for the fiscal year ended December 31, 2009

or

o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of event requiring this Shell Company Report

Commission File Number 000-30852

GRUPO FINANCIERO GALICIA S.A.

(Exact name of Registrant as specified in its charter)

GALICIA FINANCIAL GROUP
(Translation of Registrant’s name into English)

REPUBLIC OF ARGENTINA
(Jurisdiction of incorporation or organization)

Grupo Financiero Galicia S.A.
Tte. Gral. Juan D. Perón 456
C1038 AAJ-Buenos Aires, Argentina
(Address of principal executive offices)

Pedro Richards, Chief Executive Officer
Tel: 54 11 4 343 7528 / Fax: 54 11 4 331 9183, prichards@gfgsa.com
Perón 456, 2° Piso C1038AAJ Buenos Aires ARGENTINA
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
American Depositary Shares, each representing ten Class B ordinary Shares

Name of each exchange on which registered

Nasdaq Capital Market

Title of each class

Class B Ordinary Shares, Ps.1.00 par value, (not for trading but only in connection with the listing of the American Depositary Shares on the Nasdaq Capital Market)

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Class A Ordinary Shares, Ps.1.00 par value		281,221,650
Class B Ordinary Shares, Ps.1.00 par value		960,185,367

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and larger accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o		International Financial Reporting Standards As issued by the International Accounting Standards Board o		Other þ

Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 þ

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

 

 

TABLE OF CONTENTS

		Page
Item 1. Identity of Directors, Senior Management and Advisers			3
Item 2. Offer Statistics and Expected Timetable			3
Item 3. Key Information			3
Item 3.A. Selected Financial Data			3
Exchange Rate Information			6
Item 3.B. Capitalization and Indebtedness			7
Item 3.C. Reasons for the Offer and Use of Proceeds			7
Item 3.D. Risk Factors			7
Item 4. Information on the Company			17
History and Development of the Company			17
Organizational Structure			17
History			18
Business			24
Competition			31
Sales and Marketing			33
Property			34
Capital Investments and Divestitures			35
Selected Statistical Information			37
Government Regulation			70
Argentine Banking Regulation			74
Credit Cards Regulation			82
Concealment and Laundering of Assets of a Criminal Origin			83
Item 4A. Unresolved Staff Comments			85
Item 5. Operating and Financial Review and Prospects			85
Item 5.A. Operating Results			85
Overview			85
The Argentine Economy, Financial System and Insurance Industry in the Three Years Ended December 31, 2009			86
Inflation			90
Currency Composition of Our Balance Sheet			90
Results of Operations for the Fiscal Years Ended December 31, 2009, December 31, 2008 and December 31, 2007			91
U.S. GAAP and Argentine Banking GAAP Reconciliation			104
Results by Segments			109
Consolidated Assets			114
Exposure to the Argentine Public Sector			115
Securitization of Assets			116
Funding			116
Contractual Obligations			121
Off-Balance Sheet Arrangements			122
Critical Accounting Policies			123
U.S. GAAP — Critical Accounting Policies			124
Principal Trends			128
Item 5.B. Liquidity and Capital Resources			129
Liquidity — Holding Company on an Individual Basis			129
Consolidated Cash Flows			130
Banco Galicia’s Liquidity Management			134
Capital			136
Capital Expenditures			136
Item 6. Directors, Senior Management and Employees			137
Our Board of Directors			137
Our Audit Committee			139

TABLE OF CONTENTS
(continued)

		Page
Our Supervisory Committee			139
Compensation of Our Directors			141
Management of Grupo Financiero Galicia			141
Board of Directors of Banco Galicia			142
Functions of the Board of Directors of Banco Galicia			143
Banco Galicia’s Executive Officers			145
Banco Galicia’s Supervisory Committee			148
Compensation of Banco Galicia’s Directors and Officers			149
Employees			150
Nasdaq Corporate Governance Standards			150
Share Ownership			153
Item 7. Major Shareholders and Related Party Transactions			153
Major Shareholders			153
Related Party Transactions			154
Item 8. Financial Information			155
Legal Proceedings			156
Dividend Policy and Dividends			157
Significant Changes			159
Item 9. The Offer and Listing			160
Shares and ADSs			160
Argentine Securities Market			162
Market Regulations			163
Item 10. Additional Information			164
Description of Our Bylaws			164
Exchange Controls			171
Taxation			171
Material Contracts			176
Documents on Display			177
Item 11. Quantitative and Qualitative Disclosures About Market Risk			177
General			177
Interest Rate Risk			178
Foreign Exchange Rate Risk			181
Currency Mismatches			182
Market Risk			185
Item 12. Description of Securities Other Than Equity Securities			185
Item 12.D. American Depositary Shares			185
Fees and Charges Applicable to ADS Holders			185
Fees and Direct and Indirect Payments Made by the Depositary to Us			186
Item 13. Defaults, Dividend Arrearages and Delinquencies			187
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			187
Item 15. Controls and Procedures			187
Item 16. [Reserved]			188
Item 16A. Audit Committee Financial Expert			188
Item 16B. Code of Ethics			188
Item 16C. Principal Accountants’ Fees and Services			188
Item 16D. Exemptions from the Listing Standards for Audit Committees			189
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			189
Item 17. Financial Statements			190
Item 18. Financial Statements			190
Item 19. Exhibits			190
SIGNATURE			192
Exhibit 2.4
Exhibit 4.7
Exhibit 12.1
Exhibit 12.2
Exhibit 13.1
Exhibit 13.2

PRESENTATION OF FINANCIAL INFORMATION

Grupo Financiero Galicia S.A. (“Grupo Financiero Galicia”) is a financial services holding company incorporated in Argentina and is one of Argentina’s largest financial services groups. In this annual report, references to “we”, “our”, and “us” are to Grupo Financiero Galicia and its consolidated subsidiaries, except where otherwise noted. Our consolidated financial statements consolidate the accounts of the following companies:

•

Grupo Financiero Galicia S.A.;

•

Banco de Galicia y Buenos Aires S.A., our largest subsidiary, its wholly-owned subsidiaries Banco Galicia Uruguay S.A., (“Galicia Uruguay”) and Galicia Cayman Limited (“Galicia Cayman”), and other subsidiaries and affiliated companies required to be consolidated under Argentine Banking GAAP (collectively “Banco Galicia” or the “Bank” except where otherwise noted);

•

Tarjetas Regionales S.A., a wholly owned subsidiary of the Bank, and its operating subsidiaries;

•

Sudamericana Holding S.A., and its subsidiaries;

•

Galicia Warrants S.A.;

•

Net Investment S.A.,

•

Galval Agente de Valores S.A.; and

•

GV Mandataria de Valores S.A. (“GV Mandataria”).

We maintain our financial books and records in Argentine Pesos and prepare our financial statements in conformity with the accounting rules of the Argentine Central Bank, which entity prescribes the generally accepted accounting principles for all financial institutions in Argentina. This annual report refers to those accounting principles as “Argentine Banking GAAP”. Argentine Banking GAAP differs in certain relevant respects from generally accepted accounting principles in Argentina, which we refer to as “Argentine GAAP”. Argentine Banking GAAP also differs in certain significant respects from the generally accepted accounting principles in the United States, which we refer to as “U.S. GAAP”. See Note 33 to our consolidated audited financial statements included in this annual report for a description of the differences between Argentine GAAP and Argentine Banking GAAP, and Item 5. “Operating and Financial Review and Prospects-Item 5.A. “Operating Results-U.S. GAAP and Argentine Banking GAAP Reconciliation” and Note 35 to our consolidated audited financial statements for a reconciliation of the principal differences between Argentine Banking GAAP and U.S. GAAP and a reconciliation to U.S. GAAP of our net income and total shareholders’ equity for the three fiscal years ended December 31, 2009.

In this annual report, references to “US$”, “US Dollars”, and “Dollars” are to United States Dollars and references to “Ps.” or “Pesos” are to Argentine Pesos. The exchange rate used in translating Pesos into US Dollars and used in calculating the convenience translations included in the following tables is the “Reference Exchange Rate” which is published by the Argentine Central Bank and which was Ps.3.7967, Ps.3.4537 and Ps.3.1510 per US$1.00 as of December 31, 2009, December 31, 2008 and December 31, 2007, respectively. The exchange rate translations contained in this annual report should not be construed as representations that the stated Peso amounts actually represent or have been or could be converted into US Dollars at the rates indicated or at any other rate.

Our fiscal year ends on December 31, and references in this annual report to any specific fiscal year are to the twelve-month period ended December 31 of such year.

References to the Government are to the Argentine Federal Government unless otherwise indicated.

Unless otherwise indicated, all information regarding deposit and loan market shares and other financial industry information has been derived from information published by the Argentine Central Bank.

We have expressed all amounts in millions of Pesos, except percentages, ratios, multiples and per-share data.

In this annual report, we refer to the “2001-2002 crisis” as the series of events that unfolded in Argentina between late 2001 and 2002, a period of great political, economic and social instability, with severe consequences for the Argentine economy by any variable used as a measure, including a banking crisis, and a material negative impact on financial institutions operating in Argentina, including us. The 2001-2002 crisis triggered a series of far reaching measures that produced structural changes in the Argentine economy and legal framework.

Also, in this annual report, “asymmetric pesification” refers to the compulsory conversion in January 2002 of most Dollar-denominated assets and certain Dollar-denominated liabilities held by financial institutions operating in Argentina, into Peso-denominated assets and liabilities at different exchange rates. In addition, “Compensatory Bond” and “Hedge Bond” refer to the bonds that the Government issued to the Bank (as well as to other financial institutions), as compensation for the negative effects of the asymmetric pesification on the Bank’s and other financial institutions’ financial condition. This is more fully described in Item 4. “Information on the Company-Government Regulation-Compensation to Financial Institutions”.

FORWARD LOOKING STATEMENTS

This annual report contains forward-looking statements that involve substantial risks and uncertainties, including, in particular, statements about our plans, strategies and prospects under the captions Item 4. “Information on the Company-Capital Investments and Divestitures”, Item 5. “Operating and Financial Review and Prospects-Item 5.A. Operating Results-Principal Trends” and Item 5. “Operating and Financial Review and Prospects-Item 5.B. Liquidity and Capital Resources”. All statements other than statements of historical facts contained in this annual report (including statements regarding our future financial position, business strategy, budgets, projected costs and management’s plans and objectives for future operations) are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of such words as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “continue” or other similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, no assurance can be provided with respect to these statements. Because these statements are subject to risks and uncertainties, actual results may differ materially and adversely from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially and adversely from those contemplated in such forward-looking statements include but are not limited to:

•

changes in general political, legal, social or other conditions in Argentina;

•

changes in capital markets in general that may affect policies or attitudes toward lending to Argentina or Argentine companies, including expected or unexpected turbulence or volatility in domestic or international financial markets;

•

changes in regional, national and international business and economic conditions, including inflation;

•

changes in government regulation, including tax regulations and changes in or failures to comply with banking or other regulations;

•

increased competition in the banking, financial services, credit card services, insurance, asset management and related industries;

•

changes in interest rates which may, among other things, adversely affect margins;

•

a loss of market share by any of our main businesses;

•

a change in the credit cycle and increased borrowers defaults;

•

our inability to sustain or improve our performance;

•

our inability to obtain additional debt or equity financing on attractive conditions or at all, which may limit our ability to fund existing operations and to finance new activities;

•

technological changes, changes in consumer spending and saving habits, our inability to implement new technologies, and

•

other factors discussed under Item 3. “Key Information-Item 3.D. “Risk Factors” in this annual report.

You should not place undue reliance on forward-looking statements, which speak only as of the date that they were made. Moreover, you should consider these cautionary statements in connection with any written or oral forward-looking statements that we may issue in the future. We do not undertake any obligation to release publicly any revisions to forward-looking statements after completion of this annual report to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

In light of the risks and uncertainties described above, the forward-looking events and circumstances discussed in this annual report might not occur and are not guarantees of future performance.

PART I

		Fiscal Year Ended December 31,
		2009				2009				2008				2007				2006				2005
		(in millions
		of US
		Dollars,
		except as
		noted) (1)
		Unaudited				(in millions of Pesos, except as noted) (1)
Consolidated Income Statement in Accordance with Argentine Banking GAAP
Financial Income			791.6				3,005.6				2,559.3				1,997.9				2,229.8				2,398.6
Financial Expenses			384.7				1,460.5				1,421.0				1,246.7				1,851.6				1,845.9
Net Financial Income (2)			407.0				1,545.1				1,138.3				751.2				378.2				552.7
Provision for Losses on Loans and Other Receivables			168.4				639.5				395.4				255.5				110.9				76.7
Income before Taxes			101.5				385.3				250.8				117.5				75.3				126.5
Income Tax			(41.1	)			(156.0	)			(74.0	)			(71.5	)			(94.2	)			(19.3	)
Net Income / (Loss)			60.4				229.3				176.8				46.0				(18.9	)			107.2
Earnings / (Loss) per Share (in Pesos)			0.049				0.185				0.142				0.037				(0.015	)			0.086
Cash Dividends per Share (in Pesos)			—				—				—				—				—				—
Stock Dividends per Share (in Pesos)			—				—				—				—				—				—
Book Value per Share (in Pesos)			0.435				1.653				1.487				1.333				1.296				1.310
Amounts in Accordance with U.S. GAAP
Net Income / (Loss)			202.9				770.2				(1,171.0	)			592.9				3,524.9				731.0
Basic and Diluted Earnings / (Losses) per Share (in Pesos)			0.2				0.6				(0.9	)			0.5				2.8				0.6
Book Value / (Deficit) per Share (in Pesos)			0.3				1.0				(0.6	)			0.2				0.1				(1.7	)
Financial Income			888.9				3,374.8				1,201.7				2,433.2				5,456.4				2,958.7
Financial Expenses			377.8				1,434.4				1,391.3				1,160.1				1,863.6				1,845.9
Net Financial Income / (Loss)			511.1				1,940.4				(189.6	)			1,273.1				3,592.8				1,112.8
Provision for Losses on Loans and Other Receivables			138.9				527.3				450.1				203.4				160.3				113.5
Income Tax			(14.4	)			(54.5	)			50.9				(92.5	)			(277.1	)			19.3
Consolidated Balance Sheet in Accordance with Argentine Banking GAAP
Cash and Due from Banks			973.6				3,696.3				3,405.1				2,960.0				2,294.8				1,041.2
Government Securities, Net			1,029.1				3,907.2				1,531.8				1,693.0				3,188.3				5,967.4
Loans, Net			3,549.9				13,477.9				11,774.6				11,601.0				10,525.0				10,557.6
Total Assets			7,270.1				27,602.4				24,735.8				22,828.7				23,615.4				25,638.1
Deposits			4,488.0				17,039.4				14,056.1				13,165.6				10,779.4				8,421.7
Other Funds (3)			2,241.6				8,510.5				8,834.0				8,008.6				11,227.5				15,589.6
Total Shareholders’ Equity			540.6				2,052.5				1,845.7				1,654.5				1,608.5				1,626.8
Average Total Assets (4)			6,501.8				24,685.3				23,412.5				21,332.4				24,614.5				24,238.1
Percentage of Period-end Balance Sheet Items Denominated in Dollars:
Loans, Net of Allowances			17.78				17.78				16.97				15.13				16.66				9.84
Total Assets			24.95				24.95				28.85				27.60				28.94				26.55
Deposits			18.16				18.16				16.98				15.53				14.13				15.55
Total Liabilities			27.73				27.73				32.47				32.84				30.41				25.81
Amounts in Accordance with U.S. GAAP
Trading Securities			529.9				2,011.9				989.6				476.2				208.2				790.0
Available-for-Sale Securities			1,031.7				3,916.9				2,050.0				3,717.3				5,214.6				5,350.3
Total Assets			8,001.1				30,377.6				25,159.7				24,429.1				24,107.0				19,949.3
Total Liabilities			7,675.5				29,141.4				25,914.1				24,191.0				23,961.2				22,077.6
Shareholders’ Equity (Deficit)			325.6				1,236.3				(754.4	)			238.1				145.8				(2,128.3	)

The ratios disclosed above are considered significant for the Management despite of the fact that they are not a specific requirement of any GAAP.

