mercantil servicios financieros, c.a. financial report ... · net income: mercantil posted bs 2,143...

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Contact: Investor Relations. Phone: 58-212-503.1335. e-mail: [email protected]. website: www.msf.com.

Mercantil Servicios Financieros (Mercantil). Financial Report Second Quarter 2014 Caracas Stock Exchange (MVZ.A & MVZ.B); Level 1 ADR: MSFZY & MSFJY

Caracas, July 30, 2014. Mercantil announces its earnings for the quarter ended June 30, 2014.

Summary

Net Income: Mercantil posted Bs 2,143 million (US$ 341 million)1 in net income in 2Q 2014, 49.7% more than the Bs 1,432 million (US$ 228

million)1 registered in 2Q 2013. The net income at the end of the semester reached Bs. 3,974 million (US$ 632 million)

1, reflecting Bs. 502 million

(14.5%) year-on-year growth from Bs. 3,471 million (US$ 583 million)1.

Net earnings per share in 2Q 2014 were Bs. 21.61, US$ 3.441 (Bs. 14.44, US$ 2.30

1 in 2Q 2013). Net earnings per share in 1H2014 were Bs.

40.08, US$ 6.28 (Bs. 35.01 in 1H 2013, US$ 5.88).

ROE and ROA in 2Q 2014 reached 33.5% and 3.3%, respectively (32.1% and 3.4% in 2Q 2013). In 1H 2014, these indicators were 31.1% and 3.0%, respectively in 1H 2014 (38.9% and 4.2% in 1H 2013).

The price of Mercantil's class "A" and "B" shares closed at Bs. 650 each, in comparison with Bs. 900 for class “A” shares and Bs. 888 for class “B” shares as of March 31, 2014 and in comparison with Bs. 360 each as of June 30, 2013.

The main variations in net quarterly income are:

Net Interest Income reached Bs. 4,728 million (US$ 752 million)1 in 2Q 2014, representing Bs. 1,663 million (54.3%) year-on-year growth from

Bs. 3,065 million (US$ 488 million)1, mainly due to the increase of financial assets and liabilities. The financial intermediation ratio (loan-sto-

deposits) was 68.5% at the close of 2Q 2014 (68.6% at the close of 2Q 2013).

Loan Portfolio Provision showed expenditures for Bs. 719 million (US$ 114 million)1 in 2Q 2014, Bs. 277 million (62.7%) up from Bs. 442

million (US$ 70 million)1 in 2Q 2013. This provision represents 3.0% of the gross loan portfolio (3.1% at June 30, 2013) and covers 784.8% of

past-due and nonperforming loans (360.9% at June 30, 2013).

Commissions and other income reached Bs. 1,766 million (US$ 281 million)1 in 2Q 2014, Bs. 570 million (47.6%) up from Bs. 1,196 million

(US$ 190 million)1 in 2Q 2013, due to Bs. 515 million increase in income from credit and debit cards usage fees, financing insurance policies, as

well as other commissions from client operations, among others, and Bs. 55 million increase in earnings from securities trading.

Insurance premiums, net of claims reached Bs. 411 million (US$ 65 million)1 in 2Q 2014, Bs. 113 million (37.9%) up from Bs. 298 million (US$

47 million)1 in 2Q 2013. Net earned premiums during the quarter reached Bs. 3,493 million and reflected Bs. 1,120 million (47.2%) year-on-year

growth.

Personnel and Operating Expenses reached Bs. 3,917 million (US$ 623 million), Bs. 1.305 million (49.9%) up from Bs. 2,613 million (US$ 416 million) in 2Q 2013, due to increases of Bs. 379 million (36.0%) in personnel expenses, Bs. 371 million (93.7%) in contributions to regulatory organisms and Bs. 555 million (47.8%) in expenses for commissions in the use of the point-of-sale and ATM network of other banks, among others.

Personnel and operating expenses are affected by inflation in Venezuela, which averaged 60.9% over the last twelve months at May 31, 2014. The efficiency ratio, measured by calculating operating expenses as a percentage of average assets, was 4.8% in June 2014, below the 5.0% of June 2013.

Summary of Financial Statements and Ratios 2

(In millions of Bolivars, except percentages)

June 2014

March 2014

June 2013

∆ Jun. 14 vs. Mar. 14

∆ Jun. 14 vs. Jun. 13

QUARTERLY RESULTS % %

Net Interest Income 4,728 3,872 3,065 22.1 54.3 Allowance for losses on loan portfolio 719 216 442 232.9 62.7 Commissions and other income 1,766 1,552 1,196 13.8 47.6 Insurance premiums, net of claims 411 516 298 (20.3) 37.9 Salaries and Operating Expenses 3,917 3,845 2,613 1.9 49.9 Net Income – Quarter 2,143 1,832 1,432 17.0 49.7

Net Income – Semester 3,974 3,471 14.5

KEY FINANCIAL INDICATORS

Income per share – Quarter Bs / share 21.61 18.47 14.44 17.0 49.7

Income per share – Semester Bs / share 40.08 35.01 14.5

Market price A share 650.00 900.00 360.00 (27.8) 80.6

Market price B share 650.00 888.00 360.00 (26.8) 80.6

Book value per share 262.22 235.52 192.53 11.3 36.2

Net Income (quarter) / Average Assets (ROA) 3.3% 2.9% 3.4% 13.8 (2.9)

Net Income (quarter) / Average Equity (ROE) 33.5% 28.8% 32.1% 16.3 4.4

Net Income (semester) / Average Assets (ROA) 3.0% 4.2% (28.6)

Net Income (semester) / Average Equity (ROE) 31.1% 38.9% (20.1)

1 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control in place in Venezuela since February 2003.

2 See Appendix III Summary of the Financial Statements and Ratios (in Dollars).

Mercantil Servicios Financieros, C.A.

Financial Report Second Quarter 2014

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Assets: In 2Q 2014 total assets registered Bs. 26,830 million (10.3%) quarter-over-quarter growth to Bs. 287,516 million (US$ 45,753 million), and Bs. 101,401 million (54.5%) year-on-year growth.

The variations for this item, seen individually by subsidiary, are as follows:

Mercantil Banco Universal registered Bs 21,875 million (10.7%) growth in 2Q 2014 and Bs 95,235 million (72.3%) year-on-year growth.

Mercantil Commercebank registered US$ 577 million (8.4%) growth in 2Q 2014 and US$ 476 million (6.8%) year-on-year growth.

Mercantil Seguros registered Bs 500 million (4.2%) growth in 2Q 2014 and Bs 3,824 million (44.7%) year-on-year growth.

Net Loan Portfolio: In 2Q 2014, total loans registered Bs 30,670 million (24.3%) quarter-over-quarter growth to Bs 156,840 million (US$ 24,958 million)

1, and Bs 57,718 million (58.2%) year-on-year growth.


Mercantil Banco Universal registered Bs. 29,564 million (31.5%) growth in 2Q 2014 and Bs. 55,248 million (81.2%) year-on-year growth.


Deposits: In 2Q 2014, deposits registered Bs. 21,782 million (10.2%) quarter-over-quarter growth to reach Bs. 236,081 million (US$ 37,567 million), and Bs. 87,015 million (58.4%) year-on-year growth.


Mercantil Banco Universal registered Bs. 19,789 million (11.1%) growth in 2Q 2014 and Bs. 84,826 million (74.9%) year-on-year growth.


Shareholders’ Equity: Totaled Bs 26,803 million (US$ 4,265 million)1 representing Bs 2,730 million (11.3%) quarter-over-quarter growth from Bs

24,073 million (US$ 3,832 million)1 and Bs 7,124 million (36.2%) year-on-year growth. This variation can be attributed mainly to Bs 2,143 million in

net income for the period and Bs 576 million increase from adjusting investments available for sale to their market value, among others.

Capital Ratios: Mercantil’s equity to assets ratio at June 30, 2014 is 9.3% and its equity to risk-weighted assets ratio is 15.9%, based on the standards of the National Securities Superintendency (SNV – Superintendencia Nacional de Valores), (10.6% and 19.0% at June 30, 2013).

Mercantil Banco Universal, in accordance with the requirements of the Superintendency of Banking Sector Institutions (SUDEBAN - Superintendencia de las Instituciones del Sector Bancario), at June 30, 2014 has an equity to assets ratio of 9.6% and an equity to risk-weighted assets ratio of 16.2% (11.3% and 19.6% at June 30, 2013).

Mercantil Commercebank, N.A., based on the standards of the U.S. Office of the Comptroller of the Currency (OCC), at June 30, 2014 has an equity to assets ratio of 10.2% and an equity to risk-weighted assets ratio of 14.8% (10.3% and 16.2% at June 30, 2013).

The equity ratios of Mercantil and its subsidiaries exceed the regulatory minimums.

Summary of Financial Statements (In millions of Bolivars, except percentages)

June 2014

March 2014

June 2013

∆ Jun. 14 vs. Mar. 14

∆ Jun. 14 vs. Jun. 13

% %

Cash and due from banks 51,994 58,549 29,764 (11.2) 74.7

Investment Portfolio 69,584 66,964 51,122 3.9 36.1

Loan Portfolio, Net 156,840 126,170 99,122 24.3 58.2

Other assets 9,099 9,005 6,109 1.0 48.9

TOTAL ASSETS 287,517 260,688 186,117 10.3 54.5

ASSETS UNDER MANAGEMENT 54,245 51,855 42,453 4.6 27.8

Deposits 236,081 214,299 149,066 10.2 58.4

Financial Liabilities 5,818 3,782 4,844 53.8 20.1

Other Liabilities 18,814 18,534 12,528 1.5 50.2

Shareholders’ Equity 26,803 24,073 19,679 11.3 36.2

TOTAL LIABILITIES AND SHAREHOLDERS´ EQUITY 287,517 260,688 186,117 10.3 54.5


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Table of contents Page

Contribution of subsidiaries 4

Market share 5

Credit Ratings 5

Management discussion and analysis 6

Operating Income

Net Interest Income 6

Loan Portfolio Provision 7

Total Commissions and Other Income 8

Insurance Premiums, Net of Claims 8

Total Operating Expenses 9

Balance Sheet

Liquidity 10

Investment Portfolio 11

Financial Intermediation Activity

Loan Portfolio 13

Deposits 14

Total Assets 15

Financial Obligations 16

Shareholders’ Equity 16

Capital Ratios 16

Assets and Liabilities in Foreign Currency 17

Performance of Subsidiaries in accordance to its Local Accounting Standards 18

Wealth Management 21

Corporate Events New Measures announced for the Venezuelan Economy Awards and Acknowledgements

22 22 22

Global Economic Climate 23

U.S. Economic Climate 23

Venezuelan Economic Climate 24

Appendix I: Summary of the accounting principles used to prepare the financial statements 26

Appendix II: Financial statements of Mercantil Servicios Financieros 27

Appendix III: Summary of the Financial Statements and Ratios (in US$) 32

Appendix IV: Consolidated Loan Portfolio by Classification 33

Appendix V: Statutory percentage of Mercantil Banco Universal loans by economic sector and interest rates 34

Appendix VI: Summary of Financial Indicators of Mercantil Servicios Financieros 35

Appendix VII: Financial statements of Mercantil Banco Universal 37

Appendix VIII: Financial statements of Mercantil Commercebank Holding Corporation 39

Appendix IX: Financial statements of Mercantil Seguros 41

Appendix X: Key Macroeconomic Indicators 43

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Contribution of Subsidiaries

Shareholders’ Equity

In millions of Bs.(1) Total

Total Assets 223,821 46,692 4,469 11,968 205 363 287,517

% Assets 77.8% 16.2% 1.6% 4.2% 0.1% 0.1% 100.0%

Investments 46,862 13,138 1,957 7,331 160 136 69,584

Loans (Net) 123,280 31,554 2,006 - - - 156,840

Deposits 197,311 35,539 3,232 - - - 236,081

Contribution

Income net:

Quarter 1,959 57 (20) 194 6 (53) 2,143 Semester 3,658 75 (55) 435 19 (158) 3,974

Assets under Management 28,371 12,781 3,337 65 9,692 - 54,245

In millions of US$(2)

Total Assets 35,616 7,430 711 1,905 33 58 45,752

Investments 7,458 2,091 311 1,167 25 21 11,073

Loans (Net) 19,617 5,021 319 - - - 24,958

Deposits 31,398 5,655 514 - - - 37,567

Contribution

Income net:

Quarter 311 9 (3) 31 1 (8) 341 Semester 582 12 (9) 69 3 (25) 632

Assets under Management 4,515 2,034 531 10 1,542 - 8,632

Number of Employees 7,267 827 109 1,601 46 24 9,874

1 Financial data presented in accordance with SNV standards (see Appendix I). Figures net of elimination of inter-company transactions.

2 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February 2003.

3 See Summary of Subsidiaries’ performance according to their Regulatory Accounting Standards (page 18).

Venezuelan Universal

Bank

Insurance In Venezuela and Abroad

Other Minor

Investments

Shareholders’ Equity: Bs. 26,803 (US$ 4,265)

MERCANTIL SERVICIOS FINANCIEROS (1)

(In millions of Bolivars and US$ (2)

, except percentages)

U.S. Domestic Bank & Brokerage

International Banking

Investment banking, mutual funds, trading

& brokerage

Main Activity

Mercantil Bank (Schweiz) AG.

Mercantil Bank and Trust Limited (Cayman Island)

Mercantil Bank (Curacao) NV

Mercantil Bank (Panamá) S.A. .

Mercantil Commercebank N.A.

Mercantil Commercebank Investment Services (MCIS)

Mercantil Commercebank Trust Company (MCTC)

Main Subsidiaries

June 30, 2014

(3) (3) (3) (3)

Mercantil Merinvest, Casa de Bolsa, C.A.

Mercantil Servicios de Inversión, C.A.

Mercantil Sociedad Administradora de Entidades de Inversión Colectiva, C.A.

Mercantil Capital Markets (Panamá)

Mercantil Banco Universal

Bs. 20,392 US$ 3,245

Mercantil

Commercebank Bs. 4,078 US$ 649

Bank Overseas Bs. 1,413 US$ 225

Others Bs. 191

US$ 31

Mercantil Merinvest

Bs. 228 US$ 36

Mercantil Seguros Bs. 3,753 US$ 597

Mercantil Seguros Panamá S.A.

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Fitch Ratings Clave (*)

Long-term AA(Ven)

Short-term F1+(Ven)A2 A2

A1 A1

Long-term AA+(Ven)Short-term F1+(Ven)

Long-term (Foreign and local currency) B

Short-term (Foreign and local currency) B

Viability b

Long-term Deposit (Mercantil Commercebank ,N.A. only) BB+

Long-term BB

Short-term BViability bb

National Ratings

Mercantil Servicios Financieros

Mecantil Commercebank Florida Bancorp y

Mercantil Commercebank N.A.

Rating for Unsecured Bonds ( Long-term in local currency)

Rating for Commercial Paper (Short-term in local currency)


National Ratings

International Ratings

Commercial

and Universal

Bank's

Private

Tourism Loans 3 2 12.3%

Manufacturing Loans 2 1 16.0%

Agricultural Loans 2 1 15.6%

Morgtgage Loans under the mortgage Debtor Law (Ley Especial del

Deudor Hipotecario)6 3 6.9%

Microcredits Loans 6 4 7.6%

Gross Loans 3 2 15.0%

Savings Deposits 1 1 20.6%

Total Deposits 3 2 12.8%

Total Deposits + Other Demand Liabilities 3 2 12.2%

Total Assets 4 3 12.0%

Trust 5 2 7.3%

Net Premiums 2 12.0%

U.S.

