Mercantil Servicios Financieros Informe Anual 2016 - msf.com · Mercantil Servicios Financieros is...

1 Mercantil Servicios Financieros

CONTENTS

Presentation 3

Mercantil’s Stock Performance 4

Financial Highligths 5

Board of Directors and Administration 6

Notice of Ordinary General Shareholders’ Meeting 7

Board of Directors’ Report 8

Statutory Auditors’ Report 20

Financial Statements 21

Economic Climate 25

Strategic Positioning 29

Management Discussion and Analisys 30

Performance of Subsidiaries 40

Corporate Governance 46

Awards and Acknowledgements 52

Corporate Contacts and Subsidiaries 55

AnnualREPORT

2016

Mercantil Servicios Financieros is the first and most comprehensive financial services provider

in Venezuela, operating in 10 countries in the Americas and Europe. It registered total assets

for Bs 1,484,732 million and Bs 75,404 million in equity with over 8,000 employees. Its shares

are listed on the Caracas Stock Exchange (MVZ.A and MVZ.B) and it holds a Level 1 American

Depositary Receipt (ADR) in the over-the-counter market (OTC) in the United States of

America (MSFZY and MSFJY).

Mercantil’s Mission is “to fulfill the needs of our customers by providing excellent financial

products and services, attain the aspirations of our employees, support the development of

communities where Mercantil has presence and add value for our shareholders through a

long term outlook.”

Mercantil plays an active role in the development of different markets where it operates in

the banking, insurance and wealth management business, through the following subsidiaries:

in Venezuela Mercantil Banco Universal, founded in 1925, with a national network of 239

offices, a branch in Curacao and representative offices in Bogotá, Lima, México and Sao Paulo,

as of December 31, 2016; Mercantil Seguros with 29 offices; Mercantil Merinvest, C.A. and

Mercantil Inversiones y Valores, holding of other support subsidiaries. Mercantil Bank, N.A.*

in the United States, with 15 offices in Florida and 7 in Houston, Texas. Mercantil Bank

(Schweiz) AG in Switzerland. Mercantil Bank (Panamá) with four offices; Mercantil Seguros

(Panamá) and Mercantil Capital Markets (Panamá) in Panama. Mercantil Bank (Curacao) N.V.

in Curacao, and Mercantil Bank and Trust, Ltd. (Cayman), in the Cayman Islands.

Likewise, it permanently undertakes an important social work in different community sectors,

both in Venezuela through Fundación Mercantil, and in Florida and Texas in the U.S., through

the Mercantil Bank, N.A.* subsidiary.

Over the years, Mercantil Servicios Financieros has developed a set of principles and values

that make up its Culture, which has remained unchanged and is a benchmark of their business

behavior and their workers.


(*) Previously Mercantil Commercebank, N.A.

4 Annual REPORT 2016

Mercantil’sStock Performance

Market Quote for Mercantil Class A and B Shares vs. Caracas Stock Exchange Index (CSEI)

Earnings per share (1)

Closing Price Class A shareClass B share

Market price/ Earnings per share (1)Class A shareClass B share

Book value per share (2)

Market price / book value (2)

Class A shareClass B share

Number of outstanding sharesClass A shareClass B share

Daily Average Traded Volume (Shares)Class A shareClass B share

Paid DividendsIn stock (new shares for each share held)In cash (Bs per share)

Cash dividends for the year / Market price (%)Class A shareClass B share

Caracas Stock Exchange: MVZ A & MVZ B

Level 1 ADR: MSFZY y MSFJY

Year Ended

178.07

12,600.0012,600.00

70.870.8

719.78

17.517.5

60,880,92943,880,032

3,6593,657

-18.75

0.10.1

December 31

2016bolivars

141.74

5,000.005,000.00

35.335.3

435.69

11.511.5

59,401,34342,813,618

2,5173,180

-16.50

0.30.3

December 31

2015bolivars

99.40

1,400.001,400.00

14.114.1

318.49

4.44.4

59,401,34342,813,618

33,66517,440

-11.00

0.80.8

December 31

2014bolivars

73.12

929.99910.00

12.712.4

241.23

3.93.8

59,401,34342,813,618

2,1422,354

-6.50

0.70.7

December 31

2013bolivars

41.97

140.00135.00

3.33.2

147.49

0.90.9

59,450,03542,828,767

12,9795,201

-4.00

2.93.0

December 31

2012bolivars

(1) Calculated based on weighted average shares issued minus repurchased shares adjusted by stock dividens.(2)Calculated based on outstanding shares issued minus repurchased shares adjusted by stock dividens.

apr-

12

jul-1

2

oct-

12

jan-

13

jul-1

3

jan-

14

jul-1

4

jan-

15

jul-1

5

jul-1

6

jan-

16

apr-

13

oct-

13

apr-

14

oct-

14

apr-

15

oct-

15

apr-

16

oct-

16

dec-

16

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

MVZ.AMVZ.BAdjusted CSEI


Financial Highligths

Balance SheetTotal AssetsLoan Portfolio (Net)DepositsShareholders’ Equity

Income StatementNet Interest IncomeCommissions and Other IncomeOperating ExpensesNet Income

Profitability Indicators (%)Net Interest Income / Average Financial Assets (NIM)Commissions and Other Income / Total IncomeNet Earnings for the Period / Average Equity (ROE)Net Earnings for the Period / Average Assets (ROA)

Capital Adequacy Indicators (%)Equity / Risk-Weighted Assets (regulatory minimum 8 %) (1)

Equity / Assets

Loan Portfolio Quality Indicators (%)Past-Due and Non-Performing Loans / Gross Loan PortfolioAllowances for Loan Losses / Past-Due + Non-Performing LoansAllowances for Loan Losses / Gross Loan Portfolio

Efficiency Indicators (%)Operating Expenses / Average Total AssetsOperating Expenses / Total Income

Liquidity Indicators (%)Cash and Due from Banks / DepositsCash and Due from Banks and Investment Portfolio / Deposits

Other Indicators (%)Gross Loans / DepositsFinancial Assets / Total Assets Financial Assets / Deposits

Number of EmployeesEmployees in VenezuelaEmployees Abroad

Banking Distribution NetworkBranches in Venezuela (2)

Branches AbroadRepresentative OfficesMercantil Aliado Network

Correspondent DeskCorrespondent Trading Points

Automatic Teller Machines (ATM)Point of Sale Terminals (POS) (3)

Consolidated Earnings(In thousands of Bs except percentages and Other Indicators)

Year Ended

1,484,731,617655,362,111

1,281,646,95675,404,391

76,684,58537,888,170

(96,784,298)18,035,740

14.535.829.22.0

10.15.1

0.4764.4

3.0

9.461.3

44.959.0

52.757.5

66.6

7,2811,089

26830

4

64237

1,15052,454

December 31

2016bolivars

634,324,610344,140,584534,903,16644,533,603

36,733,21515,424,013

(35,550,428)14,091,763

12.032.337.13.0

11.47.0

0.21,273.3

3.0

6.448.3

29.147.1

66.370.984.1

8,6961,161

29834

5

10972

1,33353,023

December 31

2015bolivars

355,520,544197,382,285

294,674,67032,553,965

18,081,1288,141,183

(18,740,590)9,854,389

9.333.236.3

3.4

15.29.2

0.31,186.9

3.1

5.349.1

26.149.5

69.276.592.3

8,8501,003

29930

5

125122

1,37950,903

December 31

2014bolivars

239,313,132121,818,576195,916,83524,657,506

11,483,8706,385,147

(11,732,159)7,250,427

8.836.736.5

3.8

18.410.3

0.5649.3

3.3

5.347.4

23.756.2

64.379.096.4

8,944938

29926

5

128188

1,43253,388

December 31

2013bolivars

142,642,20577,885,513

114,605,56615,076,192

7,484,2643,997,898

(7,523,368)4,162,607

8.537.432.9

3.5

18.810.6

0.9372.6

3.3

5.447.7

24.052.5

70.378.898.1

8,829880

30223

5

106186

1,39248,672

December 31

2012bolivars

(1) In accordance with the standards of the National Securities Superintendency(2) Excludes internal branch for employees, at Edificio Mercantil (Caracas)(3) Physical Points of Sale (POS)


Board of Directors

Note: The Audit, Compesation and Risk Committees were created pursuantto provision in the By-laws and in accordance with a resolution by the Boardof directors. These commitees are made up of independent Directors and areattended by the Chairman and the CEO (ex-officio).

(1) Member of the Audit Committe(2) Member of the Compensation Committe(3) Member of the Risk Committe

Gustavo Vollmer A.Presidente

Alfredo Travieso P. 2

Luis A. Romero M. 2

Gustavo Galdo C. 3

Miguel A. Capriles L.2

Víctor J. Sierra A. 2

Federico Vollmer A.3

Roberto Vainrub A. 3

Millar WilsonGustavo Marturet Medina 1

Eduardo Mier y Terán 1

Luis A. Marturet M.2

Francisco Monaldi M.3

Claudio Dolman C.2

Carlos Zuloaga T. 3

Alejandro González Sosa 2

Miguel A. Capriles C. 1

Luis Pedro España N. 1

Alberto Sosa S. 3

Alexandra Mendoza Valdés 1

Rafael Sánchez B. 3

Nelson Pinto A.René Brillembourg C.1

Nerio Rosales R. 2

Fernando Eseverri I. 1

Oscar A. Machado K. 2

Francisco Torres P. 1

Gustavo A. Vollmer S. 3

Gustavo Machado C. 3

Carlos Acosta 1

Guillermo Ponce Trujillo

Rafael Stern S.

Francisco De LeónManuel Martínez Abreu

Umberto ChiricoGladis Gudiño

Luis Alberto Fernandes

Paolo Rigio C.

Principal Directors

Alternate Directors

Secretary

Alternate Secretary

Statutory Auditors

Alternate Statutory Auditor

Legal Counsel

Alternate Legal Counsel

Luis Calvo Blesa *Global Human Resources and Corporate Communications Manager

Luis Alberto Fernandes *Global Chief Legal Counsel

Vincenza Garofalo S. *Global Chief Risk Officer

Jorge Pereira *Global Operations and TechnologyManager

Isabel Pérez S. *Global Chief Financial Officer

Carlos Tejada G. *Global Commercial Banking Manager

Ignacio Vollmer Sosa *Global Personal Banking Manager

Guillermo Ponce TrujilloBoard of Directors Secretary

Rafael Stern S.Alternate Secretary

Anahy Espiga Corporate Strategic Planning Manager

Luis M. Urosa Z.Corporate Compliance

Maigualida Pereira C.Compliance Officer - Prevention ofMoney Laundering and TerroristFinancing

Gustavo Vollmer A. *Chairman & CEO

Millar Wilson *Executive Director of International Business

Alfonso Figueredo D. *Global Executive Vice Presidentof Operations and Administration

Fernando Figueredo M. *Global Executive Vice Presidentof Business

Nelson Pinto A. *Executive PresidentMercantil Banco Universal

María Silvia Rodríguez F. *Executive PresidentMercantil Seguross

Administration

(*) Member of the Committe Executive


Notice of OrdinaryGeneral Shareholder’s meeting MERCANTIL SERVICIOS FINANCIEROS, C.A. Authorized Capital Bs 1,361,892,493.00Subscribed and Paid-In Capital Bs 680,946,246.50 Caracas - Venezuela

The Board of Directors hereby convenes an Ordinary General Shareholders’ Meeting to be held at the Auditorium’s Edificio Mercantil,located at Avenida. Andrés Bello Nº 1, San Bernardino, Caracas, on March 24, 2017 at 9:30 in the morning, in order to:

1. Consider the report presented by the Board of Directors and the Company’s Audited Financial Statements as of December 31, 2016,in light of the Statutory Auditors’ Report.

2. Consider the report presented by the Board of Directors related to the Degree of Compliance with the Corporate GovernancePrinciples, contained in Resolution Nº 19-1-2005 dated February 2, 2005 by the National Securities Superintendency.

3. To appoint the Principal Members and their Alternates to the Board of Directors as established in the Bylaws and to set theremuneration of all members of said Board.

4. To appoint the Statutory Auditors and their Alternates and set their remuneration.

5. Consider the “Proposal for the Thirty-Fifth Phase of the Company’s Stock Repurchase Program; that the Board of Directors ofMercantil Servicios Financieros, C.A. submits for the consideration of the Ordinary General Shareholders’ Meeting to be held March24, 2017”.

6. Consider the “Proposal of Authorization for the Board of Directors for the Issuance and Placement of Bonds and/or CommercialPapers, that the Board of Directors submits for the consideration of the Ordinary General Shareholders’ Meeting to be held March24, 2017”.

7. Consider the “Proposal for the decree of dividends for the year 2017 of Mercantil Servicios Financieros, C.A.; that the Board ofDirectors submits for the consideration of the Ordinary General Shareholders’ Meeting to be held March 24, 2017”.

Note: The Shareholders are hereby informed that: 1) The Balance Sheet, Income Statement, Statement of Shareholders’ Equity andStatements of Cash Flow for the period ended December 31, 2016, duly examined by the external auditors “Pacheco, Apostólico yAsociados” (PricewaterhouseCoopers), the Statutory Auditors’ Reports, and the Board of Directors’ Report, 2) The Board ofDirectors’ Report related to the Degree of Compliance with the Corporate Governance Principles; 3) the “Proposal for the Thirty-Fifth Phase of the Company’s Stock Repurchase Program, that the Board of Directors of Mercantil Servicios Financieros, C.A. submitsfor the consideration of the Ordinary General Shareholders’ Meeting to be held March 24, 2017“ and, 4) the “Proposal ofAuthorization for the Board of Directors for the Issuance and Placement of Bonds and/or Commercial Papers, that the Board ofDirectors submits for the consideration of the Ordinary General Shareholders’ Meeting to be held March 24, 2017“, will be availableto them 15 days prior to the Shareholders’ Meeting, in the Company’s Headquarters located at Avenida Francisco de Miranda entresegunda y tercera Transversal de la Urbanización Los Palos Grandes, Centro Comercial El Parque, Segunda y Tercera Etapas, P03,Locales C-3-10, C-3-11, Municipio Chacao, Estado Miranda. The “Proposal for the decree of dividends for the year 2017 of MercantilServicios Financieros, C.A.; that the Board of Directors submits for the consideration of the Ordinary General Shareholders’ Meetingto be held March 24, 2017“ is already available in the mentioned Company’s Headquarters. In accordance with the provisions of theBylaws of the Company, the shareholders are hereby informed, that each group of Common “A” shares that represents at leasttwenty per cent (20 %) of the subscribed capital of said shares, has the right to propose and designate one Principal Director andits Alternated as it may correspond.

Caracas, February 16, 2017

On behalf of Mercantil Servicios Financieros, C.A.

Guillermo Ponce TrujilloSecretary of the Board of Directors


Caracas, February 16, 2017

Dear Shareolders,

We are pleased to submit the consolidated results and main activities of Mercantil Servicios

Financieros for the second half of 2016, as well as for the whole year.

The Financial Statements of Mercantil Servicios Financieros, included in this report,

consolidate the activities of its subsidiaries and were prepared in accordance with the

standards of the National Securities Superintendency. They have been examined by the

Company’s external auditors, “Pacheco, Apostólico y Asociados (PricewaterhouseCoopers)”,

whose Reports is attached hereto.

Financial Results

Mercantil reported Bs 18,036 million in net income, of which Bs 6,762 million corresponds to

the first half of the year and Bs 11,274 million to the second one. These results compare

favorably to the Bs 14,092 million achieved in 2015.

It should be noted that in accordance with the provisions regulating activities both in

Venezuela and abroad, Mercantil’s subsidiaries have made contributions to various

government entities in Venezuela and abroad, which total Bs 21,198 million, representing

19.5 % of Mercantil’s expenses. These, combined with Corporate Income Tax of Bs 9,135 million,

amount to Bs 30,333 million and represents 27.9 % of its expenses.

Mercantil Servicios Financieros’ Total Assets grew 134 % to Bs 1,484,732 million compared to

December 2015. Shareholders’ Equity increased 69 % over the same period, closing at Bs 75,404

million.