As of June 24, 2010, the exchange rate was Ps.3.9300 for US$1.00.

Item 3.B. Capitalization and Indebtedness

Not applicable.

Item 3.C. Reasons for the Offer and Use of Proceeds

Not applicable.

Item 3.D. Risk Factors

You should carefully consider the risks described below in addition to the other information contained in this annual report. In addition, most, if not all, of the risks described below must be evaluated bearing in mind that our most important asset is our equity interest in Banco Galicia, thus, a material change in Banco Galicia’s shareholders’ equity or income statement would also adversely affect our businesses and results of operations. We may also face risks and uncertainties that are not presently known to us or that we currently deem immaterial, which may impair our business. Our operations, property and customers are located mainly in Argentina. Accordingly, the quality of our customer portfolio, loan portfolio, financial condition and results of operations depend, to a significant extent, on the macroeconomic and political conditions prevailing in Argentina. In general, the risk assumed when investing in the securities of issuers from countries such as Argentina, is higher than when investing in the securities of issuers from developed countries.

Risk Factors Relating to Argentina

Political and economic instability in Argentina and Government intervention in the economy as well as market conditions may adversely affect Grupo Financiero Galicia’s business and prospects.

Grupo Financiero Galicia’s results of operations may be affected by inflation, fluctuations in the exchange rate, modifications in interest rates, changes in the Government’s policies (among other, foreign investments or tax policies), social instability and other political, economic or international developments in Argentina or somehow affecting the country. It should be taken into account that in recent years the Government has exercised and currently exercises a marked influence on the Argentine economy.

In turn, Argentina’s economy has been characterized in recent decades by a high level of instability and volatility, periods of low or negative growth and high and variable inflation and devaluation levels. During 2001 and 2002, Argentina went through a period of serious political, economic and social instability, leading to the default on Argentina’s sovereign debt payments and the devaluation of the Argentine peso, after more than 10 years of fixed exchange rate parity with the dollar.

Therefore, the Government has enacted various broad scope laws and regulations which affect the economy in general and it cannot be assured that any change in the future, including the enacting of regulations by the Government or Argentine authorities, will not substantially and adversely affect the financial condition or the results of operations of private sector companies, including Grupo Financiero Galicia and its subsidiaries, or the rights of the holders of securities issued by such institutions or their value.

Despite the economic growth achieved during the last years, Argentina may, in the future, experience another economic recession with high inflation and unemployment rates. Consequently, a substantial adverse effect on the results of operations of Grupo Financiero Galicia and its subsidiaries could take place.

Inflation could increase and affect the economy and Grupo Financiero Galicia’s financial condition.

Following the decision in January 2002 to abandon the fixed exchange rate regime set forth in the Convertibility Law, the devaluation of the peso had an effect on the domestic price system and generated inflation in 2002 after several years of price stability.

In recent months, some private analysts have warned of a rise in inflation, which, according to them, will not be demonstrated by the official information. During 2009, inflation according to the Consumer Price Index provided by the National Institute for Statistic and Census (“INDEC”) was 7.7% -in comparison with 7.2% for the previous year-, while according to private estimates, consumer prices registered a 16.3% growth and according to the Internal Wholesale Price Index (“IWPI”) there was an increase of 10.0%.

General increases in salaries, public expenditure and the tariff settlement for public services may have a direct impact on inflation. Given the current uncertainties, it is not possible to assure that inflation will not increase or that the value of the peso will remain stable. In the past, inflation significantly undermined the Argentine economy and the Government’s ability to create conditions that would permit growth. In addition, high inflation or high volatility in inflation rates would negatively and materially affect the level of economic activity and employment, and the financial system’s volume of operations.

High inflation would also undermine Argentina’s foreign competitiveness, with the same negative effect on the level of economic activity, employment, real salaries, consumption and interest rates. High volatility of economic variables and uncertainty would shorten contractual terms and would erode economic agents’ planning and decision making capacity, affecting economic activity, especially financial system activity. An increase in inflation could affect the operations of Grupo Financiero Galicia’s subsidiaries and, especially, the development of financial intermediation activities of Banco Galicia, its business, financial condition, results of operations and prospects.

Argentina’s ability to obtain financing and attract direct foreign investment is limited, which could adversely affect the economy.

In the first half of 2005, Argentina restructured part of its sovereign foreign debt, which had been in default since late 2001. According to the Government, the exchange for the restructuring of said debt was accepted by 76% of creditors. However, holders of approximately US$20 billion of the sovereign debt subject to the restructuring offer, mainly from the United States of America, Italy and Germany did not accept the exchange and some of them initiated litigation against Argentina (“holdouts”) and have requested the attachment of accounts of the Government abroad with different results.

In November 2009, the Argentine National Congress ( Congreso de la Nación Argentina ) approved a suspension until December 31, 2010 of the “ lock law ” (which ended the Argentina external debt exchange), which allowed Argentina to reopen the debt exchange with holdouts, thus those holders of securities that were not included in the exchange carried out in 2005 were entitled to exchange their securities for new debt securities. The exchange period started on May 3, 2010. The wholesale tranche closed on May 14, while the retail tranche closed on June 22, and according to the Government there was a 66% acceptance rate.

Additionally, the Government has issued a necessary and urgent decree ordering the transfer of a percentage of freely available reserves of the Argentine Central Bank for the payment of sovereign debt. As a result, certain judges of the City and State of New York have issued certain preliminary injunctions over the funds of the Argentine Central Bank deposited in financial institutions of the United States, impeding the transfer thereof. Notwithstanding the foregoing, new legal proceedings and new precautionary measures against Argentina could be brought in the future with respect to the holdouts, which could have a significant adverse effect on the Argentine economy.

On September 2, 2008, Argentina announced its intention to cancel its sovereign debt with the creditor nations of the Paris Club. The Paris Club announced its acceptance of such decision. As of the date of this report, the amount of the debt to be cancelled, terms, and extent of the representations of the parties are still unknown. Almost 70% of Argentina’s debt with such forum is with Germany, Japan and Spain, but the Paris Club includes creditors such as the United States of America and other members of the Group of Eight. Failure to agree with the Paris Club could curb financing from multilateral financial institutions, which could adversely affect Argentina’s economic growth and public finances, and, consequently, adversely affect Grupo Financiero Galicia’s business, financial condition and results of operations.

In addition, foreign investors in various Argentine companies, including public utilities companies and a group of holders which did not participate in the debt restructuring, filed claims that amount up to over US$20 billion with the International Center for Settlement of Investment Disputes (“ICSID”), alleging that the emergency measures adopted by the Government are inconsistent with the rules of fair and equal treatment set forth in the different bilateral investment treaties signed by Argentina. As of the date hereof, the ICSID has ordered the Government to pay an amount of US$1 billion, plus interest and costs, on these claims. Also, regarding the same issue, and as of the date hereof, the United Nations Commission on International Trade Law (“UNCITRAL”) issued two awards against the Government to pay US$240 million plus interest and costs. Recently, a group of bondholders who did not participate in the external public debt restructuring, submitted before the ICSID an arbitration request for the amount of US$4.4 billion.

Argentina’s default on payments, the delay in completing the debt restructuring with holdout creditors, on the one hand, and the above-mentioned claims brought against the country, on the other hand, could hinder the fluid access to capital markets and flows of direct foreign investment by the Government and the country’s private sector. Consequently, the Government could lack sufficient financial resources to foster growth. Additionally, private sector investment, which is necessary for the same purposes, may not materialize due to the lack of financing.

If Argentina’s ability to access financing from international capital markets and attract direct foreign investment is restricted, there is a risk that it may lack sufficient funds in order to restart the investment cycle and sustain an elevated level of economic growth. As a consequence, the country’s fiscal condition could be affected, which could lead to higher inflation and could negatively affect the Government’s ability to implement economic policies that would foster economic growth. Therefore, if a sustained growth cycle is not achieved, political, social and economic instability could occur. All of these events would have an adverse effect on the Argentine economic outlook, and, consequently, an adverse impact on Grupo Financiero Galicia’s activities.

An excessive real appreciation of the peso could create a recession and renewed pressures on the foreign exchange market.

Currently, the Argentine Central Bank maintains a policy of intervention in the foreign exchange market, aiming at preventing sudden fluctuations in the national currency.

Nevertheless, a real significant increase of the peso would affect Argentina’s competitiveness, substantially affecting exports, and this, in turn could prompt new recessionary pressures on the country’s economy and a new imbalance in the foreign exchange market, which could prompt great volatility in the exchange rate.

Most importantly, in the short term, a significant appreciation of the real exchange rate could substantially reduce Argentine public sector’s tax income in real terms, given the strong reliance on taxes on exports (withholdings). This could worsen the public sector’s financial condition, likely prompting an increase in taxes or the printing of money to solve the issue. The latter would likely lead to higher inflation (see “Inflation could increase and affect the economy and Grupo Financiero Galicia’s financial condition ”), and both measures would prompt recessionary effects on the economy, and therefore in the results of Grupo Financiero Galicia.

An eventual future devaluation of the peso could adversely affect the Argentine economy and Grupo Financiero Galicia.

Following the significant devaluation in the first half of 2002, the peso has remained stable at approximately 3 pesos per dollar since early 2003, and as a consequence of the world financial and economic crisis and other aspects of the local political and economic context the peso underwent a gradual devaluation. As of mid-June 2010, the peso was valued at around 3.95 per dollar. It cannot be assured that in the future, and due to the different local and international circumstances, there will not be abrupt movements in the value of the peso.

Despite the positive effects of the real devaluation of the peso in 2002 on the competitiveness of certain sectors of the Argentine economy, the depreciation has had a far-reaching negative impact on the Argentine economy in general, as well as on businesses’ and individuals’ financial condition. The devaluation of the peso had a negative impact on the ability of Argentine businesses to honor their debt denominated in foreign currency, led to high inflation, strongly reduced real wages, had a negative impact on businesses whose activity was dependent on domestic market demand, such as public utilities and the financial industry. The government’s ability to honor its foreign debt obligations was also negatively affected.

If the peso were to devalue significantly, the related negative effects on the Argentine economy could repeat, with adverse consequences on Banco Galicia and Grupo Financiero Galicia’s businesses, which could impair their ability to honor their obligations in foreign currency.

Argentina’s economy and its goods and financial services markets and securities markets remain vulnerable to external shocks which could have an adverse effect on the country’s economic growth and Grupo Financiero Galicia’s prospects.

Financial and securities markets in Argentina are influenced, to varying degrees, by economic and market conditions in other countries. Although said conditions vary from country to country, investor reactions to events occurring in one country may substantially affect capital flows to issuers and securities of markets in other countries, with similar characteristics, including Argentina. Argentina is viewed by the financial markets as being a “high beta” country, meaning that its domestic markets are highly sensitive to what happens in the international financial markets. In particular, during periods of high uncertainty in the international markets, entities generally choose to invest in high quality assets (flight to quality) to the detriment of emerging market assets. Lower capital inflows and declining prices in stock markets negatively affect the real economy of a country through higher interest rates or exchange rate volatility. In addition, foreign trade is another way through which the effects of the crisis are spread, as these transactions decrease in those countries which are going through a recession period, and, in turn, have an impact in the real economy of other countries, such as Argentina.

In the past, Argentina’s economy was adversely affected by developments in other markets, such as, among others, the events that occurred in Mexico at the end of 1994 and the collapse of various Asian economies between 1997 and 1998. There is a risk that similar events may affect the Argentine economy in the future.

In addition, at the end of 2007 and in early 2008, the Unites States of America’s economy started to show signs of weakness, stemming from the uncertainty provoked by the course of the world economy. The crisis in the subprime mortgage market in the United States of America spread quickly into other geographical regions, such as Europe, Asia and Latin America.

The volume of default on payments of mortgage loans in the subprime mortgage market in the United States increased dramatically due to the decrease in real property prices and higher interest rates. The considerable decrease in the value of financial products related to these subprime mortgage market loans initially led to the closing and bankruptcy of certain banks, which later turned into a general confidence and liquidity crisis in the international financial sector.

Given these events, long-term interest rates started to decrease from the second half of 2008. With the outbreak of the crisis in the international financial markets, central banks mainly focused on the potential negative effects on their economies. However, the dollar started to weaken reaching historically low values during 2007, when compared especially to a strengthened Euro, which reached levels of around US$1.60 per Euro, which situation is currently reversed as a result of the dissemination to European markets of the lack of confidence in the system that began in the United States of America. During the crisis, the principal financial institutions in the world have suffered substantial losses, further increasing the lack of confidence in the international financial system. At the same time, various financial institutions have become insolvent, bankrupt or had to be rescued by their country’s regulators or have merged with other institutions. Apart from the huge decreases in the world’s principal stock exchanges to historic levels during 2008 and 2009, there have been, in the context of a decelerating world economy, strong fluctuations in the price of oil and an abrupt fall in the price of other commodities.

