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EECC IFRS 2007.12 en Ingles vdef

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									Consolidated financial statements in accordance with
International Financial Reporting Standards
as of December 31, 2007, and 2006,
jointly with the Independent Auditors’ Report
BANCO PATAGONIA S.A.

  CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL
                  REPORTING STANDARDS AS OF DECEMBER 31, 2007, AND 2006
           (Translation of financial statements originally issued in Spanish – See Note 44)

                                                 TABLE OF CONTENTS

                                                                                                                  Page
Independent Auditors’ Report                                                                                        -
Cover page                                                                                                         -
Consolidated statements of income                                                                                  1
Consolidated balance sheets                                                                                        3
Consolidated statements of changes in shareholders’ equity                                                         6
Consolidated statements of cash flows                                                                              8
Note 1   Brief description of the Bank                                                                             10
Note 2   Capital stock                                                                                             11
Note 3   Basis of presentation of the financial statements and accounting policies applied                         14
Note 4   Segment reporting                                                                                         31
Note 5   Interest income and similar ones                                                                          36
Note 6   Interest expense and similar ones                                                                         36
Note 7   Commission income and expense                                                                             36
Note 8   Gains (losses) on financial assets held for trading                                                       37
Note 9   Gains (losses) on financial assets available for sale                                                     37
Note 10 Gains (losses) on financial assets measured at fair value from their initial recognition                   37
Note 11 Gains (losses) on financial assets held to maturity                                                        38
Note 12 Other operating income                                                                                     38
Note 13 Personnel expenses                                                                                         38
Note 14 Other operating expenses                                                                                   39
Note 15 Loss on uncollectibility of other receivables and provisions for miscellaneous risks                       39
Note 16 Income tax                                                                                                 40
Note 17 Earnings per share                                                                                         42
Note 18 Distribution of earnings and restrictions                                                                  43
Note 19 Cash and due from the B.C.R.A. (Central Bank of Argentina)                                                 45
Note 20 Due from other financial institutions                                                                      46
Note 21 Financial assets held for trading, measured at fair value from their initial recognition, available for    47
         sale and held to maturity
Note 22 Derivative instruments – Forward transactions without delivery of the underlying                           49
Note 23 Loans                                                                                                      50
Note 24 Other receivables                                                                                          53
Note 25 Bank premises and equipment, and other assets                                                              53
BANCO PATAGONIA S.A.

  CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL
                  REPORTING STANDARDS AS OF DECEMBER 31, 2007, AND 2006
           (Translation of financial statements originally issued in Spanish – See Note 44)

                                         TABLE OF CONTENTS (Continued)


                                                                                    Page


Note 26 Other assets                                                                 55
Note 27 Financing facilities received from financial institutions                    55
Note 28 Deposits                                                                     55
Note 29 Subordinated corporate bonds                                                 56
Note 30 Other liabilities                                                            57
Note 31 Provisions for miscellaneous risks                                           57
Note 32 Shareholders’ equity reserves                                                58
Note 33 Minimum capital requirements                                                 59
Note 34 Additional information of the statement of cash flows                        61
Note 35 Related party information                                                    61
Note 36 Restricted assets                                                            63
Note 37 Loans and deposits concentration                                             64
Note 38 Fair value of financial instruments                                          64
Note 39 Analysis of maturities of assets and liabilities                             66
Note 40 Risk management policy                                                       69
Note 41 Mutual fund custodian                                                        90
Note 42 Corpus assets                                                                90
Note 43 Financial agent of the Province of Río Negro                                 91

Note 44 Explanation added for translation in English                                 92
INDEPENDENT AUDITORS´ REPORT

Translation into English – Originally issued in Spanish
See Note 44 to the Financial Statements


To the Directors and Shareholders of
BANCO PATAGONIA S.A.
Tte. Gral. J. D. Perón 500
City of Buenos Aires


We have audited the accompanying consolidated balance sheets of BANCO PATAGONIA S.A. and its
subsidiaries as of December 31, 2007, and the related consolidated statements of income, changes in
equity and cash flows for the year then ended, and a summary of significant accounting policies and
other explanatory notes.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards. This responsibility includes: designing,
implementing and maintaining internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error; selecting
and applying appropriate accounting policies; and making accounting estimates that are reasonable in
the circumstances.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors' judgement, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion

In our opinion, the financial statements mentioned in the first paragraph, present fairly, in all material
respects, the consolidated financial position of BANCO PATAGONIA S.A. with its subsidiaries as of
December 31, 2007, and of its financial performance and its cash flows for the year then ended, in
accordance with International Financial Reporting Standards.




City of Buenos Aires,
        march 27, 2008


                                      PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.
                                             Member of Ernst & Young Global




                                                        ANDREA N. REY
                                                           Partner
                                   BANCO PATAGONIA S.A.

                                            Registered office:
              Teniente Gral. Juan D. Perón 500 – City of Buenos Aires – Republic of Argentina
    Main business activity: Commercial bank               C.U.I.T. (Argentine tax identification number):
                                                                          30 - 50000661 - 3

                                     Incorporation date: May 4, 1928

                                                   (1) Of the articles of incorporation: 09/18/1928
                                       Date
Registration with the Buenos
                                                   (2) Of the last amendment: 08/14/07
Aires City Public Registry of
         Commerce                                  Stock Corporations Book: 36
                                       Book
                                                   Number: 13,424

                      Expiry date of the articles of incorporation: August 29, 2038

                                           Fiscal year No. 84
       Beginning date: January 1, 2007                           Closing date: December 31, 2007
                                      Capital structure (See note 2)
  Number and characteristics of outstanding                          In Argentine pesos
                  shares                                   Subscribed                   Paid-in
748,155,678 book-entry shares of common stock of
                                                          748,155,678                    748,155,678
 ARS 1 face value and entitled to one vote each
BANCO PATAGONIA S.A.


                                CONSOLIDATED STATEMENTS OF INCOME
                        FOR THE YEARS ENDED DECEMBER 31, 2007, AND 2006
               (Translation of financial statements originally issued in Spanish – See Note 44)

                                 (Figures stated in thousands of Argentine pesos)




                      STATEMENT OF INCOME                                         NOTE   12/31/2007     12/31/2006



Interest income and similar ones                                                   5       438,107         341,907
Interest expense and similar ones                                                  6     (175,016)       (144,024)
Net interest income and similar ones                                                       263,091         197,883

Commission income                                                                  7      295,933         218,798
Commission expense                                                                 7      (58,159)        (42,634)
Net commission income                                                                     237,774         176,164

Gains (losses) on financial assets held for trading                                8       31,514           83,082
Gains (losses) on financial assets available for sale                              9       29,635           22,671
Gains (losses) on financial assets measured at fair value from their
initial recognition                                                                10      99,763           76,538
Gains (losses) on financial assets held to maturity                                11           -              930
Other operating income                                                             12      41,685           21,638


                    TOTAL OPERATING INCOME                                                703,462         578,906



Net recoveries of loans                                                            23       4,750           46,483


                 TOTAL OPERATING INCOME, NET                                              708,212         625,389




          Andrés G. Prida                           Rubén M. Iparraguirre                   Jorge G. Stuart Milne
       Administration Manager                     General Assistant Manager                      Chairman
         Accounting Area                        Administration and Finance Area


                                                                                                                     1
    BANCO PATAGONIA S.A.


                                     CONSOLIDATED STATEMENTS OF INCOME
                             FOR THE YEARS ENDED DECEMBER 31, 2007, AND 2006
                    (Translation of financial statements originally issued in Spanish – See Note 44)

                                     (Figures stated in thousands of Argentine pesos)



                      STATEMENT OF INCOME                                   NOTE      12/31/2007         12/31/2006



Personnel expenses                                                            13      (221,581)           (168,457)
Depreciation of bank premises and equipment, and other                        25       (14,523)            (15,673)
Loss on uncollectibility of other receivables and provisions for
                                                                              15        (9,364)                (279)
miscellaneous risks
Other operating expenses                                                      14      (242,350)           (184,642)


                  TOTAL OPERATING EXPENSES                                            (487,818)           (369,051)


                        OPERATING INCOME                                               220,394              256,338


                  INCOME BEFORE INCOME TAX                                             220,394              256,338



Income tax, net                                                               16       (79,106)            (87,061)


                   NET INCOME FOR THE YEAR

Attributable to:
  The parent’s shareholders                                                            141,288              169,277
  Minority interest (see note 3.1)                                                       -                   -

Earnings per share
Basic earnings per share                                                      17        0.2001               0.2515
Diluted earnings per share                                                    17        0.2001               0.2515

    The accompanying notes 1 through 44 are an integral part of these consolidated financial statements.




               Andrés G. Prida                          Rubén M. Iparraguirre                     Jorge G. Stuart Milne
            Administration Manager                    General Assistant Manager                        Chairman
              Accounting Area                       Administration and Finance Area


                                                                                                                          2
BANCO PATAGONIA S.A.


                                     CONSOLIDATED BALANCE SHEETS
                                    AS OF DECEMBER 31, 2007, AND 2006
                (Translation of financial statements originally issued in Spanish – See Note 44)

                                 (Figures stated in thousands of Argentine pesos)




                                ASSETS                                      NOTE   12/31/2007 12/31/2006



Cash and due from the Central Bank of Argentina                               19      934,420     684,619
Due from other financial institutions                                         20      239,941     167,121
Financial assets held for trading                                             21       58,203      57,729
Financial assets measured at fair value from their initial recognition        21    1,246,615     872,913
Financial assets available for sale                                           21      350,195     443,353
Financial assets held to maturity                                             21            -      13,390
Loans                                                                         23    3,729,213   2,703,721
Other receivables                                                             24      175,948     149,128
Bank premises and equipment, and other                                        25      149,881     170,211
Other assets                                                                  26       25,978      33,050


                           TOTAL ASSETS                                             6,910,394   5,295,235




          Andrés G. Prida                           Rubén M. Iparraguirre                  Jorge G. Stuart Milne
       Administration Manager                     General Assistant Manager                     Chairman
         Accounting Area                        Administration and Finance Area


                                                                                                                   3
BANCO PATAGONIA S.A.



                                     CONSOLIDATED BALANCE SHEETS
                                    AS OF DECEMBER 31, 2007, AND 2006
                (Translation of financial statements originally issued in Spanish – See Note 44)

                                  (Figures stated in thousands of Argentine pesos)



                              LIABILITIES                                   NOTE   12/31/2007 12/31/2006



Financing facilities received from financial institutions                     27      217,406         93,815
Deposits                                                                      28    4,734,564      3,668,775
Subordinated corporate bonds                                                  29      154,134        200,292
Deferred tax liabilities                                                      16        5,246         13,294
Other liabilities                                                             30      373,188        213,582
Provisions for miscellaneous risks                                            31       43,865         34,855


                         TOTAL LIABILITIES                                         5,528,403      4,224,613




          Andrés G. Prida                            Rubén M. Iparraguirre                     Jorge G. Stuart Milne
       Administration Manager                      General Assistant Manager                        Chairman
         Accounting Area                         Administration and Finance Area


                                                                                                                       4
BANCO PATAGONIA S.A.


                                    CONSOLIDATED BALANCE SHEETS
                                   AS OF DECEMBER 31, 2007, AND 2006
               (Translation of financial statements originally issued in Spanish – See Note 44)


                                (Figures stated in thousands of Argentine pesos)



                   SHAREHOLDERS’ EQUITY                                NOTE      12/31/2007      12/31/2006



Capital stock                                                             2        748,156           673,156
Additional paid- in capital                                               2        217,191                 -
Unappropriated retained earnings                                                   223,950           237,338
Reserve for financial instruments available for sale                     32         31,942            54,214
Reserve for conversion differences                                       32            313               151
Legal reserve                                                            32        160,439           105,763


     SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO THE
                                                                                 1,381,991         1,070,622
             PARENT’S SHAREHOLDERS

              MINORITY INTEREST (see note 3.1)                                       -                 -


TOTAL SHAREHOLDERS’ EQUITY (as per related statement)                            1,381,991         1,070,622


     TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                  6,910,394         5,295,235


The accompanying notes 1 through 44 are an integral part of these consolidated financial statements.




          Andrés G. Prida                          Rubén M. Iparraguirre                      Jorge G. Stuart Milne
       Administration Manager                    General Assistant Manager                         Chairman
         Accounting Area                       Administration and Finance Area


                                                                                                                      5
 BANCO PATAGONIA S.A.


                                                          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
                                                                   FOR THE YEARS ENDED DECEMBER 31, 2007, AND 2006
                                                           (Translation of financial statements originally issued in Spanish – See Note 44)

                                                                                 (Figures stated in thousands of Argentine pesos)
                                                                                            Non-capitalized
                                                                                                                                Reserve for       Reserve for financial
                                                                                             contributions     Legal reserve                                               Unappropriated
                              Changes                                   Capital stock (1)                                        conversion      instruments available                            Total
                                                                                            Additional paid-        (3)                                                   retained earnings
                                                                                                                               differences (3)         for sale (3)
                                                                                              in capital (1)
Balances as of January 1, 2007                                               673,156                     -           105,763              151                  54,214               237,338         1,070,622
Unrealized gains (losses) on financial instruments available for sale               -                    -                 -                 -                (34,264)                    -          (34,264)
Foreign currency conversion                                                         -                    -                 -              249                        -                    -                 249
Tax effect on net gains (losses) on financial instruments available
for sale                                                                            -                    -                 -                 -                 11,992                     -               11,992
Tax effect on the foreign currency conversion                                       -                    -                 -              (87)                       -                    -                 (87)
Net income for the year directly recognized in shareholders’ equity                 -                    -                 -              162                 (22,272)                    -          (22,110)
Net income for the year                                                             -                    -                 -                 -                       -              141,288          141,288
Total net income for the year                                                       -                    -                 -              162                 (22,272)              141,288          119,178
Distribution of unappropriated retained earnings, as approved by the
Regular Shareholders’ Meeting held on 04/24/07 (2)
      Legal reserve                                                                 -                    -            54,676                 -                       -             (54,676)                    -
  Cash dividends                                                                    -                    -                 -                 -                       -            (100,000)         (100,000)
Subscription of shares approved by the Regular and Special
Shareholders’ Meeting held on 04/24/07 (1)                                    75,000              217,191                  -                 -                       -                    -          292,191
Balances as of December 31, 2007                                             748,156              217,191            160,439              313                  31,942               223,950         1,381,991

(1)     See note 2.
(2)     See note 18.
(3)     See note 32.




                                                                     Andrés G. Prida                                   Rubén M. Iparraguirre                              Jorge G. Stuart Milne
                                                                  Administration Manager                             General Assistant Manager                                 Chairman
                                                                    Accounting Area                                Administration and Finance Area


                                                                                                                                                                                                                   6
 BANCO PATAGONIA S.A.

                                                            CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
                                                                     FOR THE YEARS ENDED DECEMBER 31, 2007, AND 2006
                                                             (Translation of financial statements originally issued in Spanish – See Note 44)

                                                                                     (Figures stated in thousands of Argentine pesos)
                                                                                                   Non-capitalized
                                                                                                                                 Reserve for    Reserve for financial
                                                                                     Capital stock  contributions Legal reserve                                           Unappropriated
                                    Changes                                                                                       conversion instruments available for                        Total
                                                                                          (1)      Additional paid –   (3)                                               retained earnings
                                                                                                                                differences (3)       sale (3)
                                                                                                     in capital (1)
Balances as of January 1, 2006                                                        439,750            72,289         58,848          124                  59,437              324,559        955,007
Unrealized gains (losses) on financial instruments available for sale                       -                  -             -             -                   529                     -              529
Realized gains (losses) on financial instruments available for sale                         -                  -             -             -                (8,564)                    -         (8,564)
Tax effect on net gains (losses) on financial instruments available for sale                -                  -             -             -                  2,812                    -          2,812
Foreign currency conversion                                                                 -                  -             -           42                       -                    -               42
Tax effect on the foreign currency conversion                                               -                  -             -          (15)                      -                    -              (15)
Net income for the year directly recognized in shareholders’ equity                         -                  -             -           27                 (5,223)                    -         (5,196)
Net income for the year                                                                     -                  -             -             -                      -              169,277        169,277
Total net income for the year                                                               -                  -             -           27                 (5,223)              169,277        164,081
Distribution of unappropriated retained earnings, as approved by the Regular
and Special Shareholders’ Meeting held on 04/18/06 (2)
    Legal reserve                                                                           -                  -        46,915             -                      -             (46,915)              -
    Cash dividends                                                                          -                  -             -             -                      -             (50,000)       (50,000)
Capitalization of unappropriated retained earnings, as approved by the
Regular Shareholders’ Meeting held on 10/30/06 (1)                                    159,583                  -             -             -                      -            (159,583)                 -
Capitalization of irrevocable contributions for future increases in capital stock,
as approved by the Regular Shareholders’ Meeting held on 10/30/06 (1)                  72,289           (72,289)             -             -                      -                    -                 -
Irrevocable contributions for future increases in capital stock made out of the
guarantee deposit (1)                                                                       -             1,534              -             -                      -                    -          1,534
Capitalization of the guarantee deposit, as approved by the Regular
Shareholders’ Meeting held on 10/30/06 (1)                                              1,534            (1,534)             -             -                      -                    -                 -
Balances as of December 31, 2006                                                      673,156                  -       105,763          151                  54,214              237,338      1,070,622

(1)   See note 2.
(2)   See note 18.
(3)   See note 32.

The accompanying notes 1 through 44 are an integral part of these consolidated financial statements.




                                                                       Andrés G. Prida                                 Rubén M. Iparraguirre                          Jorge G. Stuart Milne
                                                                    Administration Manager                           General Assistant Manager                             Chairman
                                                                      Accounting Area                              Administration and Finance Area


                                                                                                                                                                                                             7
BANCO PATAGONIA S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007,
                                                AND 2006
         (Translation of financial statements originally issued in Spanish – See Note 44)

                                 (Figures stated in thousands of Argentine pesos)


                                                                                    12/31/2007         12/31/2006
Changes in cash
Cash at beginning of year                                                              790,897            403,415
Foreign exchange difference attributable to cash                                       (46,448)           (26,632)
Cash as of year-end (see note 34)                                                    1,083,385            790,897
Net increase in cash                                                                   246,040            360,850


Causes of changes in cash

Operating activities


    Financial assets measured at fair value from their initial recognition
         Payments for purchases                                                     (2,155,559)       (1,868,088)
         Interest collections                                                            74,322             55,320
         Amortization and sales collections                                           1,807,298         1,638,414
    Interest collected on financial assets available for sale                            22,833             12,942
    Interest collected on loans                                                         323,137           207,403
    Interest paid on deposits                                                         (157,751)           (89,743)
    Interest collected on other assets, net                                               3,140              7,029
    Net collections / (payments) for:
         Financial assets held for trading                                              (8,357)         (107,062)
         Loans                                                                       (914,254)          (480,176)
         Other assets, net                                                               14,154              2,688
         Other receivables                                                               21,323           122,525
         Deposits                                                                    1,045,707            875,231
    Collections related to commission income                                           319,407            233,657
    Payments related to commission expense                                             (71,534)          (52,418)
    Operating expenses paid                                                          (429,598)          (321,414)
    Net collections for other operating activities                                        1,362            70,628
    Income tax / minimum presumed income tax payment                                   (13,872)            (7,499)
Net cash flow (used in) generated by operating activities                            (118,242)            299,437




          Andrés G. Prida                           Rubén M. Iparraguirre             Jorge G. Stuart Milne
       Administration Manager                     General Assistant Manager                Chairman
         Accounting Area                        Administration and Finance Area


                                                                                                               8
BANCO PATAGONIA S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007,
                                                AND 2006
         (Translation of financial statements originally issued in Spanish – See Note 44)

                                 (Figures stated in thousands of Argentine pesos)



                                                                                         12/31/2007         12/31/2006
Investing activities
    Collections for amortization of financial assets available for sale                      84,257            106,419
    Collections of financial assets held to maturity                                         13,390               5,010
    Payments for purchases of bank premises and equipment, and other                         (9,520)           (14,507)
    Collections for sales of bank premises and equipment, and other                          27,241              20,371
Net cash flow generated by investing activities                                             115,368            117,293

Financing activities
    Financing facilities received from financial institutions                               118,698              65,355
    Payment of principal of financing facilities received from financial institutions              -            (8,969)
    Interest paid on financing facilities received from financial institutions               (1,755)            (2,299)
    Payment of subordinated corporate bonds                                                (60,220)            (59,147)
    Capital contributions                                                                   292,191                   -
    Dividends payments                                                                    (100,000)            (50,820)
Net cash flow generated by (used for) financing activities                                  248,914            (55,880)
Net increase in cash                                                                        246,040            360,850


The accompanying notes 1 through 44 are an integral part of these consolidated financial statements.




          Andrés G. Prida                            Rubén M. Iparraguirre                 Jorge G. Stuart Milne
       Administration Manager                      General Assistant Manager                    Chairman
         Accounting Area                         Administration and Finance Area


                                                                                                                    9
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

NOTE 1: Brief description of the Bank

Banco Patagonia S.A. (the “Bank”) is a corporation organized in Argentina that operates as universal bank
and has a nationwide distribution network. In 2003, Banco Sudameris Argentina merged with and into
Banco Patagonia S.A. for the latter to extend and consolidate its presence throughout the nation, adopting
the name Banco Patagonia Sudameris S.A. In 2004, the Bank acquires the businesses of Lloyds TSB
Bank PLC, Argentine Branch and adopts again the name of Banco Patagonia S.A. In addition, the Bank
has equity interests in the following subsidiaries: Patagonia Inversora S.A. Sociedad Gerente de Fondos
Comunes de Inversión (“Patagonia Inversora”), Patagonia Valores S.A. Sociedad de Bolsa (“Patagonia
Valores”) and Banco Patagonia (Uruguay) S.A.I.F.E. The main activities of these subsidiaries, whose
information is disclosed on a consolidated basis, are as follows:

Patagonia Inversora is the company that is engaged in the mutual funds management business. Mutual
funds are traded exclusively through the Bank, which, in turn, operates as mutual funds Depositary
Company.

Patagonia Valores is the company in charge of trading securities on Mercado de Valores de Buenos Aires,
an organization of which Patagonia Valores is shareholder holding a share that entitles it to act in such
role. Patagonia Valores provides the Bank and its customers with services, extending the offer of products
and actively participating in securities trading transactions such as placement and later sale of financial
trusts and other securities.

Banco Patagonia (Uruguay) S.A.I.F.E. is a Uruguayan corporation that is authorized to perform the
financial intermediation activity in Uruguay between nonresidents exclusively and in any foreign currency
other than the Uruguayan one, under the supervision of Banco Central de la República Oriental del
Uruguay (Central Bank of Uruguay).

In addition, as from July 20, 2007, Banco Patagonia S.A.’s shares are publicly offered and listed on the
BCBA (Buenos Aires stock exchange) and BOVESPA (São Paulo stock exchange) (see also note 2). In
this respect, these consolidated financial statements in accordance with International Financial Information
Standards (IFRS) are issued to comply with the previous commitments towards the CVM (Brazilian
Securities Commission).

On March 27, 2008, Banco Patagonia S.A.’s Board of Directors approves the issuance of these
consolidated financial statements.

It is noteworthy that according to effective legal requirements, the Regular Shareholders’ Meeting to be
held on April 28, 2008 should approve the Bank’s stand-alone and consolidated financial statements as of
December 31, 2007, and 2006, which were issued under local standards and were filed with the B.C.R.A.
(Central Bank of Argentina) on February 18, 2008, and the CVM on the same date. As mentioned above,
these consolidated financial statements in accordance with IFRS will not be considered by such Regular
Shareholders’ Meeting and could only be changed as a result of addressing the stand-alone and
consolidated financial statements issued under the abovementioned local standards.

In the opinion of the Bank’s Management and Board of Directors, the stand-alone and consolidated
financial statements under the abovementioned local standards will be approved by the Regular




         Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                General Assistant Manager                     Chairman
        Accounting Area                   Administration and Finance Area


                                                                                                             10
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)

Shareholders’ Meeting without changes.

