Mercantil Servicios Financieros, C.A. Financial Report First Quarter 2018

Transcription

1 Mercantil Servicios Financieros, C.A. Financial Report First Quarter 2018 Mercantil Servicios Financieros (Mercantil) Financial Report First Quarter Caracas Stock Exchange (MVZ.A & MVZ.B); Level 1 ADR: MSFZY & MSFJY Caracas, April 30, Mercantil reports its earnings for the quarter ended 31, Summary of Financial Statements and Ratios (In millions of Bolivars, except percentages) December 2018 Net Interest Income increased as a result of increases in financial assets and liabilities. The financial intermediation ratio (loans-to-deposits) was 53.5% at the close of 1Q 2018 (51.9% at 31, ). Net income during the 1Q 2018 recognizes Bs 7,460,362 million for exchange rate difference, an increase of Bs 773,176 million for commissions on the use of credit and debit cards. On the other hand, operating expenses increased Bs 1,435,564 million, this variation includes the effect of the inflationary and foreign exchange environment of the Venezuelan economy that continues to significantly affect this item. Mar. 18 vs. Dec. 17 Mar. 18 vs. Mar. 17 QUARTERLY RESULTS % % Net Interest Income 1,024, ,792 34, ,901.9 Net Income Quarters 4,178,068 67,755 4,968 6, ,004.2 KEY INDICATORS Income per share Quarter Bs / share 40, , ,009.0 Market price A share 1,700, ,000 17, ,726.6 Market price B share 1,700, ,000 17, ,614.3 Net Income (quarter) / Average Assets (ROA) 24.0% 6.4% 1.2% ,898.6 Net Income (quarter) / Average Equity (ROE) 120.5% 121.4% 25.7% (0.7) Summary of Financial Statements Summary of Financial Statements (In millions of Bolivars, except percentages) 2018 December Mar. 18 vs. Dec. 17 Mar. 18 vs. Mar. 17 % % Cash and due from banks 35,412,132 8,236, , ,855.8 Investment Portfolio 62,114, , ,029 14, ,211.8 Loan Portfolio, Net 36,994,839 3,460, , ,742.3 TOTAL ASSETS 143,001,505 13,670,022 1,749, ,072.3 Deposits 70,757,930 11,257,784 1,516, ,565.1 Financial Liabilities 1,624,308 43,543 15,986 1,580,765 3,630.4 Shareholders Equity 28,389, ,594 78,168 3, ,218.3 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 143,001,505 13,670,022 1,749, ,072.3 ASSETS UNDER MANAGEMENT 68,283,178 7,228, , ,262.8 Net Loan Portfolio: during 1Q 2018 the loan portfolio grew Bs 33,534,777 million (969.2%) compared to the previous quarter, 4,742.3% compared to the close of 1Q. The increase was the result of the efforts to increase financial intermediation. Deposits: During 1Q 2018 deposits registered Bs 59,500,146 million increase, 528.5% compared to 4Q and 4,565.1% compared to the close of 1Q. Shareholders Equity: In 2018 Mercantil decreed dividends for Bs 34 and Bs 80 per share. At the close of the 1Q 2018 total shareholders equity reached Bs 28,389,291 million, representing a quarter-over-quarter increase of 3,183.5%. The quarterly variation is mainly due Bs 4,178,068 million in period s net income, Bs 15,268,304 million increase from translating net assets from its subsidiaries abroad. In addition, this translation resulted in Bs 8,090,267 million increase in the value of the investment portfolio. 1

2 Table of contents Page Contribution of subsidiaries 3 Credit Ratings 3 Analysis of Consolidated Financial Statements 4 Operating Income Net Interest Income 4 Allowance for losses on loan portfolio and commissions receivable 5 Total Commissions and Other Income 5 Total Insurance Premiums, Net of Claims 5 Total Operating Expenses 6 Efficiency Ratios 6 Balance Sheet 7 Liquidity 7 Investment Portfolio Financial Intermediation Activity 8 Loan Portfolio 10 Deposits 10 Total Assets 11 Financial Obligations 11 Shareholders Equity 12 Capital Ratios 12 Wealth Management 13 Performance of Subsidiaries in accordance to its Local Accounting Standards 16 Corporate Events 16 New measures announced for the Venezuelan Financial Environment 16 Awards and Acknowledgements 17 Annex I: Summary of the accounting principles used to prepare the financial statements 18 Annex II: Financial statements of Mercantil Servicios Financieros 19 Annex III: Stock Performance Summary and Financial Indicators of Mercantil Servicios Financieros 21 Annex IV: Financial statements of Mercantil Banco Universal 23 Annex V: Financial statements of Mercantil Seguros 24 2

3 Contribution of Subsidiaries Mercantil Servicios Financieros Equity Bs billions Venezuela Mercantil Banco Universal Equity Bs 5,140 billions International Mercantil Banco, S.A. Equity US$ 42 millions Mercantil Bank Curacao NV Equity US$ 24 millions Mercantil Bank & Trust Limited Cayman Equity US$ 14 millions Our Busineses Mercantil Seguros Equity Bs 707 billions Mercantil Merinvest Casa de Bolsa Equity Bs 66,351 millions Mercantil Sociedad Administradora de Entidades de Inversión Colectiva Equity Bs 20,805 millions Our people employees Our people 729 employees Mercantil Seguros y Reaseguros, S.A. Equity US$ 40 millions Mercantil Servicios de Inversion, S.A. Equity US$ 3.4 millions Mercantil Bank (Schweiz) AG Equity US$ 32 millions Our people 39 employees Our people 16 employees For further information, see Summary of Subsidiaries performance according to their Regulatory Accounting Standards page 13 Credit Ratings Mercantil Banco Universal has the best National Rating given to a Venezuelan private financial institution and the highest International Rating based on the country s sovereign rating ceiling of C Fitch Ratings Clave (*) Mercantil Servicios Financieros National Ratings Long-term Short-term Rating for Unsecured Bonds ( Long-term in local currency) Rating for Commercial Paper (Short-term in local currency) Mercantil Banco Universal National Ratings Long-term Short-term International Ratings Long-term (Foreign and local currency) Short-term (Foreign and local currency) Viability A(Ven) F1(Ven) A3 A2 A(Ven) F1(Ven) CC C CC A2 A1 (*) A credit rating agency in Venezuela. 3

