Striving for excellence - Banesco

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Striving for excellence - Banesco Powered By Docstoc
					SECOND HALF 2004




                   To our shareholders, clients and affiliates

                   We have closed 2004 with excellent news that we wish to share with you. The financial statements
                   corresponding to this year evidence the flawless performance of the human team working in this organization,
                   which has led us to rank as the undisputable leader in Venezuelan banking.

                   Throughout the year we offered our customers the best quality of service, satisfying the needs of all sectors
                   of the market we serve by means of the most modern and extensive network of agencies nationwide.

                   The successful performance demonstrated by our financial statements is a result of our strategy during
                   the previous years, consisting of the adoption of the best practices worldwide, maintaining stable and
                   adequate level of reserves, a large base capital and leadership in the small markets, particularly credit cards
                   and mortgage loans.

                   Throughout 2004 we have confirmed our good standing before clients and shareholders as well as our
                   commitment to be a socially responsible business. This goal was accomplished by means of a relevant
                   number of partners and our team of volunteers which comprises over 500 employees.

                   Striving for excellence




                   Juan Carlos Escotet Rodríguez
                   Chairman of the Board of Directors




2
                                                                                                                                                                       SECOND HALF 2004
                                                                                                                                                Financial Highlights
Financial Highlights
                                                     I Sem     II Sem      I Sem     II Sem                      Variarions
(Thousand Million VEB)                                2003       2003       2004       2004 II Sem 2004 - I Sem -2004 II Sem 2004 - II Sem -2003
                                                                                               Absolute            % Absolute               %
Total Assets                                       3,062.2    4,289.4    5,353.9    7,661.8     2,307.9       43.1% 3,372.4             78.6%
Cash and Due from Banks                               519.5      725.4      869.1    1,182.1       313.0      36.0%           456.7     63.0%
Security Investments                                1,064.2    1,886.5    2,472.9    3,612.0     1,139.1      46.1%         1,725.5     91.5%
Credit Portfolio                                      745.4      918.7    1,212.5    2,005.9       793.4      65.4%         1,087.1    118.3%

Depositis from Clients                             2,350.4    3,447.9    4,270.2    6,439.6     2,169.4       50.8%      2,991.7      86.8%
Deposits in current accounts                        1,257.8    1,919.0    2,107.9    3,056.9       949.0       45.0%      1,138.0      59.3%
Savings deposits                                      451.7      730.6      885.0    1,337.1       452.1       51.1%        606.5      83.0%
Time deposits                                         560.2      747.4    1,112.6    1,944.0       831.4       74.7%      1,196.6     160.1%
Other Deposits                                         80.7       51.0      164.6      101.7       -63.0      -38.2%         50.6      99.3%

Total stockholders' equity                           513.8      644.6      820.5      957.5       137.0       16.7%        312.9       48.5%

Trust Assets                                       1,947.8    2,266.7    3,100.9    4,092.9       991.9       32.0%      1,826.2       80.6%

Debtor Accounts Due To Trust Assignments (FMH)       451.1      517.9      598.8      700.2       101.4       16.9%        182.3       35.2%

Financial Revenues                                   299.5       305.8      342.9      420.7         77.9     22.7%         114.9      37.6%
Financial Expenses                                   108.5        90.0      106.5      135.3         28.8     27.0%          45.3      50.4%
Gross Financial Margin                               191.0       215.8      236.3      285.4         49.1     20.8%          69.6      32.2%
Financial Intermediation Margin                      303.9       384.9      515.3      480.9        -34.4      -6.7%         96.0      24.9%
Transformation Expenses                              195.7       201.4      228.7      247.2         18.5       8.1%         45.8      22.8%
Income Taxes                                           2.3         2.8        2.5        2.7          0.1       5.8%          -0.1      -4.8%
Annual Net Income                                     82.2      159.4      234.8      203.6        -31.2     -13.3%          44.2      27.7%

Yielded Investments                                1,010.2    1,630.4    1,797.0    2,183.1       386.1       21.5%        552.7      33.9%
Accumulate Agriculture Portfolio                     108.9      135.0      159.7      224.3        64.6       40.4%         89.3      66.2%
Official Institutions Deposits                       406.3      681.1    1,102.4    1,927.3       824.9       74.8%      1,246.2     183.0%
                                                         -          -       37.8       55.2        17.3       45.9%          0.0       0.0%

Commercial Loans                                     393.2      549.7      778.0    1,283.3       505.3       64.9%        733.6     133.4%
Credits to Consumer                                  240.6      271.9      343.1      455.0       111.9       32.6%        183.1      67.4%
Vehicles                                                1.4        0.8        3.5        0.9        -2.5      -72.7%          0.1     13.6%
Credit Cards                                          239.3      271.0      339.6      454.0       114.4       33.7%        183.0     67.5%
Mortgage Loans                                       111.6        97.1       91.4       80.9      -10.5      -11.5%        -16.2     -16.7%

Number of Depositors                             1,644,782 1,701,779 1,692,031 2,134,347        442,316       26.1%     432,568        25.4%
In Current Accounts                                 652,304   643,909   685,493   862,287        176,794      25.8%      218,378       33.9%
In Savings Accounts                                 991,362 1,056,779 1,005,375 1,270,805        265,430      26.4%      214,026       20.3%
In Time Accounts                                      1,116     1,091     1,163     1,255             92       7.9%          164       15.0%

Credit Cards                                     1,221,813 1,319,820 1,342,279 1,488,221        145,942       10.9%     168,401        12.8%

Ratios
Loan Portfolio Provisions/Non Accrual Loans       207.39%     320.35%    320.55%    383.77%
Non Accrual Loans/ Gross Loan Portfolio             6.20%       3.39%      2.81%      1.15%
Net Results / Average Assets                        5.56%       7.34%      9.63%      7.87%
Net Results / Average Equity                       31.13%      44.14%     64.04%     53.90%
Liquidity                                          55.13%      57.81%     42.32%     51.68%




                                                                                                                                                                                   3
SECOND HALF 2004




                   Chairman of the Board of Directors
                   Juan Carlos Escotet Rodríguez

                   Executive Chairman
                   Luis Xavier Luján Puigbó


                   Senior Directors
                   Jorge Caraballo Rodríguez
                   María Josefina Fernández Maroño
                   Nelson Becerra Méndez
                   Gonzalo Clemente Rincón
                   Fernando Crespo Suñer
                   Salvador Cores González
                   Carlos Acosta López




4
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                 ent
SECOND HALF 2004

                                                   The year 2004 marked the return of investments as a priority for both the public and



                   Financial Management            private sectors of the economy. Progress was made in the search for business, such
                                                   as the new Legal Stability Contracts provided for by the Investment Protection and
                                                   Promotion Act, whose publication was promoted among actual and potential
                                                   investors. Binational business agreements related to the hydrocarbons industry
                                                   and non-petroleum economic activities also returned during 2004.
                                                                                                                                                   The
                                                                                                                                            improvement of
                                                                                                                                          domestic economic
                                                                                                                                      activity, the stability in the
                                                                                                                                        political arena and the
                                                                                                                                       accumulation of international
                                                   An improvement in the economy was evidenced in 2004 after the contraction                reserves resulted in a
                                                   experienced during 2002 and 2003. The activities which evidenced the largest           significant reduction of
                                                   growth were procyclical, that is, those which behave in a manner directly proportional       country risk.
                                                   to the behavior of the GDP: construction, commerce and manufacturing.
                                                   Despite the recovery of aggregate demand, inflation receded approximately seven points
                                                   compared to 2003. This behavior was owing to the large idle capacity in the economy, which resulted in a lesser
                                                   impact in terms of cost upon the reactivation of economic activities.

                                                   The stability of the non-official foreign exchange market also affected the prices. Improvements made by Cadivi
                                                   resulted in a deceleration of the exchange rate in the parallel market, and the maintaining of the foreign
                                                   exchange control allowed international reserves to increase approximately 16% compared to 2003.



                                                    Gross Domestic Product
                                                    During 2004 the economy experienced a considerable         The increase in end product spending on the private
                                                    recovery measured in all its variables, particularly the   sector was mainly the result of the recovery of
                                                    Gross Domestic Product (GDP), the balance of               employment rates, the deceleration of inflation, the
                                                    payments and international reserves. By the fourth         reduction of interest rates and a greater availability
                                                    trimester of 2004, the GDP evidenced an increase of        of imported goods.
                                                    11.2% and therefore the accrued growth for 2004
                                                    was 17.3%, which constitutes the highest level             As for gross fixed investments, the role played by
                                                    recorded by the BCV.                                       construction and the purchase of machinery and
                                                                                                               equipment is to be highlighted. Foreign demand for
                                                    This was the result of the behavior of petroleum as        goods and services evidenced a growth of 13.3%,
                                                    well as non-petroleum activities, which experienced        of which a 9.2% increase corresponds to petroleum
                                                    growths of 8.7% and 17.8% respectively. From the           products export and a 23.1% increase to non-
                                                    institutional point of view, growth was also observed      petroleum products.
                                                    in the public and private sectors, 11.0% and 18.6%
                                                                            correspondingly.                   Balance of Payments
                                                                                                               During 2004 the indicators corresponding to the
                                                        The non-
                                                                              Concerning public and            balance of payments reflected the situation registered
                                                    petroleum sector
                                            evidenced significant growth p r i v a t e p e t r o l e u m       by the GDP. By the fourth trimester of the year
                                           in all its activities, particularly activities, extraction and      current accounts closed with a surplus US$ 3,889
                                            in manufacturing (25.4%), refining operations were                 million, while the capital and financial accounts
                                          construction (32.1%), transport normalized, registering              closed with a deficit of US$ 1,630 million, and
                                           and storage (26.4%), domestic growths of 7.0% and                   together totaled a positive net balance of US$ 2,259
                                                                                15.7% respectively.            million.
                                              commerce (25.5%) and
                                                   communications
                                                                             This resulted mainly from         The positive net variation of international reserves
                                                        (10.2%).
                                                                         the increase in the demand of         for the fourth trimester of 2004 was equivalent to
                                                                    end products and investments, since        US$ 1,604 million. For the year 2004 as a whole,
                                                    economic agents benefited from greater financing,          the current account closed with a surplus of US$
                                                    due among other things to the lowering of interest         14,575 million.
                                                    rates. Likewise, the aggregate value of the
                                                    government’s service producers increased 13.8%,
                                                    contributing to the reactivation of the economy.           Petroleum Market
                                                                                                               The global petroleum scenario was characterized
                                                    Domestic Demand                                            by an improvement in the levels of country risk of
                                                    Aggregate domestic demand evidenced an increase            emerging markets, the military situation of the US
                                                    of 27.9%, determined by the private sectors’               in Iraq, the attacks to petroleum facilities and the
                                                    consumption of end goods (16.6%), gross fixed              instability of key players such as Saudi Arabia, all of
                                                    investments (43.0%) and the government’s                   which resulted in prices of approximately US$ 15.
                                                    consumption of end products (13.9%).                       In the future goods market, in sight of a possible cut