Total Deposits 124

Mercantil Commercebank (3)

Mercantil Banco (1)

Market Share

Mercantil Seguros (2)

Venezuela

Positioning

Market Share

(1) Source: Summary of Unconsolidated Financial Statements Published in National newspapers. (2) Source: Venezuelan Superintendency of Insurance. (3) Figures according to American Bankers based on 200 Holding Bank, Commercial Banks and Savings Institutions with more deposits in U.S. at 12/31/13.

(*) A credit rating agency in Venezuela

Credit Ratings

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3,065 3,509 4,103 3,872 4,728

8.5%

9.0%8.8%

8.1%

8.5%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014

(Mill

ion

of

Bs)

Evolution of Net Interest Income

Net Interest Income Net Interest Income / Average Financial Assets

Management Discussion and Analysis

Operating Income Quarter Semester

Ended on ∆ Ended on ∆

(In millions of Bolivars and millions of US$, except percentages)

US$ 1 June June June June

Jun.2014 2014 2013 Bolivars % 2014 2013 Bolivars %

Net Interest Income 752 4,728 3,065 1,663 54.3 8,601 5,656 2,945 52.1 Allowance for Losses on Loan Portfolio 114 719 442 277 62.7 935 586 349 59.6

Net Financial Margin 638 4,009 2,623 1,386 52.8 7,666 5,070 2,596 51.2

Commissions and Other Income 281 1,766 1,196 570 47.6 3,318 3,121 199 6.4

Insurance Premiums, Net of Claims 65 411 298 113 37.9 926 533 393 73.7

Operating Income 984 6,186 4,117 2,069 50.2 11,910 8,724 3,188 36.5

Net Interest Income In 2Q 2014, net interest income was Bs 4,728 million (US$ 752 million)

1, up 54.3% from Bs 3,065 million (US$ 488 million) registered in 2Q 2013

1,

due to an increase in the volume of assets and liabilities. Interest income was Bs 6,720 million, which reflects a 57.1% year-on-year increase. This increase is reflected both in the behavior of income from the loan portfolio which grew 59.5%, and income from the investment portfolio which rose 46.7%. Financial expenses totaled Bs 1,992 million, up 64.2% compared to 2Q 2013. The financial intermediation ratio (loans-to-deposits) was 68.5% at the close of 2Q 2014 (68.6% at the close of June 2013).

Mercantil Banco Universal reached Bs 4,330 million, 62.4% up from Bs 2,667 million in interest income registered in 2Q 2013, mainly due to a higher volume of assets and liabilities. The financial intermediation ratio was 63.2% in June 2014 and 61.4% in June 2013.

Mercantil Commercebank, N.A. totaled US$ 36 million, 0.6% similar from US$ 35 million registered in 2Q 2013. The Bank continues to hold a significant portion of its assets, US$ 2,228 million (more than 29%), in short-term investments and securities issued by the U.S. government or U.S. government-backed agencies. This high level of liquidity has continued to allow the Bank ample flexibility to increase its credit operations.

In 1H 2014, net interest margin was Bs. 8,601 million (US$ 1,369 million)1, 52.1% more than the Bs. 5,656 million (US$ 950 million)

1 registered in

1H 2013.

Mercantil's net interest margin (net interest income-to-average financial assets) at June 30, 2014 was 8.5%, the same as the previous year.


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Gross Loans Past Due and Non-Performing Loans

3.1%3.0%

3.3%

3.3%3.0%

0.0%

0.4%

0.8%

1.2%

1.6%

2.0%

2.4%

2.8%

3.2%

3.6%

4.0%

4.4%

2009 2010 2011 2012 2013

Allowance for Losses on Loan Portfolio / Gross Loans

0.9%0.7%

0.5% 0.6%0.4%

0.0%

0.4%

0.8%

1.2%

1.6%

2.0%

2.4%

2.8%

3.2%

3.6%

4.0%

4.4%

0

15,000

30,000

45,000

60,000

75,000

90,000

105,000

120,000

135,000

150,000

165,000

Jun.2013 Sep.2013 Dec.2013 Mar.2014 Jun.2014

Past Due and Non-Performing Loans / Gross Loans

Loan Portfolio Provision In 2Q 2014, expenses totaled Bs 719 million (US$ 114 million)

1, Bs 277 million (62.7%) up from Bs 442 million (US$ 70 million) in 2Q 1013

1.

Mercantil Banco Universal registered Bs 685 million in loan portfolio provisions in 2Q 2014 (Bs 435 million in 2Q 2013), aimed mainly at provisions related to the commercial, construction and industrial sectors, as a result of loan portfolio growth during the quarter.

Mercantil Commercebank, N.A. registered US$ 1 million in loan portfolio provisions, mainly for credits related to the commercial sector. The accumulated allowance comes to Bs 4,842 million (US$ 771 million)

1 at June 30, 2014 and represents 3.0% of gross loans (3.1% at June 30,

2013). This provision expense covers 784.8% of past-due and nonperforming loans (360.9% at June 30, 2013). In 1H 2014, expenses for loan portfolio provision registered Bs. 935 million (US$ 149 million)

1, up 59.6% from the 1H 2013, when it reached Bs.

586 million (US$ 98 million)1.


(Bs. Millions)

Evolution of Loan Portfolio and Asset Quality Ratios

8


88.2%

10.6%

1.2%

2Q 2014

Banking Insurance Wealth Management

84.5%

14.1%

1.4%

2Q 2013

Total Commissions and Other Income

In 2Q 2014, commissions and other income totaled Bs 1,766 million (US$ 281 million)

1, Bs 570 million (47.6%) up from Bs 1,196 million (US$ 190

million)1 in 2Q 2013, primarily due to:

Bs 515 million (46.9%) increase in earnings from commissions for the use of credit and debit cards, income from financing insurance policies and other commissions for client transactions, among other.

Bs 55 million (55.6%) increase in earnings from securities trading activities.

In 1H 2014, commissions and other income totaled Bs 3,318 million, reflecting Bs. 199 million (6.4%) year-on-year growth, mainly due to Bs. 1,082 million (58.6%) growth of earnings from financing insurance policies, commissions on debit and credit cards, other commissions on client transactions, among others; a decline of Bs. 721 million (85.5%) in income due to exchange differences caused by the adjustment by the BCV of the official foreign exchange rate, from Bs./US$ 4.2893 to Bs./US$ 6.2842 in 1H 2013, and a decline of Bs. 162 million (37.5%) in earnings from securities trading.

Insurance Premiums, net of Claims

In 2Q 2014, insurance premiums, net of commissions, reinsurance and claims, totaled Bs 411 (US$ 65 million)

1, reflecting 37.9% year-on-year

growth from Bs 298 million (US$ 47 million)1. This improvement is attributed

to the automobile business. Collected premiums in 2Q 2014 amounted to Bs 3,493 million (US$ 556 million)

1, a Bs 1,120 million (47.2%) year-on-year growth. The main

contributors to this variation were Healthcare (63.3%) and Automobile (33.4%) businesses. At June 30, 2014, Mercantil Seguros was the country’s second largest insurance company in terms of net collected premiums, with 12.0% of the insurance market.

Claims and administrative expenses during 2Q 2014 totaled Bs 2,559 million (US$ 407 million)

1, up Bs 775 million (43.5%) compared to Bs 1,784 million

(US$ 284 million) in 2Q 2013. This growth was mainly attributable to the Healthcare insurance business. The claims ratio was 64.2% in 2Q 2014 (65.6% in 2Q 2013). The technical result was Bs 75 million (US$ 12 million)

1,

up Bs 28 million (58.9%) compared to Bs 48 million (US$ 8 million)1 in 2Q

2013.

At the close of 1H 2014, insurance premiums, net of commissions, reinsurance and claims, totaled Bs. 926 million (US$ 147 million)

1, 73.7% up

compared to 1H 2013. Collected premiums totaled Bs. 6,866 million (US$ 1,093 million)

1, representing Bs. 2,394 million (53.5%) year-on-year growth.

This increase is mainly due to the Healthcare (66.7%) and Automobile (43.1%) businesses. Claims and administrative expenses total Bs. 4,176 million (US$ 750 million)

1, up Bs. 1,493 million (46.3%) compared to 1H

2013.


Composition of Total Income

Bs. 4,560 millions US$ 725 millions

1

June 2013

Bs. 6,905 millions US$ 1,098 millions

1

June 2014

67%65%

22%24%

9% 9%2% 2%

2Q 2013 2Q 2014

Net Interest Income

Commissions on Transactions, Insurance Premiums net and Other

Exchange Gains and Losses and Other Income

Income on Sales Investment Securities

Composition of Total Income by Business Line

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014

Earned Premiums(12 months change)

Insurance Market Mercantil

9


Total Operating Expenses

Quarter Semester


(In millions of Bolivars and US$, except percentages)



Operating Income 984 6,186 4,117 2,069 50.2 11,910 8,724 3,188 36.5

Operating Expenses

Salaries and Employee Benefits 228 1,433 1,054 379 36.0 2,782 1,991 791 39.7

Other Operating expenses 395 2,484 1,558 927 59.5 4,981 2,979 2,002 67.2

Taxes Current and Deferred 20 125 72 53 73.6 172 279 (107) (38.4)

Minority interest (0) (1) (1) 0 0.0 (2) (2) 0 0.0

Net Income 341 2,143 1,432 711 49.7 3,974 3,471 502 14.5

In 2Q 2014, operating expenses totaled Bs 3,917 million (US$ 623 million)1, registering a 49.9% year-on-year increase from Bs 2,613 million (US$

416 million)1. This increase is mainly due to:

Bs 379 million in personnel expenses, reflecting a 36.0% year-on-year rise. This increase in expenses is due to the application of wage increases policies. At Mercantil Banco Universal, assets per employee rose from Bs 17.9 million in 2013 to Bs 30.9 million in 2014. At Mercantil Seguros, net collected premiums per employee rose from Bs 1.5 million in 2013 to Bs 2.2 million in 2014. In the case of the overseas business, the assets per employee indicator rose from US$ 8.7 million in 2013 to US$ 9.0 million in 2014.

Bs 371 million (93.7%) increase in expenses for contributions to regulatory agencies.

Bs 91 million (84.6%) growth of expenses for taxes and contributions.

Bs 465 million (43.9%) rise in expenses for commissions for using the point-of-sale and ATM network of other banks, among others. In 1H 2014, operating expenses totaled Bs. 7,763 million, 56.2% more than the Bs. 4,971 million recorded in 1H 2013, mainly due to Bs. 791 million growth in personnel expenses and Bs. 2,002 million increase in other operating expenses, the latter reflected a Bs. 272 million in greater depreciation expenses, property and equipment expenses, amortization of intangibles and other expenses; Bs. 657 million in larger fees paid to regulatory authorities; Bs. 138 million increases in taxes and contributions and Bs. 935 million increase in commissions for using the point-of-sale and ATM network of other banks, among others.

227 287 397 396

681 767

935

1,528 1,320 1,054

1,349 1,433

2Q 2013 1Q 2014 2Q 2014

Total Operating Expenses Quarters(In millions of Bolivars)

Salaries and employee benefits

Other operating expenses

Fees paid to regulatory agencies

Depreciation, Property and equipment, Amortization of intangibles and others expenses

2,613

Δ +49.9%

Δ +1.9%

3,845 3,917

89.2%

9.0%

1.8%

2Q 2014

Banking Insurance Wealth Management

79.7%

18.3%

2.0%

2Q 2013


Composition of Net Income by Business Line

10


Efficiency Ratios The efficiency ratio measured by calculating operating expenses as a percentage of average assets was 4.8% in June 2014 versus 5.0% in June 2013. The ratio of operating expenses to total income was 49.2% in June 2014 (44.9% in June 2013). Over the last twelve month, Personnel and Operating Expenses have been affected by the high level of inflation in Venezuela (60.9%) over the last twelve months at May 31, 2014.

Balance Sheet The principal balance sheet variations during 2Q 2014 are reviewed below and commented on with respect to the prior quarter. The main year-on-year variations are also indicated for comparison purposes.

Summary of Balance Sheet and Private Banking and Assets under Management

(In millions of Bolivars and Dollars, except percentages)

∆ ∆ US$

1 June March June Jun. 14 vs. Mar. 14 Jun. 14 vs. Jun. 13

Jun.2014 2014 2014 2013 Bolivars % Bolivars %

Cash and due from banks 8,274 51,994 58,549 29,764 (6,555) (11.2) 22,230 74.7

Investment Portfolio 11,073 69,584 66,964 51,122 2,620 3.9 18,463 36.1

Loan Portfolio, Net 24,958 156,840 126,170 99,122 30,670 24.3 57,718 58.2

Total Assets 45,752 287,517 260,688 186,117 26,829 10.3 101,400 54.5

Deposits 37,567 236,081 214,299 149,066 21,782 10.2 87,015 58.4

Shareholders´ Equity 4,265 26,803 24,073 19,679 2,730 11.3 7,124 36.2

Assets under Management 8,632 54,245 51,855 42,453 2,390 4.6 11,792 27.8

Liquidity At the close of 2Q 2014, total cash and due from banks (cash and the reserve requirement in Venezuela) plus investments in time deposits and placements which are included in the investment portfolio reached Bs 61,328 million (US$ 9,759 million)

1, down Bs 9,935 million (13.9%) from

Bs. 71,263 million (US$ 11,340 million)1 recorded in March 31, 2014.

This decline is observed mainly in the accounts held at the Venezuelan Central Bank, and in investments in time deposits and placements. Compared to June 30, 2013, cash and due from banks plus investments in time deposits and placements rose Bs 27,456 million (81.1%), from 33,872 million to Bs 61,328 million.

4.108 12.714 9.334

11.333

31.050 37.119

18.431

27.499

14.875

Jun. 2013 Mar. 2014 Jun. 2014

Liquidity (In millions of Bolivars)

Cash and Due from Banks - Legal Reserves

Legal Reserves

Investments in Time Deposits and Placements

Δ +81.1%

61,328

71,263

33,872Δ -13.9%

The liquidity ratio calculated by dividing total cash and due from banks by deposits was 22.0%; and the ratio calculated by dividing total cash and investments by deposits was 51.5%, compared with 27.3% and 58.6%, respectively in March 2014 and 20.0% and 54.3%, respectively at the close of 2Q 2013.


39.6%

49.4%

56.1%59.4%

62.1%

44.9%

45.9%

47.4%53.3%

49.2%

5.0%

5.1%

5.3%

5.0%

4.8%

4.5%

4.7%

4.9%

5.1%

5.3%

5.5%

5.7%

5.9%

6.1%

11.0%

21.0%

31.0%

41.0%

51.0%

61.0%

71.0%

Jun.2013 Sep.2013 Dec.2013 Mar.2014 Jun.2014

Inflation in Venezuela Operating Expenses / Total Income Operating Expenses / Average Assets

11


Investment Portfolio

At the close of 2Q 2014, the investment portfolio totaled Bs 69,584 million (US$ 11,073 million)

1, representing a quarter-over-quarter growth of Bs 2,620 million

(3.9%) from Bs 66,964 million (US$ 10,655 million)1. This growth is mostly seen

in investments issued by the Venezuelan government, state-owned companies and decentralized entities.