4 (Million of Bs) Analysis of Consolidated Financial Statements Operating Income (In millions of Bolivars, except percentages) Quarter Ended on 2018 Bolivars % Net Interest Income 1,024,269 34, ,147 2,901.9 Allowance for losses on loan portfolio and commissions receivable 211,039 3, ,516 5,889.5 Net Financial Margin 813,229 30, ,632 2,557.8 Commissions and Other Income 8,311,740 18,980 8,292,760 43,692.6 Insurance Premiums, Net of Claims 68,244 5,657 62,588 1,106.4 Operating Income 9,193,214 55,234 9,137,979 16,544.1 Net Interest Income In 1Q 2018, net interest income reached Bs 1,024,269 million, 2,901.9% higher than the Bs 34,121 million of 1Q, mainly due to the increase in financial assets and liabilities. Interest income was Bs 1,401,265 million, a 3,125.8% year-on-year increase reflected in the behavior of income from the loan portfolio, which grew 2,960.6%. Interest expenses totaled Bs 376,997 million, 3,945.8% up from 1Q. Mercantil s net interest margin (net interest income-to-average financial assets) was 9.0% at 31, 2018, compared to 11.5% the previous year. (In Millions of Bs) 1,200,000 1,000, , , , ,000 - Evolution of Net Interest Income 27.1% 26.0% 19.2% 11.5% 9.0% 34,121 66, , ,791 1,024,269 1Q 2Q 3Q 4Q 1Q % 25% 20% 15% 10% 5% Net Interest Income Net Interest Income / Average Financial Assets Loan Portfolio Provision and Commissions Receivable Evolution of Loan Portfolio In 1Q 2018, expenses totaled Bs 211,039 million, Bs 207,516 million (5,889.5%) up from Bs 3,523 million in 1Q. The accumulated allowance reached Bs 831,195 million at 30, 2018, representing 2.2% of gross loans (2.8% at December 31, ). This provision covers 1,549.8% of past-due and nonperforming loans (3,534.7% at December 31, ). (In Millions of Bs) 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000, % 2.8% 2.8% 2.7% 2.2% 0.4% 0.2% 0.2% 0.1% 0.1% Mar. Jun. Sep. Dec. Mar % 3.2% 2.8% 2.4% 2.0% 1.6% 1.2% 0.8% 0.4% 0.0% Gross Loans Past Due and Non-Performing Loans Past Due and Non-Performing Loans / Gross Loans Allowance for Losses on Loan Portfolio / Gross Loans 4

5 Total Commissions and Other Income In 1Q 2018, commissions and other income totaled Bs 8,311,740 million, Bs 8,292,760 million (43,692.6%) up from Bs 18,980 million in 1Q, mainly due to Bs 7,460,360 million for exchange rate difference. Composition of Total Income Bs. 58,758 millions Bs. 9,404,253 millions 2018 Bs 789,077 million (4,155.9%) increase in commissions for the use of credit and debit cards, income from financing insurance policies, as well as other commissions for clients transactions, among other, and mainly from the higher volume of transactions. Bs 43,316 million (876,235.7%) increase in earnings from trading in securities. 58% 83% Total Insurance Premiums, net of Claims In 1Q 2018, Insurance Premiums, net of Commissions, Reinsurance and Claims totaled Bs 68,244 million, 1,106.4% up Bs 5,657 million from 1Q. This variation in insurance activity is mainly due to the Automobile business. Collected premiums in 1Q 2018 totaled Bs 531,116 million, representing Bs 493,704 million, 1,319.6% up from 1Q. This growth is mainly due to the General Insurance and Automobile businesses. Claims and administration expenses in 1Q 2018 reached Bs 176,830 million, up Bs 158,857 million (883.9%) compared to Bs 17,973 million in 1Q ; the growth is mainly due to the Automobile and Health businesses. The claims ratio was 65.3% in 1Q 2018 (63.4% in 1Q ). 34% 8% 11% 0% 6% 0% IQ IQ 2018 Net Interest Income Commissions on Transactions, Insurance Premiums net and Other Other Income Income on Sales Investment Securities 5

6 Total Operating Expenses Quarter (In millions of Bolivars, except percentages) Ended on 2018 Bolivars % Operating Income 9,193,214 55,234 9,137,979 16,544.1 Operating Expenses Personal and Employee Benefits 255,532 13, ,203 1,817.1 Other Operating expenses 1,228,521 35,156 1,193,365 3,394.5 Taxes Current and Deferred 3,533,614 1,858 3,531, ,044.8 Minority Interests 2, ,519 68,947.0 Discontinued operation 0 74 (74) (100.0) Net Income 4,178,068 4,968 4,173,100 84, In 1Q 2018, personnel and operating expenses totaled Bs 1,435,568 million, 2,950.4% up from Bs 48,486 million in 1Q. This increase is mainly due to: Total Personal and Operating Expenses IQ 2018 Bs 242,203 million in personnel expenses, 1,817.1% up from the same period of. This increase was due to the application of compensation policies and benefits according to market. 17% Bs 108,370 million (1,249.4%) increase in expenses from contributions to regulatory agencies. 13% Bs 879,206 million (4,298.9%) increase in operating expenses. 66% 4% Salaries and employee benefits Depreciation, Property and equipment, Amortization of intangibles and others expenses Fees paid to regulatory agencies Other operating expenses Efficiency Ratios The efficiency ratio measured as operating expenses as a percentage of average assets was 8.2% in 2018, compared to 10.7% in. The ratio of operating expenses to total income was 15.3% in 2018 (80.2% in ). The Company has made significant efforts to adapt its organizational and operating structure to the current environment in the geographical areas where it operates. 90.0% 80.0% 70.0% 60.0% 50.0% 80.2% 10.7% 63.4% 10.0% 11.5% 58.7% 56.4% 8.5% 8.2% 14.0% 12.0% 10.0% 8.0% 40.0% 6.0% 30.0% 20.0% 10.0% 15.3% 4.0% 2.0% 0.0% 1Q 2Q 3Q 4Q 1Q % Operating Expenses / Total Income Operating Expenses / Average Assets 6

