As filed with the Securities and Exchange Commission on June 30, 2004
===============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 20-F
(Mark One) ------------------
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-14402
BANCO BILBAO VIZCAYA ARGENTARIA, CHILE S.A.
(formerly BBVA Banco BHIF)
(Exact name of Registrant as specified in its charter)
BILBAO VIZCAYA ARGENTARIA, CHILE BANK
(Translation of Registrant's name into English)
Chile
(jurisdiction of incorporation)
Pedro de Valdivia 100, Providencia
Santiago, Chile
Telephone: (562) 679-1000
(address and telephone of Registrant's principal
executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Name of each
exchange on which
Title of each class registered
- ------------------- -----------------------
American Depositary Shares, each representing the right to receive 10 Shares New York Stock Exchange
of Common Stock of Banco Bilbao Vizcaya Argentaria, Chile S.A. without par value
Shares of Common Stock of Banco Bilbao Vizcaya Argentaria, Chile S.A. without New York Stock Exchange*
par value

- ------------------
* Shares are not listed for trading, but only in connection with the
registration of American Depositary Shares pursuant to the requirements of the
New York Stock Exchange.

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:
None
(Title of Class)
The number of outstanding shares of each class of common stock of Banco Bilbao
Vizcaya Argentaria, Chile S.A. at December 31, 2003 was:
361,222,027 Shares of Common Stock, without par value

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 [x] No [ ]

Indicate by check mark which financial statement item the registrant
has elected to follow.
Item 17 [ ] Item 18 [x]

===============================================================================

TABLE OF CONTENTS

Page
PART I
Item 1. Identity of Directors, Senior Management and Advisers...........4
Item 2. Offer Statistics and Expected Timetable.........................4
Item 3. Key Information.................................................4
Item 4. Information on the Company.....................................16
Item 5. Operating and Financial Review and Prospects...................64
Item 6. Directors, Senior Management and Employees.....................93
Item 7. Major Shareholders and Related Party Transactions.............100
Item 8. Financial Information.........................................103
Item 9. The Offer and Listing.........................................105
Item 10. Additional Information........................................108
Item 11. Quantitative and Qualitative Disclosures About Market Risk....121
Item 12. Description of Securities Other than Equity Securities........123
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies...............123
Item 14. Material Modifications to the Rights of Security Holders and
Use of Proceeds...............................................123
Item 15. Controls and Procedures.......................................123
Item 16A. Audit Committee Financial Expert..............................123
Item 16B. Code of Ethics................................................123
Item 17. Financial Statements..........................................125
Item 18. Financial Statements..........................................125
Item 19. Financial Statements and Exhibits.............................125

PRESENTATION OF FINANCIAL INFORMATION

As a Chilean bank, Banco Bilbao Vizcaya Argentaria, Chile S.A. ("BBVA
Chile", and together with its consolidated subsidiaries, the "Bank" or "us" or
"we" or "ours" as the case may be) maintains its financial books and records in
Chilean pesos and prepares its consolidated financial statements in conformity
with accounting principles generally accepted in Chile ("Chilean GAAP") and the
rules of the Superintendencia de Bancos e Instituciones Financieras (the
Superintendency of Banks and Financial Institutions, which is referred to herein
as the "Superintendency of Banks") relating thereto, which together differ in
certain significant respects from accounting principles generally accepted in
the United States ("US GAAP"). References to "Chilean GAAP" in this Annual
Report are to accounting principles generally accepted in Chile, as supplemented
by the applicable rules of the Superintendency of Banks. See Note 1) to our
audited consolidated financial statements contained elsewhere in this Annual
Report (together with the notes thereto, the "Consolidated Financial
Statements") for a description of the principal differences between Chilean GAAP
and US GAAP, as they relate to us, and a reconciliation to US GAAP of net income
and shareholders' equity.

Pursuant to Chilean GAAP, unless otherwise indicated, financial data for
all full-year periods included in the Consolidated Financial Statements and
elsewhere throughout this Annual Report have been restated in constant Chilean
pesos of December 31, 2003. See Note1.c) to the Consolidated Financial
Statements.

For the convenience of the reader, we have included translations of certain
amounts into dollars at a specified rate. Unless otherwise indicated, the U.S.
dollar equivalent for information in Chilean pesos is based on the observed
exchange rate reported by Banco Central de Chile (the Central Bank of Chile,
which we refer to as the "Central Bank") for December 31, 2003, which was
Ch$599.42 = U.S.$1.00. The observed exchange rate, known as the dolar observado
(the "Observed Exchange Rate"), is, for any date, the average exchange rate at
which transactions are actually carried out in the Mercado Cambiario Formal (the
"Formal Exchange Market") on the previous day, as certified by the Central Bank
on the following business day. You should not construe these translations as
representations that the Chilean peso amounts actually represent such dollar
amounts or could be converted into dollars at the rates indicated or at any
other rate. The Observed Exchange Rate on May 30, 2003 was Ch$632.32 =
U.S.$1.00. See Item 3. Key Information--Exchange Rates for information regarding
historical exchange rates in Chile.

Unless otherwise specified, all references herein (except in the
Consolidated Financial Statements) to our loans are to loans and financial
leases before deduction of allowances for loan losses, and, except as otherwise
specified, all market share data presented herein is based on information
published periodically by the Superintendency of Banks. Past due loans include,
with respect to any loan, the portion of principal or interest that is 90 or
more days overdue; the entire outstanding balance of any loan is included in
past due loans only after legal collection proceedings have been commenced. This
practice differs from that normally followed in the United States where the
amount classified as past due would include the total principal and interest on
loans which have any portion overdue by 90 days or more. See "Selected
Statistical Information--Classification of Loan Portfolio Based on the
Borrower's Payment Performance".

Unless otherwise specified, all references herein (except in the
Consolidated Financial Statements) to "shareholders' equity" as of December 31
of any year are to shareholders' equity after deducting our net income for such
year, but all references to "average shareholders' equity" for any year are to
average shareholders' equity including our net income for such year.

Outstanding loans and the related percentages of our loan portfolio made to
middle and lower-middle income individuals and small, medium and large-size
companies in the section entitled "Business Overview" are categorized based on
the nature of the borrower. In the section entitled "Selected Statistical
Information", outstanding loans and related percentages of our loan portfolio
made up of such individual and corporate loans are categorized in accordance
with the reporting requirements of the Superintendency of Banks which are based
on the type and term of loans.

References in this Annual Report to the Chilean financial system include
all financial institutions operating in Chile (i.e., banks and finance
companies) and references to the Chilean banking system include only banks
operating in Chile.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F contains statements that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear throughout this Annual
Report on Form 20-F and include statements regarding our intent, belief or
current expectations, our officers or our management with respect to (i) our
asset growth and financing plans, (ii) trends affecting our financial condition
and results of operations, (iii) the impact of competition and regulations, and
(iv) our exposure to various types of market risks, such as interest rate risk,
foreign exchange rate risk and market price risk. Forward-looking statements
include known and unknown risks and uncertainties and are indicated by words
such as "anticipate", "believe", "expect", "intend", "risk", "could", "may",
"will", "seeks", and similar words and phrases and the negatives and variations
thereof. Such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and actual results may differ
materially from those described in such forward-looking statements in this
Annual Report on Form 20-F, including, without limitation, "Business Overview",
"Operating and Financial Review and Prospects" and "Quantitative and Qualitative
Disclosures About Market Risk".

Some factors that could cause actual results to differ materially from
those estimated by the forward-looking statements contained in this Annual
Report on Form 20-F include, but are not limited to: general economic conditions
in Chile and Latin America and the other countries in which we have significant
business activities or investments, including the United States; the monetary
and interest rate policies of the Central Bank; inflation; deflation;
unanticipated turbulence in interest rates, foreign exchange rates, equity
prices or other rates or prices; changes in Chilean and foreign laws,
regulations and taxes; changes in competition and pricing environments; natural
disasters; the inability to hedge certain risks economically; the adequacy of
loss reserves; technological changes; changes in consumer spending and saving
habits; and our success in managing the risks involved in the foregoing.

The forward-looking statements contained in this document speak only as of
the date of this report, and we do not undertake to update any forward-looking
statement to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data.

The following table presents selected consolidated and other financial and
operating information for us and certain statistical information for Chile as of
the dates and for the periods indicated. This information should be read in
conjunction with the Consolidated Financial Statements and the sections entitled
"Operating and Financial Review and Prospects" and "Selected Statistical
Information" appearing elsewhere in this Annual Report. The selected
consolidated financial information as of December 31, 2002 and 2003 and for the
years ended December 31, 2001, 2002 and 2003 has been derived from the
Consolidated Financial Statements included elsewhere in this Annual Report. The
selected financial data as of December 31, 1999, 2000 and 2001 and for the years
ended December 31, 1999 and 2000 has been derived from the Consolidated
Financial Statements that are not included in this Annual Report.

The Consolidated Financial Statements have been prepared in accordance with
Chilean GAAP (including the rules of the Superintendency of Banks), which differ
in certain significant respects from US GAAP. Note 28 to the Consolidated
Financial Statements provides a description of the principal differences between
Chilean GAAP and US GAAP as they relate to us and a reconciliation to US GAAP of
net income and shareholders' equity for periods and the dates covered thereby.

The financial data in the following tables as of and for all full-year
periods through December 31, 2003 is restated in constant Chilean pesos of
December 31, 2003. See Note 1.c) to the Consolidated Financial Statements.

Until December 31, 2001, mortgage finance bonds issued by the Bank were
considered permanent investment securities and classified under the caption
Other financial investments. On October 7, 2002, the Superintendency of Banks
issued Circular No. 3,196 which requires mortgage finance bonds issued by the
Bank to be presented net of its corresponding liability. To conform with current
year presentation, outstanding Mortgage finance bonds issued as of December 31,
2001, have also been presented net of its corresponding liability. Outstanding
mortgage finance bonds issued prior to year 2001 have been presented as in the
previous reports and have not been presented net of its corresponding liability.