As a consequence of the financial and economic crisis, during 2008 and 2009 the world’s major economies have entered into recessions or have shown a marked fall in their economic activities, which could trigger a less favorable or an unfavorable international environment for Argentina, forcing domestic economic policy adjustments by the Argentine Government, which adjustments could trigger a lower growth in the economy.

Certain market segments in which Grupo Financiero Galicia’s subsidiaries participate are vulnerable to economic recessions like the one described in this section. This and other new recessions have slowed and may in the future slow the growth of such segments and, consequently, adversely affect the business of Grupo Financiero Galicia in these areas.

The United States of America and the world’s major economies have shown signs of recovery and confidence in the financial system during recent quarters. However, there are risks that may disrupt this process, since there persist high levels of indebtedness in the public and private sector, an unrecuperated credit market and high levels of unemployment in the developed economies.

In particular, in Europe the recovery appears to be weaker, and there are differences between each country. Doubts regarding the fiscal situation and solvency of certain members of the European Union (mainly Greece, Spain, Portugal and Ireland) have generated an increase in uncertainty and greater volatility in international financial markets. The 2008-2009 crisis led to a higher fiscal deterioration of these economies, which had already been showing significant structural deficits and indebtedness, and caused uncertainty regarding their ability to honor their debts.

The interruption of the recovery process of the developed economies, or the effects of the current crisis or a new economic and/or global financial crisis, could affect Argentina’s economy, and, consequently, adversely affect the business of Grupo Financiero Galicia and its subsidiaries, including Banco Galicia, which could adversely affect their results and Grupo Financiero Galicia.

A decline in the international prices for Argentina’s main commodity exports could have an adverse effect on Argentina’s economic growth and on Grupo Financiero Galicia’s prospects.

Argentina’s financial recovery from the 2001-2002 crisis occurred in a context of price increases for Argentina’s commodity exports, such as soy. High commodity prices have contributed to the increase in the Argentine exports since the third quarter of 2002 and to high Government tax revenues from export withholdings.

The prices of the commodities that Argentina exports, though still at high historical levels, have decreased as a consequence of the world crisis which might affect future export levels. Such occurrence would have a negative impact on the levels of Government revenues and the Government’s ability to service its sovereign debt, and could either generate recessionary or inflationary pressures, depending on the Government’s reaction. Either of these results would adversely impact the prospects of the financial system and, therefore, of Grupo Financiero Galicia.

The foreign exchange market is subject to controls, which could adversely affect the ability and method in which Grupo Financiero Galicia and its subsidiaries repays its obligations denominated in a foreign currency.

Decree No. 1570/01, effective as of December 3, 2001, established certain restrictions on the manner in which foreign currencies are transferred abroad, prohibiting most ordinary foreign currency transfers abroad. Decree No. 1606/01 maintained the same provisions, but incorporated additional exceptions regarding the transfers of funds entering the country after December 3, 2001 to foreign countries.

Additionally, the Government issued Decree No. 616/05 (and supplementary regulations), which established new rules for capital movements into and from Argentina. Basically, this decree establishes that funds transferred into Argentina by residents and non-residents are subject to the deposit of a 30% reserve thereof, which must be deposited in dollars for one year in a local financial institution without bearing interest. Please note that regulations in force established certain exceptions to such deposit requirement. Moreover, the legislation provides that, subject to certain exceptions, the transfer of currency from Argentina to foreign accounts must be approved by the Argentine Central Bank, and establishes certain maximum amounts that individuals are allowed to acquire in the exchange market. For further information on these and other similar measures on foreign exchange controls, see Item 4. “Information on the Company-Government Regulation-Foreign Exchange Market” in this report.

It is not possible to assure you that the above-mentioned regulations will not be modified or to rule out that new regulations may be passed in the future maximizing or increasing even further restrictions for the inflow and outflow of foreign currencies in the local foreign exchange market. Those measures, as well as additional controls and/or restrictions, could adversely affect Grupo Financiero Galicia’s ability to access the international capital markets and could impair Grupo Financiero Galicia’s ability to pay principal and/or interest on its debt obligations in foreign currency, all of which could adversely affect Grupo Financiero Galicia’s financial condition and results of operations. Investors resident or not resident of Argentina holding assets abroad should take special notice of these regulations on access to the foreign exchange market.

High volatility in the regulatory framework could adversely affect the country’s economy in general as well as financial institutions and Grupo Financiero Galicia and/or its subsidiaries

Argentine governments have historically exercised a significant influence over the economy, and financial institutions in particular have operated in a highly regulated environment in different periods. Since December 2001, the Argentine government has enacted numerous, far-reaching laws and regulations affecting the economy in general as well as financial institutions in particular. The laws and regulations currently governing the economy and the financial sector could change in the future.

Various parliamentary projects to reform the Financial Institutions Act are under study, but the scope of such possible amendments is uncertain, and the impact on Grupo Financiero Galicia and its subsidiaries’ business is also uncertain.

It is not possible to guarantee that future changes in the regulatory framework and government policies will not adversely affect the activities carried out by Grupo Financiero Galicia’s subsidiaries, including Banco Galicia, and consequently, Grupo Financiero Galicia. The lack of a stable regulatory framework would impose significant restrictions on the financial system’s activities and on Grupo Financiero Galicia’s businesses, including Banco Galicia, and would cause uncertainty as regards Grupo Financiero Galicia’s future financial condition and results of operations.

Foreign judgments may not be able to be normally enforced in Argentina

Grupo Financiero Galicia and most of its subsidiaries are companies incorporated under the laws of Argentina. Most of their shareholders, directors, members of the Supervisory Syndics’ Committee, officers, and some specialists named herein are domiciled in Argentina and the most significant part of their assets is located in Argentina.

Under Argentine law, the enforcement of foreign judgments shall be allowed provided that the requirements in articles 517 to 519 of the National Code of Civil and Commercial Procedures are met or, if it is one of the powers reserved to the Provinces, the requirements in the local codes of procedure, and provided that the foreign judgment does not infringe the principles of public policy in Argentine law, as determined by the competent courts of Argentina.

As such, your ability to enforce a judgment of, among others, a US court against Grupo Financiero Galicia or its subsidiaries in Argentina may be limited.

Risk Factors Relating to the Argentine Financial System

The recovery of the financial system is dependent upon the ability of financial institutions, including Banco Galicia, to maintain and increase the confidence of depositors.

The measures implemented by the Argentine Government in late 2001 and early 2002, in particular the restrictions imposed on depositors to withdraw money freely from banks and the pesification and restructuring of their deposits, were strongly opposed by depositors due to the losses on their savings and undermined their confidence in the Argentine financial system and in all financial institutions operating in Argentina.

Although the financial system has seen a recovery in deposits (principally transactional deposits) since 2002, it cannot be assured that this trend will continue or that the deposit base of the Argentine financial system, including with Banco Galicia, will not be negatively affected in the future by adverse economic, social and political events. In turn, the rules and the decisions taken by the Government on the financial system may undermine the confidence of depositors. If such confidence in the financial system is affected once again, it will have a direct impact on the manner in which financial institutions, including Banco Galicia, conduct their business, basically, by affecting institutions’ ability to operate as financial intermediaries.

The negative consequences of the 2001-2002 crisis on the profile and activities of the financial system could not be completely overcome.

During and after the 2001 and 2002 crisis, the Argentine financial system practically ceased acting as an intermediary between savings and credit. In the second half of 2002, deposits began to increase, and in 2004, credit began to increase. Even though after the 2001-2002 crisis, the financial depth in Argentina increased (measured by the ratio of the total financial system’s private sector deposits and loans to gross domestic product), it is low when compared to international levels and lower than the periods prior to the crisis, especially in the case of loans to the private sector, which represented approximately 12% of the Argentine gross domestic product (“GDP”) as of December 31, 2009, as compared to a maximum of approximately 23% at the end of 1999.

The depth of the crisis and its effect on the depositors’ confidence in the financial system raise significant uncertainties as to the likelihood that the financial system will fully recover its ability to act as an intermediary between savings and credit, even more so in the current international environment.

In addition, although deposits in the financial system and in Banco Galicia have begun increasing again, most new deposits are either demand or short-term time deposits and the sources of medium- and long-term funding for financial institutions are currently limited, and have consisted, to a large extent, primarily since 2004, in the securitization of loan portfolios, which was negatively affected by the replacement of the retirement and pension system of the Retirement and Pension Fund Administrators (the “AFJPs”), which invested in loan securitization, by the Integrated Social Security System ( Sistema Integrado Previsional Argentino ) (“SIPA”), the new system administered by the National Social Security Administration ( Administración Nacional de la Seguridad Social ) (“ANSES”). Due to these reasons, as well as due to the characteristics of demand for credit, the expansion of credit through loans recorded since 2004 was based on short-term loans to individuals and companies.

For the financial system to be able to reach an adequate intermediation level and, at the same time, develop medium- and long-term credit without having to assume excessive risks in terms of maturity mismatches, the following would be required: (i) growth in deposits and loans to continue over time, (ii) the terms of assets and liabilities in the Argentine financial system to be extended, (iii) the public’s confidence in the Argentine financial system to return to levels enabling the savings in Argentina or a substantial part thereof to be redirected to the financial system, and (iv) a process of sustained growth with macroeconomic and legal stability to be consolidated.

It cannot be assured that these trends will materialize and, even if they do, financial intermediation activities could not develop to the extent needed nor attain the necessary volume so as to allow an adequate income generation capacity by Argentine financial institutions, including Banco Galicia. Under these circumstances, for an undetermined period of time, the scale of operations of financial institutions that operate in Argentina, including Banco Galicia, their business volume, the size of their assets and liabilities or their ability to generate results could be lower than before the crisis.

The asset quality of financial institutions could deteriorate if the growth process is interrupted.

The portfolio quality started to deteriorate during 2008, which, although partly recuperated since the second half of 2009, it cannot be assured that the private sector portfolio will not continue to deteriorate.

Also, despite the Argentine Central Bank’s measures to limit the financial system’s exposure to the public sector, the assets of certain financial institutions currently are highly exposed to debt instruments of Argentina’s public sector.

Therefore, currently, the value of a large portion of the assets held by various Argentine financial institutions, as well as those institutions’ income generation capacity, including Banco Galicia, is dependent, to a large extent, on the Argentine public sector’s repayment capacity, which is dependent on, among others, the presence of a verifiable continuity in economic growth.

Judgments against financial institutions relating to the pesification and rescheduling of deposits could deteriorate financial institutions’ profitability.

As a consequence of the measures adopted by the Government in connection with the pesification of banking deposits originally denominated in dollars and the rescheduling thereof, since the beginning of 2002, a significant number of legal actions were initiated by individuals and legal institutions, mainly through protection claims (“ acción de amparo” or “ amparo claims”), against financial institutions, including Banco Galicia, on the basis that these measures violated constitutional and other rights. These claims resulted in appellate and lower courts ordering precautionary injunctions, requiring banks to reimburse the relevant dollar-denominated deposits, or their equivalent in pesos, at the then prevailing exchange rate for the free market first and later the single market. These rulings resulted in a significant withdrawal of deposits from the financial system and in significant losses for financial institutions, including Banco Galicia, as these institutions had to reimburse the deposits in Argentina, which had been pesified and rescheduled by the Argentine government (mostly dollar-denominated deposits before pesification), at market exchange rates, higher than the Ps.1.40 rate at which the deposits were pesified and recorded. Banco Galicia deferred these losses, as established by the Argentine Central Bank, and they must be amortized as from April 2003. The Government has not provided compensation to financial institutions for these losses and has expressed that it has no intention to do so.

While the repayment schedule of Rescheduled Deposit Certificates (“Cedros”) expired in August 2005, and while there is a small amount of Rescheduled Deposits under amparo claims in the financial system, many of these claims are still pending and shall be determined during the following fiscal years, making it impossible to anticipate the final resolution of these cases. However, if judgments against financial institutions increased, including against Banco Galicia, additional losses would adversely impact the financial condition of financial institutions, including Banco Galicia.

The reform of the Integrated Pension and Retirement Benefits System could adversely affect the capital market evolution in Argentina.

Through the enactment of Law No. 26,425 in November 20, 2008, the Argentine National Congress approved the elimination of the capitalization system run by the AFJPs, which was absorbed and replaced by a single government run pension called SIPA. Among other measures, the law establishes that: (i) funds accumulated in the private retirement and pension system during the last fourteen years shall be administered by the ANSES and (ii) the retirement and pension system shall be public and citizens shall contribute to this new system.

The elimination of this system entails a significant change in the evolution of the local capital market and the Argentine financial system, since the AFJPs were an important factor within the group of institutional investors. Consequently, the ability to obtain financing through the capital market by Grupo Financiero Galicia and its subsidiaries could be affected.

Consumer protection laws may limit some of the rights afforded to Grupo Financiero Galicia and its subsidiaries.

Law No. 24,240, the Consumer Protection Law (the “Consumer Protection Law”) sets forth a series of rules and principles to protect consumers, including Banco Galicia’s customers. The Consumer Protection Law was amended on March 12, 2008 in various aspects, namely: (i) the universe of people considered as consumers under the Consumer Protection Law was widened, (ii) the maximum fines applicable to suppliers violating this law was increased and the enforcement administrative authority was empowered to order any supplier to pay direct damages up to a maximum amount, (iii) the courts were entitled to sentence suppliers to pay “punitive damages” to consumers (such punitive damages not to exceed Ps.5 million, depending on the gravity of the event and other circumstances), and (iv) the ability of consumers’ associations to bring class action law suits on behalf of an indeterminate universe of consumers’ rights was regulated. Also, the Secretary of Domestic Commerce, under the Ministry of Economy and Production, was appointed as the national enforcement authority whereas the city of Buenos Aires and the provinces were to act as local enforcement authorities.

Grupo Financiero Galicia cannot assure you that court and administrative rulings arising from the new regulation previously mentioned or from measures adopted by other enforcement authorities will not increase in the future the degree of protection given to its debtors and other clients, or that such rulings will not favor the claims brought by consumers’ groups or associations. This could hinder or prevent Grupo Financiero Galicia and its subsidiaries from collecting payments for services and financing provided, which could have an adverse effect on their results and operations.

Future limitations on creditors’ rights in Argentina and on the ability to foreclose on certain guarantees and collateral may adversely impact financial institutions.