The net loan portfolio grew 90 % to Bs 655,362 million compared to Bs 344,141 million at the

close of 2015. The quality of the loan portfolio continued at satisfactory levels. Therefore, the

ratio of past due and non-performing loans to total loans was 0.4 %, considering the overall

loan portfolios of Mercantil Servicios Financieros, which, consolidates the portfolios of

Mercantil C.A., Banco Universal, Mercantil Bank, N.A., Mercantil Bank (Schweiz) AG,

Mercantil Bank (Curaçao) N.V. and Mercantil Bank (Panama), S.A.

The efficiency ratio measured by calculating operating expenses as a percentage of average

assets was 9.4 % compared to 6.4 % at the close of 2015, while the efficiency ratio measured

by calculating operating expenses as a percentage of total income was 61.3 %, compared to

48.3 % in 2015.

Board of Directors’ Report


The equity/risk-weighted assets ratio was 10.1 % (regulatory minimum 8 %). This ratio was

11.4 % at the close of 2015 and is determined according to the guidelines of the National

Securities Superintendency, based on the standards of the Basel Committee on Banking

Supervision of the Bank for International Settlements.

In the Ordinary General Shareholders’ Meeting held on March 18, 2016 were approved the

decree of dividends proposed by the Board of Directors, of Bs 5.25 per share, to be paid in

two parts, the first one of Bs 2.25 on April 10, 2016 and the second of Bs 3.00 on October

10, 2016, and an extraordinary dividend of Bs 13.50 per share paid on May 27, 2016, for a total

of Bs 1,956,795,069.75.

On the other hand, the Extraordinary General Shareholders’ Meeting held on September

2016, approved the proposal submitted by the Board of Directors to enhance the social

capital in the amount of Bs 12,414,173,878.50 , through the capitalization of the “Share

Premium” account, increasing the shares’ nominal value from Bs 6.50 to Bs 125, with no

changes in the total number of shares, subject to the approval of the National Securities

Superintendency. As a result of this increase, the subscribed and paid capital of the

Company goes from Bs 680,946,246.50 to Bs 13,095,120,125.00, divided into one hundred

four million seven hundred sixty thousand nine hundred and sixty-one (104,760,961)

nominative shares, non-convertible to bearer, each one with a nominal value of Bs 125, of

which sixty million eight hundred eighty thousand nine hundred twenty nine (60,880,929)

are common “A” shares, and forty three million eight hundred eighty thousand and thirty two

(43,880,032) are common “B” shares. The authorization of the National Securities

Superintendency is pending to proceed with the registration of this increase in the

corresponding Mercantile Registry of the jurisdiction.

During the second half of 2016, Mercantil issued Series 6 of Commercial Papers Issue 2015-II

for Bs 340 million.

Outstanding Unsecured Bonds are Series 1 and 2 of Issue 2013-I for Bs 60 million, Series 1

and 2 of Issue 2014-I for Bs 40 million, Series 1 and 2 of Issue 2014-II for Bs 100 million, and

Series 1 and 2 of Issue 2015-I for Bs 100 million. Outstanding Commercial Papers are Series

2 and 5 of Issue 2015-II for Bs 160 million.

The Stock Repurchase Program, initiated in May 2000, is currently in its Thirty-Fourth

phase. It was approved at the Ordinary Shareholders’ Meeting held on September 16, 2016.

Given the stock market conditions, no shares were repurchased between July 1 and

December 31, 2016. Mercantil does not maintain any treasury stock at the end of the second

half of 2016.


Credit Ratings Mercantil Servicios Financieros obtained “A1” and “A2” risk ratings for its commercial papers

and unsecured bonds issues, respectively, from Fitch Ratings and Clave Sociedad Calificadora

de Riesgos. These are among the highest possible ratings for a debt instrument in Venezuela.

Also, Fitch Ratings in its annual review issued in December 2016, ratified Mercantil Servicios

Financieros’ national rating in “F1+(ven)” for the short-term and “A+ (ven)” for the long-term.

Fitch Ratings also affirmed, in its assessment issued in December 2016, the international

ratings of the Mercantil Banco subsidiary at “CCC” for the long-term, “C” for the short-term,

and “ccc” for Viability. These ratings are largely dependent on the country risk. In addition,

Fitch Ratings adjusted Mercantil Banco Universal’s national ratings to “F1(ven)” for the short-

term, “A+(ven)” for the long-term, the best national ratings granted to a private financial

institution in Venezuela.

In December 2016, Fitch Ratings also affirmed the risk ratings of the Mercantil Holding Corp,

Mercantil Florida Bancorp and Mercantil Bank N.A. subsidiaries at “BB” for the long-term,

with an “Stable” outlook, “B” for the short-term, and “bb” for Viability. These ratings are also

limited by the sovereign risk rating of Venezuela.

Retirement and AppointmentsLast September 2016, the Global Operations and Technology Manager and Member of the

Executive Committee, Mr. Rodolfo Gasparri, retired after 31 years of service. During this time,

Mr. Gasparri held several management positions in the areas of Operations, Systems and

Information Technology. In addition, he lead many important strategic projects both in

technology and channel developments, allowing to place Mercantil in the forefront of

financial services in Venezuela.

The dedication, competence and professionalism of Mr. Gasparri are to be noted in the

performance of all duties and positions he held at Mercantil, which reflect the high level of

commitment he dedicated to the company.

The Board of Directors acknowledge Mr. Gasparri´s professional career and sound

performance, wishing him the best of success in the venture projects.

Mr. Jorge Pereira has been appointed as Global Operations and Technology Manager, who

had been serving as Global Personal Banking Manager, and is a Member of the Executive

Committee, effective as of October 1st, 2016. Mr. Pereira is an Agricultural Engineer graduated

from Universidad Centroccidental Lisandro Alvarado, with extensive training in management

development programs at the Instituto de Estudios Superiores de Administración (IESA). Mr.

Pereira has been with Mercantil for 27 years, during which time he has held several

management positions carried out with the utmost dedication, competence and

professionalism, a reflection of his high degree of commitment with the institution.


Mr. Ignacio Vollmer Sosa was also appointed as Global Personal Banking Manager and

Member of the Executive Committee, effective as of October 1st, 2016. Mr. Vollmer has a solid

preparation, with a degree in Finances from Tulane University, New Orleans, and an MBA

from the University of New York, and has been in Mercantil for 9 years, during which time he

has served in various areas.

Both executives have excelled in their competence and commitment to the principles and

values of the Mercantil Corporate Culture.

Mercantil Brand Unification

Ten years ago, Mercantil started the unification process of the Mercantil brand across all

subsidiaries in the organization, and now carries out a project for adjusting the names of the

Mercantil companies, mainly abroad, in order to guarantee a global image and a differentiated

brand platform that allows companies and businesses a better communications and presence.

To date, changes have taken place in the United States companies, and therefore, Mercantil

Commercebank is now Mercantil Bank, N.A. and its subsidiaries Mercantil Commercebank

Investment Services Inc. and Mercantil Commercebank Trust Company are now Mercantil

Investment Services Inc. and Mercantil Trust Company N.A. These new adjustments aim

exclusively to strengthening the Mercantil brand, with no impact on the managerial structure,

on the usual business and administration processes, on the model of attention to clients or

on the shareholders’ structure. All companies maintain its current graphic identity of the

Impulso Mercantil (Mercantil, empowering your world). The project will be gradually

implemented in stages, and as the regulatory authorities of the various countries approve

the changes and corresponding registries, the companies will modify their names.

Products and Services

The Mercantil Banco subsidiary continued to offer products and services to suit the needs of

its more than 4,956,000 clients at the close of the second half of 2016, of which 136,158 were

incorporated during the year.

The credit card product the bank has a market share of 15.25 %, for a total portfolio of Bs 83,307

million (including parallel lines of credit). During the first half of the year, the bank

implemented a strategy focused on selectively increasing credit limits to the best clients in

its portfolio, to promote loyalty and preference, which resulted in an additional exposure of

almost Bs 7,700 million. In addition, the credit limits of the parallel lines Préstame and

CrediPlan/CrediFácil instant loans products were increased to Bs 600,000, throughout

various promotional strategies for these modalities.

In the Majorities Banking Segment, the bank continued to implement its consolidation

process to include and support the unbanked sector of the population through the Mercantil

Aliado network, operating in 15 states and the Capital District, and through the offer of

Microenterprise Credits product. At the close of December 2016, the Microenterprise Credits

reached Bs 15,619 million, with 10,775 active borrowers, reflecting a 43.85 % growth from

December 2015. There are also over 337,154 Tarjetas Efectivo (Cash Cards), representing 16 %

more than at the close of 2015.


Mercantil maintains the policy of digitalizing its operations and processes in order to

contribute more effectively to the development of the country's economic activities. The

Mercantil Banco subsidiary has developed this policy by establishing digital mechanisms that

facilitate clients operations.

Therefore, most of the clients’ transactions were carried out through Mercantil Business and

Personal Online Banking.

It is important to highlight the momentum achieved by the Mercantil Mobile app with more

than 14,300 active users in the business segments and more than 960,000 in the individual

segment, which together carried out over 139 million transactions. The Mercantil Mobile

channel registered 7 % of the business segment transactions. In July 2016, the menu of Mobile

Banking applications was launched, allowing customers to easily and orderly locate all

applications offered by the Bank.

Mercantil Banco became the first bank to grant loans to its customers through a mobile app,

keeping the security standards offered to them, which conduce to their loyalty.

The Pronto Crédito Empresarial (Online Fast Business Loans) app has been intensively used

by various operators.

The Portal de Pagos (Payment Portal) increased by 800 %, with a cumulative volume of

Bs 1,065 million for more than 300 affiliated companies from the small, medium and

corporate segments. The service is offered to a wide range of sectors, such as: electricity

(power), domestic gas, water, condominiums, transportation, storage, courier services, clubs

and social centers, schools, universities, telephone companies, cable TV and internet (with

the inclusion of Directv in October), and health.

In July, Mercantil Banco included in its Personal Online Banking a solution of scheduling

appointments to open accounts in a branch. In addition, the Bank incorporated in both

Personal and Business Online Banking a solution for employers to pay their legal contributions

to the National Housing and Habitat Bank (Banavih) and to the Venezuelan Social Security

Institute (IVSS). Mercantil Banco is the first bank in Venezuela to offer these services.

Mercantil Online Banking continues to garner preference among clients, reaching at the end

of the year more than 1,590,000 active users in Mercantil Personal Online Banking and more

than 88,000 active users in Mercantil Business Online Banking. Together Mercantil Online

Banking processed over 852 million transactions in 2016, representing 60 % of the

transactions carried out through all channels.

At the close of 2016, the Vía Rápida Mercantil (Mercantil Fast-track) self-service areas

processed over 6,300,000 transactions, representing 50.14 % of the total transactions

managed through branch offices.

The official Twitter account of the Bank, @MercantilBanco had more than 248,000 followers

by the end of the year, 11.7 % more than in 2015. The aim of this account is to provide

information and orientation on the various Bank services, products and activities. Since its

inception four years ago, it has attended over 44,000 requests, 31.7 % during 2016.


In the second half of 2016, the Mercantil Bank N.A. subsidiary adopted a new design for its

www.mercantilcb.com webpage, in line with Mercantil standards, with new features, such as:

navigation areas for domestic and international clients with a more friendly and sensitive

interface, which adapts to the client’s computer or mobile device screens. The new Personal

Online Banking app was also launched, with additional characteristics and functionalities

such as: loan payments, travel memory history, automatic enrollment for loans and automatic

clearing for wire transfers.

The Mercantil Bank (Panamá) subsidiary issued the new Debit MasterCard with chip

technology, allowing clients to manage their money in a comfortable, secure and trustworthy

way through ATMs and/or compatible points-of-sale anywhere in the world where MasterCard

is accepted, moreover offering facilities for internet purchases.

The Mercantil Seguros subsidiary continued to reinforce its Business Referral sales channel

for Individuals and Companies, mainly oriented to high yield products such as Línea Vital

(Personal Accidents Life, Funeral and Income Protection insurance) and Industry and

Commerce (SME), increasing the coverage granted, and improving and expanding the benefits

offered to its clients.

The range of insurance policy options was extended, with broad coverage and services

providing better safeguarding and protection of insured assets and individuals, minimizing

the effects of inflation. In this sense, a new plan for the Global Benefits Policy was promoted,

which offers, in addition to coverage for medical expenses, a complete travel assistance

services, thereby becoming an attractive option in term of Health Policies. Regarding,

Automobile Insurance the subscription policy was adjusted, allowing more vehicles brands

and models to be protected with special options and differentiated coverage, aimed at

guaranteeing that the contracted insured sum remains at reasonable levels, adjusted to the

market situation.

The use of the e-mail marketing campaigns of Relationship Marketing for renewing individual

Automobile and Health policies was consolidated, allowing clients to select the coverage that

better adapts to their requirements, with previous knowledge of the competitive benefits of

each one. The e-mail marketing campaign was also extended to the renewal of Automobile

Collective Policies, thus becoming a dynamic instrument of client contact and recruitment,

thereby promoting their loyalty maintenance.

In terms of communication, dissemination channels for internal and external information

were also consolidated, through weekly newsletters sent to employees and the sales force,

and institutional meetings to promote national business with focus on Property and Casual

products, which had the active participation of insurance advisors and company staff.


The insurance activity in Panama, carried out through the Mercantil Seguros Panama

subsidiary, continued to expand with the offer of a wide range of differentiated products and

services; among which the Mercantil Global Benefits Health Policy. This policy includes four

plans with ample coverage for worldwide medical care, whenever and wherever needed,

adding the most comprehensive travel assistance service and a range of additional coverage

for supplementary protection.

In this sense, Mercantil Global Benefits Policy’s coverage was extended, during the second

half of 2016, to residents not only in Panama, Venezuela, Latin America and the Caribbean,

but also to those who live in Spain, Italy and Portugal, thereby strengthening its character as

an option for international health insurance.

In addition, during the second half of 2016, Mercantil Seguros Panama commercialized its

Global Benefits Travel product which expands care and coverage services to insured persons

when travelling, therefore becoming an attractive protection option, supplementing the

current Individual Insurance policies on offer.

Thanks to Mercantil Seguros' strong relationships with international reinsurers, agreements

were reached to significantly increased the available limits for automatic uptake of risks,

therefore making good use of the coverage needs in the international market.

In Venezuela, the Portafolio Mercantil Renta Fija, Fondo Mutual de Inversión de Capital

Abierto, C.A. (Mercantil Fixed Income Portfolio) mantained its leading position in the

investment services business reaching Bs 3,625 million in assets for a total of 196,930 clients,

with a volume increase of 15 % in the period. Within the Mercantil Fixed Income Fund, the

Plan Crecer Mercantil product, which is a systematic form of investment affordable to anyone,

continued its expansion to Bs 2,794 million in assets. Mercantil Fixed Income Portfolio

continues offering to its clients a routing savings mechanism to meet their commitments and

financial goals.

The Mercantil C.A., Banco Universal Trust Fund registered Bs 46,105 million in assets under

management at the close of 2016, 36 % increase from the first half of the year, mainly due to

Occupational Contingency Trust and Escrow Trust. During the second half of the year, the

focus on the optimization of quality of service was maintained.

In the United States, Mercantil Investment Services, Inc. (MIS), a subsidiary of Mercantil

Bank, N.A., offers Brokerage and Investment Advisory services. The volume of assets under

management grew by 8.4 % compared to 2015, mainly due to the stock markets performance.

In 2017, MIS keeps on working in continuous improvement to generate operational

efficiencies, expand product offerings and widen the client base.

In terms of trust, Mercantil Trust Company, N.A. registered 10 % increase in consolidated

assets under management compared to 2015, for the same reasons as mentioned above for

Mercantil Investment Services, Inc. Mercantil Trust Company, N.A. maintains its efforts

focused on a continued improvement of client services with protection needs in estate

protection and inheritance planning, as well as on identifying opportunities to increase

efficiency.


Prevention and Control of Money Laundering and Terrorism FinancingPrevention and control of money laundering and terrorism financing is a priority for Mercantil

and an integral part of our organizational culture. Therefore, the company has maintained

standards of internal control and supervision of its headquarters and subsidiaries' activities to

ensure early detection of suspicious transactions, and has stepped up staff training in this area.

