US$150,000,000 BANCO HIPOTECARIO S.A. (incorporated in the Republic of Argentina) 11.25% Argentine Peso-Linked Notes Due 2010

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1 PRICING SUPPLEMENT NO. 1 (To Offering Memorandum Dated June 14, 2007) US$150,000,000 BANCO HIPOTECARIO S.A. (incorporated in the Republic of Argentina) 11.25% Argentine Peso-Linked Notes Due 2010 This Pricing Supplement relates to a series of notes to be issued under our global medium-term note program for the issuance of notes in one or more series up to an aggregate principal amount at any time outstanding of US$1,200,000,000, which we refer to as the Program. This Pricing Supplement is supplementary to, and should be read in conjunction with, the attached Offering Memorandum dated June 14, 2007 relating to the Program, which we refer to as the Offering Memorandum. To the extent that information contained in this Pricing Supplement is not consistent with the attached Offering Memorandum, this Pricing Supplement will be deemed to supersede the attached Offering Memorandum with respect to the notes offered hereby. We are offering US$150,000,000 of our % Argentine Peso-Linked Notes Due 2010, which we refer to as the Notes. The Notes will mature on June 21, The Notes will bear interest at a fixed rate of 11.25% per year, payable semi-annually in arrears on June 21 and December 21 of each year, commencing on December 21, Payment of principal, interest, additional amounts and any other amounts in respect of the Notes will, except in limited circumstances, be made in U.S. dollars, in amounts determined based on the Argentine peso equivalent of the aggregate principal amount of the Notes then outstanding (initially based on an exchange rate of Ps = US$1.00). In the event of certain changes in Argentine withholding taxes, we may redeem the Notes, in whole but not in part, at any time at a price equal to 100% of the principal amount plus accrued and unpaid interest and any additional amounts. The Notes will constitute our unsecured and unsubordinated obligations and will rank at all times pari passu in right of payment with all our other existing and future unsecured and unsubordinated indebtedness (other than obligations preferred by statute or by operation of law). We have applied to have the Notes listed on the Luxembourg Stock Exchange and admitted for trading on the Euro MTF, the market of the Luxembourg Stock Exchange. We have also applied to have the Notes listed on the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires). We expect that the notes will be eligible for trading on the Mercado Abierto Electrónico S.A. Investing in the Notes involves certain significant risks. See Risk Factors commencing on page S-5 of this Pricing Supplement and page 21of the attached Offering Memorandum. The Notes will qualify as non-convertible obligaciones negociables under Argentine Law No. 23,576 of Argentina, as amended (the Negotiable Obligations Law ), and Joint Resolution No /2004, as amended, ( Joint Resolution /2004 ) issued by the Argentine securities commission (Comisión Nacional de Valores ) and the Argentine tax authority (Administración Federal de Ingresos Públicos), and will be entitled to the benefits set forth in, and subject to the procedural requirements of, such law, resolution and Argentine Decree No. 677/2001. The Notes will not qualify for the Argentine deposit insurance system established pursuant to Argentine Law No. 24,485, as amended, and will not benefit from the priority right granted to depositors pursuant to Article 49(d) and (e) of Argentine Law No. 21,526, as amended (the Financial Institutions Law ). The Notes will not be secured by any floating lien or special guarantee nor will the Notes be guaranteed by any other means or by any other entity. The public offering of Notes under the Program has been authorized by the Comisión Nacional de Valores pursuant to Resolution No. 74,546, dated June 26, This authorization means only that the information requirements of the Comisión Nacional de Valores have been satisfied. The Comisión Nacional de Valores has not rendered any opinion in respect of the accuracy of the information contained in this Pricing Supplement or in the attached Offering Memorandum. The Notes have not been registered under the U.S. Securities Act of 1933, as amended (the Securities Act ). The Notes may not be offered or sold within the U.S. or to U.S. persons, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act and to certain non-u.s. persons in offshore transactions in reliance on Regulation S under the Securities Act. Because the Notes have not been registered, they are subject to the restrictions on resales and transfers described under Transfer Restrictions in the attached Offering Memorandum. Citi Price: % Deutsche Bank Securities Delivery of the Notes will be made in book-entry form through the facilities of Clearstream Banking, Société Anonyme and Euroclear Bank S.A./N.V. on or about June 21, June 14, 2007