NOTE 2: Capital stock

As of December 31, 2007, and 2006, the capital stock structure and changes therein are as follows:

                          SUBSCRIBED AND PAID-IN SHARES                                        CAPITAL STOCK ISSUED
                                                      Face value (ARS)
               Class                    Number           per share        Votes per share    Outstanding         Paid-in
Class “A” common shares                  22,768,818          1                      1               22,769              22,769
Class “B” common shares                650,386,860           1                      1             650,387              650,387
Total as of January 1, 2007            673,155,678                                                673,156              673,156


Class “B” common shares by virtue
of the subscription approved by the
Board of Directors on July 23, 2007      75,000,000          1                      1               75,000              75,000


Class “A” common shares                  22,768,818          1                      1               22,769              22,769
Class “B” common shares                725,386,860           1                      1             725,387              725,387
Total as of December 31, 2007          748,155,678                                                748,156              748,156


                          SUBSCRIBED AND PAID-IN SHARES                                         CAPITAL STOCK ISSUED
                                                      Face value (ARS)
                Class                    Number          per share         Votes per share    Outstanding        Paid-in
Class “A” common shares                 14,874,114           1                          1         14,874                14,874
Class “B” common shares                424,876,176           1                          1        424,876               424,876
Total as of January 1, 2006            439,750,290                                               439,750               439,750


Class “A” common shares by virtue of
the capitalization approved by the
Regular Shareholders' Meeting held
on October 30, 2006                      7,894,704           1                          1          7,895                 7,895


Class “B” common shares by virtue of
the capitalization approved by the
Regular Shareholders' Meeting held
on October 30, 2006                  225,510,684             1                          1        225,511               225,511


Class “A” common shares                 22,768,818           1                          1         22,769                22,769
Class “B” common shares                650,386,860           1                          1        650,387               650,387
Total as of December 31, 2006          673,155,678                                               673,156               673,156




           Andrés G. Prida                            Rubén M. Iparraguirre                    Jorge G. Stuart Milne
        Administration Manager                      General Assistant Manager                       Chairman
          Accounting Area                         Administration and Finance Area


                                                                                                                          11
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

The capital increase approved by the Regular Shareholders’ Meeting held on October 30, 2006, was
registered with the Public Registry of Commerce of the City of Buenos Aires on December 5, 2006, under
No. 20,165 of Stock Corporations book 33. Such Shareholders' Meeting approved the increase in Capital
Stock in the amount of 233,406, taking it from 439,750 to 673,156, by means of:

    a) The capitalization of 159,583 for the amount of “Unappropriated retained earnings” at beginning of
       FY 2006, net of the distribution of earnings related to the year ended December 31, 2005;

    b) The capitalization of 72,289 for “Irrevocable contributions for future increases in capital stock”; and

    c) The capitalization of 1,534, which was recorded as “Irrevocable contributions for future increases
       in capital stock” during October 2006.

Such Shareholders’ Meeting also resolved to issue new book-entry shares with face value of ARS 1 each
and entitled to one vote per share; of these, 7,894,704 are Class “A” shares and 225,510,684 are Class
“B” shares, totaling 233,405,388 shares related to the abovementioned capital increase.

The new shares were subscribed by the shareholders on the basis of the agreed-upon exchange ratio,
which coincided with the shareholders’ current proportions, thus satisfying preemptive rights. This means
that there were no changes to the current shareholding structure as of such date.

Banco Patagonia S.A.’s Regular and Special Shareholders' Meeting held on April 24, 2007, approved five-
fold capital increase by a face value of up to ARS 100,000,000, through the issuance of up to 100,000,000
new Class "A” and “B” common, book-entry shares in the related proportion, both with a face value of ARS
1 each, entitled to one vote per share, and to dividends reported under the same conditions as Class “A”
and “B” common, book-entry shares outstanding upon issuance, to be publicly subscribed in Argentina
and/or abroad. The task of deciding the timing of issuance in one or more portions was delegated to the
Board of Directors, as were the issuance terms and conditions not set forth by the Shareholders’ Meeting.
All shareholders expressly and irrevocably waived their preemptive right.

The amount of 217,191, booked as “Additional paid-in capital” as of December 31, 2007, relates to the
difference in value obtained from placing the shares issued for the abovementioned increase in capital
stock and is net of the respective placement expenses.

The abovementioned Shareholders’ Meeting approved the authorization required to publicly offer the
outstanding and newly issued shares as a result of the capital increase mentioned in the preceding
paragraph, or the certificates representing such shares in Argentina or on foreign markets, as determined
by the Board of Directors, as well as listing the Bank’s shares or share certificates on the BCBA and on
foreign stock exchanges or markets, as determined by the Board of Directors and pursuant to the terms
and conditions it may set forth. Such Shareholders' Meeting also issued an amendment to bylaws of
Banco Patagonia S.A., so as to align them with the provisions described in the paragraphs above.

On May 22, 2007, the Board of Directors of Banco Patagonia S.A. decided upon an offering of
200,000,000 common shares including a primary offering of 75,000,000 new common shares and a




         Andrés G. Prida                       Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                     Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                              12
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

secondary offering of 125,000,000 common shares owned by certain selling shareholders (which
expressed their desire to take part in the offering) considering that such amount would guarantee an
adequate level of liquidity and availability of capital stock to potential investors. At the abovementioned
Board of Directors’ meeting it was clearly stated that the controlling shareholders would continue to retain
control of the Bank.

The offering involved Class “B” book-entry shares, with a face value of ARS 1 each, entitling holders to
one vote per share, and shall be carried out simultaneously in Argentina and abroad, directly or through
BDRs (Brazilian depositary receipts), and these would in turn be offered either directly or finally through
ADSs (American Depositary Shares), represented by ADRs (American Depositary Receipts). Every BDR
represents twenty of the Bank’s Class “B” shares and each ADS represents a BDR.

Out of the total shares included in the Global Offering, 37,500,000 shares were offered to the general
investing public in Argentina through a public offering (the “Argentine Offering”), 37,500,000 shares were
offered to the general investing public in Brazil through a public offering in the form of BDRs (the “Brazilian
Offering”), and 125,000,000 shares in the form of BDRs were offered for sale through the final private
placement of ADSs (i) in the United Sates only to “qualified institutional buyers” (QIBs), as defined under
Rule 144A issued in accordance with the US Securities Act of 1933, as amended (“Securities Act”) and,
(ii) outside the United States, Brazil and Argentina, in accordance with the provisions established in
Regulation S of the Securities Act (the “International Offering”, and jointly with the Argentine Offering and
the Brazilian Offering, the “Global Offering”).

On July 5, 2007, the C.N.V. (Argentine Securities Commission) authorized the Bank’s public offering of
shares through Resolution No. 15,665, and on July 10, 2007, the BCBA authorized the Bank’s shares to
be listed. On July 19, 2007, as regards registration of the public offering of BDRs in Brazil, the CVM
issued the following resolutions: (a) regarding primary distribution, CVM/SRE/REM/2007/039; (b)
regarding secondary distribution, CVM/SRE/SEC/2007/031; (c) regarding the BDRs program,
CVM/SRE/BDR/2007/003; and (d) regarding the ADSs program, CVM/SRE/RDR/2007/012. On the same
date, the BOVESPA registered the Bank for BDRs trading on such exchange.

As regards the allocation of the share placement, 66,600,040 shares were placed through public offering
in Argentina to the investing public; 8,400,000 shares were placed through public offering in Brazil to the
investing public and 124,999,960 shares were sold through the final private placement of ADSs outside
Argentina and Brazil.

Additionally, on July 18, 2007, the C.N.V. authorized Caja de Valores S.A. to keep the Bank’s Share
Register through Regulation No. 1,373.

On July 20, 2007, the Bank’s shares started trading on the BCBA, and the BDRs, on the BOVESPA. On
July 23, 2007, within the framework of the Global Offering, in order to register the capital stock increase,
the Bank’s Board of Directors decided to approve (i) that the amount subscribed for the Class “B” shares
issuance amounted to 75,000,000 Class “B” shares, and (ii) that the Bank’s capital stock as of July 23,
2007, totaled ARS 748,155,678, represented by 22,768,818 Class “A” shares and 725,386,860 Class “B”
shares. In this regard, on August 14, 2007, such capital increase was registered with the Public Registry




         Andrés G. Prida                       Rubén M. Iparraguirre                   Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                      Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                               13
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

of Commerce of the City of Buenos Aires, under No. 13,424, Stock Corporations Book 36.

Finally, on August 22, 2007, and under the framework of the public offering authorized by the C.N.V., the
oversubscription option set forth in the prospectus, in the amount of 23,000,000 common Class “B” shares,
as additional ADSs to the 125,000,000 common shares of the original offering.

The funds resulting from such capital increase shall be used to support the business expansion process
planned by the Bank for the next few years.

Class “A” shares represent the interest held by the Province of Río Negro, whereas Class “B” shares
account for the interest held by private capital.

As provided by section 6 of the bylaws, Class “A” and “B” shares entitle one vote per share and have a
face value of one Argentine peso each. Class “A” shares entitle to appoint one director provided that the
Province of Río Negro retains at least one share. Those Class “A” shares will be automatically converted
into Class “B” shares when being transferred to a holder other than the Province of Río Negro. Also, there
are no differences in the economic rights between both classes of shares.

NOTE 3: Basis of presentation of the financial statements and accounting policies applied

3.1 Basis of presentation

Comparative information

The consolidated statements of income, balance sheets, of changes in shareholders’ equity, of cash flows
and notes as of December 31, 2007, are presented comparatively with those of the prior year-end.

Figures stated in thousands of Argentine pesos

These financial statements disclose figures stated in thousands of Argentine pesos and are rounded up to
the nearest amount in Argentine pesos, except when otherwise noted.

Declaration of compliance

These consolidated financial statements of the Bank were prepared in accordance with the IFRS issued
by the International Accounting Standards Board and were prepared based on historical amounts, except
for financial assets held for trading, financial assets measured at fair value from their initial recognition and
financial assets available for sale, which have been measured at their fair value.

In this respect, considering that these financial statements are the first complete financial statements
presented under IFRS, the Bank performed the following procedures on its amounts as of December 31,
2005, in accordance with IFRS 1 “First-time Adoption of International Financial Reporting Standards”.

•   All assets and liabilities, the recognition of which is required by IFRS, were recognized;




         Andrés G. Prida                        Rubén M. Iparraguirre                   Jorge G. Stuart Milne
      Administration Manager                  General Assistant Manager                      Chairman
        Accounting Area                     Administration and Finance Area


                                                                                                                14
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)

•   Items such as assets or liabilities were not recognized if IFRS do not allow such recognition.

•   Effective IFRS as of December 31, 2007, were applied when valuing all assets and liabilities
    recognized.

Additionally, the Bank did not use any of the temporary exclusions of IFRS 1 or did not retroactively apply
aspects defined in other IFRS not allowed by the latter.

The reconciliation of the shareholders’ equity and income (loss) as of December 31, 2005, (balances at
the beginning of the first fiscal year presented comparatively with these financial statements) between
B.C.R.A. standards and IFRS, as well as the main conversion adjustments are as follows:

Adjustments to shareholders’ equity

Shareholders' equity pursuant to B.C.R.A. standards                                        827,385
Reversal of the allowance for impairment in value of bank premises and
equipment, and other                                                           (a)          79,009
Deferred income tax                                                            (b)          60,446
Accrual of vacation days not taken                                             (c)          (7,707)
Reversal of the adjustment for inflation effect                                (d)          (2,217)
Other items                                                                                 (1,909)
Shareholders’ equity pursuant to IFRS                                                      955,007

Adjustments to income (loss)

Income (loss) pursuant to B.C.R.A. standards                                               234,573
Deferred income tax                                                            (b)         (76,248)
Reversal of the allowance for impairment in value of bank premises and
equipment, and other                                                           (a)          (9,120)
Disclosure of government securities classified as “available for sale”         (e)            6,352
Reversal of the adjustment for inflation effect                                (d)            6,392
Other items                                                                                 (1,137)
Net income (loss) pursuant to IFRS                                                         160,812

(a) As of December 31, 2005, the Bank booked an allowance for impairment in value of bank premises
    and equipment, and other in the amount of 79,009, as required by B.C.R.A.. International Accounting
    Standard (IAS) 36 “Impairment of Assets” requires determining as recoverable value cap the value
    resulting from comparing the market values and the estimated value in use, whichever higher, on the
    basis of financial projections of the cash generating unit. The Bank made these estimates considering
    itself as a single unit and, given that the present value of assets (value in use) exceeds their book
    value, it has determined that no adjustment whatsoever is required to be recognized for impairment of
    assets.

    Following the criterion established by IFRS, no allowance for impairment in value should have been
    booked. Therefore, shareholders’ equity as of December 31, 2005, would have increased by 79,009.
    Additionally, and considering that in the abovementioned year the Bank had reversed the allowances




          Andrés G. Prida                        Rubén M. Iparraguirre                Jorge G. Stuart Milne
       Administration Manager                  General Assistant Manager                   Chairman
         Accounting Area                     Administration and Finance Area


                                                                                                              15
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

    set by the Bank, the income (loss) for the year ended December 31, 2005, would have decreased by
    9,120.

(b) Pursuant to B.C.R.A. standards, the Bank assesses income tax applying the effective rate to the
    estimated taxable income disregarding the effect of temporary differences between book and taxable
    assets and liabilities. In accordance with IAS 12 “Income Taxes”, income tax should be booked by the
    balance sheet liability method, which consists in recognizing (as receivable or payable) the tax effect
    of temporary differences between the book and tax valuation of assets and liabilities, and in
    subsequently charging them to the statement of income for the periods in which such differences are
    reversed, having duly considered the likelihood of using such NOLs in the future. Had the deferred tax
    method been applied, it would have been appropriate to book additional assets for 60,446 as of
    December 31, 2005, whereas the income (loss) for the year then ended would have decreased by
    76,248.

(c) Under B.C.R.A. standards, the cost for statutory vacation employees are entitled to is booked by the
    Bank on a cash basis, i.e., when it is paid. IAS 19 “Employee Benefits" requires that this cost be
    booked based on the accrual of such vacation. If IFRS had been applied, the Bank’s shareholders’
    equity would have decreased by 7,707 as of December 31, 2005. In addition, income (loss) for the
    year then ended would have decreased by 521 (included in “Other items” in the reconciliation of
    income (loss) because they are of little significance).

(d) According to B.C.R.A. standards, the Bank’s financial statements as of December 31, 2005, recognize
    the effects of inflation as from January 1, 2002, through February 28, 2003, which is when such
    oversight entity established the discontinuance of the adjustment for inflation method as the conditions
    required for the economy to be considered hyperinflationary had ceased.

    As set forth by IAS 29 “Financial Reporting in Hyperinflationary Economies”, the Argentine economy
    did not meet the minimum requirements established by such standard to be considered
    hyperinflationary and, therefore, the Bank should not have restated its financial statements until
    February 28, 2003.

    Had IFRS been applied, the Bank’s shareholders’ equity as of December 31, 2005, would have
    decreased by 2,217, and the income (loss) for the year then ended would have increased by 6,392.

(e) As of December 31, 2005, according to B.C.R.A. standards, the Bank valued all its holdings of
    government securities at their effective quoted prices as of that date, charging the valuation difference
    to income.

    Pursuant to IAS 39, the Bank should have classified a portion of these assets as "available for sale"
    and valued them at their fair value, recognizing a reserve for unrealized income (loss) in shareholders'
    equity and including the portion of interest accrued by the effective interest rate method in each year’s
    income (loss).

    The effects of the adjustments required to value such holdings under IFRS did not produce changes in
    the value of the assets, as they are valued at fair value; however, they do impact on the reserve to be




         Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                General Assistant Manager                     Chairman
        Accounting Area                   Administration and Finance Area


                                                                                                             16
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

   booked in shareholders’ equity. The effect of changes in such shareholders’ equity reserve would
   have increased income (loss) by 6,352 for FY 2005.

Consolidation bases

   Subsidiaries:

       Subsidiaries are all entities (including special-purpose ones) over which the Bank has control to
       direct financial and operating policies. This is usually noted when owning over half of the shares
       entitled to vote.

       Subsidiaries are fully consolidated as from the date when the actual control over them was
       transferred to the Bank and are no longer consolidated as from the date when that control ceases.
       The consolidated financial statements include assets, liabilities, income and expenses of Banco
       Patagonia S.A. and its subsidiaries. The transactions performed among the consolidated
       companies, both the amounts thereof and realized gains (losses) therefrom are eliminated.
       Unrealized gains (losses) among consolidated companies are eliminated, except losses showing
       an impairment in value of the asset transferred.

       When necessary, the subsidiaries’ accounting policies have been changed to make them
       consistent with the policies used by the Bank and with IFRS.

       The Bank uses the accounting purchase method to book the acquisition of subsidiaries. The
       acquisition cost is determined as the fair value of the assets delivered, the equity instruments
       issued, and the liabilities assumed or incurred as of the exchange date, plus the costs directly
       attributable to the acquisition. The excess between the acquisition cost and the fair value of the
       Bank’s interest in net assets and identifiable intangibles of the acquired subsidiary is booked as
       receivable. If the acquisition cost is lower than the fair value of the acquired subsidiary’s net
       assets, the difference is directly recognized in the consolidated statement of income.

   Minority interest:

       The Bank applies the policy of considering transactions with minority shareholders as transactions
       with external parties. Sales of the minority interest result in income and losses for the Bank,
       which are recognized in the consolidated statement of income. Purchases of the minority interest
       give rise to a receivable for the Bank, resulting from the difference between the amount paid and
       the acquired interest percentage in the value of the subsidiary’s net assets.

The Bank has consolidated these financial statements with the financial statements of the following
companies:




         Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                General Assistant Manager                     Chairman
        Accounting Area                   Administration and Finance Area


                                                                                                             17
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

                                                           Shares                 Percentage of
    Company                                                                     Total
                                                                                              Possible
                                                   Class          Number       capital
                                                                                               votes
                                                                               stock
   Patagonia Valores S.A. Sociedad de Bolsa       Common          13,862,507    99.99%             99.99%
   Patagonia Inversora S.A. Sociedad Gerente
                                                  Common          13,317,233    99.99%             99.99%
   Fondos Comunes de Inversión
   Banco Patagonia (Uruguay) S.A.I.F.E.           Common              50,000   100.00%           100.00%


Banco Patagonia S.A.’s Board of Directors considers that no other companies are required to be included
in the consolidated financial statements as of December 31, 2007, and 2006.

There were no acquisitions or sales of subsidiaries during the accounting years reported and, therefore,
there is no income (loss) related to those events.

The subsidiaries’ financial statements have been prepared as of the same dates and for the same
accounting years as those of Banco Patagonia S.A., consistently using similar accounting policies to those
applied by the latter.

Minority interests represent the portion of income and shareholders’ equity that is not owned, either
directly or indirectly, by the Bank and since in these financial statements minority interests are lower than
1, they are disclosed with zero balance as a separate line on the consolidated statements of income,
balance sheets and of changes in shareholders’ equity.

The Bank considers the Argentine peso as its functional and disclosure currency. To such end, before
consolidation, the financial statements of Banco Patagonia (Uruguay) S.A.I.F.E., originally issued in US
dollars, were converted into Argentine pesos (disclosure currency) using the following method:

    a) Assets and liabilities were converted at B.C.R.A.’s benchmark exchange rate, effective for such
       foreign currency as of the closing of operations on the last business day of the years ended
       December 31, 2007, and 2006 (see note 3.2.g).

    b) Income (loss) for the years ended December 31, 2007, and 2006, were converted into Argentine
        pesos on a monthly basis, using the monthly average of B.C.R.A.’s benchmark exchange rate.

    c) Foreign exchange differences resulting from the preceding points were recognized as a separate
       component within “Shareholders’ equity”, which is called “Reserve for conversion differences”.




         Andrés G. Prida                      Rubén M. Iparraguirre                      Jorge G. Stuart Milne
      Administration Manager                General Assistant Manager                         Chairman
        Accounting Area                   Administration and Finance Area


                                                                                                                 18
 BANCO PATAGONIA S.A.

                        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (Translation of financial statements originally issued in Spanish – See Note 44)
                                 (Figures stated in thousands of Argentine pesos)


 Total assets, liabilities, shareholders’ equity and income (loss) of Banco Patagonia S.A. and each of its
 subsidiaries as of December 31, 2007, and 2006, are disclosed below:

                                                   Patagonia
                                    Patagonia    Inversora S.A.         Banco                           Banco
                     Banco         Valores S.A. Sociedad Gerente      Patagonia                       Patagonia
As of 12/31/2007                                                                   Eliminations
                 Patagonia S.A.    Sociedad de     de Fondos          (Uruguay)                          S.A.,
                                      Bolsa       Comunes de          S.A.I.F.E.                     consolidated
                                                    Inversión
Assets                 6,870,940        18,645              16,009        78,824        (74,024)         6,910,394
Liabilities            5,488,949         1,949               1,136        50,758        (14,389)         5,528,403
Shareholders’
equity                 1,381,991        16,696              14,873        28,066        (59,635)         1,381,991
Income for the
year                     141,537         1,068                 623         4,360         (6,300)           141,288



                                                   Patagonia
                                    Patagonia    Inversora S.A.         Banco                           Banco
                     Banco         Valores S.A. Sociedad Gerente      Patagonia                       Patagonia
As of 12/31/2006                                                                   Eliminations
                 Patagonia S.A.    Sociedad de     de Fondos          (Uruguay)                          S.A.,
                                      Bolsa       Comunes de          S.A.I.F.E.                     consolidated
                                                    Inversión
Assets                 5,229,199        17,179              14,777        92,603        (58,523)         5,295,235
Liabilities            4,158,577         1,551                 527        69,753         (5,795)         4,224,613
Shareholders’
equity                 1,070,622        15,628              14,250        22,850        (52,728)         1,070,622
Income for the
year                     169,319           800                 294         3,502         (4,638)           169,277



 3.2 Significant accounting estimates and valuation methods

 In preparing the financial statements, in certain cases Management is required to make estimates to
 determine the book values of assets, liabilities and income (loss) as well as their disclosure, as of each
 date on which the accounting information is presented.

 Bank bookings are based on the best estimate regarding the probability of occurrence of different future
 events and, therefore, the final amount may differ from such estimates, which may have a positive or
 negative impact on future periods. The most significant estimates comprised in these consolidated
 financial statements are related to the calculation of the allowance for uncollectibility risk of loans and
 accounts receivable, the valuation of financial instruments and the provisions for miscellaneous risks.




            Andrés G. Prida                      Rubén M. Iparraguirre                    Jorge G. Stuart Milne
         Administration Manager                General Assistant Manager                       Chairman
           Accounting Area                   Administration and Finance Area


                                                                                                                  19
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

The main valuation and disclosure methods followed in the preparation of these financial statements as of
December 31, 2007, and 2006, were:

        a) Recognition of income and expenses:

             a.1) Interest income and expenses, and similar ones:

                   Interest income and expenses, and similar ones are accounted for based on their
                   accrual period, applying the effective interest method, which is the rate that allows
                   discounting future cash flows estimated to be paid or received over the life of the
                   instrument or a shorter period, if appropriate, equal to the net book value of the financial
                   asset or liability. Interest on financial instruments held for trading, available for sale,
                   measured at fair value from their initial recognition and held to maturity is accounted for
                   in the accounts “Gains (losses) on financial assets held for trading”, “Gains (losses) on
                   financial assets available for sale”, “Gains (losses) on financial assets measured at fair
                   value from their initial recognition”, and “Gains (losses) on financial assets held to
                   maturity”, respectively.

                   The Bank interrupted the accrual of interest whenever payments of financing were in
                   default (generally, with delays over 90 days) or the collection of principal payable and
                   the recoverability of accrued interest was uncertain. Subsequently, interest is only
                   recognized based on collection, once the receivable for previously accrued interest has
                   been settled.

                   Cash dividends were recognized when they were reported.

            a.2) Commissions for loans

                   Commissions collected and direct incremental costs related to financing are deferred
                   and recognized adjusting the effective interest rate thereof.

            a.3) Commissions, professional fees, and similar items:

                   Income and expenses for commissions, professional fees and other similar items are
                   accounted for as accrued.

            a.4) Nonfinancial income and expenses:

                   They are accounted for according to their monthly accrual.

        b) Financial instruments: Initial recognition and subsequent measurement:
            Purchases or sales of financial assets requiring the delivery of assets within the term
            generally established by regulations or market conditions are booked on the transaction
            negotiation date, i.e. on the date when the Bank agrees to purchase or sell the asset.




         Andrés G. Prida                       Rubén M. Iparraguirre                   Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                      Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                               20
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)


          In the initial recognition, financial assets or liabilities were recorded at their fair values. Those
          financial assets or liabilities that are not booked at fair value through profit or loss were
          booked at fair value adjusted by the transaction costs that are directly attributable to their
          purchase or issuance.

          To value financial instruments after initial recognition, the Bank classified them, considering
          the purpose for which they were acquired and their characteristics, into:

               b.1) Financial assets measured at fair value through profit or loss, including the trading
                    portfolio and those included in this category from their initial recognition

              b.2) Financial assets available for sale

              b.3) Financial assets held to maturity

              b.4) Loans and accounts receivable (other receivables)

              b.5) Financial liabilities


          b.1) Financial assets at fair value through profit or loss:

              This category is divided into two subcategories: Financial assets held for trading and
              financial assets measured at fair value from their initial recognition. A financial asset is
              classified as a financial asset acquired for trading if it is acquired for the purpose of selling
              or repurchasing it in the near term or if it is part of a portfolio of identified financial
              instruments and that are managed together and for which there is evidence of a recent
              actual pattern of short-term profit-taking. Financial assets are considered at fair value
              through profit or loss from their initial recognition when they meet the following criteria:

                  -   The designation eliminates or reduces significantly the inconsistent treatment that,
                      otherwise, arises from measuring assets or liabilities, or recognizing income or
                      losses generated by them on a different basis; or

                  -   Assets and liabilities are part of a group of financial assets, financial liabilities or
                      both, which are managed and assessed considering their performance on a fair
                      value basis in connection with a documented risk management or investment
                      strategy; or

                  -   Financial instruments include embedded derivatives, unless the embedded
                      derivative does not materially change cash flows or it is clear, with little or even no
                      analysis, that they are not required to be booked separately.