7 Balance Sheet The main variations in the Balance Sheet during 1Q 2018 are reviewed and commented on with respect to the previous quarter. The main year-onyear variations are also indicated for comparison purposes: Summary of Balance Sheet and Assets under Management (In millions of Bolivars, except percentages) December Mar. 18 vs. Dec. 17 Mar. 18 vs. Mar Bolivars % Bolivars % Cash and due from banks 35,412,132 8,236, ,561 27,175, ,697,571 4,855.8 Investment Portfolio 62,114, , ,029 61,695,562 14, ,933,339 34,211.8 Loan Portfolio, Net 36,994,839 3,460, ,998 33,534, ,230,841 4,742.3 Total Assets 143,001,505 13,670,022 1,749, ,331, ,251,673 8,072.3 Deposits 70,757,930 11,257,784 1,516,744 59,500, ,241,186 4,565.1 Shareholders Equity 28,389, ,594 78,168 27,524,697 3, ,311,123 36,218.3 Asset Management 143,001,505 13,670,022 1,749, ,331, ,251,673 8,072.3 Liquidity At the close of 1Q 2018, cash and due from banks (cash and the legal reserve ratio in Venezuela) plus investments in time deposits and placements, included in the investment portfolio, increased by 331.9%, to Bs 35,746,218 million, up Bs 27,470,495 million compared to Bs 8,275,723 million in December 31,. This increase is mainly reflected in the accounts held at the Venezuelan Central Bank (BCV Banco Central de Venezuela). Non-interest-bearing Demand Deposits are related to the recent high levels of liquidity in the Venezuelan financial system and to the internal risk limits. Compared to 31,, cash and due from Banks plus investments in term deposits and placements grew Bs 35,097,269 million (4,706.7%), going from Bs 745,687 million to Bs 35,000,531 million. The liquidity ratio, calculated as total cash and due from banks over deposits was 50.0% and the ratio of cash and due from banks plus investments over deposits was 137.8%, compared to 73.2% and 76.9%, respectively, for December and 47.1% and 59.0% respectively at the close of 1Q. Liquidity (In millions of Bolivars) 389,993 Δ +4,693.7% 5,254,676 Δ % Mar-17 Dec Mar-18 Cash and Due from Banks - Legal Reserves Legal Reserves Investments in Time Deposits and Placements 25,619,042 Investment Portfolio At the close of 1Q 2018, the investment portfolio totaled Bs 62,114,368 million, up Bs 61,695,562 million (14,731.3%) compared to Bs 418,806 million the previous quarter. Compared to 31,, the investment portfolio grew Bs 61,695,562 million (34,211.8%) going from Bs 181,029 million to Bs 62,114,368 million. 70,000 60,000 Investments Portfolio (In millions of Bolivars) 62,114 50,000 40,000 30,000 20,000 10, Mar. Dec. Mar

8 Investments by maturities and yields at the close of 1Q 2018, are broken down as follows: Investments by Maturity and Yield (In millions of Bolivars, except percentages) Trust Fund and Restricted Investments Trading Available for Sale Held to Maturity Shares Time Deposits and Placements Years Bs. 1 Bs. 1 % 3 Bs. 2 % 3 Bs. 1 Bs. 1 % Bs. 1 % 3 TOTAL Less than 1 0 2,538,154 70,9% 407,551 1,3% 0 333,585 2,3% 37,959,336 1,5% 41,238,626 From 1 to 5 257,144 7,626,691 5,1% 1,841,416 3,6% 0 0 0,0% 24 17,1% 9,725,275 Over 5 627,488 4,565,605 9,4% 302,603 4,1% 5,654, ,7% ,3% 11,150, ,632 14,730,450 2,551,570 5,654, ,086 37,959,473 62,114,368 Government bonds issued by the Venezuelan state account for 0.08 times Mercantil s equity and 1.6% of its assets (0.05 and 0.3% in December, respectively). At Mercantil Banco Universal, these securities represent 0.24 times its equity and 2.51% of its assets (0.08 and 0.23% in December, respectively). At 31, 2018, the Mercantil C.A. Banco Universal subsidiary, in line with requirements from the executive branch, has purchased Bs million in Mortgage Bonds, Certificates of Participations, Agriculture Bonds and Stock representing 12.8% of the investment portfolio and 0.06 times its equity (Bs 319,004 million, representing 86.2% of its investment portfolio and 0.87 times its equity at December 31, ). Breakdown of Investments by Issuer 100% 90% 80% 70% 60% 50% 40% 30% 20% December % 0% Venezuelan Central Bank US Government & US Gov. Guaranteed Agencies Private Venezuelan Government and Public Entities Intermediation Activity Loan Portfolio At the close of 1Q 2018, the net loan portfolio totaled Bs 36,994,839 million, representing an increase of 969.2% compared to Bs 3,640,062 million in 4Q. Compared to 31,, the loan portfolio grew Bs 36,230,841 million (4,742.3%), going from Bs 763,998 million to Bs 36,994,839 million. The ratio of Past Due and Non-performing Loans to gross loans is 0.1% similar to the close of December. Mercantil Banco Universal s ratio of 0.2% compares to 0.3% of the Venezuelan financial system. (In millions of Bolivars, except percentages) Loan Portfolio by Economic Activity 2018 % December % % Commercial 11,020, ,112, , Foreign trade 22, , Industrial 1,792, , , Construction 16, , , Credit Cards 2,759, , , Residential mortgage 25, , , Services 1,185, , , Agricultural 3,306, , ,945 1 Car loans 20, , , Other 17,675, , , ,826, ,559, , Market Value 2 Amortized cost 3 The yield of securities is based on amortized cost at the end of the period. Yield is calculated by dividing income investments (including premium amortization or discounts) by the amortized cost or market value.. 8

9 99.9% of Mercantil s loan portfolio is outstanding at 31, The allowance for loan losses covers 1,549.8% of past-due and non-performing loans (3,534.7% at December 31, ); this ratio was 1,309.5% at Mercantil Banco Universal (4,036.7% at December 31, ). Loan Portfolio by Business Segment 2018 Loan Portfolio (In millions of Bolivars) Δ + 4,742.3% 36,994,839 27% 9% 64% SME's Large Corporation Individuals 763,998 3,460,062 Δ % Mar Dec Mar 2018 The loan portfolio by economic sector and interest rates at 31, 2018 is as follows: 31, 2018 Balance Anual Interest manteined Rates (In millions of Achieved Required Maxium Sector bolivars) % % % Agriculture (a) 3,306,490 1,701 3,893 13% Microenterprise 189,101 14,052 23,271 24% Mortage 35,662 18,082 18,082 Between 4,66% and 10,66% Turism (c) 85, ,09% or 6,09% Manufacturing (b) 1,792, % or 16,20% 5,409,101 a) In September, Mercantil C.A. Banco Universal, acquires Bs 31,019 million in Bandes 2018 Participation Certificate; which can be attributed to the mandatory agricultural portfolio as established in Circular No. SIB-II-GGR-GNP dated October 13, ; the amount of the agricultural portfolio adding up this investment amounts to Bs 3,337,509 million as of 31, b) In November 2016, the Ministry for Industries and the Ministry for Finance ratified the strategic development sectors to which at least 60% of the resources of the manufacturing loan portfolio must be allocated, as well as a minimum percentage of 40% allocated for the financing of small and medium-sized industries, joint ventures, as well as state-owned companies whose main activity is framed in the Classifier of Venezuelan Economic Activities (CAEV). c) In November 2013, Mercantil C.A. Banco Universal acquires 115,014 shares at Bs 1,800.00, Bs 207 million, which is attributable to the fulfillment of the portfolio destined to the tourism sector. The total amount of the tourist portfolio adding these investments amounts to Bs 85,424 million. As of the date of this publication, the competent bodies have not established the percentages required for the measurement of these portfolios. 9