6                                                                                                                                1. Venezuelan Council for Investment Promotion
                                                                                                                                                SECOND HALF 2004
          of the supply, prices were affected upon the increase    special fund for the development of social programs
          of speculative activity as a result of adverse news,     financed by said corporation.
          mainly concerning the situation in Iraq, Saudi Arabia,
          Nigeria and Russia.                                      In the budget for 2005 the proceeds generated by
                                                                   the BCV (no less than VEB 2.9 thousand billion) are
          In the last session of 2004, the London Brent crude      once again considered as part of fiscal resources.
          prices reached US$ 40.46 per barrel, more than US$       This time said income was not deemed ordinary,
                              10.00 above the last day of the      therefore abolishing the requirement of fund transferring
                The               previous year, averaging in      to state governments and municipalities for this
             decreased              2004 US$ 38.19 per barrel,     account.
      production capacity            representing a 34%
    affected nominal prices,           increase before the
    resulting in a powerful            average price of US$        Monetary Market
    limitation for the total           28.48 in 2003.              Concerning monetary matters, resulting of the
    aggregate supply, after a                                      pressuring requirement for liquidity greatly owing to
      greater demand for         The Venezuelan basket             the fiscal policy, the BCV acted by placing deposit
          energy was           closed on December 26 in            certificates and repurchase agreements for VEB 1,134
           evidenced.         US$ 34.71, registering a             thousand million, which resulted in a restrictive effect
                             monthly average of US$ 32.32          of VEB 464 thousand million. Consequently, the
          and an annual average of US$ 33.61, resulting in a       surplus liquidity of banking registered lower levels
          surplus US$ 13.61 compared to the US$ 20.00 price        than those of previous periods, together with a strong
          fixed for the 2004 budget 2.                             reduction of the interbank rate. The Central
                                                                   Government received a total VEB 150 thousand
                                                                   million worth of National Public Debt
        Fiscal Management                                          Bonds and VEB 49 thousand
        By the end of the third trimester of 2004 the increased    million worth of bills of           By December
        petroleum fiscal income resulted in a variation of VEB     exchange.                        31 liquidity reached
        6.4 thousand million (73.2%) compared to the figures                                            VEB 45,840 thousand
        of the previous year. Notwithstanding this increase        Economic dynamics, as in million, representing a
        (3% of the GDP), the fiscal breach among ordinary          2003, remained subject to        growth of 48.7%
        income and current expenses has not been salvaged,         the foreign currency                compared to
        to the point that by September it presented a negative     exchange control, together                2003.
        balance of VEB 3.9 thousand billion (2% of the GDP),       with an expansive fiscal policy,
        whereas the financing needs of the Executive grew          which maintained significant levels of liquidity, reaching
        to VEB 11.9 thousand billion (6% of the GDP) upon          by December 31 VEB 45.840 thousand million,
                      the addition of payments for the             representing a growth of VEB 15,004 thousand million
                              amortization of public debt (VEB     (48.7%) compared to 2003.
                                  8 thousand million by the end
       The collection of
                                    of the third trimester).       The BCV’s international reserves remained stable,
      bank debit tax is to
                                                                   reaching lower levels during the second semester
 become an ordinary income,
and therefore, the Government The Ministry of Finance              of 2004, yet higher than those reached during the
will be required to transfer 20% resolved this difference by       same period in 2003. By December 2004 this
of this income to all regions of means of new public               variable closed with US$ 23,462 million. Upon
 the country, the goal being credit transactions, the              consideration of the resources of the
                                 use of the proceeds               Macroeconomic Stabilization Fund (FEM) the
    set at VEB 1.9 thousand
                                generated by the BCV for           resulting figure is US$ 24,172 million, registering
             billion.
                               the purchase and sale of foreign    an increase of 13.5% compared to the previous
                           currency, and the financial             year. The repurchase of bonds by PDVSA in
          operations of the Government abroad.                     international markets for US$ 2,509 million was
                                                                   one of the most determining elements
          By the closing of the third trimester, bank debit tax    of said result.
          had produced VEB 1.3 thousand million, which helped
          reduce the negative balance in more than 0.5% of
          the GDP.                                                 Investment
                                                                   The Superintendence of Foreign Investments (SIEX)
          According to the Public Budget Act, the fiscal year      registered in 2004 a total US$ 491.9 million entering
          2005 reaches the figure of VEB 69.9 thousand million.    the country, mainly addressed to the manufacturing
          Petróleos de Venezuela shall provide no less than        sector (US$ 415.8 million), real estate investment and
          37.7% (VEB 26.1 thousand million), besides the VEB       financial services (US$ 55.1 million) and commerce
          4.3 thousand billion that will be transferred to the     (US$ 14.3 million), among others.
                                                                           2. According to the Venezuelan Ministry of Energy and Mining (MEM)              7
SECOND HALF 2004




                                                                                            According to
                                                                                            the National
                                                                                     Statistics Institute (INE),
                                                                                     a reduction of 3.7 points
                                                                                       in the unemployment
                                                                                      index was evidenced by
                                                                                         December 2004.


                   Foreign investment closed in 2003 with US$ 294.9          In the informalsector, the percentage of informal
                   million, thus evidencing a growth of 66.8% by the         workers by December 2004 was 48.7%, which
                   closing of 2004 compared to the previous year.            compared to the same period in 2003 when it
                   The U.S. was still the largest investor, with US$ 173.0   reached 52.4%, evidences a decrease of 3.7 points.
                   million (35.4%) worth of investments. It is closely       Informal workers account for 15% of the GDP3,
                   followed by Switzerland with US$ 157.1 million (31.9%);   equivalent to US$ thousand million per year.
                   France, with US$ 50.2 million (10.2%); and Colombia,
                   with US$ 21.3 million (4.3%).                             Perspectives for 2005
                                                                             The growth expectations of world economy
                                                                             remain the same for next year, which is a positive
                   Inflation                                                 variable for the behavior of investment flow. In
                   The behavior of inflation was related to the use of a     this account, the Venezuelan case shall greatly
                   fixed exchange rate as a nominal anchor of the            depend upon the dissipation of political
                   economy and to the prices control, which has              uncertainty, which probably had kept potential
                   permitted containing inflationary expectations which      investors at bay. For the year 2005 the
                   have been caused before during periods of political       expectation concerning international investment
                   confrontation and downfalls in the demand for money.      flow are positive. Capitals are expected to recover
                                                                             as a result of the momentum given by world
                   Indicators such as the core inflation revealed that       economic growth.
                   during the second semester of 2004, inflationary
                   deceleration acquired a dynamic of its own as a result    An increase in the world demand for petroleum
                   of the greater supply and the confidence in the           is expected, particularly as a result of the
                   strengthening of the economy.                             expected growth of the U.S. and China.
                                                                             Petroleum prices are expected to remain high,
                   The Consumers Price Index (IPC) for the Caracas           though on average may result slightly below
                   Metropolitan Area registered in December a variation      those of 2004.
                   of 1.6%, lower than that registered in December 2003
                   (1.8%). Owing to this result, the accumulated variation   Â      The Venezuelan petroleum production may
                   of the IPC in 2004 was 19.2%, lower than the IPC                 prove to be restrained by PDVSA’s lack of
                   variation for 2003 (27.1%).                                      productive capacity, and therefore the
                                                                                    eventual increase of the production would
                   Controlled goods closed 2004 with an accumulated                 be mainly supported by strategic
                   variation of 14.9%, while non-controlled goods closed            associations.
                   with 23.7%.
                                                                             Â      The expansive fiscal policies which
                                                                                    characterized 2004 shall remain in force
                   Unemployment                                                     until mid-2005, which will generate a strong
                   In the formal sector, the employment rate by                     pressure on money supply.
                   December 2004 was 51.3% (equivalent to                    Â
                   5,580,029 workers), while by December 2003 was                   Fiscal policies would be mainly funded by
                   47.6% (equivalent to 4.885.220 workers), evidencing              large petroleum income, domestic public
                   a variation of 3.7 points upon the incorporation of              debt operations and the proceeds of
                   694,809 workers to the formal sector.                            exchange operations of the BCV.

8                                                                                                          3. According to Fundaempleo
                                                                                                     SECOND HALF 2004
        Public expense could be more significant during
        the first semester of the year.

       The foreign currency exchange control shall remain
        in force throughout 2005, however with greater
        flexibility.
Â
        The expected official exchange rate
        is VEB 2,150 per US$.
Â
        As a result of the foreign Exchange
        control and the increased levels
        of liquidity, interest rates will
        remain low.
Â
        Anti-inflation policies shall
        also remain in force, based
        on exchange rate and price
        controls, and a broadening
        of the network of consumer
        goods operated by the
        government.



The Financial System
Throughout 2004 the financial
system remained mostly stable
concerning the number of
institutions it includes. Only one
foreign bank withdrew its
operations from Venezuela,
therefore totaling 51 banking
institutions in the country by
December 2004 according to the
f i g u re s p u b l i s h e d b y t h e
Superintendence of Banks. Of said
total, universal and commercial
banking represent 63% of the financial
system, which by the closing of
December 2004 registered total assets
of VEB 57,470 thousand million.

The increased economic activity made
necessary the opening of new branches during
2004 as well as the hiring of additional personnel.
By December 2004 the number of agencies had
increased with 92 new agencies and 3,339 new direct
positions had been opened, resulting in a total 2,818
agencies in our network and a total 54,966 employees in                    Throughout the
the organization.                                                      second semester of 2004
                                                                     the banking sector registered
The behavior of the consolidated balance sheet of Venezuelan an increase of 28.2% (VEB
commercial and universal banking evidences the improved conditions 12,391 thousand million) in its
prevalent in its immediate economic environment as well as the total assets, greater than the
economic environment of its clients and affiliates.                     growth pace evidenced
                                                                          during the first six
Throughout the second semester of 2004 a significant increase in its      months of the year.
total assets was registered, equivalent to 29.2% (VEB 12,391 thousand
million), greater than the growth pace evidenced during the first six months of
the year when some temporary conflict still prevailed and affected the behavior of the
economy’s real sector, which is the true engine of the development of any nation.
                                                                                                                   9
 SECOND HALF 2004

                                           The productive framework experienced a favorable           ending the year with a figure above VEB 1,900



                    Financial Management   reaction to the cease of electoral uncertainty, boosting
                                           once more the demand for loans which during 2004
                                           was driven to a point where it doubled its figures for
                                           2003, reaching by December 2004 the figure of VEB
                                           21,283 thousand million (+108.7%).
                                                                                                      thousand million, representing an annual increase
                                                                                                      of 49.45%.