To ensure compliance with anti-money laundering legislation, Mercantil implements a well-

structured “Comprehensive Money Laundering and Terrorism Financing Prevention and

Control System” at its Venezuelan and overseas subsidiaries, in addition to Operational and

Follow-Up Plans, and Monitoring and Oversight programs. The company's “Know your Client”

policy is the main guideline in this area.

Corporate Social Commitment

In 2016, Mercantil Servicios Financieros executed Bs 185.6 million in social investment both

directly and through its Mercantil Banco Universal, Mercantil Seguros, Mercantil Merinvest

and Mercantil Bank, N.A. subsidiaries, as well as Fundación Mercantil, sponsored by them.

These social investments was mainly directed to educational and various social development

programs and projects undertaken by well-known organizations in the communities in

Venezuela and the United States.

Mercantil earmarked 59.6 % of the contributions to educational institutions, mainly elementary

and higher level education, and particularly to infrastructure maintenance programs of schools

and college scholarships programs for low-income youngsters; and 40.4 % to organizations

dedicated to social development, comprehensive assistance, health, culture and environmental

protection programs.

Mercantil’s strategy and focus, in this matter, has oriented on supporting social institutions in

the different geographical areas where the companies operate with several initiatives that

have a direct impact on the communities and its citizens, as well as creating opportunities for

entrepreneurship and economic development.

During 2016, it is underlined, the strengthening of the agreement between Fundación

Mercantil and the Asociación Civil Fe y Alegría, which develops four action points: maintenance

of school facilities, promotion of entrepreneurship, training in youth leadership and citizenship.

In addition, it is important to highlight contributions granted to the Asociación Venezolana

de Escuelas de Educación Católica (AVEC), that benefits approximately 500,000 students.

Morever, highlights the contributions and support to programs and initiatives of several social,

health and cultural institutions, such as: Universidad Metropolitana, Universidad Nacional

Experimental del Táchira, Universidad Santa Rosa, UNICEF, Venezuelan Anti-Cancer Society,

Hogar Bambi, Fundación Santo Domingo, Fundación Comunidad Madre Emilia A.C., Centro al

Servicio de la Acción Popular (CESAP), Fundación para Niños con Parálisis Cerebral, Asociación

Venezolana de Servicios de Salud de Orientación Cristiana (AVESSOC) and Fundación

Camerata de Caracas.


As part of Mercantil’s Social Commitment a new program was promoted by Fundación

Mercantil, together with the Social Alliance of the Venezuelan-American Chamber of

Commerce and Industry (VenAmCham) and Red Venezolana de Organizaciones para el

Desarrollo Social, named “Institutional Strengthening of Social Development Organizations”.

The purpose of the program is to provide tools and methodologies to new or smaller social

development institutions; in order to serve as a trainee program to help them manage and

organize their activities in a more efficient way, promoting their long-term sustainability. More

than 100 representatives of 22 organizations in the country were part of this program.

The university award “Promoting Socially Responsible Leaders” also known as “El Reto U”

(The U Challenge) deserves special attention, having been established in 2004 by the Social

Alliance of the Venezuelan-American Chamber of Commerce and Industry (VenAmCham),

together with Rotary Club and Fundación Mercantil, to promote social projects developed

by university students for the benefits of various communities in the country. In 2016,

among over 500 companies worldwide, Rotary International selected the Mercantil Banco

subsidiary, as one of the two companies chosen globally and the only Latin American

company, to receive the “Socially Responsible Enterprises” award during the

commemoration of Rotary Day at the United Nations Organization Headquarters.

In the United States, as part of its Corporate Social Commiment, several programs developed

by educational, social and health organizations in South Florida and Houston were supported,

among which stand out: Centro Mater Foundation, Florida Community Loan Fund, Habitat for

Humanity of Greater Miami, Lincoln Center for the Performing Arts, Florida National

University, FIU Foundation, Houston Museum of Fine Arts, Miami Symphony Orchestra and

the American Cancer Society. Also, an alliance was established with the Zoological Society of

Florida and the Miami Zoo for a new edition of an educational program for middle school

students.

Mercantil workers and their families have volunteered in several programs in Venezuela, for

the benefit of institutions such as: Fe y Alegría, the Hospital Ortopédico Infantil, the Diviendo

Voluntario para la Comunidad, Sociedad Anticancerosa de Venezuela, Comedores Madre

Teresa de Calcuta (Comatec), Hospital J.M. de los Ríos and Universidad Simón Bolívar (Tree-

planting Day).

In the United States, Mercantil volunteers carried out several activities in conjunction with

various organizations: Miami-Dade College Foundation, Women’s Breast and Heart Initiative,

American Cancer Society, Centro Mater, Habitat for Humanity, March of Dimes, Autism Speaks

and Liga Contra el Cancer.

AcknowledgmentsThe prestigious financial publication, The Banker, included Mercantil among the World’s Top

500 Banking Brands in February. Mercantil ranks 273, 61 positions up from the 2015, and is the

leading Venezuelan institutions included in the ranking. Similarly, in June, Mercantil Servicios

Financieros was included in the Top 1000 World's Financial Institutions. Mercantil Servicios

Financieros rose 32 positions to rank 178. It also ranks 7 among the Top 25 Latin American

financial institutions. In March, the Mercantil Bank (Panamá) subsidiary was included among

the Top 100 Central America Banks, for the fourth consecutive year, ranking 76, and was also

included among Panama’s banks in the 34 position.


In May, Mercantil Servicios Financieros was again included in the Global 2000 Most Valuable

Companies in the World, published by the specialized magazine Forbes. Mercantil ranks 793

and is the first of four Venezuelan companies included in this year’s list. The Global 2000 ranking

considers income, revenues, assets and market share.

In November, the Venezuelan-American Chamber of Industry and Commerce (VenAmCham)

presented its “Top 100 Companies” ranking, including both Mercantil Servicios Financieros and

the Mercantil Seguros subsidiary in places 6 and 9, respectively. The list includes the most

successful companies in the country, with national or foreign capital, ranked by their total

income at the close of 2015.

The Global Finance magazine, in its January 2016 edition has selected the Mercantil Banco

Universal subsidiary, for the 11th consecutive year, as the “Venezuela’s Best Trade Finance

Provider in 2016”. The magazine selection process took into consideration the volume of

transactions, geographical coverage, customer services, price competitiveness, new business

development and technological innovations.

In November, the LatinFinance magazine, specialized in Latin American and Caribbean finance

topics, acknowledged the Mercantil Banco subsidiary as the Best Bank in Venezuela in 2016.

The magazine chose the institution for its long-term strategy, development of digital technology

and efficient cost management in a changing environment.

In June, Aon Hewitt international consulting firm granted to the Mercantil Banco Universal and

Mercantil Bank N.A. subsidiaries the 2016 Best Employer award. The assessment took into

consideration the opinion of workers on aspects related to Banks’ commitment, leadership,

culture and brand, compiled in the Organizational Climate and Commitment 2015 research.

In November, the Mercantil Banco subsidiary received the first edition of the Award for “Socially

Responsible Enterprises”. The award acknowledged the university program Training Socially

Responsible Leaders, also known as “El Reto U’ (The U Challenge), which has been promoted

for the last 12 years by the Social Alliance of the Venezuelan-American Chamber of Commerce

and Industry (VenAmCham) and Districts 4370 and 4380 of Rotary International. The award

was presented at the United Nations Headquarters during the celebration of the Rotary

International Day.

Finally, the AICA 2015 Award of the International Association of Art Critics, Venezuelan Chapter,

should be mentioned, which acknowledged, in November, the 1955-2008 Venezuelan Ceramics

exhibition of the Mercantil Collection as Best Collective Exhibition category. The decision was

taken because the exhibition “strengthens the artistic scope developed by modern and

contemporary Venezuelan ceramics, with specific examples in research and experimentation

with techniques”.


Development and Work Environment

During the second half of the year, Mercantil in Venezuela continued to apply significant

compensatory measures in order to improve the wellbeing and quality of life of its workers.

These measures complement those applied in the first half of the year, among which a special

bonus in July, equivalent to a month and a half of the monthly salary; a 30 % wage increase,

effective as of August 1, and an additional 30 % increase effective as of October 1 2016. To

these benefits are added those applied during the first half of 2016, of a 20 % wage increase

in January, the application of the annual of wage increase policy based on performance,

which established an average wage increase of 35 %; as well as the new Educational

Scholarship Aid for the amount of Bs 6,000 per month. In addition, during the year, the food

benefits also increased, according to current regulations. In sum, the average wage increase

for workers during 2016 was 175 %.

The Mercantil Banco and Mercantil Seguros subsidiaries also applied the benefits established

in the new 2016-2018 Collective Labor Agreements, approved during the second half of 2016

by the Ministry for Labor and Social Security. These Collective Labor Agreements will benefit

over 7,000 workers, including improvements in the economic and social conditions of

workers, and are the result of the cordial relationships and traditional harmony,

understanding and cooperation with the labor union representatives, which produce a

permanent beneficial effect on all parties.

These aspects are complemented with the development of permanent staff retention,

education and training programs, allowing the improvement of staff professional training

and the maintenance of a continuous knowledge process. Similarly, highlights the

development of several activities that encourage areas of closeness and recreation with

workers, on which their family groups actively participate throughout the country.

These actions reinforce Mercantil’s leadership among Venezuela’s financial services

institutions, underlining its commitment with the nation, in line with its long-term vision,

which has characterized the Mercantil Banco subsidiary’s performance since its inception

in 1925.

It is relevant to highlight the result obtained in the Organizational Climate and Commitment

study, with a significant 85 % workers commitment with Mercantil. The study was

undertaken with the advisory of the specialized firm Aon Hewitt, and 83 % of voluntary

participation of the invited collaborators.


Relations between bank officials and employees have continued to evolve within the

traditional spirit of harmony and cooperation and the Board of Directors wishes to

acknowledge them for their efficiency and dedication to their work.

Pursuant to the National Superintendency Securities (formerly National Securities

Commission) resolution, please note that form CNV-FG-010 reflects Bs 46,967,264.66 in

remunerations paid to Company Directors and Executives in the second half of 2016.

During this time, a number of Alternate Directors attended Board meetings, either standing

in for Principal Directors in their absence, or as invitees. On the occasion of the Chairman

of the Board's temporary absences, some of his CEO functions were delegated to members

of the Executive Committee.

Sincerely ,

Gustavo Vollmer A.

Alfredo Travieso P.

Luis A. Romero M.

Gustavo Galdo C.

Víctor J. Sierra A.

Miguel A. Capriles L.

Roberto Vainrub A.

Federico Vollmer A.

Gustavo Marturet M.

Millar Wilson


Statutory Auditors’ Report

Financial Statements(In accordance with the standards of the National Securities Superintendency)

Balance SheetUnconsolidated(in thousands of Bs)

Year ended

AssetsCash and Due from BanksInvestment PortfolioOther AssetsTotal Assets

Liabilities and Shareholders’ EquityUnsecured Bonds and Commercial PaperOther LiabilitiesTotal Liabilities

Shareholders’ Equity

Total Liabilities and Shareholder’s Equity

808,20580,105,620

535,20981,449,034

800,0005,244,6436,044,643

75,404,391

81,449,034

December 31

2016bolivars

491,26549,424,889

(20,944)49,895,210

995,0004,366,6075,361,607

44,533,603

49,895,210

December 31

2015bolivars

44,75034,778,210

(33,835)34,789,125

750,0001,485,1602,235,160

32,553,965

34,789,125

December 31

2014bolivars

Income StatementUnconsolidated(in thousands of Bs)

Year ended

IncomeFinancial IncomeEquity Investments in subsidiariesand affiliates and othersTotal Income

ExpensesOperatingFinancialDeferred Corporate Income TaxTotal Expenses

Net Income

287,954

20,544,33720,832,291

(1,317,242)(200,309)

(1,279,000)(2,796,551)

18,035,740

December 31

2016bolivars

35,420

14,455,65114,491,071

(334,619)(64,689)

0(399,308)

14,091,763

December 31

2015bolivars

15,597

9,701,9549,717,551

(144,386)(35,776)317,000136,838

9,854,389

December 31

2014bolivars


Gustavo Vollmer A.Chairman and CEO

Alfonso Figueredo DavisGlobal Executive Vice President of

Operations and Administration

Aury OliverosAdministration Manager

Isabel Pérez SanchisGlobal Chief Financial Officer


Consolidated Balance Sheet(In thousands of Bs)

Year ended

Assets

Cash and Due from BanksCash and Due from BanksCentral Bank of VenezuelaVenezuelan Banks and other Financial InstitutionsForeing Banks and Other Financial InstitutionsPending Cash Items

Invesments Portfolio Invesments in Trading SecuritiesInvesments in Securities Available-for-SaleInvesments in Securities Held-to-MaturityShare Trading PortfolioInvesments in Time Deposits and PlacementsRestricted Investments and Repos

Loan PortfolioCurrentRestructuredPast-DueIn Litigation

(Allowance for losses on Loan Portfolio)

Interest and Commissions ReceivableLong-Term InvestmentsAssets Available for SaleProperty and EquipmentOther Assets

Total Assets

24,816,727523,287,181

4,647,9782,684,915

19,953,194

575,389,995

552,12276,664,63172,043,579

1,013,39326,749,129

3,187,552

180,210,406

672,166,5331,034,0172,581,779

103,252

675,885,581(20,523,470)655,362,111

8,464,5014,841,6751,979,8688,481,814

50,001,247

1,484,731,617

December 31

2016bolivars

8,541,437137,641,397

287,8611,663,8557,525,966

155,660,516

6,55438,773,837

47,804,801386,732

7,396,8301,651,470

96,020,224

353,346,672510,653777,49550,640

354,685,460(10,544,876)

344,140,584

5,053,0511,613,928

377,8275,348,577

26,109,903

634,324,610

December 31

2015bolivars

4,363,47366,235,157

921,2861,641,0223,740,214

76,901,152

11,51936,684,481

26,404,305307,313

4,813,424646,892

68,867,934

202,742,735500,986530,681

8,618

203,783,020(6,400,735)197,382,285

2,481,114338,801

28,1162,044,6817,476,461

355,520,544

December 31

2014bolivars

3,809,87137,599,293

919,4711,580,6882,461,748

46,371,071

70,99934,967,91416,798,928

236,07811,137,596

435,473

63,646,988

124,758,531545,128539,97094,446

125,938,075(4,119,499)

121,818,576

1,681,142242,007

78,0981,116,611

4,358,639

239,313,132

December 31

2013bolivars

2,456,74522,414,239

76,026887,925

1,722,425

27,557,360

88,43020,191,962

7,364,45520,189

3,837,0521,119,752

32,621,840

79,336,932492,243552,222160,798

80,542,195(2,656,682)77,885,513

895,041185,12449,096

832,3472,615,884

142,642,205

December 31

2012bolivars







Consolidated Balance Sheet(In thousands of Bs) Year ended

Liabilities and Shareholders’ Equity

LiabilitiesDepositsNon-Interest Bearing Checking AccountsInterest Bearing Cheking AccountsSaving DepositsTime Deposits

Debt Authorized by theNational Securities SuperintendencyPublicly OfferedDebt Securities

Financial LiabilitiesObligations with Banks and Savings and Loan Institutions

In Venezuela up to one yearAbroad up to one yearAbroad for more than one year

Liabilities Under Repurchase AgreementsOther Liabilities up to one year

Interest and Commissions PayableOther LiabilitiesSubordinated Debt

Total Liabilities

Intereses minoritarios en filiales consolidadas

Shareholders’ EquityCapital Maintenance of Paid-In CapitalPremium for Issuing StockCapital ReservesAdjustment for Conversion of Net Assets by SubsidiariesAbroadRetained EarningsShares Repurchased and Held by SubsidiariesPension plan remeasurementUnrealized Gain from Adjustment at Market Value ofInvestments

Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

765,770,652190,561,241303,597,483

21,717,580

1,281,646,956

701,037

701,037

4,439,1004,538,6254,748,100

498,75014,951

14,239,526

114,903111,461,809

1,127,215

1,409,291,446

35,780

680,946191,709

12,713,451166,715

6,377,02656,038,556

(615,633)0

(1,877,630)

1,729,251

75,404,391

1,484,731,617

December 31

2016bolivars

190,706,706177,429,396155,482,82111,284,243

534,903,166

887,621

887,621

3,357,5002,490,114

2,048,649439,89442,042

8,378,199

154,26844,737,862

706,169

589,767,285

23,722

664,397191,709

0166,715

2,983,24439,914,413(234,638)