10 Deposits At the close of 1Q 2018, deposits totaled Bs 70,757,930 million, representing Bs 59,500,146 million (528.5%) quarter-over-quarter increase from Bs 11,257,784 million. Compared to 31,, deposits grew Bs 69,241,186 million (4,565.1%) going from Bs 1,516,744 million to Bs 11,257,784 million. Demand deposits were the main component of total deposits, reaching Bs 45,378,374 million, up 393.3% from the previous quarter, representing 64.1% of total deposits. Savings deposits increased by Bs 5,733,917 million (279.1%) and term deposits by Bs 17,587,281 million (456,848.9%), in the same period. Breakdown Deposits by Business Segment 2018 Deposits (In millions of Bolivars) 49% 39% 70,757,930 12% Individuals Large Corporation SME's 1,516,744 11,257,784 Δ % Mar. Dec. Mar Total Assets At the close of 1Q 2018 total assets registered 946.1% increase to Bs 143,001,505 million, up Bs 129,331,483 million from Bs million in the previous quarter. This growth is due to the performance of cash and due from banks, the investment portfolio and the loan portfolio, which grew Bs 27,175,484 million, Bs 61,695,562 and Bs 33,534,777 million, respectively. The ratio of performing assets to total assets was 71.2%, up Bs 96,648,068 million (1,890.0%) compared to the previous quarter. Compared to 31,, assets grew Bs 141,251,673 million (8,072.3%), going from Bs 1,749,832 million to Bs 143,001,437 million. Consolidated Total Assets (In millions of Bolivars) Δ +8,072.3% 143,001,505 Δ 13,670, % 1,749,832 Mar. Dec. Mar

11 The investments portfolio was the main component at 43.4%, the loan portfolio representing 25.9%, and cash and due from banks standing at 24.8% at the end of the quarter. Assets Distribution Total Bs 143,001,005 millions 2018 Cash and Due from Banks 24.8% Loan Portfolio, Net 25.9% Venezuelan Central Bank 0.0% Venezuelan Govermment 1.8% US Govermment. 4.8% Private Sector 36.5% US Govermment Guaranteed Agencies 0.2% Other Assets 6.0% Financial Obligations At the close of 1Q 2018, financial obligations totaled Bs 1,673,782 million, up 1,794.8% from Bs 88,336 million in the previous quarter; compared to 31,, obligations increased 8,270.3% December (In millions, except percentages) Publicly Traded Debt Securities Issued by Mercantil 49,500 44,791 2,905 Subordinated debt ,106 49,500 44, ,011 Other Financial Liabilities 1,624,308 43, ,986 1,673,808 88,336 19,997 Shareholders Equity At the close of 1Q 2018, shareholders equity reached Bs 28,389,291 million representing a Bs 27,524,697 million (3,183.5%) increase from Bs 864,594 million in the previous quarter; compared to 1Q shareholders equity increased 36,218.3%, from Bs 78,168 million. The variation in 1Q 2018 is mainly due to Bs 4,178,068 million in net income for the quarter, Bs 15,268,304 million increase from adjusting net assets of subsidiaries abroad, Bs 8,090,267 million increase from adjusting available-forsale investments to their market value and to Bs 11,943 million in dividends approved in the period. Evolution of Shareholders Equity (In millions of Bolivars) 28,389,291 78, ,594 Δ +3,183.5% Mar. Dec. Mar

12 Capital Ratios Mercantil s equity to assets ratio at 31, 2018 is 19.9%, and its equity to risk-weighted assets is 18.3%, according to SUNAVAL standards (4.5% and 9.0% at 31, ). Mercantil Banco Universal, in accordance to SUDEBAN regulations in Venezuela, has an equity to assets ratio of 24.9% and an equity to risk-weighted assets of 35.0% (10.6% and 12.2% at 31, ). Capital Structure 2018 The equity ratios of Mercantil and its subsidiaries exceed the regulatory minimums. Capital stock 0.1% Capital reserve 0.1% Share premium 0.1% Traslation adjustments of net assets of subsidiaries abroad 53.8% Retained earnings 15.5% Unrealized gain fron adjustments of investments to market value 28.2% Surplus on revaluation of fixed Assets 2.4% Remedición por plan de pensiones -0.1% Wealth Management The Wealth Management business comprises: trust fund, securities brokerage, mutual funds and portfolio management services. Net assets under management recorded off-balance at 31, 2018 reached Bs 68,283,177 million, representing 844.7% quarter-over-quarter and 23,262.8% yearon-year increases, broken down as follows: TOTAL ASSETS UNDER MANAGEMENT (In millions of Bolivars, except percentages) Mar. 18 vs Dec.17 % Mar. 18 vs Mar. 17 % 2018 December Financial Advisory 8,057,171 1,568 5, , ,485.7 Brokerage 42,855,905 7,029, , ,368.6 Custody of Securities Trading 4,953,266 18,322 21,526 26, ,911.1 Trust Funds 12,405, ,933 61,501 7, ,072.1 Mutual Fund 10,860 7,948 4, Total Assets under Management Bs 68,283,177 7,228, , ,262.8 Mercantil offers its clients products and services (as broker-dealers, investment advisers and custodians) within the framework of world financial markets; therefore, at the close of 2018 total value of clients assets totaled Bs 55,866,342 million, up 692.5% compared to the close of the previous quarter (24,565.3% increase compared to the close of ). At the close of 1Q 2018, the Trust Fund manages assets for Bs 12,405,976 million, which registered 7,157.8% and 20,072.1% increases when compared to the close of the previous quarter and with, respectively. At December 31,, the trust fund ranked fourth among Venezuelan private banks and eighth in the fiduciary market in the country. At the close of 2018, assets under management increased 36.6% and 154.0% compared to the close of the previous quarter and with, respectively, totaling Bs 10,860 million. 12