                                                                                                      Both portfolios, vehicles purchase loans and credit
                                                                                                      cards, are linked to external factors such as legal
                                                                                                      regulations and government decrees which
                                           The ratio measuring the intermediation management          significantly affect the decision to purchase made
                                           increased 6 points compared to the first semester of       by the consumer at a certain time. The considerable
                                           2004 and 11 points compared to the percentage              growth which both portfolios have registered in the
                                           registered in December 2003, closing the July –            previous year is related, in the case of credit cards,
                                           December 2004 period with a percentage of 48.04%,          to the users’ need of electronic transactions that
                                           the highest registered in the last two years.              ease the financed purchase of goods and services,
                                                                                                      both nationally and abroad. In the case of vehicle
                                           This growth of the portfolio was accompanied by the        purchase loans, the growth of the portfolio is related
                                           excellent improvement in is quality, which averaged        to the Family Vehicle Program and also to the
                                           for banking as a whole barely 1.65% of fixed assets        eventual increase in the prices based on a possible
                                           to gross portfolio by the closing of December 2004.        devaluation of our currency.

                                           By June 2004, a change in the orientation of the           The mortgage loans account ended 2004 with VEB
                                           financing system business was to be expected,              565 thousand million, equivalent to 2.65% of the net
                                           consisting in a return to loan intermediation. Today       commercial and universal portfolios, upon registering
                                           it is evident that the tendency towards a greater          a slight increase of 8.42% compared to the second
                                           strengthening of the demand for loans will remain          semester of 2003.
                                           current. By the closing of the second semester of
                                           2004 a greater relative relevance of loans compared        Concerning liabilities, during the ending semester the
                                           to investments was evidenced, reporting a loan             banking sector registered an increase of public funds
                                           portfolio to total assets ratio of 37.82%, nearly 10       of approximately 32.71% (VEB 10.918 thousand
                                           points above the level registered in December 2003.        million), well over the figure of VEB 44 billion registered
                                                                                                      in the previous period.
                                           The boost of the loan portfolio (+ VEB 7,128
                                           thousand million) during the last six months of 2004       The most significant variation between semesters in
                                           is consistent with these favorable expectations,           absolute terms was registered by current accounts (+
                                           confirming the tendency towards the fall of                VEB 5,054 thousand million compared to June 2004),
                                           investments which in 2004 represented 33.74% in            still with the greater weight in total public funds (50.11%).
                                           the total assets, that is 6 points below the percentage
                                           registered in 2003, when it neared 40%.                    Resources managed by universal and commercial
                                                                                                      banks maintained the tendency towards an increase
                                           The orientation of loans has reflected a change in         during the previous year, registering an annual variation
                                           its composition to match the economic recovery             of 48.4% and 26.5% between semesters, reaching
                                           of some productive sectors such as commerce,               by December 2004 the figure of VEB 76,920 thousand
                                           towards which 72.04% of net loans granted by               million, all in conformity with the increase un public
                                           commercial and universal banking were directed,            expense and therefore the higher level of liquidity in
                                           totaling VEB 15,333 by December 2004, after                the economic system.
                                           experiencing a growth of 110.19% compared to
                                           the balance registered in December 2003.                   In the financial statement corresponding to the second
                                           Consumer credits, on the other hand, evidenced             semester of 2004, commercial and universal banking
                                           a variation of 61.84% throughout the December              registered a net income of VEB 1,193 thousand million,
                                           2003 – December 2004 period, ending with a figure          that is VEB 212 thousand million below the figure
                                           over VEB 2,600 thousand million, equivalent to             obtained in the first semester of the year, when net
                                           12.51% of the net loan portfolio.                          income totaled VEB 1,405 thousand million, owing
                                                                                                      mostly to the downfall of other operative income (-
                                           This boost of the loan portfolio owes mainly to the        VEB 486 thousand million).
                                           upheaval evidenced in financing for the purchase
                                           of vehicles, which by December 2004 doubled the            Annual profitability reached VEB 2,598 thousand
                                           figure registered by December 2003 when it                 million upon totaling the results of both semesters of
                                           registered VEB 320 thousand million, currently             2004, which is VEB 798 thousand million above the
                                           reaching VEB 683 thousand million.                         results for 2003.

                                           The evolution of the credit cards portfolio also           During the last months of 2004 the tendency towards
                                           evidenced a tendency to increase throughout 2004,          a lesser profitability of productive assets of banking
10
                                                                                                                                                      SECOND HALF 2004
                                                                                                                               Financial Management
                                                                                        in general was maintained,
                                                                                        considering the fall of lending
                                                                                       interest rates during said period,
                                                                                       the excess monetary liquidity and
                                                                                      the foreign exchange rate control,
                                                                                     all of which has significantly affected
                                                                                    the decreased profitability of BCV
                                                                                   securities.



                                                                                 Banesco Banco Universal
                                                                           The year 2004 ended with excellent results
                                                                        in all areas of operation of Banesco Banco
                                                                     Universal. It reaffirmed its status as the first bank
                                                                 of the country, evidenced by its financial statements:
                                                            Banesco Banco Universal concentrates 17.42% of all funds
                                                       managed through commercial and universal banking, as a result
                                               of the wide public acceptance of our financial products and services.

        The process of strategic planning initiated by Banesco Banco Universal, as well
        as the purposefulness of its human team, have doubtlessly resulted in the                 Banesco Banco
        achievement of all set goals concerning its share and positioning in the national     Universal reaffirmed
        banking market, obtaining a relevant differentiation from our closest competitors. its position as the first bank
                                                                                          of the country, concentrating
        The intensification of market investigation processes pursued by our institution      17.42% of all funds
        allowed not only to know better our current and potential customers, but               managed through
        also to avoid obstacles generated in a hardly predictable and uncertain                  commercial and
        environment, and moreover, to maintain the achieved leadership.                        universal banking.
        The considerable semester increase of VEB 2,308 thousand million in our total assets
        was fundamentally the result of the boost of all productive assets of the bank and the decided support of
        intermediation on behalf of the high management, achieving during the last six months a growth of VEB 793
        thousand million (65.4%) of our loan portfolio, well over the market’s average, which registered a relative
        variation of 50.36% during said period.

                     The wider knowledge of our customers, their businesses and activities, made possible the
                        improvement of our quality portfolio, registering upon the closing of the second semester
    During the last       of the year a ratio of frozen portfolio of 1.15%, which was below the average for
 semester a growth of commercial and universal banking (1.65%). Moreover, Banesco maintained by the
 VEB 793 thousand closing of December 2004 a level of covered frozen portfolio of 383.77%.
million (65.4%) was Product crossing and the greater fidelity of our clients made possible that our total
registered in our loan deposits, considered as the addition of public funds and transferred investments (VEB
portfolio, well over the 8,623 thousand million), registered throughout 2004 a growth of VEB 3,544 thousand
   market’s average. million (69.8%) compared to the balance registered at the end of the previous year.

                    By the end of the second semester of 2004, Banesco Banco Universal claimed a new leading
        position, becoming the most important bank in the fund trust business by concentrating 17.66% of the fund
        trust assets of the national financial system, and 20.18% of the commercial and universal banks sector with
        a figure of VEB 4,093 thousand million by December 2004 after an increase of approximately 80.6% (VEB
        1,826 thousand million) compared to 2003.

        During 2004 the bank reaffirmed its leading position in the market as the most important administrator of
        funds from the Housing Mutual Fund, upon ending 2004 with a total VEB 700 thousand million and 37
        thousand loans granted subject to the Housing Policy Act.

        The management of the semester was also favorable to all our products and services portfolios, achieving
        results which reflect its consolidation in the national banking market.

        Notwithstanding the fact that the tendency towards the fall of interest rates was maintained throughout 2004
        and evidenced a progressive decrease of the differential ratio between lending and deposit interest
                                                                                                                                                                  11
 SECOND HALF 2004

                                           rates, by December and owing to seasonal factors and the greater competition




                    Financial Management
                                           for deposits the deposit rate increased slightly, leading to a particular decrease
                                           of nearly 2 points in average of the financial margin.

                                           Banesco maintained the average cost of its funds at a similar level than that
                                           observed during the first semester or 2004, showing a stability that also allowed
                                           it to increase its gross financial margin by VEB 49 thousand million compared to
                                           the figure registered in the financial statements corresponding to the first semester
                                           of the year.

                                           This evidences a balanced management regardless of the abrupt changes which
                                           characterize a highly competitive environment, generating a financial intermediation
                                                         margin of VEB 481 thousand million in the second half of 2004,
                                                                   margin which was wide enough so as not to depend
                                                                          excessively upon the obtaining of other operative
                                                                               income and to cover transformation costs with
                                                                                    great ease. This led to the achievement
                                                                                       of a net proceeds of VEB 204 thousand
                                                                                           million by the closing of December
                                                                                              2004, which together with the
                                                                                                 figures of June 2004 (VEB 235
                                                                                                    thousand million) brought
                                                                                                      an annual net result of
                                                                                                        VEB 439 thousand
                                                                                                         million.

                                                                                                              Combining this
                                                                                                               result with the
                                                                                                                institution’s assets
                                                                                                                 (VEB          957
                                                                                                                  thousand million),
                                                                                                                   an average
                                                                                                                   annual profit of
                                                                                                                   53.91% was
                                                                                                                   produced. This
                                                                                                                   average was
                                                                                                                   above        the
                                                                                                                  average of
                                                                                                                 commercial and
                                                                                                                universal banking,
                                                                                                               which reached
                                                                                                              45.17%, and also
                                                                                                             above the inflation
                                                                                                            rate during 2004
                                                                                                          (19.2%).

                                                                                                     Adequate financial
                                                                                                   management and an efficient
                                                                                                 handling of available resources
                                                                                             allowed not only a favorable return
                                                                                         on the investment of shareholders, but
                                                                                     also to develop ambitious projects of all
                                                                                kinds that have placed Banesco Banco
                                                                          Universal as a model to follow in the technology
                                                                    area as well as in the social and educational environments.

                                           On behalf of the Board of Directors, we wish to express our most sincere
                                           gratefulness to all our clients, employees and affiliates for their valuable contributions
                                           in the achievement of our current results.