As of or for the year ended December 31,
----------------------------------------
1999 2000 2001 2002 2003 2003
------- ------- ------- ------- ------- -------
(in millions of constant Ch$ of December 31, 2003)(1) (in thousands
of US$(2))
CONSOLIDATED INCOME STATEMENT
DATA

Chilean GAAP:
Interest revenue........................ 194,169 228,250 220,376 218,629 118,806 198,202
Interest expense........................ (113,894) (147,370) (126,101) (108,524) (80,118) (133,659)
Net interest revenue.................... 80,275 80,880 94,275 110,105 38,688 64,543
Provision for loan losses............... (35,572) (24,704) (31,872) (31,629) (35,303) (58,895)
Net interest revenue after
provision for loan losses............ 44,703 56,176 62,403 78,476 3,385 5,648
Income from services, net............... 11,395 11,913 17,400 21,980 29,304 48,887
Other operating income, net:
Gains (losses) on financial
instruments, net................... 3,126 3,991 8,640 6,202 2,756 4,598
Foreign exchange
transactions, net.................. 2,472 1,390 (4,204) (14,479) 64,293 107,259
Recovery of loans previously
charged off........................ 5,044 7,751 7,575 9,793 9,998 16,679
Other income and expenses, net....... (1,605) (15) 1,104 1,180 1,517 2,531
Operating expenses...................... (58,139) (62,695) (72,007) (75,910) (77,795) (129,784)
Loss from price-level restatement....... (2,684) (5,442) (4,509) (4,206) (1,760) (2,936)
Minority interest in
consolidated subsidiaries............ (51) (20) (24) (34) (23) (38)
Income before income taxes.............. 4,261 13,049 16,378 23,002 31,675 52,844
Income taxes............................ 5,455 2,004 (890) (2,544) (4,567) (7,619)
Net income ............................. 9,716 15,053 15,488 20,458 27,108 45,225
Net income per share (3)................ 33.50 48.87 42.90 56.67 75.09 0.1253
Net income per ADS (3) (4).............. 335.00 488.70 429.00 566.70 750.90 1.2527
Dividends per share..................... 1.15 31.22 43.75 41.77 55.64 0.0928
Dividends per ADS (4)................... 11.52 312.16 437.49 417.70 556.43 0.9282
Weighted average shares
outstanding (in millions)............ 290 308 361 361 361 361

US GAAP:
Interest revenue........................ 193,130 227,466 219,559 217,855 169,718 283,137
Interest expense........................ (117,793) (154,798) (129,596) (114,782) (83,717) (139,663)
Net interest revenue.................... 75,337 72,668 89,963 103,073 86,001 143,474
Provision for loan losses............... (31,034) (16,849) (24,377) (21,853) (25,323) (42,246)
Net income (loss) (6)................... (631) 9,606 15,776 17,087 31,651 52,803
Net income (loss) per share (3)......... (2.18) 31.19 43.70 47.33 87.68 0.1463
Net income (loss) per ADS (3)........... (21.77) 311.89 437.01 473.32 876.76 1.4627

As of or for the year ended December 31,
----------------------------------------
1999 2000 2001 2002 2003 2003
---- ---- ---- ---- ---- ----
(in millions of constant Ch$ of December 31, 2003)(1) (in thousands
of US$(2))
CONSOLIDATED BALANCE SHEET DATA
Chilean GAAP:

Cash and due from banks................. 153,401 166,144 207,161 314,133 265,827 443,474
Investments............................. 323,074 500,013 394,169 652,339 582,590 971,923
Loans, net of allowance for
loan losses..........................1,456,984 1,682,873 1,815,874 2,074,054 2,366,844 3,948,556
Other assets............................ 95,685 189,832 152,096 187,641 192,726 321,522
Total assets............................2,029,144 2,538,862 2,569,300 3,228,167 3,407,987 5,685,475
Deposits................................1,150,402 1,243,377 1,439,585 1,931,610 2,172,508 3,624,351
Borrowings.............................. 614,382 854,598 740,286 877,382 806,485 1,345,443
Other liabilities....................... 82,798 187,932 136,719 159,467 164,278 274,062

Minority interest in
consolidated subsidiaries............ 128 65 89 115 138 230
Shareholders' equity(5)................. 171,716 237,840 237,133 239,135 237,470 396,166

US GAAP:
Total assets............................1,948,250 2,459,669 2,435,531 3,145,280 3,341,587 5,574,701
Long-term borrowings.................... 440,767 419,393 405,984 457,188 444,381 741,352
Shareholders' equity(6)................. 190,578 254,991 248,233 257,898 265,779 443,394

CONSOLIDATED RATIOS
Chilean GAAP:
Profitability and Performance:
Net interest margin(7).................. 4.64% 4.30% 4.22% 4.46% 1.32%
Return on average total
assets(8)............................ 0.49% 0.68% 0.59% 0.71% 0.81%
Return on average shareholders'
equity(9)............................ 5.58% 7.63% 6.28% 8.21% 10.47%
Capital:
Average shareholders' equity as
a percentage of average
total assets......................... 8.70% 8.95% 9.34% 8.67% 7.76%
Bank regulatory capital as a
percentage of minimum
regulatory capital required
(10)................................. 167.09 192.20 177.16 145.30 141.18
Basic capital to total assets........... 8.70 9.64 9.44 7.38 6.90
Total capital to risk adjusted
assets............................... 13.40 15.40 14.17 12.31 11.30
Credit Quality:
Past due amounts/total loans(11)........ 1.72% 1.78% 2.10% 1.97% 1.90%
Category B-, C and D
loans/total loans(12)................ 5.01 5.11 4.86 4.24 3.23
Non-performing loans/total
loans(13)............................ 3.73 3.25 3.41 2.97 2.85
Allowance for loan losses/total
loans................................ 2.62 2.25 2.35 2.15 1.85
Allowance for loan losses/past
due amounts(11)...................... 152.09 126.00 111.93 108.99 97.30

As of or for the year ended December 31,
----------------------------------------
1999 2000 2001 2002 2003 2003
------ ------ ------ -------- -------- ------
(in millions of constant Ch$ of December 31, 2003)(1) (in thousands
of US$(2))

Allowance for loan losses/
category B-, C and D
loans(12)............................ 52.17 43.92 48.37 50.65 57.24
Allowance for loan
losses/non-performing
loans(13)............................ 70.11 69.01 68.82 72.36 64.84
Past due amounts/shareholders'
equity(5)............................ 14.98 12.90 16.46 17.46 19.32
Productivity:
Loans per employee (net of
allowances)(Ch$)..................... 836.38 927.71 969.50 1,175.10 1,336.44
Operating Ratios:
Operating expenses/operating
revenue, net(14)..................... 59.77 63.86 62.02 61.31 57.61
Operating expenses/average
total assets(15)..................... 2.91 2.84 2.73 2.64 2.33

OTHER DATA
Inflation Rate(16)...................... 2.3 4.5 2.6 2.8% 1.0%
Revaluation (devaluation) rate
(Ch$/US$)............................ (11.4) (8.5) (14.6) (8.6) 15.9
Employees............................... 1,742 1,814 1,873 1,765 1,771

- ----------------------
(1) Except per share and per American Depositary Share ("ADS"),
percentages, ratios, number of shares and number of employees.

(2) Except per share and per ADS data, percentages and ratios. Amounts
stated in U.S. dollars as of or for the year ended December 31, 2003
have been translated from Chilean pesos at the Observed Exchange Rate
of Ch$599.42 = US$1 for December 31, 2003.

(3) Net income per share and per ADS data under both Chilean and US GAAP
have been calculated on the basis of the weighted-average number of
shares outstanding during the period. Shares which are not fully paid
for are not entitled to receive dividends and have not been considered.
As of December 31, 2003, all shares were entitled to receive dividends.

(4) Calculated on the basis of 10 common shares per ADS. Dividends per ADS
do not reflect any deductions of Chilean withholding taxes or for the
charges described in "Description of American Depositary
Receipts--Charges of Depositary" and "Taxation".

(5) Shareholders' equity at December 31, 1999, 2000, 2001, 2002 and 2003
excludes net income for the year then ended, as applicable. The amounts
so excluded are Ch$9,716 million, Ch$15,053 million, Ch$15,488 million,
Ch$20,458 million and Ch$27,108 million, for the years ended December
31, 1999, 2000, 2001, 2002 and 2003 respectively.

(6) Including the mandatory dividend described in Note 28.1.c) to the
consolidated financial statements.

(7) Net interest revenue divided by average interest earning assets.

(8) Net income divided by average total assets in 1999, 2000, 2001, 2002
and 2003. Average total assets were calculated on the basis of daily
balances of BBVA Chile and on the basis of monthly balances for its
subsidiaries.

(9) Net income divided by average shareholders' equity in 1999, 2000, 2001,
2002 and 2003. Average shareholders' equity used in the calculation
includes our net income for the applicable period.

(10) According to the current General Banking Law, banks should have a
minimum ratio of Total Capital to Risk Adjusted Assets of 8%, net of
required allowances for loan losses, and a minimum ratio of Basic
Capital to Total Assets of 3%, net of required allowances for loans
losses.

(11) Past due loans include, with respect to any loan, the portion of
principal or interest that is 90 days or more overdue; the entire
outstanding balance of any loan is included in past due loans only
after legal collection proceedings have been commenced.

(12) All loans in categories B-, C and D are substandard loans. See
"Selected Statistical Information--Classification of Loan Portfolio".

(13) Non-performing loans includes loans which do not accrue interest and
restructured loans. See "Selected Statistical
Information--Classification of Loan Portfolio Based on the Borrower's
Payment Performance".

(14) Operating expenses divided by net operating revenue. Net operating
revenue consists of net interest revenue, income from services (net),
other operating income (net) and other income and expenses.

(15) Average total assets were calculated as an average of the daily
average asset balances for each period.

(16) As measured by the percentage change in the official Consumer Price
Index ("CPI") of the Instituto Nacional de Estadisticas (the Chilean
National Institute of Statistics) of the previous month. Such inflation
differs from the inflation rate used for purposes of price-level
restatements of our financial statements, which has a one-month lag.
See Note 1.c) to the Consolidated Financial Statements.

Exchange Rates

In this Annual Report on Form 20-F, references to "$", "US$", "U.S.
dollars" and "dollars" are to United States dollars, references to "pesos" or
"Ch$" are to Chilean pesos and references to "UF" are to Unidades de Fomento.
The UF is an inflation-indexed Chilean monetary unit with a value in Chilean
pesos that changes daily to reflect changes in the official Consumer Price Index
("CPI") of the Instituto Nacional de Estadisticas (the Chilean National
Institute of Statistics) of the previous month. See Note 1.c) to the
Consolidated Financial Statements.

This Annual Report on Form 20-F contains translations of certain Chilean
peso amounts into U.S. dollars at specified rates solely for the convenience of
the reader. These translations should not be construed as representations that
the Chilean peso amounts: (i) actually represent such U.S. dollar amounts, (ii)
were converted from U.S. dollars at the rate indicated in preparing the
Consolidated Financial Statements, (iii) could be converted into U.S. dollars at
the rate indicated or (iv) were converted at all. Unless otherwise indicated,
such U.S. dollar amounts, in the case of information concerning BBVA Chile as of
and for the years ended December 31, 2000, 2001 and 2002, have been translated
from Chilean pesos based on the Observed Exchange Rate (as defined herein)
reported by the Banco Central de Chile (the "Central Bank") on December 31,
2003, which was Ch$599.42 per US$1. The rate reported by the Central Bank on
December 31, 2003 is based upon the actual exchange rate of December 30, 2003
and is the exchange rate specified by the Superintendency of Banks for use by
Chilean banks in the preparation of their financial statements for the period
ended December 31, 2003. The Federal Reserve Bank of New York does not report a
noon buying rate for Chilean pesos.

Since the enactment of the Chilean Central Bank Act in 1989, any person may
freely buy and sell foreign exchange. The Central Bank, however, may require
that certain purchases and sales of foreign exchange specified by law must be
carried out exclusively in the Mercado Cambiario Formal (the "Formal Exchange
Market"), may impose restrictions on foreign exchange transactions, and may
intervene in the Formal Exchange Market purchasing and selling foreign currency.

The Formal Exchange Market is formed by local banks and other entities so
authorized by the Central Bank. Authorized transactions are generally carried
out at spot rates. The daily observed exchange rate "dolar observado" (the
"Observed Exchange Rate") is, for any date, the average exchange rate of
transactions in the Formal Exchange Market on the previous day, as certified and
published by the Central Bank on the banking day immediately following such day.

For purposes of the operation of the Formal Exchange Market, and until
September 1999, authorized transactions by banks were generally transacted
within a certain band above or below that of a reference exchange rate. The
reference exchange rate (dolar acuerdo) (the "Reference Exchange Rate") was
reset monthly by the Central Bank, taking internal and external inflation into
account, and was adjusted daily to reflect variations in parities among the U.S.
dollar, the Japanese yen and the Euro in the international markets. The
Reference Exchange Rate is the rate at which the Central Bank carried out its
foreign exchange operations. In order to maintain the

average exchange rate within such limits, the Central Bank intervened by selling
and buying foreign currencies on the Formal Exchange Market.