0(504,556)

1,352,319

44,533,603

634,324,610

December 31

2015bolivars

94,244,958101,175,77391,069,3378,184,602

294,674,670

619,507

619,507

300,1272,620,5111,805,136439,894127,739

5,293,407

93,50421,573,322

696,338

322,950,748

15,831

664,397191,709

0166,715

2,982,24127,054,686

(91,626)0

(93,223)

1,679,066

32,553,965

355,520,544

December 31

2014bolivars

58,309,77968,533,11362,315,5966,758,347

195,916,835

198,080

198,080

430,127974,051

1,528,632628,420

19,9273,581,157

54,23614,198,060

696,144

214,644,512

11,114

153,322191,709

203,546166,715

3,005,73018,505,241

(10,850)(48,608)

0

2,490,701

24,657,506

239,313,132

December 31

2013bolivars

35,309,37734,308,37339,013,606

5,974,210

114,605,566

176,149

176,149

4211,115,218846,064

707,73513,963

2,683,401

23,3059,591,762

478,591

127,558,774

7,239

153,418191,709

203,546166,715

1,550,16811,902,480

(6,678)(48,608)

0

963,442

15,076,192

142,642,205

December 31

2012bolivars







Consolidated Income Statement(In thousand of Bs)

Year ended

Interest IncomeIncome from Cash and Due from BanksIncome from Investment PortfolioIncome from Loan Portfolio

Total Interest Income

Interest ExpensesInterest on Demand and Savings DepositsInterest on Time DepositsInterest on Securities issued by the institutionInterest on Financial Liabilities

Total Interest Expenses

Net Interest Income

Provision for Losses on Loan Portfolio

Net Financial Margin

Commissions and Other IncomeTrust Fund OperationsForeing Currency TransactionsCommissions for account TransactionsCommissions on Letters of Credit and Guarantees GrantedEquity in Long-Term InvestmentExchange GainsIncome on Sale of Investments SecuritiesOther income

Total Commissions and Other Income

Insurance Premiums. Net of ClaimsPremiumsClaims

Total Insurance Premiums. Net of Claims

Operating Income

Operating ExpensesSalaries and Employee BenefitsDepreciation, Property and Equipment Expenses, Amortization of Intangibles and OtherFees Paid to Regulatory AgenciesOther Operating Expenses

Total Operating Expenses

Net before Income taxes, Extraordinary itemsand Minority Interest

TaxesCurrentDeferred

Total Taxes

Net Income before Minority Interest

Minority Interest

Net Income for the Year

1,371,9218,891,293

108,102,085

118,365,299

(27,362,124)(259,689)(119,838)

(1,268,027)

(29,009,678)

89,355,621

(12,671,036)

76,684,585

514,30599,332

10,702,20722,358

616,262112,137

632,68325,188,886

37,888,170

63,344,695(51,316,251)

12,028,444

126,601,199

(24,691,335)

(13,895,142)(11,417,688)

(46,780,133)

(96,784,298)

29,816,901

(9,135,398)(2,634,841)

(11,770,239)

18,046,662

(10,922)

18,035,740

December 31

2016bolivars

463,7125,417,729

52,962,731

58,844,172

(16,453,734)(145,524)(54,939)

(532,248)

(17,186,445)

41,657,727

(4,924,512)

36,733,215

251,03630,594

3,347,45224,309

329,040270,899916,886

10,253,797

15,424,013

27,856,851(23,368,580)

4,488,271

56,645,499

(10,052,560)

(4,715,174)(5,842,759)

(14,939,935)

(35,550,428)

21,095,071

(7,437,214)441,521

(6,995,693)

14,099,378

(7,615)

14,091,763

December 31

2015bolivars

215,6644,676,951

25,247,483

30,140,098

(8,858,292)(111,123)(30,513)

(185,461)

(9,185,389)

20,954,709

(2,873,581)

18,081,128

167,40836,051

1,419,09830,216

238,62590,089

460,3305,699,366

8,141,183

13,377,429(11,216,351)

2,161,078

28,383,389

(6,274,223)

(1,713,468)(3,334,025)(7,418,874)

(18,740,590)

9,642,799

(96,592)314,149

217,557

9,860,356

(5,967)

9,854,389

December 31

2014bolivars

24,5243,786,234

14,642,794

18,453,552

(4,904,321)(119,849)

(13,111)(148,163)

(5,185,444)

13,268,108

(1,784,238)

11,483,870

104,2743,495

858,94525,872

159,506914,781799,961

3,518,313

6,385,147

8,548,931(7,225,263)

1,323,668

19,192,685

(4,314,387)

(1,015,980)(1,779,089)

(4,622,703)

(11,732,159)

7,460,526

(63,303)(142,568)

(205,871)

7,254,655

(4,228)

7,250,427

December 31

2013bolivars

8,5951,979,4399,815,722

11,803,756

(3,179,620)(105,916)

(6,603)(109,681)

(3,401,820)

8,401,936

(917,672)

7,484,264

70,8834,685

525,54323,141

102,563198,319877,446

2,195,318

3,997,898

6,055,320(5,033,730)

1,021,590

12,503,752

(2,996,641)

(644,642)(1,127,533)

(2,754,552)

(7,523,368)

4,980,384

(612,535)(202,787)

(815,322)

4,165,062

(2,455)

4,162,607

December 31

2012bolivars







Global During 2016, the economy grew slowly, at an estimated 2.2 % rate (2.5 % in 2015), the lowest

expansion since the financial crisis of 2008-2009. The level of economic activity in developed

countries slightly increased 1.5 % (2.1 % in 2015) and the growth of emerging economies

slowed to 3.6 % (3.8 % in 2015). With few exceptions, most of the large developed economies

showed this deceleration. The United States ended by increasing a mere 1.6 % (2.6 % in 2015),

after a first half of low growth. The Euro Zone’s GDP also increased by 1.6 % (vs. 2 % the

previous year). Japan remains with very moderate variations at 0.5 % (0.6 % in 2015).

As in previous years, emerging economies remained as the largest growing areas, although

with significant asymmetries. China, for the sixth consecutive year, reduced its growth to

6.6 % (6.9 % in 2015), while India remains the emerging economy with the largest growth

at 7.5 % (7.2 % in 2015). In contrast, other large emerging economies, such as Brazil and

Russia, continued to decrease its growth in 2016 with variations of -3.4 % (-3.9 % in 2015)

and -0.5 % (-3.7 %), respectively.

This inactivity resulted in a new deceleration of world trade volumes (1.7 % vs. 2.3 % in 2015),

within the framework of a weak global aggregate demand, low fixed investments, contraction

of large emerging economies, such as Russia and Brazil, and the new lower growth shown by

China.

However, some favorable features could be seen during 2016, which could anticipate a more

robust economic growth in 2017. Following the initial tension associated with the decision of

the British electorate to separate from the European Union (Brexit), an instructed exit and

with reduced immediate collateral effects has contributed to reduce financial volatility.

Capital flows towards emerging countries have resumed, the perception of high risk due to

the dysfunctional Chinese economy and, in particular, of its capital market has dissipated,

and the considerable reduction of prices of commodities has been moderated (-6 % vs. -29 %

in 2015), which alleviates external restrictions on many developing economies. Similarly, the

monetary policy of most central banks has continued to give priority to strengthening

demand with very low interest rates.

Global inflation rose from 2.6 % to 3.9 % due to the observed acceleration in both developed

(0.4 % to 1.3 %) and emerging (5.9 % to 7.8 %) economies, basically due to the pressure on

prices in Latin America, Africa and the Middle East.

Economic Climate


United StatesThe U.S. economy showed a weakened growth in 2016 closing the year with 1.6 % expansion

of its Gross Domestic Product, below the 2.6 % of 2016, and the lowest increase since 2011,

mostly due to the low rates of the first two quarters of the year, at slighly 0.8 % and 1.4 %.

This performance of the GDP was not an obstacle to the high dynamism in the labor market,

which generated, on average, almost 180,000 new jobs per month throughout the year

(although still below the 229,000 new jobs in 2015) to a total of 2.16 million new joBs The

unemployment rate closed at 4.7 %, below the 5 % considered full employment.

The boost of economic activity on the side of aggregate demand this year was mainly based

on the 2.7 % increase in personal consumption expenses (3.2 % in 2015), public expenditure at

0.9 % (vs. 1.8 %), weaker federal spending (+0.6 %) than at the state and local levels (+1.0 %)

and net exports at 0.4 % (0.1 %); these factors more than compensated the decline of private

investments, which fell by 1.5 % (in contrast with the 5 % expansion of 2015), which in turn

centered on infrastructure (-3.1 %) and equipment (-2.8 %).

Although at a slower rate than in the previous triennium (3.8 % in 2016 vs. 12.8 % in 2015),

the value of the U.S. currency continued to strengthen compared to the main currencies of

its commercial partners, particularly in Europe, going from its recent historical maximum

record of 1.37 €/US$ in December 2013 to 1.05 €/US$ at the end of 2016. This variation brings

the cumulative appreciation to over 30 %, which has negatively affected domestic growth

and net results of its external sector. With the reduction of exports competitiveness, the

deficit in the balance of goods and services has surpassed US$ 490 billion since 2014, with a

decreasing value of exports for the third consecutive year, against imports that also, and in

decline too, dropped less than external sales (-2.4 % vs. -2.7 %). Industrial production, which

also been adversely affected by the exchange appreciation, is experiencing profound

technological and location changes, which explain the 1 % decline in 2016, compared to a

modest 0.3 % expansion of 2015 (+2.9 % in 2014).

Following the monetary exceptionality imposed to combat the financial crisis, the Federal

Reserve (FED), at the December meeting of the Federal Open Market Committee (FOCM)

and for the second time in over a decade (after the first adjustment of December 2015), made

a new adjustment of 25 basis points in interest rates to bring them to a range between 0.50 %

and 0.75 %, acknowledging that economic growth is following a solid trajectory, that the labor

market has significantly reduced its under-utilization margin of resources, and that inflation

remains below the 2 % mid-term margin, still gaining from the moderate prices of energy and

imports.


Latin AmericaThe region, as the rest of emerging economies, has suffered from the decline of the global

economic growth, particularly via foreign trade, which became the main source of expansion

of Latin America prior to the 2008-2009 global crisis. The regional GDP in 2016 contracted

by 1.1 % (-0.5 % in 2015), the worse decline since 2009, with several regional economies in the

region, including Venezuela (according to the Economic Commission for Latin America), in

recession: Brazil (-3.6 %), Argentina (-2 %) and Ecuador (-2 %), and the rest of the larger

countries with less dynamism in their production activity.

This performance of the real sector was reflected in the negative results of the labor market,

with a rise in the unemployment rate to 9.0 % (from 7.4 % in 2015); which in turn has

deteriorated the quality of new jobs, concentrating on self-employment, and contributed to

reduce the growth of real wages to 1 %, 100 basic points, less than in 2015.

Inflation rate, excluding Venezuela, closed at 8.4 % from 7.9 %, mainly due to the recovery of

energy and food prices in the commodities markets, but also as a result of adjustment in

public utilities, exchange rate devaluations, and in some cases, monetary financing of the

imbalances of the public sector.

For the fifth consecutive year, the region trade terms have declined, although merely 0.7 %

(-9.5 % in 2015). Although the flow of international funds towards Latin America declined in

2016, the contraction of imports may have been sufficient to more than compensate the

deficit in its current account (US$ -95 billion in 2016 vs. US$ -175 billion in 2015) and to

accumulate external assets up to US$ 812 billion (+2.1 % variation).

The fiscal situation of the region continued to show a deficit (-2.7 %) in spite of the efforts to

reduce public spending (from 15.1 % of GDP in 2015 to 14.9 % in 2016), a reduction that has

concentrated on the capital expenditure component. The cyclical movement of fiscal revenues

(a reduction from 17.8 % of GDP in 2015 to 17.6 % in 2016), given the prevailing recession,

explains that public debt continues to grow, although at moderate rates (50.8 GDP points in

2016 vs. 50.7 points in 2015).

VenezuelaThe value of the Venezuelan oil basket declined for the fourth consecutive year, which worsened,

during 2016, the decline of external revenue and the availability of international reserves, with

unfavorable effects on the growth capacity of the domestic economic activity, maintaining

moderate inflation rates.

Venezuelan oil prices averaged US$/b 35.5 during 2016, 20.6 % below the US$/b 44.7 of 2015,

and equivalent to a third of the highest historical price of US$/b 103.4 in 2012. The trajectory of

oil prices throughout 2016, nonetheless, showed a progressive improvement from a minimum

of US$/b 24.3 in the first two months to an average of US$ 41.9 in the fourth quarter of 2016.

On the other hand, oil production declined 10.4 % on average, from a daily volume of 2.667

million barrels in 2015 to 2.390 million barrels in 2016, the lowest production since 2011.

This mix of lower prices and lower production volumes, and consequently of exports, largely

explains the reduction of external assets in the hands of the Venezuelan Central Bank, which

ended in US$ 10,974 million from US$ 16,367 million at the close of 2015 (-33 %).

Fiscal spending, measured in terms of primary spending (not including the service of the

national public debt) executed by the National Treasury, grew 121 % in nominal terms in

2016 (vs. a 100 % growth in 2015). Domestic fiscal revenue (taxes and duties in the hands

of Seniat) showed a nominal expansion of 285.6 %, even above the high increase registered

in 2015 (245.8 %). VAT, as the main domestic tax ( accounting for 56 % of total collections)

rose by 270.3 % (254.6 % in 2015), and the remaining revenues, except for Customs Income,

grew at even higher rates (310 % for Corporate Income Tax, 357 % for Liquors and 284 % for

Tobacco, among the main sources of income). In contrast, all taxes and duties associated

with imports activities, such as VAT on Importers and Customs Income, although increased,

were at much lower rates (119 % and 126 %, respectively).

During 2016, monetary liquidity, which includes all means of payment in the hands of the public,

continued the expanding trend started in 2011, increasing by 159 % (101 % in 2015), with a

significantly high expansion during the second half of the year, even above the typical seasonal

expansion, making the liquidity surpluses of the financial system to increase from July to

December in 673 %.

The growth of the nominal magnitudes was even higher in the case of high-powered money or

monetary base, with a 236 % variation (108 % in 2015). In this creation of primary money by the

Central Bank, the components of the base which contributed the most to its expansion were

the international reserves measured in bolivars, as a result of higher average exchange rate used

to express those assets (+110 %), and mostly, the financing to PDVSA (+389 %).

Commercial and full-service bank lending rates in 2016 averaged 21.5 % in 2016 (20.3 % in 2015).

On the other hand, deposit rates for savings and term deposits were 12.7 % and 15.1 %,

respectively, slightly different from the 13 % and 15.0 % rates of the previous year for the same

deposit instruments.


Source: Central Bank of Venezuela and in-house calculations.

Summary of Economic Performance 2015 2016

Variation of Gross Domestic Product %Total -3.1 nd Oil Sector -0.4 nd Non Oil Sector -3.3 nd

Exchange Rate Bs/US$ End of Period 12.7 56.9 Average 12.2 34.1

Exchange Rate Variation %End of Period -24.2 % 349.5 %Average -14.4 % 180.4 %

Inflation (Caracas) %Cumulative Variation 47.3 nd Annualized Variation 187.3 nd

Interest Rate - End of PeriodAverage Leading Rates (6 main Banks) 19.2 20.8 90 day Time Deposits (6 main Banks) 14.6 14.7


StrategicPositioning

Our Culture

Soundness: “Strength and Soundness above all else”.

Long-term thinking and vision: “The strategy is based on a long-term outlook, with tactical

decisions and permanently striving to achieve the desired results”.

Respect and Care for Employees: “The well-being, motivation, recognition and individual

development of our employees are permanent goals for the organization”.

Mercantil brand is the focal point: “The brand image is the organization. The public presence

is of the organization as a whole and not of its individual members. The corporate profile is

guided by the strategy”.

Compliance: “Strict and timely adherence to all applicable laws, regulations, rules and policies”.

Ethical Behavior: “Zero tolerance for unethical behavior and transparency in all

communications and information”.

Multinational: “We are an international organization with Venezuelan roots”.