12
 SECOND HALF 2004

                                                Management and Human Resources                        Banesco volunteers



                    Human Capital Management
                                                At the end of the second semester of 2004, the        The work of Banesco’s Corporate Volunteers,
                                                department of Human Capital Management                comprising more than 500 employees, deserves to
                                                                highlighted the role of Banesco as    be highlighted.
                                                                    a job position generator, upon
                                                  Banesco as a         accounting a total 1,603       Its creation was an inspiration and a motivation for
                                                  job position          new employees compared        our workers and their families to participate in social
                                                generator, upon          to 2003. Likewise,           programs, helping to create a social conscience and
                                               accounting a total permanent career plans              stimulating solidarity as a corporate and human
                                                   1,603 new            enabled 577 promotions        value required for coexistence.
                                                   employees.          benefiting our employees,
                                                                     and as part of our developing    In December 2004 the team of          The creation of
                                                                 plan for continuous improvement,     volunteers received an Banesco’s Corporate
                                                580 training events were held as part of the          acknowledgement from the Volunteers is our pride
                                                management and supervising competence project.        Venezuelan Red Cross for the and a motivation to
                                                                                                      campaign developed in the participate in social
                                                Banesco values: where cultures meet                   Asoplacer community in                  programs.
                                                Our organization believes values in direction are     Guarenas, which consisted in the
                                                fundamental to decision making.                       education of the population concerning
                                                                                                      the alleviation of situation of emergency caused by
                                                Among other programs directed to found                natural disasters.
                                                organizational culture, a special project was
                                                developed allowing the reformulation of our values,   The social conscience of Banesco’s employees and
                                                which were later transmitted nationwide through       their social responsibility are also to be highlighted.
                                                all the organization’s leaders in a dynamic and       By the second semester of 2004, teaching events
                                                active manner by means of a training process. The     in special educational workshops addressed to
                                                new values are the fundamental pillars of the         students of the IUJO in Catia were more numerous,
                                                success of our vision and our mission: Integrity      as well as the participation as promoters of health
                                                and Trustworthiness, Individual and Social            prevention measures and primary medical attention
                                                Responsibility, Innovation and Quality of Service,    in low-income communities.
                                                Endeavor, Interdependence and Leadership,
                                                Renovation and Personal Excellence, Diversity and
                                                Adaptability.                                         Banesco’s social responsibility:
                                                                                                      Building a country
                                                The best of talents                                   Banesco renders accounts to Venezuela
                                                During the second semester of 2004 the                and to its Social Partners
                                                development of training programs was multiplied       The bank has presented the country the results of
                                                by jeans of massive distance learning, thanks to      its social management by publicizing its Social
                                                the incorporation of E-Learning methodology, which    Balance Sheet summed up with the same technology
                                                has produced successful results.                      as that used for its financial statements. Our Social
                                                                                                      Balance Sheet evidences our transparency in
                                                Work environment                                      destining proceeds to the management of our
                                                At Ciudad Banesco, social responsibility begins       Corporate Social Responsibility Program. This
                                                with its employees. Therefore, Banesco keeps up       balance sheet is the accounting expression of an
                                                permanent events and                                  open and productive dialogue with our social
                                                programs that improve its        Social               partners, with whom we have maintained a
                                                employees’ quality of life      programs              commitment to education, health issues and children
                                                and contribute to their      strengthen the           during the last semester of 2004. The following are
                                                wellbeing. These             behavior and             some of the projects and programs initiated with
                                                events include sports identification of the           our social partners:
                                                tournaments,                employees with
                                                performance awards          organizational            Fe y Alegría
                                                and labor benefits.               goals.              We reaffirmed our commitment with this educational
                                                                                                      institution, with whom we have a compromise to
                                                Besides the projects included in the collective       provide with VEB 10 thousand million throughout a
                                                employment contract other non-contractual             5-year period in order to build 3 superior education
                                                programs are offered to employees, such as:           centers in the country. During the second semester
                                                provision of work uniforms, vocational programs       of this year we opened the new ‘Instituto Universitario
                                                for children, discount fairs, additional medical      San Francisco’ in Maracaibo, which will begin
                                                services and documentation services.                  operating with some 800 students.

14
                                                                                                                        SECOND HALF 2004
        The action of our Corporate Volunteers has been fundamental in the support we offer to Fe y Alegría, as
        the team has begun participating in the comprehensive education of youths.

        Venezuelan Network of Youths’ and Children’s Orchestras
        Banesco understands the importance of the effort made by this institution and entered into an agreement with
        the Venezuelan Network of Youths’ and Children’s Orchestras headed by the musical master José Antonio
        Abreu, consisting of a VEB 3 thousand million fund trust to be carried throughout a period of three years.

                          The funds shall be used for the creation and furbishing of a center to house the Social
                             Action for Music Program. The plan is to renovate one of the classrooms of the Instituto
       Banesco executed
                               Universitario Jesús Obrero in Catia, belonging to Fe y Alegría, in order to convert it
    an agreement with the
                                 into a center for musical education, therefore linking the IUJO and master Abreu’s
    Social Action for Music
                                  network of orchestras.
   Program, which has been
designated by the Interamerican
Development Bank (IDB) as a With the Social Action for Music Program, master Abreu supports young and
 leading program in the areas talented Venezuelan musicians. Education being its most important goal as
                                 a socially responsible corporation, Banesco is proud to have successfully
     of social inclusion and
                                completed the educational programs meant to be carried out during the second
           community
                              semester of 2004.
           integration.
                          UCAB
        We have contributed with VEB 768 million to be used for the construction of a new classrooms module
        in the campus of the Universidad Católica Andrés Bello, which shall offer needed new space for academic
        activities in a modern and adequate environment. The construction area is approximately 9,300 square
        meters. Funds provided by Banesco shall be used in the construction of one of three type A classrooms,
        the furbishing of which is to be different than regular classrooms as they may be used as small auditoriums
        housing 200 seats each.

        Archdioceses Schools in Maracaibo
        In order to keep up the program started in 1976 by Monsignor Roa Pérez and consisting today of 23
        schools providing quality and comprehensive education to more than 20 thousand students in Zulia State,
        Banesco entered into an agreement with the Archdioceses of Maracaibo that will enable the process of
        including other local schools to the program. The amount to be contributed by Banesco is VEB 400 million.

        ‘Colegio San Ignacio’ in Caracas
        Banesco sponsored the XIII “Activating Personal and Social Commitments to Overcoming Poverty” Congress
        with a contribution of VEB 45 million. The vent was organized by former alumni of the Society of Jesus and
        was held in the grounds of the ‘Colegio San Ignacio’ school in Caracas. Moreover, Banesco donated VEB
        20 million to be used for the renovation of the school’s olympic pool.

        Venamcham
        A total VEB 35 million was contributed by Banesco to hold the IV Social Responsibility in Action Symposium
        organized by Venamcham, ‘Venezuela Sin Límites’ and the IDB, in order to promote corporate social
        responsibility actions among private corporations.

        Archdioceses of Mérida
        Banesco donated VEB 25.34 million to be used in the renovation of the Archdiocesan Museum of Mérida,
        a valuable artistic and architectonic landmark of Mérida state.

        Office of the Academic Vice-Chancellor of the UCV
        We supported the Office of the Academic Vice-Chancellor of the ‘Universidad Central de Venezuela’ with
        a donation of VEB 25 million to be destined to the activities held during the university’s Alumni Week which
        is traditionally celebrated November 15 – 20, and which was sponsored by Banesco this year.

        ‘San Vicente de Paúl’ Conference in Caracas
        Banesco donated VEB 21.41 million to this institution for the purchase of a new x-ray machine.

        ‘Apoye’ Civil Association
        We contributed with VEB 10 million to ‘Apoye,’ an association helping people with special needs.

                                                                                                                                15
 SECOND HALF 2004




 Building a country            Banesco is currently en route to receive
                               an AA1000-Standard International
                               Certification in the field of Corporate Social
                               Responsibility.
                               Banesco began in the second semester of 2004 the
                                              process of adopting the AA1000
                                                  Standard in the field of Corporate
                                                                                          Our range of products
                                                                                          and offers
                                                                                          The best offers to close 2004
                                                                                          The best choice: sight deposits with the return of
                                                                                          a fixed investment. With only VEB 100,000, all
                             In the second          Social Responsibility. The            customers may enjoy 13% interest rate on their
                          semester of 2004,           AA100 Standard is an                sight deposits in Liquid Checking Accounts, free
                         Banesco donated 65            international tool for the         of maintenance fees.
                     computers, typing machines evaluation and accounting
                    and office equipment to several of corporations’ social
                     educational institutions and actions, which will provide             Banesco Christmas credit cards were a
                      organizations which carry Banesco with the standards                gift on their own with 19.75% interest rates
                         out social assistance       needed to consolidate its            Only the leader in credit cars could offer its clients
                                projects.          corporate management.                  the best Christmas present: Visa and MasterCard
                                                                                          credit cards with a preferred rate of 19.75% for all
                                          By obtaining the AA1000-Standard                national and international purchases.
                                International Certification we seek to assess and
                                improve our corporate performance in accordance
                                with set standards for a socially responsible             Banesco Mortgage Loans with preferred
                                management.                                               interest rates
                                                                                          We offered an attractive fixed rate of 23% for one
                                The AA1000 Certification will reaffirm our role as a      year to all clients requesting mortgage loans, as
                                dynamic and responsible corporation, aware of its         our bank is Number 1 in the loan market.
                                actions and commitments to internal and external
                                groups, and shall identify us as a leading corporation
                                in the field of corporate social responsibility.          The Sambil credit card arrives at
                                                                                          Maracaibo
                                                                                          In keeping with the opening of the ‘Centro Sambil
                                Branding, Products and Campaigns                          Maracaibo’ Mall, a regional campaign was launched
                                Banesco reaffirms its leadership as a brand               in October inviting the public to request free of
                                Surveys made by acknowledged consulting agencies          charge the Sambil credit card, in order to access
                                indicate that Banesco is the banking institution best     a world of VIP services, promotions and discounts.
                                remembered by the public in general and among
                                representatives of small and medium-sized enterprises,
                                with figures of 80% and 75% respectively.                 Automatic recharge of Movilnet phone
                                                                                          cards through BanescOnline
                                Among the ABC+, C and D sectors of the population,        Registered users of are now able to authorize
                                Banesco is the most acknowledged bank and its             automatic debiting of their checking or savings
                                publicity is deemed as the best. Moreover, the            accounts to immediately recharge their Movilnet
                                preference and expectations of its customers are          phone cards.
                                above the expectations of customers of other financial
                                institutions.
                                                                                          Navigate BanescOnline and fish out a new
                                The pillars that support Banesco’s brand equity and       laptop
                                which set it aside from the rest of the banking market,   From June 27 to December 15, 2004, users of
                                positioning it as one of the greatest quality brands,     BanescOnline participated in the sweepstakes to
                                are the following:                                        win new laptops upon accumulation of electronic
                                Â        Excellent customer service                       coupons when performing online banking
                                Â        Safe and trustworthy transactions                operations.
                                Â        Services to fit all kinds of customers
                                Â        Nationwide network of agencies
                                Â        Treatment of customers as persons and not        Private Banking Referral Plan
                                         numbers                                          With the Private Banking Referral Plan, our
                                Â        Fast and simple processes                        customers in this sector won immediately and
                                                                                          without participating in any sweepstakes tickets
                                The public in general prefers these functional            for two to fabulous destinations across the world,
                                characteristics and Banesco is the brand that provides    simply by referring three or more friends to become
                                the best performance and therefore is preferred.          clients of Banesco’s Private Banking.

16
                                                                                                                                                      SECOND HALF 2004
Acknowledgements




                                                                                                                     Branding… Products… Campaigns…
Throughout the second semester of the year we were acknowledged by diverse organizations and enterprises
for many of our projects and activities. To be highlighted are the following: the National Construction 2004
Award which the Ciudad Banesco project received from the Venezuelan Construction Chamber; the first
place won in the “Art with Arts” Awards organized by the El Nacional newspaper in order to prize distinguished
publicity in print; the ‘Producto’ Award received in its October edition; and for the third year in a row, we
were awarded the P&M acknowledgement as the ‘Best Advertiser in the Banking Sector.’