On September 2, 1999, the Central Bank resolved to eliminate the exchange
rate band as an instrument of exchange rate policy, introducing more flexibility
to the exchange market. At the same time, the Central Bank announced that an
intervention in the exchange market by buying or selling foreign exchange on the
Formal Exchange Market would take place only in special and qualified cases.

Purchases and sales of foreign exchange may be effected outside the Formal
Exchange Market, through the Mercado Cambiario Informal (the "Informal Exchange
Market"), which is a recognized currency market in Chile. The Informal Exchange
Market reflects the supply and demand for foreign currency by entities not
authorized to operate in the Formal Exchange Market, such as stock brokers,
travel agencies and others. There are no limits imposed on the extent to which
the rate of exchange in the Informal Exchange Market can fluctuate above or
below the Observed Exchange Rate. We estimate that since 1991, the year-end rate
of exchange for Chilean pesos into dollars on the Informal Exchange Market has
fluctuated between approximately 1.0% below and 5.0% above the Observed Exchange
Rate. As of December 31, 1999, the rate of exchange for Chilean pesos into U.S.
dollars on the Informal Exchange Market was 1.1% above the Observed Exchange
Rate; 0.21% above the Observed Exchange Rate as of December 31, 2000; 0.7% above
the Observed Exchange Rate as of December 31, 2001, and 1.1% above the Observed
Exchange Rate as of December 31, 2002. As of December 31, 2003, the Informal
Exchange Market was 1.1% above the Observed Exchange Rate.

The following table sets forth for each of the last five years, the annual
low, high, average and year-end Observed Exchange Rates for dollars as reported
by the Central Bank. No representation is made that the Chilean peso or the
dollar amounts referred to herein actually represent, could have been or could
be converted into dollars or Chilean pesos, as the case may be, at the rates
indicated, at any particular rate or at all.

------------------------------------------------
Observed Exchange Rates of Ch$ per US$1.00
------------------------------------------------
Low(1) High(1) Average Year-End
------- ------- --------- --------
Year
1999.......................... 468.69 550.93 508.78(2) 527.70
2000.......................... 501.04 580.37 538.87(2) 572.68
2001.......................... 557.13 716.62 633.69(2) 656.20
2002.......................... 641.75 756.56 689.24(2) 712.38
2003 ......................... 593.10 758.21 691.54(2) 599.42

Months
December 2003.............. 593.10 621.27 602.90(3)
January 2004............... 559.21 596.78 573.64(3)
February 2004.............. 571.35 598.60 584.31(3)
March 2004................. 588.04 623.21 603.91(3)
April 2004................. 596.61 624.84 608.19(3)
May 2004................... 622.25 644.42 635.76(3)
- ----------------------
Source: Central Bank

(1) Exchange rates are for the actual low and high days for each period.

(2) The average of monthly average rates during the period.

(3) The average of daily average rates during the period.
The Observed Exchange Rate reported by the Central Bank on December 30,
2003 was Ch$599.42 =US$1.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors.

You should consider the following risks with respect to an investment in
our company and investments in Chilean corporations that are not normally
associated with investments in securities of issuers in the United States and
other jurisdictions.

Our growth, asset quality and profitability may be affected by volatile
macroeconomic conditions in Chile

All of our operations are conducted and substantially all of our customers
are located in Chile. Accordingly, our ability to recover on our loans and our
financial condition and results of operations are substantially dependent on
economic conditions prevailing from time to time in Chile, particularly in those
segments of the retail and corporate markets in which our business is primarily
focused. During the first three months of 2004, the Chilean economy is estimated
to have grown 4.5% as compared to the first quarter of year 2003. The Chilean
economy has experienced growth as evidenced by annual increase in Chile's gross
domestic product ("GDP") of 3.2%, -0.8%, 4.5%, 3.4%, 2.2% and 3.3%,
respectively, for the years 1998 through 2003, and an average annual increase of
4.8% over the ten year period 1994-2003, and is now entering a solid recovery
that should bring growth rates to the 5.0-5.5% range in 2004 and 2005.
Nevertheless, there can be no assurance that such annual growth will continue in
the future. Future developments in the Chilean economy could impair our ability
to proceed with our business strategies, our financial condition or our results
of operations. Our financial condition and results of operations could also be
adversely affected by changes in economic or other policies of the Chilean
government, which has been exercising substantial influence over many aspects of
the private sector, or other political or economic developments in or affecting
Chile, as well as regulatory changes or administrative practices of Chilean
authorities, over which we have no control. See "Chilean Regulation and
Supervision".

In addition, our financial condition and results of operations could be
affected by changes in the level of economic activity in other Latin American
countries as well as countries outside Latin America, as a significant portion
of our loans are to finance Chilean foreign trade. Although economic conditions
are different in each country, investor reaction to developments in one country
can have significant effects on the economic environment in other countries,
including Chile. For example, political and economic developments in December
1994 and early 1995 in Mexico, the economic crisis in several Asian nations in
the second half of 1997 and the Brazilian Real devaluation on January 12, 1999,
have had a negative impact on the financial and securities markets in many
emerging market countries, including Chile. Even though the Mexican crisis had a
negligible impact on Chile, that was not the case in 1998-1999, when several
Asian nations faced a severe financial crisis, that quickly spread to all
emerging markets.

The economic crisis in several Asian nations in the second half of 1997 had
a significant negative impact on the Chilean economy, on two levels. First, it
affected negatively our terms of exchange, driving the price of our exports (and
particularly the price of copper) to their lowest level in many years; second,
it invited speculative activity towards the Chilean peso, thus causing a marked
increase in local interest rates and, consequently, causing a decrease in the
GDP growth from levels around 7%, sustained over most of the 90's, to a negative
growth of around 1% in 1999. The recovery of the economy has been slow, and has
been affected by the Brazilian Real devaluation on 1999 and by the recent
Argentine crisis. The most visible effect of the latter crisis has been a
sustained devaluation of the local currency since 2001 and until 2003, a process
that reversed itself recently when terms of trade improved dramatically.
Inflation has remained low, with small variations due to the fluctuation of the
international prices of commodities relevant for Chile, such as copper and oil.

After prolonged periods of recession, followed by political instability,
Argentina announced in 2001 that it would not service its public debt. In order
to address the worsening economic and social crisis, the Argentine government
abandoned its decade-old fixed US dollar/Argentinean peso exchange rate and
created a floating

exchange rate regime in January 2002. Argentina is a trading partner of Chile,
and the continuation of the Argentine crisis could affect the revenues and
profitability of companies with ties to Argentina. Its honoring of an agreement
to provide natural gas for Chilean electricity generating facilities is lately
under doubt, and it could adversely affect Chile's internal price of energy and
slightly dampen the recovery of the economic activity which is presently under
way.

Although Chile has a history of moderate inflation, there is a risk that we
could experience inflationary pressures which would have an adverse impact on
our business.

The annual rate of inflation (as measured by changes in the CPI and as
reported by the Chilean National Institute of Statistics) in 1998, 1999, 2000,
2001, 2002 and 2003 was 4.7%, 2.3%, 4.5%, 2.6%, 2.8% and 1.1%, respectively.
Within this context, the Central Bank changed its reference interest rate from a
real interest rate definition to a nominal definition. Thus, on July 26, 2001,
this rate was changed from a 3.5% real interest rate to a 6.5% nominal interest
rate, assuming a 3% inflation for the year. From then on, the reference rate has
been expressed in nominal terms and has fallen steadily, reaching its current
level of 1.75% in January this year. This has been possible thanks to steady
progress in the reduction of inflation, and a slow economic recovery. The
current monetary stance has been termed "expansionary" by the Central Bank and
it is due to change any time now.

Inflation for the twelve months ended March 31, 2004 was (0.8)%. Although
Chilean inflation has proved moderate in recent years, in the past Chile has
experienced high levels of inflation. A return to high levels of inflation in
Chile could adversely affect the Chilean economy and have an adverse impact on
our business and results of operations. There can be no assurance that Chilean
inflation will not change significantly from the current level. See "Operating
and Financial Review and Prospects--Inflation".

Although we currently benefit from inflation in Chile due to the structure
of our assets and liabilities (i.e., a significant portion of our deposits are
not indexed to the inflation rate and do not accrue interest (such as checking
accounts, the majority of which do not earn interest), and a significant portion
of our loans are indexed to the inflation rate), there can be no assurance that
our operating results in the future will not be adversely affected by changing
levels of inflation or by changes in the Chilean regulations such as the one
allowing payment of interest on deposit accounts, which became effective on June
1, 2002.

Because economic stability in Chile has depended, to some extent, on the
stability of the exchange rate, a political decision to modify the current
status of the regulation could have an adverse effect on the economy and our
profitability.

The Chilean peso has been subject to large nominal devaluations in the past
and may be subject to significant fluctuations in the future. In the five-year
period ended December 31, 2003, the value of the Chilean peso relative to the
U.S. dollar decreased approximately 21% in nominal terms and approximately 10%
in real terms, based on the Observed Exchange Rates for U.S. dollars on December
31, 1998 and December 31, 2003. See "Exchange Rates". Our results of operations
have not been significantly affected by fluctuations in the exchange rates
between the Chilean peso and the dollar because of our policy and Chilean
regulations relating to the control of material exchange transactions. At March
31, 2004, we had a net foreign currency exposure of Ch$7,890 million (US$13.1
million), equal to 3.3% of our capital and reserves (below the 20% permitted
under regulations of the Superintendency of Banks) See "Operating and Financial
Review and Prospects--Exchange Rate Risk". No assurance can be given that our
policy or the regulations will continue. In the absence of this policy and
regulations, and in the event of a devaluation of the Chilean peso, the
financial condition and results of operations of Chilean companies, including
us, and the ability of the Chilean companies to meet their obligations in
foreign currencies, could be adversely affected. The Chilean government's
economic policies and future fluctuations in the value of the Chilean peso
against the U.S. dollar could adversely affect our operating results.

Our customer base is particularly sensitive to adverse developments in the
Chilean economy, which renders our lending activities relatively riskier than
lending to higher-income customers.

We have developed our lending business with particular emphasis on the
Personal Banking and Corporate Banking divisions, although restricted by
conservative risk policies. At December 31, 2003, those divisions accounted for
80.9% of our loan portfolio (including contingent and past due loans). Adverse
changes affecting any

of the above mentioned sectors is likely to have a significant adverse impact on
our loan portfolio and, as a result, on our financial condition and results of
operations.

A significant part of our customers consists of:

o large and corporate companies, with annual sales over US$10
million; and

o individual customers in all income segments, most of them
customers with monthly income between Ch$200,000 (US$350) and
Ch$1.5 million (US$2,600).

Medium and small-size companies and middle and lower-middle income
individuals typically have less financial strength and accordingly can be
expected to be more adversely affected by adverse developments in the Chilean
economy than large companies and high income individuals. As a result, it is
generally accepted that lending to these segments of our existing customer base
represents a relatively higher degree of risk than lending to other groups.

Important features of our strategy are to increase lending and the
provision of other services through cross-sales, and to gain new customers in
every customer segment, particularly in the upper income and corporate segments.
Consequently, though we may experience higher levels of past due amounts which
could result in higher levels of allowance for loan losses, the probability is
lower than in previous years since we have reduced the proportion that the more
vulnerable segments represent in our portfolio. Moreover, we believe that the
net interest margins on lending to the lesser income groups more than compensate
for the higher risk. We also believe that our experience in making loans to
these groups gives us an advantage over our competitors in identifying the less
risky customers in these groups, since we have historical evidence of the
factors that correlate with good payment behavior. However, we cannot assure you
that we will not suffer substantial adverse effects on our base portfolio in the
event of adverse developments in the Chilean economy.