Compared to June 30, 2013, the investment portfolio grew Bs 18,463 million (36.1%), from Bs 51,122 million to Bs 69,584 million. The variations for this item, taken individually by subsidiary, are as follows:

51.122

66.964 69.584

Jun. 2013 Mar. 2014 Jun. 2014

Investments Portfolio(In million of Bolivars)

Δ +36.1%

Δ + 3.9%

(In millions,

except percentages) June March ∆

2014 2014 Abs. %

Mercantil Banco Universal Bs. 48.849 50.178 (1.329) (2,6)

Mercantil Seguros Bs. 7.464 6.711 753 11,2

Mercantil Commercebank US$ 2.101 1.765 337 19,1

Investments by maturity and yield at the close of 2Q 2014 are broken down as follows:

Investments by Maturity and Yield


Trading Available for Sale

Held to Maturity Shares

Time Deposits and Placements

Trust Fund and Restricted

Investments

Years Bs. 2 Bs.

2 %

4 Bs.

3 %

4 Bs.

2 Bs.

2 % Bs.

2 %

4 TOTAL

Bs. Less Than 1 1,860 8.8 1,196 4.5 9,3195 5.9 456 6.1 12,831

From 1 to 5 6,842 12.9 5,881 4.8 6 10.6 12,729

Over 5 14,091 13.7 13,634 4.5 284 28,009

US$ Less Than 1 1 639 6.9 120 4.1 2 0.3 391 4.6 1,153

From 1 to 5 5 1,779 4.8 299 2.7 7 2.7 2,090

Over 5 61 12,620 4.6 34 2.7 3 13 0.2 41 2.5

12,772

67 37,831 21,164 287 9,334 901

69,584


2 Registered at Market Value

3 Amortized cost

4 The yield of securities is based on amortized cost at the end of the period. Yield is calculated by dividing income investments (including premium amortization or discounts) by the amortized cost or market value.

5 Bs. 6,955 million are Central Bank placements, Bs. 1,520 million with less than 30 days maturity and Bs. 5,436 million with maturity greater than 60 days.

12


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

Venezuelan Central Bank US Government & US Gov.Guaranteed Agencies

Private Venezuelan Governmentand Public Entities

Breakdown of Investments by IssuerJune 2013

March 2014

June 2014

Investments at the close of 2Q 2014, by company, issuer and currency, are broken down as follows:

Breakdown of Investments by Issuer and Currency


Venezuelan

Venezuelan

Central US US Gov.

Guaranteed Int’I Government and Public Venezuelan Total

Bank Government Agencies Private Entities Private Bs

Bolivars

Mercantil Banco Universal 7,398 38,938 111 46,447

Mercantil Seguros y Otros 4,739 2,383 7,122

Total Bs. 7,398 - - - 43,6772 2,494 53,569

Totales

US Dollars en US$1

Mercantil Banco Universal 13 15 12 26 66 Mercantil Commercebank Florida Bancorp 1,056 579 436 20 2,091

Mercantil Seguros y Otros 86 16 112 172 5 391

Total US$ - 1,155 610 560 218 5 2,548

Breakdown % 10.6% 10.4% 5.5% 5.1% 64.8% 3.6% 100.0%

1 Dollar figures given for reference purposes only and are translated al the closing exchange rate. See Exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February 2003.

2 Bs. 1,250 million include US$ indexation clause Government bonds issued by the Venezuelan State account for 0.90 times Mercantil's equity and 8.4% of its assets (0.98 and 9.0%, respectively in March 2014). At Mercantil Banco Universal, these securities represent 0.89 times the equity and 8.0% of the assets (0.96 and 8.8%, respectively in March 2014). Mercantil holds 3.1% of the public debt securities in national and foreign currency issued by the Venezuelan State, according to official figures obtained from the Ministry of Planning and Finance at May 31, 2014. At June 30, 2014 the Mercantil, C.A. Banco Universal subsidiary, in line with a regulation issued by the Executive branch, purchased Bs 20,916 million in Mortgage Bonds, Participation Certificates, Agricultural Bonds and Stocks. These represent 44.7 % of the bank's investment portfolio and 1.1 times its equity (Bs 18,319 million representing 38.6% of its investment portfolio and 1.2 times its equity at March 31, 2014).

13


44% 47% 43% 42%44%

26%23%

27% 28%

25%30%

30%30% 30%

31%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Jun. 2013 Sep. 2013 Dec. 2013 Mar. 2014 Jun. 2014

Loan Portfolioby Business Segment(In millions of bolivars)

Individuals

Large Corporation

SME's

Financial Intermediation Activity

Loan Portfolio

At the close of 2Q 2014, net loans totaled Bs 156,840 million (US$ 24,958 million)

1, reflecting 24.3% growth from Bs 126,170 million (US$ 20,078 million)

1

in 1Q 2014.

Compared to June 30, 2014, the loan portfolio increased Bs 57,718 million (58.2%), from Bs 99,122 million to Bs 156,840 million. At June 30, 2014, consumer and commercial loans account for 60.3% of the loan portfolio, which totaled Bs 97,480 million, reflecting 24.2% quarter-over-quarter growth and 60.7% year-on-year growth.

The variations for this item, taken individually by subsidiary, are as follows:

99,122

126,170

156.840

Jun. 2013 Mar. 2014 Jun. 2014

Loan Portfolio(In million of Bolivars)

Δ + 58,2%

Δ + 24.3%

(In millions,


2014 2014 Abs. %

Mercantil Banco Universal Bs. 123,280 93,716 29,564 31.5

Mercantil Commercebank US$ 5,021 4,820 202 4.2

The ratio of past-due and nonperforming loans to gross loans was 0.4% (0.6% at March 2014). The ratio by subsidiary is as follows:

Mercantil Banco Universal 0.4% compared with 0.6% for the Venezuelan financial system.

Mercantil Commercebank, N.A. 0.3%, below the closing 0.5% of the previous quarter. Non-accrual loans reached 1% of the loan portfolio (0.7% at March 31, 2014).

At June 30, 2014, 99.3% of Mercantil’s loan portfolio is outstanding. The allowance for losses on loan portfolio covers 784.8% of past-due and nonperforming loans (580.3% at March 31, 2014); this indicator is 931.3% at Mercantil Banco Universal (817.2% at March 31, 2014) and 369.4% at Mercantil Commercebank (277.0% at March 31, 2014). The analysis of Mercantil's main subsidiaries and their positioning in the market are shown on pages 5 and 18.

Annex IV shows the distribution of the loan portfolio, broken down by economic activity, maturity, country and type of risk.

The statutory percentage of Mercantil Banco Universal loans by economic sector and interest rates is shown in Annex V.


14


23% 25% 26% 25% 26%

23%24%

24% 25%26%

54%51%

50%50%

48%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000


Breakdown Depositsby Business Segment(In millions of bolivars)

Individuals

Large Corporation

SME's

Deposits

At the close of 2Q 2014 deposits reached Bs 236,081 million (US$ 37,567 million)

1, representing a quarter-over quarter increase of Bs 21,782 million

(10.2%) from Bs 214,299 million (US$ 34,100 million)1.

Compared to June 30, 2013, deposits grew Bs 87,015 million (58.4%), from Bs 149,066 million to Bs 236,091 million.

Demand deposits were the main component of total deposits, which reached Bs 158,075 million, up 13.3% from the previous quarter, representing 67.0% of total deposits. Savings deposits rose Bs 3,036 million (4.5%) and time deposits Bs 134 million (1.9%) compared to the previous quarter.

The variations for this item, taken individually by subsidiary, are as follows:

149,066

214,299 236,081

Jun. 2013 Mar. 2014 Jun. 2014

Deposits(In million of Bolivars)

Δ + 58.4%

Δ +10.2%

(In millions,


2014 2014 Abs. %



The financial intermediation (loan-to-deposit) ratio is 68.5%, compared to 60.9% in March 2014. The analysis of Mercantil's main subsidiaries and their positioning in the market are shown on pages 5 and 18.


15


Total Assets At the close of 2Q 2014, total assets registered 10.3% growth to Bs. 287,517 million (US$ 45,752 million)

1, up Bs. 26,829 million compared to Bs.

260,688 million (US$ 41,484 million)1 in 1Q 2014. This is the result of the

combined behavior of the investment and loan portfolios, which grew Bs. 2,620 million and Bs. 30,670 million, respectively. The ratio of performing assets to total assets was 80.8%, up Bs. 34,053 million (17.2%) from the previous quarter. Compared to June 30, 2013, assets grew Bs 101,400 million (54.5%) from Bs 186,117 million to Bs 287,517 million. The variations for this item, taken individually by subsidiary, are as follows:

186,117

260,688 287,517

Jun. 2013 Mar. 2014 Jun. 2014

Consolidated Total Assets(In million of Bolivars)

Δ +54.5%

Δ +10.3%

(In millions,


2014 2014 Abs. %


Mercantil Seguros Bs. 12,369 11,870 500 4.2


The analysis of Mercantil's main subsidiaries and their positioning in the market are shown on pages 5 and 18. The loan portfolio remained the principal component (54.5%) of total assets, and the investment portfolio accounts for 24.2%, while total cash and due from banks at the end of the quarter accounted for 18.1%.

Assets Distribution Total Bs. 287,517 million

(US$ 45,752 million)1

June 2014

Composition of Assets(In millions of Bolivars)

Cash and Due from Banks 18.1%

Loan Portfolio, Net 54.5%

Venezuelan Central Bank 2.6%

Venezuelan Govermment 15.7%

US Govermment. 2.5%

Private Sector 2.1%

US Govermment Guaranteed Agencies 1.3%

Other Assets 3.2%

Investment Portfolio 24.2%

Composition of Assets by Sudsidiary(In millions of Bolivars)

Mercantil Banco Universal 77.8%

Mercantil Commercebank 16.2%

Mercantil Seguros 4.2%

Other Subsidiaries (Abroad) 1.6%

Other Subsidiaries (Venezuela) 0.2%


16


Financial Obligations At the close of 2Q 2014, total financial obligations were 6,680 million (US$ 1.063 billion)

1, 44.5% up compared to Bs 4,624 million (US$ 736

million)1 in the previous quarter while compared to June 30, 2013, obligations rose 18.0%.

June 2014

March 2014

June 2013

(In million of bolivars) Bs. Bs. Bs.

Publicly Traded Debt Securities Issued by Mercantil 166 146 118

Subordinated debt 696 696 701

862 842 819

Other Financial Liabilities * 5,818 3,782 4,844

6,680 4,624 5,663

* Includes, funds received for special financing programs, liabilities with credit cards, letters of credit and securities loan agreements.

Shareholders’ Equity At the close of 2Q 2014, shareholder's equity reached Bs 26,803 million (US$ 4,265 million)

1, Bs 2,730 million (11.3%) increase from Bs 24,073

million (US$ 3,832 million)1

in the previous quarter and 36.2% up from Bs 19,679 million (US$ 3,132 million)

1 in 2Q 2013.

The variation in 2Q 2014 is primarily due to Bs 2,143 million in net annual income for the period, and a Bs 576 million increase from adjusting available-for-sale investments to their market value, among others.

19,679

24,073

26,803

Jun. 2013 Mar. 2014 Jun. 2014

Evolution of Shareholders´Equity(In million of Bolivars)

Δ +36.2%

Δ +11.3%

Capital Ratios Mercantil’s equity to assets ratio at June 30, 2014 is 9.3% and its equity to risk-weighted assets ratio is 15.9%, based on the standards of the National Securities Superintendency (SNV – Superintendencia Nacional de Valores) (10.6% and 19.0% at June 30, 2013).

Mercantil Banco Universal, in accordance with the requirements of the Superintendency of Banking Sector Institutions (SUDEBAN – Superintendencia de las Instituciones del Sector Bancario en Venezuela) has an equity to assets ratio of 9.6% at June 30, 2014, and an equity to risk-weighted assets ratio of 16,2% (11.3% and 19.6% at June 30, 2013).

Mercantil Commercebank, N.A., based on the standards of the U.S. Office of the Comptroller of the Currency (OCC), has an equity to assets ratio of 10.2% at June 30, 2014 and an equity to risk-weighted assets ratio of 14.8% (10.3% and 16.2% at June 30, 2013).

The equity ratios of Mercantil and its subsidiaries exceed the regulatory minimums.

Capital StructureJune 2014

Capital stock 3%

Capital reserve 1%

Traslation adjustments of net assets of subsidiaries abroad 11%

Retained earnings 79%

Unrealized gain fron adjustments of investments to market value 6%


17


Cash and Due from Banks (Banks

Abroad), 28.7%

US Treasuries, 2.4%

US$ denominated bonds issued by the Venezuelan

government, 21.5%

Principal and Interest Covered Bonds (Ticc) (*),

46.7%

Other Liabilities, net, 0.7%

0%

20%

40%

60%

80%

100%

Mercantil Commercebank FloridaBancorp and Subsidiaries (46%)

Other Subsidiaries Abroad (16%)

Subsidiaries in Venezuelan (30%)

Mercantil Banco's Overseas Branchand Agency (8%)

Assets and Liabilities in Foreign Currency

Mercantil’s assets and liabilities in foreign currency amounted to US$ 8.724 million and US$ 7.300 million, respectively at June 30, 2014. The estimated effect of each Bs 0.10/US$1 increase on the exchange rate of Bs 6.2842/US$ at June 2014 would be an increase of Bs 872 million in assets and Bs 142 million in equity, Bs. 23 million of which would be recorded as income for the period.

