Fitch Upgrades Argentina's BBVA Banco Frances' Individual & National L-T Rating.

BUENOS AIRES & NEW YORK -- Fitch Ratings has upgraded BBVA Banco Frances S.A.'s (Frances) as follows:

--Individual to 'D' from 'E';

--Long-term national ratings to 'AA-(arg)' from 'A+(arg)';

--Subordinated debt national rating to 'A+(arg)' from 'A(arg)'.

Fitch also affirms the following ratings:

--Support '5';

--Short-term national ratings 'A1(arg)'.

The Rating Outlook remains Stable.

The ratings reflect Frances' solid franchise in Argentina, the steady improvement of its profitability and balance sheet integrity and its good liquidity and asset quality. They also take into account its ownership by Spain's Banco Bilbao Vizcaya Argentaria ('BBVA', rated 'AA-' by Fitch), as well as its still high exposure to the public sector and the operating environment remaining potentially volatile, in spite of its sustained improvement.

As with many of its peers, Frances' profitability is improving and 2005 was the first year with profits since the 2001 crisis. This improvement is mainly based on stronger operating revenues, significant inflation adjustments on certain assets, and higher results from its government bonds portfolio. Fitch expects profitability to keep improving if the healthier economy consolidates and loan demand continues strong.

Although Frances has been actively reducing its public sector exposure, at 43% of total assets and four times its equity it is still significant. Excluding Argentine Central Bank (BCRA) securities held for liquidity purposes, the exposure falls to a still considerable 25% of assets and was largely marked to market at end-June 2006. This exposure should continue falling as the activity with the private sector rises.

Lending to the private sector has been growing very rapidly but still accounts for a low 31% of assets. In common with its peers, Frances' non-performing loans have substantially decreased and are at historical lows (Q206: 1.2%); loan loss reserve coverage was a high 200%.

Liquidity is ample, backed by continued deposit growth. In 2005 the bank pre-paid its crisis-related BCRA liabilities. External USD debt, mainly with BBVA, has also been reduced. Frances' capital adequacy has been supported by the capitalisation of subordinated debt with BBVA, among other measures. Its equity/assets ratio was a satisfactory 10.6% at end-Q206.

Frances was the largest private sector bank by deposits at end-2005 and had one of the largest branch networks in Argentina. It also holds 53.9% of Consolidar AFJP, a leading pension fund management company. Spain's BBVA held a 75.97% stake at end-June 2006; the remainder is widely held.

Fitch's National Ratings provide a relative measure of creditworthiness for rated entities in countries where the sovereign's foreign and local currency ratings are below 'AAA'. National ratings are not internationally comparable since the best relative risk within a country is rated 'AAA' and other credits are rated only relative to this risk. They are signified by the addition of an identifier, for the country concerned, such as 'AAA (arg)' for national ratings in Argentina.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.