Significant competition as a result of the limited barriers to entry and
continued consolidation of the Chilean banking industry could intensify price
competition and limit our ability to increase market share.

The Chilean market for financial services is highly competitive. We compete
with other Chilean private banks, and with BancoEstado that make consumer credit
available to an important portion of the Chilean population. The upper and
upper-middle income segments of the Chilean population and the corporate and
large companies have become the target of several banks and competition in those
segments is likely to increase. Accordingly, net interest margins are likely to
be subject to greater pressure. Although we believe that demand for financial
products and services from all income segments of the population and for
companies of all sizes will continue to grow during the remainder of the decade,
no assurance can be given that net interest margins will continue at present
levels.

Because Chilean regulations do not impose barriers to entry into the
Chilean market and do not restrict capital movements, we face significant
competition from both domestic and foreign commercial and investment banks. The
regulatory framework in the Chilean financial system has led to increased
consolidation both in the universal bank sector and in the sectors of financial
institutions specializing in specific products or markets. Concentration, as
measured by the participation of the 10 major banks in total deposits, increased
from 84.3% at December 31, 1999 to 89.7% at December 31, 2003. We expect the
trends of increased competition and consolidation to continue, and result in the
formation of new large financial groups. In 2002, Banco Edwards was merged into
Banco de Chile, allowing the latter to reach a pro forma 18.6% loan market share
(currently 18.1%), and Banco Santiago merged with Banco Santander, a merger that
created the largest bank in Chile (24.4% loan market share, pro forma; currently
22.6%). A few smaller banks have entered the market in the past year, all of
them catering to niches such as consumer loans, mortgage loans and small
business firms. Banco Santander-Santiago divested a small consumer loans
division and sold it to one of those new banks, Banco Paris, which is expected
to open in the second half of 2004.

Consolidation in the Chilean market has given the opportunity to other
competitors to increase their branch network and gain proximity to compete for
banking penetration. Traditional competitors with international name recognition
and easy access to financial and technical resources made the market more
competitive, thereby constraining our growth strategy.

Furthermore, we also face competition from non-bank competitors, such as:

o department stores (for some credit products);

o leasing companies;

o factoring companies;

o mutual funds;

o pension funds; and

o insurance companies.

Such competitors generally enjoy regulatory advantages vis-a-vis banks. The
banking rules subject banks like us to the more stringent capital requirements
described in "Chilean Regulation and Supervision". Our advertising and promotion
is also subject to stricter transparency requirements, which compel banks to
disclose in fine print the total financial cost of the bank products they
advertise. For more details regarding our competitive position, see "Business
Overview--Competition".

A reversal in the rate of growth of the Chilean economy could adversely
affect the recent growth of our loan portfolio and increase the potential for
requirements of allowances for loan losses.

During the period from 1998 through 2003, the volume of our loans has grown
at an average annual rate of 10.9%, from Ch$1,336,571 million at December 31,
1998 to Ch$2,407,741 million at December 31, 2003. Our portfolio grew
approximately 3.3% to Ch$2,471,879 million at March 31, 2004 from Ch$2,393,628
million at December 31, 2003 (in Ch$ of March 31, 2004). The growth in our loan
portfolio during these periods can be attributed generally to the continued
growth of the Chilean economy, an increased level of savings and investment, and
to our increased efforts in commercial activity and creativity, which enabled us
to gain market share. During 2003, the volume of our loans grew by 13.6%
principally as a result of the implementation of a new strategic plan called
"New Stage" which has focused on developing our core lines of business and thus
position ourselves as one of the fastest growing banks in the Chilean Banking
System. In accordance with this plan, we have continued launching innovative and
convenient new products, especially in the housing mortgage segment, and we have
reached a leadership position in the Corporate segment. No assurance can be
given that the trends described will continue in the future. A reversal in the
rate of growth of the Chilean economy could adversely affect the rate of growth
of our portfolio and its risk index and, accordingly, increase the amount of
allowance for loan losses it is required to maintain. Also, the further
expansion in our loan portfolio may expose us to a higher level of loan losses
and require us to establish higher levels of allowance for such losses. See
"Loans" and "Risk Index".

Our loan portfolio is concentrated in certain sectors

We have developed our lending business with particular emphasis in the
residential mortgage, foreign trade and business segments. At March 31, 2004,
those segments accounted for 81.1% of our loan portfolio (excluding contingent
and past due loans). See "Selected Statistical Information--Analysis of our Loan
Classifications". The quality of our loan portfolio is dependent on domestic
economic conditions affecting medium and small-size companies and the middle and
lower-middle income segments of the population, as well as on international
economic conditions affecting Chile's foreign trade. Adverse changes affecting
any of the above mentioned sectors is likely to have an adverse impact on our
loan portfolio and, as a result, on our financial condition and results of
operations.

Our business is particularly vulnerable to volatility in interest rates.

Our results of operations are substantially dependent upon the level of our
net interest income, which is the difference between interest income from
interest-earning assets and interest expense on interest-bearing liabilities.
Interest rates are highly sensitive to many factors beyond our control,
including deregulation of the financial sector, monetary policies, domestic and
international economic and political conditions and other factors.

Changes in market interest rates could affect the interest rates charged on
the interest-earning assets differently from the interest rates paid on
interest-bearing liabilities. This difference could result in an increase in
interest expense relative to interest income leading to a reduction in our net
interest income. Income from treasury operations is particularly vulnerable to
interest rate volatility. Rising interest rates may also bring an increasing
non-performing loan portfolio.

Since our principal sources of funds are short-term deposits, a sudden
shortage of funds could cause an increase in our costs of funding and an adverse
effect on our operating revenues.

Historically, funding in Chile has been short-term, being today's average
funding duration approximately 80 days. Consistent with this funding structure,
our principal sources of funds have traditionally been short-term savings,
certificates of deposit and demand deposits. Since we rely heavily on short-term
deposits for our funding, we cannot assure you that, in the event of a sudden or
unexpected shortage of funds in the banking systems and money markets in which
we operate, we will be able to maintain our levels of funding without incurring
higher funding costs or the liquidation of certain assets.

At December 31, 2003, 83.2% of our time deposits were in amounts greater
than Ch$60 million (US$100,000). Time deposits have represented 73.2%, 73.5% and
74.7% of total funding from clients at the end of 2001, 2002 and 2003,
respectively. Large-denomination time deposits may, under some circumstances, be
a less stable source of deposits. However, our management believes that, by
having 69.3% of our time deposits coming from individuals, and by having 8,329
clients with large-denomination deposits, we enjoy greater bargaining power
vis-a-vis this type of customer, which would allow us to adjust our lending
rates to a sudden increase in our funding costs. Therefore, we believe we are
well positioned to deal with the risks associated with these time deposits.

A disposition of our shares by our principal shareholders could adversely
affect the trading price of our shares and ADSs.

We are controlled by BBVA and as of December 31, 2003, BBVA controlled
66.03% of the outstanding shares. See "Major Shareholders and Related Party
Transactions--Principal Shareholders". A disposition by BBVA or the other
significant shareholders, or by entities controlled by any of them, of a
significant portion of the shares of our common stock (the "Common Shares"), or
the perception that such a disposition may occur, could adversely affect the
trading price of the Shares on the Chilean Stock Exchanges (and, consequently,
the trading prices of the ADSs) and could affect our control. See "Major
Shareholders".

The relative illiquidity and volatility of Chilean securities markets could
adversely affect the price of BBVA Chile ADSs and the Common Shares.

The Chilean securities markets are substantially smaller and less liquid
than the major securities markets in the United States. In addition, the Chilean
securities markets may be affected materially by developments in other emerging
markets, particularly other countries in Latin America. The low liquidity of the
Chilean market may impair the ability of holders of ADSs to sell Shares
withdrawn from the ADS program into the Chilean market in the amount and at the
price and time they wish to do so.

Chilean controls on foreign investment and repatriation of investments and
Chilean Withholding Tax requirements are relatively onerous.

Equity investments in Chile by persons who are not Chilean residents are
generally subject to various exchange control regulations that govern the
repatriation of the investments and earnings therefrom. Holders of the ADSs and
the Bank of New York (the "Depositary") have the benefit of a contract, the
"Foreign Investment Contract" among the Depositary, us and the Central Bank. See
"The Central Bank". The Foreign Investment Contract grants the Depositary and
the holders of the ADSs access to Chile's Mercado Cambiario Formal, the "Formal
Exchange Market", permits the Depositary to remit dividends it receives from
BBVA Chile to the holders of ADSs and permits the holders of ADRs to repatriate
the proceeds of the sale of the Shares withdrawn from the ADS facility thereby
enabling them to acquire on more favorable terms the foreign exchange necessary
to repatriate investments in the Shares and earnings therefrom. See "Chilean Tax
Considerations". Pursuant to current Chilean law, the Foreign Investment
Contract may not be amended unilaterally by the Central Bank, and there are
judicial precedents (which are not binding with respect to future judicial
decisions) indicating that a contract such as the Foreign Investment Contract
may not be abrogated by future legislative changes. Owners of the ADSs will be
entitled to receive dividends on our underlying shares to the same extent as the
holders of Common Shares. Dividends received by holders of ADSs will be paid in
U.S. dollars net of foreign currency exchange fees and expenses of the
Depositary and will be subject to Chilean withholding tax, currently imposed at
a rate of 35% (subject to credits in certain cases as described under
"Taxation"). See "Taxation--Chilean Tax Considerations".

A significant change in the Chilean economic liberalization and
deregulation policies could disrupt our business and cause material adverse
effects.

We are subject to regulation by the Central Bank and the Superintendency of
Banks. During the Chilean financial crisis of 1982 and 1983, the Central Bank
and the Superintendency of Banks strictly controlled the funding, lending and
general business activities of the banking industry in Chile. See "Central Bank
Subordinated Debt" and "Chilean Regulation and Supervision".

Pursuant to an amendment to the Chilean General Banking Law enacted on
November 4, 1997, all Chilean banks may engage in additional businesses
depending on the strength of the bank and the approval by the Superintendency of
Banks of a feasibility study. Such businesses include offering commercial
banking services outside of Chile and providing factoring, underwriting,
transportation of securities, financial services, leasing, direct financial
advising services and securitization products. See "Chilean Regulation and
Supervision--Other Businesses". The Chilean General Banking Law also applies a
modified version of the capital adequacy guidelines issued by the Basle
Committee on Banking Regulation and Supervisory Practices (the "Basle
Committee") to the Chilean banking system and limits the discretion of the
Superintendency of Banks to deny new banking licenses. There can be no assurance
that regulators will not in the future impose more restrictive limitations on
the activities of banks, including us, than those that are currently in effect.
Any such change could have a material adverse effect on our business, financial
condition and results of operations.

Because the Chilean financial system has different corporate disclosure and
accounting standards from the U.S., our financial statements may not give you
the same information as financial statements prepared under the U.S. accounting
rules.

As a regulated financial institution, we are required to submit unaudited
unconsolidated balance sheets and income statements prepared in accordance with
Chilean GAAP to the Superintendency of Banks on a monthly basis. This
information is subsequently made public by the Superintendency of Banks within
approximately one month of receipt. Such unaudited financial information is
prepared in summary form, is not sent directly to our shareholders and differs
in other significant respects from information generally available in the United
States with respect to U.S. financial institutions.