81,0%

19,0%

70,5%

29,5%

Bolívares Dolares

At June 30, 2014 Mercantil’s shareholders’ equity was Bs 26,803 million, equivalent to US$ 4,265 million1, which is partially covered in US$ by the

following net assets:

Allocation by Company:


Assets of subsidiaries in Venezuela (30%)

Bs. 186,117 million (US$ 29,617 million

1)

June 2013

Bs. 287.517 million (US$ 45.752 million

1)

June 2014

Assets by Currency

* Issued in US$ or under indexation clause (see Investment Portfolio, page 11)

US$ 1,424 million

Assets

18


Performance of Subsidiaries in accordance to its local accounting standards Mercantil Banco Universal Mercantil Banco Universal’s total assets grew Bs 22,588 million (11.2%) compared to March 2014. During 2Q 2014 net loans grew Bs 29,564 million (31.5%) and total deposits rose Bs 19,940 million (11.0%) compared to 1Q 2014, to Bs 123,280 million and Bs 202,015 million, respectively. Loan portfolio quality remains very favorable, with a 0.4% ratio of past-due and nonperforming loans to gross loans compared to 0.6% for the Venezuelan financial system. The loan portfolio provision covers 931.3% of past-due and nonperforming loans (817.2% at March 31, 2014). At June 30, 2014 Mercantil Banco Universal subsidiary ranks fourth in the Venezuelan financial system in terms of total assets with 12.0% of the market. The largest institution has a 18.2% share and Venezuela’s four main banks account for 56.1% of the financial system as a whole. It also has a 16.0% and 15.6% market share, respectively, in terms of manufacturing and agriculture loans. It ranks second in gross loan portfolio and loans for tourism, with market shares of 15.0% and 12.3%, respectively. It also ranks third with a market share of 6.9% in mortgages loans. Mercantil is Venezuela's leading bank in terms of savings deposits with 20.6% of the market. Shareholder’s equity registered Bs. 2,342 million (14.7%) quarter-over-quarter grow to reach Bs 18,263 million (US$ 2,906 million)

1. This growth is

due to Bs 1,914 in net quarterly income, and Bs 428 million increase from adjusting available-for-sale investments to their market value. The equity to assets ratio at June 30, 2014 is 9.6% (minimum requirement 9%) and the equity to risk-weighted assets ratio, according to the standards of the SUDEBAN, is 16.2% (minimum requirement 12%). In 2Q 2014, net income of Bs 1,914 million represented Bs 668 million (53.6%) year-on-year growth, mainly due to Bs 1,558 million rise in net interest income as a result of assets and liabilities growth, Bs 403 million in net income from commissions on credit and debit cards and other commissions on clients’ transactions; Bs 252 million in expenses for loan portfolio provisions; increases of Bs 675 million in personnel and operating expenses; Bs 275 million in contributions to regulatory agencies; and an increase of Bs 91 million in corporate income tax. In 1H 2014, net income were Bs. 3,505 million and represented Bs. 1,159 million (49.4%) year-on-year growth. This growth is mainly associated with an increase of Bs. 2,768 million in net interest income: Bs. 748 million in net income from commissions on credit and debit cards and other commissions on clients’ transactions; increases of Bs. 318 million in expenses for loan portfolio provisions; Bs. 1,522 million rise in personnel and operating expenses; and Bs. 550 million increase in contributions to regulatory agencies.

Mercantil C.A., Banco Universal Consolidated (In millions of Bs and US$)

US$ Jun. 2014

Jun. 2014

Mar. 2014

Jun. 2013

Total Assets 35,798 224,959 202,371 130,584 Investments Portfolio 7,462 46,894 47,510 31,235 Loan Portfolio 19,617 123,280 93,716 68,032 Deposits 32,147 202,015 182,075 115,451 Shareholders´ Equity 2,906 18,263 15,921 12,081 Income net Quarter 305 1,914 1,591 1,246 Income net 6 Months 558 3,505 2,346 Historic figures in accordance with the standards of the Venezuelan Superintendency of Banking Sector Institutions (SUDEBAN).

2,687 3,028 3,749 3,392 4,245

10.9%10.4%

10.8%

9.6%

10.9%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014

Net Interest Income

Net Interest Margin

3.7% 3.8% 3.5% 3.3% 3.5%

Evolution of Net Interest Income

Operating Expenses / Average Total Assets

7.5%

15.3%16.7%

9.5%

16.4%

6.4%

14.6% 15.2%

4.3%

31.1%

14.2% 14.2% 14.0%

13.3%

15.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

24.0%

28.0%

32.0%

36.0%

40.0%

2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014

Evolution of Gross Loans PortfolioVenezuela

Venezuelan Financial System Mercantil Market Share

19


Mercantil Commercebank, N.A. At June 30, 2014, total assets reached US$ 7,467 million, up US$ 569 million (8.3%) compared to US$ 6,898 million at the close of the previous quarter and 6.7% up compared to 2Q 2013. The net loan portfolio was US$ 5,007 million, up from US$ 4,824 million registered in the previous quarter and 8.7% compared to 2Q 2013. Commercial and industrial loans grew 5.4% compared to June 2013. At June 30, 2014 the Bank holds US$ 2,228 million (29.8% of total assets) mainly in short-term investments and bonds issued or guaranteed by the U.S. government or U.S. government-backed agencies. The Bank's deposits reached US$ 5,840 million at the close of June 2014, which reflects 3.8% quarter-over-quarter growth and 6.9% year-on-year growth.

Nonperforming assets (non-accrual loans and assets received in lieu of payment) fell US$ 16 million compared to June 2013. The ratio of nonperforming assets to total assets accounted for 0.8%, down 0.3% from June 2013. The ratio of nonperforming loans to total loans declined from 1.2% at the close of June 2013, to 1.0% in 2Q 2014. At June 30, 2014, the Bank's equity totaled US$ 740 million, US$ 10 million (1.4%) up from the previous quarter, mainly due to US$ 7 million in quarterly income, US$ 6 million increase from adjusting available-for-sale investments to their market value and US$ 3 million decline from dividends paid. At June 30, 2014 the equity to assets ratio is 10.2% and the equity to risk-weighted assets ratio is 14.8% (10.3% and 16.2% at June 30, 2013), based on the standards of the Office of the Comptroller of the Currency (OCC).

In 2Q 2014, net income totaled US$ 7 million, US$ 3 million (27.5%) down compared to 2Q 2013, mainly attributable to US$ 1 million increase in loan portfolio provisioning, US$ 3 million increase in operative expenses and US$ 2 million decline in corporate income tax. In 1H 2014, net income totaled US$ 13 million, US$ 7 million (34.9%) down compared to 1H 2013, mainly attributable to US$ 3 million increase in loan portfolio provisioning, US$ 5 million increase in operative expenses, US$ 3 million decline in commissions and other income, and US$ 4 million decline in corporate income tax.

Mercantil Commercebank N.A. Consolidated (In millions of US$)

Jun. 2014

Mar. 2014

Jun. 2013

Total Assets 7,467 6,898 6,997 Investments Portfolio 2,228 1,857 2,176 Loan Portfolio 5,007 4,824 4,608 Deposits 5,840 5,624 5,465 Shareholders´ Equity 740 729 719 Income net Quarter 7 6 9 Income net 6 Months 13 19 Figures presented according to accounting principles generally accepted in the United States (USGAAP )

1,1%0,9%

0,7% 0,7% 0,8%

1,5%1,7%

1,2%1,3% 1,4%

11,7%12,7%

9,3%9,8% 9,5%

0%

6%

12%

18%

0%

2%

4%


Assets Quality Ratios

NA(w/o Commitments) /Total Lns.

Total Class Lns /Total Lns.

Total Class+OREO /Tier 1+ALLL

20


Mercantil Seguros In 2Q 2014 net collected premiums registered 47.2% growth to Bs 3,493 million from Bs 2,373 million at the close of 2Q 2013. At the close of June 30, 2014, this subsidiary was the country’s second insurance company in terms of net collected premiums, with a market share of 12.0%. Total assets stood at Bs 12,152 million at June 30, 2014 reflecting 9.7% quarter-over-quarter growth. The Company registered Bs 3,915 million in shareholders’ equity, meeting the statutory solvency requirements in place. The figures presented include all the mandatory and voluntary reserves required to guarantee the company’s operations, including outstanding claims reserves and end-of-period payments.

At the close of June 30, 2014 the company’s investment portfolio was Bs 10,048 million (6.6% up on the previous quarter). Total investments representing technical reserves reached Bs 8,618 million (8.0% higher than the figure for the previous quarter and 45.1% more than at the close of June 2013), while liquidity levels amply meet all the statutory requirements on commitments towards policyholders, insurance brokers and reinsurers. In 2Q 2014, the technical result

2 closed at Bs 75 million, with a

combined operating ratio2 of 97.6%. Net income for 2Q 2014 registered

a 15.9% year-on-=year decline to Bs 270 million. The claims ratio was 64.2% (65.5% in 2013). In 1H 2014, the technical result closed at Bs. 234 million, with a combined operating ratio of 95.9%. Net income for 1H 2014 reached 604 million, a 17.5% increase compare to 1H 2013. The claims ratio was 62.1% at the close of 1H 2014 (65.7 at June 30, 2013).


3 Combined ratio = (incurred claims + commissions + operating expenses)/ earned premiums

Mercantil Seguros C.A. Consolidated (In millions of Bs. and US$)

US$ Jun. 2014

Jun. 2014

Mar. 2014

Jun. 2013

Total Assets 1,933 12,152 11,074 8,040 Investments suitable for representing Technical Reserves 1,371 8,618 7,981 5,938 Investments not-suitable for representing Technical Reserves 227 1,430 1,441 1,035 Shareholders´ Equity 623 3,915 3,650 2,498 Income net Quarter 43 270 335 322 Income net 6Months 96 604 514 Premiums Received Quarter 556 3,493 3,373 2,373 Premiums Received 6 months 1,093 6,866 4,472

Historic figures in accordance with the standards of the Venezuelan Superintendency of Insurance Activity (Sudeseg)

2,373 2,513

3,394 3,373 3,493

2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014

Evolution of Net Collected Premiums and Combined Ratio2

Net Collected Premiums

97.7%

93.6%94.6%

94.1%

97.6%

90%

92%

94%

96%

98%

100%

Combined Ratio

21


Wealth Management The Wealth Management business comprises: trust services, securities brokerage, mutual fund and portfolio management services. Net assets under management recorded off the balance sheet on June 30, 2014 were Bs 54,245 million (US$ 8,632 million)

1, representing a 4.6% quarter-

over-quarter increase and 27.8% year-on-year growth. They are broken down as follows:


During the second quarter of 2014, the Trust Fund managed Bs 20,953 million in assets, which reflects 6.9% quarter-over-quarter growth and 27.9% year-on-year growth. At June 30, 2014 Mercantil's trust fund ranked second in the private banking sector and fifth in the fiduciary market in Venezuela. At the close of June 2014, Mercantil maintained its position as Venezuela's mutual fund industry leader. Mutual Fund assets under management grew 2.6% and 36.5% compared to March 2014 and June 2013 respectively, reaching Bs 1,988 million. Mercantil offers its clients investment products and services (as broker-dealers and investment advisers) in global financial markets. At the close of June 2014 the total value of client assets was Bs 19,784 million, 4.9% more that at the close of March 2014 (up 49.0% year-on-year).

TOTAL ASSETS UNDER MANAGEMENT


June 2014

March 2014

June 2013

∆ Jun. 14 vs. Mar.14

%

∆ Jun. 14 vs. Jun. 13

%

Trust Funds 20,953 19,598 16,380 6.9 27.9 Mutual Fund

1,988 1,937 1,456 2.6 36.5

Brokerage 16,041 15,333 10,365 4.6 54.8 Financial Advisory 3,743 3,531 2,914 6.0 28.4 Custody of Securities Trading

11,520 11,455 11,338 0.6 1.6

Total Private Banking and Wealth Management Bs. 54,245 51,855 42,453 4.6 27.8

Total Private Banking and Wealth Management US$ 8,6321 8,2521 6,7561 4.6 27.8

22


Corporate Events The Superintendency of Insurance and Reinsurance Companies of Panama authorized Mercantil Seguros Panama to initiate activities During the first half of 2014, the Superintendency of Insurance and Reinsurance Companies of Panama authorized Mercantil Seguros Panama, SA, to operate on insurance products of life, funeral, personal accidents and daily rent; Mercantil Seguros Panama is a company that offers to Panamanian and foreign customers products and services that offer easy and quickly subscription of insurance coverage. Mercantil Commercebank opens a new banking center in Houston, Texas In June 2014, Mercantil Commercebank opened a new banking center in The Woodlands occupying 3,500-square-foot, at 1735 Research Forest Drive, within the Woodlands Town Center development, Houston, Texas. This banking center offers to personal and business banking customers an array of products and services designed to meet their financial needs, and conveniences such as three drive-thru lanes, an ATM, a vault and night- drop services.

New Measures announced for the Venezuelan Economy

The Ministry of Planning and Finance and the Ministry of Agriculture and Lands modified the distribution of the 2014 Agriculture Loan Portfolio The Ministry of Planning and Finance and the Ministry of Agriculture and Lands modified the distribution of the total Agriculture Loan Portfolio for 2014, with the percentage for financing production of strategic items changing from a minimum of 15% to a maximum of 5%, and increasing the percentage for financing agro-industrial loans from 10% to a maximum of 20%. As a result, the minimum percentage of the quarterly agriculture loan portfolio earmark to strategic items was increased to 95%. The Ministry of Housing and Habitat modified the basis for calculating the Minimum Percentages of the Mortgages Portfolio The Ministry of Housing and Habitat modified the basis for calculating the Minimum Percentage of the Annual Gross Loan Portfolio that Banks must earmark to the compulsory mortgage portfolio in 2014. For this compliance Banks must consider the portfolio balance at December 31, 2013 of granted loans for the acquisition of main dwellings in each of the established loan segments, thereby derogating the previous requirement of calculating such percentages based on expenditures actually made, as provided for in previous years.

Awards and Acknowledgements

Mercantil Servicios Financieros among the Top 1000 World's Financial Institutions The Banker magazine has included Mercantil Servicios Financieros as the first Venezuelan institution in its Top 1000 World's Financial Institutions, according to the analysis of the magazine. Mercantil Servicios Financieros rose 112 places in comparison with the previous year, to rank 260

th. It also ranks 9

th (up 11 places from 2013) among the Top 25 Latin American financial institutions.

Mercantil Servicios Financieros among the 2,000 World’s Biggest Public companies, according to Forbes. For the tenth consecutive year, Mercantil Servicios Financieros is among the 2,000 biggest and most important companies worldwide, according to the prestigious Forbes magazine. The ranking is calculated on the basis of total sales, profits, asset growth and market value of public companies. The May 2014 edition of Forbes places Mercantil in rank 773, up 375 places in comparison with the previous year, and among the 58 Latin American companies. MasterCard Worldwide recognized Mercantil with the Data Integrity 2013 Award Mercantil Banco Universal received the Data Integrity 2013 Award for Latin America from MasterCard Worldwide, acknowledging the quality of the information for authorizing, exchanging and clearing card transactions. MasterCard uses a Data Integrity Monitoring Program to follow up transactions sent by member financial institutions in order to reward the most efficient ones, for showing the highest increases in their operating quality indexes. This award from MasterCard Worldwide acknowledges the commitment of Mercantil to quality operations for the benefit of its customers. Mercantil Banco Universal and Mercantil Seguros among the 100 outstanding brands of 2014 According to the Gerente Magazine, Mercantil Banco Universal ranks, for the seventh consecutive year, as the first bank in the ranking of the Top 100 brands in Venezuela with a 29% preference rate, based on a survey conducted to Venezuelan executives in various economic sectors, while Mercantil Seguros is placed as the second insurance company in the country, with a 17% preference rate.

23


Mercantil Bank (Panamá) among the Top 100 Central American Banks For the second consecutive year, Mercantil Bank (Panamá) has been included among the Top 100 Central American Banks , according to the prestigious financial publication The Banker. Mercantil Bank (Panamá) ranks 74

th among the Top 100 (33

rd among banks in Panama), and 8

th

among the Top 10 as measured by its ROE.