2 Unless otherwise defined herein, capitalized terms used in this Pricing Supplement shall have the meanings given to them in the attached Offering Memorandum. In this Pricing Supplement, unless the context requires otherwise, references to we, our, us or the bank mean Banco Hipotecario S.A. and its consolidated subsidiaries. We have translated some of the peso amounts contained in this Pricing Supplement into U.S. dollars for convenience purposes only. Unless otherwise specified, the rate used to translate such amounts was Ps to US$1.00, which was the Tipo de Cambio Referencia, or reference exchange rate, reported by the Banco Central de la República Argentina (the Central Bank ) for U.S. dollars for June 14, The Federal Reserve Bank of New York does not report a noon buying rate for pesos. The U.S. dollar equivalent information presented in this Pricing Supplement is provided solely for the convenience of investors and should not be construed as implying that the peso amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See Exchange Rates and Exchange Controls in the attached Offering Memorandum. In addition, the reference exchange rate reported by the Central Bank is not necessarily the same as the exchange rates used to calculate payments in respect of the Notes. See Terms and Conditions of the Notes Applicable Exchange Rate in this Pricing Supplement. The information provided in this Pricing Supplement or in the attached Offering Memorandum that relates to the Republic of Argentina ( Argentina ) and its economy is based upon publicly available information, and we do not make any representation or warranty with respect thereto. Argentina, and any governmental agency or political subdivision thereof, does not in any way guarantee, and their credit does not otherwise back, our obligations in respect of the Notes. You should rely only on the information contained in this Pricing Supplement and the attached Offering Memorandum. Neither we, nor the dealers or the Argentine placement agents, have authorized anyone to provide you with information that is different from the information contained in this Pricing Supplement and the attached Offering Memorandum. The information in this Pricing Supplement and the attached Offering Memorandum is accurate only as of the date of this Pricing Supplement. In making your decision whether to invest in the Notes, you must rely on your own examination of us and the terms of the offering, including the merits and risks involved. You should not construe the contents of this Pricing Supplement or the attached Offering Memorandum as legal, business or tax advice. You should consult your own attorney, business advisor or tax advisor. The distribution of this Pricing Supplement and the attached Offering Memorandum, or any part thereof, and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. We, the dealers and the Argentine placement agents require persons into whose possession this Pricing Supplement or the attached Offering Memorandum come to become familiar with and to observe such restrictions. Neither this Pricing Supplement nor the attached Offering Memorandum constitute an offer to sell or a solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation, nor do this Pricing Supplement or the attached Offering Memorandum constitute an invitation to subscribe for or purchase any Notes. For a description of restrictions on offers, sales and deliveries of the Notes and on the distribution of this Pricing Supplement and the attached Offering Memorandum, see Transfer Restrictions and Subscription and Sale in the attached Offering Memorandum and Subscription and Sale in this Pricing Supplement. FOR PURCHASES MADE IN ARGENTINA: NON-BINDING EXPRESSIONS OF INTEREST IN CONNECTION WITH THE PURCHASE OF THE NOTES MUST BE MADE TO THE DEALERS AND ARGENTINE PLACEMENT AGENTS DURING THE PERIOD OF NINE (9) BUSINESS DAYS, OR THE SOLICITATION PERIOD, COMMENCING ON THE DATE OF PUBLICATION OF THE PRICING SUPPLEMENT IN SPANISH IN THE BUENOS AIRES STOCK EXCHANGE S BULLETIN (UNLESS SUCH PERIOD IS EXTENDED BY US, AND NOTICE OF SUCH EXTENSION IS PROVIDED THROUGH THE BUENOS AIRES STOCK EXCHANGE S BULLETIN AND PUBLISHED IN AN ARGENTINE NEWSPAPER OF GENERAL CIRCULATION PRIOR TO THE EXPIRATION OF THE SOLICITATION PERIOD). NON- BINDING EXPRESSIONS OF INTEREST WILL INCLUDE THE INTEREST RATE OFFERED AND ANY OTHER INFORMATION CONTAINED IN THE FORM PROVIDED BY THE DEALERS AND THE ARGENTINE PLACEMENT AGENTS TO THE INVESTORS. NON-BINDING EXPRESSIONS OF INTEREST MUST BE SUBMITTED DURING REGULAR BUSINESS HOURS TO THE DEALERS AND THE ARGENTINE PLACEMENT AGENTS, AT THEIR ADDRESSES INDICATED IN THE RELEVANT FORM. INVESTORS MAY WITHDRAW THEIR OFFERS IN WRITING AT ANY TIME DURING THE ii

3 SOLICITATION PERIOD (AND ANY EXTENSION OF SUCH PERIOD) PRIOR TO ITS EXPIRATION. ONCE THE ISSUE PRICE AND THE INTEREST RATE FOR THE NOTES HAVE BEEN DETERMINED ON THE PRICING DATE (AS DEFINED BELOW), A NOTICE WILL BE PUBLISHED IN THE BUENOS AIRES STOCK EXCHANGE S BULLETIN AND INVESTORS WILL BE ABLE TO CONFIRM, DURING THE BUSINESS DAY (IN BUENOS AIRES) FOLLOWING THE DAY OF PUBLICATION OF SUCH NOTICE NOT LATER THAN 1:00 PM EASTERN STANDARD TIME, ANY NON-BINDING EXPRESSIONS OF INTEREST PLACED DURING THE SOLICITATION PERIOD NOT DULY WITHDRAWN SHALL BE CONSIDERED BINDING AND CONFIRMED BY INVESTORS. PRICING DATE MEANS THE LAST BUSINESS DAY (IN BUENOS AIRES) IN THE SOLICITATION PERIOD. BOTH THE ISSUE PRICE AND THE INTEREST RATE FOR THE NOTES WILL BE DETERMINED BY THE DEALER TOGETHER WITH US. iii