              Financial assets measured at fair value through profit or loss are recorded in the
              consolidated balance sheet at fair value. Changes in fair value and interest earned or




       Andrés G. Prida                         Rubén M. Iparraguirre                  Jorge G. Stuart Milne
    Administration Manager                   General Assistant Manager                     Chairman
      Accounting Area                      Administration and Finance Area


                                                                                                              21
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)

              incurred are recorded in the consolidated statement of income in the account “Gains
              (losses) on financial assets held for trading” and “Gains (losses) on financial assets
              measured at their fair value from their initial recognition”. Income from dividends is
              recorded in the abovementioned accounts when the payment right has been recognized.

              The estimated market value of investments measured at fair value was calculated using
              the effective quoted prices as of each year-end on active markets (Mercado de Valores or
              Mercado Abierto Electrónico), if they are representative. If there was no active market,
              valuation techniques were used, including the use of market transactions performed under
              mutually independence conditions between duly informed and interested parties, provided
              that they are available, as well as references to the current fair value of another
              instrument that is substantially the same or the analysis of discounted cash flows.

          b.2.) Financial assets available for sale:

              They are those assets designated as such to keep them for an indefinite time, which can
              be sold due to the liquidity needs or changes in the interest rate, exchange rates, among
              others, or do not qualify for being recorded at fair value through profit or loss, held to
              maturity or loans and accounts receivable.

              After their initial recognition, financial assets available for sale are later valued at their fair
              value, except for interests in other companies without a market price and that were valued
              at acquisition cost, since their fair value cannot be reliably estimated. Unrealized gains
              (losses) are directly recognized in shareholders’ equity in the account “Reserve for
              financial instruments available for sale”, less the related income tax. Interest and
              dividends earned over the period in which investments were held, such as accumulated
              losses or retained earnings in shareholders’ equity, are recognized in the consolidated
              statement of income in the account “Gains (losses) on financial assets available for sale”.
              Interest is earned using the effective interest rate. Dividends earned during the period in
              which the investment was held are recognized in the consolidated statement of income
              when the payment right has been established.

              The estimated market value of investments measured at fair value was calculated using
              the effective quoted prices as of each year-end on active markets (Mercado de Valores or
              Mercado Abierto Electrónico), if they are representative. If there was no active market,
              valuation techniques were used, including the use of market transactions performed under
              mutually independence conditions between duly informed and interested parties, provided
              that they are available, as well as references to the current fair value of another
              instrument that is substantially the same or the analysis of discounted cash flows.

              Losses on the impairment in value of these investments are recognized in the
              consolidated statement of income and removed from the shareholders’ equity account
              “Reserves for financial instruments available for sale”. The Bank determines that an
              investment available for sale is impaired in value when there is a significant or long-
              standing drop in the market price as compared to the cost, as further explained in note
              3.2.e.3).




       Andrés G. Prida                        Rubén M. Iparraguirre                     Jorge G. Stuart Milne
    Administration Manager                  General Assistant Manager                        Chairman
      Accounting Area                     Administration and Finance Area


                                                                                                                22
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)


          b.3) Financial assets held to maturity:

              They are financial assets with a fixed maturity date, the payments of which are quantified
              on a fixed or determinable basis, and the Bank actually intends and is able to keep them
              to maturity.

              After their initial recognition, financial assets held to maturity are valued at their amortized
              cost, using the effective interest rate method (see note 3.2.a.1), recognizing income (loss)
              for each year in the account “Gains (losses) on financial assets held to maturity”.

              Losses on impairments in value of these investments are recognized in the consolidated
              statement of income, and are determined as the difference between the book value of
              assets and the current value of estimated future cash flows (excluding future credit losses
              not incurred), discounted at the original effective interest rate of the financial asset,
              following the methodology to determine the impairment in value of the other financial
              assets booked at amortized cost, as described in note 3.2.e.1).


          b.4) Loans and accounts receivable (other receivables):

              They are nonderivative financial assets, the collections of which are fixed or determinable,
              that are not traded on an active market and that differ from: (i) those the Bank intends to
              sell immediately or in the near future; (ii) those that the Bank designates as being
              available for sale from their initial recognition; and (iii) those that may not allow the holder
              to substantially recover the whole initial investment due to circumstances other than credit
              impairment in value.

              After their initial recognition, loans and accounts receivable are then valued at amortized
              cost, using the effective interest rate method (see note 3.2.a.1), less the allowance for
              uncollectibility risk. The amortized cost is calculated considering any discount or premium
              incurred upon the acquisition, and commissions and cost that are an integral part of the
              effective interest rate. Losses on impairment in value are included in the consolidated
              statement of income in the accounts “Net recoveries of loans” and “Loss on uncollectibility
              of other receivables and provisions for miscellaneous risks”. The breakdown of changes in
              each of these accounts is disclosed in notes 23 and 24, respectively.

              Direct accounts receivable and loans are recorded when funds are disbursed to
              customers. Guarantees granted and contingent obligations are recorded when the
              documents supporting those credit facilities are issued. Also, the Bank considers as
              refinanced or rescheduled those financing facilities that are rescheduled due to the
              debtor's payment difficulties.

              The allowance for uncollectibility risk of loans and other receivables is set if there is
              objective evidence that the Bank cannot collect all the amounts receivable, under the
              original contractual terms. This allowance is determined based on the assigned risk




       Andrés G. Prida                       Rubén M. Iparraguirre                   Jorge G. Stuart Milne
    Administration Manager                 General Assistant Manager                      Chairman
      Accounting Area                    Administration and Finance Area


                                                                                                             23
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)

              ratings and considering the guarantees and collaterals provided. (See further details in
              note 40).

          b.5) Financial liabilities:

              After the initial recognition, all financial liabilities are valued at amortized cost using the
              effective interest rate method, as explained in note 3.2.a.1).

     c) Derecognition of financial assets and liabilities:

          Financial assets:
          A financial asset (or when a portion of a financial asset or a portion of a group of similar
          financial assets is applicable) is derecognized when: (i) the rights to receive cash flows from
          the asset expire; or (ii) the Bank has transferred its rights to receive cash flows from the asset
          or has assumed an obligation to pay all cash flows received immediately to a third party under
          a transfer agreement; and (iii) the Bank has substantially transferred all the risks and benefits
          of the asset or, if it has not transferred or retained substantially all the risks and benefits of the
          asset, it has actually transferred its control.

          Financial liabilities:
          A financial liability is derecognized when the payment obligation extinguishes, is settled or
          expires. When an existing financial liability is replaced by another one of the same borrower
          under significantly different conditions, or conditions are materially changed, such
          replacement or change is considered as a derecognition of the original liability and a new
          liability is recognized. The difference between them is charged to income for each year.




       Andrés G. Prida                        Rubén M. Iparraguirre                    Jorge G. Stuart Milne
    Administration Manager                  General Assistant Manager                       Chairman
      Accounting Area                     Administration and Finance Area


                                                                                                               24
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)


     d) Compensation of financial instruments:

          Financial assets and liabilities are offset and the net amount is disclosed in the consolidated
          balance sheet when there is a legal right to offset them and Management intends to cancel
          them on a net basis or to realize the asset and settle the liability simultaneously.

     e) Impairment in value of financial assets:

          As of the date of the financial statements, the Bank evaluates whether there is objective
          evidence of whether a financial asset or a group of financial assets are impaired in value. A
          financial asset or a group of financial assets are impaired in value and result in losses only if
          there is objective evidence of the impairment in value as a result of one or more events
          subsequent to the initial recognition of the asset (an incurred loss event) and when that loss
          event impacting on projected cash flows of the financial asset or group of financial assets can
          be reliably estimated. This evidence of impairment in value may include hints of the debtor’s
          or group of debtors’ significant financial difficulties, default or payment in arrears of principal
          or interest, likelihood for rescheduling or bankruptcy of the company or any corporate
          reorganization where it is proven that there will be a decrease in estimated cash flows, such
          as changes in economic conditions or circumstances correlated with defaults on payment.
          The following is the method used for each category of financial assets:

          e.1) Loans and accounts receivable:

               For loans and accounts receivable booked at amortized cost, the Bank first evaluates
               individually if there is objective evidence of impairment in value for financing facilities that
               are individually significant or collectively for those that are not individually significant. If
               the Bank determines that there is no objective evidence of impairment in value for a
               financial asset individually evaluated, either significant or not, the asset is included in a
               group of financial assets with similar credit risk characteristics and evaluates them
               collectively. Assets that are individually evaluated as to impairment in value are not
               included in the collective evaluation.

               If there is objective evidence that a loss for impairment in value has been incurred, the
               amount of the loss is quantified as the difference between the book value of the asset and
               the present value of the estimated future cash flows. The book value of these assets
               decreases through an allowance account and the loss amount is recognized in the
               consolidated statement of income. Interest income continues to be recognized on the
               reduced amount based on the original effective interest rate of the asset. The loans,
               along with their related allowance, are written off when there is no realistic estimate of
               future recovery and guarantees have been sold or transferred to the Bank. If in a
               subsequent year the estimated amount of the loss for impairment in value increases or
               decreases due to an event occurring after the impairment in value is recognized, the loss
               for impairment in value previously recognized increases or decreases adjusting the




       Andrés G. Prida                        Rubén M. Iparraguirre                   Jorge G. Stuart Milne
    Administration Manager                  General Assistant Manager                      Chairman
      Accounting Area                     Administration and Finance Area


                                                                                                              25
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)

               allowance account. If an asset that was written off is later recovered, the recovery is
               charged to the allowance for uncollectibility risk of loans and other receivables.

               The present value of estimated cash flows is discounted at the original effective interest
               rate of the asset. If a loan bears a variable interest rate, the discount rate will be the
               current effective interest rate.

               For the purpose of a collective evaluation of the impairment in value, financial assets are
               grouped based on the Bank’s risk rating system, which considers its past experience
               based on statistical information, type of guarantee, delinquency situation, and other
               relevant factors.

               Future cash flows of a group of financial assets The experience of historical losses is
               adjusted based on the current observable information that reflects the effects of current
               conditions that have not affected the years on which the historical losses information is
               based, and removes the historical period effects and conditions that do not currently exist.
               The methodology and assumptions used to estimate future cash flows are regularly
               reviewed to reduce any difference between the estimated loss and the experience of
               actual losses.

          e.2) Renegotiated accounts receivable and loans:

               The Bank’s loan portfolio includes transactions refinanced through: (a) new agreements
               where the terms and conditions of the original payment schedule are redefined, or (b) the
               inclusion of corporate bonds issued by the borrowers. In order to consider the impairment
               of these assets, the valuation of these loans should be carried out based on the present
               value of the future cash flows, discounted at the effective interest rate of the original loan.

               As a result of credit improvements noted by debtors impaired in prior years, the
               uncollectibility charge previously recognized is reversed through the adjustment to the
               allowance for uncollectibility risk used. Such recovery does not give rise to an amount in
               excess of the amortized cost that would have been recognized on the reversal date if the
               loss on the impairment in value had not been booked. (See note 23).

          e.3) Financial assets available for sale:

               As of the date of the consolidated financial statements, for assets available for sale, the
               Bank evaluates whether there is objective evidence of whether an asset or group of
               investments has impairment problems. When there is evidence of impairment in value, the
               accumulated loss (measured as the difference between the acquisition cost and the
               current fair value, less any loss for impairment in value in the asset previously recognized
               in the statement of income) is removed from the shareholders’ equity and is recorded in
               the statement of income. Losses for impairment in value of shares are not reversed
               through the statement of income, since any increase after the impairment in value is




       Andrés G. Prida                        Rubén M. Iparraguirre                   Jorge G. Stuart Milne
    Administration Manager                  General Assistant Manager                      Chairman
      Accounting Area                     Administration and Finance Area


                                                                                                              26
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)

               directly recognized in shareholders' equity.

               If these assets are debt instruments classified as available for sale, the impairment in
               value is evaluated on the basis of the same criteria as those for financial assets recorded
               at amortized cost. If in a subsequent year the fair value of a debt instrument increases
               and may be objectively related to an event occurring after the impairment in value is
               recognized in the statement of income, the loss for impairment in value is recovered
               through the statement of income.

     f)   Financial lease:

          The Bank grants loans through financial leases. Consequently, the Bank recognizes the
          current value of lease payments as an asset. The difference between the total value
          receivable and the present value of the financing is recognized as interest to be earned. This
          income is recognized over the lease term using the effective interest rate method, which
          reflects a constant rate of return.

     g) Assets and liabilities in foreign currency:

          Assets and liabilities denominated in US dollars have been valued at B.C.R.A.’s benchmark
          exchange rate for the US dollar at the closing of operations of the last business day of each
          fiscal year. In addition, assets and liabilities denominated in other foreign currencies were
          converted at the foreign exchange rates published by the B.C.R.A.. Foreign exchange
          differences were charged to income for each year.

     h) Cash and due from the B.C.R.A. and due from other financial institutions:

          They were measured at nominal value, plus accrued interest as of each year-end, if
          appropriate. Accrued interest was charged to income for each year.

     i)   Purchases and sales with repurchase agreements:

          Purchases (sales) of financial instruments with the nonoptional repurchase commitment at a
          determined price are recorded in the consolidated balance sheet as financing facilities
          granted (received) based on the nature of the related debtor (creditor) in the "Other
          receivables" or "Financing facilities received from financial institutions" accounts.

          The difference between the purchase and sale prices of those instruments is recorded as
          interest, which is accrued over the agreement period using the effective interest rate method.

     j)   Derivative instruments – Forward transactions without delivery of the underlying:

          Includes forward purchases and sales of foreign currency and the BADLAR rate without
          delivery of the underlying asset traded. They are valued at their quoted prices as of each
          year-end on Mercado Abierto Electrónico and these transactions are performed by the Bank
          for the purpose of intermediation for its own account.




       Andrés G. Prida                       Rubén M. Iparraguirre                 Jorge G. Stuart Milne
    Administration Manager                 General Assistant Manager                    Chairman
      Accounting Area                    Administration and Finance Area


                                                                                                           27
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)




     k) Bank premises and equipment, and other:

          These assets are recorded at their historical acquisition cost, less the related accumulated
          depreciation and impairment in value, if applicable. The historical acquisition cost includes
          expenses directly attributable to the acquisition of assets. Maintenance and repair costs are
          recorded in the statement of income. Any material improvement and renovation is capitalized
          solely when it is probable that there will be future economic benefits exceeding the return
          originally evaluated for the asset.

          Depreciation was calculated based on the months of useful life. The assets were fully
          depreciated in the month of addition, but were not depreciated in the month of retirement.
          Additionally, at least as of year-end, the estimated useful lives of items included in bank
          premises and equipment, and other are reviewed to detect significant changes therein, which,
          upon occurrence, will be adjusted through the related adjustment to the depreciation charge
          of bank premises and equipment, and other.

          In the specific case of foreclosed assets, they are recorded under "Other assets" at the lower
          of the net book value or their estimated market values, determined on the basis of appraisal
          revaluations made by independent experts.

          Changes in market values, if appropriate, are recognized in the consolidated statement of
          income.

          The residual value of bank premises and equipment, and other, taken as a whole, does not
          exceed the recoverable value of such assets.

     l)   Impairment in value of nonfinancial assets:

          As of each year-end or more frequently, the Bank evaluates whether there are events or
          changes in circumstances that indicate that the value of assets can be impaired or whether
          there are hints that a nonfinancial asset can be impaired. If there is any hint or when an
          annual impairment test is required for an asset, the Bank estimates the recoverable value of
          the asset. If the book value of an asset (or cash generating unit) exceeds its recoverable
          value, the asset (or cash generating unit) is considered impaired and the amount decreases
          to the recoverable value of the asset.

          As of the date of presentation of the consolidated financial statements, nonfinancial assets
          are evaluated as to whether there are any hints that the loss for impairment in value
          previously recognized may no longer exist or may have decreased. If there is such a hint, the
          Bank estimates the recoverable value. A loss for impairment in value previously recognized is
          reversed solely if there has been a change in the estimates used to determine the recoverable




       Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
    Administration Manager                General Assistant Manager                     Chairman
      Accounting Area                   Administration and Finance Area


                                                                                                           28
BANCO PATAGONIA S.A.

                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (Translation of financial statements originally issued in Spanish – See Note 44)
                            (Figures stated in thousands of Argentine pesos)

          value of the asset from the recognition of the latter loss for impairment in value. In such a
          case, the book value of the asset increases to its recoverable value.

          The Bank has made these estimates and, given that the present value of assets (value in use)
          exceeds their book value, it has determined that no adjustment whatsoever is required to be
          recognized for impairment in value.

     m) Provisions for miscellaneous risks:

          In order to assess the provisions for miscellaneous risks, the existing risks and uncertainties
          were considered taking into account the opinion of the Bank’s external and internal legal
          counsel. Based on the analysis carried out, the Bank booked a provision in the amount
          considered to be the best estimate of the potential disbursement required to settle the current
          obligation as of each year-end.

          The provisions booked by the Bank are reviewed as of each year-end and adjusted to reflect
          the best estimate available at all times. Additionally, each provision is allocated to a specific
          item in order to be used only to cover the disbursements for which they were originally
          recognized.

          The Bank has recognized a provision when and only when: (a) the Bank has a current
          obligation, as a result of a past event; (b) it is probable (i.e. more likely than not) that an
          outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be
          made of the amount of the related payable.

          Contingent liabilities are not recognized and are disclosed in notes, except when the
          likelihood for making a disbursement is deemed remote.

     n) Income tax:

          Income tax is calculated based on the stand-alone financial statements of Banco Patagonia
          S.A. and each of its subsidiaries.

          Deferred income tax reflects the effects of temporary differences between book and tax
          amounts of assets and liabilities. Assets and liabilities are measured using the tax rates
          expected to be applied to taxable income in the years when these differences are recovered
          or eliminated. The measurement of deferred assets and liabilities reflects the tax
          consequences derived from the way in which Banco Patagonia S.A. and its subsidiaries
          expect to recover or calculate the value of their assets and liabilities as of each year-end.

          Deferred assets and liabilities are recognized disregarding the time when temporary
          differences are deemed to be annulled. Deferred assets are recognized when future tax
          benefits sufficient for the deferred asset to be applied are likely to exist.




       Andrés G. Prida                      Rubén M. Iparraguirre                   Jorge G. Stuart Milne
    Administration Manager                General Assistant Manager                      Chairman
      Accounting Area                   Administration and Finance Area


                                                                                                            29
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)

        o) Earning per share:

             Basic and diluted earnings per share are calculated by dividing net income attributable to
             Banco Patagonia S.A.'s shareholders by the weighted average of common outstanding
             shares during the period, excluding common shares purchased and held as treasury stock. In
             the fiscal years ended December 31, 2007, and 2006, Banco Patagonia S.A. did not hold any
             financial instruments with dilutive effects. Therefore, basic and diluted earnings per share are
             the same in the years presented.

        p) Segment reporting:

             The Bank considers as a business segment the group of assets and transactions committed
             in providing products or services subject to risks and returns that are different from those of
             other business segments. (See note 4).

        q) Investment management and trust activities:
             The Bank provides custody, administration, investment management and advisory services to
             third parties that give rise to the holding or placement of assets in their name. These assets
             and income (losses) therefrom are excluded from the consolidated financial statements, since
             they are not the Bank’s assets. (See note 42).

             Commissions arising from this activity are included in the account “Commission income" in the
             consolidated statement of income.

3.3 New pronouncements

The Bank has decided not to adopt in advance the following standards and interpretations which have
been issued but are not yet effective as of December 31, 2007:

   -    IFRS 8 “Operating Segments” (effective for periods as from January 1, 2009).

   -    IAS 23 (Revised) – “Borrowing Costs” (effective for years as from January 1, 2009).

   -    IFRIC 11 and IFRS 2 “Treasury Share Transactions” (effective for years as from March 1, 2007).

   -    IFRIC 12 “Service Concession Arrangements” (effective for years as from January 1, 2008).

   -    IFRIC 13 “Customer Loyalty Programmes” (effective for years as from July 1, 2008).

   -    Revised IFRS 3 “Business Combination” and IAS 27 “Consolidated and Separate Financial
        Statements"; these changes are effective for periods as from July 1, 2009. This standard
        establishes that its application is not retroactive. Therefore, it will not be effective for the Bank.




          Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
       Administration Manager                General Assistant Manager                     Chairman
         Accounting Area                   Administration and Finance Area


                                                                                                              30
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)

    -    IFRS 2 “Share-Based Payment” – Settlements and Accrual Conditions, effective for years as from
         January 1, 2009. This standard limits the definition of “Accrual Condition” to that including an
         implied or explicit requirement of providing services.

    -    IAS 1 (revised) “Presentation of Financial Statements”, effective for the years as from January 1,
         2009. The standard separates changes in shareholders’ equity of the bank’s owners from those
         that are not. Additionally, the standard requires a statement of comprehensive income.

    -    Amendments to IAS 32 and IAS 1 – Financial Instruments with put options – , effective for years
         as from January 1, 2009.

Based on the thorough analysis of standards, the Bank believes that the potential impact of applying them
will not be material to its consolidated financial statements.

NOTE 4: Segment reporting

The Bank determined the following business segments (primary segments) considering the nature of their
risks and profits to disclose the related information:

    -    Individuals: The individuals segment groups the transactions of customers that are individuals.
         The products most used by them include personal loans, credit cards, overdrafts, checking
         accounts and saving accounts.

    -    Companies: The Corporate segment groups the transactions performed by large-, medium-,
         micro- and small-size companies that take the credit assistance offered by the Bank in addition to
         transaction and liability transaction services (deposits).

    -    Financial and government: Centralizes the transactions that the different groups of customers
         from the financial and government sector perform with the Bank and its main products include
         trading of government and private securities, investment and wholesale foreign exchange
         transactions, mutual funds, interest-bearing accounts, certificates of deposit, loans, purchase of
         credit portfolios and trusts.

         The government sector groups the transactions that the different Argentine federal, provincial and
         municipal government agencies, armed and security forces and federal universities, including the
         Province of Río Negro (see note 49), perform with the Bank.

    -    Other, not distributed: Other core functions.

The Bank does not disclose any information by geographic segment (secondary segments) since it only
operates in Argentina. Consequently, there are no exploitations in economic environments with
significantly different risks and profits.




           Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
        Administration Manager                General Assistant Manager                     Chairman
          Accounting Area                   Administration and Finance Area


                                                                                                               31
     BANCO PATAGONIA S.A.

                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           (Translation of financial statements originally issued in Spanish – See Note 44)
                                           (Figures stated in thousands of Argentine pesos)

     Given the nature of the abovementioned business segments, the Bank has not determined any internal
     prices or allocable costs/revenues resulting from procuring or placing funds, as the case may be, among
     the different segments.