Resilience: “We continuously adapt to changing environments and circumstances with dignity

and integrity”.

Good citizenship: “Our behavior reflects the solidarity and commitment to the community”.

Corporate Governance: “Respect for the organization’s corporate governance structure”.

Our Commitment

• To be the best financial services provider as measured by the degree to which customers’

needs and expectations are met, through products and services considered by them as the

best in the market.

• To be a leading and innovative institution that anticipates the needs of the customers and

competitors actions.

• To be recognized for its quality and excellence.

• To have the best and most capable human resources that are committed to working as a team.

• To maintain a prudent risk management combined with an excellent asset and liability

management.

• To maintain a continuous focus on increasing operational efficiency across the organization,

leveraging on technology as a competitive advantage.

Mission

To fulfill the needs of our customers

by providing excellent financial

products and services, attain the

aspirations of our employees, support

the development of the communities

where Mercantil has presence and add

value for our shareholders through

a long term outlook.

Vision

To be an independent financial

services organization of reference**

in the areas of banking, wealth

management and insurance, in the

markets we serve.

(*) Independent:

• Mercantil is the brand. Mercantil Servicios Financieros isthe organization.

• Mercantil Servicios Financieros isthe parent company and is notdependent on any other company.

(**) Reference:

To be recognized and respectedfor our strength, ethical behavior,dynamism, innovation, quality ofservice and for being the bestplace to work.

Balance Sheet

A summary balance sheet at the close of December 2016 is shown below and the main

variations by comparison to December 2015 and 2014 are commented on.

The audited financial statements and their notes are attached to this Report. The accounting

standards used are summarized at the end of this chapter.

Total Assets

Total assets were Bs 1,484,732 million, representing 134.1 % annual growth. This growth is due

to a combined behavior of cash and due from banks, investments portfolio and loan portfolio,

which increased by 269.6 %, 87.7 % and 90.4 %, respectively. Financial assets reached 58.4 %

of total assets, Bs 409,894 million (89.7 %) up from the previous year. Among cash and due

from bank, demand deposits (non-bearing interests) at the BCV are related to internal limits

of liquidity risks. As of December 31, 2016, this includes the effect of the recent high levels of

liquidity of the Venezuelan financial system.

The variations for this item during 2016, taken individually by subsidiary, are as follows:


ManagementDiscussion and Analysis

Summary of ConsolidatedBalance SheetYear ended(In thousands of Bs except percentages)

Total Assets

Investment Portfolio

Loan Portfolio, Net

Deposits


Trust Fund Assets

1,484,731,617

180,210,406

655,362,111

1,281,646,956

75,404,391

49,594,274

December 31

2016bolivars

634,324,610

96,020,224

344,140,584

534,903,166

44,533,603

32,117,678

December 31

2015bolivars

355,520,544

68,867,934

197,382,285

294,674,670

32,553,965

24,874,057

December 31

2014bolivars

850,407,007

84,190,182

311,221,527

746,743,790

30,870,788

17,476,595

134.1

87.7

90.4

139.6

69.3

54.4

317.6

161.7

232.0

334.9

131.6

99.4

Dec. 2016 Vs. Dec. 2015Increase/

(Decrease)bolivars %



1,129,211,073

111,342,472

457,979,826

986,972,286

42,850,426

24,720,217

(In thousands of Bs except percentages)

563,052,568

31,838,781

8,130,082

802,808,641

28,056,409

267,512

142.6 %

88.1 %

3.3 %

December 31

20151,365,861,209

59,895,190

8,397,594

December 31

2016Mercantil Banco Universal Bs

Mercantil Seguros Bs

Mercantil Bank Holding Corporation Us$


(Decrease)

bolivars %


Investment Portfolio

At December 31, 2016, investments totaled Bs 180,210 million, reflecting Bs 84,190 million

(87.7 %) year-on-year growth from Bs 96,020 million in December 2015. This increase is mainly

observed in investments issued by the Bolivarian Republic of Venezuela and placements in the

BCV.

The most significant variations of this item during the year, taken individually by subsidiary, are

as follows:

Government bonds issued by the Venezuelan State account for 0.44 times Mercantil’s equity

and 2.2 % of its assets (0.57 and 4.0 % in December 2015, respectively). At Mercantil Banco

Universal, these securities represent 0.24 times its equity and 1.7 % its assets (0.39 and 3.5 %

in December 2015, respectively).

At December 31, 2016, the Mercantil C.A., Banco Universal subsidiary, in line with regulations

issued by the National Executive Branch, has purchased Bs 92,570 million in Mortgage

Securities, Certificates of Participation, Agriculture Bonds and Stocks, representing 70.3 %

of the investment portfolio and 1.5 times its equity (Bs 47,243 million, representing 68.2 % of

its investment portfolio and 1.3 times its equity at December 31, 2015).

Investments in Securitiesby IssuerBs 180,211 million December 2016

Venezuelan Central Bank

Venezuelan State and Goverment Entities

Goverment and US Goverment-sponsored Bodies

Others

Dec-2016 Dec-2015 Dec-2014


(Decrease)

bolivars %(In thousands of Bs except percentages)

81,541,577

11,694,491

2,198,375

81,471,329

11,392,627

132,849

99.9 %

97.4 %

6.0 %

December 31

2015163,012,906

23,087,118

2,331,224

December 31

2016

8.9 %

69.8 %

10.5 %

10.8 %

2.2 %

75.4 %

10.6 %

11.8 %

1.7 %

70.0 %

15.9 %

12.4 %

Mercantil Banco Universal Bs

Mercantil Seguros Bs


Net Loan Portfolio

At December 31, 2016, net loans totaled Bs 655,362 million, up Bs 311,222 million (90.4 %) from

Bs 344,141 million in December 2015.

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

The ratio of past due and non-performing loans to gross loans is 0.4 % (0.2 % at December 2015).

The ratio by subsidiary is as follows:

• Mercantil Banco Universal 0.3 %, the same as for the Venezuelan financial system (0.2 %

compared to 0.3 % of the Venezuelan financial system in December 2015).

• Mercantil Bank, N.A. 0.8 % (0.3 % 0.3 % at the close of December 2015). Non-accrual loans

at the close of December 2016 and 2015 amounted to 1.2 % of total loans.

99.4 % of Mercantil’s loan portfolio is outstanding at December 31, 2016. The allowance for

losses on loan portfolio covers 764.4 % of past due and non-performing loans (1,273.3 % at

December 31, 2015). At Mercantil Banco Universal, this ratio is 959.4 % (1,466.9 % at December

31, 2015) and 170.2 % at Mercantil Bank N.A. (480 % at the close of December 2015).


Investments by Maturity and Yield(Stated in millions of Bs, except percentages)

Years

Less than 1 From 1 to 5 Over 5

Trading

Bs 1

1 192 359

552

Available for Sale

Held toMaturity Shares

Bs 1

--

1,013

1,013

TOTAL

67,07919,75993,373

180,211

Time Depositsand Placements

Trust Funds andRestricted

Investments

Bs 1

35,407 8,296

32,962

76,665

% 3

4.2 7.4 8.5

Bs 2

1,814 11,260 58,970

72,044

% 3

5.3 5.2 6.4

Bs 1

26,749--

26,749

% 4.8

--

Bs 1

3,10811

69

3,188

% 3

5.518.115.6

(1) Market value.(2) Amortized cost.(3) Yield is based on the amortized cost at year end. This is obtained by dividing income from securities (including

amortization of premiums or discounts) by the amortized cost or market value.

Investments, by maturity and yield at December 31, 2016, are broken down as follows:

(In thousands of Bs except percentages)

307,416,423

5,558,623

287,905,383

120,243

93.7 %

2.2 %

December 31

2015Mercantil Banco Universal Bs


595,321,806

5,678,866

December 31

2016Net Loan Portfolio byBusiness SegmentBs 655.362 million December 2016

Large Corporations 15 %

Small and Medium Enterprise 45 %

Individuals 40 %

15 %E

40 %

15 %E

40 %


(Decrease)

bolivars %


(1) Includes Bs 626 million in Agricultural Bonds issued by the Venezuelan State and Government Entities valid for thecompulsory agricultural portfolio; and Bs 207 million in Class "B" shares of the company guaranteeing the loans oftourism SMEs "Sociedad de Garantías Recíprocas para la Pequeña y Mediana empresa " applicable for compliancewith the tourism portfolio.

(2) Includes Bolivarian Mortgage Securities 2015-II.

December 2016

SectorPercentages

of Compliance %reached

%required

December 2016Interest rates in force

Agriculture

Mortgage

Microcredits

Tourism

Manufacturing

42.04 1

3.53 2

3.88

5.42 1

10.15

26.0

20

3.0

5.25

10

Calculated on the average of balances shown asnet loan portfolio at December 31, 2015 and 2014,compliance is monthly. Maximum per client: 5 %of the current net agriculture portfolio. A mini-mum of 10 % annual of new loan takers, and theportfolio must be quarterly distributed amongstrategic items (75 %), non-strategic (5 %), agroin-dustrial investments (14 %) and commercialization(5 %) according to regulations from the Ministryof Agriculture and Lands. A minimum 20 % of theportfolio must be dedicated to mid- and long-termloans.

Calculated on the gross loan portfolio at 12/31/2015,distributed as follows: 7.6 % for home purchase,0.4 % for self-construction, improvements andexpansion, and 12 % for self-construction of maindwellings, from the latter 9.0 % should be allocatedfor the purchase of bonds and 3 % for construction.Annual Compliance, only applies for new credits atDecember.

3 % calculated on the gross loan portfolio at06/30/2016. Monthly Compliance.

Calculated on the average gross loans at 12/31/2015and 12/31/2014. The Tourism Ministry set in 5.25 %the percentage that full service banks have toearmark to the tourism sector in 2016. Compliancemust be achieved at 12/31/2016.

10 % calculated on the net loan portfolio byDecember 31, 2015. The percentage of compliancemust be directed to strategic development sectors(60 %) and 40 % to financing small and mediumenterprises, as well as joint community ventures,and state companies. Compliance is annual.

Set weekly by the Venezuelan CentralBank. At 12/31/2016 the maximum is 13 %.

Set by the Housing and Habitat Ministry.Set in accordance with family income ofdebtors, ranging between 4.66 % and10.66 %.

Within minimum and maximum ratesestablished by the Venezuelan CentralBank. At 12/31/2016 the rate cannot behigher than 24 %.

The Venezuelan Central Bank establishesa preferential rate for the sector on amonthly basis. As of 12/31/2016, themaximum rate is 11.62 % and, in somecases, could be decreased in 3 bps(minimum 8.62 %) in accordance withthe Law for Tourism Loans.

Set by the Venezuelan Central Bank at 18%. For SME, state-owned industries,community industries and jointventures, the applicable interest ratemay not exceed 90 % of the rate set bythe Venezuelan Central Bank. At12/31/2016 this is equivalent to 16.2 %.

Compulsory Percentage of Mercantil Banco UniversalLoan Portfolio by economic sector and interest rates

Loan Portfolio, grossClassified by StatusYear Ended(In thousands of Bs except percentages)

353,346,672510,653777,49550,640

354,685,460

December 31

2015bolivars

202,742,735500,986530,681

8,618203,783,020

December 31

2014bolivars

99.50.20.30.0

100.0

%

99.70.10.20.0

100.0

%

CurrentRestructuredPast DueIn Litigation

672,166,5331,034,0172,581,779

103,252675,885,581

December 31

2016bolivars

99.40.20.40.0

100.0

%

Deposits

At December 31, 2016, deposits totaled Bs 1,281,647 million, representing 139.6 % increase

compared to Bs 534,903 million in December 2015. Demand deposits were the main components

of total deposits, which reached Bs 956,332 million, 159.8 % up from December 2015 and 74.6 %

of total deposits. Savings and time deposits increased by Bs 148,115 million (95.3 %) and Bs 10,433

million (92.5 %) over the same period, respectively.

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


At December 31, 2016, shareholders’ equity totaled Bs 75,404 million, 69.3 % up from Bs 44,534

million in December 2015. This variation mainly includes Bs 18,036 million in net income for

the year, Bs 12,730 million for social capital increase approved in the General Shareholders’

Meeting held on September 2015, Bs 3,394 million increase from the conversion of net assets

of subsidiaries abroad, Bs 1,912 million decline corresponding to dividends declared net of

cash dividends and Bs 1,373 million reduction of remeasurement for personnel benefits.

Capital Ratios

Mercantil’s equity-to-assets ratio at December 31, 2016 is 5.1 %, and its equity to risk-weighted

assets ratio is 10.1 %, based on the standards of the National Securities Superintendency

(7.0 % and 11.4 % as of December 31, 2015, respectively).

• Mercantil Banco Universal, in accordance with the requirements of the Superintendency

of Banking Sector Institutions in Venezuela, has an equity-to-assets ratio of 11.2 % and an

equity to risk-weighted ratio of 13.1 % (10.0 % and 12.7 % at December 31, 2015, respectively).

• Mercantil Bank, N.A., based on the standards of the Office of the Comptroller of the

Currency (OCC) has an equity-to-assets ratio of 9.2 % at December 31, 2016, and an equity

to risk-weighted assets ratio of 12.4 % (9.4 % and 12.3 % at December 31, 2015, respectively).

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


Deposits byBusiness SegmentBs 1,281,647 millionDecember 2016

Large Corporations 21 %

Small and Medium Enterprise 31 %

Individuals 48 %

492,825,991

6,507,626

721,095,466

55,330

146.3 %

0.9 %

December 31

20151,213,921,457

6,562,956

December 31

2016(In thousands of Bs except percentages)Mercantil Banco Universal Bs



(Decrease)

bolivars %

Evolution of Net Interest Income


Income StatementThe main variations between figures for December 2016 and December 2015 are summarized

below:

Net Interest Income

Net interest income in 2016 was Bs 89,356 million, 114.5 % up from Bs 41,658 million in 2015,

mainly due to the growth of financial assets and liabilities. Interest income totaled Bs 118,365

million, recording 101.2 % year-on-year increase, reflected in the growth of the loan portfolio

income by 104.1 %. Interest expenses were Bs 29,010 million, 68.8 % more than in 2015. The

financial intermediation ratio (loans-to-deposits) was 52.7 % at the close of December 2016

and 66.3 % in December 2015.

• Mercantil Banco Universal reached Bs 85,128 million, 132.5 % year-on-year growth from

Bs 36,618 million, mainly due to the increase of financial assets and liabilities. The

financial intermediation ratio was 50.1 % in December 2016 and 63.8 % in December 2015.

• Mercantil Bank, N.A. reached US$ 193 million1 (Bs 1,805 million), 11.5 % up from US$ 173

million1 (Bs 1,085 million) in 2015. The Bank continues to hold a significant portion of its

assets, US$ 2,290 million (more than 27 %), in short-term investments and securities

issued by the U.S. government or U.S. government-sponsored agencies. This high level

of liquidity has continued to allow the Bank ample flexibility to increase its credit

operations.

Mercantil’s net interest income to average financial assets ratio at December 31, 2016 was 14.5

%, compared to 12.0 % in the previous year.

Interest Income

Interest Expense

Net Interest IncomeProvision for losses on Loan PortfolioandCommissions Receivable

Net Financial Margin

118,365,299

(29,009,678)

89,355,621

(12,671,036)

76,684,585

58,844,172

(17,186,445)

41,657,727

(4,924,512)

36,733,215

30,140,098

(9,185,389)

20,954,709

(2,873,581)

18,081,128

59,521,127

11,823,233

47,697,894

7,746,524

39,951,370

101.2

68.8

114.5

157.3

108.8

292.7

215.8

326.4

340.9

324.1

88,225,201

19,824,289

68,400,912

9,797,455

58,603,457

Net Financial MarginYear Ended(In thousands of Bs except percentages)

December 31

2016bolivars

December 31

2015bolivars

December 31

2014bolivars

Dic . 2016 Vs. Dec. 2015Increase/




5.5 %

7.5 %

9.5 %

11.5 %

13.5 %

15.5 %

8,402 13,267 20,955 41,658 89,356

2012 2013 2014 2015 2016

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

8.5 % 8.6 %

9.3 %

12.0 %

14.5 %

13,267 20,955 41,658 89,356

2

8

Net Interest IncomeNet Interest Income / Average Financial Assets

(1) Dollar figures are given for reference only; balance sheet figures are converted at the period-end exchange rate of Bs 9.975/US$ 1 and income statement figures at the averageexchange rate for the period of Bs 9.3599/US$ 1. Exchange control has been in place in Venezuela since February 2003.