4 TABLE OF CONTENTS Pricing Supplement Page Placement Efforts and Allocation Process... 1 Presentation of Financial Information... 2 Summary... 1 Risk Factors... 7 Management Discussion and Analysis of Financial Condition and Results of Operations... 8 Terms and Conditions of the Notes Page Use of Proceeds...18 Capitalization...18 Certain U.S. Federal Income Tax Considerations...21 Certain ERISA Considerations...23 Subscription and Sale...24 Financial Statements... F-1 Offering Memorandum Page Disclosure Regarding Forward-Looking Statements... 6 Available Information... 7 Incorporation by Reference... 7 Presentation of Financial and Other Information... 8 Summary Risk Factors Capitalization Use of Proceeds Ratings Exchange Rates and Exchange Controls Selected Financial and Other Information Management s Discussion and Analysis of Financial Condition and Results of Operations Business Selected Statistical Information Page Management...99 Principal Shareholders Argentine Banking System and Regulation Argentine Insurance System and Regulation Certain Legal Aspects of Mortgages in Argentina Description of the Notes Subscription and Sale Transfer Restrictions Description of Capital Stock Taxation Independent Accountants Legal Matters General Information Form of Pricing Supplement Index to the Financial Statements... F-1 iv

5 PLACEMENT EFFORTS AND ALLOCATION PROCESS Placement Efforts We, the dealers and the Argentine placement agents plan to undertake a series of marketing and placement efforts to place the Notes in an oferta pública under the Negotiable Obligations Law and Joint Resolution /2004. Accordingly, we, the dealer and the Argentine placement agents, will offer the Notes to the public in Argentina and outside Argentina to a broad group of institutional investors, including in the United States to qualified institutional buyers in reliance on Rule 144A of the Securities Act. Notwithstanding the foregoing or anything to the contrary contained in this Pricing Supplement or the attached Offering Memorandum, the Notes will be offered outside of Argentina only in private offerings in accordance with the laws of the applicable jurisdictions. See Subscription and Sale in the attached Offering Memorandum and in this Pricing Supplement. The placement efforts will consist of a variety of marketing methods which we expect to include the following: an international and local road show in which potential institutional investors will be invited to participate; a global conference call where potential institutional investors, including Argentine investors that may not have participated in the road show, will have the opportunity to ask questions of the bank s management; the bank s management will also be available to potential institutional investors, both in Argentina and in other countries outside Argentina, via: (i) (ii) one-on-one conference calls; one-on-one meetings; and (iii) group meetings; an electronic road show, an audio/visual presentation through the Internet which allows potential institutional investors unable to attend the road show and global conference call referred to above to have access to our road show presentation; distribution (in hard copy and/or electronically) of the preliminary and final Pricing Supplement and attached Offering Memorandum relating to the Notes and the Program, in Spanish in Argentina and in substantially similar offering documents in English in countries outside of Argentina; making available to potential Argentine investors, upon request, at our offices copies of the attached Offering Memorandum and Pricing Supplement referred to above, and designating a contact person to respond to investor inquiries; and compliance with the local communication and publication requirements of the CNV for a public offering in Argentina. Allocation Process The criteria for allocating the Notes among those investors who have placed orders with the dealers or the Argentine placement agents with a price indication that is below or equal to the final pricing accepted by us will be primarily based on such investors interest in understanding our credit profile and their intention of maintaining a long-term position in the Notes. The rationale for these criteria is that the secondary market price of the Notes will benefit from a stable, credit-oriented base of long-term holders, thereby creating a benchmark for our debt and facilitating our future access to the international capital markets. 1

6 In the event that the Notes are over-subscribed, we expect that the Notes will be sold principally to Argentine and international institutional investors as well as to private and retail banking accounts in Argentina and, as permitted by applicable law, elsewhere outside of Argentina, in particular, pension funds, insurance companies, brokerage firms, money managers and private banking and retail accounts. Subject to compliance with applicable laws, and the criteria set forth in this Pricing Supplement and the attached Offering Memorandum, substantially all investors who place orders with a price indication below or equal to the final pricing for the Notes accepted by us will receive a portion of Notes offered. The criteria for allocating the Notes among investors with similar characteristics will be based on the size of the investor s order, the aggressiveness of its price indication during the book-building process, its interest in our credit profile throughout the marketing period and its history in supporting transactions from Latin American issuers. In addition, interested investors may be required to furnish to the dealers or the Argentine placement agents all information and documentation required to be filed by such investors, or which may otherwise be requested by the dealers or the Argentine placement agents, for compliance with criminal and other laws and regulations relating to the laundering of assets, including the capital market rules for the prevention of the laundering of assets issued by the Argentine Unidad de Información Financiera and similar rules established by the CNV and/or the Central Bank. We, the dealers and the Argentine placement agents reserve the right to reject any investor order if we, the dealers or the Argentine placement agents believe that such laws and regulations have not been fully complied with to our satisfaction. Financial Statements PRESENTATION OF FINANCIAL INFORMATION We prepare our financial statements in conformity with the accounting rules established by the Banco Central de la República Argentina (the Central Bank ), which we refer to as Central Bank accounting rules, through Memorandum CONAU 1, as supplemented and amended, which differ in certain significant respects from the standards generally accepted as in effect in Argentina from time to time, which we refer to as Argentine GAAP, and from accounting principles generally accepted in the United States, which we refer to as US GAAP. Our audited financial statements do not contain a reconciliation to Argentine GAAP or to U.S. GAAP of our shareholders equity at December 31, 2006 or December 31, 2005, or of our net income for the years ended on such dates. Potential investors should consult their own professional advisors for an understanding of the differences between our accounting policies and Argentine GAAP and U.S. GAAP and how those differences affect the financial information herein. Effective January 1, 1995, pursuant to Resolution No. 388 of the Central Bank s Superintendency of Financial and Exchange Institutions, we discontinued our practice of adjusting our financial statements for inflation. Effective January 1, 2002, however, as a result of the application of Communication A 3702 which established the repeal of any regime that did not allow companies to restate their accounting balances at period-end currency values, we resumed the application of the adjustment for inflation. To this end, we followed the restatement method established by Technical Pronouncement No. 6 of the Argentine Federation of Professional Councils in Economic Sciences ( FACPCE ), as amended by Technical Resolution No. 19, using the domestic wholesale price index, or WPI, published by the Argentine National Statistics and Census Institute ( INDEC ). The adjustment resulting from the changes in the purchasing power of the Argentine peso between January 1, 2002 and December 31, 2002 are stated in constant Argentine pesos as of December 31, On March 25, 2003, Decree No. 664/03 rescinded the requirement that financial statements be prepared in constant currency, effective for financial periods on or after March 1, 2003, and on April 8, 2003, the Central Bank issued Communication A 3921 discontinuing inflation accounting effective as of March 1, As a result, our audited financial statements as of December 31, 2004, 2005 and 2006 do not include the effects of inflation. 2