13 Summary of Subsidiaries performance according to their local Accounting Standards Mercantil Banco Universal Total assets of Mercantil Banco Universal grew Bs 36,218,453 million (291.4%) compared to December. During 1Q 2018 the net loan portfolio grew Bs 13,360,758 million (386.6%) total deposits increased Bs 29,541,321 million (257.9%) quarter over quarter to Bs 40,996,567 million. Loan portfolio quality remains at favorable levels, with 0.2% ratio of past due and non-performing loans to gross loans, compared to 0.3% of the Venezuelan financial system. Loan portfolio provision covers 1,309.5% of past due and non-performing loans (4,036.7% at December 31, ). Assets per employee in Venezuela went from Bs million in to Bs 9,810.4 million in At 31, 2018 the Mercantil Banco Universal subsidiary ranks fourth in terms of total assets with 6.0% of the market, the first institution covers 43.5% and the four main banks 72.3% of the financial system. Mercantil ranks second in the Venezuelan private financial system in terms of loans to tourism, agriculture, mortgage and microcredit loans, Mercantil C.A., Banco Universal Consolidated (In millions of Bolivars) with market shares of 11.1%, 17.4%, 9.7% and 4.1%, respectively. In manufacturing loans, it ranks first, with 23.4% of the market. Mercantil is the second bank in Venezuela in terms of savings deposits with 15.5% of the market. Shareholders equity grew Bs 4,771,911 million (1,297.6%) compared to 4Q, to Bs 5,133,646 million. This increase includes the quarter s net income of Bs 233,773 million and Bs 4,528,227 million increase from adjusting exchange rates registered on equity, among others. At 31, 2018, the equity to assets ratio was 24.9% (regulatory minimum is 7%), and the equity to risk-weighted assets is 35.0% (minimum required 11%), according to the standards of SUDEBAN in Venezuela During 1Q 2018, net income of Bs 233,773 million represented Bs 228,248 million (1,198.7%) increase compared to 4Q, mainly due to Bs 224,432 million increase in net interest income from the growth of financial assets and liabilities; Bs 411,951 million in earnings from commissions in the use of credit and debit cards, as well as from other clients transactions; Bs 224,695 million in expenses for loan portfolio provisions; Bs 900,986 million increase in personnel and operating expenses; Bs 40,705 million in contributions to regulatory agencies, and Bs 24,276 million increase in corporate income tax expenses The Company has made significant efforts to adapt its organizational and operating structure to the current environment. December Total Assets 48,647,661 12,429,209 1,590,975 Investments Portfolio 2,489, , ,308 Loan Portfolio 16,816,922 3,456, ,279 Deposits 40,996,567 11,455,246 1,469,710 Shareholders Equity 5,139, ,735 68,053 Net Income Quarter 233,773 91,475 5,526 Historic figures in accordance with the standards of SUDEBAN. Evolution of Net Interest Income 1,200,000 1,000, , , , , % 15.1% 12.6% 11.6% 9.4% 10.2% 9.6% 8.6% 8.3% 6.8% 34,008 67, , ,014 1,041,328 1Q 2Q 3Q 4Q 1Q 2018 Net Interest Income Net Interest Margin Operating Expenses / Average Total 17.0% 15.0% 13.0% 11.0% 9.0% 7.0% 5.0% 3.0% 1.0% 13

14 Mercantil Seguros Mercantil Seguros In 1Q 2018, collected premiums totaled Bs 531,116 million, 1,319.6% up from Bs 37,412 million at the close of 1Q. At the close of January 31, 2018, Mercantil Seguros ranked fourth among insurance companies in the country in terms of net collected premiums, with 7.4% of the market. Net collected premiums per employee in Venezuela went from Bs 37.9 million in to Bs million in Total assets registered Bs 2,302,111 million at 31, 2018, representing 221.1% increase compared to December. Shareholders equity reached Bs 707,405 million, which complies with the statutory solvency requirements. The figures presented include all mandatory and voluntary reserves required to guarantee the company s operations, including outstanding claims reserves, and payments. Mercantil Seguros C.A. (In millions of Bolivars) At the close of 31, 2018, the company s investment portfolio totaled Bs 1,929,662 million, up 199.5% from the previous quarter. Total investments representing Technical Reserves reached Bs 676,463 million (63.0% quarter-over-quarter and 894.2% year-on-year increases), while liquidity levels amply meet all statutory requirements on commitments towards policyholders, insurance brokers and reinsurers. In 1Q 2018, the technical result closed at a negative Bs 23,588 million, with a combined 1 operating ratio of 112.5%. Net earnings for 1Q 2018 totaled Bs 93,322 million. The claims ratio was 63.5% (63.4% in ) December Total Assets 2,302, , ,681 Investments suitable for representing 676, ,002 68,043 Investments not-suitable for representing Technical Reserves 1,253, ,363 29,842 Shareholders Equity 707, ,169 51,902 Net Income Quarter 93,322 (14,263) 1,556 Income net 9 Months 531, ,506 37,412 Historic figures in accordance with the standards of the Venezuelan Superintendency of Insurance Activity (Sudeseg) Evolution of Net Collected Premiums and Combined Ratio 1 130% 120% 110% 100% 98.9% 98.9% 95,6% 98,8% 112.5% 90% 80% 37,412 47,098 67, , ,116 1Q 2Q 3Q 4Q 1Q 2018 Net Collected Premiums Combined Ratio 1 Combined ratio = (incurred claims + commissions + operating expenses)/ earned premiums 14