Updated Electronic Channels
By the end of 2004 average transactions made electronically experienced an accelerated growth compared
to the previous year, and as a result electronic channels reaffirmed their participation in the total transactions
of the organization.

Electronic Data Interchange
Electronic transactions increased 28%; services of payroll-managed services, payments to suppliers and
payments domiciled by means of our electronic data interchange platform increased 89%; and the number
of customers affiliated to these services increased 97% compared to the previous year.

A customizable account statement was introduced with our electronic payments services, allowing merchant
customers to view movements of their accounts by means of a standard EDI format that permits the
automated reconciliation of administrative processes.

BanescOnline
An increase of 98% in the average number of transactions was achieved, and also a 66% increase in the
number of registered users compared to 2003.

Upon closing the semester, BanescOnline had more than 400,000 registered users and managed a monthly
average of 3.75 million transactions and VEB 267,040 million, thus becoming the second most important
electronic banking service in both indicators.

The scope of products and services offered through this channel was broadened with the inclusion of fund
trust operations and viewing fund trust transactions, and the incorporation of electronic banking password
modification online.

Phone Banking Services
By the end of 2004 the Phone Banking Center handled a significant monthly
amount of calls and transactions substantially handled by the IVR robot.
Calls answered by our phone banking agents report highly competitive
levels of service within the local and international markets.

Phone authorizations improved by 6 points the levels of
acceptance of both classic and gold credit cards, an
additional 3.5 points for platinum credit cards and 1.5
points for debit cards, therefore ranking above the
average required by card franchises for the local
market.
                                                   Banesco reported
Nationwide Electronic Banking                    growths of 106.8%,
At the end of 2004, Banesco had 650 40.8% and 58.3% in the
ATMs (14.63% of the market share), 108           monthly average of
self-service tellers and the widest network transactions processed through
of POS and checkbook dispensing                 its self-service tellers,
machines in the market, with 237 and            checkbook dispensing
20,928 machines respectively.                    machines and POS,
                                                      respectively.
Transactions made through its ATMs by
customers and non-customers experienced
growths of 51.3% and 42.8% respectively
compared to the previous year, maintaining

                                                                                                                                                              17
 SECOND HALF 2004


                    therefore the leadership in customer transactions in the Suiche7B and Conexus networks with
                    a market share of 19.6% by the end of the year.

                    ATM availability improved almost 10 points as a result of the incorporation
                    of Gasper monitoring technology and the support of the Comprehensive
                    Monitoring Center (CIM).

                    A pilot program for the new Banesco Visa Smart credit card
                    was launched, which makes available to our customers
                    the most advanced security technology.



                    Banesco makes history
                    with its credit cards
                    In order to keep providing
                    its customers with the
                                                     Banesco
                    best available
                                                  reaffirms its
                    financial backup,
                                               leadership in the
                    Banesco increased
                                          market, sets new records
                    the credit limit to
                                          and makes history with
                    more than 300
                                           its credit cards totaling
                    thousand credit card
                                                  10,708,023
                    holders, in time for
                                                  transactions.
                    them to make their
                    seasonal Christmas
                    purchases with the best interest
                    rate in the market: 19.75%.



                    Banesco Debit Cards
                    By the end of 2004, Banesco
                    reaffirmed its ranking in
                    Maestro (POS) sales, as the
                    figure experienced an increase
                    of 96.2% compared to the
                    previous year and shortened
                    the distance from the first place
                    in the ranking by 1.29 points.

                    As a result of the diverse
                    strategic alliances made during
                    the second semester of 2004, our
                    debit and credit customers enjoyed
                    innumerable benefits and discounts.

                    In order to provide greater ease and
                    keep offering the best of services to our
                    Gold customers, a new service was
                    introduced during the second semester of
                    the period consisting of automatic relocation
                    of CANTV phone bill payments to other
                    accounts in case of reported loss or theft of debit
                    cards.

                    ATMSafe
                    All customers with Maestro Gold debit cards now enjoy an
                    exclusive benefit: insurance for their ATM transactions, ATMSafe,
                    offered by MasterCard for the Maestro Gold program.



18
                                                                                                                  SECOND HALF 2004
                                                                                      A quality portfolio was
                                                                Throughout         maintained thanks to
                                                           the second semester       the management of
                                                             of 2004, Banesco         our Department of
                                                         complied at all times with Loan Assessment
                                                         the required monthly 3% which kept risks
                                                           of its loans portfolio     under control. As a
                                                             granted as micro       result 2004 was
                                                                    loans.        ended with a low late
                                                                                   index (1.2%), mostly
                                                                            owing to excellent collection
                                                                     management and to the improved
                                                                   quality of the portfolio.

                                                              Banesco Agricultural Loans
                                                         Our Department of Agricultural Banking offered
                                                         unrelenting support to the agricultural sector, owing
                                                         to its significance for Venezuelan economy since
                                                         it is a profitable business which generates
Loans market                                             employment opportunities and secures food
Throughout 2004 the loans market was determined          resources.
by an increased demand for loans on behalf of all
economic sectors, driven by the greater flexibility      During 2004, 752 loans were granted for a total
of currency exchange regulations and the greater         VEB 291 thousand million, of which 457 were
stability of sales volume which evidence the recovery    granted during the second semester of the year
of markets during the period. In general, 2004 was       for a total VEB 135 thousand million, ending the
a year in which clients were aided in their              year with an agricultural loans portfolio of VEB 224
businesses, and new business opportunities and           thousand million, surpassing by far the required
attractive investment mechanisms were found              percentages of loans granted according to the
again.                                                   Agricultural Loans Act.

Banesco Loans                                            Customers of the agricultural sector made deposits
Banesco had set clear goals for 2004’s strategic         totaling VEB 162 thousand million, therefore proving
planning in order to maintain its market share. The      the reciprocity of clients and the bank.
bank perused new customers and it was
satisfactory to see the results evidenced in the         The Chairman of the bank endorsed this practice
growth of our loans portfolio.                           by visiting several producers and entrepreneurs
                                                         associations of the Venezuelan agricultural sector
Comercial Loans Portafolio                               in order to reaffirm our support, maintain close
This portfolio evidenced the greatest relative growth    relations with our customers of this sector and
index of all, registering a figure of VEB 2,022          increase knowledge of their business, which shall
thousand million, having increased 63% compared          doubtlessly allow the design of precise strategies
to the period ended on June 30, 2004 among its           to satisfy their needs.
peer group.
                                                         Mortgage Loans
Micro loans                                              During the second half of 2004 nearly 4,000
Throughout the second semester of the year               mortgage loans were granted according to the
Banesco complied with the required number of             requirements of the Housing Policy Act, both short-
micro loans granted, equivalent to a monthly 3%          and long-termed, benefiting approximately 16,000
of its total loans portfolio.                            people nationwide and substantially contributing
                                                         to improve our clients’ quality of life, which in turn
The micro loans portfolio manages loans of VEB           allows us to strengthen our values regarding
1 million to VEB 100 million, and the average loan       Individual and Social Responsibility.
amount is VEB 30 million. Rather than a requirement,
this portfolio has become a standing business,           Throughout the last six months of the year
since its late index is a stable 2%, consists of a       substantial improvements in loan management
short-term portfolio (as loans are granted for periods   were made, including the reduction of average
not exceeding a year) and is addressed to                approval time to 21 days and in many cases to
established merchants who maintain excellent             only 17 days, a market record for this type of
levels of commitment towards the bank.                   transactions.

                                                                                                                           19
 SECOND HALF 2004

                                                  Concerning deposits made for Housing
                              Over 10,000         Policy Mutual Funds, Banesco remains
                            new companies           the leader in the market, managing
                          preferred Banesco to more than 28% of funds deposited
                       deposit their contributions in the financial system for this
                        to their Housing Policy purpose. Moreover, this has allowed
                             Mutual Funds          it to become the most important bank
                             during 2004.        in granting loans for this program, and
                                                its portfolio reached VEB 652 thousand
                                          million by the end of 2004, totaling 37,969
                                       granted loans.

                                       Respecting the collection of funds according to
                                       the Housing Policy Act, Banesco widened the
                                       breach with the next following bank by more than
                                       VEB 72 thousand million, therefore consolidating
                                       its leading position in the sector with a portfolio of
                                       VEB 700 thousand million, and achieving during
                                       the second half of 2004 the collection of 75
                                       thousand new savings customers, funding of more
                                       than VEB 181 thousand million and setting a new
                                       record of monthly deposits equivalent to VEB 21
                                       thousand million.
                                                                       The second
                                       Our commitment
                                                                      semester of 2004
                                       for 2005 is to
                                                                represented the consolidation
                                       keep offering our
                                                               of Banesco as the leading bank
                                       customers an
                                                              in management of funds of the
                                       e ff i c i e n t a n d
                                                              Housing Policy Mutual Fund,
                                       innovative
                                                              ranking as the most important
                                       service, which
                                                                brand with the highest level
                                       will result in a
                                                                    of acceptance in the
                                       highly satisfied
                                                                       mortgage loans
                                       population that will at
                                                                          market.
                                       all times prefer the services
                                       of the best bank in the country.



                                       Network Quality
                                       During the last half of 2004 Banesco’s goal was to
                                       maintain the quality levels offered with our customer
                                       service, based on the quality of the infrastructure
                                       of banking agencies, quality in technology and a
                                       wide array of products and services ever oriented
                                       towards satisfying our customers’ needs.

                                       Therefore, with this clear purpose and its impact
                                       on the strengthening of Banesco’s position in the
                                       financial system, the results achieved by our network
                                       of agencies are highlighted as follows:

                                                   Leadership is maintained with
                                Banesco            nationwide network of sales and 364
                        surpassed the goal set      service centers, supported by the
                         for deposits in 2004,        latest technology available in the
                          contributing to the         market and highly-qualified human
                    strengthening of the leadership resources.
                     attained during the year as
                        Number 1 in customer  We renewed the strategy
                        funds and transferred oriented towards the segmentation
                              investments.      of clients according to specific needs
20
                                                                                                                   SECOND HALF 2004
and obtained palpable results in the CD+ and               services tailored to meet clients’ needs, therefore
Premium segments of individuals and in the Small           strengthening customer relations and earning
and Medium Enterprises segment in the corporate            customer fidelity.
segment.