     The following table shows the Bank’s business segment reporting for the accounting fiscal years ended
     December 31, 2007, and 2006:



                                               Corporate          Individuals          Financial and          Other, not         Total as of
                                               segment             segment          government segment        distributed        12/31/2007


Cash and due from the Central Bank of
                                                           -                    -                        -           934,420          934,420
Argentina
Due from other financial institutions                      -                    -                        -           239,941          239,941



                                                                                -                 58,203                    -           58,203
Financial assets held for trading                          -
Financial assets measured at fair value from
                                                           -                    -              1,246,615                    -        1,246,615
their initial recognition
Financial assets available for sale                        -                    -               342,595                 7,600         350,195

Loans                                             1,889,529              969,942                869,742                     -        3,729,213
Other receivables                                          -                    -               121,470               54,478          175,948

Bank premises and equipment, and other                     -                    -                        -           149,881          149,881

Other assets                                               -                    -                        -            25,978            25,978

TOTAL ASSETS                                      1,889,529              969,942               2,638,625           1,412,298         6,910,394


Financing facilities received from financial
institutions                                               -                    -               160,074               57,332          217,406
Deposits                                          1,345,454            2,312,511               1,076,599                    -        4,734,564
Subordinated corporate bonds                               -                    -                        -           154,134          154,134
Deferred tax liabilities                                   -                    -                        -              5,246            5,246
Other liabilities                                          -                    -                 96,189             276,999          373,188
Provisions for miscellaneous risks                         -                    -                        -            43,865            43,865
TOTAL LIABILITIES                                 1,345,454            2,312,511               1,332,862             537,576         5,528,403




                   Andrés G. Prida                             Rubén M. Iparraguirre                         Jorge G. Stuart Milne
                Administration Manager                       General Assistant Manager                            Chairman
                  Accounting Area                          Administration and Finance Area


                                                                                                                                      32
     BANCO PATAGONIA S.A.

                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           (Translation of financial statements originally issued in Spanish – See Note 44)
                                           (Figures stated in thousands of Argentine pesos)



                                                       Corporate          Individuals          Financial and          Other, not         Total as of
                                                       segment             segment          government segment        distributed        12/31/2007
Interest income and similar ones                           199,291               140,024                  80,169              18,623          438,107
Interest expense and similar ones                          (33,148)             (65,624)                (70,912)              (5,332)        (175,016)
Net interest income and similar ones                       166,143                74,400                   9,257              13,291          263,091


Commission income                                           46,359               195,019                  37,832              16,723          295,933
Commission expense                                          (2,680)             (47,433)                 (2,595)              (5,451)         (58,159)
Net commission income                                       43,679               147,586                  35,237              11,272          237,774


Gains (losses) on financial assets held for
trading                                                            -                    -                 31,514                    -           31,514
Gains (losses) on financial assets available for
sale                                                               -                    -                 24,797                4,838           29,635
Gains (losses) on financial assets measured at
fair value through profit or loss from their initial
recognition                                                        -                    -                 99,763                    -           99,763
Other operating income                                      23,026                 9,863                (28,941)              37,737            41,685
TOTAL OPERATING INCOME                                     232,848               231,849                171,627               67,138          703,462


Net recoveries of loans                                       2,447                1,629                    674                     -           4,750
TOTAL OPERATING INCOME, NET                                235,295               233,478                172,301               67,138          708,212


Personnel expenses                                          33,482                48,055                  10,878             129,166          221,581
Depreciation of bank premises and equipment,
and other                                                          -                    -                        -            14,523            14,523
Loss on uncollectibility of other receivables and
provisions for miscellaneous risks                                 -                    -                (3,656)              13,020             9,364
Other operating expenses                                    51,747               104,103                  28,467              58,033          242,350
TOTAL OPERATING EXPENSES                                    85,229               152,158                  35,689             214,742          487,818



OPERATING INCOME (LOSS)                                    150,066                81,320                136,612            (147,604)          220,394




INCOME BEFORE INCOME TAX                                                                                                                      220,394


Income tax, net                                                                                                                               (79,106)
NET INCOME FOR THE YEAR
Attributable to:
The parent’s shareholders                                                                                                                     141,288




                   Andrés G. Prida                                     Rubén M. Iparraguirre                         Jorge G. Stuart Milne
                Administration Manager                               General Assistant Manager                            Chairman
                  Accounting Area                                  Administration and Finance Area


                                                                                                                                              33
        BANCO PATAGONIA S.A.

                                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                              (Translation of financial statements originally issued in Spanish – See Note 44)
                                              (Figures stated in thousands of Argentine pesos)



                                                           Corporate           Individuals          Financial and           Other, not            Total as of
                                                           segment              segment          government segment         distributed           12/31/2006


Cash and due from the Central Bank of Argentina                         -                    -                        -            684,619             684,619
Due from other financial institutions                                   -                    -                        -            167,121             167,121
Financial assets held for trading                                       -                    -                 57,729                     -              57,729
Financial assets measured at fair value from their
initial recognition                                                     -                    -               872,913                      -            872,913
Financial assets available for sale                                     -                    -               427,659                15,694             443,353

Financial assets held to maturity                                       -                    -                 13,390                     -              13,390
Loans                                                         1,185,917               644,987                872,817                      -          2,703,721
Other receivables                                                       -                    -               119,579                29,549             149,128
Bank premises and equipment, and other                                  -                    -                        -            170,211             170,211
Other assets                                                           51                    -                        -             32,999               33,050
TOTAL ASSETS                                                  1,185,968               644,987               2,364,087            1,100,193           5,295,235


Financing      facilities   received    from   financial
institutions                                                            -                    -                 87,010                 6,805              93,815
Deposits                                                       972,235              1,802,452                894,088                      -          3,668,775
Subordinated corporate bonds                                            -                    -                        -            200,292             200,292
Deferred tax liabilities                                                -                    -                        -             13,294               13,294
Other liabilities                                                       -                    -               105,513               108,069             213,582
Provisions for miscellaneous risks                                      -                    -                        -             34,855               34,855
TOTAL LIABILITIES                                              972,235              1,802,452               1,086,611              363,315           4,224,613




                       Andrés G. Prida                                     Rubén M. Iparraguirre                          Jorge G. Stuart Milne
                    Administration Manager                               General Assistant Manager                             Chairman
                      Accounting Area                                  Administration and Finance Area


                                                                                                                                                      34
      BANCO PATAGONIA S.A.

                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           (Translation of financial statements originally issued in Spanish – See Note 44)
                                           (Figures stated in thousands of Argentine pesos)



                                                        Corporate           Individuals          Financial and           Other, not            Total as of
                                                        segment              segment          government segment         distributed           12/31/2006


Interest income and similar ones                            119,581                 91,252                119,436                11,638             341,907
Interest expense and similar ones                           (20,741)              (36,469)                (45,019)              (41,795)           (144,024)
Net interest income and similar ones                         98,840                 54,783                  74,417              (30,157)            197,883


Commission income                                            33,104                144,595                  28,011               13,088             218,798
Commission expense                                           (1,470)              (35,498)                 (1,992)               (3,674)            (42,634)
Net commission income                                        31,634                109,097                  26,019                 9,414            176,164


Gains (losses) on financial assets held for trading                  -                    -                 83,082                     -              83,082
Gains (losses) on financial assets available for sale                -                    -                 22,671                     -              22,671
Gains (losses) on financial assets measured at fair
value through profit or loss from their initial
recognition                                                          -                    -                 76,538                     -              76,538
Gains (losses) on financial assets held to maturity                  -                    -                   930                      -                 930
Other operating income                                       16,698                  5,550                (18,498)               17,888               21,638
TOTAL OPERATING INCOME                                      147,172                169,430                265,159                (2,855)            578,906




Net recoveries of loans                                      41,587                  6,329                 (1,433)                     -              46,483
TOTAL OPERATING INCOME, NET                                 188,759                175,759                263,726                (2,855)            625,389


Personnel expenses                                           26,549                 41,883                   9,350               90,675             168,457
Depreciation of bank premises and equipment and
other                                                                -                    -                        -             15,673               15,673
Loss on uncollectibility of other receivables and
provisions for miscellaneous risks                                   -                    -                (1,337)                 1,616                 279
Other operating expenses                                     50,559                 90,761                  22,404               20,918             184,642
TOTAL OPERATING EXPENSES                                     77,108                132,644                  30,417              128,882             369,051


OPERATING INCOME (LOSS)                                     111,651                 43,115                233,309             (131,737)             256,338


INCOME BEFORE INCOME TAX                                                                                                                            256,338


Income tax, net                                                                                                                                     (87,061)
NET INCOME FOR THE YEAR
Attributable to:
The parent’s shareholders                                                                                                                           169,277




                   Andrés G. Prida                                      Rubén M. Iparraguirre                          Jorge G. Stuart Milne
                Administration Manager                                General Assistant Manager                             Chairman
                  Accounting Area                                   Administration and Finance Area


                                                                                                                                                   35
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)



NOTE 5: Interest income and similar ones
                                                                                   12/31/2007          12/31/2006
Cash and due from the B.C.R.A.                                                            6,202                3,508
Due from other financial institutions                                                     2,473                1,555
Loans                                                                                  418,415               321,673
Other receivables                                                                         4,718                5,941
Other                                                                                     6,299                9,230
                                                                                       438,107               341,907

NOTE 6: Interest expense and similar ones

                                                                                   12/31/2007          12/31/2006
Deposits                                                                               153,810               125,390
Subordinated corporate bonds                                                             14,062               12,956
Financing facilities received from financial institutions                                 6,735                4,959
Other                                                                                       409                  719
                                                                                       175,016               144,024

NOTE 7: Commission income and expense

                                                                                   12/31/2007          12/31/2006
Commission income
Credit and debit cards                                                                  97,626                    77,939
Checking accounts                                                                       51,465                    36,275
Insurance                                                                               26,028                    18,588
Checks to be collected and items in custody                                             16,666                    10,121
Savings accounts                                                                        16,330                    13,778
Foreign trade                                                                           16,294                    12,069
Packages of products                                                                    13,625                     7,118
Collections                                                                             12,564                    11,529
Trust activity (see note 42)                                                            11,986                     6,687
Transfers                                                                                8,285                     5,857
Safe-deposit boxes                                                                       4,372                     3,870
Securities                                                                               3,107                     3,415
Other                                                                                   17,585                    11,552
                                                                                       295,933                   218,798




          Andrés G. Prida                            Rubén M. Iparraguirre               Jorge G. Stuart Milne
       Administration Manager                      General Assistant Manager                  Chairman
         Accounting Area                         Administration and Finance Area


                                                                                                                   36
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)


                                                                               12/31/2007           12/31/2006
Commission expense
Credit and debit cards                                                               35,479                   26,635
Salary plan                                                                           8,677                    8,016
Insurance                                                                             5,014                    2,933
Transfers                                                                             2,543                    2,153
Other                                                                                 6,446                    2,897
                                                                                     58,159                   42,634


NOTE 8: Gains (losses) on financial assets held for trading

                                                                               12/31/2007           12/31/2006
Interest                                                                              5,364                 5,705
Foreign exchange differences                                                          (877)                59,425
Foreign exchange difference in foreign currency                                      27,027                17,952
                                                                                     31,514                83,082


NOTE 9: Gains (losses) on financial assets available for sale

                                                                               12/31/2007           12/31/2006
Interest                                                                             22,833                12,942
Realized foreign exchange difference                                                      -                 8,564
Foreign exchange difference in foreign currency                                       1,964                 1,165
Sale of unlisted shares                                                               4,838                     -
                                                                                     29,635                   22,671



NOTE 10: Gains (losses) on financial assets measured at fair value from their initial recognition

                                                                               12/31/2007           12/31/2006
Interest                                                                             74,143                55,016
Foreign exchange differences                                                         25,620                21,522
                                                                                     99,763                76,538




          Andrés G. Prida                        Rubén M. Iparraguirre                Jorge G. Stuart Milne
       Administration Manager                  General Assistant Manager                   Chairman
         Accounting Area                     Administration and Finance Area


                                                                                                               37
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)


NOTE 11: Gains (losses) on financial assets held to maturity


                                                                              12/31/2007          12/31/2006
Interest                                                                                -                     930
                                                                                        -                     930


NOTE 12: Other operating income

                                                                              12/31/2007            12/31/2006
Foreign exchange difference in foreign currency                                     23,538                10,619
Income from sales of bank premises and equipment, and other                         14,420                 4,458
Other                                                                                3,727                 6,561
                                                                                    41,685                    21,638

NOTE 13: Personnel expenses

                                                                                12/31/2007           12/31/2006
Salaries                                                                              146,570             114,210
Payroll taxes                                                                          30,825              22,184
Administrative services hired                                                          19,325              13,837
Services to personnel                                                                  12,100               9,472
Entertainment, travel & living expenses                                                 8,960               5,701
Personnel bonuses                                                                       2,388               2,567
Severance payments                                                                      1,413                 486
                                                                                      221,581                 168,457




          Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
       Administration Manager                General Assistant Manager                     Chairman
         Accounting Area                   Administration and Finance Area


                                                                                                                38
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)



NOTE 14: Other operating expenses

                                                                                     12/31/2007          12/31/2006
Maintenance, conservation and repair expenses                                              30,512              26,078
Professional fees                                                                          29,902              15,565
Turnover tax                                                                               27,961              19,717
Electric power and communications                                                          27,108              20,714
Advertising and marketing                                                                  19,435               5,716
Rentals                                                                                    14,593              10,413
Security services                                                                          13,033              10,557
Tax on bank account transactions                                                           10,370               8,067
Differences from court resolutions                                                          9,535              10,160
Contribution to the deposit guarantee fund                                                  7,080               5,197
Personal assets tax – Shareholders (1)                                                      5,966               4,500
Directors’ and statutory auditors’ fees                                                     5,894               8,145
Cleaning expenses                                                                           5,569               3,954
Office expenses                                                                             5,484               8,404
Other taxes                                                                                 4,315               3,409
Miscellaneous subscription expenses                                                         2,931               2,863
Clearing house expenses                                                                     2,608               2,166
Value-added tax – noncomputable tax credit                                                  2,154               2,788
Insurance                                                                                   1,985               3,144
Operating expenses on Mercado Abierto Electrónico                                           1,779               1,798
Other                                                                                      14,136              11,287
                                                                                          242,350               184,642

(1) Relates to the tax paid by the Bank, pursuant to current legal requirements in Argentina, as to which the Bank will
    not receive any reimbursement from the Shareholders.


NOTE 15: Loss on uncollectibility of other receivables and provisions for miscellaneous risks

                                                                                      12/31/2007         12/31/2006
Reversals, less allowances for other receivables (See note 24)                             (3,656)             (1,337)
Provisions for miscellaneous risks (See Note 31)                                           13,020                1,616
                                                                                             9,364                    279




          Andrés G. Prida                          Rubén M. Iparraguirre                      Jorge G. Stuart Milne
       Administration Manager                    General Assistant Manager                         Chairman
         Accounting Area                       Administration and Finance Area


                                                                                                                       39
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)



NOTE 16: Income tax

Income tax

Income tax should be booked by the balance sheet liability method, which consists in recognizing (as
receivable or payable) the tax effect of temporary differences between the book and tax valuation of
assets and liabilities, and in subsequently charging them to the statement of income for the periods in
which such differences are reversed, having duly considered the likelihood of using NOLs in the future.

Deferred tax liabilities and assets are as follows:

Description                                                                        12/31/2007             12/31/2006
Deferred tax assets:
  Bank premises and equipment, and other                                                    24,607                21,000
  Other assets                                                                               1,648                 4,046
  Deposits                                                                                   8,791                 7,787
  Other liabilities                                                                          2,377                 1,319
  Provisions for miscellaneous risks                                                        16,647                16,648
  Total deferred assets                                                                     54,070                50,800
Deferred tax liabilities:
  Loan loss reserve                                                                       (59,316)            (64,094)
  Total deferred liabilities                                                              (59,316)            (64,094)
   Net deferred tax liabilities as of year-end                                             (5,246)            (13,294)

Changes in net deferred tax liabilities /assets during the years ended December 31, 2007, and 2006, are
summarized as follows:

Description                                                                        12/31/2007            12/31/2006
Net deferred tax (liabilities) / assets at beginning of year                              (13,294)             60,446
Deferred tax charge                                                                        (3,857)           (76,537)
Effect booked in shareholders’ equity reserves (See note 32)                                11,905              2,797
Net deferred tax liabilities as of year-end                                                (5,246)           (13,294)

The following table shows the difference between the current income tax accrual and the amounts
obtained by applying the effective tax rate in Argentina for income tax pursuant to IFRS:




          Andrés G. Prida                            Rubén M. Iparraguirre                Jorge G. Stuart Milne
       Administration Manager                      General Assistant Manager                   Chairman
         Accounting Area                         Administration and Finance Area


                                                                                                                    40
BANCO PATAGONIA S.A.

                         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                  (Translation of financial statements originally issued in Spanish – See Note 44)
                                  (Figures stated in thousands of Argentine pesos)



Description                                                                              12/31/2007            12/31/2006
Income before taxes                                                                           220,394             289,294
Statutory income tax rate                                                                         35%                 35%
Tax on net income                                                                               77,138            101,253
Permanent differences:
   Income not subject to income tax                                                              (4,047)            (2,574)
   Expenses not subject to income tax                                                              6,097              3,862
   Effect of the application of Presidential Decree No. 1,035/06 (1)                               (520)             17,813
   Miscellaneous                                                                                     438              (337)
Income tax                                                                                       79,106            120,017
Accruals reversed                                                                                      -           (32,956)
Income tax, net                                                                                  79,106              87,061

(1)   Related to the income tax effect for the year resulting from the change in tax regulations set forth by Presidential Decree No.
      1,035/06 issued in 2006, which considered as income for income tax purposes the revenues booked in prior years and which,
      until the date on which the regulation was issued, were not considered taxable. Such revenues result from Argentine
      Government Secured Loans.

The following table shows the difference between the current income tax accrual pursuant to tax
regulations and the total expense for income tax pursuant to IFRS:

Description                                                                               12/31/2007            12/31/2006

Income tax pursuant to tax regulations                                                            75,249             43,480
Deferred tax charge                                                                                3,857             76,537
Income tax                                                                                        79,016           120,017
Accruals reversed                                                                                      -           (32,956)
Income tax, net                                                                                   79,106             87,061


Minimum presumed income tax

Minimum presumed income tax was established by Law No. 25,063 for a ten-year term for fiscal years
ended as from December 31, 1998. This tax is supplementary to income tax because, while the latter is
levied on taxable income for the year, minimum presumed income tax is a minimum levy determined by
applying the current 1% rate on the potential income of certain productive assets. Therefore, the Bank’s
tax obligation will be equal to the higher of the two taxes. In the case of institutions governed by Financial
Institutions Law, the abovementioned law sets forth that they shall consider as taxable income 20% of
their taxable assets, previously deducting those assets defined as non-computable. However, should
minimum presumed income tax exceed income tax in a given year, such excess may be computed as a
payment on account of any income tax in excess of minimum presumed income tax that may occur in any
of the following ten years.




            Andrés G. Prida                             Rubén M. Iparraguirre                           Jorge G. Stuart Milne
         Administration Manager                       General Assistant Manager                              Chairman
           Accounting Area                          Administration and Finance Area


                                                                                                                                  41
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)


As of December 31, 2007, and 2006, the amounts assessed for income tax were higher than those
assessed for minimum presumed income tax for those years.

Additionally, as of December 31, 2006, by virtue of the actual use of minimum presumed income tax
amounts, the Bank reversed the allowance for impairment in value previously set.

The following is the information related to minimum presumed income tax credit balances, which are
disclosed offsetting the account “Other liabilities – Taxes payable”:

                                                 12/31/2007
                       Year of origin       Capitalized credit              Expiration year
                          2004                      865                          2014
                          2005                    8,632                          2015
                          Total                   9,497

                                                 12/31/2006
                       Year of origin       Capitalized credit              Expiration year
                          1998                    4,251                          2008
                          1999                    2,983                          2009
                          2000                    3,653                          2010
                          2001                    3,995                          2011
                          2002                    4,335                          2012
                          2003                    5,575                          2013
                          2004                    8,164                          2014
                          2005                    8,632                          2015
                          Total                 41,588


The capitalized credit will be used in filing the income tax return for the year ended December 31, 2007,
which will take place in next May.

NOTE 17: Earnings per share

Basic and diluted earnings per share were calculated by dividing income for the year attributable to the
shareholders holding common shares by the average number of outstanding common shares during the
year. Capitalization of earnings or other similar forms of increasing the number of shares entail a share
split and therefore, they have been considered as if they had been issued from the beginning, and such
increases were applied retroactively to the calculation of “earnings per share”. Therefore, the
capitalizations of irrevocable contributions made on October 30, 2006, were computed for the whole year
ended December 31, 2006. Also, the weighted average of outstanding common shares during the year
ended December 31, 2007, is the number of outstanding common shares at beginning of year, adjusted
by the number of common shares issued on July 23, 2007.

The “diluted earnings per share” measure the yield of common shares considering the effect of other
financial instruments that may be converted into shares. Given that the Bank has not issued financial




         Andrés G. Prida                      Rubén M. Iparraguirre                           Jorge G. Stuart Milne
      Administration Manager                General Assistant Manager                              Chairman
        Accounting Area                   Administration and Finance Area


                                                                                                                      42
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

instruments which have a dilutive effect on earnings per share, basic and diluted earnings per share are
consistent.

The following table shows the calculation of basic and diluted earnings per share:

                                                                              12/31/2007                12/31/2006
Numerator:
Income (loss) for the year                                                         141,288                      169,277
Denominator:
Weighted average of common shares for the year, adjusted by share                Face value                 Face value
splits (1)                                                                      706,237,870                673,155,678
Basic and diluted earnings per share (stated in ARS)                                 0.2001                     0.2515

Outstanding common shares at beginning of year (see note 2)                      Face value                 Face value
                                                                                673,155,678                439,750,290
Common shares issued due to capitalizations according to decisions by                                       Face value
the Regular Shareholders’ Meeting dated October 30, 2006 (see note 2)                                      233,405,388
Common shares for the subscription approved by the Regular                       Face value
Shareholders’ Meeting dated April 24, 2007 (see note 2)                          75,000,000
Outstanding common shares at beginning of year (see note 2)                      Face value
                                                                                748,155,678                673,155,678

(1) During the year ended December 31, 2006, the Bank paid cash dividends in the amount of 50,000 for
    the year ended December 31, 2005, which were approved by the Regular and Special Shareholders’
    Meeting dated April 18, 2006. In addition, on April 27, 2007, the Bank paid cash dividends in the
    amount of 100,000 for the year ended December 31, 2006, which were approved by the Regular
    Shareholders’ Meeting dated April 24, 2007. Dividends per share amounted to ARS 0.142 and ARS
    0.074, respectively, which resulted from the division of cash dividends by the weighted average of
    shares to calculate earnings per share.


NOTE 18: Distribution of earnings and restrictions

B.C.R.A. Communiqué “A” 4,152 dated June 2, 2004, lifted the suspension of distribution of earnings
established by Communiqué “A” 3,574, requiring the previous authorization from the Foreign Exchange
and Financial Institutions Regulatory Agency for such distribution subject to the requirements established
in the abovementioned communiqué. Additionally, through Communiqué “A” 4,589, the B.C.R.A. set new
requirements to distribute earnings.

Under Law No. 25,063, the dividends to be distributed, either in cash or in kind, in excess of accumulated
taxable income as of the year-end immediately preceding the payment or distribution date, will be subject
to the effective income tax withholding (35%) as single and definitive payment.




         Andrés G. Prida                        Rubén M. Iparraguirre                         Jorge G. Stuart Milne
      Administration Manager                  General Assistant Manager                            Chairman
        Accounting Area                     Administration and Finance Area


                                                                                                                      43
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

The Regular and Special Shareholders’ Meeting, held on April 18, 2006, related to the fiscal year ended
December 31, 2005, approved the following distribution of earnings under B.C.R.A. standards:

  To legal reserve                                                                        46,915
  To cash dividend payment (subject to approval by the B.C.R.A.)                          50,000
  To unappropriated retained earnings                                                    137,658
                                                         Total                           234,573


On April 24, 2006, the B.C.R.A. decided not to object to such request and, therefore, the abovementioned
dividends were made available to the shareholders, net of the respective income tax withholdings, as
mentioned in the second paragraph of this note.

The Regular Shareholders’ Meeting, held on April 24, 2007, related to the fiscal year ended December 31,
2006, approved the following distribution of earnings under B.C.R.A. standards:

  To legal reserve                                                                        54,676
  To cash dividend payment (subject to approval by the B.C.R.A.)                         100,000
  To unappropriated retained earnings                                                    118,705
                                                         Total                           273,381


On April 23, 2007, the B.C.R.A. decided not to object to such request and, therefore, the abovementioned
dividends were made available to the shareholders, net of the respective income tax withholdings, as
mentioned in the second paragraph of this note.

As mentioned in note 17, dividends per share amounted to ARS 0.142 and ARS 0.074 as of December 31,
2006, and 2005, respectively, which resulted from the division of cash dividends by the weighted average
of shares to calculate earnings per share.

B.C.R.A. regulations establish that 20% of income (loss) for the year obtained as established by B.C.R.A.
standards, plus/less prior-period adjustments, shall be allocated to legal reserve. Consequently, the
Bank’s unappropriated retained earnings as of December 31, 2007, under B.C.R.A. standards are
restricted by 26,539, which shall be applied by the next regular shareholders’ meeting to increase the legal
reserve.




         Andrés G. Prida                        Rubén M. Iparraguirre                Jorge G. Stuart Milne
      Administration Manager                  General Assistant Manager                   Chairman
        Accounting Area                     Administration and Finance Area


                                                                                                             44
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)



NOTE 19: Cash and due from the B.C.R.A.

                                                                                12/31/2007         12/31/2006
Cash on hand                                                                        303,389           197,897
B.C.R.A. – Checking account (2)                                                     540,055           425,879
B.C.R.A. – Special guarantee accounts (1) and (2) (see note 36)                      90,976            60,843
                                                                                    934,420             684,619

(1) The Bank has special guarantee checking accounts opened with the B.C.R.A. for transactions related
    to electronic clearing houses and other similar ones.

(2) The B.C.R.A. recognizes interest at 2.55 % p.a. on the proportion of the monthly average of daily
    amounts of checking accounts and special guarantee accounts related to the minimum requirements
    derived from deposits and certificates of deposit, without exceeding the higher of the amounts
    resulting from comparing the result of the following procedure:

    -     Monthly minimum cash requirement in Argentine pesos of deposits and certificates of deposit,
          less the following computable items: Cash, cash in transit and held by armored car companies,
          special guarantee accounts due to transactions performed with checks, special accounts opened
          with the B.C.R.A. related to the payment of social security benefits to the Federal Social Security
          Administration.

    -     Daily minimum requirement in Argentine pesos of deposits and certificates of deposit, less the
          allowed computable items of cash, cash in transit and held by armored car companies, special
          guarantee accounts due to transactions performed with checks, special accounts opened with the
          B.C.R.A. related to the payment of social security benefits to the Federal Social Security
          Administration in the appropriate proportion according to these due liabilities.

Minimum cash requirement

The B.C.R.A. establishes different “statutory operating ratios” that should be met by financial institutions
regarding solvency, liquidity, maximum credits that may be granted by customer and foreign currency
positions, among others (see also note 33).

The minimum cash requirement establishes that a financial institution shall keep a portion of deposits or
obligations available and not appropriated to lending transactions.