15 Other Subsidiaries of Mercantil Servicios Financieros The subsidiaries of Mercantil Servicios Financieros include a brokerage company, a mutual fund and investment portfolio management company, as well as other overseas banks, and other non-financial subsidiaries in Venezuela, as listed below: Mercantil Bank (Schweiz) started operations in 1988 as BMS Finanz AG, providing correspondent banking services and facilitating foreign trade. Twelve years later in 2000, the Swiss authorities granted the bank a license to operate as a bank and securities intermediary under the name Banco Mercantil (Schweiz) AG, offering personal, corporate and private banking services. In 2012 it dedicated its activities exclusively to private banking and wealth management, always complying with international standards. At the close of 31, 2018 its total assets reached US$ 176 million, and its assets under management totals US$ 451 million, similarly to the 4Q. Its net income in 1Q 2018 was US$ 0.1 million. Mercantil Banco, S.A. started banking operations in 1977 under an international license as Banco del Centro. Later, in 2008 they were authorized to operate under a general license and changed their name to Mercantil Bank (Panamá) and initiated an expansion process. Over the last five years, the bank has developed a full range of financial services, breaking into the areas of insurance and wealth management. At 31, 2018, Mercantil Banco, S.A. s total assets accounted for US$ 456 million, 4.7% up from the close of December. The loan portfolio reached US$ 290 million, which compares to US$ 293 million at the close of December. Deposits totaled US$ 396 million 3.1% up to December. Net income during 1Q 2018 was US$ 1.4 million, US$ 1.3 million up from net income in the same period of the previous year. Mercantil Seguros y Reaseguros total assets at 31, 2018 stand at US$ 58 million, 8.0% up from 4Q. The investment portfolio reached US$ 41 million, representing an 8.8% increase compared to December. Shareholders equity reached US$ 40 million 6.1% up from December. Net income for 1Q 2018 reached US$ 3.0 million, up US$ 0.4 million from net income in the same period of the previous year. Mercantil Merinvest Casa de Bolsa, C.A. incorporated in Venezuela and carries out brokerage activities (buy / sale of securities) and financial advice in the stock market. Mercantil Merinvest Casa de Bolsa, C.A. s total assets at 31, 2018 reached Bs 92,994 million, representing 631.2% increase compared to December 31,. This variation is reflected mainly in the investment portfolio, which increased 318.9% compared to December to Bs 48,044 million at 31, Net income for 1Q 2018 was Bs 37,393 million, up Bs 37,342 million from net earnings in the same period of the previous year. Mercantil Inversiones y Valores includes Mercantil s non-financial companies, such as Servibien, Almacenadora Mercantil and other, with various investments in securities. At 31, 2018, Mercantil Inversiones y Valores C.A. s consolidated assets and equity were Bs 30,193 million and Bs 30,105 million, respectively. 15

16 Corporate Events General Shareholders Meeting of Mercantil Servicios Financieros, C.A. In 2018, the General Shareholders Meeting of Mercantil: Approved a raise capital. The purpose of the raise is to facilitate the expansion of the equity and shareholders base of the company by raising funds from other investors, through the issuance of common shares, fully paid with a charge to earnings and/or any surplus, to be distributed among shareholders as dividends, or to be subscribed and paid by shareholders. Authorized the 37th phase of the Mercantil Servicios Financieros Stock Repurchase Program, to begin April 21, Approved the payment of a cash dividend for Bs. 34 per common share, payable as follows: two ordinary cash dividends for each Class A and Class B outstanding common share at Bs. 17 per common share, payable on April 10, 2018 and October 10, 2018, respectively, and an extraordinary cash dividend for Bs. 80 per common share payable on April 10, Mercantil s Board of Directors established the effective record date and the last date shares trade (cum-dividend) as decreed by the General Shareholders Meeting of December 15, In compliance with the powers delegated by the General Shareholders Meeting of December 15,, the Board of Directors established the effective record date and the last date shares trade (cum-dividend), as follows: Cash dividend of Bs. 25 per share payable on April 2, 2018, as effective record date, establishing 26, 2018 as the last date shares trade (cum-dividend). Dividend in kind with Mercantil Bank Holding Corporation shares payable on April 2, 2018, as effective record date, establishing 26, 2018 as the last date shares trade (cum-dividend). 30 th anniversary of Mercantil Bank (Schweiz), first Latin American bank in Switzerland Long-term thinking and vision are part of Mercantil s corporate culture and a key factor for the activities carried out by its companies worldwide. The Company is pleased to celebrate 30 years of activity of Mercantil Bank (Schweiz), our subsidiary in Zurich, the financial heart of Switzerland and one of the most relevant banking markets in the world. Also, Mercantil Bank (Schweiz) was the first Latin American bank authorized by Swiss authorities to operate in that European country within a demanding and competitive regulatory framework, which includes more than two hundred financial institutions. For Venezuelan and Latin American clients, the bank has become the best option in private banking, with a professional team specializing in wealth management, well aware of the expectations and needs of this segment, and able to communicate in their own language. Mercantil companies in Panama renamed to strengthen their brand presence Mercantil Bank (Panamá) changed its name to Mercantil Banco; Mercantil Seguros Panamá to Mercantil Seguros, and Reaseguros, S.A. and Mercantil Capital Markets renamed as Mercantil Servicios de Inversión. The name changes, will not affect client relations with their services. The decision was made in order to strengthen their presence and businesses. This is part of the brand evolution process and graphic identity of the company, which began ten years ago, in order to guarantee a global image. 16

17 New Measures announced in the Venezuelan Financial Environment The Office of the President of the Republic decreed a Monetary Reconversion to come into effect from June 4, 2018 It consists in the elimination of three zeros from the current national bills and coins, in order to simplify transactions, accounts and accounting records. The resulting currency will be named Bolívar Soberano (BsS) (Sovereign Bolivar), to be issued by the Venezuelan Casa de la Moneda (the nation s Mint). The Venezuelan Central Bank issues Exchange Agreement N 39 to regulate foreign currency operations in the National Financial System This agreement repeals Exchange Agreement No. 35, which stipulated the DIPRO exchange rate (Bs 10 / US $ 1), dictates some changes on the operation of DICOM and allows stock exchanges the negotiation of securities in bolivars and dollars. Mercantil Banco selected as the 2018 Best Venezuelan Bank Awards and Acknowledgments Mercantil Banco has been recognized as the Best Venezuelan Bank in 2018 by the Global Finance magazine. The publication took into account quantitative and qualitative aspects. Among quantitative aspects it considered asset growth, profitability, geographical reach, strategic relations and development of new business and products. Among qualitative aspects, it included opinions of equity and credit rating analysts, banking consultants and other people in the business. Mercantil Banco selected as the 2018 Best Venezuelan Foreign Trade Provider The Global Finance magazine has selected Mercantil Banco Universal for the 13 th consecutive year as the Venezuela s Best Trade Finance Provider in For this selection, Global Finance took into account volume of transactions, geographical coverage, customer services, price competitiveness, new business development and technological innovation. The Caracas Stock Exchange granted Mercantil Merinvest Casa de Bolsa two recognition for its performance in Venezuela The first one recognizes its leading position among fixed-income market operators (buy and sale of debt). The other recognition was for its second position among of variable income market operators (buy and sale of stocks). 17