Our micro loans portfolio evidenced a sustainable          Regional Conventions
growth of 146%, maintaining our support of small           In order to strengthen relations and exchange ideas
and medium producers and merchants.                        with our clients, suppliers and affiliates, we have
                                                           continued to organize regional conventions.
New agencies opened in the                                 We have held regional conventions in Mérida,
second half of 2004                                        Puerto La Cruz, Puerto Ordaz, San Cristóbal and
In order to broaden the scope of our service centers       the Sambil Mall in Maracaibo.
in the largest cities of the country, during this period
eight new agencies were opened, where we
continue to offer our clients excellent service quality.   Government Banking Management
                                                           By December 2004 funds from this specialized
The changes made to our network of agencies are            banking increased 45%, which in real terms
the following:                                             reflected deposits of approximately VEB 700
New Agencies:                                              thousand million during the second half of the year.
        Unicentro El Marqués.                             The successful administration of government
        Centro Sambil Maracaibo.                          banking also affected favorably the diversification
        C.C. Hyper Jumbo.                                 of sight and term deposits compared to June 2004,
        C.C. Marina Plaza.                                as well as making new customers.
New service tellers:
        Central El Batey                                  A total 34 new fund trusts were executed,
        Brahma Aragua                                     representing approximately VEB 340 thousand
        Hospital Vargas                                   million by the end of December 2004, and were
        Brahma Guatire.                                   mostly comprised of Management Fund Trusts for
                                                           autonomous government agencies.

Consolidating our Premium                                  New payroll accounts were opened in this segment,
Segment of customers                                       belonging to both old and new customers, and
By December 31, 2004, the total portfolio of               resulting in the incorporation of some 40,000 payroll
customers in this segment remained proportionate           accounts for government employees nationwide.
to the total customer portfolio of the bank (5%),          This process was thoroughly completed via Internet,
and was comprised by a combination of liabilities          since Electronic Accounts were opened in bulk.
70% - 30% concerning term and sight deposits               Throughout the second half of 2004 we were the
respectively. These figures speak of the profitability     leading institution in Government Payment
of this segment of customers.                              Programs.

The total number of customers in this segment is
13,324, receiving personalized customer care from
111 sales executives belonging to the
corresponding department team. The result
is an average product crossover of 4.82
per customer.

During the second semester
of 2004, 87 new Business
Consultants were
certified, guaranteeing
the comprehensive
training of our
executives and
a s a re s u l t
providing




                                                                                                                           21
 SECOND HALF 2004

                            Supporting the                                          Risk Management
                            Petroleum Segment                                       Operative Risk
                            Banesco was the leading supporter of this sector        Â    Launch of a new methodology for operative
                            with a contribution of VEB 30,000 thousand million           risk management nationwide and
                            by means of a syndicated loan of VEB 60,000                  development of a pilot Project: “Identifying
                            thousand million.                                            and managing operative risk.”
                                                                                    Â
                                   Significant new clients were made in the              Training of 300 new Operative Risk
                                          Petroleum Segment and its affiliates,          Delegates nationwide, to be the engines of
                           With              allowing the consolidation of a             identification of operative risk and the design
                       the results of         portfolio of corporate customers           and organization of the first Operative Risk
                    2004, the institution in this sector and the increase                Workshop.
                     was PDVSA’s first of its participation. In order to
                     paying bank of its achieve this goal, it was relevant          Â      Activation of an Operative Risk Committee
                    correspondent bank to know the market, visualize                       and its linking with the Comprehensive Risk
                        agreement.           business opportunities and make               Committee in order to determine priorities
                                          use of the bank’s strength as an                 and make decisions regarding the follow-
                                    institution.                                           up of strategies, events and design of
                                                                                           operative risk policies.
                            The synergy among corporation within this segment
                            has been decisive in the making of new businesses.      Safety of Data
                            Through Banesco Seguros, the purchase by the            Â     Nationwide launch o fan awareness plan
                            banking sector of insurance against all risk and              addressed to our clients, employees and
                            civil responsibility was achieved. This allowed the           shareholders, with the slogan: “Safety of
                            bank to participate in the petro-chemical market,             Data: Reaffirming our Commitment.”
                            which is expected to experience a significant growth    Â
                            in 2005.                                                      Initiation of annual training and nationwide
                                                                                          re-certification regarding Data Safety
                                                                                          Policies.
                            Banesco in the
                            international market                                    Â      Completion of the Data Safety Site, where
                            International banks and activities related to foreign          all data safety policies are to be found as
                            commerce have managed to achieve the goals set                 well as prevention tips for backing up
                            for 2004, with more than USD 150 million in                    information assets.
                            deposits and more than USD 115 million in letters
                            of credit.                                              Â      Design and maintenance of an awareness
                                                                                           plan addressed to Banesco’s employees
                            During the second semester of 2004 the automation              concerning data safety.
                            of services concerning check cashing, deposits in
                            USD and the purchase and sale of travelers’ checks      Â      Continuing processes for the permanent
                            charging the customer’s account was implemented.               security of the technological platform and
                            Likewise, the issuance of debit cards for customers            information assets, and application
                            of Banesco Internacional Panamá was incorporated               of advanced technologies such as
                            to the list of services.                                       biometrics.

                            Moreover, in order to broaden the scope of our          Credit Risk
                            international banks a process was begun which           In a continuous effort to implement the best
                            consists of installing in all Banesco agencies a        practices advised by internationally renowned
                            platform for our international banks, including         brands, Banesco completed the development of
                            Banesco Puerto Rico which now offers savings            a process consisting of internal classification of
                            accounts to its customers.                              credit risk and the design of a first model to be
                                                                                    applied in order to estimate possible losses
                            In August 2004 a new commissions scheme was             ensuing with the business and how to cover
                            defined for savings accounts in USD, as an              such losses.
                            additional effort to improve the corresponding
                            portfolio.                                              For this purpose the best methodological backup
                                                                                    was used in accordance with the regulations of
                            Credit facilities with correspondent banks were         the Basilea II Agreement and the processes of
                            improved, allowing greater ease in the negotiation      continuous training and updating included in the
                            of foreign commerce products.                           general area strategy.

22
                                                                                                                       SECOND HALF 2004
Market and Liquidity Risk




                                                                                            Technology and Processes
As part of the plan for the improvement of market and liquidity risk processes, a
    project for the implantation of price risk was completed with the advice of experts
        in the area. As a result, processes were updated in order to determine the
             limits of exposure to risk and its proper follow-up.

                    Moreover, an induction program was completed which included
                      all personnel of the areas of the bank involved in market and
                          liquidity risk, where the theoretical elements necessary for
                             an adequate management of risk associated with the
                               structure of the balance and the bank’s investment
                                  portfolio were lectured.



                                    Technology and Processes
                                     Innovation
                                      Customer care systems
                                       Website for Affiliates and Patrons: A site
                                       where fund trust clients, whether beneficiaries
                                        of patrons, may perform online transactions,
                                        24 hours a day and 365 days a year.

                                           Credit WorkFlow: An innovative
                                           technological tool supporting credit
                                           processes, with functional improvements
                                           that ease and optimize answering times
                                           offered to our credit customers.

                                           New communication channels: Our
                                           customers may now use a Suggestions
                                           Box, a new technological tool meant to
                                          receive customer ideas concerning their
                                          needs and the improvement of our products.

                                        Empowerment: Automation of new operative
                                       and functional policies in oroder to adequately
                                      empower operative roles.

                                   Migration of the Biztalk Platform for Electronic
                                 Data Interchange to the 2004 version: This
                               platform is the axis of all services concerning electronic
                             data interchange, such as payrolls, domiciliation, automatic
                           payments to suppliers, request of customized bank
                         statements, and others.

                   Supporting Business Executives’ decision making
                 Empowerment: Automation of new operative and functional policies
             in order to adequately empower operative roles.

    Management indicators module for fund trust customer requests: Supporting
analysis and decision-making throughout the process of utilization of resources.

Auditing of services, supported by hand-held equipment allowing the reduction
of assessment time and the increase in productivity of auditing services.

Strategic Planning Comprehensive Program (PIPE), to ease the design,
coordination, conciliation and registration of investment operations.

Technological Support for our Projects Department: A Microsoft case study
The technological platform of the applications supporting the Department of Portfolios
and Projects was successfully substituted, in conformity with the organization’s
                                                                                                                              23
 SECOND HALF 2004
                                               Strategic Planning Strategy. Microsoft
                                               Corporation has determined the implantation


                    Technology and Processes   of this platform in Banesco as a reference case
                                               study for its international clients.

                                               Quality in the development of internal
                                               processes and systems of the
                                               Department of Information and
                                               Processes Technology
                                                     Implementation of Change Management
                                                     Processes in 80% of all critical services.

                                                      Creation of a portal for the administration
                                                      of application requirements to support all
                                                      Systems Departments in order to service
                                                      internal clients.
                                                                                                        Intranet requests:
                                                      Adequacy of the methodological frame in                  Phone requests: 1’05’’ in average.
                                                      all service areas, positively affecting the              Email requests: 4 to 8 hours.
                                                      quality of system products and all                       Web requests: 1 minute in average.
                                                      methodologies within the bank.
                                                                                                        70% of all requests are answered when the first
                                               Business Support Systems and compliance                  contact is made, close to the international standard
                                               with Credit Card Franchise regulations                   of 80%.
                                               On Demand Reports: Reduction of stationery costs
                                               by using electronic reports.                             Processes:
                                                                                                        Design and development of service and internal
                                               Migration of the Collection Management System            customer care model.
                                               to a new (iCS) version: Defining customized
                                               collection strategies for each area of business.         Design of processes for incident and problem
                                                                                                        management.
                                               Business Support Systems and Compliance
                                               with the regulations of the BCV, CADIVI and
                                               Sudeban concerning Fund Trusts, Treasury                 Cash Operations
                                               and Capital Markets                                      Securities and Cash
                                               ROCA (Regulation Process): automates processes           By the closing of 2004 our own figures of cash sales
                                               related to Sudeban (reports, files and requests) and     to nationwide banks tripled compared to 2003,
                                               allows the optimization of information delivery times.   representing a reduction of costs of approximately
                                                                                                        VEB 295 million.
                                               Improvement of automated processes related
                                               to the issuance of bonds for the fourth issuance         Back Office Automation
                                               of USD Bonds for sale.                                   The Project for the automation of remittance and
                                                                                                        delivery of transfers among national banks was
                                               Implantation of the Integrated Fund Trusts               successfully completed, addressed to orders of
                                               System (GESTOR) for collective products.                 transfer received through BanescOnline.

                                               Support Systems for our Employees                        As a result of the completion of this Project, a great
                                               Technology for our employees:                            part of the remittance of transfers to other banks and
                                               A new technological platform, the Corporate Intranet,    its reception is automated, therefore the process is
                                               is available to all Banesco employees. This new          eased, costs are reduced and the quality of the service
                                               platform is meant to satisfy employees’ needs            is improved. This service is in great demand by our
                                               concerning self-management and self-service.             customers.

                                               Service Desk                                             Advanced Electronic Clearing
                                               Internal Clients:                                        Electronic Clearing Chamber Project: Banesco
                                               Of a total 81,863 events, incidents and requests,        led this pilot project together with another 5 banking
                                               95% were provided with solutions, thus supporting        institutions (Banco Venezolano de Crédito, Helm Bank
                                               the operation and continuity of business.                de Venezuela, Bolívar Banco, Banvalor and Banpro).