The following table shows the items booked by the Bank as minimum cash requirement, as provided by
the related B.C.R.A. standards, as of December 31, 2007, and 2006:




           Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
        Administration Manager                General Assistant Manager                     Chairman
          Accounting Area                   Administration and Finance Area


                                                                                                               45
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)


                                   Item                                         12/31/2007          12/31/2006
Cash and due from the B.C.R.A.
 Cash on hand                                                                     147,074                97,947
 Cash held by armored car companies                                                55,919                34,404
 B.C.R.A. – Checking account                                                      540,055               425,879
 B.C.R.A. – Special guarantee accounts                                             87,544                60,843
                                                                                  830,592               619,073


 NOTE 20: Due from other financial institutions
                                                                             12/31/2007            12/31/2006
 Wachovia Bank N.A.                                                               95,014                 74,783
 Citibank N.Y. – Mastercard                                                       44,429                 23,021
 Euroclear Bank S.A.                                                              15,924                 17,742
 Banco Intesa San Paolo S.p.A.                                                    15,755                  6,139
 Standard Chartered Bank                                                          12,183                  2,999
 Banco de la Nación Argentina                                                      7,634                  3,982
 American Express Bank                                                             6,845                  1,574
 Bank of Montreal                                                                  5,009                  3,625
 Banco de la Provincia de Buenos Aires                                             4,951                      -
 Lloyds TSB Bank PLC                                                               3,628                  1,636
 Bank of New York                                                                  3,101                  1,074
 Unicrédito Italiano SPA                                                           2,744                  4,949
 Banco Intesa New York                                                             2,286                  2,155
 Banco de la Nación Argentina - Miami                                              1,138                  3,019
 Banco Popular Español S.A.                                                        1,095                  2,485
 HSBC Bank USA                                                                       468                  1,071
 Other banks and correspondents (see note 36)                                     17,737                 16,867
                                                                                 239,941                 167,121

The amounts due from other financial institutions earn interest at an annual nominal rate from 2.10% to
4.75%.




          Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
       Administration Manager                General Assistant Manager                     Chairman
         Accounting Area                   Administration and Finance Area


                                                                                                              46
           BANCO PATAGONIA S.A.

                                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                            (Translation of financial statements originally issued in Spanish – See Note 44)
                                            (Figures stated in thousands of Argentine pesos)


           NOTE 21: Financial assets held for trading, measured at fair value from their initial recognition,
                    available for sale and held to maturity

           The Bank has classified its financial assets as disclosed below:

Financial assets held for trading
                   Description                        Maturity        Currency         Rate          Amortization         12/31/2007        12/31/2006

Argentine Government Bonds in USD Libor 2012         08/03/12          USD             Libor      8 annual installments          708            1,094
(Boden)
Discount bonds in ARS + GDP-Variation                                                               20 semiannual
                                                     12/31/33          ARS         5.83% + Cer                                29,136             31,331
Securities in ARS                                                                                    installments
Social security debt consolidation bond in ARS                                                        48 monthly
                                                     01/03/10          ARS          2% + Cer                                   8,626              7,907
3rd series, 2%                                                                                       installments
Secured bonds, Presidential Decree No. 1,579/02                                                      156 monthly
                                                     02/04/18          ARS          2% + Cer                                 (1,226)            (1,802)
(BOGAR) – Repo transactions                                                                          installments
                                                                                                      120 monthly
Debt consolidation bonds in ARS 4th Series, 2%       01/03/16          ARS          2% + Cer                                           -          8,641
                                                                                                      installments
B.C.R.A. bills – C31E7                               01/31/07          ARS          3% + Cer        Upon maturity                      -          6,599
Par bond in ARS Step-Up 2038 + GDP-Variation                                                        20 semiannual
                                                     12/31/38          ARS         0.63% + Cer                                 1,582              2,650
Securities in ARS                                                                                    installments
                                                                                                     106 monthly
Debt consolidation bonds in ARS 2nd Series, 2%       12/03/10          ARS          2% + Cer                                   1,229                    -
                                                                                                     installments
Social security debt consolidation bond in ARS 4th                                                    72 monthly
                                                     03/15/14          ARS          2% + Cer                                  17,251              1,227
Series, 2%                                                                                           installments
Other                                                                                                                            897                82
                                                                                                                              58,203             57,729


Financial assets measured at fair value from their initial recognition
                   Description                        Maturity        Currency         Rate          Amortization         12/31/2007       12/31/2006

B.C.R.A. notes-CD08N                                  12/24/08           ARS         3% + Cer        Upon maturity           429,048            253,554
B.C.R.A. notes-CE08N                                  01/23/08           ARS         3% + Cer        Upon maturity           217,260            242,871
B.C.R.A. notes-CL07N                                  07/25/07           ARS         3% + Cer        Upon maturity                     -        107,158
B.C.R.A. notes-BA07                                   04/18/07           ARS       Badlar+2.5%       Upon maturity                     -          5,010
B.C.R.A. notes-BB07                                   04/11/07           ARS       Badlar+2.5%       Upon maturity                     -            12
B.C.R.A. notes-BY07                                   05/30/07           ARS       Badlar+2.5%       Upon maturity                     -         15,247
B.C.R.A. notes-BN07                                   11/21/04           ARS       Badlar+2.5%       Upon maturity                     -          3,057
B.C.R.A. notes-BF08                                   02/20/08           ARS       Badlar+2.5%       Upon maturity             9,685             20,460
B.C.R.A. notes-BM08                                   03/05/08           ARS       Badlar+2.5%       Upon maturity            10,109              6,281
B.C.R.A. notes-BZ08                                   03/26/08           ARS       Badlar+2.5%       Upon maturity            31,469             22,703
B.C.R.A. notes-BA08                                   04/16/08           ARS       Badlar+2.5%       Upon maturity            11,091             29,877
B.C.R.A. notes-BY08                                   05/07/08           ARS       Badlar+2.5%       Upon maturity            39,158             16,105
B.C.R.A. notes-BL08                                   07/16/08           ARS       Badlar+2.5%       Upon maturity            27,864             19,627
B.C.R.A. notes-BG08                                   08/06/08           ARS       Badlar+2.5%       Upon maturity            72,026             62,730
B.C.R.A. notes-BS08                                   09/10/08           ARS       Badlar+2.5%       Upon maturity            28,284              2,025




                      Andrés G. Prida                               Rubén M. Iparraguirre                      Jorge G. Stuart Milne
                   Administration Manager                         General Assistant Manager                         Chairman
                     Accounting Area                            Administration and Finance Area


                                                                                                                                           47
             BANCO PATAGONIA S.A.

                                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                              (Translation of financial statements originally issued in Spanish – See Note 44)
                                              (Figures stated in thousands of Argentine pesos)

Activos financieros valuados a valor razonable desde su reconocimiento inicial (Cont.)
                      Description                   Maturity     Currency         Rate          Amortization         12/31/2007         12/31/2006
B.C.R.A. notes-BO08                                 10/15/08       ARS        Badlar+2.5%       Upon maturity             49,862             21,630
B.C.R.A. notes-BN08                                 11/05/08       ARS        Badlar+2.5%       Upon maturity             24,252              2,047
B.C.R.A. notes-BV08                                 11/26/08       ARS        Badlar+2.5%       Upon maturity             30,381              5,093
B.C.R.A. notes-BD07                                 12/19/07       ARS        Badlar+2.5%       Upon maturity                      -         37,426
B.C.R.A. notes-BD08                                 12/17/08       ARS        Badlar+2.5%       Upon maturity             73,157                    -
B.C.R.A. notes-BE10                                 01/06/10       ARS        Badlar+2.5%       Upon maturity             18,315                    -
B.C.R.A. notes-BE08                                 01/30/08       ARS        Badlar+2.5%       Upon maturity             12,348                    -
B.C.R.A. notes-BE09                                 01/21/09       ARS        Badlar+2.5%       Upon maturity             89,713                    -
B.C.R.A. notes-BR10                                 01/20/10       ARS        Badlar+2.5%       Upon maturity             22,396                    -
B.C.R.A. notes-BF09                                 02/11/09       ARS        Badlar+2.5%       Upon maturity              3,030                    -
B.C.R.A. notes-BF10                                 02/10/10       ARS        Badlar+2.5%       Upon maturity             10,699                    -
B.C.R.A. notes-BA10                                 04/21/10       ARS        Badlar+2.5%       Upon maturity             36,468                    -
                                                                                                                       1,246,615            872,913

Financial assets available for sale
Description                                         Maturity     Currency         Rate          Amortization         12/31/2007        12/31/2006
Argentine Government Bonds in USD Libor 2012
                                                    08/03/12       USD            Libor      8 annual installments       311,635            390,331
(see note 36)
                                                                                                 156 monthly
Secured bonds, Presidential Decree No. 1,579/02     02/04/18       ARS          2% + Cer                                  30,960             37,328
                                                                                                 installments
Banelco S.A.                                           -           ARS              -                   -                  2,617              2,622
Mercado de Valores S.A. (see note 36)                  -           ARS              -                  -                   2,064              2,064
Visa Argentina S.A.                                    -           ARS              -                  -                     966               966
Provincanje S.A.                                       -           ARS              -                  -                     685               680
Seguros de Depósitos S.A.                              -           ARS              -                  -                     425               427
Interbanking S.A.                                      -           ARS              -                  -                     284               284
Mercado a Término de Buenos Aires S.A.                 -           ARS              -                  -                      73                73
Mercado Abierto Electrónico S.A,                       -           ARS              -                  -                      65                65
Bolsa de Comercio de Mar del Plata S.A.                -           ARS              -                  -                      56                56
Argencontrol S.A.                                      -           ARS              -                  -                      53                53
Compensadora Electrónica S.A.                          -           ARS              -                  -                      38                38
Banco Latinoamericano de Exportaciones S.A.            -           USD              -                  -                      55                53
S.W.I.F.T.                                             -           EUR              -                  -                      13                11
Sanatorio Las Lomas S.A.                               -           ARS              -                  -                      84                84
Other                                                  -           ARS              -                  -                     122              8,218
                                                                                                                         350,195            443,353




                         Andrés G. Prida                       Rubén M. Iparraguirre                       Jorge G. Stuart Milne
                      Administration Manager                 General Assistant Manager                          Chairman
                        Accounting Area                    Administration and Finance Area


                                                                                                                                       48
          BANCO PATAGONIA S.A.

                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           (Translation of financial statements originally issued in Spanish – See Note 44)
                                           (Figures stated in thousands of Argentine pesos)



Financial assets held to maturity
Description                                            Maturity     Currency         Rate          Amortization        12/31/2007       12/31/2006
Argentine government securities – Treasury bills
                                                       04/26/07       USD            5.94%         Upon maturity                   -        13,390
(see note 36)
                                                                                                                                   -        13,390


          Financial assets measured at fair value from their initial recognition:

          Below we disclose the amortized cost of those holdings and its difference with fair value:

                 B.C.R.A. notes                    Amortized cost              Fair value      Unrealized gain
                      2007                              1,242,150              1,246,615                 4,465
                      2006                                859,649                872,913                13,264

          Financial assets classified as “available for sale” – reserves (see note 32):

          The Boden 2012 reserve disclosed below is fully related to unrealized gains, without considering the effect
          of deferred tax on such reserve, which is also booked under equity and which amounts to 11,783 and
          21,565 as of December 31, 2007, and 2006, respectively.

                     Boden 2012                    Amortized cost               Fair value      Unrealized gain
                        2007                              277,970                 311,635                33,665
                        2006                              328,718                 390,331                61,613

          The Bogar reserve disclosed below is fully related to unrealized gains, without considering the effect of
          deferred tax on such reserve, which is also booked under equity and which amounts to 5,417 and 7,628
          as of December 31, 2007, and 2006, respectively.

                        Bogar                      Amortized cost               Fair value      Unrealized gain
                        2007                               15,483                  30,960                15,477
                        2006                               15,534                  37,328                21,794


          NOTE 22: Derivative instruments – Forward transactions without delivery of the underlying

          In the normal course of business, the Bank agreed forward transactions with daily settlement of
          differences without delivery of the underlying, measured at their fair value. Changes in this value impact
          on the consolidated statement of income. Those transactions do not qualify as hedging under IAS 39.
          Notional values as of those dates break down as follows:
                                                                                                      Notional value as of
                                                                                                12/31/2007           12/31/2006
           Forward purchases of foreign currency                                               USD 88,500           USD 9,000
           Forward sales of foreign currency                                                   USD 72,500           USD 6,500
           Forward sales of Badlar                                                                   1,000                    -




                     Andrés G. Prida                             Rubén M. Iparraguirre                     Jorge G. Stuart Milne
                  Administration Manager                       General Assistant Manager                        Chairman
                    Accounting Area                          Administration and Finance Area


                                                                                                                                       49
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)

The fair value of agreements is zero because the difference between the agreed-upon and market values
is daily calculated with impact on the statement of income. (Losses) gains from foreign currency
transactions as of December 31, 2007, and 2006, amounted to (480) and 711, respectively, and gains
from Badlar rate transactions amounted to 7, and 12, respectively.


NOTE 23: Loans

The following transactions are related to the "Loans and accounts receivable" financial assets category:
                                                                              12/31/2007             12/31/2006
Loans to financial institutions                                                     445,475                376,823
Overdrafts                                                                          595,503                381,399
Notes                                                                             1,213,545                710,811
Mortgage loans                                                                      129,880                118,521
Collateral loans                                                                      44,722                  6,427
Credit cards                                                                        330,781                216,120
Personal loans                                                                      482,193                302,735
Other                                                                               214,825                213,227
Secured loans (see note 36)                                                         193,605                367,440
Financial leases                                                                    152,951                  98,241
Interest and similar items receivable                                                 27,420                 15,776
Interest to accrue                                                                   (7,777)                (7,132)
Total loans                                                                       3,823,123              2,800,388
Allowances for uncollectibility risk                                                (93,910)               (96,667)
Total                                                                             3,729,213              2,703,721

Loans by type as of December 31, 2007, and 2006, are as follows:

                                                                              12/31/2007             12/31/2006
Corporate loans                                                                   2,596,693              2,008,288
Consumer loans                                                                    1,096,550                673,579
Mortgage loans                                                                      129,880                118,521
Total                                                                             3,823,123              2,800,388

Interest rates for loans are established based on the existing market rates on the date they are granted.




           Andrés G. Prida                      Rubén M. Iparraguirre                   Jorge G. Stuart Milne
        Administration Manager                General Assistant Manager                      Chairman
          Accounting Area                   Administration and Finance Area


                                                                                                                50
BANCO PATAGONIA S.A.

                        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (Translation of financial statements originally issued in Spanish – See Note 44)
                                 (Figures stated in thousands of Argentine pesos)


Loan loss reserves

                                             Mortgage       Consumer           Corporate
                                              loans           loans             loans        Total


  At beginning                                   6,037         20,176            70,454      96,667
  Charge for the year                              117         14,481             3,619      18,217
  Writte off                                    (2,369)        (1,808)         (16,797)     (20,974)

  As of December 31, 2007                        3,785         32,849            57,276      93,910



  Allowances not determined individually         3,475         31,943            23,676      59,094

  Allowances determined individually               310            906            33,600      34,816
                                                 3,785         32,849            57,276      93,910




                                               Mortgage       Consumer          Corporate
                                                loans           loans            loans        Total


  At beginning                                    10,722         16,825           99,673     127,220
  Charge for the year                                116          4,722            1,595        6,433
  Writte off                                     (4,801)         (1,371)         (30,814)    (36,986)

  As of December 31, 2006                          6,037         20,176           70,454       96,667



  Allowances not determined individually           5,323         19,443           24,919       49,685

  Allowances determined individually                 714            733           45,535       46,982
                                                   6,037         20,176           70,454       96,667




          Andrés G. Prida                        Rubén M. Iparraguirre                      Jorge G. Stuart Milne
       Administration Manager                  General Assistant Manager                         Chairman
         Accounting Area                     Administration and Finance Area


                                                                                                                    51
BANCO PATAGONIA S.A.

                             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Translation of financial statements originally issued in Spanish – See Note 44)
                                      (Figures stated in thousands of Argentine pesos)


The following is a reconciliation of loan loss reserves determined and not determined individually:

                                            12/31/2007                                              12/31/2006
                           Allowances not      Allowances                      Allowances not          Allowances
                            determined         determined                       determined             determined
                            individually       individually        Total        individually           individually          Total


At beginning                    49,685                46,982        96,667             63,371                 63,849         127,220
Charge for the year             11,464                 6,753         18,217              3,724                  2,709           6,433
Writte off                      (2,055)             (18,919)       (20,974)           (17,410)               (19,576)        (36,986)

As of closing                   59,094                34,816        93,910             49,685                 46,982             96,667


The following is the breakdown of “Net recoveries of loans”:

                                                                                             12/31/2007               12/31/2006
Provision for loan losses for the year                                                           (18,217)                   (6,433)
Recoveries of loans                                                                                22,967                   52,916
Net recoveries of loans                                                                             4,750                   46,483

Contingent transactions

The Bank’s credit policy includes granting sureties, guarantees and documentary credits to meet
customers’ specific financial needs. As these transactions imply a contingent obligation for the Bank, they
expose it to credit risks additional to those recognized in the consolidated balance sheets and are
therefore an integral part of the Bank's total risk.

As of December 31, 2007, and 2006, the Bank recorded the following contingent transactions in
memorandum accounts:

                                                                                            12/31/2007           12/31/2006
Guarantees granted                                                                             87,429                27,813
Letters of credit                                                                              18,349                14,461
Obligations for foreign trade transactions                                                     32,908                29,017
                                                                                                 138,686                71,291

The provisions for uncollectibility of these transactions are booked under “Provisions for miscellaneous
risks – Other” (see note 31).

The risks related to the contingent transactions mentioned above are evaluated and monitored under the
Bank’s credit risk policy mentioned in note 40.




            Andrés G. Prida                             Rubén M. Iparraguirre                          Jorge G. Stuart Milne
         Administration Manager                       General Assistant Manager                             Chairman
           Accounting Area                          Administration and Finance Area


                                                                                                                                    52
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)


NOTE 24: Other receivables

These transactions are related to the “Loans and accounts receivable” financial assets category.
They break down as follows:

                                                                                   12/31/2007              12/31/2006
Trust securities (1)                                                                     80,658                    79,529
Sundry receivables                                                                       43,248                    55,497
Amounts receivable from sales of government securities                                   22,884                       434
Amounts receivable from repo transactions                                                13,861                    22,864
Trade receivables                                                                        11,230                     1,868
Other                                                                                    13,998                    22,093
                                                                                        185,879                  182,285
Allowance for uncollectibility risk of other receivables                                 (9,931)                 (33,157)
                                                                                        175,948                  149,128

(1) Effective trust securities are receivables with fixed installments earning interest at an average
    nominal rate of 12.5% p.a. and the average term of which is 35 months.

The following are the changes in the allowance for uncollectibility risk of other receivables:

                                                                                  12/31/2007               12/31/2006

At beginning of year                                                                  33,157                    51,594
Provision for loan losses for the year                                                   771                       611
Reversals                                                                            (4,427)                   (1,948)
Reversals, less allowances for other receivables (see note 15)                       (3,656)                   (1,337)
Uses                                                                                (19,570)                  (17,100)
As of year-end                                                                         9,931                    33,157



NOTE 25: Bank premises and equipment, and other

Bank premises and equipment: Includes the tangible assets owned by the Bank, used for its specific
activity.

Other assets: Includes the tangible assets owned by the Bank that are not used in branches’ operations
and those acquired for future use.

The following table shows a breakdown of bank premises and equipment, and other:




         Andrés G. Prida                            Rubén M. Iparraguirre                      Jorge G. Stuart Milne
      Administration Manager                      General Assistant Manager                         Chairman
        Accounting Area                         Administration and Finance Area


                                                                                                                         53
BANCO PATAGONIA S.A.

                               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        (Translation of financial statements originally issued in Spanish – See Note 44)
                                        (Figures stated in thousands of Argentine pesos)


                                                                                                Bank premises and equipment, and other
                                                                                 Machinery      Vehicles                                          Other
                                                    Real        Furniture and       and            and    Assets under    Foreclosed          miscellaneous    Total as of
                                                  property        fixtures       equipment      aircrafts     lease          assets             assets (1)     12/31/2007

Original value:

As of January 1, 2007                                  92,546          72,052         44,685       12,592         8,465            8,440             55,402         294,182

Additions                                               2,389           3,810          2,110          337                 -               -             874           9,520

Retirements                                           (8,689)          (2,432)        (1,395)        (173)         (755)                  -          (7,765)       (21,209)

As of December 31, 2007                                86,246          73,430         45,400       12,756         7,710            8,440             48,511         282,493



Depreciation:

As of January 1, 2007                                  14,827          50,741         36,987        4,913         2,703            7,635              6,165         123,971

Retirements                                             (893)          (2,413)        (1,395)        (125)         (134)                  -           (922)          (5,882)

Depreciation charge for the accounting year             2,098           5,694          2,966        2,523           378                  19             845          14,523

As of December 31, 2007                                16,032          54,022         38,558        7,311         2,947            7,654              6,088         132,612



Residual value as of December 31, 2007                 70,214          19,408          6,842        5,445         4,763              786             42,423         149,881




                                                                                    Bank premises and equipment, and other
                                                                                         Vehicles                                                 Other
                                                            Furniture and Machinery and     and     Assets under     Foreclosed               miscellaneous    Total as of
                                              Real property   fixtures     equipment     aircrafts      lease           assets                  assets (1)     12/31/2006

Original value:

As of January 1, 2006                               98,323           69,360         40,749        12,461          8,465            8,419             63,747         301,524

Additions                                                5            3,080          4,131           173              -                  43           7,075           14,507

Retirements                                          (634)            (388)           (195)         (42)              -             (22)            (20,568)        (21,849)

Transfers                                           (5,148)               -               -            -              -                   -           5,148                    -

As of December 31, 2006                             92,546           72,052         44,685        12,592          8,465            8,440             55,402         294,182



Depreciation:

As of January 1, 2006                               13,648           45,386         33,690         2,420          2,314            7,578              7,908         112,944

Retirements                                            (33)           (651)           (195)         (31)              -                   -          (3,736)         (4,646)

Transfers                                            (922)                -               -            -              -                   -             922                    -
Depreciation charge for the accounting
year                                                 2,134            6,006          3,492         2,524           389                   57           1,071           15,673

As of December 31, 2006                             14,827           50,741         36,987         4,913          2,703            7,635              6,165         123,971



Residual value as of December 31, 2006              77,719           21,311          7,698         7,679          5,762              805             49,237         170,211




       1) Includes the assets that the Bank does not currently use in branches’ operations, the potential sale of which
              Management is currently analyzing and that still do not comply with the conditions set forth in IFRS 5 for
              them to be considered as available for sale. The residual value of those assets does not exceed their
              recoverable value.




               Andrés G. Prida                                           Rubén M. Iparraguirre                                      Jorge G. Stuart Milne
            Administration Manager                                     General Assistant Manager                                         Chairman
              Accounting Area                                        Administration and Finance Area


                                                                                                                                                                        54
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)



NOTE 26: Other assets

                                                                                  12/31/2007                12/31/2006
Guarantee deposits (see note 36)                                                        10,477                       17,060
Advance payments                                                                         5,212                        6,199
Works of art                                                                             3,015                        3,015
Stationery and office supplies                                                           1,506                        2,489
Prepayments for purchases of assets                                                      1,137                          733
Other                                                                                    4,631                        3,554
                                                                                        25,978                       33,050



NOTE 27: Financing facilities received from financial institutions

                                                                                  12/31/2007                12/31/2006
Amounts payable from repo transactions                                                 160,074                       87,010
B.C.R.A.                                                                                 20,904                         511
Due from correspondent financial institutions                                             6,420                       6,294
Nuevo Banco de Entre Ríos                                                                 3,156                           -
Banco de la Ciudad de Buenos Aires                                                        9,496                           -
Nuevo Banco del Chaco                                                                     1,579                           -
Banco Credicoop                                                                          15,777                           -
                                                                                       217,406                            93,815



NOTE 28: Deposits
                                                                                  12/31/2007                12/31/2006
Nonfinancial government sector                                                          329,258                     232,031
Financial sector                                                                          9,780                      37,266
Nonfinancial private sector and foreign residents                                     4,395,526                   3,399,478
Checking accounts                                                                       885,436                     630,416
Savings accounts                                                                      1,272,131                   1,001,178
Certificate of deposit                                                                1,936,501                   1,504,306
Other                                                                                   278,965                     245,191
Interest and similar items payable                                                       22,493                      18,387
                                                                                      4,734,564                    3,668,775

Deposit guarantee

Law No. 24,485 and Presidential Decree No. 540/95 created a Deposit Guarantee Insurance System to




          Andrés G. Prida                           Rubén M. Iparraguirre                         Jorge G. Stuart Milne
       Administration Manager                     General Assistant Manager                            Chairman
         Accounting Area                        Administration and Finance Area


                                                                                                                             55
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

provide coverage for risks inherent in bank deposits, as a subsidiary and supplementary protection to the
one offered by the system of bank deposit privileges and protection established by the Financial
Institutions Law. This system shall cover the deposits in Argentine pesos and foreign currency with the
participating institutions as checking accounts, savings accounts, certificates of deposit or any other types
determined by the B.C.R.A., as long as fulfilling the requirements under Presidential Decree No. 540/95
and any others established by the enforcement authority.

As of December 31, 2007, and 2006, such deposit guarantee amounts to 1,505,002 and 1,206,019,
respectively.


NOTE 29: Subordinated corporate bonds

                                                                             12/31/2007                 12/31/2006
Corporate bonds issued, maturing in 2010                                            154,134                     200,292
                                                                                   154,134                       200,292

The Bank has in effect a global corporate bond issuance program for a maximum amount outstanding at
any time of up to USD 150.000.000 approved by the shareholders’ meeting of February 27, 1996, and by
the C.N.V. through certificate No. 115 dated June 4, 1996.