The global economy, with the support of the growth of China and possibly U.S. , is finally overcoming the risk of recession, although risks to financial stability and risks of deflation remain in the Euro zone. Indicators of economic activity in China continue to improve, while prices remain stable. In particular, the external sector provided a pleasant surprise at the end of June, with China’s exports having a 7.2% year-on-year growth of 7.2% in June, more than the growth of May, and in contrast with the declines at the beginning of the year. On the other hand, imports registered a 5.5% year-on-year increase (in contrast with -1.6% in May), which indicates an improvement in internal demand. In this climate, prices rose 2.3% year-on-year, still far from showing inflationary tendencies. This allows leeway to the Chinese government to implement expansive measures. In the U.S., after the negative growth of the first quarter (-2.9%), the second quarter’s growth may have been closer to 3%, although final figures are not yet available. Employment data show hope, with unemployment rates at the lowest level in many years (6.1%). On the other hands, emerging economies show a variety of improvements. The aggregate diagnosis for these countries continues to improve. In a context of low volatility in international financial markets, capital flows to emerging markets begin to show recovery after the decline between May 2013 and the beginning of the current year. Two points should be noted: (i) China’s economic indicators, supported by the positive effect of the measures for fiscal and monetary stimulation, and (ii) moderate advance in redressing economic imbalances in the Asian countries. In contrast, the economies of Brazil and Turkey continue to show excess inflationary pressures. The combination of data on economic growth, together with actions or messages from central banks has again influenced markets in the global financial scene. The Federal Reserve Bank of the U.S. has stated that monetary normalization will be slow. On the other hand, the European Central Bank (ECB) has adopted measures geared towards supporting growth in the Euro zone and deflecting the threat of deflation. The reaction of investors has been clear: interest rates and risk-free yields remain low (in the U.S.), or have even declined (in Germany); risk premiums associated with corporate, peripheral and emerging bonds have been deepened, and exchange markets have increased some indexes to historical maximums. Volatility is at a very low level for all assets. One of the main causes of this is the increased appetite risk by investors. Regarding monetary policy, the ECB seems to have relaxed its position. The ECB met the expectations and decided to adopt expansive measures in the June meeting. Among other measures, the reference interest rate was cut to 0.15%, loans were granted to banks at long maturities, under conditions of new loan taking. Some of the reasons justifying these actions are the need of reactivating credit and of warding off the risk of deflation. These actions might gradually improve the economic climate and increase inflation. The debt markets have reacted to these measures with declining yields. On the other hand, the exchange rate of the Euro to the U.S. dollar has declined, to US$/€ 1.36.

U.S. Economic Climate The U.S. economy created 832,000 jobs in the second quarter of the year, bringing the unemployment rate to 6.1% at the close of June. The average hours worked rose 3.8% during the second quarter, in comparison with the first quarter, the best increase of the last three years. Retail sales changed little during the second quarter, although with positive month-on-month increases and a 4.3% year-on-year increase in June. Likewise, sales of vehicles rose significantly in June, showing 6.9% year-on-year increase. On the other hand, the available personal income showed a real monthly 0.2% increase in May. The personal consumption expenditures index grew 0.2% in May, as in the two previous months, with the largest increase occurring in energy goods and services (gasoline, electricity and gas), at a 0.8% rate. With no published figures yet, it is estimated that the U.S. economy increased almost 3% in the second quarter of the year. Therefore, the gap of the first quarter of the year, when GDP declined 2.9%, seems to have been overcome. Part of the explanation of the low movement of the U.S. economic activity during that first quarter has been ascribed to the adverse climate conditions at the beginning of the year, which would also have affected construction and real estate sales (housing). The U.S. Index of Consumer Prices (ICP) grew a 3.0% year-on-year rate in the second quarter (adjusted by seasonality), the highest of the last 19 months. This higher inflation rate confirms the possibility of a larger increase in aggregate demand during the second quarter. Sales of new housing in the U.S. increased more than expected in April, as well as prices, a new indication that the real estate market is recovering. Sales of single family units increased 3.3% at a year-on-year rate of 343,000 units (from a revised rate of 332,000 units in March). The average price of single units increased 0.7% to US$ 235,700 in comparison with March, in contrast with 4.9% increase of April of last year. At the rate of sales in April, housing stock would be depleted in 5.1 months, less than the 5.2 months in March.

Global Economic Climate

24


1.0%

1.3%

1.6%

1.9%

2.2%

2.5%

2.8%

3.1%

3.4%

3.7%

4.0%

4.3%

4.6%2

Q0

9

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

Source: Bloomberg

Treasury Rate 10 Years

Regarding monetary policy, the Open Market Committee of the Federal Reserve Bank foresees an end to the program of massive purchases of securities (tapering) in October. This confirms the improvement of the U.S. economy after the difficulties during the first quarter, and the lack of concern by the Federal Reserve authorities regarding the increase of inflation in May. Inflation is not perceived as an imminent risk. However, the contents of the minutes still emphasize the aim of prolonging the lax monetary situation for some time, thereby indicating that the first increase of the reference interest rate will not take place until mid-2015. On the other hand, the same minute indicate concern over the recent trends in financial markets, which could evidence excessive risk taking by investors.

Venezuelan Economic Climate Economic Activity During the second quarter of 2014, the petroleum market continued to show an imbalance between world demand and supply, with a supply experiencing continuous unplanned cuts both within OPEC as outside of the cartel, although with a larger expansion of supply than of demand; this has allowed prices to remain relatively low (although still high). Similarly to the first quarter, in spite of petroleum prices being slightly below US$/b 100, of lower allocation of foreign exchange, and of no transfers taking place from the Venezuelan Central Bank (BCV – Banco Central de Venezuela) to the National Development Fund (FONDEN – Fondo de Desarrollo Nacional), International Reserves in the hands of the BCV declined in the April-June period of this year. Government finances during the second quarter of the year showed an acceleration in public spending. A slight increase of the money in circulation took place in the same period, mainly explained by the larger expansion of money of fiscal origin, the lower allocation of foreign exchange by the various established mechanisms, together with the net expansive effect of Open Market Operations on the means of payment. In this context, an acceleration took place in the growth rate of domestic prices. Petroleum Sector, Reserves The Venezuelan petroleum basket reached an average price of US$/b 97.7 in the second quarter of the year, reflecting 1.4% increase in comparison with the previous quarter, but still a 0.6% decline in comparison with the same quarter of 2013. On the other hand, Venezuelan petroleum production averaged 2,834 mbd in the April-May period of the current year, an almost 80 kbd increase in comparison with the same period of last year. However, international reserves showed US$ 325 million contraction in comparison with the first quarter of the year, and US$ 4,181 million decline in comparison with the same period of 2013, to close at US$ 21,620 million in June. Monetary Policy

On the fiscal front, primary spending, according to the Office of the National Treasury, reached Bs. 224.1 billion in the second quarter, an almost 130% increase in comparison with the previous quarter, but a 129% increase in comparison with the April-June period of 2013, in clear contrast with the 12.6% increase of the same period of 2013, and also represents the largest increase since the statistical series became available (2004). Allocations of DPN Bonds and Treasury Bills reached Bs. 30.8 billion, showing 44.2% decline in comparison with the April-June period of 2013. In spite of this decline in placements, the lower maturities caused a net positive domestic indebtedness of Bs. 18.3 billion, still 60% below the positive domestic indebtedness of the same period of 2013 (Bs. 45.8 billion). In the money market, money in the hands of the public (M2) showed a cumulative 18.6% increase in the second quarter of the year, 110 basis points (bp) over the 17.5% increase of the same period of 2013. Regarding monetary policy, in the second quarter of the year, the BCV showed more action in issuing OMAs than in the same period of last year, although the larger maturities caused the net effect of OMAs on the means of payment to be expansive by Bs. 5.2 billion, 21.4% over the expansion of the second quarter of 2013.

25


0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

Monetary Liquidity Monetary Base

Source: Central Bank of Venezuela and Own Calculation

Monetary Liquidity (M2) and Monetary Base (BM) (Annual Var.)

BMM2

Inflation

In the case of domestic prices, the national inflation rate reached a cumulative 11.7% in the April-May period of the current year, 110 bp over the variation of the same period of 2013 (10.6%). The largest price adjustments over the average took place in: Food and Non-Alcoholic Beverages (15.2%), Transportation (13.6%), and Restaurants and Hotels (13%). By geographic areas, cities within the eleven regions included in the National Consumer Price Index (INPC – Índice Nacional de Precios al Consumidor) showing increases over the national average (11.7%) were: Maracay and Valencia (13.3%), Barquisimeto (12.7%), Puerto La Cruz-Barcelona (12.5%), Ciudad Guayana (12.1%), San Cristobal (12%), and Other Regions (11.9%).

26


APPENDIX I

Summary of the Accounting Principles used to prepare the Financial Statements

Financial statements are presented in accordance with the accounting standards of the National Securities Superintendency (SNV), in bolivars. A summary of some of the main accounting principles applied is given below:

Investment Portfolio Securities Held for Trading - Unrealized gains or losses resulting from differences in market value due to market fluctuations are included in the results for the period. Available-for-Sale Securities – Recorded at their market value. Unrealized gains or losses resulting from differences in market value and exchange rate fluctuations are included in shareholders’ equity. Held-to-Maturity Securities – Recorded at their acquisition cost, adjusted for amortization of premiums or discounts. For all portfolio investments, permanent losses in market value are recorded as a charge to income in the period in which they occur. Permanent investments – are investments that represent 20% to 50% stock ownership. Those greater than 50% are recorded as an equity interest and consolidated, except when control is likely to be temporary.

Loan Portfolio Loans are classified as overdue 30 days after their maturity. Allowances for loan portfolio losses are determined through a collectibility assessment that quantifies the amount that must be set aside for each loan. These assessments take into account such aspects as economic conditions, credit risk by customer, credit history and the collateral received. When assessing loans for small amounts of the same nature, these are grouped together to determine the provisions required. Recognition of income and expenditure Income, costs and expenses are recorded as they are earned or incurred. Interest earned on past-due loan portfolios is recorded as income when collected. Fluctuations in the market value of derivatives are recognized as income in the period in which they occur. Insurance premiums are recorded as income when earned. Consolidation The consolidated financial statements include the accounts of Mercantil and its more than 50%-owned subsidiaries and other institutions in which Mercantil has a controlling interest. See the principal subsidiaries on page 5 and the conciliation of its accounting standards with SNV regulations on pages 37, 39, 41. Inflation Adjustment According to SNV standards, Mercantil’s financial statements, as of December 31, 1999 must be presented in historic figures. Since then Mercantil has ceased to adjust for inflation in its primary financial statements. As a result, fixed and other assets are shown at their inflation-adjusted value up to December 31, 1999. The market value determined by independent assessments is higher than the inflation cost adjusted for inflation indicated above. New additions are being recorded at their acquisition value. Differences between the accounting standards of the Superintendency of Banking Sector Institutions in Venezuela (SUDEBAN, for its abbreviation in Spanish) and US GAAP The main accounting differences for the reconciliation of items under SNV and SUDEBAN for Mercantil Servicios Financieros are:

Amortization of premiums or discounts of securities carried out on a straight-line basis under SUDEBAN standards and in accordance with the constant amortization rate under SNV standards.

Under SNV standards, the effects of exchange fluctuations are included in the results for the period, with the exception of exchange fluctuations from available-for-sale investments and the stock trading portfolio which are included in shareholders' equity. Under SUDEBAN standards, all fluctuations are recorded in the results, with the exception of exchange fluctuations from the stock trading portfolio and the fluctuations which, as provided by the SUDEBAN exception, must subsequently be included in income when authorized by SUDEBAN.

The main accounting differences for Mercantil Servicios Financieros between the SNV standards indicated above and US GAAP are:

Deferred Income Tax: US GAAP allows deferred tax to be recognized for the total amount of loan portfolio loss allowances, while SNV standards only allow recognition of allowances for loans classified as high risk and unrecoverable.

Provision for assets received in lieu of payment: SNV standards stipulate a 100% allowance for real property received in lieu of payment after one year from the date of incorporation; under US GAAP no amortization deadlines are established. (See SNV - USGAAP earnings reconciliation, page 39).

27


APPENDIX II

MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED BALANCE SHEET

UNAUDITED FIGURES


∆ ∆

US$ 1 June March June Jun. 14 vs. Mar. 14 Jun. 14 vs. Jun. 13

Jun. 2014 2014 2014 2013 Bolivars % Bolivars %

CASH AND DUE FROM BANKS

Cash 442 2,776 3,157 1,956 (381) (12.1) 820 41.9

Banco Central de Venezuela 6,861 43,118 49,950 24,003 (6,832) (13.7) 19,115 79.6 Venezuelan Banks and Other Financial Institutions 82 517 1,246 42 (729) (58.5) 475 1.131.0

Foreign and Correspondent Banks 249 1,563 1,323 1,472 240 18.1 91 6.2

Allowance for Cash and Due from Banks 640 4,020 2,873 2,291 1,147 39.9 1,729 75.5

8,274 51,994 58,549 29,764 (6,555) (11.2) 22,230 74.7

INVESTMENT PORTFOLIO

Investments in Trading Securities 11 67 15 20 52 346.7 47 235

Investments in Securities Available for Sale 6,020 37,831 35,075 32,445 2,756 7.9 5,386 16.6

Investments in Securities Held to Maturity 3,368 21,164 18,533 13,420 2,631 14.2 7,744 57.7

Share Trading Portfolio 46 287 286 22 1 0.3 265 1.204.5

Investments in Time Deposits and Placements 1,485 9,334 12,714 4,108 (3,380) (26.6) 5,226 127.2

Restricted Investments 143 901 341 1,106 560 164.2 (205) (18.5)

11,073 69,584 66,964 51,122 2,620 3.9 18,463 36.1

LOAN PORTFOLIO

Current 25,544 160,524 129,178 100,876 31,346 24.3 59,648 59.1

Rescheduled 86 541 519 555 22 4.2 (14) (2.5)

Past Due 94 589 705 756 (116) (16.5) (167) (22.1)

Litigation 4 28 29 129 (1) (3.4) (101) (78.3)

25,728 161,682 130,431 102,315 31,251 24.0 59,367 58.0

Allowance for Losses on Loan Portfolio (771) (4,842) (4,261) (3,193) (581) 13.6 (1,649) 51.6

24,958 156,840 126,170 99,122 30,670 24.3 57,718 58.2

INTEREST AND COMMISSIONS RECEIVABLE 331 2,078 1,931 1,235 147 7.6 843 68.3

LONG-TERM INVESTMENTS 40 251 284 145 (33) (11.6) 106 73.1

ASSETS AVAILABLE FOR SALE 7 43 94 130 (51) (54.3) (87) (66.9)

PROPERTY AND EQUIPMENT 206 1,292 1,194 1,094 98 8.2 198 18.1

OTHER ASSETS 864 5,435 5,502 3,505 (67) (1.2) 1,930 55.1

TOTAL ASSETS 45,752 287,517 260,688 186,117 26,829 10.3 101,400 54.5

1

Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February 2003.

28


APPENDIX II

MERCANTIL SERVICIOS FINANCIEROS, C.A.