For the purpose of protecting debtors affected by the economic crisis, as of 2002, the Government passed various laws and regulations limiting temporarily the ability of creditors to foreclose on collateral and to exercise their rights pursuant to similar instruments upon the occurrence of a default by a debtor under a financing agreement. Such limitations have restricted Argentine creditors, such as Banco Galicia, from initiating actions and/or lawsuits to collect and recover on defaulted loans. In the event of an adverse economic environment or in other circumstances, the Government could pass new rules and regulations restricting the ability of creditors to enforce their rights pursuant to loan agreements, guarantees and similar instruments, with a negative effect on the financial system and the business of Grupo Financiero Galicia and its subsidiaries.

The stability of the Argentine banking system is uncertain.

During 2001 and the first half of 2002, a significant amount of deposits were withdrawn from Argentine financial institutions. This massive withdrawal of deposits was largely due to the loss of confidence of depositors in the Argentine government’s ability to repay its debts, including its debts within the financial system, and to maintain peso-dollar parity in the context of its solvency crisis.

To prevent a run on the U.S. dollar reserves of local banks, the government restricted the amount of money that account holders could withdraw from banks and introduced exchange controls restricting capital outflows.

While the condition of the financial system has improved, adverse economic developments, even if not related to or attributable to the financial system, could result in deposits flowing out of the banks and into the foreign exchange market, as depositors seek to shield their financial assets from a new crisis. Any run on deposits could create liquidity or even solvency problems for financial institutions, resulting in a contraction of available credit.

In the event of a future shock, such as the failure of one or more banks or a crisis in depositor confidence, the Argentine government could impose further exchange controls or transfer restrictions and take other measures that could lead to renewed political and social tensions and undermine the Argentine government’s public finances, which could adversely affect Argentina’s economy and prospects for economic growth.

For additional information on our liquidity risk, see Item 5. “Operating and Financial Review and Prospects-Item 5.B. “Liquidity and Capital Resources”.

Risk Factors Relating to Us

Part of Banco Galicia’s assets is invested in debt instruments of the Argentine public sector.

As of March 31, 2010, the net global position of Banco Galicia in the Argentine public sector reached Ps.4,917 million, representing approximately 17.3% of its total assets and 2.2 times its shareholders’ equity. Of this total, Ps.3,433 million corresponded to National Government securities while the remaining Ps.1,484 million were Argentine Central Bank debt instruments.

Banco Galicia’s ability to honor its financial obligations could be adversely affected by the Argentine Government’s payment capacity.

In addition, the Argentine Government’s ability to honor its financial obligations is dependent on, among other things, its ability to establish economic policies that succeed in fostering an economy growth process sustainable in the long term, generating tax revenues and controlling public expenditures, which could, either partially or totally, fail to take place.

Banco Galicia’s public sector assets have been accounted for pursuant the Argentine Central Bank’s valuation rules, which implies that their book value does not reflect market values.

It should be noted that Banco Galicia records its public sector assets according to the Argentine Central Bank’s valuation rules. The book values of some of Banco Galicia’s public sector assets are higher than their respective market value.

Therefore, Banco Galicia’s financial condition does not reflect the adjustments to the market values of the above-mentioned assets. Future sales, exchanges of assets provided by National Government or the Argentine Central Bank where the received assets may have lower market values or arrangements of transactions carried out with these assets will reflect market conditions as of that moment, which could result in losses due to differences between the market and book value of said assets at such time.

Banco Galicia’s net position in assets adjustable by the Resource Stabilization Coefficient (Coeficiente de Estabilización de Referencia) (“CER”) exposes it to real interest rate variation.

The amendments and modifications of Banco Galicia’s assets and liabilities resulting from the Government measures to address the 2001-2002 economic crisis have created mismatches between its assets and liabilities in terms of currency, interest rate and terms. Currently, Banco Galicia has a net position in CER-adjustable assets (which index varies based on changes in consumer retail prices) that accrue a fixed interest rate on the adjusted principal. This position is funded by non-adjustable pesos-denominated liabilities, which bear market rates that are repriced mainly in the short term. This mismatch exposes the Bank to fluctuations in real interest rates, with an adverse impact on income if there is a significant increase in real interest rates paid on our peso-denominated liabilities, which occurs when the nominal interest rate increases more than the inflation rate.

Increased competition and consolidation in the banking and financial industry could adversely affect Banco Galicia’s operations.

If competition in the banking and financial sector increases as a result of the consolidation process in the industry, with the consequence of the creation of stronger and larger banks that may have more resources than Banco Galicia, this could reduce prices and margins and/or the volume of operations and market share, and therefore, the results of operations of Banco Galicia and other subsidiaries of Grupo Financiero Galicia could be adversely affected and consequently, Grupo Financiero Galicia’s capacity to honor its debt.

Grupo Financiero Galicia could be unable to invest in its business developments and/or to repay its financial obligations due to a lack of liquidity caused by it being a holding company.

Grupo Financiero Galicia, as a holding company, conducts its operations through its subsidiaries. Consequently, it does not operate nor hold substantial assets, except for equity investments in its subsidiaries. Except for such assets, Grupo Financiero Galicia’s ability to invest in its business developments and/or to repay obligations is subject to the funds generated by its subsidiaries and their ability to pay cash dividends. In the absence of such funds, Grupo Financiero Galicia could have to resort to financing options at unappealing prices, rates and conditions. Additionally, such financing could be unavailable when Grupo Financiero Galicia may need it.

Grupo Financiero Galicia’s subsidiaries are under no obligation to pay any amount to enable Grupo Financiero Galicia to carry out investment activities and/or to cancel its liabilities, or to give Grupo Financiero Galicia funds for such purposes. Each of the subsidiaries is a legal entity separate from Grupo Financiero Galicia, and due to certain circumstances, legal or contractual restrictions, as well as to the subsidiaries’ financial condition and operating requirements, Grupo Financiero Galicia’s ability to receive dividends could be limited and, its ability to develop its business and/or to comply with its payment obligations could be limited.

In addition, under certain regulations and agreements, Banco Galicia has certain restrictions related to dividend distribution. Notwithstanding the fact that the repayment of Grupo Financiero Galicia’s obligations could be afforded through other means, such as bank loans or new issuances in the capital market, investors should take such restrictions into account when analyzing Grupo Financiero Galicia’s investment developments and/or its ability to cancel its obligations. For further information on dividend distribution restrictions, see Item 8. “Financial Information-Dividend Policy and Dividends”.

It could be difficult for Grupo Financiero Galicia and its subsidiaries to completely overcome all the negative residual effects of the 2001-2002 crisis.

The ability of Grupo Financiero Galicia and its subsidiaries to generate income was adversely affected by the 2001-2002 crisis, especially its ability to generate financial income. It is difficult to predict whether Grupo Financiero Galicia’s subsidiaries will be able to maintain or increase their services and loans to the private sector, generating an increase in their financial income and income from services so that their net operating results exceed the losses originated during 2001-2002 crisis, in particular, and with respect to Banco Galicia, the amortization of amparo claims, the negative margin on their matched position in foreign currency resulting from the low yield of the Government bonds in dollars at a Libor interest rate, due in 2012 (the “Boden 2012”) and their exposure to government securities with market values lower than the book values.

Demand for fee-related products and services as well as for credit in Argentina depends mainly on the growth of the economy, for which reason the demand for financial products and credit could fail to increase to a sufficient extent or at the necessary pace.

Likewise, Grupo Financiero Galicia may not be able to sufficiently increase its business volume for operating income to exceed the losses. Also, lower economic growth could have a negative impact on asset quality and the losses associated with the loan portfolio. Therefore, Grupo Financiero Galicia may not be able to increase its operating results in the required amount or at the required pace in order to offset the losses, for which reason its final profitability and internal capital generation capacity could be negatively affected.

Certain administrative proceedings started by tax authorities against financial institutions could generate losses to such institutions, including Banco Galicia.

Some tax authorities in the provinces and in the City of Buenos Aires initiated administrative proceedings against certain financial institutions in order to collect higher gross income taxes from such financial institutions from year-end 2002 onwards. Provincial tax authorities claim a substantial amount in connection with gross income generated by financial institutions in 2002, as such authorities include the income related to the Compensatory Bond (as defined below), into the income subject of the tax. The purpose of the Compensatory Bond was to compensate financial institutions for the losses that they would otherwise incur as a result of the measures implemented to face the 2001-2002 crisis, in particular, the asymmetric pesification. Although the final decision of these proceedings is uncertain, financial institutions, including Banco Galicia, could suffer material losses.

Grupo Financiero Galicia’s estimates and established reserves for credit risk and potential credit losses may prove to be inaccurate and/or insufficient, which may materially and adversely affect its financial condition and results of operations.

A number of our products expose us to credit risk, including consumer loans, commercial loans and other receivables. Changes in the income levels of Grupo Financiero Galicia’s borrowers, increases in the inflation rate or an increase in interest rates could have a negative effect on the quality of Grupo Financiero Galicia’s loan portfolio, causing Grupo Financiero Galicia to increase provisions for loan losses and resulting in reduced profits or in losses.

Grupo Financiero Galicia estimates and establishes reserves for credit risk and potential credit losses. This process involves subjective and complex judgments, including projections of economic conditions and assumptions on the ability of our borrowers to repay their loans.

Grupo Financiero Galicia may not be able to timely detect these risks before they occur, or due to limited resources or available tools, Grupo Financiero Galicia’s employees may not be able to effectively implement its credit risk management system, which may increase its exposure to credit risk.

Overall, if Grupo Financiero Galicia is unable to effectively control the level of non-performing or poor credit quality loans in the future, or if its loan loss reserves are insufficient to cover future loan losses, Grupo Financiero Galicia’s financial condition and results of operations may be materially and adversely affected.

In addition, the amount of Grupo Financiero Galicia’s non-performing loans may increase in the future, including loan portfolios that Grupo Financiero Galicia may acquire through auctions or otherwise, maybe subject to the same credit risk as described above.

Changes in market conditions, and any risks associated therewith, could materially and adversely affect Grupo Financiero Galicia’s financial condition and results of operations.

We are directly and indirectly affected by changes in market conditions. Market risk, or the risk that values of assets and liabilities or revenues will be adversely affected by variation in market conditions, is inherent in the products and instruments associated with our operations, including loans, deposits, securities, bonds, long-term debt and short-term borrowings. Changes in market conditions that may affect our financial condition and results of operations include fluctuations in interest and currency exchange rates, securities prices, changes in the implied volatility of interest rates and foreign exchange rates, among others.

Item 4. Information on the Company

History and Development of the Company

Our legal name is Grupo Financiero Galicia S.A. We are a financial services holding company that was incorporated on September 14, 1999, as a “ sociedad anónima ” (“a stock corporation”) under the laws of Argentina. As a holding company we do not have operations of our own and conduct our business through our subsidiaries. Banco Galicia is our main subsidiary and one of Argentina’s largest full-service banks. Through the operating subsidiaries of Tarjetas Regionales S.A., a holding company wholly owned by the Bank, we provide proprietary brand credit cards and consumer finance services throughout Argentina. Through Sudamericana Holding S.A. and its subsidiaries or “Sudamericana” we provide insurance products in Argentina. We directly or indirectly own other companies providing financial related products as explained herein. We are one of Argentina’s largest financial services groups with consolidated assets of Ps.27,602.4 million as of December 31, 2009.

Our goal is to consolidate our position as one of Argentina’s leading comprehensive financial services providers while continuing to strengthen Banco Galicia’s position as one of Argentina’s leading banks. We seek to broaden and complement the operations and businesses of Banco Galicia, through holdings in companies and undertakings whose objectives are related to and/or can produce synergies with financial activities. Our non-banking subsidiaries operate in financial and related activities that Banco Galicia cannot undertake or in which it is limited to invest in due to restrictive banking regulations.

Our domicile is in Buenos Aires, Argentina. Under our bylaws, our corporate duration is until June 30, 2100. Our duration can be extended by a resolution passed at a general extraordinary shareholders’ meeting. Our principal executive offices are located at Teniente General Juan D. Perón 456, Second Floor, (C1038AAJ), Buenos Aires, Argentina. Our telephone number is (54-11) 4343-7528.

Our agent for service of process in the United States is C T Corporation System, presently located at 111 Eighth Avenue, New York, New York 10011.

Organizational Structure

The following table illustrates our organizational structure as of December 31, 2009. Percentages indicate the ownership interests held. All of the companies shown in the chart are incorporated in Argentina, except for:

•

Galicia Uruguay, incorporated in Uruguay and currently not an operating financial institution;

•

Galval Agente de Valores S.A. or “Galval”, incorporated in Uruguay;

•

Galicia (Cayman) Ltd. or “Galicia Cayman”, incorporated in the Cayman Islands;

•

Tarjeta Naranja Dominicana S.A., incorporated in the Dominican Republic.

History

Grupo Financiero Galicia

Grupo Financiero Galicia was formed on September 14, 1999 as a financial services holding company to hold all of the shares of the capital stock of Banco Galicia held by members of the Escasany, Ayerza and Braun families. Its initial nominal capital amounted to 24,000 common shares, 12,516 of which were designated as class A ordinary (common) shares (the “class A shares”) and 11,484 of which were designated as class B ordinary (common) shares (the “class B shares”).

Following Grupo Financiero Galicia’s formation, the holding companies that held the shares in Banco Galicia on behalf of the Escasany, Ayerza and Braun families were merged into Grupo Financiero Galicia. Following the merger, Grupo Financiero Galicia held 46.34% of the outstanding shares of Banco Galicia. In addition, and due to the merger, Grupo Financiero Galicia’s capital increased from 24,000 to 543,000,000 common shares, 281,221,650 of which were designated as class A shares and 261,778,350 of which were designated as class B shares. Following this capital increase, all of our class A shares were held by EBA Holding S.A., an Argentine corporation that is 100% owned by our controlling shareholders, and our class B shares were held directly by our controlling shareholders in an amount equal to their ownership interests in the holding companies that were merged into Grupo Financiero Galicia.

On May 16, 2000, our shareholders held an extraordinary shareholders’ meeting during which they unanimously approved a capital increase of up to Ps.628,704,540 and the public offering and listings of our class B shares. All of the new common shares were designated as class B shares, with a par value of Ps.1.00. During this extraordinary shareholders’ meeting, all of our existing shareholders waived their preemptive rights. In addition, the shareholders determined that the exchange ratio for the exchange offer would be one class B share of Banco Galicia for 2.5 of our class B shares and one ADS of Banco Galicia for one of our ADSs. The exchange offer was completed in July 2000 and the resulting capital increase was of Ps.549,407,017. At date of completion of the exchange offer, our only significant asset was our 93.23% interest in Banco Galicia.