7 General In this Pricing Supplement and the attached Offering Memorandum, when we refer to peso, pesos or Ps. we mean Argentine pesos; when we refer to dollar, dollars, US dollars, US$ or $ we mean United States dollars; and when we refer to bps we mean basis points (each basis point equals one-hundredth of one percent). References in the table appearing in the attached Offering Memorandum to NM (not meaningful) are intended to indicate variations that are in excess of 300%. Unless otherwise indicated, our assets and liabilities in foreign currency are valued at the exchange rate as of each relevant date or period-end according to the Central Bank reference exchange rate for dollars. In the case of dollars, Central Bank quotes for such exchange rates were Ps.1.00 = US$1.00 until December 23, From December 24, 2001 to January 10, 2002, the exchange market was officially suspended. On January 11, 2002, the exchange rate in the free market began to float for the first time since April At that time, the free market rate was Ps.1.70 = US$1.00 while the official market rate was Ps.1.40 = US$1.00. On February 3, 2002, the Argentine government repealed the dual exchange rate system and since February 11, 2002, Argentina has had one freely floating exchange rate for all transactions. As of June 1, 2007, the exchange rate reported by the free exchange market was Ps = US$1.00, respectively. You should not construe the translation of currency amounts in this Pricing Supplement or the attached Offering Memorandum to be representations that the peso amounts actually represent US dollar amounts or that any person could convert the peso amounts into US dollars at the rate indicated or at any other exchange rate. See Exchange Rates in the attached Offering Memorandum for information regarding recent developments in exchange rates. Rounding Certain amounts which appear in this Pricing Supplement or the attached Offering Memorandum (including percentage amounts) may not sum due to rounding. Certain information included in this Pricing Supplement or the attached Offering Memorandum has been derived from information on the Argentine banking system published by the Central Bank. Information published by the Central Bank related to mortgage loans does not include information related to non-bank mortgage lenders such as provincial housing institutes and other non-banking institutions. 3

8 SUMMARY Overview Established in 1886 by the Argentine government and privatized in 1999, we have historically been Argentina s leading mortgage lender and provider of mortgage-related insurance and mortgage loan services. All of our operations and customers are located in Argentina where we operate a nationwide network with 33 branches in all provinces and more than 47 additional points of sale. We are a full-service commercial bank offering a wide variety of banking activities and related financial services to individuals, small- and medium-sized companies and large corporations. We seek to distinguish ourselves by our focus on household and consumer credit which we believe offer attractive opportunities for continued growth. We are the largest lender of mortgage loans in Argentina and also offer our customers a wide range of personal and corporate loans, deposits, credit and debit cards and additional financial services. At December 31, 2006, we were Argentina s second-largest bank in terms of shareholders equity with shareholders equity of Ps. 2,561.5 million, and its eighth-largest bank in terms of total assets with assets of Ps. 9,231.5 million. Our net income for the years ended December 31, 2004, 2005 and 2006 was Ps million, Ps million and Ps million, respectively, representing a return on average equity of 14.4%, 11.7% and 14.0% and a return on average assets of 3.5%, 3.3% and 4.4%, respectively. Between December 31, 2004 and 2006, our portfolio of non-mortgage loans grew significantly from Ps million at December 31, 2004 to Ps. 1,162.6 million at December 31, 2006, increasing from 12.9% to 41.9% of our total loan portfolio. During the same period, non-performing loans as a percentage of our total loans decreased from 11.3% at December 31, 2004 to 4.7% at December 31, 2006, and our reserves for loan losses as a percentage of non-performing loans increased from 92.2% at December 31, 2004 to 103.2% at December 31, 2006, Since 1999, our shares have been listed on the Buenos Aires Stock Exchange in Argentina, and since 2006 we have had a Level I ADR program. Our Strategy We believe that the current environment of the Argentine economy and the increased lending to the private sector affords a significant opportunity to expand our business. Our strategy is focused on leveraging our sound financial position and developing a diversified banking business built on our existing mortgage franchise. Our goal is to promote our overall growth by increasing our customer base, expanding our loan portfolio and generating more fee income from transactional services. We seek to achieve this goal by marketing and promoting a wide range of financial and related products and services to individuals and small, medium and large companies throughout Argentina and by expanding our distribution network and developing alternative sales channels. The key elements of our strategy include: Focus on household and consumer loans. We intend to continue focusing on low- and middle-income individuals to capitalize on increasing demand for credit that we believe will accompany future growth of the Argentine economy. We seek to develop new products and services which target this dynamic segment. Increase cross-selling of products and services. We seek to expand our relationship with mortgage customers by increasing the cross-selling of personal loans, credit cards and other products and services to such clients. We seek to focus on providing higher margin products and services that enhance our profitability. Increase customer base and expand distribution network. We plan to increase our base of customers by expanding our distribution network by opening new branches in areas that we believe offer attractive S-1