(in m

illio

ns o

f Bs)


Loan Portfolio Provision

During 2016, loan loss provision were Bs 12,671 million, up 157.3 % from Bs 4,925 million in

2015, bringing the accumulated provision to Bs 20,523 million at the close of December 2016.

This represents 3.0 % of Mercantil’s gross loans (3.0 % at December 31, 2015) and 764.4 %

coverage of past due and non-performing loans (1,273.3 % at December 31, 2015).

• Mercantil Banco Universal registered Bs 12,474 million in loan loss provision in 2016

(Bs 4,804 million in 2015) mainly aimed at provisions in the construction, commercial,

industrial and service sectors, resulting from loan portfolio growth during the period.

At December 31, 2016, the accumulated loan portfolio provision was Bs 19,552 million,

which represents 959.4 % of past due and non-performing loans (1,466.9 % at December

31, 2015). The ratio of past due and non-performing loans to gross loans reached 0.3 %

in December 2016, which compares to 0.2 % in December 2015.

• Mercantil Bank, N.A. registered US$ 22 million1 (Bs 207 million) in loan loss provision

during the 2016. At December 31, 2016, the accumulated provision for the loan portfolio

was US$ 82 million1 (Bs 815 million) and covers 170.0 % of past due and non-performing

loans (480 % at the close of December 2015).

0

0.0 %

1.6 %

2.0 %

0.4 %

0.8 %

1.2 %

2.4 %

2.8 %

3.2 %

3.6 %

4.0 %

4.4 %

2012 2013 2014 2015 2016

3.3 % 3.3 % 3.1 % 3.0 % 3.0 %

50,000100,000150,000

200,000250,000300,000350,000

400,000450,000500,000550,000600,000650,000700,000

0.9 %

0.5 % 0.4 % 0.3 % 0.2 %

C

Loan Portfolio Evolution

(in m

illio

ns o

f Bs)

Loan Portfolio

Past due and non-performing loans

Past due and non-performing Loan / Gross Loan Portfolio

Loan Portfolio Provision / Gross Loan Portfolio

(1) Dollar figures are given for reference only; balance sheet figures are converted at the period-end exchange rate of Bs 9.975/US$ 1 and income statement figures at the averageexchange rate for the period of Bs 9.3599/US$ 1. Exchange control has been in place in Venezuela since February 2003.


Commissions, Other Income and Insurance Premiums, Net of Claims

Commissions and Other Income during 2016 totaled Bs 37,888 million, reflecting Bs 22,464

million (145.6 %) year-on-year increase from Bs 15,424 million. This increase is mainly due to:

• Bs 22,620 million (162.7 %) growth in earnings from commissions on the use of debit and

credit cards, income from financing insurance policies, as well as other commissions on

customer operations, among others.

• Bs 253 million (27.6 %) decrease in earnings from securities trading activities.

Insurance premiums, net of commissions, reinsurance and claims totaled Bs 12,028 million in

2016, reflecting 168.0 % increase compared with Bs 4,488 million in 2015. Net collected premiums

in 2016 totaled Bs 84,759 million, which represents a year-on-year increase of Bs 45,742 million

or 117.2 %. This growth was mainly from net collected premiums in both the collective business

lines, which increased by 139 % compared to 2015 from Bs 12,476 million to Bs 29,940 million and

the individuals business lines, which rose by 95.7 % from Bs 24,100 million in 2015 to Bs 47,180

million in 2016, mainly in the automobile business. This segment represents an important amount

in Mercantil Seguros’ portfolio with 50.1 % of participation.

Mercantil Seguros is the second insurance company in the country in terms of net collected

premiums, with a 9.7 % market share at December 31, 2016. Claims and administrative expenses

totaled Bs 51,316 million, up Bs 27,948 million (119.6 %) from 2015. The claims ratio was 62 % in

2016 (64.0 % at December 31, 2015). During 2016, the Mercantil Seguros Panamá registered

US$ 16,308 thousand collected premiums in Venezuela.

Commissions, Other Income andInsurance Premiums, Net of ClaimsYear Ended(In thousands of Bs except percentages)

Net Financial MarginCommissions and Other Income

Insurance Premiums, Net of Claims

Operating Income

76,684,585

37,888,170

12,028,444

126,601,199

December 31

2016bolivars

36,733,215

15,424,013

4,488,271

56,645,499

December 31

2015bolivars

18,081,128

8,141,183

2,161,078

28,383,389

December 31

2014bolivars

39,951,370

22,464,157

7,540,173

69,955,700

108.8

145.6

168.0

123.5

324.1

365.4

456.6

346.0





58,603,457

29,746,987

9,867,366

98,217,810

Net IncomeYear Ended(In thousands of Bs except percentages)

Earnings from Financial OperationOperating Expenses

Personal Expenses

Taxes (Current and Deferred)

Minority Interest

Net Income for the Period

126,601,199

(72,092,963)

(24,691,335)

(11,770,239)

(10,922)

18,035,740

December 31

2016bolivars

56,645,499

(25,497,868)

(10,052,560)

(6,995,693)

(7,615)

14,091,763

December 31

2015bolivars

28,383,389

(12,466,367)

(6,274,223)

217,557

(5,967)

9,854,389

December 31

2014bolivars

69,955,700

46,595,095

14,638,775

4,774,546

3,307

3,943,977

123.5

182.7

145.6

68.2

43.4

28.0

346.0

478.3

293.5

(5.510.2)

83.0

83.0





98,217,810

59,626,596

18,417,112

11,987,796

4,955

8,181,351


Operating ExpensesDuring 2016, Operating and Personnel Expenses registered 172.2 % (Bs 61,234 million) year-on-

year increase , which has been affected by the inflationary environment. This growth is mainly

due to:

• Bs 14,639 million increase in personnel expenses, reflecting 145.6 % year-on-year rise. This

increase in expenses is mainly due to the application of compensation and benefits policies

consistent with the market. Assets per employee at Mercantil Banco Universal rose from

Bs 76.2 million in 2015 to Bs 215.4 million in 2016. At Mercantil Seguros, net earned

premiums per employee rose from Bs 10.7 million in 2015 to Bs 28.1 million in 2016. In the

case of the overseas business, assets per employee ratio rose from US$ 8.0 million in 2015

to US$ 8.9 million in 2016.

• Bs 27,341 million (210.1 %) increase in expenses from commissions on the use of the point-

of-sale and ATM network, among others.

• Bs 5,575 million (95.4 %) increase in expenses for contributions to regulatory agencies.

• Bs 9,180 million (194.7 %) rise in depreciation, property and equipment expenses,

amortization of intangibles and others.

• Bs 4,500 million (233.3 %) increase in expenses for taxes and contributions.

Expenses for corporate income tax increased Bs 4,775 million (68.2 %), compared to 2015, mainly

due to the exclusion of financial and insurance activities from the system of adjustment for

inflation, as a result of regulatory changes in Venezuela. Also, the applicable fee for these

activities increased from 34 % to 40 %.

The efficiency ratio measured by calculating operating expenses as a percentage of average

assets was 9.4 % in December 2016, and 6.4 % in December 2015. The ratio of operating expenses

to total revenue was 613 % in December 2016 (48.3 % in December 2015).

Taxes and ContributionsFor the year ended December 31, 2016, Mercantil and its subsidiaries reported significant

expenses for various types of taxes and contributions.

Operations in Venezuela generated the following expenses: Bs 8,968 million in payable

corporate income tax, Bs 742 million in deferred corporate income tax; Bs 6,055 million in

value added tax; Bs 6,416 million in municipal taxes; Bs 8,199 million in contributions to the

Deposit Guarantee Fund; Bs 974 million in contributions to the Superintendency of Banking

Sector Institutions; Bs 2,180 million in contributions to the Superintendency of Insurance

Activity; and Bs 1,396 million in contributions to the National Community Council Fund.

Operations abroad registered the following expenses: Bs 167 million in expenses for payable

corporate income tax, Bs 1,450 million in deferred corporate income tax, Bs 23 million in

municipal taxes and other contributions, and Bs 64 million for contributions to regulatory

agencies of the banking activity.

Mercantil Servicios Financieros and its subsidiaries also complied with other compulsory

contributions provided for under the applicable legislation.

Total contributions to the various official entities both in Venezuela and abroad account for

19.5 % of Mercantil's expenses which, combined with corporate income tax, make up 27.9 %

of those expenses (22.8 % and 40.3 % as of December 31, 2015, respectively).


Financial statements are presented in accordance with the

accounting standards of the 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

collectability 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 expendituresIncome, 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.

Inflation AdjustmentAccording 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.

Assets and Liability in Foreign currency Transactions and balances in foreign currency are translated

according to the best estimate of the expectations of the future

flows of bolivars obtained, making use of mechanisms legally

established.

Main differences between the accounting standards of

SNV and the accounting standards of other subsidiariesThe 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.

• Foreign exchange rate fluctuations are recorded in the

results, with the exception of those that Sudeban indicates

to be included in equity and are subsequently recorded in

the results when Sudeban authorized.

The main accounting differences for Mercantil Servicios

Financieros between the SNV standards and the USGAAP are:

• Deferred Income Tax: USGAAP 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 that 100 % allowance for real estate

property received in lieu of payment after one year from the

date of incorporation; under IFRS no amortization deadlines

are established Superintendency.

Summary of the Accounting Principlesused to prepare the Financial Statements


Performance of Subsidiaries

Mercantil’s global business includes the company’s operations in Venezuela and abroad. Its

results are explained in the Management and Discussion Analysis chapter.

A summary of Mercantil’s operations carried out through each subsidiary at December 31,

2016, prepared in accordance with the accounting standards of the National Securities

Superintendency is presented below.

(1) In accordance with the standards of the National Securities Superintendency. Figures net of elimination resulting from the consolidation process.

Equity

Main Activity

Main Subsidiaries

Mercantil, C.A.Banco Universal

Bs 91,905,044

Venezuelan

Universal

Bank

MercantilFlorida BanCorp

Bs 6,701,682

Commercial Bank,Brokerage and

TrustServices in the US

Mercantil Bank N.A.

Mercantil Investment

Services (MIS)

Mercantil Trust Company

(MTC)

OtherBanks Overseas

Bs 1,152,335

InternationalBank

Mercantil Bank (Schweiz), AG.

Mercantil Bankand Trust Limited

(Cayman)

Mercantil Bank(Curaçao) NV

Mercantil Bank(Panamá) S.A.

Mercantil Seguros, C.A.

Bs 9,922,649

Insurance inVenezuela

MercantilSeguros

Panamá, S.A.

MercantilMerinvest, C.A.

Bs 582,226

Investment Banking, MutualFunds, Trading &

Brokerage

Mercantil MerinvestCasa de Bolsa, C.A.

MercantilServicios de

Inversión, C.A.

MercantilSociedad

Administradora de Entidadesde Inversión

Colectiva, C.A.

Mercantil CapitalMarkets

(Panamá)

Other NonFinancial

Businesses

Total

1,334,458,407

131,854,117

595,301,690

1,211,637,887

18,697,431

6,196

83,711,299

23,489,514

56,646,691

64,716,020

179,467

944

8,111,070

3,168,657

3,413,730

5,293,049

(541,782)

123

56,204,778

21,116,863

-

-

1,734,648

1,035

2,010,942

218,057

-

-

(2,185,316)

34

1,484,731,617

180,210,406

655,362,111

1,281,646,956

18,035,740

8,370

235,124

363,198

-

-

151,292

38

Mercantil Servicios Financieros (1)(In thousands of Bs)

as of December 31, 2016 Shareholders’ Equity Bs 75,404,391

(In thousands of Bs)1

Total Assets

Investment

Loan Portfolio, Net

Deposits

Net Income

for the year

Number of Employees

Others Bs 761,066


Comments and a summary of the financial statements of Mercantil’s main subsidiaries are

presented below, based on the accounting standards applicable to each of them. This explains

why they differ from the consolidated information presented according to the accounting

standards of the National Securities Superintendency. Mercantil C.A., Banco Universal

consolidated with foreign subsidiaries is presented in accordance with the standards of the

Superintendency of Banking Sector Institutions; Mercantil Florida Bancorp in accordance with

USGAAP; Mercantil Seguros, C.A., according to the Superintendency of Insurance Activity;

and Mercantil Merinvest, C.A., in accordance with the standards of National Securities

Superintendency.

Mercantil Banco UniversalDuring 2016, Mercantil Banco Universal's total assets grew Bs 783,538 million (142.2 %), net

loan portfolio increased Bs 287,890 million (93.6 %) and total deposits grew Bs 729,201 million

(146.7 %). Loan portfolio quality remains favorable, with a ratio of past due and non-

performing loans to gross loans of 0.3 %, the same as for the Venezuelan financial system as

a whole. The loan portfolio provision covers 959.4 % of past due and non-performing loans

(1,466.9 % at December 31, 2015).

At December 31, 2016, the Mercantil Banco Universal subsidiary ranks fourth in the

Venezuelan private financial system in terms of total assets with 10.2 % of the market. The

leading institution has a 19.7 % share, and Venezuela’s four main banks account for 58.7 % of

the total for the financial system. Mercantil Banco Universal is the leading bank in Venezuela's

private financial system in terms of savings deposits and loans to the agriculture with a market

share of 20.2 % and 14.4 %, respectively. Additionally, it is the third bank in the private sector

in terms of loans to the tourism, manufacturing, mortgages and microcredits sectors, with

market shares of 8.5 %, 7.7 %, 6.2 % and 7.1 %, respectively.

At December 31, 2016 investments in securities totaled Bs 131,671 million, reflecting Bs 62,423

million (90.1 %) growth compared to December 2015. At December 31, 2016 investments in

securities are made up of 87.2 % in securities issued or guaranteed by the Venezuelan State

and Government Entities; 12.1 % in certificates of deposit issued by the Venezuelan Central

Bank (BCV) with maturities between January and September 2017; and 0.7 % in securities

issued by the Venezuelan and international private sectors, and others.

Shareholders’ equity grew Bs 24,010 million (64.3 %) compared to December 2015 reaching

Bs 61,349 million at the close of December 2016. This increase mainly includes Bs 18,602

million in net income for 2016; Bs 5,998 million increase from capital contributions not

capitalized and Bs 581 million reduction from adjusting available-for-sale investments to their

market value.

The equity/assets ratio as of December 31, 2016 is 11.2 %1 (minimum requirement 9 %) and the

equity/risk-weighted assets ratio is 13.1 % (minimum requirement 12 %), according to the

standards of the Superintendency of Banking Sector Institutions.

Net income in 2016 was Bs 18,602 million, reflecting Bs 6,441 million (53.0 %) year-on-year

increase. This variation is mainly due to:

(1) Obtained by dividing equity plus generic provisionand anticyclical for the loan portfolio and microcreditsby total assets minus investments and cash and duefrom banks at the BCV, as well as bonds and securitiesissued by the BCV and Petróleos de Venezuela, S.A.(PDVSA).


Bs 45,670 million (115.6 %) increase in net interest income, attributed mainly to a higher

volume of financial assets and liabilities. Mercantil's net interest margin (net interest

income/average financial assets) at December 31, 2016 was 16.1 % compared to 13.8 % in the

previous year.

Bs 7,747 million (160.2 %) growth of expenses for non-performing

loans, Bs 10,549 million (163.7 %) increase in earnings from

commissions on debit and credit cards, other commissions on client

transactions, net of commissions for the use of the point-of-sale and

ATM network, generated by a higher volume of transactions during

the year, Bs 236 million (34.6 %) increase in net earnings from the sale

of investments in securities as a result of trading in securities, issued

by the Venezuelan government, an activity that produced Bs 915

million in net earnings in 2016, Bs 126 million (57.,6 %) increase in

income from commissions on investments in trust funds, and Bs 113

million (5.8 %) increase in expenses from available-for-sale assets,

from provision for other assets and operating expenses, among other.

