galicia's companies and hit a new record by underwriting insurance for an agricultural area of 200,000 hectares against hail. 18 Grupo Financiero Galicia Annual Report Fiscal Year 2017

20 The Bank was also present at 190 events, which represented a 300-day presence effort throughout the country, consolidating the Galicia brand as a universal bank. Products and Marketing Foreign Trade The foreign trade volume (imports + exports) amounted to US$ 17,501 million in 2017, which accounts for 13% of the Argentine trade exchange. Out of a total of 134,904 foreign trade transactions, 70% were channeled through Office Banking. As a result of the strong deregulation of the Argentine exchange market, there was a change in the business paradigm, where differentiation is now given by full digital transactions and the use of financial instruments and mechanisms suitable to an open economy, accommodating to market requirements and customers needs. Therefore, we conducted workshops with customers oriented to these developments, under a 3x3 modality (Foreign Trade+Lending Operations+Economist). In addition, we continued delivering internal training to Foreign Trade Officers countrywide in the form of monthly meetings and 2 training sessions per year, aimed at introducing these new financial instruments. Our participation at the school of Managers, Corporate Officers, Éminent and Private Banking Officers continued during the year. In April, we deployed a new Foreign Trade Service Model, seeking to simplify internal processes in order to streamline operations and enhance the customer experience. Galicia Comex, the Bank s Foreign Trade specialized site, was relaunched, featuring more content, functionalities and updated information, consolidating as a valuable reference site for the market. In an effort to encourage self-service, we introduced the Consumer Banking portal, which provides information to simplify foreign trade transactions. The Comex Project continued to make progress, the end of which is expected for the first quarter of With this word-class project, Banco Galicia technologically replaces the systems that it currently uses to channel, process and manage foreign trade transactions. There is another project underway for the comprehensive management of Import Letters of Credit. Transactional Products, Investments and Insurance In 2017, Wholesale Banking focused on simplifying the transactional activity seeking to reduce the number of claims by directing operations to the digital environment, and to streamline treasury management, regardless of the company size. These actions translated into increasing transactions on the e-platform: Time deposits via Office Banking, with around 65% of such deposits currently being made through the digital channel for approximately Ps. 30,000 million. Closing of Primary Biddings (now Lebacs and Letes), decompressing physical channels, and creating a distinct customer experience. The possibility to carry out scheduled transactions of subscription and redemption of Fima Mutual Funds. This way we promote investment planning and full performance of the customer daily obligations, thus attracting more funds and increasing eligibility. Opening of Brokerage Accounts via Office Banking. As regards Checking Accounts, the deployment of the new Clearing system has optimized operations with checks in general, minimizing the associated claims. As far as Payroll accounts are concerned, we successfully deployed the first stage of Payroll Massive Addition Project, which purported to a significant improvement in setting up new payroll accounts and led to a substantial decline in companies claims (-33%) in connection with this process. We deployed two banks at work in the innovative form of a Container Bank, allowing for reusing 65% of the initial investment. One of them was set up in YPF, Luján de Cuyo and the other one, in Coca Cola, in the Province of Córdoba. Grupo Financiero Galicia Annual Report Fiscal Year

21 Furthermore, in order to streamline and facilitate customers treasury management and to enhance internal efficiency, we focused on two fronts: one of them consisting of migrating a portion of Cobranza Integrada Galicia (Galicia Integrated Collection) services (CIG, as per its initials in Spanish) to the smart self-service terminals ( TASI, as per its initials in Spanish), with the ensuing increase in operations via this channel from 5% to 18%. On the other hand, in an attempt at mitigating the effects of cash collections, in partnership with Branch Operating Management and Cash Logistics, we deployed two collection centers: one of them based in Córdoba and the other one based in General Pacheco, in the northern area of GBA. Finally, considerable efforts were made to address discounts and price deviations in connection with Collections, Payments and Checking Accounts, attaining a 44% increase in income from services derived from these products vis-a-vis 2016, with approximately Ps. 2,200 million in annual revenues. e-platform During 2017, we completed certain developments in Office Banking, focused on usability, look & feel, and financing, and on the opening of a new channel - the Galicia Office Banking app. We worked on the migration of all Office-based products with digital signature to Office Express, including Foreign Trade, and focused on the migration of customers, as well as on communication and promotion efforts. We made available new implementations to our users in the form of selfservice, including foreign currency exchange, opening of brokerage accounts, upgrade of the FIMA model, and Stop debit of service payments. We conformed to regulatory changes by implementing the operation of DEBIN I and CBU Alias. We improved the usability and design of Galicia Rural and Galicia Comex communities. We worked on the development of the Galicia Office app. Users may authorize all operations managed on-line with the portability provided by a smartphone. They will be able to do so in a secure environment, as we are the first wholesale bank in implementing facial recognition technology. In turn, we made certain innovations in check management, making available a new tool - the check remote deposit. We made progress on the 2020 project with the following opportunities: Posición Consolidada (Consolidated Position), Préstamo Inmediato (Immediate Loan), Mis pagos (My Payments) (electronic payment vouchers (VEPS, as per its initials in Spanish), service electronic payment (PES, as per its initials in Spanish) and Cobranza Integrada (Integrated Collection)) and automatic addition of customers at the time of the account opening. During 2017, there was a 34% increase in transactions vis-a-vis the previous year. As concerns the number of operations, there was a 22% increase considering the 3 platforms used by our customers (Office Banking, Interbanking and Swift). Concerning Interbanking, in 2017 we migrated a large portion of the Bank's Core System which handles payments to the SAP "Payment Engine". This first step will result in significant benefits in terms of payment optimization and will allow us to communicate directly with companies SAP teams through automated means. As concerns Swift, we continued increasing the number of companies operating in a fully automated environment and are working hard to meet the CSP security standards. We achieved 12 of the 16 goals that will become mandatory by November 2018 for companies operating through this channel and 5 of the 11 optional goals. Retail Banking (1) Retail Banking continued consolidating its commercial strategy differentiated by segment. The following are the major challenges for the period : To build, along with all the Bank s sectors, a customer-oriented culture. ( 1 ) The figures included in this section correspond only to the Bank, without consolidation with the regional credit-card companies or CFA. 20 Grupo Financiero Galicia Annual Report Fiscal Year 2017