9 prospects for growth. We are also emphasizing the development of an integrated multi-channel network that will facilitate our access to customers through new agencies and additional points of sale. Development of funding sources. We seek to develop alternative funding sources to enable us to provide a competitive range of consumer loans in terms of tenor and cost. Maintain a balanced asset and liability structure. We seek to maintain a prudent balance of assets and liabilities by matching currency exposures and managing assets with a shorter average life than that of our liabilities. S-2

10 SUMMARY FINANCIAL AND OPERATING DATA The following table presents summary historical financial and other information for the Bank as of the dates and for the periods indicated. The financial information as of December 31, 2005 and 2006 and for each year in the three-year period ended December 31, 2006 has been derived from our financial statements included in this Pricing Supplement or the attached Offering Memorandum. The financial information as of March 31, 2006 and 2007 and for the three month periods ended on such dates has been derived from our unaudited financial statements included in this Pricing Supplement. The following data should be read in conjunction with, and is qualified in its entirety by reference to, Management s Discussion and Analysis of Financial Condition and Results of Operations and our audited and unaudited financial statements that appear in this Pricing Supplement and the attached Offering Memorandum. Our audited and unaudited financial statements have been prepared in accordance with Central Bank accounting rules which differ in certain significant respects from Argentine GAAP and from U.S. GAAP. Our audited financial statements do not contain a reconciliation to Argentine GAAP or to U.S. GAAP of our shareholders equity at December 31, 2006 or 2005 or net income for the fiscal periods ended on such dates. Potential investors should consult their own professional advisors for an understanding of the differences between our accounting policies and Argentine GAAP and U.S. GAAP and how those differences affect the financial information herein. Effective January 1, 1995 pursuant to Resolution No. 388 of the Central Bank s Superintendency of Financial and Exchange Institutions, we discontinued our prior practice of adjusting our financial statements for inflation. Effective January 1, 2002, however, as a result of the application of Communication A 3702 which repealed any regime that did not allow companies to restate their accounting balances at period-end currency values, we resumed the application of the adjustment for inflation. On March 25, 2003, Decree No. 664/03 rescinded the requirement that financial statements be prepared in constant currency, effective for financial periods on or after March 1, 2003 and on April 8, 2003, the Central Bank issued Communication A 3921 discontinuing inflation accounting effective as of March 1, As a result, our audited financial statements as of December 31, 2006, 2005 and 2004 do not include the effects of inflation. S-3