Under the referred program, the Bank issued a series of subordinated corporate bonds amounting to USD
80.000.000, which was approved by the shareholders’ meeting of June 27, 2000, and by the C.N.V.
through certificate No. 271 dated August 15, 2000, and issued on December 27, 2000, maturing in ten
years from such date. The interest rate of the transaction was established as described below: (i) six-
month LIBOR, plus 110 basic percentage points for the first effective year; (ii) six-month LIBOR, plus 175
basic percentage points for the second effective year; and (iii) six-month LIBOR, plus 220 basic
percentage points as from the third year and through the final maturity of the obligation. Effective interest
rates as of December 31, 2007, and 2006, are 7.3875% and 7.575, respectively.

In addition, on September 27, 2006, and 2007, the Bank settled USD 16.000.000 for the first and second
principal repayment installments. The next maturity date is September 27, 2008. As of December 31,
2007, and 2006, the residual principal amounts to USD 48.000.000 and USD 64.000.000, respectively.

The Bank's Board of Directors decided that the funds obtained from this placement be added to the
Bank’s working capital in Argentina, i.e. be included in the Bank’s funding structure.




         Andrés G. Prida                       Rubén M. Iparraguirre                          Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                             Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                                      56
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)


NOTE 30: Other liabilities

                                                                               12/31/2007             12/31/2006
Taxes payable                                                                         96,600                  21,759
Credit card consumption charges payable                                               75,444                  57,973
Payables for foreign trade transactions                                               59,486                  46,326
Salaries and payroll taxes payable                                                    40,594                  33,431
Amounts payable for purchases of government securities                                29,328                   1,227
Sundry payables                                                                       22,928                  14,171
Collections on account and behalf of third parties                                    16,778                  14,844
Securities to be delivered for foreign currency sales                                  7,375                       -
Withholdings on salaries                                                               2,430                   1,729
Fees payable                                                                           1,770                   4,700
Prepayment for sale of other assets                                                    1,538                     953
Other                                                                                 18,917                  16,469
                                                                                      373,188                     213,582



NOTE 31: Provisions for other risks

Covers the amounts estimated necessary to face likely risks that, if verified, will result in a loss to the Bank.
The following are the changes in those provisions during 2007 and 2006:

                                                                       Provisions
                                       Labor and     Constitutional rights
                                         legal      protection actions (1)        Other                Total

 At beginning                            24,300                  9,593                 962                34,855
 Charge for the year (see note 15)         5,786                 5,509               1,725                13,020
 Uses                                    (2,704)               (1,095)               (211)                (4,010)
 As of December 31, 2007                 27,382                14,007                2,476                43,865


 Current                                  3,280                  1,678                 297                 5,255
 Noncurrent                              24,102                 12,329               2,179                38,610
 As of December 31, 2007                 27,382                 14,007               2,476                43,865




         Andrés G. Prida                        Rubén M. Iparraguirre                     Jorge G. Stuart Milne
      Administration Manager                  General Assistant Manager                        Chairman
        Accounting Area                     Administration and Finance Area


                                                                                                                    57
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)


                                                                              Provisions
                                              Labor        Constitutional rights
                                             and legal     protection actions (1)        Other                         Total

 At beginning                                   24,350                   10,152                    1,690                  36,192
 Charge for the year (see note 15)                1,541                      75                        -                    1,616
 Uses                                           (1,591)                   (634)                    (728)                  (2,953)
 As of December 31, 2006                        24,300                    9,593                      962                  34,855


 Current                                         2,704                    1,095                       211                  4,010
 Noncurrent                                     21,596                    8,498                       751                 30,845
 As of December 31, 2006                        24,300                    9,593                       962                 34,855

(1) As a result of the measures taken by the Argentine Government in connection with the de-dollarization of
    deposits originally denominated in US dollars, and the rescheduling of bank deposits from early 2002, a
    significant number of legal actions were brought by individuals and companies against financial institutions.

    Also, during 2006, and 2007, the Argentine Supreme Court entered judgments ordering and/or clarifying both the
    calculation method and the computation of advance payments with respect to the deposits involved.

    Accordingly, as of each fiscal year-end, the Board of Directors estimated the additional effects which may result
    from the application of the abovementioned decisions, charging the additional amount resulting therefrom to
    income for each year.

    In the opinion of the Bank’s Management and its legal counsel, there are no significant effects other than those
    disclosed in these financial statements, the amounts and payment terms of which were recorded based on the
    current value of those estimates, as well as the probable date of their final resolution.

NOTE 32: Shareholders’ equity reserves

                                                                    Reserve for
                                                                      financial         Reserve for
                                                                                                            Legal
                                                                    instruments          conversion                            Total
                                                                                                         reserve (3)
                                                                  available for sale   differences (2)
                                                                         (1)
  As of January 1, 2007                                                   54,214               151          105,763            160,128
  Changes in unrealized gain from BODEN 2012                            (27,947)                  -               -        (27,947)
  Changes in unrealized gain from BOGAR                                   (6,317)                 -               -            (6,317)
  Foreign currency conversion                                                   -              249                -               249
  Tax effect on net gains (losses) on financial instruments
                                                                          11,992                  -               -             11,992
  available for sale
  Tax effect on the foreign currency conversion                                 -              (87)               -               (87)
  Distribution of unappropriated retained earnings, as approved
  by the Regular Shareholders’ Meeting held on 04/24/07 (see                    -                 -          54,676             54,676
  note 18)
  As of December 31, 2007                                                 31,942               313          160,439            192,694




          Andrés G. Prida                              Rubén M. Iparraguirre                             Jorge G. Stuart Milne
       Administration Manager                        General Assistant Manager                                Chairman
         Accounting Area                           Administration and Finance Area


                                                                                                                                       58
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)


                                                                          Reserve for
                                                                            financial         Reserve for
                                                                                                                    Legal
                                                                          instruments          conversion
                                                                                                                 reserve (3)        Total
                                                                        available for sale   differences (2)
                                                                               (1)
  As of January 1, 2006                                                         59,437               124           58,848           118,409
  Changes in unrealized gain from BODEN 2012                                    (1,236)                 -                -          (1,236)
  Transfers to income (losses) from sales of BODEN 2012                         (8,564)                 -                -          (8,564)
  Unrealized gain on BOGAR                                                       1,765                  -                -            1,765
  Foreign currency conversion                                                         -                42                -                42
  Tax effect on net gains (losses) on financial instruments available
                                                                                 2,812                  -                -            2,812
  for sale
  Tax effect on the foreign currency conversion                                       -              (15)                -               (15)
  Distribution of unappropriated retained earnings, as approved by
  the Regular and Special Shareholders’ Meeting held on 04/18/06                      -                 -          46,915            46,915
  (see note 18)
  As of December 31, 2006                                                       54,214               151          105,763           160,128


(1) Includes changes in the fair value of financial instruments available for sale.

(2) Foreign exchange differences arising from the conversion of Banco Patagonia (Uruguay) S.A.I.F.E.’s
    financial statements are recorded.

(3) B.C.R.A. regulations establish that 20% of income (loss) for the year obtained as established by
    B.C.R.A. standards, plus/less prior-period adjustments, shall be allocated to legal reserve (see note
    18).


NOTE 33: Minimum capital requirements

The B.C.R.A. requires that financial institutions shall keep, on individual and consolidated bases, minimum
capitals ("minimum capitals"), which are defined as a counterparty risk, interest rate risk and market risk of
a financial institution's assets.

The primary goals of the Bank’s capital management are to ensure the Bank's compliance with the capital
requirements externally established and that the Bank’s keeping of strong credit ratings and sound capital
ratios to sustain its business and maximize the shareholders' value.

The Bank manages its capital structure and adjusts it to the changes in economic conditions and to the
risk characteristics of its activities. To keep or adjust the capital structure, the Bank may adjust the amount
of the dividends paid to shareholders, reimburse the capital to the shareholders or issue securities. There
were no changes in goals, policies or processes regarding the previous accounting years.

Regarding this requirement, the Bank has a surplus, representing the amount in excess of the mandatory
consolidated minimum capital established by the B.C.R.A.. Consequently, the Bank considers that it has




          Andrés G. Prida                               Rubén M. Iparraguirre                               Jorge G. Stuart Milne
       Administration Manager                         General Assistant Manager                                  Chairman
         Accounting Area                            Administration and Finance Area


                                                                                                                                    59
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

the appropriate capital to meet its current and fairly foreseeable needs.

The Bank’s required consolidated minimum capital and consolidated capital calculated under B.C.R.A.
standards are broken down in the following table:

                                                                                 12/31/2007        12/31/2006

 Counterparty risk (1)                                                             282,580           196,306
 Market risk (2)                                                                     36,272            36,582
 Interest rate risk (3)                                                              92,507            62,835
 Mandatory consolidated minimum capital according to B.C.R.A. standards            411,359           295,723
 Stand-alone shareholders’ equity (4)                                            1,244,491           987,430
 Supplementary shareholders’ equity (5)                                            188,927           161,299
 Deductions (6)                                                                    (28,482)          (26,036)
 Consolidated computable equity according to B.C.R.A. standards                  1,404,936         1,122,693
 Capital surplus                                                                   993,577           826,970

    (1) It is the capital requirement to cover the credit risk calculated through a formula based on
        weighing several assets according to the associated risk.

    (2) It is given by the addition of different amounts necessary to cover the risk by category of assets.
        Compliance is daily calculated.

    (3) Captures the risk arising when the “duration”, sensitivity of assets, in the face of changes in
        interest rates does not agree with that of liabilities.

    (4) It is made up of capital stock, noncapitalized contributions, adjustments to capital stock,
        appropriated retained earnings, unappropriated retained earnings and debt instruments with
        certain issuance conditions.

    (5) It is made up of subordinated corporate bonds, 100% of income (losses) booked through the last
        quarterly financial statement for the current year, 100% of NOLs not considered in the financial
        statements, loan loss reserves related to performing loans and financing facilities covered by “A”
        preferred guarantees.

    (6) Due from correspondents and other demand deposits with banks and other foreign financial
        institutions not classified with an “investment grade”, debt instruments not physically held by the
        Bank, securities issued by foreign country governments, the classification of which is lower than
        that assigned to federal government securities, securities and other debt instruments contractually
        subordinated to other liabilities acquired through September 30, 2006, interests in financial
        institutions, shareholders, real property, goodwill, organization costs, items pending allocation and
        others.




         Andrés G. Prida                       Rubén M. Iparraguirre                 Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                    Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                             60
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)


NOTE 34: Additional information of the statement of cash flows

Cash and cash equivalents
                                                                                   12/31/2007        12/31/2006
     Cash (see note 19)                                                               303,389           197,897
     B.C.R.A. – Checking account (see note 19)                                        540,055           425,879
     Due from other financial institutions (see note 20)                              239,941           167,121
                                        TOTAL                                       1,083,385           790,897

 Cash and cash equivalents comprises cash, checking accounts with the B.C.R.A. and other financial
 institutions readily available.


NOTE 35: Related party information

The following are related party transactions ( all persons related to the Bank).

Province of Río Negro

As provided in the Bank’s by laws, the Province of Río Negro, sole shareholder holding Class A shares, is
empowered to appoint a director for Class A shares, as long as it owns at least one share of that class.
Since 1996, the Bank has been acting as financial agent (see note 43) of the Province of Río Negro, by
virtue of the agreement executed in 1996, renewed on December 14, 2006, for a 10-year term as from
January 1, 2007. The provincial financial agent’s role allows providing several services to meet the
financial and service needs of the different government sector areas in the province (central management,
agencies and affiliates, as well as municipalities) such as tax revenues, salary crediting, among others.
The financial agent duties do not include the obligation to provide financial assistance to the Province of
Río Negro under conditions other than those consistent with the Bank’s nature as private bank.

Intesa Sanpaolo Group

The Intesa Sanpaolo Group provides the Bank with typical services of the banking activity under market
terms and conditions, such as correspondent account services abroad.
The Bank performed correspondent transactions with Intesa Sanpaolo S.p.A. in the amount of 18,041 and
8,294 as of December 31, 2007, and 2006, respectively, which are recorded in the “Due from other
financial institutions” account.

Transactions with directors, first-class managers or their close relatives

The Bank has not been involved in transactions with and has not granted any loans to its directors, first-
class managers or their close relatives. The Bank has not granted any loans or has not performed any
proposed transaction with those people, except for those allowed by effective laws, which are of little
significance due to the amounts involved. In particular, some of its directors participated in certain credit




         Andrés G. Prida                           Rubén M. Iparraguirre              Jorge G. Stuart Milne
      Administration Manager                     General Assistant Manager                 Chairman
        Accounting Area                        Administration and Finance Area


                                                                                                              61
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

transactions with the Bank, as allowed by Business Associations Law and B.C.R.A. standards allowing
those transactions when they conform to market practices. Those standards establish limits on the credit
amount that may be granted to related parties.

The B.C.R.A. requires monthly filing the breakdown of the outstanding credit amount of directors,
controlling shareholders, officers and other related entities dealt with by the Board of Directors.

As of December 31, 2007, and 2006, the outstanding financial assistance grated by the Bank (financing
facilities including guarantees granted) to related parties totaled 7,247 and 5,486, respectively.


                                                                     12/31/2007        12/31/2006
                  Loans                                                     3,198             729
                   Unsecured overdrafts                                     2,196              94
                   Unsecured notes                                            115               -
                   Unsecured personal loans                                    94               9
                   Unsecured credit cards                                     211             185
                   Financial leases                                           582             441

                  Contingent obligations                                       4,049        4,757
                  Total credit assistance                                      7,247        5,486

                  Deposits                                                    19,170        6,702


Loans granted to and contingent transactions performed with related parties are in line with market
conditions for other customers.

As of December 31, 2007, and 2006, loans to employees, including those granted to first-class managers,
amounted to 29,836 and 20,812, respectively.

Income (loss) from loan and deposit transactions is not material.

The Bank has not granted any share-backed loans to directors and key personnel.

The compensation of the group’s key personnel was related to salaries and bonuses amounting to 11,273,
and 12,912 as of December 31, 2007, and 2006. It is noteworthy that there are no other benefits for key
personnel.




         Andrés G. Prida                        Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                  General Assistant Manager                     Chairman
        Accounting Area                     Administration and Finance Area


                                                                                                               62
BANCO PATAGONIA S.A.

                    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (Translation of financial statements originally issued in Spanish – See Note 44)
                             (Figures stated in thousands of Argentine pesos)

NOTE 36: Restricted assets

                                                                                12/31/2007         12/31/2006
   Cash and due from the B.C.R.A.
   Guarantees for transactions settled on time / MAE (1)                              3,432                     -
   Due from other financial institutions
   Other banks and correspondents (2)                                                 1,831                     -
   Financial assets available for sale
   Argentine government bonds in USD Libor 2012 (Boden 2012) (3)                      2,682                 3,338
   Share of Mercado de Valores S.A. (4)                                               2,064                 2,064
   Financial assets held to maturity
   Argentine government securities – Treasury bills (2)                                    -                1,535
   Loans
   Secured loans – Communiqué “A” 4,620 (5)                                         44,638                      -
   Other assets
   Guarantees at credit card managers (1)                                             8,333             12,172
   Court deposits (6)                                                                 1,702              4,439
   Certificate of deposit at BBVA Banco Francés S.A. (7)                                214                214
   Other security deposits                                                              228                235
   Other                                                                              2,839             11,263
                                   TOTAL                                            67,963              35,260



  (1) They are used as security for the transaction with the B.C.R.A., credit card managers and MAE.

  (2) They are used as security for compliance with section 393, Compilation of Central Bank of
      Uruguay’s Financial System Regulation and Control Rules.

  (3) They are attached for a contractual breach related to former Banco Sudameris S.A., which will be
      reimbursed upon payment. As of December 31, 2007, and 2006, a provision for 1,992 and 1,492,
      respectively, is recorded in the "Provisions for miscellaneous risks" account.

  (4) As of December 31, 2007, and 2006, Patagonia Valores held one share in Mercado de Valores
      S.A. as security for the transactions performed thereby.

  (5) Securing the BID loan No. 1,192/OC-AR (Communiqués “A” 4,620, “B” 8,920 and supplementary
      standards of the B.C.R.A.) of the Global Credit Program for micro, small- and medium-sized
      enterprises.

  (6) Provisions for 466 were booked as of December 31, 2007, and 2006.

  (7) As of December 31, 2007, and 2006, Patagonia Inversora held deposits at BBVA Banco Francés
      S.A., which were attached and for which the depository company assumed the settlement
      commitment in the event of an unfavorable resolution.




        Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
     Administration Manager                General Assistant Manager                     Chairman
       Accounting Area                   Administration and Finance Area


                                                                                                              63
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)

The Bank’s Management believes that there will be no losses for the restrictions on the abovementioned
availability.


NOTE 37: Loans and deposits concentration

                                                                                       Loans

               Number of customers                            12/31/07                                   12/31/06
                                                  Outstanding            % of total            Outstanding          % of total
                                                     balance             portfolio               balance            portfolio
10 largest customers                                      675,519                17.67                671,610               23.98
50 next largest customers                                 524,605                13.72               451,660                16.13
100 next largest customers                                436,454                11.42               323,498                11.55
Rest of customers                                       2,186,545                57.19              1,353,620               48.34

Total (see note 23)                                     3,823,123               100.00              2,800,388              100.00


                                                                                      Deposits
                                                              12/31/07                                   12/31/06
               Number of customers                Outstanding            % of total            Outstanding          % of total
                                                    balance              portfolio               balance            portfolio
10 largest customers                                      403,749                 8.53               367,545                10.02
50 next largest customers                                 602,207                12.72               482,005                13.14
100 next largest customers                                362,170                 7.65               291,650                 7.95
Rest of customers                                       3,366,438                71.10              2,527,575               68.89
Total (see note 28)                                     4,734,564               100.00              3,668,775              100.00



NOTE 38: Fair value of financial instruments

The fair value is defined as the amount for which an asset could be exchanged or a liability settled
between duly informed parties and willing to do so in a current transaction under the assumption that the
Bank is a going concern.

When a financial instrument is sold on a liquid and active market, its price traded on the market in an
actual transaction provides the best evidence of its fair value. When there is no agreed-upon price on the
market or it cannot indicate the fair value of the instrument, to determine such fair value the market value
of another instrument of similar characteristics, the analysis of discounted flows or other applicable
techniques can be used, which may be significantly affected by the assumptions used.

Although Management has used its best judgment in estimating the fair values of its financial instruments,
any technique to make such estimate implies certain inherent fragility. In conclusion, the fair value could




          Andrés G. Prida                       Rubén M. Iparraguirre                             Jorge G. Stuart Milne
       Administration Manager                 General Assistant Manager                                Chairman
         Accounting Area                    Administration and Finance Area


                                                                                                                           64
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)

not indicate the net realizable or settlement value. Below we describe the methodologies and assumptions
used to determine the fair values of financial instruments:

Fixed-rate financial instruments

The fair value of financial assets was determined by discounting future cash flows at the current market
rates offered for each year for financial instruments of similar characteristics. The estimated fair value of
fixed-interest rate deposits was determined in future cash flows by using market interest rates for deposits
with similar maturities to those of the Bank’s portfolio. For the subordinated corporate bond, the future
cash flow was discounted at Libor effective for each of the years.

Other financial instruments

In the case of financial assets and liabilities that are liquid and with short-term maturity, it is estimated that
their fair value is similar to their book value. This assumption is also applied to savings account, checking
account and other deposits.

The following chart shows a comparison between the fair value of financial instruments and their book
value.
                                                                                        December 31, 2007
                                                                                Book value             Fair value
        Financial assets
        Cash and due from the Central Bank of Argentina                            934,420                   934,420
        Due from other financial institutions                                      239,941                   239,941
        Financial assets held for trading                                              58,203                 58,203
        Financial assets measured at fair value from their initial
                                                                                  1,246,615                 1,246,615
        recognition
        Financial assets available for sale                                        350,195                   350,195
        Loans (1)                                                                 3,729,213                 3,658,939
        Other receivables (1)                                                      175,948                   160,994


        Financial liabilities
        Financing facilities received from financial institutions                  217,406                   217,406
        Deposits                                                                  4,734,564                 4,719,227
        Subordinated corporate bonds                                               154,134                   154,061
        Other liabilities                                                              87,228                 87,228




          Andrés G. Prida                                Rubén M. Iparraguirre                        Jorge G. Stuart Milne
       Administration Manager                          General Assistant Manager                           Chairman
         Accounting Area                             Administration and Finance Area


                                                                                                                              65
BANCO PATAGONIA S.A.

                         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                  (Translation of financial statements originally issued in Spanish – See Note 44)
                                  (Figures stated in thousands of Argentine pesos)


                                                                                        December 31, 2006
                                                                              Book value               Fair value

      Financial assets
      Cash and due from the Central Bank of Argentina.                                  684,619               684,619
      Due from other financial institutions                                             167,121               167,121
      Financial assets held for trading                                                  57,729                57,729
      Financial assets measured at fair value from their initial
                                                                                        872,913               872,913
      recognition
      Financial assets available for sale                                               443,353               443,353
      Financial assets held to maturity                                                  13,390                13,390
      Loans (1)                                                                     2,703,721               2,681,739
      Other receivables (1)                                                             149,128               137,644


      Financial liabilities
      Financing facilities received from financial institutions                          93,815                94,934
      Deposits                                                                      3,668,775               3,638,001
      Subordinated corporate bonds                                                      200,292               200,469
      Other liabilities                                                                  46,447                46,447


(1) The Bank’s Management has not identified any further indicators of impairment in value of its financial
assets as a result of differences in their fair value.


NOTE 39: Analysis of maturities of assets and liabilities

The following table shows an analysis of contractual maturities of assets and liabilities as of December 31,
2007, and 2006:




         Andrés G. Prida                                  Rubén M. Iparraguirre                        Jorge G. Stuart Milne
      Administration Manager                            General Assistant Manager                           Chairman
        Accounting Area                               Administration and Finance Area


                                                                                                                               66
                           BANCO PATAGONIA S.A.

                                                               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                                        (Translation of financial statements originally issued in Spanish – See Note 44)
                                                                        (Figures stated in thousands of Argentine pesos)


                                                      Without        Up to 1       From 1 to From 3 to From 6 to 12   From 1 to 5       From 5 to 10                           Total as of
                                                      maturity       month         3 months 6 months     months          years             years           Over 10 years       12/31/2007


Cash and due from the B.C.R.A.                                   -   934,420               -         -            -                 -                  -                   -        934,420

Due from other financial institutions                            -   239,941               -         -            -                 -                  -                   -        239,941

Financial assets held for trading                            365        3,006           747      1,961        3,637         16,689              3,217             28,581              58,203
Financial assets measured at fair value from
                                                                 -   229,608          51,263    49,230      735,893        180,621                     -                   -      1,246,615
their initial recognition
Financial assets available for sale                        7,600       64,048              -         -            -        258,624             19,164                759            350,195
Loans                                                            - 1,593,146        420,716    478,394      250,683        881,422             75,292             29,560          3,729,213

Other receivables                                         89,225       46,320              -       249       23,475         16,679                     -                   -        175,948
Other assets                                              16,481               -           -         -            -           9,497                    -                   -          25,978

TOTAL ASSETS                                            113,671 3,110,489           472,726    529,834    1,013,688      1,363,532             97,673             58,900          6,760,513


Financing facilities received from financial
institutions                                               6,420     191,036            629      1,326        1,818         16,177                     -                   -        217,406
Deposits                                           (a) 2,331,260 1,609,758          596,886    146,019       24,800         25,841                     -                   -      4,734,564
Subordinated corporate bonds                                     -             -       2,886         -       50,416        100,832                     -                   -        154,134
Deferred tax liabilities                                         -             -           -     5,246            -                 -                  -                   -           5,246
Other liabilities                                       166,290      125,997               -    80,901            -                 -                  -                   -        373,188
Provisions for miscellaneous risks                               -             -           -         -        5,255         38,610                     -                   -          43,865
TOTAL LIABILITIES                                     2,503,970 1,926,791           600,401    233,492       82,289        181,460                     -                   -      5,528,403


                           (a) Including demand deposit accounts.




                                       Andrés G. Prida                                       Rubén M. Iparraguirre                                Jorge G. Stuart Milne
                                    Administration Manager                                 General Assistant Manager                                   Chairman
                                      Accounting Area                                    Administration and Finance Area


                                                                                                                                                                                               67
                              BANCO PATAGONIA S.A.

                                                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                                           (Translation of financial statements originally issued in Spanish – See Note 44)
                                                                           (Figures stated in thousands of Argentine pesos)


                                                    Without        Up to 1       From 1 to From 3 to From 6 to 12   From 1 to 5       From 5 to 10                            Total as of
                                                    maturity       month         3 months 6 months     months          years             years           Over 10 years       12/31/2006


Cash and due from the B.C.R.A.                                 -   684,619               -          -           -                 -                  -                   -         684,619

Due from other financial institutions                          -   167,121               -          -           -                 -                  -                   -         167,121

Financial assets held for trading                              -     15,543           837        694        1,048           7,242             3,685              28,680             57,729
Financial assets measured at fair value from
                                                               -             -       5,010     15,260     156,164        696,479                     -                   -         872,913
their initial recognition
Financial assets available for sale                      7,869       40,580           209      60,866       8,453        248,387             73,356               3,633            443,353
Financial assets held to maturity                              -             -           -          -      13,390                 -                  -                   -          13,390

Loans                                                          - 1,159,510        192,062     361,034     161,791        727,087             74,687              27,550          2,703,721
Other receivables                                       48,110       38,579              -          -      30,764         31,675                     -                   -         149,128

Other assets                                            33,050               -           -          -           -                 -                  -                   -          33,050

TOTAL ASSETS                                            89,029 2,105,952          198,118     437,854     371,610      1,710,870            151,728              59,863          5,125,024


Financing facilities received from financial
institutions                                             6,294       87,521              -          -           -                 -                  -                   -          93,815
Deposits                                          (a) 1,827,991 1,174,027         448,759     109,887     106,581           1,530                    -                   -       3,668,775
Subordinated corporate bonds                                   -             -       3,844          -      49,112        147,336                     -                   -         200,292
Deferred tax liabilities                                       -             -           -     13,294           -                 -                  -                   -          13,294
Other liabilities                                       14,535     199,047               -          -           -                 -                  -                   -         213,582
Provisions for miscellaneous risks                             -             -           -          -       4,010         30,845                     -                   -          34,855
TOTAL LIABILITIES                                    1,848,820 1,460,595          452,603     123,181     159,703        179,711                     -                   -       4,224,613


                              (a) Including demand deposit accounts.