CONSOLIDATED BALANCE SHEET UNAUDITED FIGURES


∆ ∆


Jun. 2014 2014 2014 2013 Bolivars % Bolivars %

DEPOSITS

Non-interest Bearing 11,735 73,747 63,258 43,575 10,489 16.6 30,172 69.2

Interest-Bearing 13,419 84,328 76,205 48,135 8,123 10.7 36,193 75.2

Savings Deposits 11,286 70,921 67,885 47,850 3,036 4.5 23,071 48.2

Time Deposits 1,127 7,085 6,951 9,506 134 1.9 (2,421) (25.5)

37,567 236,081 214,299 149,066 21,782 10.2 87,015 58.4

DEPOSITS AUTHORIZED BY THE VENEZUELAN SECURITIES AND EXCHANGE COMMISSION

26 166 146 118 20 13.7 48 40.7 Publicly Traded Debt Securities Issued FINANCIAL LIABILITIES 926 5,818 3,782 4,844 2,036 53.8 974 20.1 INTEREST AND COMMISSION PAYABLE 10 64 56 42 8 14.3 22 52.4

OTHER LIABILITIES 2,845 17,877 17,625 11,657 252 1.4 6,220 53.4

SUBORDINATED DEBT 111 696 696 701 0 0.0 (5) (0.7)

TOTAL LIABILITIES 41,485 260,702 236,604 166,428 24,098 10.2 94,274 56.6

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 2 12 11 9 1 9.1 3 33.3

SHAREHOLDERS’ EQUITY

Paid in Capital 106 664 664 153 0 0.0 511 334.0

Capital Inflation Adjustment 31 192 192 192 0 0.0 0 0.0

Share Premium 0 0 0 204 0 0.0 (204) (100.0)

Capital Reserves 27 167 167 167 0 0.0 0 0.0 Translation Adjustments of net Assets of Subsidiaries Abroad 478 3,006 3,023 2,993 (17) (0.6) 13 0.4

Retained Earnings 3,365 21,146 18,905 14,726 2,241 11.9 6,420 43.6

Shares repurchased and held by Subsidiary (2) (15) (15) (7) 0 0.0 (8) 114.3 Repurchased Shares Restricted for Employee Stock Option Plan (8) (49) (49) (49) 0 0.0 0 0.0 Unrealized Gain (Loss) from Adjustment on Investments Available For Sale to Market Value

(11) (69) 0 0 (69) (100.0) (69) (100.0)

TOTAL SHAREHOLDERS´ EQUITY 280 1,762 1,186 1,301 576 48.6 461 35.4

TOTAL LIABILITIES AND SHAREHOLDERS´ EQUITY 4,265 26,803 24,073 19,679 2,730 11.3 7,124 36.2

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 45,752 287,517 260,688 186,117 26,829 10.3 101,400 54.5


29


APPENDIX II

MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED INCOME STATEMENT

UNAUDITED FIGURES (In millions of Bolivars and Dollars, except percentages)

Quarter 6 Months


US$

1 June June June June


Income from Cash and Due from Banks 3 18 5 13 260.0 26 9 17 188.9

Income from Investment Securities 206 1,295 883 412 46.7 2,513 1,538 975 63.4

Income from Loan Portfolio 860 5,407 3,391 2,016 59.5 9,872 6,430 3,442 53.5

INTEREST INCOME 1,069 6,720 4,278 2,442 57.1 12,411 7,977 4,434 55.6

Interest for Demand and Savings Deposits 303 1,901 1,146 755 65.9 3,634 2,193 1,441 65.7

Interest for Time Deposits 5 31 30 1 3.3 61 58 3 5.2 Interest for Securities Issued by the Bank 1 4 3 1 33.3 8 7 1 14.3

Interest on Financial Liabilities 9 56 34 22 64.7 107 63 44 69.8

INTEREST EXPENSE 317 1,992 1,213 779 64.2 3,810 2,321 1,489 64.2

NET INTEREST INCOME 752 4,728 3,065 1,663 54.3 8,601 5,656 2,945 52.1

Provision for losses on loan portfolio 114 719 442 277 62.7 935 586 349 59.6

NET FINANCIAL MARGIN 638 4,009 2,623 1,386 52.8 7,666 5,070 2,596 51.2

Trust Fund Operations 5 31 25 6 24.0 60 46 14 30.4

Foreign Currency Transactions 1 4 2 2 100.0 4 12 (8) (66.7)

Commissions on Transactions 48 304 179 125 69.8 564 333 231 69.4 Commissions on Letters of Credit and Guarantees Granted 1 7 6 1 16.7 11 11 0 0.0

Equity in Long-Term Investments 6 40 (23) 63 275.4 69 1 68 100.0

Exchange Gains and Losses (6) (38) 120 (158) (131.7) 122 843 (721) (85.5)

Income (Loss) on Sale of Investment Securities 25 154 99 55 55.6 270 432 (162) (37.5)

Other Income 201 1,264 788 476 60.4 2,217 1,442 777 53.8

TOTAL COMMISSIONS AND OTHER INCOME 281 1,766 1,196 570 47.6 3,318 3,121 199 6.4

Total insures premiums, net of claims 65 411 298 113 37.9 926 533 393 73.7

OPERATING INCOME 984 6,186 4,117 2,069 50.2 11,910 8,724 3,188 36.5

Salaries and employee benefits 228 1,433 1,054 379 36.0 2,782 1,991 791 39.7 Depreciation, Property and Equipment Expenses, Amortization of Intangibles and Others 63 397 227 170 74.9 684 412 272 66.0

Fees paid to regulatory agencies 122 767 396 371 93.7 1,449 792 657 83.0

Other operating expenses 210 1,320 935 386 41.3 2,848 1,775 1,073 60.5

TOTAL OPERATING EXPENSES 623 3,917 2,613 1,305 49.9 7,763 4,971 2,793 56.2

INCOME BEFORE TAXES AND MINORITY INTEREST 361 2,269 1,505 764 50.8 4,147 3,753 394 10.5

Total Taxes 20 125 72 53 73.6 172 279 (107) (38.4)

Minority Interests (0) (1) (1) 0 0.0 (2) (2) 0 0.0

NET INCOME 341 2,143 1,432 711 49.7 3,974 3,471 502 14.5

NET INCOME US$ 1 341 228 113 49.7 632 583 49 8.4

1 Dollar figures are given for reference purposes only. Balance Sheet figures are translated at the closing exchange rate and income statement figures at the average exchange rate for the

period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February 2003

30


APPENDIX II

MERCANTIL SERVICIOS FINANCIEROS, C.A. CONSOLIDATED STATEMENT OF CASH FLOWS

UNAUDITED FIGURES (In millions of Bolivars)

Quarter ended on 6 Months ended on

June 2014

June 2013

June 2014

June 2013

CASH FLOWS FROM OPERATING ACTIVITIES

Net income 2,143 1,432 3,974 3,471

Adjustments to reconcile net income to net cash provided

Operating activities - Allowance for losses on the loan portfolio 719 442 935 586 Depreciation and amortization 105 71 200 132 Provision for interest receivable and other assets 9 3 17 5

Gain on equity in long-term investment (40) (39) (69) (63)

Minority interest expense 1 1 2 2

Deferred Income Tax (8) 34 20 84

Provision for available for sale assets 0 1 1 2

Accrual for employee termination benefits 346 191 609 366 Payment of employee termination benefits (424) (212) (1,168) (342) Net change in operating assets and liabilities -

Interest and commissions receivables (147) (51) (397) (297)

Interest and commissions payables 8 2 9 13

Available for sale and other assets 75 54 (1,152) (788)

Other liabilities 1,297 825 4,079 1,742

Net cash provided by operating activities 4,084 2,753 7,060 4,913

CASH FLOWS FROM INVESTING ACTIVITIES

Net change in investments securities (3,141) (5,560) (7,342) (13,564) Loans granted (32,876) (2,144) (65,359) (33,242) Loans collected 1,488 1,333 29,402 20,142

Additions to fixed assets, net of depreciation and write-offs (163) (52) (302) (217)

Net cash flows from investing activities (34,691) (6,423) (43,600) (26,881)

FLUJOS DE EFECTIVO POR ACTIVIDADES DE FINANCIAMIENTO

Net change in

Deposits 21,782 3,037 40,164 23,828

Short-term financial liabilities 2,954 672 2,243 856

Debt securities by Mercantil 20 22 (32) (58) Subordinated debt (0) (223) (0) 0 Long-term financial liabilities received (991) (568) 4 82 Long-term financial liabilities paid 74 (25) (10) (20)

Cash dividends (937) (560) (937) (560)

Shares premium plus (1) (0) (4) (0)

Net cash flows from financing activities 22,901 2,355 41,428 24,128

CASH AND CASH EQUIVALENTS 1

Net increase for the period (7,706) (1,315) 4,888 2,161

At the beginning of the period 65,793 34,866 53,200 31,390

At the end of the period 58,087 33,551 58,087 33,551

1 Includes: Cash and Cash Equivalents, Cash and Due from banks, Investments in time deposits and placements within 90 days maturity

31


APPENDIX II

MERCANTIL SERVICIOS FINANCIEROS, C.A. Statement of Shareholders’ Equity

UNAUDITED FIGURES

(In millions of Bolivars)

Shares repurchased

held by subsidiary

Pension Plans Remeasurement

Unrealized Gain

(loss) from adjustments

on investments Available for

sale to market value Total

Capital stock

Capital inflation

adjustment Paid-in Surplus

Capital Reserves

Translation adjustment

of the assets in

subsidiaries Abroad

Retained earnings

Repurchased shares

restricted for employee

stock option plan

Balance as of June 30, 2013 153 192 204 167 2,993 14,726 (7) (49) - 1,301 19,679

Net income 1,784 1,784

Share repurchased 1 (2) (2)

Unrealized income on Investments available for sale (162) (162) Translation effect of net assets in subsidiaries abroad 9 9

Balance as of September 30, 2013 153 192 204 167 3,002 16,509 (9) (49) - 1,139 21,308


Cash dividends 2 2

Share repurchased and redeemed (2) 2 -

Share repurchased 1 (4) (4)

Unrealized income on Investments available for sale 1,352 1,352 Translation effect of net assets in subsidiaries abroad 4 4

Balance as of December 31, 2013 153 192 204 167 3,006 18,505 (11) (49) - 2,491 24,658


Increase Capital Stock 511 (204) (307) -

Cash dividends (1,124) (1,124)

Share repurchased and redeemed (4) (4) Unrealized income on Investments available for sale (1,305) (1,305) Translation effect of net assets in subsidiaries abroad 17 17

Balance as of March 31, 2014 664 192 - 167 3,023 18,905 (15) (49) - 1,186 24,073


Cash dividends 29 29

Pension Plans Remeasurement 69 (69) - Unrealized income on Investments available for sale 576 576 Translation effect of net assets in subsidiaries abroad (16) (16)

Balance as of June 30, 2014 664 192 - 167 3,006 21,146 (15) (49) (69) 1,762 26,803

32


APPENDIX III

MERCANTIL SERVICIOS FINANCIEROS, C.A. Summary of the Financial Statements in millions of US$1 and Ratios

June 2014

March 2014

June 2013

∆ Jun. 14 vs. Mar. 14

∆ Jun. 14 Vs. Jun. 13

% %

Cash and due from banks 8,274 9,317 4,737 (11.2) 74.7 Investment Portfolio 11,073 10,655 8,136 3.9 36.1 Loan Portfolio Net 24,958 20,078 15,773 24.3 58.2 Other assets 1,447 1,434 971 0.9 49.0

TOTAL ASSETS US$ 45,752 41,484 29,617 10.3 54.5

ASSETS UNDER MANAGEMENT US$ 8,632 8,252 6,756 4.6 27.8 Deposits 37,567 34,100 23,721 10.2 58.4 Financial Liabilities 926 602 771 53.8 20.1 Other Liabilities 2,993 2,950 1,993 1.5 50.2 Shareholders’ Equity 4,265 3,832 3,132 11.3 36.2

TOTAL LIABILITIES AND SHAREHOLDERS´ EQUITY US$ 45,752 41,484 29,617 10.3 54.5 INCOME – QUARTER

Financial Margin 752 616 488 22.1 54.3 Allowance for losses on loan portfolio 114 34 70 235.3 62.7 Commissions and other income 281 247 190 13.8 47.6 Insurance premiums, net of claims 65 82 47 (20.7) 37.9 Salaries and Operating Expenses 623 612 416 1.8 49.9 Net Income - Quarter US$ 341 292 228 16.8 49.7

Net Income – 6 Months US$ 632 583 8.4 KEY FINANCIAL INDICATORS

Income per share – Quarter Bs/ share US$ 3.44 2.94 2.30 17.0 49.7 Income per share – 6 Months Bs/ share US$ 6.38 5.88 8.5 Market price A share US$ 103.43 143.22 57.29 (27.8) 80.6 Market price B share US$ 103.43 141.31 57.29 (26.8) 80.6 Book value per share 41.73 37.48 30.64 11.3 36.2

Net Income (quarter) / Average Assets (ROA) 3.3% 2.9% 3.4% 13.8 (2.9)

Net Income (quarter) / Average Equity (ROE) 33.5% 28.8% 32.1% 16.3 4.4

Net Income (6 Months) / Average Assets (ROA) 3.0% 4.2% (28.6) Net Income (6 Months) / Average Equity (ROE) 31.1% 38.9% (20.1)


33


APPENDIX IV

MERCANTIL SERVICIOS FINANCIEROS, C.A.

Consolidated Loan Portfolio by Classification


By Economic Activity June 2014 %

March 2014 %

June 2013 %

Commercial 71,504 44.2 57,963 44.4 44,424 43.4

Credit Cards 24,006 14.8 18,369 14.1 13,948 13.6

Agricultural 20,329 12.6 15,279 11.7 10,739 10.5

Industrial 13,942 8.6 9,878 7.6 6,954 6.8

Services 9,572 5.9 8,238 6.3 6,271 6.1

Residential mortgage 5,830 3.6 5,455 4.2 4,767 4.7

Foreign trade 5,182 3.2 4,690 3.6 5,781 5.7

Construction 2,562 1.6 2,357 1.8 2,261 2.2

Car loans 1,970 1.2 2,174 1.7 2,293 2.2

Other 6,785 4.2 6,028 4.6 4,878 4.8

161,682 100.0 130,431 100.0 102,315 100.0

By Maturity June 2014 %

March 2014 %

June 2013 %

Up to six months 54,702 33.8 43,012 33.0 33,957 33.2

Six months to one year 22,657 14.0 19,653 15.1 13,817 13.5

One to two years 32,789 20.3 24,170 18.5 18,123 17.7

Two to three years 21,036 13.0 15,554 11.9 11,696 11.4

Three to four years 8,682 5.4 6,958 5.3 6,589 6.4

Four to five years 6,096 3.8 6,232 4.8 6,502 6.4

Over five years 15,720 9.7 14,852 11.4 11,632 11.4

161,682 100.0 130,431 100.0 102,315 100.0

By Geographical Location of the Debtor June 2014 %

March 2014 %

June 2013 %

Venezuela 128,593 79.5 98,340 75.4 71,501 69.9

United States of America 20,919 12.9 20,242 15.5 19,589 19.1

Mexico 1,309 0.8 1,353 1.0 1,319 1.3

Colombia 870 0.5 1,103 0.8 764 0.7

Brazil 1,674 1.0 1,448 1.1 1,519 1.5

Switzerland 981 0.6 974 0.7 910 0.9

Peru 1,847 1.1 1,221 0.9 1,430 1.4

Other countries 5,489 3.4 5,750 4.5 5,284 5.2

161,682 100.0 130,431 100.0 102,315 100.0

By Type of Risk June 2014 %

March 2014 %

June 2013 %

Normal 158,862 98.3 127,712 97.9 99,222 97.0

Potential 913 0.6 822 0.6 870 0.9

Real 1,403 0.9 1,439 1.1 1,379 1.3

High 402 0.2 374 0.3 711 0.7

Unrecoverable 102 0.1 84 0.1 132 0.1 161,682 100.0 130,431 100.0 102,315 100.0

34


APPENDIX V

Statutory percentage of Mercantil Banco Universal loans by economic sector and interest rates

June 2014

June 2014

Sector Percentages of compliance

% of Compliance

Reached

% of Compliance

required

Interest Rates

Agriculture

Calculated on the average gross loans at 12/31/2013 and 12/31/2012. Monthly compliance. Maximum per customer 5% of the current portfolio. It requires a minimum number of new clients. Additionally the portfolio must be quarterly classified among areas: strategic, non-strategic sectors, machinery, equipment, construction and improvement of infrastructure and trading and agribusiness investment. The concentration in the strategic segment of the loan portfolio must not be less than 60% and medium and long-term credits less than 20% of the total.