11 As of and for the Three Months Ended As of or for the Year Ended December 31, March 31, (in thousands (in thousands of US dollars, except ratios) (in thousands of pesos, except ratios) of US dollars, except ratios) (in thousands of pesos, except ratios) (17) (17) INCOME STATEMENT DATA: Financial income , , , , , ,505 81,757 Financial expenditures (1)... (289,760) (418,836) (355,652) (115,866) (78,553) (95,385) (30,762) Net financial income , , , ,129 83, ,120 50,995 Provision for losses on loans... (17,502) (19,871) (12,904) (4,204) (6,770) (13,732) (4,429) Net contribution from insurance (2)... 35,546 39,736 53,763 17,515 11,941 18,654 6,016 Other income from services, net (3)... 27,507 19,340 2, ,151 6,797 2,192 Administrative expenses... (134,016) (167,520) (214,719) (69,952) (55,814) (67,042) (21,622) Miscellaneous income (loss), net (4)... (54,135) 101,736 90,801 29,582 13,715 (25,339) (8,172) Income tax... (8,831) (642) (1,686) (549) (989) 0 - Minority interest... (1,073) (613) (521) (170) 3829 (197) (64) Net income (loss) , , , ,182 64,051 77,261 24,916 BALANCE SHEET DATA: Assets Cash due from banks... 62,351 58,553 43,814 14,274 56,800 51,579 16,635 Bank and correspondents , , , , , , ,350 Government and corporate securities ,124 2,219,553 1,991, ,869 2,462,131 2,144, ,620 Mortgage-backed securities (5) , , , , , , ,387 Loans: Mortgage loans... 1,632,989 1,535,207 1,621, ,199 1,505,343 1,659, ,352 Personal loans... 23, , , , , , ,787 Credit card loans... 3,655 57, ,587 77,728 76, ,756 98,609 Overdrafts , , ,913 66, , ,666 41,496 Corporate short-term loans... 57,173 47, ,297 95,862 56, ,245 86,511 Interbank loans... 79,520 22,800 66,796 21,761 25,974 61,789 19,927 Public sector loans , , ,791 51, , ,922 45,448 Other loans... 44,501 36,017 99,693 32,479 79,358 61,247 19,752 Total loans (6)... 2,564,096 2,285,259 3,082,842 1,004,347 2,318,507 3,084, ,882 Accrued interest receivable ,698 94,476 64,967 21,165 91,941 51,263 16,533 Reserve for loan losses... (287,527) (172,743) (136,354) (44,422) (160,756) (133,740) (43,132) Net loans... 2,568,267 2,206,992 3,011, ,090 2,249,692 3,002, ,283 Other receivables from financial transactions: Loans in trust pending securitization (7) , ,127 85,731 27, ,840 82,064 26,466 Government compensatory bonds (8)... 2,689, , ,448 82, , ,445 83,673 Other (9)... 1,491,590 1,871,579 2,746, ,654 2,321,531 2,663, ,910 Reserve for loan losses... (47,305) (33,175) (34,408) (11,210) (40,427) (34,501) (11,127) Total other receivables 4,389,645 2,587,562 3,051, ,270 2,702,057 2,970, ,922 Bank premises and equipment, net , , ,552 38, , ,296 38,474 Other assets , , , , , , ,152 Total assets... 9,134,875 8,160,686 9,231,483 3,007,488 8,474,970 9,413,177 3,035,823 Liabilities and Shareholders Equity Central Bank debt... 2,228, , ,642 67, , ,345 68,805 Other banks and international entities , , ,655 56, , ,427 53,029 Bonds... 2,717,257 2,679,612 3,231,105 1,052,649 2,937,373 3,150,092 1,015,929 Deposits , , , , , , ,864 Amounts payable under derivative instruments , ,318 1,034, , , , ,459 Reserve for contingencies , , ,191 83, , ,159 89,386 Other liabilities (10) , ,789 1,129, , ,000 1,247, ,341 Total liabilities... 7,175,715 5,943,571 6,670,029 2,173,002 6,193,804 6,774,460 2,184,813 Total shareholders' equity... 1,959,160 2,217,115 2,561, ,486 2,281,166 2,638, ,010 Total liabilities and shareholders equity... 9,134,875 8,160,686 9,231,483 3,007,488 8,474,970 9,413,177 3,035,823 S-4

12 As of or for the Year Ended December 31, As of and for the Three Months Ended March 31, SELECTED RATIOS: Profitability Return on average assets % 3.3% 4.4% 3.04% 3.25% Return on average shareholders equity % 11.7% 14.0% 10.86% 11.36% Average rate of interest on loan portfolio (11) % 12.8% 11.8% 12.11% 12.22% Net interest margin (12) % 4.4% 6.4% 5.18% 9.02% Efficiency (13) % 47.6% 41.1% 50.59% 34.50% Insurance loss ratio (14) % 17.2% 13.1% 13.83% 8.94% Asset Quality (15) Mortgage loans to individuals: Non-performing mortgage loans to individuals as a % of such loans (16) % 10.9% 6.3% 8.98% 5.96% Reserve for mortgage individual loan losses as a % of such loans % 17.3% 12.5% 17.37% 12.21% Reserve for mortgage individual loan losses as a % of such nonperforming loans (16) % 105.3% 106.9% % % Other loans to individuals: Non-performing other loans to individuals as a % of such loans (16) % 3.8% 7.9% 5.78% 7.40% Reserve for other individual loan losses as a % of such loans % 3.8% 5.1% 3.38% 4.39% Reserve for other individual loan losses as a % of such nonperforming loans (16) % 100.0% 64.4% 58.57% 59.38% Total loans: Non-performing loans as a percentage of total loans (16) % 7.4% 4.7% 6.41% 4.89% Reserve for loan losses as a percentage of total loans % 7.9% 4.9% 7.48% 4.86% Reserve for loan losses as a percentage of non-performing loans (16) % 106.6% 103.2% % 99.27% Charge-offs: Charge-offs as a percentage of average loans % 6.6% 1.9% 0.52% 0.52% Capital Total shareholders equity / total assets % 27.2% 27.7% 26.92% 28.03% Regulatory capital as a percentage of risk-weighted assets (%) % 36.8% 40.4% 37.1% 40.6% Operations Number of branches Number of employees ,312 1,028 1,430 S-5