                                           Andrés G. Prida                                       Rubén M. Iparraguirre                                   Jorge G. Stuart Milne
                                        Administration Manager                                 General Assistant Manager                                      Chairman
                                          Accounting Area                                    Administration and Finance Area


                                                                                                                                                                                             68
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)


NOTE 40: Risk management policy

Risks are inherent to the Bank’s activities and are managed through a process for the continuous
identification, measurement and control thereof, subject to limits and other risk controls. This risk
management process is critical for the Bank's profitability.

The Bank is headed and managed by a Board of Directors formed by a chairman, a first vice-chairman
and a second vice-chairman, who are the majority shareholders, and three directors, two of whom are
independent pursuant to current C.N.V. standards. The Board of Directors is in charge of managing the
Bank, and its objectives are, among others, coordinating and supervising that the operating performance
is consistent with institutional objectives, facilitating the performance of business with efficiency, control
and productivity, for the purpose of generating permanent improvement in administrative and commercial
processes.

Risk management structure

Additionally, the Bank has structured its risk control based on the Board of Directors’ supervision. The
Board of Directors is in charge of approving the Bank’s effective strategies and policies, provides the
general risk management principles and approves the risk control policies for specific areas such as
operating, market, liquidity and credit risk.

The abovementioned structure comprises different separate and independent committees. The main
committees and a detail of their functions are as follows:

Internal audit committee: It is in charge of actions that allow ensuring the appropriate operation of the
Bank’s internal control procedures and systems, aligned with the guidelines set forth by the Board of
Directors. This committee also approves the Annual Internal Audit Plan and reviews the degree of
compliance therewith, and analyzes the Bank’s annual and quarterly financial statements, the external
auditor’s reports, the relevant financial reporting, and the statutory audit committee reports.

Senior credit committee: It analyzes and approves credit transactions exceeding 2,000 but not above 1%
or 1.5% of the Bank’s computable equity (i.e. the statutory capital calculated as established by Financial
Institutions Law and B.C.R.A. rules, which is determined through the following formula: Stand-alone
shareholders’ equity, plus supplementary shareholders’ equity less deductibles), depending on whether
guarantees were not provided or were provided in granting financing facilities, respectively.

Financial institutions credit committee: It establishes the cap for financial system institutions to perform
credit transactions up to an amount of 30,000.




         Andrés G. Prida                       Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                     Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                              69
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)


Government sector credit committee: It analyzes and approves credit lending to federal, provincial or
municipal government sector customers.

Corporate banking credit committee: It analyzes and approves credit transactions of up to 2,000.

IT security committee: It is in charge of proposing IT security policies to the Board of Directors, and
monitoring compliance therewith. This committee is also in charge of preparing proposals to the Board of
Directors regarding preventive measures tending to minimize system-related risks or, as the case may be,
corrective actions.

Finance committee: Its purpose is to monitor management inherent risks of the Bank’s financial assets
and liabilities, such as liquidity and market risks.

Risk measurement and reporting systems

The Bank’s risks are measured through a method reflecting both the expected loss that probably arises
from normal circumstances, and unexpected losses, which are an estimate of the last actual loss based
on statistical models. Estimates use as benchmark the possibilities arising from past experience, adjusted
to reflect the economic environment. The Bank also considers worse scenarios that could arise if those
extreme assumptions with low likelihood of occurrence actually take place.

Risks are supervised and controlled primarily based on the limits established by the Bank. These limits
reflect the Bank’s business strategy and market environment, as well as the risk level the Bank is ready to
accept, with further focus on the industries selected. In addition, the Bank controls and measures the full
risk it bears as regards the total risk exposure as to all types of risks and activities.

The different committees prepare and issue reports for the Board of Directors on a monthly basis,
including the significant risks identified, if any.

The Bank actively uses guarantees to mitigate its credit risks.

Excessive risk concentration

To avoid excessive risk concentrations, the Bank’s policies and procedures include specific guidelines to
focus on keeping a diversified portfolio. The identified credit risk concentrations are controlled and
managed accordingly. The selective coverage is used at the Bank to manage risk concentrations both in
terms of relationships and industry.




         Andrés G. Prida                       Rubén M. Iparraguirre                 Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                    Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                             70
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)

The main types of risks that the Bank is exposed to are those related to credit risk, liquidity risk, market
risk and operating risk.

The following are the policies and processes aimed at identifying, assessing, controlling and mitigating
each one of the main risks:

Credit risk

The credit risk is the existing risk regarding the possibility for the Bank to incur a loss because one or
several customers or counterparties fail to meet their obligations.

To manage and control the credit risk, the Board of Directors approves the Bank’s credit policy and credit
assessment in order to provide a framework for the creation of businesses to attain an adequate
correlation between the risk assumed and profitability. The Bank has procedure manuals that contain
guidelines with the goals mentioned below:

a)   Achieving an adequate portfolio segmentation;

b)   Boosting the use of the risk analysis and assessment tools that best adjust to the customer’s profile;

c)    Setting consistent standards for granting loans, following conservative parameters based on the
     customer’s solvency, cash flows and profitability in the case of companies, and revenues and equity in
     the case of individuals;

d)   Setting limits to individual powers for granting loans depending on the amount, promoting the
     existence of specific committees that, according to their sphere of competence, will be in charge of
     defining assistance levels;

e)   Optimizing the quality of risks assumed, having appropriate guarantees according to the loan term
     and the level for the risk involved; and

f)   Monitoring the loan portfolio and the level of customers’ compliance permanently.

In order to evaluate the credit risk, based on the credit analysis and proposal prepared by the business
officer, the company analysis sector of Risk Management analyzes the customer’s credit and repayment
capacity and issues a report in which, among other aspects, it mentions the main risks to which the
company is exposed and that may affect its payment capacity and findings regarding any litigation deriving
from the legal regulations of the financial system or from commercial activities, such as disqualifications,
requests for bankruptcy, and litigation in progress. Based on the risk report, the business officer prepares




          Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
       Administration Manager                General Assistant Manager                     Chairman
         Accounting Area                   Administration and Finance Area


                                                                                                              71
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

a customer credit rating proposal, including the analysis of loans, other receivables, contingent obligations
and guarantees granted, which is sent to the credit committee in charge of analyzing it and granting the
related loan.

According to the amount and type of loan, the credit committees are in charge of analyzing and
determining whether the loan should be approved: the senior credit committee, the corporate banking
committee or those performed by area or virtually in the case of small- and medium-sized enterprises.

The senior credit committee, which is in charge of analyzing the financing involving larger amounts, is
made up of members of the Bank’s top management of the Corporate Banking and Risks area, including
the general assistant manager in charge of the Corporate Commercial area.

Individuals’ Banking customers are rated through a scoring system. The Bank’s policies in this regard
establish that only special cases may be rated through nonautomatic means, requiring the participation of
different approval levels depending on the financing amount to be agreed upon. Once the loan is granted,
each customer is rated following the same pattern. The rating makes reference to the quality of customers
and it is related to what is established by B.C.R.A. regulations regarding “Debtor classification and
minimum loan loss reserves”.

It is noteworthy that the Bank uses the request for guarantees for its financing facilities to mitigate the
credit risk. The main guarantees received are related to collateral or pledge on certificate of deposit, cash,
standby letter of credit (with the Finance Management’s consent to the issuing bank), atomized postdated
checks (the guarantee may be considered according to the limits provided), certificates of works, discount
on credit card coupons, first mortgage and first automobile and/or machinery security agreement.

The Bank's Risk Management monitors the market value of guarantees, requesting appraisal revaluations
on a periodic basis.

The classification and periodical monitoring of customers permit to protect the quality of assets and to take
corrective actions in advance in order to maintain the Bank’s equity.

The main considerations to assess the impairment in value of loans include if there are principal or interest
payments past due over 90 days or if there is any known difficulty in the counterparties’ cash flows,
reduced credit ratings or breach of the original terms of the agreement. The Bank assesses the
impairment in value in two areas: allowances individually evaluated and allowances collectively evaluated.

The guarantees granted, letters of credit and obligations for foreign trade transactions are assessed and
an allowance is booked in the same manner as that of the loan portfolio.




         Andrés G. Prida                       Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                     Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                              72
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)

The financing facilities granted to the nonfinancial government sector and financing facilities with a term of
less than 30 days granted to financial sector customers are excluded from the analyses of allowances.

The Bank classifies all its financing facilities into five risk categories, depending on the degree of the risk
of default in payment of each loan.

The following are the classes used by the Bank, specifying the appropriate characteristics of each of them.

Individuals and mortgage loans portfolio

The criterion used to classify debtors of the individuals and mortgage loans portfolio is based on the days
of delinquency to pay their obligations, as specified below:

               Days of
Situation      delinquency
1              Up to 31
2              32 to 90
3              91 to 180
4              181 to 365
5              Over 365

Commercial loans portfolio

Situation 1:

The analysis of the customer’s cash flows shows such customer's ability to meet appropriately all its
financial commitments. The most significant indicators that may reflect this situation are that the customer
shows a liquid financial situation, with low level and adequate indebtedness structure with respect to its
capacity to generate profits, and shows a high debt (principal and interest) payment capacity under the
agreed-upon conditions, generating funds to an acceptable degree. Cash flows are not subject to
significant variations in the face of important changes in the behavior of variables both proprietary ones
and those related to its activity sector. The debtor regularly complies with the payment of its obligations,
even when delays of up to 31 days are incurred, in the understanding that this happens when the
customer settles obligations without resorting to the Bank’s new direct or indirect financing facilities.

Situation 2:

The analysis of the customer’s cash flows shows that, upon performing it, may meet all its financial
commitments. The most significant indicators that may reflect this situation are that the customer who has




         Andrés G. Prida                       Rubén M. Iparraguirre                   Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                      Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                               73
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)

a good financial and profitability situation, with moderate indebtedness and adequate cash flows to pay
principal and interest owed. Cash flows tend to weaken to bear payments since this is extremely sensitive
to changes in one or two variables, as to which there is a material degree of uncertainty, being especially
subject to changes in sector-related circumstances. The customer incurs in delays of up to 90 days to pay
its obligations.

Situation 3:

The analysis of the customer’s cash flows shows that the customer is experiencing problems to meet all
its financial commitments on a regular basis and that, if not resolved, these problems may result in a loss
for the financial institution. The most significant indicators that may reflect this situation are that the
customer has an illiquid financial situation and a cash flow level that does not allow it to meet the payment
of all principal and interest payables. It can only pay interest. The customer has scarce capacity to
generate profits. Projected cash flows show a gradual impairment and a high sensitivity to minor and
foreseeable changes in either proprietary or environment variables, weakening even more payment
possibilities. It incurs in delays of up to 180 days.

Situation 4:

The analysis of the customer’s cash flows indicates that it is highly unlikely that the customer will be able
to meet all its financial commitments. The most significant indicators that may reflect this situation are that
the customer has an illiquid financial situation and a very high indebtedness level, with operating losses
and the obligation to sell highly significant assets, as well as those material to the business activity carried
out. Cash flows are clearly insufficient and are not enough to pay interest. It incurs in delays of up to one
year.

Situation 5:

Customers’ payables classified into this category are deemed uncollectible. Although these assets could
have some recoverable value under a given set of future circumstances, their uncollectibility is clear upon
the analysis. The most significant indicators that may reflect this situation are that the customer has a poor
financial situation with inability to pay debts, adjudication of bankruptcy or voluntary bankruptcy petition,
with the obligation to sell highly significant assets, as well as those material to the business activity carried
out. Cash flows are not enough to bear operating costs. It incurs in delays of above one year.

Allowances individually evaluated

Banco Patagonia determines the appropriate allowances for each individually significant loan on an
individual basis. The matters considered upon determining the amounts of the allowance include the




         Andrés G. Prida                        Rubén M. Iparraguirre                   Jorge G. Stuart Milne
      Administration Manager                  General Assistant Manager                      Chairman
        Accounting Area                     Administration and Finance Area


                                                                                                                74
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

counterparty’s business plan, capacity to improve profitability once the financial difficulty arises, projected
inflows, percentage of net income intended for the payment of dividends if there is bankruptcy, another
financial support capacity, the realizable value of the guarantee and the term of expected cash flows.
Losses for impairment in value are assessed as of each date of filing of the consolidated financial
statements.

Allowances collectively evaluated

Allowances are collectively evaluated in the event of loan losses that are not individually significant.
Allowances are assessed and set as of the date of each filing of the consolidated financial statements.

The collective evaluation considers the impairment of the portfolio although there is still no objective
evidence of impairment in an individual evaluation. Impairment losses are estimated considering historical
losses with respect to the portfolios.

Loan follow-up and review

The verification of the request formal aspects and of the implementation of the related guarantees, and the
control over the payments of installments form part of the loan follow-up process.

In this respect, after 16 days and up to 90 days from the delay in the payment, the collection procedure is
under the charge of the risk area, which –considering the specific characteristics of each case– is required
to send notices and perform the procedures in order to recover the loan.

Should this goal not be achieved, the loan will pass to the “pre-legal” stage, in which the Bank’s risk
management intensifies recovery procedures in order to obtain the payment from customers or propose
refinancing according to their payment capacity. Once this stage is over and no positive results have been
obtained, the loan collection will be entrusted to the Bank’s Legal Management, which –depending on the
loan amount and guarantees– will decide on the use of court or out-of-court procedures.

Credit risk management in investments in financial assets

The Bank evaluates the credit risk identified of each of the financial assets invested by analyzing the risk
rating given by a rating agency. These financial instruments are primarily concentrated in amounts
deposited with first-class financial institutions and government securities issued by the Argentine Federal
Government, bills and notes issued by the B.C.R.A., which are listed on active markets.

The following table shows the gross maximum exposure to credit risks disregarding any guarantee or
other credit improvements:




         Andrés G. Prida                       Rubén M. Iparraguirre                   Jorge G. Stuart Milne
      Administration Manager                 General Assistant Manager                      Chairman
        Accounting Area                    Administration and Finance Area


                                                                                                               75
BANCO PATAGONIA S.A.

                             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Translation of financial statements originally issued in Spanish – See Note 44)
                                      (Figures stated in thousands of Argentine pesos)


                                                                           Notes        12/31/2007           12/31/2006
Cash and due from the B.C.R.A. (1)                                          19            631,031               486,722
Due from other financial institutions                                       20            239,941               167,121
Financial assets held for trading                                           21             58,203                57,729
Financial assets measured at fair value from their initial recognition      21           1,246,615              872,913
Financial assets available for sale                                         21            350,195               443,353
Financial assets held to maturity                                           21                      -            13,390
Loans                                                                       23           3,729,213            2,703,721
Other receivables                                                           24            175,948               149,128
Total                                                                                    6,431,146            4,894,077

Guarantees granted                                                          23             87,429               27,813
Letters of credit                                                           23             18,349               14,461
Obligations for foreign trade transactions                                  23             32,908               29,017
Total                                                                                     138,686               71,291
Total credit risk exposure                                                              6,569,832            4,965,368


        (1)    Excluding the amount in cash.

The table above represents the worst scenario of the Bank’s credit risk exposure as of December 31,
2007, and 2006, disregarding the guarantees received or other credit risk coverages. For the assets
included in the balance sheet, disclosures are based on the book amounts, less the respective allowances
for uncollectibility risk, as shown on the consolidated balance sheet. Based on the above, as of December
31, 2007, 59% of the total maximum exposure is derived from contingent transactions and loans (56% as
of December 31, 2006); 24% represents financial assets available for sale and at fair value from their
initial recognition (27% as of December 31, 2006), and 10% represents cash and due from the B.C.R.A.
(10% as of December 31, 2006). Management relies on the capacity to continue to control and keep a
minimum credit risk exposure for the Bank as a result of its portfolio of loans and financial assets based on
the following:

               98% of the loan portfolio is classified into two upper levels of the internal classification system as
               of December 31, 2007 (98% as of December 31, 2006);

               91% of the loan portfolio is considered not to be past due or impaired as of December 31, 2007
               (98% as of December 31, 2006);




                 Andrés G. Prida                          Rubén M. Iparraguirre                 Jorge G. Stuart Milne
              Administration Manager                    General Assistant Manager                    Chairman
                Accounting Area                       Administration and Finance Area


                                                                                                                          76
BANCO PATAGONIA S.A.

                        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (Translation of financial statements originally issued in Spanish – See Note 44)
                                 (Figures stated in thousands of Argentine pesos)


The following is an analysis of the Bank’s financial assets by activity before considering the guarantees
received:


                                                                Gross                             Gross
                                                              maximum          Net maximum      maximum      Net maximum
                                                            exposure as of     exposure as of exposure as of exposure as of
                                                              12/31/2007        12/31/2007 (1)  12/31/2006   12/31/2006 (1)

  Granted to individuals                                        1,130,061           973,255       726,462          640,850
  Crops, agricultural and marketing services                     148,743            127,033        85,620            75,061
  Animal breeding, livestock services, except for
  veterinary and marketing ones                                    92,344               80,196     46,361            44,270

  Hunting and capture of living animals, repopulation
  of hunting animals and related services; forestry,
  wood extraction and related services                              4,228                4,205        726               707
  Fishing, related services, production and sale                   43,541               18,281     18,874            17,353
  Exploitation of mines and quarries; sale and
  production of products extracted                                 23,758               19,557     19,254            16,424
  Production of food and beverages                               152,651            105,185        77,269            68,988

  Wholesale sale and production of textiles, clothing,
  finishing and dyeing of furs, tanning and finishing of
  hides, production of leather goods, saddlery and
  footwear, and parts thereof                                      47,445               43,447     43,426            33,822
  Extraction, exploitation and sale of oil, rubber and
  chemical byproducts                                            104,128                91,994     55,292            42,917
  Wholesale sale and manufacture of machines and
  equipment (all), electrical appliances,
  communications, TV, and radio equipment, precision
  and optical medical instruments, clocks                        107,602            105,086        75,094            72,271
  Wholesale sale and manufacture of vehicles,
  automobiles, trailers and semitrailers of equipment
  and means of transport                                           18,965               10,160     26,357            17,664
  Electricity, gas, steam and hot water                             9,519                7,950      8,642             8,105
  Construction                                                   100,446                81,316     71,334            65,467

  Wholesale and/or on-commission or on-consignment
  trade, except for the trade of vehicles, automobiles
  and motobicycles                                               205,930            169,504       140,575          132,099




          Andrés G. Prida                                 Rubén M. Iparraguirre                      Jorge G. Stuart Milne
       Administration Manager                           General Assistant Manager                         Chairman
         Accounting Area                              Administration and Finance Area


                                                                                                                              77
BANCO PATAGONIA S.A.

                            NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                     (Translation of financial statements originally issued in Spanish – See Note 44)
                                     (Figures stated in thousands of Argentine pesos)


                                                                         Gross                                Gross
                                                                       maximum             Net maximum      maximum      Net maximum
                                                                     exposure as of        exposure as of exposure as of exposure as of
                                                                       12/31/2007           12/31/2007 (1)  12/31/2006   12/31/2006 (1)

    Retail trade, except for the trade of vehicles,
    automobiles and motobicycles, repair of personal
    effects and household equipment, services                              154,706               134,435             108,665              102,114
    Hotels and restaurants                                                 258,122               218,078             170,700              147,019
    Financial intermediation and other financial services                3,278,681             3,178,647          2,632,818             2,419,481
    Real estate, business and lease                                           9,962                 8,176              7,570                    6,592
    Public administration, defense and mandatory social
    security Organizations and extraterritorial bodies                     211,988               211,496             384,587              384,234
    Other industries                                                       467,012               330,781             265,742              189,721
    Total                                                                6,569,832             5,918,782          4,965,368             4,485,159

      1)     It is obtained by deducting from the “gross maximum exposure” the amounts of guarantees received for the financing facilities as
             improvement of the credit risk.


The amount and type of guarantee required for financing facilities granted depend on an assessment of
the counterparty’s credit risk. The guidelines are implemented according to the capacity of acceptance of
the types of guarantee and valuation metrics.

The main types of guarantees obtained are as follows:

-            Collaterals of certificates of deposit with the Bank;
-            Cash on hand;
-            Postdated checks;
-            Mortgage on real property and security agreements related to private parties’ property.

The Bank controls the market values of guarantees, requests additional guarantees according to the loan
agreements involved and controls the market value of the guarantees obtained during their review to
determine whether the allowances for uncollectibility risk are adequate.

It is the Bank’s policy to dispose of such guarantees to reduce or settle uncollected amounts.




               Andrés G. Prida                                   Rubén M. Iparraguirre                                  Jorge G. Stuart Milne
            Administration Manager                             General Assistant Manager                                     Chairman
              Accounting Area                                Administration and Finance Area


                                                                                                                                                        78
BANCO PATAGONIA S.A.

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               (Translation of financial statements originally issued in Spanish – See Note 44)
                               (Figures stated in thousands of Argentine pesos)


Loan quality by sector

The Bank manages the quality of loans through ratings established by the B.C.R.A., as mentioned above.


                                Neither delinquent nor
                                      impaired                                            Impaired
                                         Situation                                        Situation
                                                              Delinquent,                                          Total as of
                                    1                 2       not impaired       3            4        5           12/31/2007


  Corporate loans                2,430,150            4,718        124,376         816      20,905    15,728         2,596,693
  Mortgage loans                   119,399            1,690          5,579         923       1,238     1,051           129,880
  Consumer loans                   929,392            8,642        135,390       5,872       9,815     7,439         1,096,550
  Totals                         3,478,941           15,050        265,345       7,611      31,958    24,218         3,823,123



                                Neither delinquent nor
                                       impaired                                           Impaired
                                         Situation                                        Situation
                                                               Delinquent,                                         Total as of
                                     1                2        not impaired          3        4        5           12/31/2006


  Corporate loans                 1,907,682           5,616           41,312      2,962     33,927    16,789         2,008,288
  Mortgage loans                    108,904           4,508              681        635      1,331     2,462           118,521
  Consumer loans                    572,610           6,712           83,224      2,295      4,185     4,553           673,579
  Totals                          2,589,196          16,836          125,217      5,892     39,443    23,804         2,800,388


The other financial assets are neither delinquent nor impaired.




          Andrés G. Prida                                Rubén M. Iparraguirre                        Jorge G. Stuart Milne
       Administration Manager                          General Assistant Manager                           Chairman
         Accounting Area                             Administration and Finance Area


                                                                                                                                 79
  BANCO PATAGONIA S.A.

                         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                  (Translation of financial statements originally issued in Spanish – See Note 44)
                                  (Figures stated in thousands of Argentine pesos)


  Impaired loans by type, along with the fair value of the related guarantee and the amounts of allowances,
  are as follows:
                                                                                    Impaired
                                        Delinquent, not impaired                 Situation 3 to 5
                                      12/31/2007      12/31/2006           12/31/2007       12/31/2006

        Loans                             265,345             125,217              63,787             69,139
        Fair value of guarantees
        received                           19,524              10,913               1,836                331
        Corporate loans                    12,305               5,334               1,358                192
        Mortgage loans                      3,926                 631                  38                 31
        Consumer loans                      3,293               4,948                 440                108
        Allowances                          3,054               1,432              58,599             68,764
        Corporate loans                     1,177                 591              33,117             53,457
        Mortgage loans                        102                  11               3,127              4,384
        Consumer loans                      1,775                 830              22,355             10,923

  Analysis by aging of loans in arrears but not impaired (in days):


                                                       Delinquent, not impaired
                                                                                                               Total as of
                                         Up to 30   From 31 to 60 From 61 to 90             Over 90            12/31/2006

Corporate loans                            13,457            2,340              4,287       21,228                    41,312
Mortgage loans                                228                66               20           367                      681
Consumer loans                             80,335            1,170                309        1,410                  83,224
TOTAL                                      94,020            3,576              4,616       23,005                 125,217


                                                       Delinquent, not impaired
                                                                                                               Total as of
                                         Up to 30   From 31 to 60 From 61 to 90             Over 90            12/31/2007
Corporate loans                            94,434          13,940               5,388       10,614                 124,376
Mortgage loans                              4,213             935                431              -                    5,579
Consumer loans                            123,175           8,177               2,312        1,726                 135,390
TOTAL                                     221,822          23,052               8,131       12,340                 265,345




            Andrés G. Prida                       Rubén M. Iparraguirre                       Jorge G. Stuart Milne
         Administration Manager                 General Assistant Manager                          Chairman
           Accounting Area                    Administration and Finance Area


                                                                                                                        80
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)


The following table shows the book value of refinanced financial assets:

                                                      12/31/2007              12/31/2006
Loans                                                         354                   522
Corporate loans                                               151                   489
Mortgage loans                                                  92                     -
Consumer loans                                                111                    33
Other receivables                                               -                   917
 Other                                                          -                   917
Total                                                         354                 1,439




           Andrés G. Prida                      Rubén M. Iparraguirre                      Jorge G. Stuart Milne
        Administration Manager                General Assistant Manager                         Chairman
          Accounting Area                   Administration and Finance Area


                                                                                                                   81
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)


Liquidity risk

In order to reduce the liquidity risk deriving from the uncertainty that the Bank may be exposed to with
respect to its capacity to honor the financial commitments assumed with its customers in due time and
manner, a policy has been established, the main aspects of which are as follows:

Assets: A high-liquidity assets portfolio will be maintained to cover at least 5% of total liabilities,
comprising deposits, the corporate bonds issued by the Bank, the repurchase agreements taken and the
financial and interbank loans borrowed, maturing before the term of 90 days.