28.7%1 23.0%

Set weekly by the Venezuelan Central Bank

(BCV). At 06/30/2014 this is 13%.

Mortgage

Calculated on the gross loan portfolio at 12/31/2013, distributed as follows: 6.6% for home purchase, 0.4% for self-construction and 13.0% for self-construction of main dwellings. Annual Compliance.

7.7% -

Set by the Housing and Habitat Ministry. Set

in accordance with family income of debtors,

ranging between 4.66% and 10.66%.

Microcredits

3% calculated on the gross loan portfolio at

12/31/2013. Monthly Compliance.

3.6% 3.0%

Within minimum and maximum rates established by the Venezuelan Central Bank. At 06/30/2014 the rate cannot be higher than 24%.

Tourism

Calculated on the average gross loans at 12/31/2013 and 12/31/2012. In 03/31/2014 the minimum percentage that full-service banks have to earmark to the tourism sector was set in 4.25%, which must be attained at 12/31/2014.

3.1%1 2.0%

The Venezuelan Central Bank establishes a preferential rate for the sector on a monthly basis. As of 06/30/2014, the rate is 9.84% and can be as low as 6.84% in some cases in accordance with the Law for Tourism Loans.

Manufacturing

Calculated on the gross loan portfolio at

12/31/2013. Annual Compliance (at December

31, 2014 the required percentage is 10%)

15.0% -

Set by the Venezuelan Central Bank at 18%.

For SME, government industries, community

industries and joint ventures, the applicable

interest rate may not exceed 90% of the rate

set by the Venezuelan Central Bank.

1 Includes Bs 1,587 million in Agricultural Bonds issued by the Venezuelan State and Government Entities valid for the compulsory agricultural portfolio; and Bs 207 million in Class "B" shares of the company guaranteeing the loans of tourism SMEs "Sociedad de Garantías Recíprocas para la Pequeña y Mediana empresa " applicable for compliance with the tourism portfolio.

35


0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

900

950

1,000

Jun-13 Sep-13 Dec-13 Mar-14 Jun-14

Market Quote Mercantil Class A and Class B Sharesvs. Caracas Stock Exchange (CSE) Index

Price MVZ/A Adjusted CSE

Price MVZ/B

APPENDIX VI

Summary of Financial Indicators

Quarter

Ended on

6 Months Ended on

US$ Jun. 14 Jun. 14 Jun. 13 Jun. 14 Jun. 13

Net income in billions of Bolivars (millions of US$) 341 2,143 1,432 3,974 3,471

Mercantil’s stock indicators

Class A share:

Number of outstanding shares3 (Issued shares minus repurchased shares) 59,401,343 59,401,343

Market Price 103.43 650.00 360.00

Average daily volume (# of shares) 33.357 3.066

Market Price / Book value per share 2.5 1.9

Market Price / Period Net Earnings per share 30.1 24.9 16.2 10.3

Dividends received in Cash / Market price A 1.5 1.5 1.5 1.4

Class B share:

Number of outstanding shares3 (Issued shares minus repurchased shares) 42,813,618 42,813,618 42,813,618

Market Price 103.43 650.00 360.00

Average daily volume (# of shares) 656 5.712

Market Price / Book value per share 2.5 1.9

Market Price / Period Net Earnings per share 30.1 24.9 16.2 10.3

Dividends received in Cash / Market price B 1.5 1.5 1.5 1.4

Book value per share in Bs (Equity / # of outstanding shares) 2 41.73 262.22 192.53

Total weighted outstanding shares 99,152,561 99,161,734 99,153,501 99,161,953

Earnings per share (Net Result/ weighted outstanding shares) 3.44 21.61 14.44 40.08 35.01

1

Figures in US$ given for reference purposes only; Balance Sheet figures translated at the closing exchange rate and income at the average exchange rate for the period. See exchange rates in Appendix VI. Exchange control has been in place in Venezuela since February 2003.

2

Issued shares minus repurchased shares. 3

Stock dividends paid are considered as issued shares for comparison purposes.

36


APPENDIX VI

Quarter

Ended on

6 Months Ended on

Jun. 14 Jun. 13 Jun. 14 Jun. 13

Balance Structure indicators

Gross Loans/Deposits 68.5% 68.6%

Profitability Ratios (%):

Gross financial margin / Average interest earning assets 9.3% 9.2% 8.5% 8.5%

Commissions and other income as a percentage of Total income 31.5% 32.8% 33.0% 39.3%

Return on average assets (ROA) 3.3% 3.4% 3.0% 4.2%

Return on average equity (ROE) 33.5% 32.1% 31.1% 38.9%

Efficiency Ratios (%):

Operating expenses / Average total assets 4.8% 5.3% 4.8% 5.0%

Operating expenses / Total income 45.6% 48.6% 49.2% 44.9%

Liquidity Ratios (%):

Cash and due from banks / Deposits 22.0% 20.0%

Cash and due from banks and Investments Portfolio / Deposits 51.5% 54.3%

Asset Quality Ratios (%):

Non-performing loans/ Gross loans 0.4% 0.9%

Allowance for loan losses / Non performing loans 784.8% 360.9%

Allowance for loan losses / Gross loans 3.0% 3.1%

Capital Adequacy Ratios (%):

Shareholders equity / Assets 9.3% 10.6%

SNV-Risk based capital (minimum required 8%) 15.9% 19.0%

Number of employees

Employees in Venezuela 8,917 8,927

Employees Abroad 957 908

Distribution network

Branches in Venezuela 299 302

Bank branches 265 268

Insurance branches 34 34

Branches Abroad 29 25

Representative Offices 5 5

Number of ATMs 1,385 1,384

Number of points of sale (POS) 51,750 51,253

Mercantil Aliado Network:

Correspondent Desk 127 125

Correspondent Trading Points 185 190

Exchange and inflation rates

Exchange rate Bs/US$1 (Controlled since February 2003) 6.2842 6.2842

Average Exchange Rate for the quarter (Bs/US$1) 6.2842 6.2842 6.2842 5.9517

Average Exchange Rate for the 12 months (Bs/US$1) 60.9% 39.6%

Summary of Financial Indicators

37


APPENDIX VII

MERCANTIL C.A. BANCO UNIVERSAL

According to rules issued by SNV 1 UNAUDITED CONSOLIDATED FIGURES


∆ ∆



SUMMARY OF BALANCE SHEET ASSETS Cash and Cash Equivalents 8,038 50,514 56,756 28,817 (6,242) (11.0) 21,697 75.3 Investments Portfolio 7,773 48,849 50,178 32,325 (1,329) (2.6) 16,523 51.1 Loan Portfolio 19,617 123,280 93,716 68,032 29,564 31.5 55,248 81.2 Properties and Equipment and Other Assets 686 4,304 4,422 2,537 (117) (2.6) 1,767 69.6

TOTAL ASSETS 36,114 226,946 205,072 131,711 21,875 10.7 95,235 72.3

LIABILITIES AND SHAREHOLDERS'EQUITY Deposits 3 31,523 198,097 178,308 113,270 19,789 11.1 84,826 74.9 Financial Liabilities and Other Liabilities 1,346 8,458 8,040 5,116 418 5.2 3,342 65.3


SHAREHOLDERS´ EQUITY 3,245 20,392 18,724 13,325 1,667 8.9 7,067 53.0

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 36,114 226,946 205,072 131,711 21,875 10.7 95,235 72.3

Quarter 6 Months


US$ 2

June 2014

June 2013 Bolivars %

June 2014

June 2013 Bolivars % Jun.2014

SUMMARY OF STATEMENT OF INCOME

993 6,238 3,823 2,416 63.2 11,472 7,108 4,364 61.4 Interest Income Interest Expense 304 1,909 1,156 753 65.1 3,649 2,214 1,435 64.8

Gross Financial Margin 689 4,330 2,667 1,663 62.4 7,823 4,894 2,929 59.8 Provision for Losses on Loan Portfolio 109 685 435 250 57.6 886 572 314 54.8

Net Financial Margin 580 3,645 2,232 1,413 63.3 6,937 4,322 2,615 60.5 Commissions and Other Income 235 1,474 1,019 454 44.6 2,774 2,588 186 7.2

Operating Income 815 5,119 3,252 1,867 57.4 9,711 6,910 2,801 40.5 Operating Expenses 478 3,003 1,929 1,074 55.6 5,895 3,702 2,193 59.2

Income before taxes 337 2,116 1,322 793 60.0 3,816 3,208 608 19 Taxes 19 121 30 91 304.4 121 155 (34) (21.9)

NET INCOME 318 1,995 1,292 702 54.3 3,695 3,052 642 21.0

NET INCOME IN US$ 2 318 205 112 54.3 588 513 75 14.6

1 These financial statements are presented in accordance with SNV standards and adjusted for inflation up to December 31. 1999 (See accounting principles used). They reflect Mercantil Banco Universal’s contribution to Mercantil´s results. These Standards of the SNV are described in Appendix I.


3 Historic figures in accordance with the standards of the Superintendency of Banking Sector Institutions in Venezuela.

Conciliation of Net Income SNV and SUDEBAN

(In millions of Bs.)

Quarter 6 Months

Ended on Ended on

June June June June

2014 2013 2014 2013

Net income 3 1,914 1,246 3,505 2,346

Long term interest bearing loans, investments in securities adjusted for amortization, and other consolidation effects 81 47 90 67

Exchange Gains and Losses - - 100 639

Net income SNV 1,995 1,292 3,695 3,052

Inter-company eliminations (36) (124) (37) (123)

Contribution to Mercantil's Results 1,959 1,168 3,658 2,929

38


APPENDIX VII

MERCANTIL C.A. BANCO UNIVERSAL

According to rules issued by SUDEBAN 1

UNAUDITED CONSOLIDATED FIGURES (In millions of Bolivars and Dollars, except percentages)

∆ ∆



SUMMARY OF BALANCE SHEET ASSETS Cash and Cash Equivalents 8,038 50,514 56,756 28,817 (6,242) (11.0) 21,697 75.3 Investments Portfolio 7,462 46,894 47,510 31,235 (616) (1.3) 15,659 50.1 Loan Portfolio 19,617 123,280 93,716 68,032 29,564 31.5 55,248 81.2 Properties and Equipment and Other Assets 680 4,271 4,388 2,501 (117) (2.7) 1,770 70.8

TOTAL ASSETS 35,798 224,959 202,371 130,584 22,588 11.2 94,375 72.3

LIABILITIES AND SHAREHOLDERS'EQUITY Deposits 32,147 202,015 182,075 115,451 19,940 11.0 86,564 75.0 Financial Liabilities and Other Liabilities 745 4,681 4,375 3,052 306 7.0 1,629 53.4


SHAREHOLDERS´ EQUITY 2,906 18,263 15,921 12,081 2,342 14.7 6,182 51.2

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 35,798 224,959 202,371 130,584 22,588 11.2 94,375 72.3

Quarter 6 Months




SUMMARY OF STATEMENT OF INCOME Interest Income 987 6,201 3,845 2,355 61.3 11,432 7,124 4,308 60.5 Interest Expense 311 1,956 1,159 797 68.8 3,796 2,255 1,540 68.3

Gross Financial Margin 676 4,245 2,687 1,558 58.0 7,637 4,869 2,768 56.8 Allowance for Losses on Loan Portfolio 110 689 437 252 57.6 894 575 318 55.3

Net Financial Margin 566 3,556 2,250 1,306 58.0 6,743 4,294 2,449 57.0 Commissions and Other Income 249 1,563 1,160 403 34.7 2,980 2,232 748 33.5

Operating Income 815 5,119 3,410 1,709 50.1 9,723 6,526 3,197 49.0 Operating Expenses 491 3,084 2,134 950 44.5 6,097 4,025 2,072 51.5

Income before taxes 324 2,035 1,276 759 59.5 3,626 2,501 1,125 45.0 Taxes 19 121 30 91 304.6 121 155 (34) (21.9)

NET INCOME 305 1,914 1,246 668 53.6 3,505 2,346 1,159 49.4

NET INCOME IN US$ 3 305 198 107 53.7 558 394 164 41.5


Indicators1 from Consolidated Financial Statements

System June June

average2 2014 2013

Gross financial margin / Average assets 8.3% 8.3% 9.0%

Return on average assets (ROA) 2 3.9% 3.5% 4.0%

Return on average equity (ROE) 2 51.3% 40.8% 44.1%

Non performing loans / Gross loans 0.6% 0.4% 0.7%

Allowance for loan losses / Non performing loans 484.0% 931.3% 545.8%

Allowance for loan losses / Gross loans 2.8% 3.4% 3.7%

Operating expenses / average total assets 4.3% 4.1% 4.6%

Equity / Assets 7.3 8.1% 9.2%

Equity / Assets minus Venezuelan Government Investments N.D. 9.6% 11.3%

Equity / Risk-weighted Assets N.D. 16.2% 19.6%

1 Consolidated.

2 Based on annualized figures.


39


APPENDIX VIII

MERCANTIL COMMERCEBANK FLORIDA BANCORP

According to rules issued by SNV 1 UNAUDITED CONSOLIDATED FIGURES

(In millions of Dollars, except percentages)

∆ ∆

June March June Jun. 14 vs. Mar. 14 Jun. 14 vs. Jun. 13

2014 2014 2013 Dollars % Dollars %

SUMMARY OF BALANCE SHEET ASSETS Cash and Cash Equivalents 173 137 189 35 25.5 (16) (8.7) Investments Securities 2,101 1,765 2,005 337 19.1 96 4.8 Loan Portfolio 5,021 4,820 4,606 202 4.2 415 9.0 Properties and Equipment and Other Assets 154 151 173 3 2.2 (19) (10.8)

TOTAL ASSETS 7,449 6,872 6,973 577 8.4 476 6.8

LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits 5,810 5,590 5,447 220 3.9 364 6.7 Financial Liabilities, Other Liabilities and Subordinated Debt 989 647 907 343 53 83 9,1

TOTAL LIABILITIES 6,800 6,237 6,354 563 9.0 446 7.0 SHAREHOLDERS´ EQUITY 649 635 619 14 2.2 30 4.8

TOTAL LIABILITIES AND SHAREHOLDERS´ EQUITY 7,449 6,872 6,973 577 8.4 476 6.8

Quarter 6 Months


June June June June

2014 2013 Dollars % 2014 2013 Dollars %

SUMMARY OF STATEMENT OF INCOME Interest Income 43 42 1 1.6 85 85 (0) (0.1) Interest Expense 7 7 0 6.9 14 14 1 4.5

Gross Financial Margin 36 35 1 0.6 71 72 (1) (1.0) Allowance for Losses on Loan Portfolio 1 0 1 100.0 3 0 3 100.0

Net Financial Margin 35 36 (1) (2.0) 68 72 (4) (5.2) Commissions and Other Income 15 14 2 12.0 24 28 (4) (14.2)

Operating Income 50 49 1 1.9 92 100 (8) (7.7) Operating Expenses 39 36 3 8.7 77 72 5 6.6

Income before taxes 11 13 (2) (17.2) 15 28 (13) (44.9) Taxes 2 (1) 3 224.2 3 2 1 49.1

NET INCOME US$ 9 14 (5) (37.3) 12 26 (14) (53.2)

1 These financial statements are presented in accordance with rules of the SNV (see accounting principles used) to reflect the contribution of Mercantil Commercebank Florida Bancorp to the results of Mercantile. These Standards of the SNV are described in Appendix I.