On January 2, 2004, our shareholders held an extraordinary shareholders’ meeting during which they approved a capital increase of up to 149,000,000 preferred shares, each of them mandatorily convertible into one of our class B shares on the first anniversary of the date of issuance, to be subscribed for in up to US$100.0 million of face value of subordinated notes to be issued by the Bank to its creditors in the restructuring of the foreign debt of its Head Office in Argentina (the “Head Office”) and its Cayman Branch, or cash. This capital increase was carried out in connection with the restructuring of the Bank’s foreign debt. On May 13, 2004, we issued 149,000,000 preferred non-voting shares, with preference over the ordinary shares in the event of a liquidation, each with a face value of Ps.1.00. The preferred shares were converted into class B shares on May 13, 2005. With this capital increase, our capital increased to Ps.1,241,407,017. For more information on the Bank’s debt restructuring, please see below.

In January 2005, we created Galval, a securities broker based in Uruguay, with the purpose of providing trading and custody services. We own 100% of the capital and voting rights of this subsidiary.

In August 2007, Grupo Financiero Galicia exercised its preemptive rights in the Bank’s share issuance and subscribed for 93.6 million shares of the Bank. The consideration consisted of: (i) US$102.2 million face value of negotiable obligations due 2014 issued by the Bank in May 2004, and (ii) cash. After the capital increase, Grupo Financiero Galicia held 94.66% of the Bank’s shares, up from 93.60%. For more information on the Bank’s capital increase, please see “-Banco Galicia-Banco Galicia’s 2007 Capital Increase”.

As of December 31, 2009, the controlling percentage grew to 94.71% due to minor purchases in the Buenos Aires Stock Exchange (“BASE”).

Banco Galicia

Banco de Galicia y Buenos Aires S.A. is a banking corporation organized as a stock corporation under Argentine law and supervised and licensed to operate as a commercial bank by the Superintendencia de Entidades Financieras y Cambiarias (Superintendency of Financial Institutions and Exchange Bureaus or the “Superintendency”).

The Bank was founded in September 1905 by a group of businessmen from the Spanish community in Argentina and initiated its activities in November of that year. Two years later, in 1907, the Bank’s stock was listed on the BASE. The Bank’s business and branch network increased significantly by the late 1950s and continued expanding in the following decades, after regulatory changes allowed the Bank to exercise its potential and gain a reputation for innovation, thereby achieving a leading role within the domestic banking industry.

In the late 1950s, the Bank launched the equity fund FIMA Acciones and founded the predecessor of the asset manager Galicia Administradora de Fondos S.A., Sociedad Gerente de Fondos Comunes de Inversión (“Galicia Administradora de Fondos”). Beginning in the late 1960s the Bank began to establish an international network mainly comprised of branches in New York and in the Cayman Islands, a bank in Uruguay and several representative offices.

In order to develop automated banking in Argentina and avoid bank disintermediation (i.e., when consumers directly access information or goods rather than using intermediaries) in the provision of electronic information and fund transfer services, in 1985, Banco Galicia established, together with four other private- sector banks operating in Argentina, Banelco S.A. to operate a nationwide automated teller system, which became the largest in the country. During the same year, Banco Galicia also acquired an interest in VISA Argentina S.A., and is currently one of the largest issuers of such cards in Argentina.

During the 1990s, the Bank implemented a growth and modernization strategy directed at achieving economies of scale and increasing productivity and, therefore, heavily invested in developing new businesses, acquiring new customers, widening its product offering, developing its IT and human resources capabilities, and expanding its distribution capacity. This was comprised of traditional channels (branches) and, especially, alternative channels, including new types of branches (in-store for example), ATMs, banking centers, phone banking and Internet banking.

As part of its growth strategy, in 1995, the Bank began a new expansion drive into the “ Interior ” of Argentina where high growth potential was believed to exist. Argentines refer to the Interior as that part of the country’s territory different from the federal capital and the areas surrounding the city of Buenos Aires (“Greater Buenos Aires”), i.e., the provinces, including the Buenos Aires Province but excluding the city of Buenos Aires and its surroundings. Typically the Interior is underserved relative to the city of Buenos Aires and its surroundings with respect to access to financial services and its population tends to use fewer banking services. As such, mainly between 1995 and 1999, the Bank acquired equity interests in entities or formed several non-banking companies providing financial services to individuals in the Interior through the issuance of proprietary brand credit cards. See “-Regional Credit Card Companies” below. In addition, in 1997, the Bank acquired a regional bank that was merged into it, with branches located mainly in Santa Fe and Córdoba, two of the wealthiest and more populated Argentine provinces.

In order to fund its strategy, during the 1990s, the Bank tapped the international capital markets for both equity and debt. In June 1993, the Bank carried out its initial international public offering in the United States and Europe and, as a result, began to list its American depositary receipts (“ADRs”) on the Nasdaq Stock Market until 2000, when the Bank’s shares were exchanged for our shares. In 1991, it was the first Argentine bank to issue debt in the European capital markets and, in 1994, it was the first Latin American issuer of a convertible bond. In 1996, the Bank raised equity again through a local and international public offering.

In 1996, Banco Galicia entered the bank-assurance business through an agreement with ITT Hartford Life Insurance Co. for the joint development of initiatives in the life insurance business. In this same year, the Bank initiated its Internet presence, which evolved into a full e-banking service for both companies and individuals.

At the end of 2000, the Bank was the largest private-sector bank in the Argentine market with a 9.8% deposit market share.

In 2001 and 2002 Argentina experienced a severe political and financial crisis, which had a material adverse effect on the financial system, including on Banco Galicia, and on financial businesses as a whole but especially on financial intermediation activity. However, during the crisis, the provision of banking services of a transactional nature was maintained. With the normalization of the Argentine economy’s situation and the subsequent growth cycle that began in mid 2002, financial activities began to expand at high rates, which translated into high growth at the level of the financial system as a whole, including the Bank. The provision of services continued to develop, even further than prior to the crisis, and financial intermediation resumed progressively.

Beginning in May 2002, the Bank began to implement a series of initiatives to deal with the liquidity shortage caused by the systemic deposit run, the unavailability of funding and other adverse effects of the 2001-2002 crisis on the financial system as a whole. The Bank significantly streamlined its operations and reduced its administrative expenses and, immediately after launching such initiatives, restored its liquidity. Also, in late 2002 and early 2003, the Bank closed all of its operating units abroad or began to wind them down. In addition, the Bank: (i) restructured most of its commercial loan portfolio, a process that was substantially completed in 2005, (ii) restructured its foreign debt, a process that began in 2002 and that was completed in May 2004, and resulted in an increase in its capitalization, and (iii) in February 2004, finalized the restructuring of its debt with the Argentine Central Bank incurred as a consequence of the 2001-2002 crisis.

Together with the launching of the above-mentioned initiatives, the Bank began to normalize its activities, progressively restoring its customer relations and growing its business with the private sector. The Bank’s deposit base began to increase in the second half of 2002 and loan origination picked up in late 2003. In parallel to the implementation of the above-mentioned initiatives, and while consistently expanding its business, the Bank undertook to progressively strengthen its balance sheet by (i) obtaining compensation from the Government for the negative effects of the asymmetric pesification, (ii) consistently reducing its high exposure to the public sector that was a legacy of the 2001-2002 crisis as well as (iii) reducing those liabilities incurred as a consequence of such crisis. Between 2005 and 2007, the Bank significantly reduced its exposure to the public sector by, among others, using public-sector assets to repay in advance Argentine Central Bank debt and restructured foreign debt. In 2007, the Bank finalized the full repayment in advance of its debt with the Argentine Central Bank incurred as a consequence of the 2001-2002 crisis. In addition, in August 2007, the Bank repaid in full the negotiable obligations that it had issued to restructure the debt of its New York Branch and undertook a share offering to increase its capitalization, in order to be able to support the increase in regulatory capital requirements on a bank’s exposure to the public sector and the growth of its business with the private sector. For more information, see “-Banco Galicia’s 2007 Capital Increase” below.

Restructuring of the Foreign Debt of the Bank’s Head Office in Argentina and its Cayman Branch

On May 18, 2004, the Bank successfully completed the restructuring of US$1,320.9 million of the debt of the Bank’s Head Office and its Cayman Branch, consisting of bank debt (including debt with multilateral credit agencies) and bonds. This amount represented 98.2% of the foreign debt eligible for restructuring. As of December 31, 2009, the principal amount of old debt, the holders of which did not participate in the exchange offer was US$1.7 million.

Based on the final amounts validly tendered, on May 18, 2004, the Bank paid creditors who elected to participate in the cash offer and the Boden offer and issued the following new debt instruments:

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US$648.5 million of long-term Dollar-denominated debt instruments, of which US$464.8 million were Dollar-denominated negotiable obligations due 2014 (referred to as the “Step Up Notes Due 2014” or the “2014 Notes”) issued under an indenture.

•

US$399.8 million of medium-term Dollar-denominated debt instruments, of which US$352.8 million were Dollar-denominated negotiable obligations due 2010 (referred to as the “Floating Rate Notes Due 2010” or the “2010 Notes”) issued under an indenture.

•

US$230.0 million of subordinated Dollar-denominated debt instruments, of which US$218.2 million were Dollar-denominated negotiable obligations due 2019 (referred to as the “Subordinated Notes Due 2019” or the “2019 Notes”) issued under an indenture.

As of December 31, 2009, the outstanding principal amount of debt resulting from the above-mentioned restructuring amounted to US$556.3 million, US$132.2 million lower than as of December 31, 2008 and US$218.1 million lower than as of December 31, 2007, due to amortization, prepayments and advance cancellations. For more information see Item 5. “Operating and Financial Review and Prospects-Item 5.A. “Operating Results-Contractual Obligations”, and “Funding”.

Banco Galicia’s 2007 Capital Increase

On October 11, 2006, the Bank’s shareholders resolved to increase the Bank’s capital stock by up to 100 million ordinary (common) book-entry, class B shares, with one vote per share and a nominal value of Ps.1.0 each. The new shares could be purchased, at the option of the purchaser, in cash or in 2010 Notes, 2014 Notes and/or 2019 Notes. The offer was made only to shareholders. The purpose of the capital increase was to guarantee the Bank’s compliance with the Argentine Central Bank’s capital adequacy rules, in light of the increase in such requirements. This increase was expected because of the current and projected growth of the Bank’s business volume with the private sector and the Argentine Central Bank’s regulations establishing increasing capital requirements in respect of public-sector assets. See Item 4. “Information on the Company-Selected Statistical Information-Regulatory Capital-Banco Galicia”.

On July 27, 2007, we purchased 93,604,637 new shares through the exercise of our preemptive rights. During August 2007, the Bank issued 93,664,806 new shares through the exercise of its shareholders’ preemptive and accretion rights. In total, the transaction led to a net increase in the Bank’s shareholder’s equity of Ps.493 million, of which Ps.466 million was an aggregate increase in the Bank’s shareholders’ equity items capital stock and issuance premiums, net of issuance costs, and Ps.27 million was a profit in connection with the portion paid for in 2014 Notes, given that these notes were received by the Bank at a value lower than their book value.

Banco Galicia Uruguay S.A. and Galicia (Cayman) Ltd.

In 1983, Banco Galicia Uruguay S.A. was established as a “ Casa Bancaria ”, a license that granted an offshore status, as an alternative service location for the Bank’s customers. In September and October 1999, the Uruguayan government’s executive branch and the Uruguayan Central Bank, respectively, approved Galicia Uruguay’s status as a full service domestic bank. Due to the effects of the 2001-2002 crisis on Galicia Uruguay, in early 2002, the Central Bank of Uruguay suspended its activities and assumed control and management of Galicia Uruguay. In December 2002, Galicia Uruguay restructured its deposits into debt maturing in 2011. On June 1, 2004, Galicia Uruguay’s license to operate as a domestic commercial bank was revoked by the Central Bank of Uruguay, but it retained the license from the Uruguayan government’s executive branch. Control and management of Galicia Uruguay by the Central Bank of Uruguay ended on February 22, 2007. On May 15, 2009, Galicia Uruguay made available to its clients in advance US$27.3 million, corresponding to the remaining balance of its restructured debt, which was initially due in September 2011. At the date of this annual report, Galicia Uruguay is not engaged in any active business and its restructured debt (time deposits and negotiable obligations), has been repaid in full.

On May 29, 2009, the Special General Meeting of Galicia Uruguay approved the voluntary reduction of capital by redemption of shares. Following such capital reduction, Banco Galicia held 100% of the capital stock of Galicia Cayman, of which formerly 65.34% was controlled by Galicia Uruguay and the remaining 34.66% by Banco Galicia. As of the closing of fiscal year 2009 the shareholders’ equity of Galicia Uruguay amounted to Ps.56.2 million.

Galicia (Cayman) Ltd. was established in 1988 in the Cayman Islands as another alternative service location for the Bank’s customers. Galicia Uruguay’s situation adversely affected its subsidiary Galicia Cayman, which commenced voluntary liquidation and surrendered its banking license effective as of December 31, 2002. In May 2003, Galicia Cayman together with the provisional liquidators designated by the Grand Court of the Cayman Islands completed a debt restructuring plan and, with the authorization of such Court, presented it to all creditors for their consideration. The plan was approved, in whole, by the vote of 99.7% of creditors, exceeding the legal majority required, on July 10, 2003, and became effective and mandatory for all creditors. On February 2, 2006, the Grand Court of the Cayman Islands declared the plan as terminated and ended the involvement of any third parties in the company’s management beginning on February 23, 2006.

Regional Credit Card Companies

In the mid ‘90s, Banco Galicia made the strategic decision to target the “non-bankarized” individuals market, which, in Argentina, typically includes the low and medium-low income segments of the population which typically live in the Interior of the country, in addition to certain locations of the Greater Buenos Aires. To implement this strategic decision, among others, in 1995, the Bank began investing in non-bank companies operating in certain regions of the Interior, providing financial services to individuals through the issuance of credit cards with proprietary brands and extending credit to its customers through such cards. We refer to these companies in aggregate as “the regional credit card companies”.

In 1995, Banco Galicia made the first investment in this business by acquiring a minority stake in Tarjeta Naranja S.A. The remaining stake remained in the hands of the founders of the company, who currently retain a minority interest. This company had begun operations in 1985 in the city of Córdoba, the second largest city in Argentina, by marketing “Tarjeta Naranja”, its proprietary brand credit card, in this city and had enjoyed local growth.

