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Summary of the Accounting Principles used to prepare the Financial Statements National Securities Superintendency (SNV) Mercantil’s financial statements are presented based on SNV accounting standards. A summary of some of the main accounting principles applied is given below: Investment Portfolio Investments in Trading Securities- Unrealized gains or losses resulting from differences in fair value due to market fluctuations are included in the results for the period. Investments in Securities Available for Sale – Recorded at their fair market value. Unrealized gains or losses resulting from differences in fair value and exchange rate fluctuations are included in shareholders’ equity. Investments in Securities Held to Maturity– Recorded at their acquisition cost, adjusted for amortization of premiums or discounts. For all portfolio investments, permanent losses in fair market value are recorded in the results for the period in which they occur. Permanent investments are stock ownership between 20% and 50% Those greater than 50% are recorded as equity participation and are consolidated, except when control is likely to be temporary. Loan Portfolio Loans are classified as overdue 30 days after their maturity. Allowances for losses on loan portfolio are determined through a collectibility assessment that quantifies the amount to 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 evaluating loans for small amounts of the same nature, these are grouped together to determine provisions. Recognition of income and expenditure Income, costs and expenses are recorded as they are earned or incurred. Interest earned on loan portfolios is recorded as income when collected. Fluctuations in the market value of derivatives are recognized in 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. 46 Annual Report 2011 Inflation Adjustment According to SNV standards, Mercantil’s financial statements, as of December 31, 1999 must be presented in historic figures. Since then Mercantil has ceased to adjust for inflation in its primary financial statements. As a result, fixed and other assets are shown at their inflation-adjusted value up to December 31, 1999. The market value determined by independent assessments is greater than the inflation cost adjusted for inflation indicated above. New additions are being recorded at their acquisition value. Accounting differences between SNV and of SUDEBAN standards and US GAAP The main accounting differences for the reconciliation of items under SNV and SUDEBAN for Mercantil Servicios Financieros are: • Amortization of premiums or discounts of securities carried out on a straight-line basis under SUDEBAN standards, applying the Constant Amortization Rate under SNV standards. • Under SNV standards, the effects of exchange fluctuations are included in the results for the period, with the exception of exchange fluctuations from available-for-sale investments and the stock trading portfolio which are included in shareholders' equity. Under SUDEBAN standards, all fluctuations are recorded in the results, with the exception of exchange fluctuations from the stock trading portfolio and the fluctuations which, as provided by the SUDEBAN exception, must subsequently be included in income when authorized by SUDEBAN. The main accounting differences between the SNV standards indicated above and USGAAP standards for Mercantil Servicios Financieros are: • Deferred Income Tax: US GAAP allows deferred tax to be recognized for the total amount of loan portfolio loss allowances, while SNV standards only allow recognition of allowances for loans classified as high risk and unrecoverable. Provision for assets received in lieu of payment: SNV standards stipulate a 100% allowance for real property received in lieu of payment after one year from the date of incorporation; under US GAAP no amortization deadlines are established.
Francisco Hung Pintura N� 5, 1964 Oil, acrylic, and plaster on canvas 145 x 228 cm 47 Mercantil Servicios Financieros
Page 1 and 2: AnnualReport 2011
Page 3 and 4: AnnualReport 2 0 1 1 CONTENTS Merca
Page 5 and 6: Mercantil is Venezuela’s in equit
Page 7 and 8: Financial Highligths Earnings Conso
Page 9 and 10: Notice of Ordinary General Sharehol
Page 11 and 12: * Dollar figures are given for refe
Page 13 and 14: The Stock Repurchase Program initia
Page 15 and 16: Inflation closed at 6.9% (6.5% in 2
Page 17 and 18: Mercantil Personal and Commercial O
Page 19 and 20: It also launched the Gold and Plati
Page 21 and 22: Special mention should be made of M
Page 23 and 24: Statutory Auditors’ Report ��
Page 25 and 26: Financial Statements (In accordance
Page 27 and 28: Consolidated Balance Sheet (In thou
Page 30 and 31: Fernando Irazábal Bestia 10, aroun
Page 32 and 33: Latin America During 2011 the regio
Page 34 and 35: Francisco Hung Materias flotantes,
Page 36 and 37: In the insurance business in Venezu
Page 38 and 39: Investments Portfolio by Issuer Bs
Page 40 and 41: Loan Portfolio by Business Segment
Page 42 and 43: Deposits by Business Segment Bs 81,
Page 44 and 45: Loan Portfolio Evolution Million Bo
Page 46 and 47: Operating Expenses Net Income Year
Page 50 and 51: Humberto Jaimes Sánchez Exterior 1
Page 52 and 53: Personal Banking Deposits Year 2011
Page 54 and 55: At the close of 2011, Commercial Ba
Page 56 and 57: Corporate Banking During 2011, the
Page 58 and 59: Corporate Products The Deposit Prod
Page 60 and 61: In the Venezuelan money market, the
Page 62 and 63: Portfolio of Investments Available
Page 64 and 65: Private Banking and Wealth Manageme
Page 66 and 67: José Ramón Sánchez Las tres aleg
Page 68 and 69: In 2011, options or service functio
Page 70 and 71: Alberto Brandt Untitled, around 195
Page 72 and 73: Harry Abend Relieve, 1964 Bronze 1/
Page 74 and 75: Credit Risk Breakdown of Credit Ris
Page 76 and 77: Market Risk A financial institution
Page 78 and 79: Price Risk Positions of Interest Ra
Page 80 and 81: Maruja Rolando Untitled, 1960 Oil o
Page 82 and 83: (1) Dollar figures are given for re
Page 84 and 85: Mercantil Commercebank Florida BanC
Page 86 and 87: Other subsidiaries of Mercantil Ser
Page 88 and 89: Humberto Jaimes Sánchez Stage of b
Page 91 and 92: Prevention and Control of Money Lau
Page 93 and 94: Evaluation Special PCLC/FT - AML/TF
Page 96 and 97: 94 Annual Report 2011
Page 98 and 99:
Social Development and Healthcare P
Page 100 and 101:
Elsa Gramcko R-32, 1960 Acrylic, go
Page 102 and 103:
Another very significant aspect of
Page 104 and 105:
Board of Directors’ Compensation
Page 106 and 107:
Internal Audit Manager In accordanc
Page 108 and 109:
Ángel Hurtado Noche transfigurada.
Page 110 and 111:
Awards and Acknowledgements The wor
Page 112 and 113:
Alberto Brandt Fantasía, undated O
Page 114 and 115:
Víctor J. Sierra A. Member of the
Page 116 and 117:
Nerio Rosales Rengifo Member of the
Page 118:
Alberto Benshimol M. Manager of Ins
Page 121 and 122:
MERCANTIL, C.A. BANCO UNIVERSAL Ave
Page 123 and 124:
I n f o r m a l i s m i n V e n e z
Page 125 and 126:
Carlos Sosa (Caracas, 1950) Sosa is
Page 127 and 128:
Manuel Mérida (Carabobo, 1939) Pai
Page 129 and 130:
Alberto Brandt Untitled, around 195
Page 131:
Avenida Andrés Bello Nº 1, Edific
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Annualreport

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