18 ANNEX I Summary of the Accounting Principles used to prepare the Financial Statements Financial statements are presented in accordance with the accounting standards of the SUNAVAL, in bolivars. A summary of some of the main accounting principles applied is given below: Investment Portfolio Securities Held for Trading - Unrealized gains or losses resulting from differences in market value due to market fluctuations are included in the results for the period. Available-for-Sale Securities Recorded at their market value. Unrealized gains or losses resulting from differences in market value and exchange rate fluctuations are included in shareholders equity. Held-to-Maturity Securities Recorded at their acquisition cost, adjusted for amortization of premiums or discounts. For all portfolio investments, permanent losses in market value are recorded as a charge to income in the period in which they occur. Permanent investments are investments that represent 20% to 50% stock ownership. Those greater than 50% are recorded as an equity interest and consolidated, except when control is likely to be temporary. Loan Portfolio Loans are classified as overdue 30 days after their maturity. Allowances for loan portfolio losses are determined through a collectability assessment that quantifies the amount that must be set aside for each loan. These assessments take into account such aspects as economic conditions, credit risk by customer, credit history and the collateral received. When assessing loans for small amounts of the same nature, these are grouped together to determine the provisions required. Recognition of income and expenditure Income, costs and expenses are recorded as they are earned or incurred. Interest earned on past-due loan portfolios is recorded as income when collected. Fluctuations in the market value of derivatives are recognized as income in the period in which they occur. Insurance premiums are recorded as income when earned. Consolidation and discontinued operation The consolidated financial statements include the accounts of Mercantil and its more than 50%-owned subsidiaries and other institutions in which Mercantil has control. See the main subsidiaries on page 3. The net assets of Mercantil Bank Holding Corporation are presented as discontinued operations, given that their shares were given in dividends in December. Inflation Adjustment According to SUNAVAL standards, Mercantil s financial statements, as of December 31, 1999 must be presented in historic figures. Since then Mercantil has ceased to adjust for inflation in its primary financial statements. As a result, fixed and other assets are shown at their inflation-adjusted value up to December 31, The market value determined by independent assessments is higher than the inflation cost adjusted for inflation indicated above. New additions are being recorded at their acquisition value. Fixed assets The buildings and land of the main MERCANTIL headquarters are presented at market values determined by experts, the revaluation of assets is recorded in equity, net of deferred corporate tax income. The rest of the fixed assets are presented at their historical cost. Depreciation expense is recorded in the results of the period. Assets and liability in foreign currency Transactions and balances in foreign currency are translated according to the best estimate of the expectations of the future flows of bolivars obtained, making use of mechanisms legally established, see Annex III. Main differences between the accounting standards of SUNAVAL and the accounting standards of other subsidiaries The main accounting differences for the reconciliation of items under SUNAVAL and SUDEBAN for Mercantil Servicios Financieros are: Amortization of premiums or discounts of securities carried out on a straight-line basis under SUDEBAN standards and in accordance with the constant amortization rate under SUNAVAL standards. Foreign exchange rate fluctuations are recorded in the results, with the exception of those that SUDEBAN indicates to be included in equity and are subsequently recorded in the results when SUDEBAN authorized. 18

19 ANNEX II MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED BALANCE SHEET UNAUDITED FIGURES (In millions of Bolivars, except percentages) December Mar. 18 vs Dec. 17 Mar. 18 vs Mar Bolivars % Bolivars % Cash and due from banks 35,412,132 8,236, ,561 27,175, ,697,571 4,855.8 Investment Portfolio 62,114, , ,029 61,695,562 14, ,933,339 34,211.8 Discontinued Operation 213, , ,630 66, ,053 7,282.7 Direct Productive Assets 36,994,839 3,460, ,998 33,534, ,230,841 4,742.3 Loan Portfolio, Net 8,266,214 1,554,186 87,346 6,712, ,178,868 9,363.8 Other assets 143,001,505 13,670,022 1,749, ,331, ,251,673 8,072.3 TOTAL ASSETS 70,757,930 11,257,784 1,516,744 59,500, ,241,186 4,565.1 Deposits 49,500 44,791 2,905 4, ,595 1,604.2 Publicly Traded Debt Securities Issued 1,624,308 43,543 15,986 1,580,765 3, ,608,322 10,060.9 Financial Liabilities 42,177,572 1,459, ,991 40,718,474 2, ,041,580 30,914.9 Other Liabilities 114,609,310 12,805,216 1,671, ,804, ,937,684 6,756.2 Total Liabilities 2, ,692 1, ,866 7,553.2 Minority interest in consolidated subsidiaries 28,389, ,594 78,168 27,524,697 3, ,311,123 36,218.3 Shareholders Equity 143,001,505 13,670,022 1,749, ,331, ,251,673 8,072.3 MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED INCOME STATEMENT UNAUDITED FIGURES (In millions of Bolivars and US$, except percentages) Quarter Ended on 2018 Bolivars % Interest Income 1,401,265 43,439 1,357,826 3,125.8 Interest Expense 376,997 9, ,679 3,945.8 Net Interest Income 1,024,268 34, ,147 2,901.9 Provision for losses on loan portfolio 211,039 3, ,516 5,889.5 Net Financial Margin 813,229 30, ,632 2,557.8 Commissions and Other Income 8,311,740 18,980 8,292,760 43,692.6 Insures Premiums, Net of Claims 68,244 5,657 62,588 1,106.4 Operating Income 9,193,213 55,234 9,137,979 16,544.1 Total Operating Expenses 1,484,053 48,486 1,435,568 2,960.8 Income Before Taxes 7,709,160 6,749 7,702, ,133.4 Total Taxes 3,533,614 1,858 3,531, ,044.8 Minority Interests 2, ,519 68,947.0 Discontinued operations 0 74 (74) (100.0) Net Income 4,178,068 4,968 4,173,100 84,