Liabilities: In order to minimize the unintended effects of illiquidity deriving from the possible withdrawal of
deposits and the repayment of interbank loans taken, the Bank’s purpose is to diversify the structure of
liabilities, as regards sources and instruments. In this respect, the objective is to attract funds from as
many customers and industries as possible, offering the greatest diversity of financial instruments. For this
purpose, the Bank has implemented the following policies, the follow-up and control of which are under
the charge of the Finance Committee:

    a) Giving priority to the attraction of retail deposits in order to have an atomized portfolio, avoiding
       the risk of concentrating the portfolio in a few investors. The level of retail deposits is expected to
       be at least 50% of total deposits.

    b) The interest held in the certificates of deposit portfolio of institutional investors (foreign investors,
       mutual funds, insurance companies and pension fund managers) shall not exceed 15% of total
       liabilities.

    c) The certificates of deposit taken shall not exceed 5% of total certificates of deposit, or a fixed
       amount determined by the Bank.

    d) No investor may have certificates of deposit for an amount exceeding 10% of the total deposits
       portfolio.

    e) Finally, financial and interbank loans borrowed may not exceed 20% of total liabilities. No
        institution can exceed 50% of such limit.

In the event of a liquidity crisis, the Bank has a contingency plan with the following actions:

    a) Sale of high-liquidity assets that form part of the reserve held of 5% of total liabilities, as
       previously mentioned;




         Andrés G. Prida                        Rubén M. Iparraguirre                   Jorge G. Stuart Milne
      Administration Manager                  General Assistant Manager                      Chairman
        Accounting Area                     Administration and Finance Area


                                                                                                                82
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)


    b) Repurchase agreements with the B.C.R.A. with assets issued thereby, which are held in the
       Bank’s portfolio;

    c) Limiting any new credit assistance; and

    d) Requesting financial assistance from the B.C.R.A. in the event of illiquidity. Current B.C.R.A. rules
       set forth the criteria to grant financial assistance to financial institutions in the event of illiquidity
       problems.

The following table shows the liquidity ratios during FY 2007 and 2006, which arise from dividing net liquid
assets, made up of cash, due from the B.C.R.A., due from other financial institutions, net interbank loans,
B.C.R.A. bills and B.C.R.A. notes, by total deposits.

                                                                              12/31/2007         12/31/2006
                                                                                  %                  %

       As of December 31                                                           55.7                 49.4
       Average for the year                                                        53.2                 44.3
       Higher                                                                      55.7                 49.4
       Lower                                                                       51.2                 40.8

The following table shows the breakdown by contractual maturity considering the undiscounted values of
the Bank’s financial liabilities:




         Andrés G. Prida                        Rubén M. Iparraguirre                      Jorge G. Stuart Milne
      Administration Manager                  General Assistant Manager                         Chairman
        Accounting Area                     Administration and Finance Area


                                                                                                                   83
BANCO PATAGONIA S.A.

                                                    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                             (Translation of financial statements originally issued in Spanish – See Note 44)
                                                             (Figures stated in thousands of Argentine pesos)




                                                    Without        Up to 1       From 1 to From 3 to From 6 to 12    From 1 to 5       Total as of
                                                    maturity       month         3 months 6 months     months           years          12/31/2007
  Financing facilities received from financial
  institutions                                           6,420     191,134            629      1,326        1,818          16,177           217,504
  Deposits                                        (a) 2,331,260 1,614,786         605,326    151,195       26,764          30,255         4,759,586
  Subordinated corporate bonds                                 -             -       5,587         -       56,002         112,006           173,595
  Other liabilities                                   123,218        66,138              -         -            -                  -        189,356
  TOTAL LIABILITIES                                  2,460,898 1,872,058          611,542    152,521       84,584         158,438         5,340,041



                                                    Without        Up to 1       From 1 to From 3 to From 6 to 12    From 1 to 5       Total as of
                                                    maturity       month         3 months 6 months     months           years          12/31/2006
  Financing facilities received from financial
  institutions                                           6,294       87,550             70         -            -                  -          93,914
  Deposits                                        (a) 1,827,991 1,177,006         453,794    114,209      114,396            1,595        3,688,991
  Subordinated corporate bonds                                 -             -       7,440         -       56,553         173,595           237,588
  Other liabilities                                            -   120,393               -         -            -                  -        120,393
  TOTAL LIABILITIES                                  1,834,285 1,384,949          461,304    114,209      170,949         175,190         4,140,886


         (a) Including demand deposit accounts.




         Andrés G. Prida                                  Rubén M. Iparraguirre                                     Jorge G. Stuart Milne
      Administration Manager                            General Assistant Manager                                        Chairman
        Accounting Area                               Administration and Finance Area


                                                                                                                                                       84
  BANCO PATAGONIA S.A.

                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                    (Translation of financial statements originally issued in Spanish – See Note 44)
                                    (Figures stated in thousands of Argentine pesos)

The following table shows the breakdown by contractual maturity considering the undiscounted
values of the Bank’s contingent obligations:

                                   Up to 1    From 1 to From 3 to From 6 to 12 From 1 to From 5 to   Over 10        Total as of
                                   month      3 months 6 months     months      5 years  10 years     years         12/31/2007
Guarantees granted                   13,706      12,418     8,702       44,985     4,674     2,859             85          87,429
Letters of credit                    13,143       4,610       596            -                   -              -          18,349
Obligations for foreign trade
transactions                         16,412      13,286     3,210            -          -        -              -          32,908
TOTAL                                43,261      30,314    12,508       44,985     4,674     2,859             85        138,686



                                   Up to 1    From 1 to From 3 to From 6 to 12 From 1 to From 5 to   Over 10        Total as of
                                   month      3 months 6 months     months      5 years  10 years     years         12/31/2006
Guarantees granted                   11,290       3,491     5,017        1,047     5,167     1,713             88          27,813
Letters of credit                     4,558       9,732       171            -          -        -              -          14,461
Obligations for foreign trade
transactions                          3,116      20,681     5,059         161           -        -              -          29,017
TOTAL                                18,964      33,904    10,247        1,208     5,167     1,713             88          71,291




  Market risk

  The market risk is that arising from fluctuations due to changes in market prices that cause the value of
  future cash flows of financial instruments to fluctuate due to those changes. Market risks arise from net
  interest rate, currency and price positions, all of which are exposed to general and specific market
  changes and changes in the price volatility such as interest rates, credit margins, foreign currency
  exchange rates and prices of shares and securities.

  Banco Patagonia determines the market risk exposure arising from the fluctuation in the value of portfolios
  of investments for trading and available for sale, which result from changes in market prices, the Bank's
  net positions in foreign currency, and government and private securities with normal quoted prices.

  These risks arise from the size of the Bank’s net positions and/or the volatility of the risk factors involved in
  each financial instrument. Such monitoring is made monthly based on daily positions.

  Risks to which those investment portfolios are exposed are monitored through historical simulation
  techniques of “Value at Risk” (VaR).
  Banco Patagonia applies the VaR methodology to calculate the market risk of the main positions adopted
  and the expected maximum loss based on a series of assumptions for a variety of changes in market
  conditions.

  The daily VaR measurement is a statistical-based estimate of the maximum loss possible of the current
  portfolio based on the adverse changes of the market. It states the maximum amount the Bank could lose,
  but with a certain confidence level (99 percent). Therefore, there is a specific statistical possibility (1
  percent) for the actual loss to exceed the estimated VaR. The VaR model assumes a certain “retention
  period” until positions can be closed (1-5 days). The time horizon used to calculate the VaR is one day.




             Andrés G. Prida                              Rubén M. Iparraguirre                           Jorge G. Stuart Milne
          Administration Manager                        General Assistant Manager                              Chairman
            Accounting Area                           Administration and Finance Area


                                                                                                                                    85
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

However, the one-day VaR is extended to a time period of 5 days and is calculated by multiplying the one-
day VaR by the square root of 5.

It is noteworthy that the use of that approach does not avoid losses beyond those limits in the event of the
most significant market changes.

As of December 31, 2007, and 2006, the Bank’s VaR by type of risk is as follows:

              VaR of the trading portfolio                                12/31/2007    12/31/2006

              Currency exchange rate risk                                       7,118          5,554
              Interest rate risk                                               88,621        87,223
              Price risk                                                       37,841        31,831



The Bank uses simulation models to evaluate possible changes in the market value of the trading portfolio
based on historical data for the last five years.

The VaR models are designed to measure the market risk in a normal market environment. They assume
that any change occurring in risk factors that affect the normal market environment will follow a normal
distribution.

Distribution is calculated through historical data weighted exponentially. The use of VaR has limitations
because it is based on historical volatilities and correlations in market prices and assumes that future price
changes will follow a statistical distribution.

As the VaR is largely based on historical data to provide information and perhaps does not clearly
anticipate future variations and changes in risk factors, the possibility of significant market changes can be
underestimated if changes in risk factors are not aligned with the normal distribution presumption.

The VaR can only be over or underestimated due to risk factor assumptions and the correlation between
those factors and specific instruments. Although positions may vary throughout the day, the VaR only
represents the risk of portfolio as of the end of each business day, and does not book the losses that may
occur when the 99% confidence level is exceeded.

Sensitivity to interest rate changes

The following table shows the sensitivity to a possible change in interest rates, keeping all the other
variables constant in the statement of income and changes in shareholders’ equity before income tax.

The statement of income sensitivity is the effect of estimated changes in interest rates on net financial
income for a year, before income tax, based on financial assets and liabilities as of December 31, 2007,
and 2006, breaking down items by currency and adjustment for inflation, and applying thereto the
sensitivity of changes in different interest rates and inflation. This is due to the holding of government




         Andrés G. Prida                         Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                   General Assistant Manager                     Chairman
        Accounting Area                      Administration and Finance Area


                                                                                                                86
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)

securities (including government securities available for sale) and secured loans adjusted by the CER, as
well as the asset position in foreign currency resulting from the increase in the credit lines to foreign trade
activities over the last few years. With respect to the assets and liabilities subject to the risk of nominal
exchange rate in local currency, the position is covered by a very low proportion of fixed-rate assets.

The equity sensitivity is calculated revaluing net financial assets, before income tax, as of December 31,
2007, and 2006 due to the effects of estimated changes in interest rates:
                                                           As of December 31, 2007
                                        Changes in basis       Equity sensitivity           Statement of
        Currency                            points                                       income sensitivity
        Foreign currency               +/-              50      +/-            320         -/+        4,762
        Foreign currency               +/-              75      +/-            479         -/+        7,143
        Foreign currency               +/-             100      +/-            639         -/+        9,523
        Foreign currency               +/-             150      +/-            959         -/+       14,250

        Pesos                          +/-              50      -/+               44       -/+          122

        Pesos                          +/-              75      -/+               66       -/+          183

        Pesos                          +/-             100      -/+               88       -/+          245

        Pesos                          +/-             150      -/+            132         -/+          367

        Pesos + Cer                    +/-              50      -/+            692         -/+        1,894

        Pesos + Cer                    +/-              75      -/+         1,038          -/+        2,860

        Pesos + Cer                    +/-             100      -/+         1,385          -/+        3,839

        Pesos + Cer                    +/-             150      -/+         2,077          -/+        5,834


                                                           As of December 31, 2006
                                       Changes in basis      Equity sensitivity        Statement of income
        Currency                           points                                           sensitivity
        Foreign currency               +/-            50      +/-          402           -/+         7,700
        Foreign currency               +/-            75      +/-          603           -/+       11,554
        Foreign currency               +/-           100      +/-          804           -/+       15,444
        Foreign currency               +/-           150      +/-         1,206          -/+       23,145

        Pesos                          +/-            50      -/+          322           -/+            50

        Pesos                          +/-            75      -/+          483           -/+            74

        Pesos                          +/-           100      -/+          644           -/+            99

        Pesos                          +/-           150      -/+          967           -/+          149

        Pesos + Cer                    +/-            50      -/+          928           -/+         2,076

        Pesos + Cer                    +/-            75      -/+         1,393          -/+         3,138

        Pesos + Cer                    +/-           100      -/+         1,856          -/+         4,217

        Pesos + Cer                    +/-           150      -/+         2,785          -/+         6,424




         Andrés G. Prida                         Rubén M. Iparraguirre                             Jorge G. Stuart Milne
      Administration Manager                   General Assistant Manager                                Chairman
        Accounting Area                      Administration and Finance Area


                                                                                                                           87
BANCO PATAGONIA S.A.

                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                    (Translation of financial statements originally issued in Spanish – See Note 44)
                                    (Figures stated in thousands of Argentine pesos)


The tables above are illustrative and are based on simplified scenarios. Figures represent the effect of
proforma changes in net financial income based on scenarios of the return curve and the risk profile of the
effective interest rate in the Argentine financial system. They do not include actions to be taken by
Management to mitigate the impact of this interest rate risk. Banco Patagonia seeks to maintain a position
of net assets that allows it to minimize losses and optimize net income. The above projections also
assume that the interest rate for all maturities are for the same amount and, therefore, do not reflect the
potential impact on the net financial income of some rates that change, whereas others remain unchanged.
Projections also include assumptions to facilitate calculations, for example, that all positions are kept to
maturity.

Foreign currency exchange rate risk:

Banco Patagonia is exposed to fluctuations in foreign currency exchange rates in its financial position and
cash flows. The larger proportion of assets and liabilities kept are related to US dollars.

The foreign currency position includes assets and liabilities reflected in pesos at the exchange rate as of
the closing dates mentioned below. An institution’s open position comprises assets, liabilities and
memorandum accounts stated in foreign currency, where an institution assumes the risk. Any devaluation
/ revaluation of those currencies would affect the Bank’s statement of income.

Foreign currency transactions are performed at the supply and demand exchange rates. As of December
31, 2007, and 2006, the Bank’s assets and liabilities stated in Argentine pesos by currency were as
follows:


                                               Total as of                                 Pound       Swiss
                 ITEMS                                              Euro       US dollar                            Other
                                                12/31/07                                   sterling    franc
ASSETS
Cash and due from the B.C.R.A.                      248,411           20,058     227,939       175              -        239
Due from other financial institutions               230,121            5,720     215,793      3,561            38      5,009
Financial assets held for trading                     1,180                -       1,180          -             -          -
Financial assets available for sale                 311,703               13     311,690          -             -          -
Financial assets held to maturity                         -                -           -          -             -          -
Loans                                               851,754            1,507     850,234         13             -          -
Other receivables                                    36,237                5      36,226          6             -           -
Other assets                                               77              -          77           -            -           -
                 Totals                           1,679,483           27,303   1,643,139      3,755            38      5,248
LIABILITIES
Financing facilities received           from
financial institutions                               43,778                -      43,778         -              -           -
Deposits                                            688,781           21,491     667,290         -              -           -
Subordinated corporate bonds                        154,134                -     154,134         -              -           -
Other liabilities                                    76,703            5,075      70,870       738             13           7
                 Totals                             963,396           26,566     936,072       738             13           7




           Andrés G. Prida                                          Rubén M. Iparraguirre                           Jorge G. Stuart Milne
        Administration Manager                                    General Assistant Manager                              Chairman
          Accounting Area                                       Administration and Finance Area


                                                                                                                                            88
BANCO PATAGONIA S.A.

                          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                   (Translation of financial statements originally issued in Spanish – See Note 44)
                                   (Figures stated in thousands of Argentine pesos)


                                               Total as of                                 Pound          Swiss
                 ITEMS                                              Euro       US dollar                               Other
                                                12/31/06                                   sterling       franc
ASSETS
Cash and due from the B.C.R.A.                      129,025            6,830     121,838        215                -        142
Due from other financial institutions               164,632            8,760     150,703      1,494               50      3,625
Financial assets held for trading                     1,094                -       1,094          -                -          -
Financial assets available for sale                 390,396               12     390,384          -                -          -
Financial assets held to maturity                    13,390                -      13,390          -                -          -
Loans                                               524,669              445     524,196         28                -          -
Other receivables                                     8,580                -       8,580          -                -          -
Other assets                                               34              -          34           -               -           -
                 Totals                           1,231,820           16,047   1,210,219      1,737               50      3,767
LIABILITIES
Financing facilities received           from
financial institutions                                6,294                -       6,294           -               -           -
Deposits                                            427,862            2,073     425,789           -               -           -
Subordinated corporate bonds                        200,292                -     200,292           -               -           -
Other liabilities                                    53,125            7,164      45,830          91              40           -
                 Totals                             687,573            9,237     678,205          91              40           -


In connection with the exposure to exchange rate variations, gains (losses) on a devaluation / revaluation
of the Bank’s net asset position in foreign currency are as follows:

                                                                     Exchange rate
                                                                      percentage
                     Sensitivity analysis                               variation                 2007                    2006

   Peso devaluation with respect to the foreign                                  5                    37,707                29,103
   currency

   Peso devaluation with respect to the foreign                                 10                    75,414                58,206
   currency

   Peso revaluation with respect to the foreign                                  5                (37,707)                (29,103)
   currency

   Peso revaluation with respect to the foreign                                 10                (75,414)                (58,206)
   currency



Operating risk

The operating risk is the risk of loss arising from a system failure, human error, fraud or external events.
When internal controls do not operate, operating risks may damage reputation, bring about legal or
regulatory consequences or cause financial losses. The Bank's goal cannot be to eliminate all operating
risks. However, the Bank may manage these risks by using control matrices and monitoring and
responding to potential risks. Controls primarily comprise segregation of duties, accesses, authorization
and reconciliation procedures, personnel training and performance evaluation processes, including the
internal audit review.




           Andrés G. Prida                                          Rubén M. Iparraguirre                              Jorge G. Stuart Milne
        Administration Manager                                    General Assistant Manager                                 Chairman
          Accounting Area                                       Administration and Finance Area


                                                                                                                                               89
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)


NOTE 41: Mutual fund Depositary Company

Under section 32, Chapter XI (11), of the revised text of C.N.V. regulations, below is the information on the
total amount in custody as of December 31, 2007, of the portfolio of the following mutual funds for which
the Bank acts as depository institution:


                                                                                                       Total
                               Name                                  Deposits         Other
                                                                                                      assets
  Lombard Renta en Pesos Fondo Común de Inversión                           238,179    17,903          256,082
  Fondo Nuevo Renta en Dólares Fondo Común de Inversión                         356         -              356
  Fondo Común de Inversión Lombard Acciones                                      18     3,701            3,719
  Fondo Común de Inversión Lombard Renta Fija Premium                             9       685              694
  Fondo Común de Inversión Lombard Renta Fija                                    18     5,636            5,654
  Fondo Común de Inversión Lombard Ahorro                                    25,609         -           25,609
  Lombard Asia F.C.I.                                                             6    34,482           34,488
  Lombard Cer Renta Fija F.C.I.                                                 120     3,049            3,169
  Lombard Europa F.C.I.                                                          64    45,030           45,094
  Lombard Capital F.C.I.                                                        304     2,542            2,846
                             TOTAL                                          264,683   113,028          377,711

Additionally, the Lombard América F.C.I., Lombard Latin América F.C.I. and Lombard Global F.C.I. funds
management regulations were approved. Although the abovementioned funds are ready to receive
subscriptions, as of the date of issuance of these financial statements, they do not show any movements.

Commissions earned as depository institution are recorded under “Commission income – Other” in the
amounts of 658 and 402 as of December 31, 2007, and 2006, respectively.



NOTE 42: Corpus assets

The Bank executed a series of agreements with other companies whereby it was appointed trustee of
certain financial trusts. The corpus assets of these trusts were mainly loans. Those loans were not
recorded in the financial statements, since they are not the Bank’s assets and, therefore, are not
consolidated.

As of December 31, 2007, and 2006, the Bank acts as trustee of 73 and 39 trusts, respectively, and in no
case will it answer for the obligations undertaken in executing these trusts with its own assets; these
obligations will only be covered with and up to the amount of corpus assets and the proceeds therefrom.

The commissions earned by the Bank for acting as trustee are calculated under the terms of the
respective agreements and the Bank's compensation as trustee is recorded under "Commission income –
Trust activity" in the amounts of 11,986 and 6,687 as of December 31, 2007, and 2006, respectively.




         Andrés G. Prida                      Rubén M. Iparraguirre                    Jorge G. Stuart Milne
      Administration Manager                General Assistant Manager                       Chairman
        Accounting Area                   Administration and Finance Area


                                                                                                               90
BANCO PATAGONIA S.A.

                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (Translation of financial statements originally issued in Spanish – See Note 44)
                                (Figures stated in thousands of Argentine pesos)


The following is a table summarizing the assets and equity managed by the Bank as of December 31,
2007, and 2006.
                                                                 12/31/2007      12/31/2006
                             Total assets                         911,284         450,588
                             Total shareholders’ equity           424,188         157,092


NOTE 43: Financial agent of the Province of Río Negro

Under Law No. 2,929 of the Province of Río Negro, and the agreement signed on May 27, 1996, the Bank
acted as financial agent of the Provincial Government, being in charge of the following banking duties:

   a) Transfer and deposit of federal tax revenue sharing resources, those related to special laws and
      other federal funds in official checking accounts opened or to be opened in the Bank, except for
      those federal funds that as required by the Federal Government should be credited in accounts
      authorized for that purpose, in banks other than Banco Patagonia.

   b) The distribution to municipalities of provincial tax revenue sharing resources by crediting to the
      checking account with the branch nearer to the holder of funds to be received.

   c) The deposit of currency, securities or other cash equivalents provided as security for agreements
      or bids of the public administration and court deposits.

   d) Compliance with payment of salaries, in their different types, to public administration agents and
      officers, and payment of other provincial benefits, as well as compliance with payment orders to
      suppliers.

   e) Receipt of deposits for payment of taxes, rates, assessments, pension fund contributions and any
      other service of the public administration.

   f)    Crediting of amounts related to the deposits established in the preceding point to the checking
         accounts that the province has authorized for that purpose.

   g) Hoarding of funds, in cash and/or securities, of the public administration and provision of all
      banking services supplementary to the activities summarized in this section, including principal
      and coupon interest payment services of the Province government debt securities.

   h) Those other related or new services that in the future the Bank may implement, provide or
      develop for its customers and that the Province may accept to introduce.


On February 28, 2006, such agreement expired. Through successive extensions it remained effective
through December 31, 2006, under the same terms and conditions as those of the abovementioned




           Andrés G. Prida                         Rubén M. Iparraguirre                Jorge G. Stuart Milne
        Administration Manager                   General Assistant Manager                   Chairman
          Accounting Area                      Administration and Finance Area


                                                                                                                91
BANCO PATAGONIA S.A.

                     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              (Translation of financial statements originally issued in Spanish – See Note 44)
                              (Figures stated in thousands of Argentine pesos)

agreement.

Furthermore, through Argentine public bidding No. 1/2006, the Ministry of Finance, Public Works and
Services of the Province of Río Negro called for the engagement of a bank to render services as agent.
The bids opening date was August 4, 2006, and Banco Patagonia has submitted the related bid.

Finally, as a result of such bidding process, on December 14, 2006, the Río Negro Province Banking and
Financial Services Agreement was signed for a 10-year term as from January 1, 2007. Such duties do not
include the obligation to provide financial aid to the Province of Río Negro under conditions other than
those consistent with the private bank nature of this bank.

The Province guarantees the Bank the payment as compensation for services provided there to, which
shall be made monthly. The Bank is thus empowered to debit such amount directly.

Commission income related to such activity is recorded under “Commission income – Other” in the
amounts of 7,054 and 7,323 as of December 31, 2007, and 2006, respectively.



NOTE 44: Explanation added for translation in English

These financial statements are the English translation of those originally issued in Spanish.

They are presented in accordance with International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB). The effects of differences between those standards and
the accounting principles generally accepted in the countries in which the accompanying financial
statements may be used have not been quantified.

Accordingly, these financial statements are not intended to present financial position, results of operations
or changes in financial position in accordance with accounting principles generally accepted in the
countries of users of the financial statements, other than those countries that apply IFRS issued by the
IASB.




         Andrés G. Prida                      Rubén M. Iparraguirre                  Jorge G. Stuart Milne
      Administration Manager                General Assistant Manager                     Chairman
        Accounting Area                   Administration and Finance Area


                                                                                                             92

								
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