Operating expenses rose Bs 39,864 million (180.9 %) compared to

2015, mainly due to Bs 13,251 million (184.4 %) increase in personnel expenses as a result of

the application of compensation and benefits policies according to the market; Bs 4,369

million (90.9 %) increase in contributions to regulatory agencies; and Bs 22,244 million

(221.4 %) increase in general and administrative expenses. This increase is primarily due to

Bs 7,880 million (231.2 %) in expenses to outsource services such as securities transportation

and surveillance, among others, Bs 9,337 million (197.6 %) in expenses for depreciation of

property and equipment, amortization of intangibles and others, Bs 2,499 million (220.2 %)

in taxes and contributions, and Bs 2,529 million (325.1 %) in other general administrative

expenses.

Historic figures presented in accordance with the Superintendency of Banking Sector Institutions.

Mercantil C.A., Banco Universal. Consolidated with Foreign SubsidiariesYear Ended(In thousand of Bs)

Total Assets

Investments in Securities

Loan Portfolio, Net

Deposits

Equity

Net Earnings for the Period

1,334,641,402

131,670,733

595,301,690

1,226,342,085

61,349,302

18,602,428

December 31

2016bolivars

551,102,948

69,247,833

307,411,935

497,141,013

37,339,031

12,161,578

December 31

2015bolivars

287,893,368

44,287,993

162,619,332

258,084,541

24,255,805

9,430,659

December 31

2014bolivars

0.0 %

3.0 %

6.0 %

9.0 %

12.0 %

15.0 %

18.0 %

M

2012 2013 2014 2015 20160

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

4.1 % 3.5 % 3.3 %

4.4 %

6.5 %

11.1 % 10.8 % 10.9 %

12.0 %

16.1 %

7,352 11,646 19,134 39,528 85,194

Evolution of Net Interest Income

Net Interest MarginOperating Expenses / Average Total Assets

Net Interest Margin(in

mill

ions

of B

s)

(1) Obtained by dividing equity plus generic provision and anticyclical for the loan portfolio and microcredits by total assets minus investments and cash and due from banks at theBCV, as well as bonds and securities issued by the BCV and Petróleos de Venezuela, S.A. (PDVSA).


Mercantil Florida BancorpAt December 31, 2016 Mercantil Florida Bancorp registered US$ 8,433 million in total assets,

reflecting 3.3 % increase compared to December

2015. The investment portfolio increased by 3.6 %

from the close of December 2015 to US$ 2,183

million. The net loan portfolio reached US$ 5,683

million, 2.5 % up from the previous year. Total

deposits ended at US$ 6,579 million, 0.9 % up from

US$ 6,522 million registered at the close of

December 2015.

At the close of the year, shareholders' equity totaled

US$ 702 million, representing 3.3 % year-on-year

growth from US$ 679 million. This variation is mainly

due to US$ 23 million in net income for the period,

among others.

Mercantil Florida Bancorp registered US$ 24 million

in net income by December 31, 2016, 55.4 % up from

the net income registered in 2015. The net income

of its main subsidiary, Mercantil Bank, N.A., was US$ 31

million in 2016, registering 50.4 % year-on-year

growth from US$ 21 million. This variation is mainly

due to US$ 20 million increase in net interest

income, US$ 9 million increase in loan loss provision

requirement, and US$ 7 million increase in operating

and personnel expenses.

The ratio of non-accrual loans to total loans was 1.2 %

in December 2016, the same as at the close of 2015.

Mercantil Bank N.A.’s main capital adequacy ratios

are 9.2 % for equity/assets ratio, and 12.4 % for

equity/risk-weighted assets ratio, in accordance with

the standards of the Office of the Comptroller of the

Currency.

0 %

5.0 %

10.0 %

15.0 %

20.0 %

25.0 %

0.0 %

4.0 %

2.0 %

6.0 %

8.0 %

2012 2013 2014 2015 2016

1.9 % 1.2 %

0.8 % 1.2 % 1.2 %

18.7 %

2.9 % 9.3 %

1.1 % 1.7 %

2.2 %

0.7 %

7.7 %

13.5 % 14.9 %

Assets Quality Ratios

Non Accrual / Gross LoansTotal Class Loans / Gross LoansTotal Class Loans + Oreo / Tier 1 + Allowance for loan losses

Year Ended(In thousands of Bs and millions of US$)

Total Assets


Loan Portfolio, Net

Deposits

Equity


8,433

2,183

5,683

6,579

702

24

December 31

2016US$(1)

84,120,472

21,772,802

56,688,025

65,629,216

7,000,206

224,806

December 31

2016bolivars

51,289,824

13,234,619

34,914,456

40,983,780

4,269,498

97,129

December 31

2015bolivars

49,722,111

14,010,461

32,884,873

39,446,822

4,255,497

141,602

December 31

2014bolivars

Figures in accordance with Generally Accepted Accounting Principles (US GAAP).

(1) Dollar figures are given for reference only; balance sheet figures are converted at the period-end exchange rate of Bs 9,975/US$ 1 and income statement figures at the averageexchange rate of Bs 9,3599 / US$ 1 (Bs 6,2842 / US$ 1 for 2015). Exchange control have been in place in Venezuela since February 2003.

Mercantil Florida BanCorp, IncConsolidated


Mercantil SegurosIn 2016, collected premiums registered 117,2 % year-on-year growth to Bs 84,759 million,

reflecting an outstanding achievement of the company’s sales force. At December 31, 2016,

Mercantil Seguros was the country’s second insurance company in terms of net collected

premiums, with 9.7 % of the insurance market.

Total assets at December 31, 2016 were Bs 101,565 million, 122.3 % more than at December 31,

2015. Shareholders’ equity was Bs 52,373 million at December 31, 2016, 127.3 % up from the close

of December 2015, which means the company’s solvency margin complies the regulations in

force.

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.

Guarantees and reserves totaled Bs 37,488 million and reflect 84.7 % growth compared to the

close of December 2015.

At the close of December 31, 2016 the company’s investment portfolio

totaled Bs 86,616 million, 144.9 % more than at the close of December

2015. Total investments representing technical reserves were Bs 64,522

million, 124.8 % up from December 31, 2015. Liquidity levels remained

sufficient to meet commitments with policyholders, insurance advisers

and reinsurers diligently.

Net collected premiums for the Individual Business Lines grew 95.7 %

from Bs 24,100 million in 2015 to Bs 47,180 million at December 31, 2015,

mainly due to the automobile business growth.

Net collected premiums for the Collective Business Lines rose 139 %

from Bs 12,476 million at December 31, 2015 to Bs 29,940 million at

December 31, 2016. During 2016, the Mercantil Seguros Panamá

subsidiary registered US$ 16,308 thousand collected premiums in

Venezuela.

The technical result1 at December 31, 2016 was Bs 1,593 million, with

a combined operating ratio2 of 97.5 %. Net income for 2016 registered

Bs 7,035 million, 219.7 % up from 2015.

Mercantil Seguros, C.A.Year Ended((In thousands of Bs)

Total Assets


Equity


Net Premiums

101,564,863

86,616,261

52,373,092

7,035,314

84,759,000

December 31

2016bolivars

45,697,902

35,374,297

23,045,766

2,200,370

39,016,800

December 31

2015bolivars

16,233,747

13,364,999

5,451,630

1,613,693

17,504,400

December 31

2014bolivars

Historic figures presented in accordance with the standars of the Superintendency of Insurance Activity.(1) Technical result = Earned Premiums - Incurred claims - Commissions - Administrative Expenses.(2) Combined Operating Ratio (COR) = Claims + Commissions + Administrative Expenses + Contributions / Earned Premiums.

97.5 %

2012 2013 2014 2015 201680 %

85 %

90 %

95 %

100 %

7,166 10,379 17,504 39,017 84,759

89.8 %

95.7 % 95.6 % 97.4 %

Net Collected PremiumsCombined Operating Ratio

Evolution of Net Collected Premiums and Combined Operating Ratio1


(1) Dollar figures are given for reference only; balance sheet figures are converted at the period-end exchange rate of Bs9,975/US$ 1 and income statement figures at the average exchange rate of Bs 9,3599 / US$ 1 (Bs 6,2842 / US$ 1 to 2015).Exchange control have been in place in Venezuela since February 2003.

Other Subsidiaries of Mercantil Servicios FinancierosThe subsidiaries of Mercantil Servicios Financieros include a brokerage company, a mutual

fund and investment portfolio management company which are consolidated with

Mercantil Merinvest, C.A., as well as other overseas banks, and other non-financial

subsidiaries in Venezuela, as listed below:

• Mercantil Merinvest Casa de Bolsa, C.A. reached Bs 368 million in total assets at

December 31, 2016, reflecting 172.5 % growth compared to December 31, 2015. This

variation is reflected in cash and due from banks, which grew 521 % compared to

December 2015 to Bs 161 million at the close of 2016. Investments in securities totaled

Bs 186 million, 84.7 % up from December 2015. Annual net income was Bs 99 million, up

Bs 66 million from last year. This variation was mainly due to Bs 224 million growth of

net earnings from securities trading operations issued by private companies,

commissions on portfolio management; Bs 83 million in expenses from information

services, taxes and contributions to regulatory agencies, among others; and Bs 63 million

in corporate income tax expenses.

• Mercantil Bank (Schweiz) AG, reached US$ 168 million in total assets at December 31, 2016

and an annual net income of US$ 1.4 million.

• Mercantil Bank (Panamá) S.A., reported US$ 321 million in total assets at December 31, 2016,

0.3 % up from the close of December 2015. The net loan portfolio totaled US$ 186 million,

reflecting US$ 53 million (39.7 %) increase compared to US$ 133 million for the previous

year. Deposits reached US$ 278 million, 24.9 % year-on-year rise from US$ 222 million at

the close of December 2015. Net income in 2016 totaled US$ 2.6 million, US$ 10.8 million

more than the US$ 8.3 million loss registered during the previous year. This variation was

mainly due to the increase in earnings from trading securities operations of US$ 2.4 million

during 2016 compared to US$ 1 million in 2015, and lower loan portfolio provision

requirements of US$ 11 million in 2016.

• Mercantil Inversiones y Valores comprises Mercantil Servicios Financieros’ non-financial

companies, such as Servibien, Almacenadora Mercantil and others with various

investments in securities. At December 31, 2016, Mercantil Inversiones y Valores C.A.

registered Bs 563 million and Bs 685 million in consolidated assets and equity,

respectively.


Corporate GovernanceMercantil Servicios Financieros (Mercantil) is registered in Venezuela and its shares are listed

on the Caracas Stock Exchange. It also has a program of Level 1 ADR which are traded over

the counter in the U.S. Mercantil’s corporate governance structure is based on its bylaws, the

Capital Markets Law, the Code of Commerce and the resolutions issued by the National

Securities Superintendency, (formerly the National Securities Commission) on the subject.

The Board of Directors and Mercantil's management keep up with the changing regulations

through ongoing analysis and study of this area so the Corporation is able to adapt its

Corporate Governance structure to current best practices in order to guarantee the

appropriate transparency and efficiency demanded of it, based on the highest professional

and ethical principles that characterize its permanent and close relationship with its

shareholders, customers, creditors and employees.

According with the aforementioned, Mercantil has a Unit in charge of Compliance, which is

responsible for independently detecting and managing the risk of compliance with regulatory

obligations through adequate policies, methodologies and procedures, to strengthen the

business model, eliminating or reducing exposure to associated risks. During 2016 progress

was made with the execution of this unit's Strategic Agenda.

It is important to point out that there has been a Compliance Unit at Mercantil Bank, N.A.

subsidiary for many years now.

Another very significant aspect of Corporate Governance is the dividend policy which gives

shareholders greater assurance that dividends will be declared and paid. In line with this

policy, all proposals to declare dividends must be formulated in accordance with the

corresponding legislation and bylaws. They must adhere to the provisions on compliance with

the regulatory relevant equity ratios and meet the company’s investment and development

plans. A Board of Directors meeting is normally held each February. It reviews the dividend

proposal that will be submitted for consideration by the first General Shareholders’ Meeting

held in the first quarter of the year, and after it is approved by the Board, a press release is

published. Notwithstanding, the Board of Directors may at any time consider any dividend

proposal it deems to be in order. In 2016, an ordinary cash dividend was declared and paid in

two portions and an extraordinary cash dividend was paid in a single instalment.

Among the elements of the Mercantil Corporate Culture, which comprise a series of principles

and values that guide Mercantil performance in its decision making and activities, is its Ethical

Behavior, expressed as “Zero tolerance for unethical behavior and transparency in all

communications and information”. Part of the implementation of this principle is the Code

of Ethics in place for Mercantil, which gather a set of ethical principles and values that lead

its decision-making and execution of activities. This Code of Ethics cover fundamental duties


such as probity, loyalty, efficiency, co-fraternity, honesty, sincerity, dignity and law abidance.

It also establishes rules designed to regulate treatment in the event of conflicts of interest

and complement the provisions of the relevant bylaws. The bylaws stipulate how such

situations should be handled and ban Board Members from taking part in discussions on any

matters in which they, or their partners in civil or mercantile companies have a personal

interest. Directors are required to remain outside the meeting room until the final decision

is reached.

Mercantil’s governance structure is comprised by the Shareholders’ Meeting, followed by the

Board of Directors, with its Audit, Risk and Compensation Committees, the Executive

Committee, the Chairman and CEO (both positions currently held by the same person), the

Internal Auditor and the Compliance Officer.

Board of DirectorsIt is essential for the Board of Directors to be efficient so that it can act in the interests of the

company, which are ultimately those of the community at large and its shareholders, creditors,

client and employees in particular.

The Board has responsibility for defining corporate strategies, determining business policies

and establishing and controlling the strategic direction of the institution. It also supervises

the management of the organization’s different business and support areas. It evaluates

results by comparing them against previously approved plans and strategies, performance in

previous years and the general banking environment.

In line with best Corporate Governance practices, the majority of Mercantil Servicios

Financieros' Board members are independent from management. The presence of directors

who are independent from management is further proof of Mercantil’s commitment to

international management standards and in line with best Corporate Governance practices.

The Directors are highly qualified and well-versed in business and finance, thereby ensuring

optimum performance of their functions.

The Board of Directors is made up of ten directors and twenty alternate directors. The Board

appoints the Chairman and CEO, who must be Directors, from among its members, and these

appointments may be held by the same person. The Board meets once a month and whenever

else its Chairman deems necessary.

To ensure more transparency and better control over management procedures, from the

outset Mercantil’s bylaws have provided for the activity of a Compensation, Audit and Risk

Committees, whose functions are regulated by those bylaws. Members of these Committees

are comprised mainly of Directors, who are independent from management.

Consistent with the Company’s tradition of adhering to best corporate governance practices,

the Audit Committee is subject to bylaws governing its functions. This document details the

purpose of the Committee, as well as its functions and its responsibilities. There members

should undertake an annual compliance evaluation with them. It also states that its members

must be independent from Management, adding that at least one of them must have

considerable accountancy or financial management experience.


The committee must review and discuss accounting and management policies, the opinions and

reports of the organization’s internal and external auditors, establish reserves, reviewing the Financial

Statements and their Notes and formulate recommendations on matters incumbent upon it to the

Board. It also approves the engagement and remuneration of the external auditors. In 2016 the Audit

Committee met eight times. The main topics reviewed were: Consideration of the financial statements

of Mercantil and its subsidiaries in Venezuela, opinions of the external auditors on the financial

statements and their corresponding notes, which included a review of the new disclosures contained

in the notes; observations of internal control presented by the external auditors; review and follow-

up of internal audit activities of Mercantil and its subsidiaries; report of activities related to the

Prevention and Control of Money Laundering and Terrorism Financing; external auditing activities

schedule for 2017; consideration of fiscal aspects; evaluation of the investment portfolio in foreign

currency; VEN-FRS financial statements; consideration and approval of the remuneration of the

External Auditors, appointment of the new corporate internal auditor; Credit Risk reports of Mercantil

and its subsidiaries.