The securities laws of Chile, which govern open or publicly listed
companies such as us, impose disclosure requirements that are more limited than
those in the United States in certain important respects. In addition, although
Chilean law imposes restrictions on insider trading and price manipulation, the
Chilean securities markets are not as highly regulated and supervised as the
U.S. securities markets.

There are also important differences between Chilean and U.S. accounting
and financial reporting standards. As a result, Chilean financial statements and
reported earnings generally differ from those reported based on U.S. accounting
and reporting standards. See Note 28 to the Audited Consolidated Financial
Statements.

Our by-laws have fewer and less well-defined shareholders' rights as
compared to the by-laws of a U.S. Corporation.

Our corporate affairs are governed by our estatutos (the "By-laws"), which
function as our articles of incorporation and our by-laws, and by the laws of
Chile. See "Description of By-laws". Under such laws, our shareholders may have
fewer or less well-defined rights than they might have as shareholders of a
corporation incorporated in a U.S. jurisdiction. For example, under legislation
applicable to Chilean banks our shareholders would not be entitled to appraisal
rights in the event of a merger or other business combination undertaken by us.
See "Description of By-Laws--Shareholders' Meetings and Voting Rights".

Item 4. Information on the Company

A. History and development of the Bank.

Banco Bilbao Vizcaya Argentaria

Banco Bilbao Vizcaya Argentaria S.A. ("BBVA") financial group resulted from
the merger between Banco Bilbao Vizcaya S.A. ("BBV") and Argentaria S.A.,
formerly a Spanish retail banking, asset management and insurance provider, that
took place in December, 1999. The merger was a strategic response to the
economic environment, where size is a fundamental competitive factor for
achieving sustainable gains. BBVA has over 27 million clients and a presence in
37 countries with 6,924 offices and approximately 86,197 employees throughout
the world.

BBVA is a global banking organization with a presence in the following
businesses: retail banking, wholesale banking, European banking, Latin American
banking, asset management and private banking, investment banking, industrial
group, insurance, and e-business, among others.

Our integration into the BBVA Group has provided us with tangible benefits
including the following: (i) sharing of technology; (ii) expanding range of
banking products and services that can better serve the Chilean market; (iii)
leveraging BBVA's global client relationships to serve those clients operating
in Chile; and (iv) broad financial support from a powerful shareholder whose
investment in us is both long-term and strategic.

The Acquisition

On September 24, 1998, BBVA (then BBV), obtained a 55% controlling stake in
us through: (i) the acquisition of 40,637,415 of our shares for an aggregate
price of Ch$20,821,157,368 (historical pesos) and (ii) the subscription of
158,034,393 of our newly-issued shares that were issued in accordance with the
shareholders' resolution passed at the Extraordinary Shareholders' Meeting held
on August 21, 1998. BBVA undertook these transactions in accordance with a
subscription and share purchase agreement, which had been entered into by BBVA
and the former principal shareholders on June 18, 1998. In addition, pursuant to
such agreement, BBVA and the former principal shareholders entered into a
separate agreement, which governs our future administration. The former
principal shareholders also entered into an agreement among themselves with
respect to our future administration. See "Major Shareholders -- Principal
Shareholders". On March 25, 1999, our shareholders voted to change our name from
Banco BHIF to BBV Banco BHIF.

As a result of the merger between BBV and Argentaria that took place in
December 31, 1999, on May 17, 2000 our shareholders voted to change our name
from BBV Banco BHIF to BBVA Banco BHIF. On March 17, 2003, our shareholders
voted to change our name to Banco Bilbao Vizcaya Argentaria, Chile S.A.

Overview

Banco Bilbao Vizcaya Argentaria, Chile S.A. is a Chilean private commercial
bank incorporated on September 22, 1883 under Chilean General Banking Law. We
provide a wide range of financial products and services to the retail and
corporate banking markets throughout Chile. We are domiciled in Chile and our
principal executive office is located at Pedro de Valdivia 100, Providencia,
Santiago, Chile. Our telephone number is 56-2-679-1000. Our agent in the United
States for U.S. federal securities law purposes is the office of BBVA in New
York, 1345 Avenue of the Americas, 45th Floor, New York, NY 10105. BBVA's
telephone number is (212) 728-1660.

We conduct our business through our 85 full-service branches, two
limited-service branches, 101 pension payment centers and five subsidiaries. Our
business activities are targeted principally at high, middle and lower-middle
income individuals and large, medium and small-size companies. At December 31,
2003, we had assets of Ch$3,407,987 million (US$5,686 million), total deposits
of Ch$2,172,508 million (US$3,624 million), and shareholders' equity of
Ch$264,578 million (US$441 million), including our net income for the year ended
December 31, 2003, which was Ch$27,108 million (US$45 million). This resulted in
a return on average shareholders' equity of 10.47% and a return on average total
assets of 0.81%. See "Key Information-- Selected Financial Data".

Our retail banking business includes products such as residential mortgage
lending, the extension of other personal loans (including consumer loans),
automobile financing and credit cards, and services such as electronic banking,
custodial arrangements and foreign exchange transactions. Our corporate banking
business includes the extension of credit to small, medium and large-size
companies in the form of commercial loans, working capital lines of credit,
trade financing and other products and services such as payment services and
assistance to medium and small-size companies in connection with foreign trade
operations. This business is conducted through our Corporate and Business
Banking Divisions.

Through our branches and pension payment centers, we offer the
aforementioned products and services mentioned as well as payment and cash
management services to, and take deposits from, our customers. In addition, we
make electronic and phone banking services available to our customers on a
24-hour basis. At December 31, 2003, we had 1,771 employees.

We, through our subsidiaries, BBVA Brokerage, BBVA Advisory, BBVA
Residential Leasing, BBVA Fund Manager and BBVA Insurance Brokerage, are
becoming increasingly active in the Chilean financial leasing, securities and
insurance brokerage, financial advisory services, investment fund management,
residential housing fund management, residential leasing and mutual fund
markets. See "Business Overview-- Lines of Business-- Financial Services
Subsidiaries".

Under Chilean law, banks may conduct only those activities allowed by the
General Banking Law, which include, without limitation, lending, accepting
deposits and, subject to limitations, investing and providing financial
services. Investments are restricted to real estate for the bank's own use,
gold, foreign exchange and debt securities. Through subsidiaries, Chilean banks
may also engage in certain activities, such as securities brokerage services and
mutual fund management. Subject to certain limitations, Chilean banks may own
majority or minority interests in foreign banks. As a result of the amendment to
the General Banking Law passed by the Chilean Congress in December 1997, Chilean
banks are authorized in principle to conduct additional activities such as
factoring, underwriting, transportation of securities, financial services
(portfolio management), leasing and direct financial advisory services, and,
through subsidiaries, to engage in securitizations, brokerage of non-pension
fund insurance, loan collection, factoring, custody and transportation of
securities. Banks are required to conduct these activities in accordance with
general instructions of the Superintendency of Banks. The activities that banks
have engaged in after the referred amendment to the General Banking Law have
translated into increased competition in those areas, with subsidiaries of
Chilean banks gradually becoming more important players. In 1998, we acquired a
majority stake at an insurance brokerage company, Corredora Tecnica de Seguros,
and began to offer non-pension fund insurance brokerage services through our
branch network. In June 1999, we absorbed our leasing subsidiary and integrated
its leasing operations with ours. In 2000, we acquired the remaining stake at
Corredora Tecnica de Seguros. During 2003, a change in regulations allowed us to
consolidate all our fund manager subsidiaries (Residential Housing Fund Manager,
Closed End Fund Manager and Mutual Fund Manager into one subsidiary, BBVA Fund
Manager.

B. Business overview.

General

The Chilean economy has grown at a compound average rate of 4.8% per annum
during the years 1993 through 2003 and at a compound average rate of 2.5% per
annum during the years 1999 through 2003. Inflation for the year 2003 reached
1.1%, below the official target range of 2.0%-4.0% for the year. The rate of
investment has increased from 22.2% of Chile's gross domestic product in 1999 to
23.4% of gross domestic product in 2003. The growth of the economy has generated
a demand for financial services from an increasing number of individuals in all
income segments of the population and from an increasing number of companies,
although at a slower pace over the last few years due to the current economic
environment. Our business strategy targets the growing demand for banking
products and services from upper to lower-middle income individuals and from
large corporations to small-size companies. Our strategy aims to increase
lending and to provide services through cross-selling to all customer segments.
Our historical strength in residential mortgages and with medium and small-size
companies serves as a natural and strong base for expansion in those markets.
While we believe that this strategy has the potential to provide higher net
interest margins, it also has the potential to expose us to a higher degree of
credit risk. We continuously seek to improve the quality of our loan portfolio
and our risk index through the adherence to our strict loan origination
procedures and credit management policies.

The Chilean market is highly competitive. We intend to maximize our
competitiveness by offering new and more sophisticated products and
higher-quality services to our actual and potential clients through our branch
network and through modern electronic and home-banking facilities. With that
objective, beginning in 1993 we undertook an investment and modernization
program aimed at improving our operating efficiency and expanding the scope and
variety of products and services offered to our customers. We reformulated this
program in 1999 and in furtherance thereof we opened 20 full-service branches in
1999, 6 more in 2000, one branch in the year 2001, none in the year 2002, and 5
in 2003. We continue to renovate our existing branches and maintain
state-of-the-art electronic and home banking facilities, and we will continue a
moderate expansion plan of opening a few branches in 2004. Upon renewal of the
pension payment contract with the INP (Instituto de Normalizacion Previsional),
an agency of the Ministry of Labor, we opened 37 new pension payment centers in
2003, which, together with the 64 centers we already had, allowed us to achieve
national coverage.

Our strategy in respect of our net interest margin is to continue our
policies designed to attract demand deposits as a less expensive source of
funding, while promoting all products oriented towards all market segments. We
will also continue to promote our fee-generating products, emphasizing the
cross-selling of our subsidiaries' products and services to our clients.

Retail Market

Management believes that our future growth in the retail market will derive
from our ability to serve a larger customer base and to increase the
cross-selling of our products and services to our customers. Our present
strategy for the retail market is to target upper to lower-middle income
individuals, which represent approximately 70% of the population. Through our
consumer lending division, we have been able to capture a growing portion of the
demand for consumer credit from middle and upper-middle income individuals who
previously did not resort to credit or borrowed from our bank. See "--Lines of
Business--Retail Banking Division". We also conduct promotional campaigns
designed to enhance our image and target new customers, and we conducted a
promotional campaign aimed at positioning our new image as Banco Bilbao Vizcaya
Argentaria, Chile S.A., a member of the BBVA Group.

We are continuously launching new consumer loan products, aimed at
attracting customers from the upper income brackets. The products were
successful, as reflected by our 14.8% growth in consumer loans during 2003. We
are also continuously launching new residential mortgage loan products aimed at
attracting customers from the middle to upper income brackets. Our mortgage
loans start at a higher loan amount than traditional mortgage loans and have a
unique flexibility and some attributes like a variable interest rate and other
incentives. The loans are usually offered as part of a package including a
current account and a credit card. These products have been successful, bringing
our self-financed mortgage loans (classified under "commercial loans") up by
49.9% in 2003 (See "--Loan Portfolio").We intend to continue to capitalize on
the strength of our residential mortgage lending business and to continue
promoting the cross-selling of our other retail products to our residential
mortgage customers, who totaled approximately 46,251 at December 31, 2003.