13 (1) Financial expenditures consist primarily of interest on deposits and other liabilities from financial transactions and contributions, and taxes on financial income. (2) Consists of insurance premiums earned minus insurance claims paid. (3) Income from services other than insurance premiums minus expenditures on services other than insurance claims. (4) Miscellaneous income minus miscellaneous expenses. (5) We hold subordinated bonds and certificates of participation issued in connection with our prior securitization activities. (6) Total loans exclude loans in trust pending securitization. (7) We transferred these loans to a trust pending their proposed securitization. Although not included in our loans for accounting purposes, these loans are included in our total loan portfolio for purposes of classifying our loans and establishing loan loss reserves in accordance with Central Bank requirements. (8) Includes the positive effects resulting from our option, pursuant to Central Bank Communication A 3800, to offset anticipated future losses by recognizing in advance compensation to be received from the Argentine government for our net financial position of foreign currency-denominated assets and liabilities at December 31, 2001 converted at the exchange rate of Ps.1.40 to US$1.00. (9) Includes Ps million, Ps. 1,142.1 million, Ps.1,147.9 million, Ps million and Ps.1,017.9 million of amounts receivable under derivative financial instruments for the three months ended March 31, 2006 and March 31, 2007 and the years ended December 31, 2004, 2005 and 2006, respectively. (10) Includes Ps million, Ps million, Ps.60.6 million, Ps.76.3 million and Ps.80.4 million of accrued interest payable at March 31, 2006, March 31, 2007, December 31, 2004, 2005, and 2006, respectively. (11) Aggregate financial income earned on mortgage loans divided by average mortgage loans. (12) Net financial income divided by average interest earning assets. Included in financial income are net gains (losses) on government securities. (13) Administrative expenses divided by the sum of (i) net financial income, (ii) contribution from insurance and (iii) other income from services, net. Excludes severance payments and bonuses that totaled Ps.0.1 million, Ps.3.7 million, Ps.7.2 million, Ps.5.5 million and Ps.16.0 million for the three months ended March 31, 2006 and 2007 and for the years ended December 31, 2004, 2005 and 2006, respectively. (14) Insurance claims paid divided by insurance premiums earned. (15) For purposes of Central Bank loan classifications and our establishment of loan loss reserves, total loans include accrued interest and loans in trust pending securitization. (16) Non-performing loans consist of (i) in the case of consumer loans, those classified under Central Bank regulations as Deficient Performance, Difficult Collection, Uncollectible and Uncollectible for Technical Reasons and (ii) in the case of commercial loans, those classified under Central Bank regulations as Problematic, High Risk of Insolvency, Uncollectible and Uncollectible for Technical Reasons. See Selected Statistical Information Central Bank s Loan Classification System and Reserves for Loan Losses in this offering memorandum. We have used a variety of different methodologies for classifying the non-performance of our mortgage loans. As a result, information regarding nonperforming loans is not necessarily comparable from one period to another. See Management s Discussion and Analysis of Financial Condition and Results of Operations Factors Affecting Comparability of Data, Selected Statistical Information Central Bank s Loan Classification System and Reserves for Loan Losses and Classification of Loan Portfolio According to Central Bank Criteria in this offering memorandum. (17) The US dollar convenience translations at March 31, 2007 and December 31, 2006 are based on the peso/dollar exchange rate of Ps =US$1.00 and Ps =US$1.00, respectively, prevailing as of such dates. Such translation should not be construed as a representation that the local currency amounts represent, or have been or could be converted into, US dollars at that or any other rate. S-6

14 RISK FACTORS Investing in the Notes involves risks. Before making a decision to purchase the Notes, you should carefully consider the risks described below and the other information included in this Pricing Supplement and in the attached Offering Memorandum. ADDITIONAL RISKS RELATING TO THE NOTES A devaluation of the Argentine peso will result in a loss of principal and interest in U.S. dollar terms. Payments of principal, interest, additional amounts and any other amounts in respect of the Notes are determined based on the Argentine peso equivalent (based on the initial exchange rate of Ps = US$1.00) of the aggregate principal amount of the Notes then outstanding and converted into U.S. dollars based on an exchange rate on the second business day prior the applicable payment date. As a result, a devaluation of the Argentine peso will result in a loss of principal and a reduction in the effective interest rate in U.S. dollar terms. In circumstances where we can satisfy our payment obligations in respect of the Notes by transferring Argentine pesos to accounts located in Argentina, you may not be able to obtain U.S. dollars or transfer funds outside Argentina. If we are unable either to purchase U.S. dollars or to transfer funds outside Argentina in order to make a payment in respect of the Notes, because of any legal or regulatory restriction or due to any other reason beyond our control, then we will be able to satisfy such payment obligation in Argentine pesos and with transfers to accounts located in Argentina. In such event, you may not be able to obtain U.S. dollars at the applicable exchange rate under the Notes or at all, and you may not be able to freely transfer funds outside Argentina. Additional Risks Prospective investors in the Notes should carefully consider the additional risks factors discussed under Risk Factors beginning on page 21 in the attached Offering Memorandum. S-7

15 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is based on, and should be read in conjunction with, our consolidated financial statements and related notes in this Pricing Supplement and in the attached Offering Memorandum and Management s Discussion and Analysis of Financial Condition and Results of Operations, Overview of Banco Hipotecario S.A., Selected Financial and Operating Data and the other financial information appearing in the attached Offering Memorandum. THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31, 2006 General The following table sets forth the principal components of our net income for the three months ended March 31, 2007 and Three Months ended March 31, % Change to 2007 (in millions of pesos, except for percentages) Financial income... Ps Ps % Financial expenses... (78.6) (95.4) 21.4 Net financial income Provision for losses on loans... (6.8) (13.7) Net contribution from insurance (1) Other income from services Other expenses on services... (7.5) (16.6) Administrative expenses... (55.8) (67.0) 20.1 Miscellaneous income, net (2) (25.4) (286.8) Minority interest (0.2) (105.3) Income tax Net income... Ps Ps % Net interest margin (3)... Net interest spread (4)... Average rate of interest on mortgage loan portfolio... (1) Insurance premiums minus insurance claims paid. (2) Miscellaneous income minus miscellaneous expenses. (3) Net financial income divided by average interest-earning assets. Net financial income is financial income minus interest paid on deposits and other liabilities from financial transactions. (4) Average rate earned on interest-earning assets minus average rate paid on interest-bearing liabilities. Net Income Our net income increased to Ps million for the three months ended March 31, 2007, compared to Ps million for the three months ended March 31, 2006, principally due to: higher financial income as result of higher income from new consumer products due to higher banking activity, intermediation in government and corporate securities and improved asset and liability management through the use of hedge instruments. higher income from insurance activity, as a result of the increase in new loan origination and an expansion of insurance products offered. These factors were partially offset by: S-8