Approves Mercantil’s risk profile, policies and limits. It also optimizes the use of capital to support

the approved risk profile. In 2016 the Risk Committee met seven times. The main topics reviewed

were: Credit, Market and Operational Risk Reports for Mercantil and its subsidiaries; consideration

and establishment of cross-border risk limits; follow-up of the limits set for the Republic of Venezuela;

consideration, adjustment and measures related to the credit risk policy, review of limits for individual

borrowers, economic groups, boards of directors, Loan and Capital Commitment Committee and

Global Corporate Committee; adjustment of credit / integration faculties of the various Committees;

adjustment of Risk Manuals; analysis of particular loan sectors; budget for treasury activities and

limits of market risk; summary of security trading activities; projected losses for Mercantil and its

subsidiaries operational risk; security of information reports; analysis of Commercial Real Estate

Retail (Mercantil Bank, N.A.) reports; consideration of PDVSA Sovereign Risk exposure; follow-up of

the Risk Committee of the Board of Directors of Mercantil Bank, N.A.

Board of Directors’ Auditor Committee

Board of Directors’ Risk Committee The Committee is made up

as follows:

Gustavo Galdo C. (Coordinator)

Roberto Vainrub A.

Francisco Monaldi M.

Federico Vollmer A.

Carlos Zuloaga T.

Rafael Sánchez B.

Alberto Sosa S.

Gustavo Vollmer S.

Gustavo Machado C.

Gustavo Vollmer A. (Ex officio)

The Committee is made up as follows:

Gustavo Marturet Medina (Coordinator)

Eduardo Mier y Terán

Luis Pedro España

Alexandra Mendoza de Martínez

Miguel Ángel Capriles C.

René Brillembourg C.

Fernando Eseverri I.

Francisco Torres Pantin

Carlos Acosta



Board of Directors’ Compensation Committee

Executive Committee

The committee is responsible for setting the organization’s policy on pay and benefits, approving

the remuneration of the Chairman and senior management and informing the Board of Directors

accordingly. In 2016, the Compensation Committee met eight times. The main topics reviewed were:

program for variable compensation, short-term incentives, procedures for performance evaluation,

strategic goals; initiative for organizational efficiency, implementation and results; wage policy

actions for Mercantil and its subsidiaries’ workers; 2017 personnel expenses budget; actuarial

assumptions for calculating retroactive welfare benefits and retirement pensions; analysis of staff

turnover semi-annually and annually; Mercantil’s plan for retention of talented individuals; Labor

immobility decree; impact of modifications of national minimum wage; Food Law; payment of

pensions; Special Mortgage Plan; voluntary retirement savings plan; homologation of 2016-2018

Collective Agreements for the Mercantil Banco and Mercantil Seguros subsidiaries; considerations

on per diems of Board Directors, Audit, Risk and Compensation Committees; reports to be presented

to the National Securities Superintendency.

Mercantil has an Executive Committee comprising a Chairman and twelve senior managers from the

organization’s Business and Supporting areas, which guarantees the timely implementation of

Mercantil’s decisions and strategies. The committee meets weekly and holds extraordinary meetings

as required. It is responsible for evaluating options and making recommendations on policy,

objectives, strategies and organization and submitting to the Board of Directors for consideration,

as well as guiding management in its effort to implement the policies adopted. It is also responsible

for evaluating the outcome of their implementation.


Gustavo Vollmer A.Chairman & CEO

Millar Wilson Executive Director of International Business

Alfonso Figueredo D.Global Executive Vice President

of Operations and Administration

Fernando Figueredo M.Global Executive Vice President of Business

Nelson Pinto AlvesExecutive President Mercantil Banco Universal

María Silvia RodríguezExecutive President Mercantil Seguros

Luis Calvo Blesa

Luis Alberto Fernandes

Vincenza Garofalo

Jorge Pereira

Isabel Pérez S.

Carlos Tejada G.

Ignacio Vollmer S.


AlfredoTravieso P. (Coordinator)

Víctor Sierra A.

Miguel Ángel Capriles L.

Luis A. Romero M.

Claudio Dolman

Luis A. Marturet M.

Alejandro González S.

Oscar Machado K.

Nerio Rosales R.



Chairman of the Board of DirectorsThe Chairman of the Board of Directors is the President of the Company. The positions of

Chairman of the Board of Directors and CEO are currently held by the same person. The

corresponding statutory provisions provide that the same person exercising both positions,

if deemed appropriate by the Board of Directors.

This officer, as Chairman of the Board, shall be responsible for directing the Company's

activities and business, chairing Shareholders meetings, Board meetings and meetings of the

Executive Committee, and providing them with guidance on setting the policies, goals and

strategies to be followed when taking important decisions. He, or she, also represents the

Company before political and administrative authorities and public and private entities. The

CEO is responsible for the executive management and coordination of the company;

submitting to the consideration of the Board of Directors and the Executive Committee any

major policies, objectives, strategies and decisions and informing both bodies periodically on

the company’s financial condition and the results of their operations. Further responsibilities

include designing, establishing and developing the company’s organizational structure and

appointing and removing general managers, consultants and advisors as necessary.

The two Global Executive Vice Presidents, of Business and of Operations and Administration,

together with the Executive Director of International Business, the Executive Presidents of

Mercantil Banco Universal, Mercantil Seguros and Mercantil Bank, N.A. subsidiaries, the

Global Chief Risk Officer, and the Corporate Compliance Manager, report directly to the

Chairman and to the CEO of Mercantil. The Audit Unit, the Board of Directors Secretary, and

the Compliance Officer of Prevention of Money Laundering and Terrorist Financing, report

directly to the Board of Directors, and depends on administrative matters of the Chairman.

Internal AuditorIn accordance with the regulations applicable to Mercantil and its subsidiaries, Mercantil has

an Internal Audit Manager who works in conjunction with the Audit Committee when the

overall operations of Mercantil and its subsidiaries are audited.

The results of the internal audits are reviewed and discussed periodically by the Audit

Committee and the Board of Directors so that any corrective action may be taken.


Compliance Officer for the Prevention of MoneyLaundering and Terrorism Financing In accordance with regulations on the matter, Mercantil has a Compliance Officer on the

Prevention of Money Laundering and Terrorist Financing who is responsible for designing the

Annual Operating Plan on the Prevention and Control of Money Laundering and Terrorist

Financing, by coordinating and supervising training activities and training Mercantil staff on

prevention and control of money laundering and terrorist financing, and maintaining

institutional relations with the regulatory bodies on the matter. The Compliance Officer also

advises the Audit Committee and Board of Directors on compliance with their anti-money

laundering and antiterrorism financing obligations under the legislation in force.

Disclosure of Information Mercantil prepares and publishes the company’s financial statements on a semi-annual

basis in compliance with the rules of the regulatory bodies. The company also prepares a

quarterly report containing detailed information and accurate economic and financial data,

as well as other relevant data for the market, which is disclosed to the general public, the

National Securities Superintendency and the Caracas Stock Exchange through nationwide

distribution methods, and by e-mail to analysts and participants in the local and

international markets. In addition, information is distributed periodically to the Securities

and Exchange Commission in accordance with its obligation to maintain Mercantil’s Level1

ADR program in the United States of America. Financial information on the company is also

available on Mercantil's website www.msf.com and on that of its principal subsidiary

Mercantil Banco at www.mercantilbanco.com. Thus Mercantil fulfills the regulations on

immediate dissemination of any information that may materially affect the price of its

shares.

Last but not least, Mercantil has an Investor Relations business Unit, whose functions include

the timely disclosure of information to investors by different means, including events and

presentations.


In 2016, Mercantil Servicios Financieros and its subsidiaries received various acknowledgments

from prestigious publications and institutions.

Mercantil Servicios Financieros• In February, the prestigious financial publication The Banker, included Mercantil among

the World’s Top 500 Banking Brands. Mercantil ranks 273, 61 positions up from the 2015,

and is the leading Venezuelan institutions included in the ranking.

• In May, Mercantil Servicios Financieros was again included in the Global 2000 Most

Valuable Companies in the World, published by the specialized magazine Forbes. Mercantil

ranks 793 and is the first of four Venezuelan companies included in this year’s list. The

Global 2000 ranking considers income, revenues, assets and market share.

• In June, The Banker magazine included Mercantil Servicios Financieros in its Top 1000

World's Financial Institutions. Mercantil Servicios Financieros rose 32 positions to rank 178.

It also ranks 7 among the Top 25 Latin American financial institutions.

• In November, the Venezuelan-American Chamber of Commerce and Industry (VenAmCham)

granted the Entrepreneur award of the year 2016 to Gustavo Vollmer A., Chairman of

Mercantil in recognition of his entrepreneurial qualities, among which are the preeminence

he gives to the practice of values and ethical principles, modeled by his example, sobriety

and discretion in his social commitment; a tireless and disciplined worker, who with his

conciliatory temperament and his ability to create and promote work teams has allowed

him to accumulate ample experiences to run enterprises that he has always put at the

service of the nation’s interests.

• In November, the Venezuelan-American Chamber of Industry and Commerce (VenAmCham)

presented its “Top 100 Companies” ranking where Mercantil Servicios Financieros ranked 6.

The list includes the most successful companies in the country, with national or foreign

capital, ranked by their total income at the close of 2015.

Awards and Acknowledgements


Mercantil Banco Universal• In January, the Global Finance magazine selected Mercantil Banco Universal, for the 11th

consecutive year, as the “Venezuela’s Best Trade Finance Provider in 2016”. The magazine

selection process took into consideration the volume of transactions, geographical

coverage, customer services, price competitiveness, new business development and

technological innovations.

• In June, Aon Hewitt international consulting firm granted to Mercantil Banco Universal the

2016 Best Employer award. Among the criteria considered for this assessment are workers’

opinion on Banks’ commitment, leadership, culture and brand, compiled in the

Organizational Climate and Commitment research.

• In November, Mercantil Banco Universal was recognized as the Best Venezuelan Bank in

2016 by the LatinFinance, a magazine specialized in Latin America and the Caribbean

financial topics. The magazine chose Mercantil Banco Universal for three aspects: long-

term strategy, development of digital technology, and efficient cost management in a

changing environment.

• In November, Mercantil Banco received the first edition of the Award for “Socially

Responsible Enterprises”. The award acknowledged the university program Training Socially

Responsible Leaders, also known as “El Reto U’ (The U Challenge), which has been promoted

for the last 12 years by the Social Alliance of the Venezuelan-American Chamber of

Commerce and Industry (VenAmCham) and Districts 4370 and 4380 of Rotary International.

The award was presented at the United Nations Headquarters during the celebration of

the Rotary International Day.

Mercantil Bank, N.A.• In June, Mercantil Bank, N.A. received the 2016 Best Employer Award from Aon Hewitt

International consulting firm. Workers opinion on the Banks’ commitment, leadership,

culture and brand were taken into account in the Organizational Climate and Commitment

research compilation.

• In September, the Office of the Comptroller of the Currency (OCC) granted to Mercantil

Bank, N.A. the “Outstanding” rating in the evaluation of its Community Reinvestment Act

(CRA) performance. The highest rating granted to a financial institution in the United

States. The Bank has consistently received this rating since 2000.


Mercantil Bank (Panama)• In March, for fourth 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 76, and was also included among Panama’s

banks in the 34 position.

Mercantil Seguros• In November, the Venezuelan-American Chamber of Commerce and Industry (VenAmCham)

presented its “Top 100 Companies” raking, where Mercantil Seguros ranked ninth. The list

includes the most successful companies in the country, with national or foreign capital,

ranked by their total income at the close of 2015.

Mercantil Arte y Cultura• In November, the 1955-2008 Venezuelan Ceramics exhibition of the Mercantil Collection,

received the 2015 AICA Award of the International Association of Art Critics, Venezuelan

Chapter, as Best Collective Exhibition. The decision was taken because the exhibition

“strengthens the artistic scope developed by modern and contemporary Venezuelan

ceramics, with specific examples in research and experimentation with techniques”.


Mercantil Servicios FinancierosAv. Francisco de Miranda, between Segunda and TerceraTransversal, Urb. Los Palos Grandes, Centro ComercialEl Parque, Segunda y Tercera Etapa, P03, suites C-3-10y C-3-11, Chacao, Caracas, Venezuela.Phone : (58-212) 287.8200www.msf.com

INVESTOR RELATIONSAv. Andrés Bello, N° 1, Edificio Mercantil 25th floor, Caracas 1050, Venezuela Phone : (58-212) 503.1335 [email protected]

CORPORATE COMMUNICATIONSAv. Andrés Bello N° 1, Edificio Mercantil 14th floor, Caracas 1050, VenezuelaPhone: (58-212) [email protected]

SubsidiariesMERCANTIL, C.A. BANCO UNIVERSALAv. Andrés Bello N° 1, Edificio Mercantil Caracas 1050, VenezuelaPhone: (58-212) 503.1111Telex 27002/27003 [email protected]@MercantilBancoCall Center: Phone: 0-500-600 2424/ 0-500-503 2424(58-212) 600.2424 -(58-212) 503 2424

MERCANTIL, C.A. BANCO UNIVERSALSUCURSAL CURAÇAOAbraham de Veerstraat #1 Willemstad, CurazaoPhone: (5999) 432 [email protected]

REPRESENTATIVE OFFICES

BOGOTACarrera 13, Nº 119-95, Office 105Bogota, ColombiaPhone: (57-1) 635 [email protected]

LIMAAv. Canaval and Moreyra Nº 452, 15th and 17th floorSan Isidro, Lima 27, PerúPhone: (511) 442 [email protected]

MÉXICOEugenio Sue N° 58,Colonia Polanco Chapultepec,Delegación Miguel HidalgoC.P.11560, México, D.F.Phone: (52-55) 5282 2300/[email protected]

SAO PAULOAv. Paulista, N° 1765, Conjunto 131 -13° andarBela Vista- São Paulo- BrasilCep: 01311-020Phone: (55-11) [email protected] [email protected]

MERCANTIL BANK N.A.*220 Alhambra Circle, Coral Gables, Fl. 33134, U.S.A. Phone: (1-305) 460.8701www.mercantilcb.com@MercantilCB (english)@MercantilCBesp (spanish)

MERCANTIL TRUST COMPANY, N.A.*220 Alhambra Circle, 11th floor, Coral Gables,Fl. 33134, U.S.A.Phone: (1-305) 441.5555www.mercantilctc.com

MERCANTIL INVESTMENT SERVICES, Inc.*220 Alhambra Circle, Penthouse, Coral Gables,Fl. 33134, U.S.A.Phone: (1-305) 460.8599www. mercantilcis.com

MERCANTIL BANK (SCHWEIZ) AGKasernenstrasse 18004 Zurich,SuizaPhone: (41) - 433 444 555 [email protected]

MERCANTIL MERINVEST, C.A.Avenida Andrés Bello, N° 1 Edificio Mercantil24th floor .Caracas 1050, VenezuelaPhone: (58-212) 503.2700www.mercantilmerinvest.com@MMerinvest

MERCANTIL CAPITAL MARKETS (PANAMÁ), S.A.Torres de Las Américas, Torre A, 14th floor. Punta PacificaPanama City, PanamaPhone: (507) 282 5800contactenos@mercantilcmp.comwww.mercantilcapitalmarketspanama.com

MERCANTIL SEGUROS, C.A.Av. Libertador con calle Isaías “Látigo” Chávez,Edificio Mercantil Seguros, Chacao. Caracas1060, VenezuelaPhone: (58-212) 276.2000www.mercantilseguros.com@MercantilSeg

MERCANTIL SEGUROS PANAMÁ, S.A.Torres de las Américas,Torre A, piso 14. Punta PacíficaPanama City, PanamaPhone: (507) 304 [email protected] www.mercantilseguros.com.pa

MERCANTIL BANK (PANAMÁ), S.A.Torres de las Américas, Torre A, 14th. Punta PacíficaPanama City, PanamaPhone: (507) 282.5000mercan24@mercantilbankpanama.comwww.mercantilbankpanama.com

MERCANTIL BANK & TRUST, LIMITED (CAYMAN)Harbour Place, 4th floor 103 South Church StreetP.O. Box 1034 Grand Cayman, KY1-1102 Cayman IslandsPhone: (1-345) 949-8455

MERCANTIL BANK (CURAÇAO) N.V.Abraham Mendez Chumaceiro Boulevar 1 Willemstad, CurazaoPhone: (5999) 432 [email protected]

Corporate Contactsand Subsidiaries

(*) Formerly known as Mercantil Commercebank, N.A,Mercantil Commercebank Trust Company, N.A. andMercantil Commercebank Investment Services, Inc.


General Production: Corporate Communications Management Graphic Design: Arte Impreso H.M., C.A.Caracas, Venezuela, May 2017.

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