Banco Patagonia is the fifth largest Argentine private bank in terms of deposits and tenth in terms of net worth. The Bank offers a wide range of products and services, with a strong focus on SMEs. The Bank was founded in 1997, after the merger between Banco Mildesa and Banco de Rio Negro. In 2000, the Banks was renamed as Banco Patagonia. In 2003, BP merged with Banco Sudameris, with the objective of increasing its presence in Buenos Aires and Capital Federal. Finally, in 2004, BP acquired Lloyds TSB Bank plc Argentine Branch, which had established Banco de Tres Arroyos in 1998. BP had a successful IPO in 2007, and the shares of the Bank are traded in Buenos Aires and Sao Paulo. The daily volume traded in the Buenos Aires stock exchange amounts to around AR$2.1 million. The Bank is controlled by Jorge Stuart-Milne, Ricardo Stuart-Milne and Emilio Gonzalez Moreno (57.03%), Banca Intesa SpA (9.99%) and the province of Rio Negro (3.0%). As of March 2008, BP had an asset base of US$2.4 billion, and the loan portfolio represented 46% of total assets. The Bank is well capitalized, with the equity representing 19% of total assets and a CAR of 38%. The net income amounted to US$18 million, which implied an annualized ROAA and ROAE of 2.8% and 15.6%.

The proposed investment will be a dual-currency A Loan of up to US$30 million or its equivalent in AR$ (peso-linked loan).

30.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	30.0
Equity

* These investment figures are indicative

BP has 150 branches with a strong presence in the interior of the country as well as in Buenos Aires.

- Enhance access to finance for agricultural SMEs and farmers: The project will allow BP to provide its agribusiness-related client base access to funding with longer maturities both in pesos and US$ (reaching the whole spectrum of viable small and medium ventures) and enabling these to undertake capital investments at longer tenors and attractive costs. - Contribute to build a long term peso curve: Through this financing, IFC will inject local currency liquidity in a market where bank to bank lending is practically non existent and where long term financing available is usually up to five years. Therefore, the project is intended to address an important constraint to growth for the target segments, as banks are not currently able to offer medium- or long-term term lending, given the short-term nature of their funding. - Generate positive demonstration effect: The proposed project will create a demonstration effect for other banks and thus further enhance IFC’s developmental impact and additionality in Argentina’s agricultural sector.

Support smaller agricultural SMEs and farmers which lack of sustainable funding sources partnering with a true SME bank with a strong focus on the agribusiness sector. Farmers and agricultural SMEs is a segment overlooked by larger banks that lack the scope and expertise of the different approach needed to appraise agricultural risk, and thus traditionally have an erratic approach towards this segment; In a very important countercyclical role, through this project IFC will be able to fill a financing void due to the tightening of credit markets in emerging countries, including Argentina. Unavailability of long-term funding has traditionally been one of the critical issues limiting access to finance for farmers and smaller-scale agricultural companies. In this context, IFC’s additionality derives from its ability to provide funding with longer maturities and better amortization patterns than are readily available in the market.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. During appraisal, IFC will analyze Banco Patagonia''s portfolio and the activities proposed to be supported with IFC financing for types of transactions, size, tenor and industry sectors and determine the Applicable Performance Requirements, that should, in principle, include a combination of:

- The IFC FI Exclusion List; and
- The applicable National Social and Environmental Laws and regulations;
- The Performance Standards

IFC will also review, if required, the capacity of Banco Patagonia to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.

Based on the review, the project will be required to:

- Develop an, or upgrade, if necessary, any existing Social & Environmental Management System (SEMS), prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Performance Requirements;
- Submit a periodic report to IFC as per a format to be provided by IFC.