16 higher miscellaneous expenses as a result of certain provisions related to profit sharing plan, stock appreciation and administrative expenses; an increase in administrative expenses as a result of higher banking activity; and higher provisions for losses on loans due to an increase in our consumer loans portfolio. Financial Income The following table sets forth the principal components of our financial income for the three months ended March 31, 2007 and Three Months ended December 31, % Change to 2007 (in millions of pesos, except for percentages) Mortgage loans and other financial transactions... Ps Ps (1.5) Personal loans Credit card loans NM Overdraft (10.4) Interbank loans Corporate and other loans Public sector loans (57.6) Buyback of restructured debt NM Mortgage-backed securities (25.9) Hedging transactions NM Government and private securities Effects of changes in exchange rates (62.0) Cash and due from banks (43.8) Others NM Total... Ps Ps Our financial income increased 55.9% to Ps million for the three months ended March 31, 2007, compared to Ps million for the three months ended March 31, 2006, primarily as a result of: higher income as a result of the use of hedging instruments; higher income from credit cards and new consumer products as a result of higher banking activity; and higher income from public sector and private securities as a result of higher market prices, and the increase in LIBO rate on the stock of BODEN 2012, accounted as an investment. These factors were partially offset by: negative effects of variations in exchange rates; lower income from public sector loans resulting from our reduced exposure to public sector loans; and lower income from mortgage backed securities. Financial Expenses The following table sets forth information regarding our financial expenses for the three months ended March 31, 2007 and S-9

17 Three Months ended March 31, % Change to 2007 (in millions of pesos, except for percentages) Bonds and similar obligations... Ps Ps % Borrowings from Central Bank (40.6) Borrowings from banks (60.0) Time deposits Other deposits Contributions and taxes on financial income Total... Ps 78.6 Ps % Our financial expenses increased 21.4% to Ps.95.4 million for the three month period ended March 31, 2007, from Ps.78.6 million for the same period in 2006, primarily as a result of : higher financial expenses from foreign currency-denominated liabilities due to new external debt; and higher interest on deposits resulting from increased average balances on savings accounts, time deposits and other deposits. These effects were partially offset by: lower financial expenditures as a result of a substantial reduction in Central Bank borrowings and other bank borrowings. Provision for Losses on Loans The following table sets forth our provision for loan losses for the three months ended March 31, 2007 and Three Months ended March 31, % Change to 2007 (in millions of pesos, except for percentages) Provision for loan losses... Ps. 6.8 Ps % Charge-offs % Our provision for loan losses in the three-month period ended March 31, 2007 increased to Ps million from Ps. 6.8 million for the three-month period ended on March 31, 2006, as a result of the increase in our consumer loan portfolio and the reclassifications of our existing loans. Net Contribution from Insurance The following table sets forth the principal components of our net contribution from insurance for the three months ended March 31, 2007 and Three Months ended March 31, % Change to 2007 (in millions of pesos, except for percentages) Insurance premiums earned: Life... Ps. 9.8 Ps % Property damage (3.2) Unemployment S-10

18 Three Months ended March 31, % Change to 2007 (in millions of pesos, except for percentages) Other Total premiums earned... Ps.13.9 Ps Insurance claims paid: Life... Ps (5.9) Property damage Other Total claims paid (5.3) Net contribution from insurance... Ps Ps % Our net contribution from insurance activities increased 55.8% from Ps.12.0 million to Ps.18.7 million for the three-month period ended March 31, 2007, compared to the same period in This increase was primarily a consequence of higher premiums earned during the year as a result of our increased volume of business. Other Income from Services The following table includes the principal components of our other income from services for the three months ended March 31, 2007 and S-11 Three Months ended March 31, % Change to 2007 (in millions of pesos, except for percentages) Loan servicing fees from third parties... Ps. 0.3 Ps % FONAVI commissions Credit card commissions Commissions for technological services (MSI) (100.0) Other commissions Total commissions (5.7) Recovery of loan expenses Other Total... Ps Ps % Our income from services increased to Ps.23.4 million for the period ended March 31, 2007 from Ps million in the first quarter of This increase was mainly due to higher commissions derived from credit cards, origination of mortgage loans and new consumer products, as a result of higher banking activity. Other Expenses on Services The following table includes the principal components of our other expenses on services for the three months ended March 31, 2007 and 2006: Three Months ended March 31, % Change to 2007 (in millions of pesos, except for percentages) Structuring and underwriting fees... Ps. 2.6 Ps % Banking services (17.6) Commissions on third party originations Collections (50.0) Credit card commissions NM