20 ANNEX II MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED FIGURES (In Millions of Bolivars) Quarter Ended on 2018 CASH FLOWS FROM OPERATING ACTIVITIES Continued Operation 4,178,068 4,894 Discontinues Operation - 74 Net income 4,178,068 4,968 Net cash provided by operating activities 38,913,929 12,637 Net cash flows from investing activities ( ) (117,984) Net cash flows from financing activities 61,324, ,025 CASH AND CASH EQUIVALENTS 1 Net increase for the period 27,390, ,678 At the beginning of the period 8,256, ,998 At the end of the period 35,646, ,676 MERCANTIL SERVICIOS FINANCIEROS, C.A. Statement of Shareholders Equity UNAUDITED FIGURES (In millions of Bolivars) 2018 First Quarter Fourth Quarter First Quarter Beginning balance 75, , ,594 Net income 4,968 67,755 4,178,068 Pension Plans Remeasurement 0 (4,701) 0 Recompras de acciones (1) Share repurchased 304 (920) 8,090,267 Cash dividends (2,514) (8,538) (11,943) Amortization of the surplus of fixed assets revaluation 0 (1,686) 0 Fixed assets revaluation 0 546,697 0 Translation effect of net assets in subsidiaries abroad 8 1,685 15,268,304 Final balance 78, ,594 28,389,291 1 Includes: Cash and Cash Equivalents, Cash and Due from banks, Investments in time deposits and placements within 90 days maturity. 20

21 Stock Performance ANNEX III Quarter Ended on 2018 Net income in billions of Bolivars 4,178,068 4,968 Mercantil s stock indicators Class A share: Number of outstanding shares (Issued shares minus repurchased shares) 60,880,929 60,880,929 Market Price Bs 1,700, , Average daily volume (# of shares) 2,604 9,617 Market Price / Book value per share Market Price / Period Net Earnings per share Class B share: Number of outstanding shares (Issued shares minus repurchased shares) 43,880,032 43,880,032 Market Price Bs 1,700, , Average daily volume (# of shares) Market Price / Book value per share Market Price / Period Net Earnings per share Book value per share in Bs (Equity / # of outstanding shares) 1 40, Market Quote Mercantil Class A and Class B Shares vs. Caracas Stock Exchange (CSE) Index Price MVZ/A Adjusted CSE Price MVZ/B 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 1 Issued shares minus repurchased shares 21

22 Summary of Financial Ratios ANNEX III Balance Structure indicators 2018 Quarter Ended on Gross Loans/Deposits 53.5% 51.9% Profitability Ratios (%): Net Interest Income / Average Financial Assets (NIM) 9.0% 15.3% Commissions and other income / Total income 89.1% 41.9% Return on average assets (ROA) 24.0% 1.2% Return on average equity (ROE) 120.5% 25.7% Efficiency Ratios (%): Operating expenses / Average total assets 8.2% 10.7% Operating expenses / Total income 15.3% 80.2% Liquidity Ratios (%): Cash and due from banks / Deposits 50.0% 47.1% Cash and due from banks and Investments Portfolio / Deposits 137.8% 59.0% Asset Quality Ratios (%): Non-performing loans/ Gross loans 0.1% 0.4% Allowance for loan losses / Non-performing loans 1,549.8% 715,7% Allowance for loan losses / Gross loans 2,2% 3,0% Capital Adequacy Ratios (%): Shareholders equity / Assets 19.9% 4.5% SUNAVAL-Risk based capital (minimum required 8%) 18.3% 9.0% Number of employees Employees in Venezuela 5,156 7,085 Employees Abroad 586 1,092 Distribution network Branches in Venezuela Bank branches Insurance branches Branches Abroad Representative Offices 4 4 Number of ATMs 1,137 1,137 Number of points of sale (POS) 51,456 51,456 Mercantil Aliado Network: Correspondent Desk Correspondent Trading Points Exchange and inflation rates Exchange rate Bs/US$1 (Controlled since February 2003) 49, Average Exchange Rate for the quarter (Bs/US$1) 29,

23 ANNEX IV MERCANTIL C.A. BANCO UNIVERSAL According to rules issued by SUNAVAL 1 UNAUDITED CONSOLIDATED FIGURES (In millions of Bolivars, except percentages) December Mar. 18 vs. Dec. 17 Mar. 18 vs. Mar Bolivars % Bolivars % SUMMARY OF BALANCE SHEET ASSETS Cash and Cash Equivalents 27,753,259 8,194, ,496 19,558, ,048,763 3,839.4 Investments Portfolio 2,489, , ,308 2,119, ,355,686 1,753.9 Loan Portfolio 16,816,922 3,456, ,279 13,360, ,111,643 2,284.4 Properties and Equipment and Other Assets 1,587, ,347 46,892 1,179, ,540,594 3,285.4 TOTAL ASSETS 48,647,661 12,429,209 1,590,975 36,218, ,056,686 2,957.7 LIABILITIES AND SHAREHOLDERS'EQUITY Deposits 40,996,567 11,455,246 1,469,710 29,541, ,526,857 2,689.4 Financial Liabilities and Other Liabilities 2,511, ,227 53,212 1,905, ,458,235 4,619.7 TOTAL LIABILITIES 43,508,015 12,061,473 1,522,922 31,446, ,985,093 2,756.9 SHAREHOLDERS EQUITY 5,139, ,735 68,053 4,771,911 1, ,071,594 7,452.5 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 48,647,661 12,429,209 1,590,975 36,218, ,056,686 2,957.7 Quarter Ended on December 2018 Bolivars % SUMMARY OF INCOME STATEMENT Interest Income 1,133,411 43,132 1,090,280 2,527.8 Interest Expense 92,084 9,123 82, Net Interest Income 1,041,328 34,008 1,007,319 2,962.0 Provision for Losses on Loan Portfolio 228,232 3, ,695 6,354.3 Net Financial Margin 813,096 30, ,624 2,568.3 Commissions and Other Income 428,856 17, ,591 2,384.0 Operating Income 1,241,952 47,737 1,194,215 2,501.7 Operating Expenses 982,294 40, ,692 2,319.3 Income before taxes 259,658 7, ,524 3,539.6 Taxes 25,885 1,609 24,276 1,509.2 NET INCOME 233,773 5, ,248 4,130.6 Mercantil Banco Universal Indicators 1 from Consolidated Financial Statements System Mar. Mar. Average Net Interest Income / Average assets 8.6% 15.1% 9.4% Return on average assets (ROA) 2 3.7% 3.4% 1.5% Return on average equity (ROE) % 37.6% 34.4% Non-performing loans / Gross loans 0.3% 0.2% 0.4% Allowance for loan losses / Past-Due and Non-performing loans 864% 1,309.5% 859.5% Allowance for loan losses / Gross loans 2.7% 2.0% 3.1% Operating expenses / average total assets 4.2% 10.2% 8.6% Equity / Assets 16.4% 10.6% 4.3% Equity / Assets minus Venezuelan Government Investments N.A. 24.9% 10.6% Equity / Risk-weighted Assets N.A. 35.0% 12.2% 1 Consolidated. 2 Based on annualized figures. N.A: Not Available 23