In order to improve our capacity to serve a larger customer base, we plan
to extend our network of electronic and home banking facilities to a larger
geographic area. See "--Branch Network and Electronic Banking". We have adopted
and will continue to implement credit approval and management and review
policies designed to improve steadily the quality of our retail loan portfolio.
We also seek to increase cross-selling, to improve our net interest margin by
increasing non-interest bearing checking account deposits and other deposits as
a source of funding, and to increase the volume of higher interest rate loans to
lower-middle income individuals.

Corporate Market: Small and Medium-Size Companies and Large (Corporate)
Companies

We principally target two distinct segments in the corporate banking
market--small and medium-size companies and large (corporate) companies--and
have developed specific strategies and customized products for each segment.
These segments are served by two specialized divisions, our Business Banking
Division and our Corporate Banking Division, respectively. Our "Lines of
Business" report reflects this structure.

In Chile, a smaller company will tend to rely on a limited number of banks
(generally two or three) and these banks are frequently banks with which the
company's managers have had personal banking relationships. Smaller companies
also consider criteria such as proximity, efficiency and image in their
selection of banks. Accordingly,

we seek to continue to take advantage of our customer base in the retail market
to promote our business with small companies. In addition, we will continue
developing standardized products particularly suited to the needs of this
segment of the market, such as Trade Point(R), a facility developed to assist
small-size companies with their foreign trade transactions. In the large
company segment of the market, we seek to expand our customer base,
particularly in sectors of the economy with strong potential for growth such as
consumer product retailers, mining, construction, fisheries, automobile
distribution, and telecommunications.

Through the continued implementation of our investment and modernization
program, we seek to enhance our ability to provide electronic banking and
related services to our corporate customers. Benefiting from our increased
capital base, the strength of the BBVA Group and the expanded range of products
and services that we can provide overseas as a member of the BBVA Group, we are
aiming to expand our corporate client base. We will also continue our efforts to
attract deposits, particularly from medium and small-size companies, as a means
of broadening our funding base and controlling our funding costs.

Lines of Business

The following tables provide daily average unconsolidated information as to
our retail and corporate banking business for the months of December 2001, 2002
and 2003.

Average daily balances for the month of December 2001
----------------------------------------------------------
Percentage of Percentage of
Outstanding Total Loans Past Due Total Past Due
----------- ------------- -------- --------------
(in millions of constant Ch$ of December 31, 2003,
except for percentages)

Retail banking division
Residential mortgage lending................ 393,164 21.9% 4,039 10.0%
Consumer lending............................ 200,626 11.2 2,250 5.6
Subtotal............................... 593,790 33.1 6,289 15.6
Business banking division 463,856 25.8 30,432 75.6
Corporate banking division 738,893 41.1 3,529 8.8
--------- ------ ------ ------
Total.................................. 1,796,539 100.0% 40,250 100.0%
========= ====== ====== ======

Average daily balances for the month of December 2002
----------------------------------------------------------
Percentage of Percentage of
Outstanding Total Loans Past Due Total Past Due
----------- ------------- -------- --------------
(in millions of constant Ch$ of December 31, 2003,
except for percentages)

Retail banking division
Residential mortgage lending................ 451,820 22.9% 4,179 10.1%
Consumer lending............................ 224,171 11.3% 1,889 4.6%
Subtotal............................... 675,991 34.2% 6,068 14.7%
Business banking division 570,105 28.9% 33,357 80.7%
Corporate banking division 729,485 36.9% 1,885 4.6%
--------- ------ ------ ------
Total.................................. 1,975,580 100.0% 41,310 100.0%
========= ====== ====== ======

Average daily balances for the month of December 2003
----------------------------------------------------------
Percentage of Percentage of
Outstanding Total Loans Past Due Total Past Due
----------- ------------- -------- --------------
(in millions of constant Ch$ of December 31, 2003,
except for percentages)

Retail banking division
Residential mortgage lending................ 679,160 29.5% 4,729 10.0%
Consumer lending............................ 219,951 9.6% 2,196 4.6%
Subtotal............................... 899,111 39.1% 6,925 14.7%
Business banking division 439,439 19.1% 31,661 67.0%

Corporate banking division 963,318 41.8% 8,655 18.3%
--------- ------ ------ ------
Total.................................. 2,301,867 100.0% 47,241 100.0%
========= ====== ====== ======

Retail Banking Division

For the month of December 2003, we had a daily average of Ch$899,111
million (US$1,500 million) in retail loans outstanding, accounting for 39.1 % of
the average daily balance of our total loan portfolio for such month.
Approximately 0.8% of our daily average of retail loans outstanding for the
month of December 2003 were past due, accounting for 14.7% of the average daily
balance of all past due loans for such month, and the risk index for retail
loans was 1.15%.

We offer our products and services to all segments of the Chilean
population through BBVA Chile and have organized our retail banking division to
satisfy the demands of these segments. Our personal banking offers customers a
diversified range of products, including residential mortgage loans, other
personal loans (including consumer loans), automobile financing and credit
cards, and services such as electronic banking, custodial arrangements and
foreign exchange transactions. Building on our residential mortgage loan
business, since 1992 we have steadily expanded the scope of our activities to
offer innovative as well as traditional products to our retail customer base.

Residential Mortgage Lending. For the month of December 2003, we had a
daily average of Ch$679,160 million (US$1,133 million) in residential mortgage
loans outstanding, accounting for 29.5% of the average daily balance of our
total loan portfolio for such month. For the month of December 2003, our daily
average of past due residential mortgage loans totaled Ch$ 4,729 million (US$7.9
million), accounting for 10.0% of the average daily balance of our total past
due loans, and the risk index for residential mortgage loans was 0.61%.

At December 31, 2003, we were Chile's third largest private bank in terms
of residential mortgage loans and accounted for 9.79% of the residential
mortgage loans in the Chilean banking system and 13.71% of such loans made by
the Chilean privately-owned banks, based on information prepared by the
Superintendency of Banks.

Mortgage lending is our oldest and most developed retail business. Our
portfolio of 34,692 residential mortgage loans at December 31, 2003, which
amortize on a monthly basis, represents our widest and strongest credit
relationships with retail customers. For this reason, our mortgage lending
business continues to play a significant role as part of our strategy of
cross-selling our products to the retail market. At December 31, 2003,
approximately 17.8% of our residential mortgage customers had consumer loans
with us.

Most of our residential mortgage loans are denominated in UF, bear interest
at a fixed rate (which is at a spread above the cost of funding) and have
maturities between five and 30 years, with a weighted average life of
approximately 20 years at December 31, 2003. We fund an important proportion of
our residential mortgage loans and certain of our commercial mortgage loans
through the issuance of UF-denominated notes ("Mortgage Finance Bonds") which
enable us to limit our exposure to interest rate fluctuations and inflation.

Consumer Lending. For the month of December 2003, we had a daily average of
Ch$219,951 million (US$367 million) outstanding in retail loans (other than
residential mortgage loans), accounting for 9.6% of the average daily balance of
our total loan portfolio for such month. Our average daily balance for the month
of December 2003 of past due retail loans (other than residential mortgage
loans) totaled Ch$2,196 million (US$3.7 million), accounting for 4.6% of the
average daily balance of total past due loans for such month, and the risk index
for such loans was 2.82%. Our retail loans (other than residential mortgage
loans) included personal loans (such as consumer loans), automobile financing
and credit cards.

Consumer Lending - Personal Loans. For the month of December 2003, we had
an average daily balance of approximately Ch$203,704 million (US$340 million) in
personal loans outstanding, accounting for 8.8% of the

average daily balance of our total loan portfolio and 22.7% of the aggregate
amount of our retail loans for such month. The risk index for personal loans
was 2.62% at such date.

Our personal lending business targets middle and upper income individuals.
Personal lending on a short to medium-term basis involves loans and overdraft
facilities. We offer our personal lending products through our branches to our
existing customers (mainly holders of checking accounts). In response to the
increasing demand for small consumer loans from the lower-middle income segment
of the Chilean population as the Chilean economy has expanded during the past
decade, most Chilean private banks have established separate consumer loan
divisions. Unlike certain other Chilean banks which have their consumer credit
divisions operating out of premises physically separate from their full-service
branches and under a different name, our Consumer Credit division operates
through all of our full-service branches.

Consumer Lending - Automobile Loans. We offer special retail credit lines
to finance partially or, in the case of selected customers, up to 100% of the
purchase price of automobiles. For the month of December 2003, we had a daily
average balance of approximately Ch$7,847 million (US$13 million) in automobile
loans outstanding, representing 0.9% of our average daily balance of total
retail loans for such month and 0.3% of our average daily balance of total loans
outstanding for such month. For the month of December 2003, our daily average of
past due automobile loans totaled Ch$13 million (US$21,700), accounting for less
than 0.1% of our average daily balance of total past due loans for such month,
and the risk index for such loans was 7.21%. Automobile loans have maturities
that range from six months to four years, are denominated in Chilean pesos,
accrue interest on a fixed rate basis and are payable monthly. We generally
require that the automobile purchased with the proceeds of the loan be pledged
as collateral, together with the purchaser's rights to proceeds under the
applicable insurance policy.

Consumer Lending - Credit Cards. For the month of December 2003, we had a
daily average of Ch$8,401 million (US$14 million) credit card balances
outstanding, accounting for 0.4% of the average daily balance of its total loan
portfolio for such month. Our average daily balance for the month of December
2003 of past due credit card balances was Ch$320 million (US$0.5 million),
accounting for 0.7% of our average daily balance of total past due loans for
such month. The risk index for credit card balances was 3.97%. We issue BBVA
Chile credit cards to our customers under the Visa trademark pursuant to an
agreement with Visa, the largest credit card company in Chile. In addition, we
issue affinity cards also under the Visa trademark pursuant to agreements with
the Chilean lawyers' association, the Chilean medical association, the Chilean
teachers' association and the Chilean engineers' association. BBVA Chile credit
cards are issued for personal and corporate use and they allow customers access
to national and international credit. As of December 31, 2003, we had
approximately 65,202 active Visa credit cards.

We process our credit cards through Nexus S.A., a credit card processing
facility owned by 8 Chilean banks in which we had a 9.68% interest at December
31, 2003. Our management believes that acceptance of credit cards as a means of
payment for goods and services in Chile will increase in the future as it has
over the past five years. Accordingly, we will continue to promote the use of
our credit cards. Our revenues arising from our credit card business take the
form of commissions charged to merchants and annual fees, commissions and
interest charged to cardholders on their balances.

Consumer Lending - Credit Approval Process. In reviewing credit
applications, our policy is to verify that a series of quantitative and
qualitative parameters are met. We have developed a credit scoring system which
allows loan officers to classify applicants on the basis of their income,
overall level of indebtedness, liquidity and assets, as well as on qualitative
factors such as the applicant's educational, professional and financial
background. We obtain credit information on each applicant from DICOM S.A.
("DICOM"), which provides a broad and updated nationwide credit database that we
can readily access. Our evaluation of loan applications is centralized and based
on information obtained by loan sales managers. In the credit analysis, emphasis
is placed on different factors, depending upon the credit requested and whether
the applicant is an existing customer of BBVA Chile, among other considerations.
See "Selected Statistical Information--Credit Approval Process". We consider our
credit approval policies in respect of retail loans generally comparable to
those of other Chilean private banks.