In 1996, the Bank formed Tarjetas Cuyanas S.A., to operate in the Cuyo Region (the provinces of Mendoza, San Juan and San Luis) in partnership with local businessmen, who currently retain a minority interest in the company. This company launched the “Nevada Card” in May 1996 in the city of Mendoza. Also in 1996, the Bank formed a new company, Tarjetas del Mar S.A., to operate in the city of Mar del Plata and its area of influence. Tarjetas del Mar S.A. began marketing the “Mira” card in March 1997.

In early 1997, the Bank purchased an interest in Comfiar S.A., a consumer finance company operating in the provinces of Santa Fe and Entre Ríos, which was merged into Tarjeta Naranja S.A. in January 2004.

In 1999, the Bank reorganized its participation in this business through Tarjetas Regionales S.A., a holding company wholly owned by Banco de Galicia y Buenos Aires S.A. and Galicia Cayman, which achieved control of Tarjeta Naranja S.A., Comfiar S.A., Tarjetas Cuyanas S.A., and Tarjetas del Mar S.A. In addition, in 1999, Tarjetas Regionales S.A. acquired a 12.5% interest in Tarjetas del Sur S.A., a credit card company operating in southern Argentina. In January 2000, this interest increased to 60% and, in February of the same year, Tarjeta Naranja S.A. acquired the remaining 40%. In March 2001, Tarjetas del Sur S.A. merged into Tarjeta Naranja S.A.

As of December 31, 2009, Banco Galicia held 68.22% of Tarjetas Regionales S.A. while Galicia Cayman held the remaining 31.78%. Directly or indirectly, as of that date, the Bank held 80.0% of Tarjeta Naranja S.A., 60.0% of Tarjetas Cuyanas S.A., and 99.995% of Tarjetas del Mar S.A.

These companies have experienced a significant expansion of their customer bases, in absolute terms and with respect to the range of customers served, number of cards issued, distribution networks and size of operations, as well as a technological upgrade and general modernization. By mid 1995, Tarjeta Naranja S.A. had approximately 200,000 cards outstanding. As of December 31, 2009, the regional credit card companies had more than 4.7 million cards outstanding in the aggregate and were the largest proprietary brand credit card operation in Argentina.

Sudamericana

In 1996, Banco Galicia entered the bank-assurance business, through the establishment of a joint venture with Hartford Life International to sell life insurance and annuities, in which it had a 12.5% interest. In December 2000, the Bank sold its interest in this company and purchased 12.5% of Sudamericana, a subsidiary of Hartford Life International. As a result of various acquisitions, Grupo Financiero Galicia owns 87.5% of Sudamericana (with the remaining 12.5% being held by Banco Galicia) which offers life, retirement and property and casualty insurance products in Argentina through its subsidiaries Galicia Seguros S.A. (property and casualty and life insurance), Galicia Retiro Compañía de Seguros S.A. (retirement insurance) and Sudamericana Asesores de Seguros S.A. (insurance broker).

Net Investment S.A.

Net Investment S.A. (“Net Investment”) was established in February 2000 as a holding company (87.5% owned by Grupo Financiero Galicia and 12.5% owned by Banco Galicia) whose initial purpose was to invest in and develop businesses related to technology, communications, the Internet, connectivity, and contents. The objective was to develop Banco Galicia’s internet businesses, in the areas related to e-commerce among companies, individuals and government agencies, mobile-phone payment solutions, content and connectivity services, and electronic services for companies, aiming to generate and exchange synergies with Banco Galicia’s operations.

On February 1, 2007, Tradecom Argentina -the only operating subsidiary of Net Investment — was merged into Net Investment.

By the beginning of 2008, Net Investment began to make changes to both its institutional and product images in order to improve its market presence, look for new customers and retain its current clients. Net Investment focused on, among other objectives, improving its organizational structure in order to strengthen its strategic areas, so as to be able to take advantage of new business opportunities. The efforts made were not sufficient to reach the business volumes necessary to generate the resources needed to cover Net Investment’s operating expenses for 2008. During 2009, Net Investment’s Board of Directors decided to refocus its operations and reorganize its structure, based on the future activities and objectives. As of December 31, 2009, the company did not hold ongoing transactions and as of the date of this annual report, the Board of Directors of the company is analyzing different business alternatives.

Galicia Warrants S.A.

Galicia Warrants S.A. (“Galicia Warrants”) was founded in April 1993, when it obtained the authorization from the relevant authorities to store goods and issue certificates of deposit of goods and warrants under the provisions of Law No. 9,643. On August 30, 2001, we acquired 87.5% of the capital stock and voting rights of Galicia Warrants, Banco Galicia holds the remaining 12.5%.

Galval

In January 2005, Galval Agente de Valores S.A. (“Galval”) was incorporated under the laws of Uruguay. This company operates in Montevideo’s free trade zone and acts as stock broker in Uruguay. Grupo Financiero Galicia owns 100% of the voting shares of this company. Galval gradually started to operate in September 2005.

GV Mandataria

In March 2008, GV Mandataria de Valores S.A. (“GV Mandataria”) was incorporated with the purpose of carrying out securities related representations, mandates and commissions of all types, whether involving domestic or international companies. Grupo Financiero Galicia holds 90% of GV Mandataria’s stock, and the remaining 10% is held by Galval.

Business

Banking

Banco Galicia is our largest subsidiary. Banco Galicia operates in Argentina and substantially all of its customers, operations and assets are located in Argentina. Banco Galicia is a bank that provides, directly or through its subsidiaries, a wide variety of financial products and services to large corporations, small and medium sized companies (“SMEs”), and individuals.

Banco Galicia is one of the main banks within the Argentine financial system, and is a leading provider of financial services in Argentina. As per the information published by the Argentine Central Bank, as of December 31, 2009, the Bank ranked third in terms of assets and deposits and second in terms of its loan portfolio within private-sector banks. As of the same date, the Bank was also ranked first among private-sector domestic bank in terms of assets, loans and deposits. Its market share of private sector deposits and of loans to the private sector was of 7.81% and 7.67% respectively, as of the end of 2009. On a consolidated basis, as of the end of fiscal year 2009, Banco Galicia had total assets of Ps.28,355 million, total loans of Ps.14,041 million, total deposits of Ps.17,977 million, and its shareholders’ equity amounted to Ps.2,187 million.

Banco Galicia provides a full range of financial services through one of the most extensive and diversified distribution platforms amongst private-sector financial institutions in Argentina. This distribution platform is comprised of 237 full service banking branches, located throughout the country, 1,431 ATMs and self-service terminals owned by Banco Galicia, phone banking and e-banking facilities. The Bank’s customer base reaches more than 1.6 million customers, who were comprised of mostly individuals but who also included more than 46,000 companies. The Bank has a strong competitive position in retail banking, both with respect to individuals and SMEs. Specifically, it is one of the primary providers of financial services to individuals, one of the largest providers of credit cards, the primary private-sector institution serving the SMEs sector, and has traditionally maintained a leading position in the agriculture and livestock sectors.

For a breakdown of the Bank’s revenues by category of activity for the last three financial years, see Item 5. “Operating and Financial Review and Prospects-Item 5.A. “Operating Results-Results by Segments-Banking”.

Wholesale Banking

The Wholesale Banking Division includes the SMEs, Agriculture and Livestock Sector, Corporate, Capital Markets and Investment Banking, Public Sector and Foreign Trade Departments. The Wholesale Banking Division manages Banco Galicia’s business transactions with companies, aimed at developing value-added financial solutions and services, focused on the optimization of the business process of companies from the different economic sectors, thus contributing both to their business development and their competitive growth.

Banco Galicia is firmly committed to meeting the needs of Argentina’s economic activity, what is reflected in over 46,000 corporate customers and in the composition of Banco Galicia’s total loan portfolio (without consolidation with Tarjetas Regionales S.A.), 62% of which corresponds to credit to the productive sector (43.4% to SMEs and the agriculture and livestock sector, and 18.6% to large companies and corporations).

During the fiscal year 2009, Banco Galicia maintained its leading position in the SMEs and agriculture and livestock sectors, as well as a strong presence in the corporate segment.

Throughout its history of over 100 years, Banco Galicia has shown its commitment to the agriculture and livestock sector, building up a direct and close relationship with producers and the entities that group them, developing a tailor-made product and service offer and providing the professional and customized advisory services customers need.

Banco Galicia has a strong presence in the corporate segment, which is strengthened year after year thanks to the development of value-added solutions to meet the needs of this kind of companies, and the advisory services rendered by a team of professionals with considerable experience.

During the fiscal year, Banco Galicia unified the Middle-market Banking and the Large-corporations Banking areas.

The different collection and payment services offered by Banco Galicia, designed to ease and optimize daily operations reducing times and costs, are highly appreciated by customers within this sector. During this fiscal year, Cobranza Integrada Galicia (Galicia Integrated Collections) , Pago a Proveedores (Payment to Suppliers) and Pago de Haberes (Payroll Payments) are worth noting due to the increase in the volume of transactions thereof.

With eight Corporate Banking Centers distributed in the main business areas of Argentina, Banco Galicia offers solutions adapted to the problems of each region, meeting the demands of customers on site, within the socio-economic environment in which they operate, and decentralizing decisions from the Head Office.

Cobranza Integrada Galicia , a product highly valued by companies since it allows them to optimize their collection system, obtained the ISO 9001 Certification, what evidences the kind of work carried out to improve the quality of products and services.

As regards the commercial credit-card market, Banco Galicia strengthened its leading position by offering more benefits through its Galicia Business and Galicia Corporate credit cards, which are aimed at the SMEs and the large corporations segments, respectively.

Galicia Rural , the leading credit card within the agriculture and livestock sector, with an estimated 60% market share taking into account the specific cards of this sector, continued offering benefits aimed at financing all the supplies, goods and services needed by the rural sector, exclusive financing conditions: 0% interest rate and terms from 90 to 180 days for the purchase of seeds, agrochemicals, fertilizers, bulk liquefied gas, machines and services, among others.

Galicia Office is the corporate e-banking service. By means of Galicia Office, companies may, without any cost, make inquiries and requests about their banking products (accounts, loans, investments, Visa and Galicia Rural liquidations), as well as gain access to a wide range of information about its checks portfolio and returned checks, request and ratify checkbooks, make transfers between their accounts and third party accounts at the Bank or any other Bank, make investments, consult their foreign trade operations, make payments to their employees with maximum security, renew its digital signature on line and make payments to their suppliers. The volume of queries and transactions made through Galicia Office continues to grow year after year as well as the companies subscribed thereto, which nowadays are more than 35,000. During the fiscal year 2009, over 52 million queries and 2.1 million transactions were recorded.

As regards direct payroll deposits, the volume of transactions exceeded by 42% the figure recorded in 2008. As regards foreign trade, the amount of transfers abroad and payment orders processing exceeded by 35% the figure recorded the previous fiscal year.

Capital Markets and Investment Banking

The capital market activity is focused on corporate debt transactions and, to a lesser extent, on financial trusts.

Also, Banco Galicia contributes to the optimization of the affiliated companies’ financing strategy.

Non-Financial Public Sector

During the fiscal year 2009, Banco Galicia continued improving its position as a service provider for the public sector, by visiting and offering services to several municipalities and national universities. As a result of these actions, new agreements were entered into and additional services were offered to the municipal sector. Furthermore, Banco Galicia continued taking part in different public bids on direct payroll deposit.

The interest in such offered services shown by the municipal sector places Banco Galicia in a good position to continue doing business in fiscal year 2010.

Foreign Trade

During 2009, trade transactions totaled US$7,673 million, thus increasing the market share from 6.6% to 8.0%.

It is worth noting that Galicia Comex, the first Internet portal specialized in foreign trade in the Argentine financial system, is increasingly being used by customers as a source of information and consultation. From Galicia Comex, customers may access valuable information for their activity, such as tools, key news, sector-specific reports, analyses on external markets, interpretation of regulations and articles written by specialists, among others, in order to provide a comprehensive vision of the international business, combining operational and commercial aspects. In 2009, there were more than 3,000 monthly visits to the portal.

Retail Banking

The Retail Banking Division manages the Bank’s business with individuals and with businesses, small retailers and professionals with annual revenues below Ps.1 million. Retail Banking provides a wide range of financial products and services, encompassing transactions, loans, and investments. On the transactions side, among others, the Bank offers its customers checking and savings accounts, credit and debit cards, and payroll direct deposit. On the investment side, Banco Galicia’s products and services include certificates of deposit, mutual funds and insurance products. In addition, Banco Galicia provides credit for the acquisition of consumer goods and housing, mainly through personal loans, credit-card loans, overdraft loans and residential mortgages. The Bank’s product offerings also include securities and foreign exchange brokerage, securities custody, and safe deposit boxes, among others. In addition the Bank provides private banking services. The Bank’s customers have access to its services through its branch network as well as through its electronic distribution channels. See below and “-Sales and Marketing”.

Banco Galicia is one of the members of the small group that is the leader in this market, and in 2009 led the way by maintaining an attractive benefit offer for its customers under the “ Cada día Más ” (More every day) campaign, what allowed Banco Galicia to anticipate and increase its market share in most of the business lines.

Banco Galicia divides its customer base with regard to customer activity and income level, with the purpose of meeting the needs of each customer profile.

Galicia Prefer is a comprehensive financial offer devised for higher-income customers, through which Banco Galicia renders a distinctive service and financial products according to the needs of this type of customers.

During 2009, Banco Galicia launched Galicia Prefer Platinum, a new service that includes exclusive features such as personal concierge, a broad insurance coverage, preferential rates both for assets and investments and higher financing limits, among others.

As regards direct payroll deposit services, Banco Galicia renders this service to 15,000 companies, what accounts for more than 500,000 customers.

Banco Galicia has more than 31,000 customers in the Small-sized Companies segment. This customer segment, with a turnover of up to Ps.20 million, is serviced by more than 250 specialized corporate officers in branches.

Private Banking offers distinctive and professional services to individuals with medium to high-sized net worth, through the management of their investment portfolios and the provision of financial advisory services. Private Banking offers its customers a wide range of domestic financial investment alternatives, giving priority to Banco Galicia’s products (deposits, Fima mutual funds, among others) and to trusts and negotiable obligations where Banco Galicia acts as arranger.

One of the competitive advantages offered by Private Banking within this segment is the broad geographic coverage, with thirteen service centers throughout Argentina.

Furthermore, the new ISO 9001 certification of the customer service model is worth noting. This certification has been improved during the fiscal year under the 9001:2008 version, thus reaffirming Private Banking’s commitment to the ongoing improvement of customer service quality.

Banco Galicia issues Visa, Visa Débito, American Express and MasterCard credit cards, exceeding 1.15 million accounts with statements and debit cards with purchases.