                                               Incorporation of new service channel (Intranet):         Installation of Users Access Platform: The UAP
                                               A significant improvement was made to the waiting        shall serve as a messenger for data sent and received
                                               times to process.                                        between Banesco and the BCV.
24
 SECOND HALF 2004


                    Balance Sheets
                    As of December 31, 2004 and June 30, 2004
                    Stated in million VEB




                                                                                    Operatios in   Consolidated     Operations   Consolidated
                                                                                     Venezuela     with Foreign   in Venezuela   with Foreign
                                                                                                      Branches                      Branches

                                                                                      Dec-2004       Dec- 2004      Jun-2004       Jun-2004
                    ASSETS


                    CASH AND DUE FROM BANKS                                          1,182,132       1,186,743       869,186        987,023
                    Cash                                                                164,120        164,129        102,050        102,059
                    Central Bank of Venezuela                                           896,395        896,395        632,848        632,848
                    Local banks and other financial institutions                          9,642           9,642          4,804          4,804
                    Foreign banks                                                        12,758         17,361         20,938        138,767
                    Notes receivable                                                     99,219         99,219        108,547        108,547
                    Provision for bank accounts                                               -2             -2             -2             -2
                    SECURITY INVESTMENTS                                             3,611,965       3,988,053      2,472,986      2,682,814
                    Investments in Central Bank                                       2,106,806       2,126,496       897,676        928,080
                    Security investments for negotiation                                      0              0              0              0
                    Available for sale security investments                              39,028         40,497         40,118         41,586
                    Security investments held until maturity                          1,409,692       1,762,851      1,479,655      1,655,849
                    Other security investments                                           50,142         51,912         49,526         51,288
                    Limited availability investments                                      6,296           6,296          6,012          6,012
                    CREDIT PORTFOLIO                                                 2,005,878       2,022,914      1,212,562      1,238,632
                    Outstanding credits                                               1,988,359       2,014,405      1,199,642      1,226,639
                    Restructured credits                                                 85,883         85,883         95,562         95,562
                    Past due credits                                                     23,317         24,998         34,219         43,729
                    Credits in litigation                                                   768            768           3,248          3,248
                    Provision for credit portfolio                                       -92,450       -103,141       -120,109       -130,545
                    INTEREST AND COMMISSIONS RECEIVABLE                                 76,141          80,682         87,376         92,838
                    Interest receivable from cash and cash equivalents                        0              0              0            870
                    Interest receivable from security investments                        51,097         54,826         64,675         68,042
                    Interest receivable from credit portfolio                            35,775         36,588         34,510         35,735
                    Commissions receivable                                                2,613           2,613          2,325          2,325
                    Provision for interest receivable and other                          -13,345        -13,345        -14,134        -14,134
                    INVESTMENTS IN SUBSIDIARY COMPANIES, AFFILIATES, AND BRANCHES      152,918          16,748       115,006          13,709
                    Investments in subsidiary companies, affiliates and branches        153,471         17,301        115,406         14,109
                    Provision for investments in subsidiary companies, affiliates          -553           -553           -400           -400
                    and branches
                    PROPERTY RECEIVED IN LIEU OF PAYMENT                                  8,236          8,236         13,444         13,444
                    PROPERTY IN USE                                                    347,157        347,506        325,457        325,815


                    OTHER ASSETS                                                       277,398        277,401        257,883        258,046


                    Total assets                                                     7,661,825       7,928,283      5,353,899      5,612,322
                    Contingent Debtor Accounts                                          139,843        215,114        146,006        168,978
                    Trust Assets                                                      4,092,881       4,092,881      3,100,902      3,100,902
                    Other Trusts Assignments                                             33,619         33,619         33,949         33,949
                    Debtor Accounts Due to Trust Assignments (FMH)                      700,243        700,243        598,844        598,844
                    Other Debtor Accounts from FMH                                        5,804           5,804          5,613          5,613
                    Other Debtor Memorandum Accounts                                 11,545,938      11,552,867      8,191,836      8,203,282
                    Other Debtor Book Accounts                                           48,989         48,989         46,346         46,346
26
                                                                                                                                                    SECOND HALF 2004
Balance Sheets




                                                                                                                                       Balance Sheets
As of December 31, 2004 and June 30, 2004
Stated in million VEB

                                                                             Operations   Consolidated     Operations   Consolidated
                                                                           in Venezuela   with Foreign   in Venezuela   with Foreign
                                                                                             Branches                      Branches


                                                                             Dec-2004       Dec-2004       Jun-2004       Jun-2004
LIABILITIES AND STOCKHOLDERS' EQUITY


LIABILITIES
DEPOSITS FROM CLIENTS                                                        6,439,633      6,657,073      4,270,226      4,460,672
Deposits in current accounts-                                                 3,056,935      3,056,935      2,107,911      2,107,911
Non-remunerated checking accounts                                             1,556,431      1,556,431      1,029,504      1,029,504
Remunerated checking accounts                                                 1,500,504      1,500,504      1,078,407      1,078,407
Other demand liabilities                                                       100,846        100,846        163,773        163,773
Savings deposits                                                              1,337,050      1,459,172       885,053        998,573
Time deposits                                                                 1,943,990      2,039,308      1,112,613      1,189,539
Securities issued by the institution                                               773            773            838            838
Restricted deposits from clients                                                    39             39             38             38
DEPOSITS FROM CLIENTS AND OBLIGATIONS WITH BANAP                                   161            161          6,325          6,325
OTHER FINANCING OBTAINED                                                        65,938       122,541          51,144       113,328
Liabilities with local financial institutions up to one year                    43,812         43,133         36,121         34,488
Liabilities with foreign financial institutions up to one year                       0              0              0              0
Liabilities with foreign financial institutions over one year                   19,305         76,588         11,526         75,343
Liabilities for other financing up to one year                                       0              0              0              0
Obligations for other financing over one year                                        0              0              0              0
Liabilities for other financing over than one year                                2,821          2,821          3,497          3,497
OTHER FINANCIAL OBLIGATIONS                                                     24,685         24,685         25,723         25,723
INTEREST AND COMMISSIONS PAYABLE                                                 8,325          8,649          8,699          8,892
Expenses payable due to deposits from clients                                     8,203          8,241          8,591          8,625
Expenses payable due to deposits from clients and liabilities with BANAP             0              0              0              0
Expenses payable due to other financing obtained                                    55             55             55             55
Expenses payable due to other financial obligations                                 67            353             53            213
ACCRUALS AND OTHER LIABILITIES                                                165,617        157,708        171,263        176,863


Total Liabilities                                                            6,704,358      6,970,816      4,533,381      4,791,804


STOCKHOLDERS' EQUITY
Capital paid-in                                                                427,996        427,996        427,996        427,996
Non-capitalized equity contributions                                                 0              0              0              0
Capital reserves                                                               178,235        178,235        137,515        137,515
Accumulated income                                                             374,042        374,042        287,963        287,963
Non-realized gain or (loss) on available for sale security investments          11,978         11,978         12,771         12,771
Treasury stock                                                                  -34,784        -34,784        -45,727        -45,727


Total stockholders' equity                                                    957,467        957,467        820,518        820,518


Total liabilities and stockholders' equity                                   7,661,825      7,928,283      5,353,899      5,612,322




                                                                                                                                                                 27
 SECOND HALF 2004


                    Statements of Earnings

Balance Sheets      As of December 31, 2004 and June 30, 2004
                    Stated in million VEB
                                                                                                   Operations
                                                                                                 in Venezuela

                                                                                                   Dec-2004
                                                                                                                Consolidated
                                                                                                                with Foreign
                                                                                                                   Branches
                                                                                                                  Dec-2004
                                                                                                                                 Operations
                                                                                                                               in Venezuela

                                                                                                                                 Jun-2004
                                                                                                                                              Consolidated
                                                                                                                                              with Foreign
                                                                                                                                                 Branches
                                                                                                                                                Jun-2004

                    FINANCIAL REVENUES                                                              420,724        435,017        342,849        350,217
                    Revenues from cash and cash equivalents                                              261            262            309          1,865
                    Revenues from security investments                                               242,078        253,671        200,691        204,166
                    Revenues from credit portfolio                                                   159,301        162,000        126,114        128,450
                    Revenues from other accounts receivable                                           19,084         19,084         15,535         15,535
                    Revenues from investments in subsidiary companies, affiliates and branches             0              0              0              0
                    Other financial revenues                                                               0              0            201            201
                    FINANCIAL EXPENSES                                                              135,353        136,970        106,515        108,179
                    Expenses due to deposits from clients                                            130,361        131,576        101,629        102,679
                    Expenses due to obligations with BCV                                                   0              0              0              0
                    Expenses due to deposits from clients and obligations with BANAP                     329            329            329            329
                    Expenses due to other financing obtained                                             439            842            181            795
                    Expenses due to other financial obligations                                           34             34             38             38
                    Other financial expenses                                                           4,190          4,190          4,338          4,338
                    GROSS FINANCIAL MARGIN                                                          285,372        298,047        236,335        242,038
                    INCOME FROM RECOVERED FINANCIAL ASSETS                                           15,152         15,152         10,523         10,523
                    EXPENSES DUE TO UNCOLLECTIBILITY OF CREDITS AND OTHER                                                                         20,000
                    ACCOUNTS RECEIVABLE                                                                 350            550         20,000        232,561
                    NET FINANCIAL MARGIN                                                            300,174        312,649        226,857         317,066
                    Other operating income                                                           191,905        170,478        310,158         32,406
                    Other operating expenses                                                          11,172         11,215         21,708       517,220
                    FINANCIAL INTERMEDIATION MARGIN                                                 480,907        471,912        515,308        229,198
                    TRANSFORMATION EXPENSES                                                         247,167        248,377        228,658          89,672
                    Personnel expenses                                                               107,630        107,873         89,455        127,765
                    Administrative and general expenses                                              124,552        125,518        127,442          9,158
                    Contributions to Deposit Guarantee and Bank Protection Fund                       10,961         10,961          9,158          2,604
                    Contributions to Superintendency of Banks and Other Financial Institutions         4,024          4,024          2,604       288,022
                    GROSS OPERATING MARGIN                                                          233,740        223,535        286,649           6,111
                    Income from adjudicated goods                                                      3,981          3,981          6,111            694
                    Income from sundry accounts                                                          768          2,226            594          6,343
                    Expenses due to realizable property                                                5,251          5,251          6,343         49,598
                    Expenses due to sundry accounts                                                   23,878         15,131         48,126       238,887
                    NET OPERATING MARGIN                                                            209,359        209,360        238,887               0
                    Extraordinary income                                                                   0              0              0          1,576
                    Extraordinary expenses                                                             3,095          3,095          1,576       237,311
                    GROSS INCOME BEFORE TAXES                                                       206,264        206,264        237,311          2,516
                    INCOME TAXES                                                                      2,665          2,665          2,516        234,794
                    NET INCOME                                                                      203,599        203,599        234,794