After credit is extended, we monitor the credit quality of the debtor and
reclassify a debtor loan on the basis of our scoring system based on the our
appraisal of changes in such debtor's ability to meet the qualitative and
quantitative parameters described above. In addition, our general policy is to
initiate legal collection proceedings on any retail loan as promptly as possible
upon such loan becoming overdue and to charge off the entire consumer loan

four months after any payment of principal or interest is overdue, which is
earlier than the six months allowed by the regulations of the Superintendency
of Banks. See "--Chilean Regulation and Supervision--Loan Loss Reserves".

Corporate Banking

Relying on a team of account managers and through specialized branch
offices, we provide a full range of financial products and services to small,
medium and large-size companies in Chile through BBVA Chile and its
subsidiaries, including commercial loans, working capital lines of credit, trade
financing, payment services and short-term and other deposits.

For the month of December 2003, BBVA Chile had a daily average of
Ch$1,402,756 million (US$2,340 million) of outstanding corporate loans,
accounting for 60.9% of the average daily balance of BBVA Chile's total loan
portfolio for such month. BBVA Chile's daily average of past due corporate loans
for the month of December 2003 totaled Ch$40,317 million (US$67.3 million),
accounting for 85.3% of our average daily balance of total past due loans for
such month, and the risk index for such loans was 1.26%.

Business Banking Division. Within BBVA Chile's corporate banking business,
companies with annual sales between US$750,000 and US$20 million are considered
medium and small-size companies. Loans to such companies, which are made through
our personal banking branches as well as through our specialized commercial
banking branches, totaled a monthly average of Ch$439,439 million (US$733
million) in December 2003 and accounted for 19.1% of BBVA Chile's total loan
portfolio. As a result of the predominance of loans to small and medium-size
companies within Banco Nacional's loan portfolio, following the merger with
Banco Nacional in 1989, BBVA Chile became a significant source of credit for
such companies in Chile and had approximately 11,500 such customers at December
31, 2003. Our strategy in this market is to continue targeting medium and
small-size companies that operate in the sectors of the Chilean economy with the
highest growth potential, such as mining, construction, automobiles, trade,
telecommunications and other services. Small and medium-size companies tend to
rely on two or three banks to cover their financing requirements, principally
for the acquisition of capital goods, foreign trade and working capital.

We also lend to small businesses (companies with annual sales of less than
US$750,000), providing loans and other services specifically designed for such
businesses. In this segment of the market, we employ credit approval policies
largely based on the verification of objective conditions and generally requires
collateral at least equal to 90% of the value of its loans.

Through our foreign trade business, we provide our banking customers with a
wide range of products and services designed to facilitate their export and
import transactions, including issuing, confirming and negotiating letters of
credit, extending credit lines for pre-export/import financing from foreign
banks, fund transfers and foreign exchange transactions. In this connection, we
have developed the Trade Point(R) facility to assist small and medium-size
companies with their foreign trade transactions. Trade Point(R) has been
successful in attracting business from midsize companies with foreign trade
business. See "--Business Overview--Corporate Market: Small and Medium-Size
Companies and Large (corporate) Companies".

Corporate Banking Division. Large (corporate) firms are a segment of the
market that has become increasingly competitive in recent years, largely due to
the internationalization of the financial markets and the growth in the capital
base of Chilean institutional investors. As a result, domestic lenders have
generally experienced narrowing spreads and a decrease in the profit margins
generated by loans to large corporate borrowers (companies with annual sales
greater than US$20 million). In an effort to increase its profits in this
important segment of the corporate market, BBVA Chile continues to explore
business opportunities with large corporate borrowers, seeking to offer products
that are subject to less competitive pressure such as payment services and other
tailored services, and to leverage on the capability of the Bank to provide
world wide services through the network of banks that form part of the BBVA
Group. Loans to other corporate borrowers, mostly large companies, totaled a
daily average of Ch$963,318 million (US$1,607 million) for the month of December
2003 and accounted for 41.8% of the daily average of our loan portfolio in such
month.

Our cross-border loans are principally trade-related. These include credit
lines to foreign financial institutions. At December 31, 2003, our cross-border
lending was US$102 million.

BBVA Chile offers payment services and cash management services to its
corporate banking customers. BBVA Chile is a party to a number of payment
service contracts with large and medium-size companies. Under those contracts,
in exchange for a fee BBVA Chile allows customers, through a secure Internet
connection, to manage their accounts and make payments to suppliers, pension
funds and employees, avoiding administrative costs. BBVA Chile believes that
payment and cash management service contracts provide it with a low-cost, stable
deposit base and the opportunity to cross-sell its products.

Credit Approval Process. BBVA Chile's credit approval policy in respect of
medium and small-size companies is defined mainly by certain quantitative
parameters such as the applicant's debt servicing capacity, net worth, leverage,
results of operations and reputation among financial institutions. In addition,
loan officers are required to prepare a file containing information regarding
the applying company's track record and prospects, as well as projections for
the economic sector in which it operates. The information is transmitted to BBVA
Chile's principal executive offices, where the corporate banking division
operates and decisions regarding corporate credit are made. In the case of large
companies, the credit analysis focuses on the applicant's financial condition as
well as an evaluation of developments and projections relating to the
applicant's market. In addition, we monitor the borrower's financial condition
and results of operations while the loan is outstanding, including the use of
reports prepared by DICOM, and seek to maintain contact with our customers so as
to anticipate developments that could impact adversely the customer's repayment
capacity. See "Selected Statistical Information--Allowance for Loan Losses".

Deposits and Pension Payment Services

Deposits. Time deposits are denominated in Chilean pesos, UF and dollars
and generally bear interest at a fixed rate. Checking accounts are Chilean
peso-denominated, non-interest bearing accounts, and savings accounts are
UF-denominated and generally bear interest at a relatively low floating rate. At
December 31, 2003, BBVA Chile's deposit balances amounted to Ch$2,172,508
million (US$3,624 million) and accounted for 69% of our total liabilities at
that date.

Total Deposits
(as of December 31, % of Total
2003) Deposits
------------------- ----------
(in millions of
constant Ch$ of
December 31, 2003,
except for percentages)
Product
Time deposits................................. 1,622,226 74.67
Checking accounts............................. 226,655 10.43
Bankers demand drafts and other deposits...... 268,185 12.34
Savings....................................... 55,442 2.55
2,172,508 100.00

Our strategy in the retail market is to attract deposits from a large
number of individuals as a means of maintaining a relatively stable and
cost-effective source of funding. As part of this strategy, BBVA Chile has
developed a variety of deposit accounts designed to appeal to the various
segments of the retail market. We conduct promotional campaigns aimed at these
specific segments, which have rendered satisfactory results. In 2000, we
launched our Cuenta 7(R) campaign, aimed at increasing our checking accounts,
particularly amongst upper to upper middle income clients. In 2001, with the
help of the improved systems platform, we launched the Cuenta Libreton (R), a
savings account associated with a checking account that enabled our clients to
optimize their checking account balances by keeping their money in the
associated savings account and receive interest on them. Such product revived a
national discussion on the convenience of allowing banks to pay interest on
checking accounts balances, and resulted in a change in regulations that allowed
banks to do that. After the new regulation became effective, we re-launched the
Cuenta Libreton (R) as a remunerated checking account, with limited success
since the interest rate environment made it difficult to offer an attractive
interest on those balances. The same happened to all banks who offer a
remunerated checking account.

In 2003, focusing on mid-to-upper-income clients and business firms, we
launched some new products, such as Cuenta Euro(R) and BBVA Plus(R). Cuenta
Euros(R) is a checking account in euros, allowing clients with income and

expenses in the European currency to operate in euros without having to go
through the process of currency exchange. The average balance of this product
for December, 2003, shortly after its launch, reached Ch$1,305 million (US$2.2
million). BBVA Plus(R) is a time deposit taken for at least 6 months, which
offers a fixed interest rate for the period. The interest is earned on a monthly
basis and automatically credited to the client's checking account. As of
December 31, 2003, the balance for this deposits was Ch$117 million (US$0.2
million).

Pension Payment Services. Since 1992, we have been party to a payment
service contract with the INP, providing monthly pension payments to
approximately 750,000 of Chile's 1.5 million pensioners (the "INP Contract").
The previous contract expired in 2003. The new contract was executed in 2003 and
expires in four years, covering the full population of 1.5 million pensioners.
Under this contract we receive pension funds from the INP, being required to pay
such funds to the pensioners shortly thereafter. We are paid a fee for this
service, which depends on the amounts held by the INP with us on its current
accounts. These fees are liquidated and entered on a monthly basis (See
"Operating and Financial Review and Prospects -- Operating results--Income from
services, net"). This arrangement allows us to have access to an important
non-interest bearing source of funds.

The majority of our payments to pensioners are made through our 101
special-service pension payment centers exclusively engaged in providing
services under the INP Contract. Payments are also made by mail, through
independent contractors in rural areas or by direct deposit. For the year ended
December 31, 2003, average daily amounts on deposit with us in connection with
the INP Contract totaled Ch$25,157 million and represented approximately 1.0% of
our average daily outstanding demand deposits and savings accounts, or
approximately 1.0% of average total deposits daily, as a result of the
advantages of the INP contract.

BBVA Chile has capitalized on the experience gained under the INP Contract
and developed systems to provide payment services to pension funds,
beneficiaries of insurance companies and pensioners under the privately run
social security system.

Branch Network and Electronic Banking

We had a network of 85 full-service branches and 101 pension payment
centers at December 31, 2003.

Our full-service branches accept deposits, disburse cash, offer the full
range of our retail banking products such as residential mortgages, consumer
loans, automobile financing and credit cards, open checking accounts, lend to
small and medium-size companies, offer leasing, securities brokerage and housing
fund management services and provide information to customers and potential
customers. The role of our special-service payment centers is to provide check
cashing and cash disbursement services to Chilean pensioners pursuant to the INP
Contract. In the second half of 2004, 43 of those centers will become "BBVA
Express" Service Centers and will provide transaction services to INP pensioners
and BBVA clients from the Bank and from Provida (the largest private pension
fund administrator in Chile, also a member of the BBVA Group). See "--Lines of
Business--Deposits and Pension Payment Services".

We are expanding our geographic penetration to be in a position to readily
provide our customers throughout the country our wide range of products and
services. The financing needs of companies located in regions of Chile outside
the Santiago area have increased as a result of gradual changes affecting the
Chilean economy. Corporate clients with operations throughout Chile need banking
services in all of Chile's regions. As the Chilean middle class has grown,
demand for consumer banking services has also increased. See "--Lines of
Business--Retail Banking". In addition to increasing the number of our branches,
we are constantly investing in telecommunication and computer equipment, so as
to offer customers up-to-date electronic and home-banking facilities. We believe
this expansion has been instrumental in supporting the outstanding growth
achieved by the bank in the past two years.

We offer electronic banking services to our customers. BBVA Chile has made
arrangements for its individual customers to have access to the REDBANC system,
with their BBVA Global or Visa cards. The REDBANC system was recently integrated
with the BancoEstado network to conform a network of ATMs at 3,790 locations
throughout Chile at December 31, 2003. Such access allows customers holding a
checking or savings account or a BBVA Visa card to obtain balance and account
related information, withdraw cash and make payments. At December 31, 2003, BBVA
Chile had 311,675 active BBVA labeled cards, all of which provide access to the
REDBANC system. At December 31, 2002, we had 277,225 active BBVA labeled cards
(counting all active cards for each client).