Banco Galicia maintains its position as one of the major financial institutions that puts at the disposal of its customers, in an efficient and easy manner, a broad range of property and personal insurance products marketed through its wide distribution network, conducting operations with renowned insurance companies that are market leaders.

During 2009, property insurance policies that provide coverage for homes were more than 138,000. Individual’s insurance, such as personal accident insurance, exceeded 53,000 policies; life and health insurance exceeded 19,000 policies, and more than 85,000 insured customers carry unemployment insurance.

Homeowners and office package insurance policies guarantee the continuity of customers’ undertakings and reached almost 5,000 insurance policies by the end of 2009.

As regards personal loans, Banco Galicia continued working hard on improving its offer, with special emphasis on its customer base and aimed at keeping growing while maintaining the excellent risk levels obtained. With this goal in mind, Banco Galicia continued developing and improving credit limits (through an automatic rating process) to those customers whose salaries are directly deposited in Banco Galicia or those who already have an outstanding risk product.

As regards the offer of lines of credit, Banco Galicia is focused on offering products with characteristics that are in line with the different customers’ needs and income segment, what made it possible to improve granting efforts and get higher product profitability.

The branch network contributes to make Banco Galicia’s distribution network one of its most important competitive advantages, due to its extension and wide geographical coverage. Such issues are reinforced through the use of Banco Galicia’s intranet, high technology systems and communications, a consistent system of incentives and the constant follow up of service quality.

As of December 31, 2009, the Bank’s branch network’s geographical distribution was as follows:

Apart from the branches, Banco Galicia has Alternative Channels which include the Red Galicia 24, the e-galicia.com portal, Galicia Servicios Móviles and the Retail Sales Unit. These are, in addition to the branches, a service, transactions and sales channel focused on individual and corporate customers. During 2009, the volume of transactions carried out through these channels accounted for 86% of total transactions.

Banco Galicia’s ATMs and self-service terminals make up a channel to solve customers’ and users’ transactional needs in a simple, safe and affordable way, on a 24/7 basis. They are distributed all over the country in the branch network and other locations, such as gas stations, supermarkets and shopping malls.

During the first semester of the fiscal year 2009, Banco Galicia ended the replacement of all the ATMs in branches and other locations. Apart from that, towards the end of 2009 Banco Galicia was the first bank in Argentina that launched to the market an ATM which allows making deposits in cash without using envelopes. This technology immediately authorizes deposits in Galicia accounts, and money is credited online. In this way, the transaction speeds up and deposits are automatized in a more advanced manner, thus eliminating the use of envelopes, the only way to deposit money in local ATMs until today.

The e-galicia website stands out for the services it renders, its contents and quality. There, customers can request products pursuant to their needs with the assistance of an interactive advisor, make queries on promotions in the innovative benefits catalogue, and get information about all the products and services offered by Banco Galicia. It as well facilitates access to Banco Galicia’s specific channels for both individuals (Galicia Home Banking) and companies (Galicia Office), allowing customers to operate with their products from any location 365 days a year.

Galicia Servicios Móviles comprises the suite of services for cell phones (SMS, WAP, and Java and iPhone applications) which allow customers to make queries on accounts, to pay services, to subscribe to alerts and to make queries on information regarding their credit cards.

Regional Credit- card Companies (Consumption)

The companies devoted to the issuance of regional credit cards and the provision of financing transactions to consumers are subsidiaries of Banco Galicia through Tarjetas Regionales S.A. (Tarjeta Naranja S.A., Tarjetas Cuyanas S.A. and Tarjetas del Mar S.A.).

The regional credit card companies’ operation is estimated to be the largest of its kind in Argentina. These companies issue proprietary brand credit cards (the “Naranja”, “Nevada” and “Mira” cards) to their customers in the Interior, which allow their holders to charge purchases of goods or services in a network of more than 100,000 retailers that have agreed to accept the cards, located throughout the Interior and in certain locations of the Greater Buenos Aires area. The companies accept and process from each participating retailers the charges arising from cardholder purchases. The cards can be used as charge cards or purchases can be financed through different payment schedules among which cardholders can choose and that differ by company. The regional credit card companies also extend personal loans to the cardholders to be repaid in up to 24 fixed installments. Through these cards, customers also have access to the ATM networks operating in Argentina (Banelco and Link) to make cash withdrawals and to automatic debit services, among others. The regional credit card companies also market Sudamericana’s insurance products and issue Visa, Amex and MasterCard cards (accepted all over the world) to holders of their proprietary brand cards. All of the products of a customer are managed through one statement.

At the end of 2009, the branch network was composed of 209 service centers and the staff totaled 3,936 employees in all the companies.

As of December, 2009, the number of statements issued and the number of cards managed by the regional credit card companies exceeded 1.9 million and 4.7 million, respectively, figures similar to the ones registered at the end of fiscal year 2008. With respect to business volume, aggregate annual purchases made by cardholders exceeded Ps.9.06 billion in fiscal year 2009, representing an increase of 20% from fiscal year 2008, while the regional credit card companies loan portfolio before allowances for loan losses and including securitized loans, amounted to Ps.3.37 billion, representing a 3.8% increase from the end of 2008. In 2009, the total number of transactions (purchase coupons plus loan and advance operations) amounted to 77 million.

During 2008, aggregate annual purchases made by cardholders were more than Ps.7.55 billion in fiscal year 2008, representing almost an increase of 35% from fiscal year 2007 and the regional credit card companies loan portfolio before allowances for loan losses and including securitized loans amounted to more than Ps.3.25 billion, representing a 20% increase from the end of 2007. In 2008, the total number of transactions (purchase coupons plus loan and advance operations) amounted to about 70 million.

During 2009, Tarjeta Naranja obtained the second position in the Great Place to Work award, thus reaffirming the goals related to improving the quality of resources and the rendering of services. Human resources were one of the mainstays for the business and operational success of the regional credit card companies.

For a breakdown of the regional credit card companies’ revenues for the last three financial years, see Item 5. “Operating and Financial Review and Prospects-Item 5.A. “Operating Results-Results by Segments-Regional Credit Cards”.

Financial Division

The Financial Division includes the Treasury, Banking Relations and Management of Assets and Liabilities. Apart from that, this Division takes part in the mutual funds business -being the main distribution channel for this type of products-, as well as in the trading business through Galicia Valores S.A.

The Treasury Department is responsible for, among other things, managing liquidity and the different financial risks of Banco Galicia, based on the parameters determined by the Board of Directors. It manages positions in foreign currency and government securities, and it as well acts as intermediary and distributes financial instruments for its own customers (Institutional Investors) and corporate customers and individuals. It takes part in different markets in its capacity as agent of the Mercado Abierto Electrónico (MAE) and member of the Rosario Futures Exchange (ROFEX), Financial Products Division. Through Galicia Valores S.A. Sociedad de Bolsa (“Galicia Valores”), this Department offers customers the possibility to conduct transactions at the BASE.

In 2009, Banco Galicia was ranked 8 ^th in the MAE’s annual ranking for transactions of fixed-income instruments. In the wholesale foreign exchange market, the total amount corresponding to transactions made by Banco Galicia through the MAE was US$5,591 million, what represented a 47% decrease in the year. As regards the currency futures market (OTC-Rofex), volumes traded by Banco Galicia amounted to US$7,230 million during 2009, representing a 20% increase in volume compared to the previous year, ended the fiscal year in the 5 ^th place within the MAE’s ranking.

During the last quarter of 2009, Banco Galicia started to conduct operations in the interest rate derivatives market within the MAE, getting to the 5 ^th place in swaps contracts and the 3 ^rd place in futures contracts, in terms of volume.

The Banking Relations Department is responsible, at the international level, for managing Banco Galicia’s business relationships with correspondent banks, international credit agencies, official credit agencies and international mutual funds and, since the fourth quarter of fiscal year 2009, within the domestic sector, with financial institutions and exchange houses.

The Management of Assets and Liabilities Department is in charge of preparing and analyzing information aimed at managing the mismatches Banco Galicia’s activities are subject to, maintaining the exposure within the policies determined by the Board of Directors.

Among its activities, the following are included: provision of support to the Assets and Liabilities Committee (ALCO) through the analysis, quantification and control of the risks associated to different business hypotheses and market scenarios, as well as the follow-up and control of liquidity policies and currency mismatches, whether due to regulations of the Argentine Central Bank or else Banco Galicia’s operations.

Banco Galicia distributes the Fima mutual funds through its broad distribution network (branches, electronic banking, telephone banking) to different customer segments (institutions, companies and individuals), while it acts as custodian of the assets that make up the funds, in its role as depository. Galicia Administradora de Fondos is the company that manages investments and determines the value of the mutual fund units on a daily basis.

Fima mutual funds reached to Ps.1,098 million as of 31 December, 2009 with a market share of 6.5%.

The Comprehensive Corporate Services Division integrates all of Banco Galicia’s operations so as to improve the efficiency of operational processes.

Insurance

Galicia Seguros S.A. (“Galicia Seguros”) is a provider of a variety of property and casualty (“P&C”) and life insurance products.

Its most important line of business is group life insurance, including employee benefit plans and credit related insurance. With regard to P&C insurance products, it primarily underwrites home and ATM theft insurance. Galicia Retiro Compañía de Seguros S.A. (“Galicia Retiro”) provides annuity products, and Sudamericana Asesores de Seguros S.A. is an insurance broker. These companies operations are all located in Argentina.

Total insurance production of the aforementioned insurance companies amounted to Ps.325.5 million during 2009, 10.8% higher than the volume of premiums of the previous year (Ps.293.7 million). This increase in insurance production was mainly recorded for Galicia Seguros, with Ps.50.3 million more premiums written than in the same period of the previous fiscal year. As regards Galicia Seguros’ business transactions, the focus was placed on continuing to increase the company’s turnover and sales, which in 2009 amounted to Ps.95 million of annualized premiums. This represented a 28% growth when compared to the previous year, thus increasing the insurance policy laps ratio and extending the types of coverage offered.

In turn, Galicia Retiro recorded a Ps.18.6 million decrease in premiums written, as a result of the coming into force of Law 26425 that creates the Argentine Integrated Social Security System (SIPA), which brought about the end of pension-linked life annuities, the main product marketed by this company. Notwithstanding that, Galicia Seguros continues with the management of funds and the payment of annuities to its insured. For a breakdown of the insurance company’s revenues for the last three financial years, see Item 5. “Operating and Financial Review and Prospects-Item 5.A. “Operating results-Results by Segments-Insurance”.

Other Businesses

Galicia Warrants: this company is a leading company in the deposit certificates and warrants issuance market. This company has been continuously conducting transactions since 1994, supporting medium and large companies in regard to the custody of stocks. Galicia Warrants main objective is to enable its customers access to credit and financing, which are secured by the property kept under custody. Galicia Warrants main customers belong to the agricultural, industrial and agro-industrial sectors, and also include exporters and retailers.

The higher credit offer and the better performance of productive markets allowed the company to recover the business volumes that had been hit by the crisis that took place at the beginning of the year, and generated a more optimistic outlook for the next fiscal year. Consequently, during 2009 the company recorded income from services for Ps.10.9 million, with a net income amounting to Ps.7.7 million at fiscal year-end. This can be further explained by the sale of an important warehouse.

Net Investment: this company has performed its activities in the areas of intercompany e-commerce, with the purpose of creating and exchanging synergies with Banco Galicia’s business activities.

The extension of terms to carry out new sales, the increases in the structure of costs and the inability to pass such increases on to the prices of the services rendered, were factors that did not allow the company to achieve the results it expected. Due to the aforementioned, in addition to the international financial crisis, estimates for fiscal year 2009 showed a less favorable scenario. For such reason, Net Investment’s Board of Directors decided to refocus its operations and rightsize its structure.

Due to the above-described circumstances, the company requested cash contributions to shareholders, ad-referendum of the resolution adopted at the Shareholders’ Meeting, to be used for the absorption of the losses recorded for the fiscal year ended December 31, 2009. In order to end the business relationships developed with its customers successfully, Net Investment offered to act as a link to ease the migration of transactions to other providers in the market.

The outlook for the current fiscal year is related to the possibility of carrying out the business alternatives that are being analyzed by the Board of Directors.

Galval : this company mainly generates fee income from brokerage and custodial services. As of December 31, 2009, it had customers’ securities held in custody for US$116.8 million, of which US$17.6 million correspond to the holding of securities of Grupo Financiero Galicia.

GV Mandataria: The Company acts as a provider of administrative services of Galval. During 2009, income from services amounted to Ps.3.8 million, with a pretax net income of Ps.0.3 million.

For a breakdown of the other businesses’ revenues for the last three financial years, see Item 5. “Operating and Financial Review and Prospects-Item 5.A. “Operating Results-Results by Segments-Other Grupo Businesses”.

Competition

Due to our financial holding structure, competition is experienced at the level of our operating subsidiaries. We face strong competition in most of the areas in which our subsidiaries are active. For a breakdown of our total revenues, for each of the past three fiscal years, for the activities discussed below (i.e., banking, regional credit cards and insurance), please see Item 5. “Operating and Financial Review and Prospects-Item 5.A. “Operating Results-Results by Segments”.

Banking

Banco Galicia faces significant competition in all of its principal areas of operation. The Bank faces competition from foreign banks operating in Argentina, mainly large retail banks which are subsidiaries or branches of banks with global operations, Argentine national and provincial government-owned banks, private-sector domestic banks and cooperative banks, as well as non-bank financial institutions.

With respect to private-sector customers, the principal segment for the Bank, the main competitors are large foreign banks and certain domestically-owned private-sector banks, which, prior to the crisis, operated in commercial or private banking and that, after the 2001-2002 crisis, acquired the retail operations of banks that left the business as a result of such crisis. Competition from public-sector banks has decreased since the immediate post-crisis period, as the public initially attracted to such institutions as a safe harbor began to search for better service with private-sector financial institutions. However, the three largest government-owned banks are of a significant size and also compete with the Bank.

Banco Galicia’s estimated deposit market share of private-sector deposits in the Argentine financial system was 7.81% as of December 31, 2009, compared to 7.61% as of December 31, 2008 and 8.23% as of December 31, 2007.

According to information published by the Argentine Central Bank, as of December 31, 2009, the Bank was the third private-sector bank as measured by its assets and by its deposits, the second bank measured by its loan portfolio, and ranked fifth in terms of net worth.

The Bank believes that it has a strong competitive position in retail banking, both with respect to individuals and SMEs. Specifically, Banco Galicia believes it is one of the primary providers of financial services to individuals, the primary private-sector institution serving the SMEs sector, and has traditionally maintained a leading position in the agriculture and livestock sector.