Conciliación de la Utilidad SNV con USGAAP (En millones de US$)

Quarter 6 Months

Ended on Ended on

June June June June

2014 2013 2014 2013

Mercantil Commercebank N.A. Consolidated - Net Income 7 9 13 19

Results for the Holding and other Affiliates (1) (2) (3) (2)

Mercantil Commercebank Florida Bancorp - Net Income 5 8 10 17

Deferred Income Tax 1 6 2 8

Provision for available for sale assets 3 1 0 2

Others (0) (0) 0 (1)

Contribution to Mercantil's Results1 9 14 12 26

40


APPENDIX VIII

MERCANTIL COMMERCEBANK, N.A.

According to USGAAP UNAUDITED CONSOLIDATED FIGURES

(In millions of Dollars, except percentages)

∆ ∆

June March June Jun. 14 vs. Mar. 14 Jun. 14 vs. Jun. 13

2014 2014 2013 Dollars % Dollars %

SUMMARY OF BALANCE SHEET

ASSETS Cash and Cash Equivalents 44 43 18 2 4.3 27 151.9 Investments Securities 2,228 1,857 2,176 371 20.0 52 2.4 Loan Portfolio 5,007 4,824 4,608 183 3.8 399 8.7 Properties and Equipment and Other Assets 188 175 195 13 7.4 (7) (3.5)

TOTAL ASSETS 7,467 6,898 6,997 569 8.3 471 6.7

LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits 5,840 5,624 5,465 216 3.8 375 6.9 Financial Liabilities, Other Liabilities and Subordinated Debt 887 545 813 343 62,9 75 9,2

TOTAL LIABILITIES 6,727 6,169 6,278 559 9.1 450 7.2 SHAREHOLDERS´ EQUITY 740 729 719 10 1.4 21 2.9

TOTAL LIABILITIES AND SHAREHOLDERS´ EQUITY 7,467 6,898 6,997 569 8.3 471 6.7

Quarter 6 Months


June June June June

2014 2013 Dollars % 2014 2013 Dollars %

SUMMARY OF STATEMENT OF INCOME Interest Income 43 42 1 1.7 85 85 0 0.0 Interest Expense 6 5 1 9.2 11 10 1 6.0

Gross Financial Margin 37 37 0 0.7 74 75 (1) (0.8) Allowance for Losses on Loan Portfolio 1 0 1 100.0 3 0 3 100.0

Net Financial Margin 36 37 (1) (1.8) 71 75 (4) (4.8) Commissions and Other Income 13 13 0 (2.9) 24 26 (3) (9.8)

Operating Income 49 50 (1) (2.1) 95 101 (6) (6.1) Operating Expenses 38 35 3 8.8 75 71 5 6.5

Income before taxes 11 15 (4) (28.3) 20 31 (11) (35.3) Taxes 4 5 (2) (29.6) 7 11 (4) (35.9)

NET INCOME US$ 7 9 (3) (27.5) 13 19 (7) (34.9)

Mercantil Commercebank, N.A. Indicators

Similar June June

Group1 2014 2013

Gross financial margin / Average assets 3.5% 2.2% 2.3%

Return on average assets (ROA) 2 1.0% 0.4% 0.6%

Return on average equity (ROE) 2 9.0% 3.4% 5.3%

Non Accrual / Gross loans 1.1% 1.0% 1.2%

Allowance for loan losses / Gross loans 1.4% 1.2% 1.3%

Operating expenses / average total assets 2.7% 2.2% 2.1%

Equity / Assets N.D. 10.2% 10.3%

Equity / Risk-weighted Assets N.D. 14.8% 16.2%

1 Based on March, 2014.

2 Annualized

N.A.: Not available

41


APPENDIX IX

MERCANTIL SEGUROS

According to rules issued by SNV 1 Unaudited Consolidated Figures


∆ ∆



SUMMARY OF BALANCE SHEET ASSETS Cash and Cash Equivalents 182 1,145 1,864 336 (719) (38.6) 808 240.3 Investments Portfolio 1,188 7,464 6,711 5,909 753 11.2 1,555 26.3 Premiums receivable 295 1,855 1,671 1,201 184 11.0 655 54.5 Property and equipment 41 257 253 203 4 1.5 54 26.3 Other assets 262 1,649 1,370 896 279 20.3 753 84.0

TOTAL ASSETS 1,968 12,369 11,870 8,546 500 4.2 3,824 44.7

LIABILITIES AND SHAREHOLDERS’ ÉQUITY Uncollected Premium 649 4,078 3,811 2,711 267 7.0 1,367 50.4 Reserves 333 2,090 2,197 1,575 (107) (4.9) 516 32.7 Financial Liabilities 111 695 605 255 90 14.9 440 172.5 Accounts Payable Reinsures 101 632 538 382 94 17.4 250 65.6 Other provisions and other liabilities 184 1,165 977 809 188 19.3 356 44.0

TOTAL LIABILITIES 1,379 8,661 8,129 5,732 533 6.6 2,929 51.1

SHAREHOLDERS’ ÉQUITY 590 3,708 3,741 2,814 (33) (0.9) 894 31.8

TOTAL LIABILITIES AND SHAREHOLDERS’ ÉQUITY 1,968 12,369 11,870 8,546 500 4.2 3,824 44.7

Quarter 6 Months




SUMMARY OF STATEMENT OF INCOME Earned Premiums Received 489 3,074 2,073 1,001 48.3 5,763 3,829 1,934 50.5 Claims Incurred (314) (1,972) (1,358) (615) 45.3 (3,580) (2,512) (1,068) 42.5 Commissions and Acquisition Expenses (85) (534) (368) (166) 45.2 (1,185) (649) (536) 82.7 Management Expenses (49) (308) (201) (107) 53.1 (572) (380) (191) 50.3 Taxes and Contributions (29) (184) (100) (85) 85.3 (375) (196) (179) 91.6

Technical Result 12 76 47 28 59.4 51 92 (41) (44.4) Income from Investments 38 240 173 67 38.9 386 353 33 9.3 Foreign exchange gains (5) (34) 107 (141) (131.4) 26 134 (108) (80.5) Taxes 0 2 (11) 12 (115) 0 (19) 19 (100.0) Contracts of excess of lost (14) (89) (54) (35) 65.2 (170) (103) (67) 65.0

NET INCOME 31 194 262 (68) (26.0) 294 457 (163) (35.7)

NET INCOME US$ 2 31 42 (11) (26.4) 47 77 (30) (39.1)

1 These financial statements are presented in accordance with SNV standards and adjusted for inflation up to December 31, 1999 (See accounting principles used, Appendix I). They reflect Mercantil Seguros contribution to Mercantil’s results. These Standards of the SNV are described in Appendix I.


Conciliation of Net Income SNV and SUDESEG (In millions of Bs.)

Quarter 6 Months

Ended on Ended on

June June June June

2014 2013 2014 2013

Mercantil Seguros (Consolidated) - Net Income 270 322 604 514

Earned premiums - 3 2 4

Exchange Gains and Losses (116) (59) (158) (59)

Other 40 (4) (155) (2)

Net income SNV 194 262 294 457

Inter-company eliminations - - 142 -

Contribution to Mercantil's Results 194 262 435 457

42


APPENDIX IX

MERCANTIL SEGUROS

According to rules issued by SUDESEG Unaudited Consolidated Figures


∆ ∆



SUMMARY OF BALANCE SHEET ASSETS Cash and Cash Equivalents 1,371 8,618 7,981 5,938 637 8.0 2,680 45.1 Investments Portfolio 227 1,430 1,441 1,035 (11) (0.8) 395 38.1 Premiums receivable 335 2,104 1,651 1,067 452 27.4 1,038 97.2

Property and equipment 1,933 12,152 11,074 8,040 1,078 9.7 4,113 51.2

LIABILITIES AND SHAREHOLDERS’ ÉQUITY Uncollected Premium 988 6,208 6,008 4,286 200 3.3 1,922 44.8 Other provisions and other liabilities 322 2,029 1,416 1,256 613 43.3 775 61.7

TOTAL LIABILITIES 1,310 8,238 7,424 5,541 814 11.0 2,697 48.7

SHAREHOLDERS’ ÉQUITY 623 3,915 3,650 2,498 265 7.2 1,416 56.7

TOTAL LIABILITIES AND SHAREHOLDERS’ ÉQUITY 1,933 12,152 11,074 8,040 1,078 9.7 4,113 51.2

Quarter 6 Months




SUMMARY OF STATEMENT OF INCOME Earned Premiums Received 489 3,074 2,070 1,003 48.4 5,761 3,825 1,937 50.6 Claims Incurred (314) (1,972) (1,358) (615) 45.3 (3,580) (2,512) (1,068) 42.5 Commissions and Acquisition Expenses (85) (534) (365) (169) 46.2 (1,001) (646) (355) 55.0 Management Expenses (49) (308) (201) (107) 53.1 (572) (380) (191) 50.3 Taxes and Contributions (29) (184) (100) (85) 85.3 (375) (196) (179) 91.6

Technical Result 12 75 48 28 58.9 234 91 143 157.5 Income from Investments 32 201 173 28 16.0 356 353 3 0.7 Foreign exchange gains 13 82 166 (84) (50.6) 184 192 (8) (4.1) Taxes 0 2 (11) 12 (115.0) 0 (19) 19 (100.0) Contracts of excess of lost (14) (89) (54) (35) 65.2 (170) (103) (67) 65.0

NET INCOME 43 270 322 (51) (15.9) 604 514 90 17.5

NET INCOME US$1 43 51 (8) (16.3) 96 86 10 11.2


2 Combined ratio = (incurred claims + commissions + operating expenses)/ earned premiums

3 In numbers.

KEY FINANCIAL AND OPERATING INDICATORS

Mercantil Seguros (In millions of Bolivars, except percentages and insured persons) Quarter 6 Months

Ended on Ended on

June June June June

2014 2013 2014 2013

Premiums Received Net 3,493 2,373 6,866 4,472

Market Share 12.0% 12.0%

Equity / Total Assets 32.2% 31.1%

Incurred Claims / Earned Premiums (%) 64.2% 65.6% 62.1% 65.7%

Commissions and Acq. Expenses / Earned Premiums (%) 17.4% 17.6% 17.4% 16.9%

Administrative Expenses / Earned Premiums (%) 10.0% 9.7% 9.9% 9.9%

Combined Ratio (%)2 97.6% 97.7% 95.9% 97.6%

Insured Persons3 1,802,060 1,581,920

43


APPENDIX X

Key Macroeconomic Indicators

12 Months Quarter

2012 2013 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014

Gross Domestic Product. Var.% 1

Consolidated 5.6 1.3 0.8 2.6 1.1 1.0 ND ND

Oil activities 1.4 0.9 0.8 1.3 0.8 0.6 ND ND

Non-Oil activities 5.8 1.8 0.7 2.7 1.7 2.1 ND ND

Other Net Taxes on Products 9.1 (1.4) 1.2 3.2 (3.0) (5.8) ND ND

Consumer Price Index (% Change)2 19.5 52.7 33.9 75.0 48.8 55.7 41.5 ND

Unemployment Rate (% Change)3 7.4 7.5 8.5 7.8 7.9 7.0 8.0 ND

Wage Income Index (% Var.)1 23.6 47.9 21.7 22.8 35.1 47.9 ND ND

Monetary Liquidity (% Change)1 61.0 69.7 60.6 61.8 64.6 69.7 76.6 71.3

Interest Rates (Period end) (%)4

Six Main Commercial and Universal Banks

Period-end Loan Rate 15.6 15.6 15.3 15.3 15.8 15.6 15.6 16.2

Period-end Saving Deposit Rate 12.5 13.3 12.5 12.5 12.5 14.7 14.5 14.5

Period-end Time Deposit Rate 14.6 14.7 14.5 14.5 14.5 13.3 15.0 14.1

Exchange Rate (Preferential)

Period end (Bs/US$) (Bid rate) 7 4.289.3 6.284.2 6.284.2 6.284.2 6.284.2 6.284.2 13.687.3 ND

Annual average exchange rate (Bs/US$)7 4.289.3 6.284.2 6.284.2 6.284.2 6.284.2 6.284.2 9.276.3 ND

Depreciation (%) 2 0.0 0.0 0.0 0.0 0.0 0.0 117.8 ND

External Sector (millions of US$)

Trade Balance 5 38,001 ND 8,122 9,129 10,191 ND ND ND

Oil Exports 93,569 ND 21,368 21,572 21,456 ND ND ND

Non-Oil Exports 3,771 ND 896 814 775 ND ND ND

Imports (59,339) ND 14,142 13,257 12,040 ND ND ND

Central Bank of Venezuela Intl. Res. 29,887 21,478 27,101 25,801 23,044 21,478 21,945 21,620

FEM 3 3 3 3 3 3 3 3

Oil Export Average Price (US$/b) 103.4 99.5 103.8 98.3 102.4 96.6 96.4 97.7

Average Oil Production (Thousands bpd) 2,805 2,785 2,748 2,762 2,820 2,858 2,879 2,834

Central Government (millions of Bs)

Non-Oil Income 192,339 277,251 58,281 62,393 70,934 85,643 88,608 ND

Realized Expenses by the National Treasury 6 414,000 511,615 108,205 97,863 83,162 222,385 161,750 224,115

Year-on-year variation. 2 Annual Dec-Dec figures. Annualized quarterly figures.

3 Annual figures for the second semester.

4 Annual figures correspond to weighted averages.

5 Balance of payments figures.

6 Does not include public debt amortization.

7 Exchange Rate US$/1 for comparison purposes. At January 1, 2008, begins the Monetary Conversion Law.

ND: Not Available FEM: Macroeconomic Stabilization Fund Source: Central Bank of Venezuela (BCV). Ministry of Finance (MF). National Statistics Institute (INE) Ministry of Energy and Production (MEP). Bloomberg and own calculation

Fuente: BCV. MF. INE. MEP. Bloomberg, SENIAT, Oficina Nacional del Tesoro y Cálculos Propios

mercantil servicios financieros, c.a. financial report ... · net income: mercantil posted bs 2,143...

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