                    APPLICATION OF NET INCOME                                                                                                      46,959
                    Legal reserve                                                                     40,720         40,720         46,959          2,348
                    LOSEP Contribution                                                                 2,036          2,036          2,348        184,666
                    Accumulated income                                                               160,131        160,131        184,666




                                                    Principal Financial Indicators
                                                                                                                        Dec-04 Dec-03
                                                    Equity + Operative Management / Total Assets                          12.50  15.03
                                                    Non-Productive Assets / Equity + Operative Management                154.11 159.21
                                                    Loan Portfolio Provisions / Gross Loan Portfolio                       4.41  10.87
                                                    Non Accrual Loans / Gross Loan Portfolio                               1.15   3.39
                                                    Personnel Expenses + Operative Expenses/ Average Productive Assets * 10.27   15.52
                                                    Personnel Expenses + Operative Expenses / Financial Income *          58.81  63.43
                                                    Net Results / Average Assets *                                         7.87   7.34
                                                    Net Results / Average Equity *                                        53.90  44.14
                                                    Availability / Customer Funds                                         18.36  21.04
                                                    Availability + Investment in Securities / Customer Funds              51.68  57.81
28                                                  * Annual Percentages
                                                                                                                                     SECOND HALF 2004
           Balance
Social- 2004
As of 1998
Stated in VEB




                                                                           More
ASSETS

Solidarity (Capital and Regional)                        1.012.925.000
Vargas State                                                816.958.000


                                                                           than the
Apure & Amazonas States                                     145.967.000
Merida State                                                 50.000.000



                                                                           sum of
Social Knowledge Enterprise Network "IESA"                140.000.000

"FUNDANA" Foundation                                      907.582.000



                                                                           its parts
Words for Venezuela                                      2.814.143.000
Year 2002                                                    592.911.000
Year 2004                                                  2.221.232.000

"Fe y Alegria" Foundation                                4.884.142.000
                                                                           Throughout our existence as a Venezuelan
Trust Investment "Fe y Alegria" Foundation               5.333.332.000     enterprise, the promotion of education has become
"FUNDACUID" Organization                                    29.000.000     one of our greatest causes. When promoting our
                                                                           corporate social responsibility policies we are stating
National Park "Los Roques"                                  20.000.000
                                                                           that it is necessary to build the country. Therefore,
Vargas Hospital                                             17.749.000     our social commitment extends to our
Hospital Ortopédico Infantil “Children´s Hospital”          31.644.000
                                                                           stockholders, our 7,000 employees and their
                                                                           families, our 3,000,000 clients, our suppliers and
House of Art and Occupations "Jacobo Borges"                11.422.000     the rest of the community.
Donations of Computer Equipment                           293.198.000
                                                                           The creation of the Banesco Group of Volunteers
Other Contributions                                      3.525.467.000
Alliance for a Venezuela without Drugs                        39.513.000   is our pride and a motivation to participate in
Central University of Venezuela Contributions                 40.000.000   social issues. We strive to be corporate citizens
"Fair of Cantaura" Foundation                                 48.000.000   by creating awareness and stimulating solidarity
"Claret Homes" Foundation                                     20.000.000
"Children´s Museum" Foundation                                50.000.000   towards others.
"Let us Unite to the World for the Life" Foundation           20.000.000
Sponsorships                                                 290.724.000
Other Contributions                                        3.017.230.000   We wish to present our accounts to Venezuela
                                                                           and our social associates: Fe y Alegría Foundation,
"Andres Bello" Catholic University Scholarships             16.030.000     Fundana Foundation, the AVEC, the Don Bosco
Social Benefits                                                            Housing Program, Casarte, the IESA, the UCAB,
Noncontractual for BANESCO employees                     6.855.784.000     Fundaexcelencia, the Excelsior Foundation, the
Restaurant-Cafeteria Subsidy                               5.312.689.000
Medical Service                                            1.062.129.000   Children’s Museum, the Damas Salesianas
Employees Parking Subsidy                                    480.966.000   Association, the Venezuelan Red Cross, the
Contribution Corporative Voluntary Service                  13.277.000
                                                                           Foundation against Child Paralysis and the
Voluntary Service Training and Formation                      3.853.000    Venezuelan Anticancer Society.
Special projects                                              3.418.000
Workshops of complementary formation                          6.006.000

TOTAL ASSETS                                            25.905.695.000

Order Accounts                                           3.670.839.000
Cultural Events (Antidrug Campaigns)                       2.972.853.000
Prevention and Control of the Legitimation of Capital        697.986.000

LIABILITIES                                              5.333.332.000

Accounts Payable Due to "Fe y Alegria" Organization       5.333.332.000

EQUITY                                                  20.572.363.000

Contribution of the BANESCO Organization                 20.128.363.000
Contribution of the public                                  444.000.000

TOTAL LIABILITIES AND EQUITY                            25.905.695.000

Order Accounts                                            3.670.839.000
                                                                                                                                                 29
 SECOND HALF 2004



                          Management
     International Area   Verónica Cubek
                          General Manager, International Bank
                          Telf. (58212) 501.9940
                          e-mail: veronica_cubek@banesco.com

                          José Antonio Oliveros
                          Vicepresident Treasurer International
                          Telf. (58212) 501-8414
                          e-mail: jose_antonio_oliveros@banesco.com

                          Rafael Eduardo Padrón
                          Correspondent Banking Division, Manager
                          Telf. (58212) 501-9943
                          e-mail: rafael_padron@banesco.com

                          Rosa Mariela Padrino
                          International Treasurer Manager
                          Telf. (58212) 501-9108
                          e-mail: rosa_padrino@banesco.com

                          Manuel Cardone
                          International Bussines Division, Manager
                          Telf. (58212) 501-7255
                          e-mail:
                          manuel_cardone@banesco.com

                          Sonia Báez
                          International Operations Division, Manager
                          Telf. (58212) 501-7754
                          e-mail: sonia_baez@banesco.com



                          Subsidiaries
                          Banesco International Bank Inc., Panamá
                          Banesco International Bank Corp., Puerto Rico

                          Branches
                          Banesco Banco Universal C.A., Sucursal Panamá

                          Representative Office
                          Banesco Banco Universal C.A., Bogotà Representative Office

                          Affiliated Bank
                          Banco Uniòn C.A., Sao Paulo
                          Eduardo Loures, President
                          Telf (55 11) 3253-3722
                          e-mail: loures@bancunion.com.br



                          Mailing Address:     Banesco, Banco Universal C.A.
                                               8424 NW, 56 Street,
                                               Suite CCS00283,
                                               Miami, Florida 33166, U.S.A.




30
                                                                                                                       SECOND HALF 2004
                                                                                                 Correspondent Banks
Argentina:     Banco de la Provincia de Buenos Aires, Banco de la Nación Argentina, Banco
               Galicia, Banco Societé Generale S.A.
Australia:     ANZ Bank.
Austria:       Bank Austria Creditanstalt A.G.
Belgium:       Fortis Banque SA/NV.
Bolivia:       Banco Unión S.A., Banco Do Brasil.
Brasil:        Banco Bradesco, BICBANCO, Banco Do Brasil, Banco Itau S.A., Unibanco.
Canada:        Toronto Dominion Bank, American Express Bank.
Chile:         Banco de Chile, Banco del Estado de Chile, Bci Banco de Crédito e Inversiones.
China:         American Express Bank, Commerzbank A.G., OCBC Bank.
Colombia:      Banco de Bogotá, Bancafé, Bancolombia, Bancoldex.
Costa Rica:    Banco Nacional de Costa Rica, Banco de Costa Rica.
Curacao:       Maduro & Curiel’s Bank.
Denmark:       Danske Bank.
Ecuador:       Banco del Pichincha, Banco del Pacífico, PRODUBANCO.
El Salvador:   Banco Cuscatlán.
England:       The Royal Bank of Scotland, HSBC Bank P.L.C., Wachovia Bank
Finland:       Nordea Bank.
France:        Credit Industriel et Comercial, BNP Paribas Group, Banque Sudameris,
               Societe Generale
Germany:       Commerzbank A.G., American Express Bank Ghmb.
Guatemala:     Banco Industrial, Banco GT Continental.
Holand:        ABN Amro Bank, ING Bank
Honduras:      Banco Atlántida
Hong Kong:     HSBC Bank, American Express Bank, Wachovia Bank
India:         American Express Bank, Wachovia Bank
Ireland:       Bank of Ireland
Israel:        Bank Leumi Le Israel, Bank Hapoalim B.M.
Italy:         Banca Nazionale del Lavoro, Capitalia Spa, Unicredito Italiano Insa BCI Spa,
Japan:         The Bank of Tokyo and Mitsubischi Bank, american Express Bank, Wachovia Bank.
Korea:         American Express Bank, Wachovia Bank, KEB Bank
Luxemburg:     Kredietbank S.A.
Malaysia:      Bumiputra Commerce Bank Berhad, Public Bank, OCBC Bank.
Mexico:        Banamex, S.A.
Norway:        Nordea Bank.
New Zealand:   ANZ Bank
Panama:        Banesco International Bank Inc., Banesco Banco Universal, Metrobank, HSBC Bank.
Paraguay:      Banco Do Brasil.
Peru:          Banco de Crédito del Perú, Banco Financiero, Interbank
Portugal:      Banco Espirito Santo S.A., Banco Totta & Acores.
Puerto Rico:   Banesco International Bank Corp., Banco Popular de Puerto Rico
Singapore:     OCBC Bank.
Spain:         Banco Sabadell, Commerzbank A.G., Confederación Española de Cajas de Ahorro
Sweden:        Nordea Bank.
Switzerland:   U.B.S. Credit Swiss First Boston, HSBC Private Bank, Nordea Bank.
U.S.A.:        American Express Bank, The International Bank of Miami, JP Morgan Chase Bank,
               Wachovia Bank, Regions Bank, Citibank N.A.
Uruguay:       Banco de la Provincia de Buenos Aires, Banco ACAC.




                                                                                                                                 31
 SECOND HALF 2004

                                                     International Banking Products

                    International Banking Products   International Checking Account Plan
                                                     Non-Active Commercial Account

                                                     Commercial Checking Account Plan
                                                     Active Account

                                                     Personal Checking Account Plan

                                                     International Savings Account Plan
                                                     • All accounts bear interest on daily balances.
                                                     • Deposit Certificates.
                                                     • Free Life Insurance.
                                                     • Fund transfers to other banks in other countries.
                                                     • Traveler Checks.
                                                     • And many other services.

                                                     Letters of Credit for Imports anywhere in the world.

                                                     Confirmation of Letters of Credit for Exports.

                                                     Money Orders anywhere in the world.

                                                     International Financing Operations.




                                                     Main Offices
                                                     Ciudad Banesco, Avenida Principal de Colinas de Bello Monte,
                                                     entre calles Sorbona y Lincoln, Municipio Baruta.
                                                     Caracas - Venezuela
                                                     Telephone Banking: 0500BANCO24 - 0500 226.26.24
                                                     Master Phone: (0212) 501.71.11
                                                     www.banesco.com
32

				
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