Argentine Banking System

As of December 31, 2009, the Argentine financial system consisted of 83 financial institutions, of which 66 were banks and 17 were financial non-bank institutions (including finance companies, credit unions and savings and loans associations). Of the 66 banks, 12 were Argentine national and provincial government-owned or related banks. Of the 54 private-sector banks, 32 were private-sector domestically-owned banks; 21 were foreign-owned banks (i.e., local branches or subsidiaries of foreign banks); and 1 was a cooperative bank, also domestically-owned.

As of the same date, the largest private-sector banks, in terms of total deposits, were: Banco Santander Río, BBVA Banco Francés, Banco Galicia, Banco Macro, HSBC Bank, Credicoop and Citibank. Banco Galicia, Banco Macro and Credicoop are domestically-owned banks and the others are foreign-owned banks. According to information published by the Argentine Central Bank as of December 31, 2009, private-sector banks accounted for 56.8% of total deposits and 59.8% of total net loans in the Argentine financial system. Argentine financial industry regulations do not raise any entry or exit barriers, nor do they make any differentiation between locally or foreign-owned institutions. The only cooperative bank is active principally in consumer and middle-market banking, with a special emphasis on the lower end of the market. As of December 31, 2009, financial institutions (other than banks) accounted for approximately 0.4% of deposits and 2.9% of net loans in the Argentine financial system.

As of December 31, 2009, the largest Argentine national and provincial government-owned or related banks, in terms of total deposits, were Banco Nación and Banco de la Provincia de Buenos Aires. Under the provisions of Law No. 21,526 as amended ( Ley de Entidades Financieras, “the Financial Institutions’ Law”), public-sector banks have comparable rights and obligations to private banks, except that public-sector banks are usually chosen as depositaries for public-sector revenues and promote regional development and certain public-sector banks have preferential tax treatment. The bylaws of some public-sector banks provide that the governments that own them (both national and provincial governments) guarantee their commitments. Under current law, Banco de la Provincia de Buenos Aires is not subject to any taxes, levies or assessments that the Government may impose. According to information published by the Argentine Central Bank, as of December 31, 2009, government-owned banks and banks in which the national, provincial and municipal governments had an ownership interest accounted for 42.8% of deposits and 37.3% of loans in the Argentine financial system.

Consolidation has been a dominant theme in the Argentine banking sector since the 1990’s, with the total number of financial institutions declining from 214 in 1991 to 82 at December 31, 2009, with the ten largest banks holding 76.1% of the system’s deposits and 71.4% of the system’s loans as of December 31, 2009.

Foreign banks continue to have significant presence, despite the fact that the number of foreign banks decreased by 18 through December 2009, as compared to the end of 2001, and that foreign banks’ share of total deposits has decreased since the 2001-2002 crisis while the share of domestic private-sector banks has increased.

Regional Credit Cards

No official data is available about the credit card market and the consumer of financial services’ market in the Interior, where the regional credit card companies operate. However, the regional credit card companies’ operation is estimated to be the largest of its kind in Argentina and Tarjeta Naranja S.A. is estimated to be the largest proprietary-brand credit card issuer in Argentina among approximately 170 existing companies.

Insurance

Sudamericana’s subsidiaries face significant competition since, as of December 2009, the Argentine insurance industry was comprised of approximately 178 insurance companies, 39 of which were dedicated exclusively to life insurance and 21 to annuities. Subsidiaries of foreign insurance companies and the world’s largest insurance companies with global operations are among these companies. In addition, as of that date, the number of brokers amounted to approximately 23,800 individuals and 442 companies.

During 2009, the insurance industry continued growing, although at a lower rate when compared to previous years. Production amounted to nearly Ps.31 billion, equivalent to an 18% increase at constant values. Out of total production, 79% relates to property insurance, 19% relates to life and personal insurance, and the remaining 2% relates to retirement insurance. Within the 79% corresponding to property insurance, the automotive insurance segment continues to be the most significant one (47%), followed by the workers’ compensation segment (26%). Within the life and personal insurance business, life insurance segment is the most significant, representing 67%, followed by personal accident insurance segment, representing 12%.

During 2009, there was a 65% drop in the retirement insurance sector due to the end of the integrated pension and survivor’s benefits system according to Law No. 26,425 passed on November 20, 2008.

As of December 2009, Galicia Seguros ranked seventh in terms of number of life insurance policies underwritten and third in terms of number of home insurance policies underwritten.

Sales and Marketing

Banco Galicia’s and the regional credit card companies’ distribution capabilities are our principal marketing channels. Our distribution network is one of the largest and most flexible distribution platforms in the country and has nationwide coverage. The network of offices of the regional credit card companies mainly serves the medium and low income segments of the population, which generally make less use of bank services, through offices located all across the Interior of the country and through Banco Galicia, we operate a nationwide distribution network, which is one of the most extensive and diversified distribution networks among private-sector financial institutions in Argentina.

The Bank markets all of its financial products and services to high-, medium- and medium-low-income individuals, including loans, insurance and FIMA family of mutual funds, among others, through its branch network, which operates on-line in real time. Within the branches, the sales force is specialized by type of customer and by customer segment. The Bank’s sales policy encourages tellers to perform sales functions as well. Wealthy individuals who are private banking customers are served by specialized officers and a specialized network of service centers, including a head office facility.

Commercial and investment banking services to large corporations and other entities are provided in a centralized manner. Branch officers are responsible for the Bank’s relationship with middle-market and small businesses and most of the agriculture and livestock sector customers. The Bank also has established specialized centers that concentrate on providing service to businesses, which are distributed across the country and located in main cities of the Interior and certain customer companies facilities.

All of the Bank’s individual and corporate customers have access to the Bank’s electronic distribution channels, including the ATM and self-service terminals network and self-service terminals (“Red Galicia 24”), a multifunction call center (the “CCC”), an e-banking website (e-galicia.com) and a banking service through cell phones (“Galicia Móvil”).

Banco Galicia is client service oriented and assigns great importance to its service model and seeks to improve it constantly.

The Bank has a segmented marketing approach and designs marketing campaigns focused on specific segments of the Bank’s customer base. The Bank’s marketing strategy is also focused on the development of long-term relationships with customers based on a deep and increasing knowledge of those customers. As part of this client-oriented strategy, the Bank implemented a customer relationship management technology. The Bank’s investment in advertising has increased in the last years, in line with the general market’s trend and particularly, the Argentine financial system’s increase in investment and number of advertisers. These actions, along with massive events in shopping centers across the country and many direct-marketing programs have reinforced the perception of the Bank as a close and friendly bank and have strengthened the brand image, allowing the Bank to regain the “top of mind” (immediate brand recollection) leadership in its category.

During 2007, the Bank completed a brand image change project, launching its new brand and starting to use it in all products and communication pieces on March 31, 2008. This decision not only implies a change in style, but is also strategic and goes hand in hand with the continuous development of the Bank’s products and services. This change is focused on visually communicating the Bank’s identity in a more modern way and on achieving a better connection between its identity and visual representation.

The Bank considers quality of service as the main element capable of distinguishing it from competitors. In order to measure this indicator, the Bank periodically performs surveys, with positive results in the last years, showing high customer satisfaction. The regional credit card companies market their products and services through a network of branches and service centers, the size of which depends on the size of the locations in which they operate. The companies’ culture is strongly client service oriented and assigns great importance to quality of service. Sales officials receive intensive training in personalized sale of the companies’ products and quality of service, given that the bulk of sales is conducted on a one-on-one basis. Quality of service at the branches is permanently monitored by third parties and availability is enhanced through extended business hours. In addition, each of the companies has a web site through which they conduct sales, receive customers’ requests (such as requests for statements, loans or increases in the credit limits assigned and new cards, among others), provide information on and promote products. These sites include a link that allows payments to be made. In addition, each company has a call center, through which sales, post-sales and collection functions are performed.

To market its products, Sudamericana’s subsidiaries mainly use the Bank’s and the regional credit card companies’ distribution networks. They also use the sales officers of Sudamericana Asesores de Seguros S.A. In addition Sudamericana has a telemarketing center of its own.

Property

The following are our main assets, as of December 31, 2009:

As of December 31, 2009, our distribution network consisted of:

•

Banco Galicia: 237 branches located in Argentina, 137 of which were owned and 100 of which were rented by Banco Galicia, located in all of Argentina’s 23 provinces.

•

Tarjeta Naranja S.A.: 115 sales points located in 21 of the 23 Argentine provinces, 114 of which were rented by the company.

•

Tarjetas Cuyanas S.A.: 27 sales points and 15 client assistance centers in the provinces of Mendoza, San Juan, San Luis, Santiago del Estero, La Pampa, La Rioja, Catamarca, Neuquén, Rio Negro, Salta, Jujuy and Tucumán. All of them were rented.

•

Tarjetas del Mar S.A.: 8 sales points located in the Province of Buenos Aires, all of which were rented. In addition, it owns 7 sale stands located in premises that belong to La Anónima supermarket chain, in the provinces of Neuquén and Río Negro.

Capital Investments and Divestitures

During 2009, our capital expenditures amounted to Ps.179.5 million, distributed as follows:

	•		Ps.56.6 million in fixed assets (real estate, machinery and equipment, vehicles, furniture and fittings);
	•		Ps.4.7 million in construction in progress; and
	•		Ps.118.2 million in organizational and IT system development expenses.

During 2008, our capital expenditures amounted to Ps.279.9 million, distributed as follows:

	•		Ps.103.4 million in fixed assets (real estate, machinery and equipment, vehicles, furniture and fittings);
	•		Ps.44 million in construction in progress; and
	•		Ps.132.5 million in organizational and IT system development expenses.

During 2007, our capital expenditures amounted to Ps.208.7 million, distributed as follows:

	•		Ps.80.5 million in fixed assets (real estate, machinery and equipment, vehicles, furniture and fittings);
	•		Ps.44.7 million in construction in progress; and
	•		Ps.83.5 million in organizational and IT system development expenses.

These capital expenditures were made mainly in Argentina.

During June 2009, Banco Galicia entered into an agreement with American International Group Inc. (“AIG”) and AIG Consumer Finance Group Inc., for the purchase of Compañía Financiera Argentina S.A. (“CFA”), Cobranzas & Servicios S.A. and AIG Universal Processing Center S.A.’s stocks: Argentine companies that are devoted to financial and supplementary activities. As a result of the acquisition, Grupo Financiero Galicia is expected to expand their market share in the consumer finance Sector.

The original transfer price for all of the shares as agreed upon with the current owners, subject to usual adjustments for this kind of transaction, was Ps.187.6 million.

On June 7, 2010, the Argentine Central Bank approved the aforementioned transaction. The price adjustment was agreed upon by the parties and the fair value of the consideration to acquire the shares of these companies is Ps.331.1 million. This purchase will be financed with the Bank’s available cash, within its ordinary course of business.

As of the date of this report, due to the fact that the initial accounting for the above described business combination was incomplete, the Bank did not have all the information available that is required in order to prepare the disclosures required by ASC 805, specifically: a) the acquisition date; b) contingent consideration and indemnification assets; c) acquired receivables; d) condensed balance sheet; e) assets and liabilities arising from contingencies; and f) goodwill.

During July, 2009, Galicia Warrants sold its Silos plant in San Salvador, province of Entre Ríos, generating a profit before tax of Ps.10.6 million.

During September 2008, the interests and credits that Banco Galicia had in Aguas Argentinas S.A. and Aguas Provinciales de Santa Fe S.A. (in liquidation) were sold, and the contingent obligations timely assumed in relation to such investments were also settled. As of December 31, 2007, the interests were fully provisioned, while the credits had their related regulatory provisions according to the debtor’s standing. As of September 30, 2008, and as a result of this transaction, a profit amounting to Ps.23.4 million was generated.

In 2007, after having obtained the necessary authorizations, Grupo Financiero Galicia subscribed and paid for 93,604,637 of Banco Galicia’s class B shares with a face value of Ps.1.0 each. Payment for the shares was made in cash in an amount equal to Ps.175.3 millions and in 2014 Notes issued by Banco Galicia with a face value of US$102.2 million.

We have budgeted capital expenditures for the fiscal year ending December 31, 2010, for the following purposes and amounts:

		(In millions of Pesos)
Infrastructure of Corporate Buildings, Tower and Branches (construction, furniture, equipment, phones, etc.)		Ps.	100.0
Fixed Assets			51.7
Organizational and IT System Development			100.6
Total		Ps.	252.3

These capital expenditures will be made mainly in Argentina.

Management considers that internal funds will be sufficient to finance fiscal year 2010 capital expenditures.

Selected Statistical Information

You should read this information in conjunction with the other information provided in this annual report, including our audited consolidated financial statements and Item 5. “Operating and Financial Review and Prospects”. We prepared this information from our financial records, which are maintained under accounting methods established by the Argentine Central Bank under Argentine Banking GAAP, and do not reflect adjustments necessary to reflect the information in accordance with U.S. GAAP.

The exchange rate used in translating Pesos into US Dollars, which is used in calculating the convenience translations included in the following tables is the Reference Exchange Rate published by the Argentine Central Bank, which was Ps.3.7967, Ps.3.4537 and Ps.3.1510 per US$1.00 as of December 31, 2009, December 31, 2008 and December 31, 2007 respectively. The exchange rate translations contained in this annual report should not be construed as representations that the stated Peso amounts actually represent or have been or could be converted into US Dollars at the rates indicated or any other rate. See Item 3. “Key Information-Exchange Rate Information”.

Average Balance Sheet and Income from Interest-Earning Assets and Expenses from Interest-Bearing Liabilities

The average balances of interest-earning assets and interest-bearing liabilities, including the related interest that is receivable and payable, are calculated on a daily basis for Banco Galicia, Galicia Uruguay and Tarjetas Regionales S.A. on a consolidated basis. The average balances of interest-earning assets and interest bearing liabilities are calculated on a monthly basis for Grupo Financiero Galicia and its other non-banking subsidiaries.

Average balances have been separated between those denominated in Pesos and those denominated in Dollars. The nominal interest rate is the amount of interest earned or paid during the period divided by the related average balance.

Net gains/losses on government securities and related differences in quoted market prices are included in interest earned. We manage our trading activities in government securities as an integral part of our business. We do not distinguish between interest income and market gains or losses on our government securities portfolio. The non-accrual loans balance is included in the average loan balance calculation.

The following table shows our consolidated average balances, accrued interest and nominal interest rates for interest-earning assets and interest-bearing liabilities for the fiscal year ended December 31, 2009.