In addition, through Fono BBVA, we offer a 24-hour phone-banking service to
our customers that grant them access to account information and allows them to
effect fund transfers and certain payments. BBVA Chile was the first Chilean
bank to offer this service on a toll-free basis in all cities served by the
Compania de Telecomunicaciones de Chile. We have been providing certain
information and limited transaction services through the Internet since June
1996, and such services have been fully available since October 1996. In October
1997, we expanded our Internet services by adding new services providing
customers with financial information and the ability to perform transactions.
During the month of December of 2003, 620,684 inquiries and transactions were
made through the Internet.

BBVA Chile, in conjunction with a number of other Chilean banks, is a
shareholder of Transbank S.A., a corporation that carries out the electronic
transfer services which are necessary for our business and provides support to
our shareholders' operations, through the installation, operation, maintenance
and development of equipment and systems for the automatic and electronic
transfer of funds. The availability of this transfer capability has facilitated
our ability to serve our customers efficiently.

Financial Services Subsidiaries

Chilean banks may conduct only those activities allowed by the General
Banking Law. Chilean banks were historically prohibited from providing services
other than traditional banking activities. However, in 1986 banks were permitted
to offer, through subsidiaries, services deemed to be complementary to
commercial banking activities. Furthermore, as a result of the amendment to the
General Banking Law passed by the Chilean Congress in December 1997, Chilean
banks are authorized in principle to conduct additional activities such as
factoring, underwriting, transportation of securities, financial services
(portfolio management), leasing and direct financial advisory services, and,
through subsidiaries, to engage in securitizations, brokerage of non-pension
fund insurance, loan collection, factoring and custody and transportation of
securities. In 1998, we acquired 80% of a non-pension fund insurance brokerage
and in 2000 we acquired the remaining 20%.

In early 2004, the Chilean Congress passed a law modifying the pension
system, allowing banks to intermediate pension fund insurance. Such
authorization will be effective in August 2004. The matter is currently under
study by our administration.

In an effort to confront the growing trend towards financial
disintermediation, broaden the scope of products and services offered to
customers and increase its fee income, we have established subsidiaries that
operate in various financial markets. Our business strategy, particularly with
respect to our corporate customers, is to increase the cross-selling of the
products and services offered by the subsidiaries, which are made available at
BBVA Chile's full-service branches. See "--Business Strategy".

As approved by the Superintendency of Banks on July 1, 1999, we acquired
the 0.01% minority interest in BHIF Leasing S.A., resulting in the dissolution
of the latter. As of December 31, 2000, we absorbed the net assets of BHIF
Leasing S.A. During 2003, a change in regulation allowed us to consolidate all
our fund manager subsidiaries (Residential Housing Fund Manager, Closed End Fund
Manager and Mutual Fund Manager) into one subsidiary, BBVA Fund Manager.

The following table sets forth information with respect to BBVA Chile's
financial services subsidiaries at December 31, 2003:

Shareholders' Ownership
Assets Equity Net Income Interest
-------------- ------------- --------------- ---------------
Twelve-month
period ended
At December 31, At December 31, December 31, At December 31,
Company 2003 2003 2003 2003
- ----------------------------------------------- -------------- ------------- --------------- ---------------
(in millions of constant Ch$ of December 31, 2003, respectively,
except for percentages)

BBVA Brokerage.................................. 110,556.6 10,104.1 1,505.5 100.00
BBVA Advisory................................... 2,569.8 2,235.9 1,175.3 98.60
BBVA Residential Leasing........................ 10,398.3 4,215.9 259.4 97.48
BBVA Fund Manager............................... 10,920.1 8,736.6 1,301.3 100.00

BBVA Insurance Brokerage........................ 4,771.1 4,059.1 1,400.0 100.00
Total........................................ 139,215.9 29,351.6 5,641.5

Securities Brokerage Services

BBVA Brokerage, which has operated since 1988, is registered with the
Superintendencia de Valores y Seguros (the "Superintendency of Securities and
Insurance") as a securities broker, and is a member of the Santiago Stock
Exchange and of the Electronic Stock Exchange. According to information released
by the Santiago Stock Exchange, business transacted by BBVA Brokerage as a
stockbroker during 2003 totaled approximately Ch$18,867,989 million, and
accounted for approximately 20.44% of the market. For the year ended December
31, 2003, BBVA Brokerage recorded net income of Ch$1,506 million (US$2.5
million). BBVA Brokerage is consolidating its position in the markets where it
currently operates and enhancing its access to the domestic markets by utilizing
our distribution networks. Our current policy is to capitalize 100% of any
profits generated by BBVA Brokerage to increase its capital base, subject to a
revision every year. This subsidiary offers our high-income individual and
corporate clients a wide range of services, acting as an entity complementary to
us. BBVA Brokerage operates actively in the different markets, including equity,
variable and fixed income (debt instruments) and the trading of foreign
currency.

Financial Advisory Services

BBVA Advisory, a 98.6%-owned subsidiary of BBVA Chile, was established by
us in 1987. The subsidiary adopted its current name in 2002 and focuses on
providing consulting and advisory services, mainly to our customers. Such
services include debt restructuring, asset and company valuations, debt and
equity offerings and syndication of loans, among other activities. For the year
ended December 31, 2003, BBVA Advisory recorded a net income of Ch$1,175 million
(US$2 million).

General Fund Manager

During 2003, a change in regulation allowed us to consolidate all our fund
manager subsidiaries. Thus, our Closed-end Fund Manager, our Residential Housing
Fund Manager, and our Mutual Fund Manager, all being a 100.0%-owned subsidiaries
of BBVA Chile, were merged into BBVA General Fund Manager, which commenced
operations in October 2003. For the year ended December 31, 2003, BBVA General
Fund Manager recorded net income of Ch$1,301 million (US$2.2 million).

Residential Leasing

In 1996, we obtained authorization from the Superintendency of Banks and
the Superintendency of Securities and Insurance to establish BBVA Residential
Leasing to participate in the market for the management of funds applied to the
financing of residential housing. BBVA Residential Leasing, a 97.48%-owned
subsidiary of BBVA Chile, was established and began operations in October 1996.
BBVA Residential Leasing is the leading firm in the residential leasing
industry, owning Ch$99,585 million in leasing contracts as of December 2003. For
the year ended December 31, 2003, BBVA Residential Leasing recorded a net income
of Ch$259 million (US$0.4 million).

Insurance Brokerage

Our Board of Directors, in an Extraordinary Session held on September 4,
1998, agreed to purchase 80% of the rights of Corredora Tecnica de Seguros
Limitada, an insurance brokerage firm, for approximately US$5.5 million. On
September, 2000, we agreed to purchase the remaining 20% of the rights of
Corredora Tecnica de Seguros Limitada, for approximately US$1.4 million. The
acquisition was authorized by the Superintendency of Banks

on August 24, 1998. For the year ended December 31, 2003, BBVA Insurance
Brokerage recorded a net income of Ch$1,400 million (US$2.3 million).

COMPETITION

Overview

The Chilean financial system is comprised of 26 private-sector banks (of
which 16 are banks established in Chile and 9 are subsidiaries of banks
established abroad, and one public-sector bank (BancoEstado). At December 31,
2003, the Chilean financial system had a total of Ch$33,480,544 million
(US$55,855 million) of loans outstanding. In the last five years, the average
annual rate of increase in outstanding loans for the Chilean financial system
was 12.52% (compared with an average annual rate of increase in GDP of 2.52%
during the same period) and the average annual return on average shareholders'
equity was 13.12%.

The following table provides certain statistics on the Chilean banking
system at December 31, 2003:

Assets Loans Deposits Shareholders' Equity
-------------------- -------------------- -------------------- --------------------
Amount Share Amount Share Amount Share Amount Share
----------- ----- ----------- ----- ----------- ----- ----------- -----
Ch$ Million % Ch$ Million % Ch$ Million % Ch$ Million %
----------- ----- ----------- ----- ----------- ----- ----------- -----

Banco del Estado 7,394,500 15.1% 4,456,446 13.3% 4,414,771 15.7% 352,772 9.4%

Banks established in Chile 38,303,359 78.4% 27,268,672 81.4% 21,998,775 78.0% 2,905,506 77.7%
Subsidiaries of banks
established abroad 3,187,936 6.5% 1,755,426 5.2% 1,791,793 6.4% 481,590 12.9%

Private sector total 41,491,295 84.9% 29,024,098 86.7% 23,790,568 84.3% 3,387,096 90.6%

Financial system, total 48,885,795 100.0% 33,480,544 100.0% 28,205,339 100.0% 3,739,868 100.0%

- ----------------------
Source: Superintendency of Banks

The Chilean banking industry has experienced increased competition in
recent years, which has led to, among other things, consolidation in the
industry. We expect the trends of increasing competition and consolidation to
continue. In 1996, Banco Santander-Chile agreed to merge with Banco Osorno and
the Superintendency of Banks approved the merger of Banco de Santiago and Banco
O'Higgins, effective January 1, 1997. Additionally, the former owners of Banco
Osorno acquired a controlling interest in Banco Concepcion, the ninth largest
private bank in Chile, pursuant to which the name of the institution was changed
to Corpbanca.

During 1998, Corpbanca purchased from Banco Sud Americano its consumer loan
division, "Corfinsa", and acquired 100% of the rights to Financiera Condell.
Financiera Condell was merged into Corpbanca, effective July 1, 1999. Also, in
July 1998 the former ING Bank reopened as Banco Falabella, and in October 1998
ABN AMRO Bank acquired Banco Real (worldwide), which led to a merger between the
two institutions in Chile, effected in January 2000. The merger had no effect on
the financial system, given the small size of both banks.

In March 1999, Citibank acquired Financiera Atlas, a finance company with
an 8.3% market share in consumer loans, and integrated it into its Retail
Banking Division. In July 1999, Corpbanca acquired Financiera Condell, a finance
company with a consumer loan portfolio totaling Ch$146,513 million. After such
purchase, the only finance company left in the market was Financiera Conosur,
the largest one, with a consumer loan market share of 11.5%. In late 2002,
Financiera Conosur was authorized by the Superintendency of Banks to become
Banco Conosur. Therefore, there are no finance companies left in the market.

During 2001, a Chilean financial group (the Luksic Group), which had a
controlling participation at Banco de A. Edwards, acquired control of Banco de
Chile and completed procedures to merge it with Banco de A. Edwards. The merger
became effective on January 1, 2002. On the first half of 2002, the Central Bank
sold its participation in Banco Santiago (See "--The Central Bank") to Grupo
Santander , following an agreement signed with them in 2000 and after a failed
attempt to sell those shares at a public offering. As a consequence of this
operation, Grupo Santander achieved full control of both Banco Santander and
Banco Santiago and proceeded to merge both

institutions. The merger gave birth to the largest banking institution in
Chile, Banco Santander Santiago with a combined loan market share reaching
27.9% pro-forma at the time of the merger (currently 22.6%).

The largest bank in Chile in terms of assets is Banco Santander Santiago,
with outstanding loans at December 31, 2003 of Ch$7,554,175 million (US$12,602
million), representing 22.6% of the total amount of loans made by the Chilean
financial system We face significant competition in the retail market from Banco
Santander Santiago and more generally from other large privately-owned Chilean
banks as well as BancoEstado, the only bank owned by the Republic of Chile. Most
Chilean private-sector banks have adopted the universal banking model and, like
us, are seeking to expand the range of products and services offered to
customers.

Subsidiaries from foreign banks have been operating in Chile since the
1930s. At December 31, 2003, such banks accounted for only 6.5% of total loans
made by the Chilean financial system. Banco Santander Santiago, accounting for
approximately 22.6% of total loans, was the Bank established in Chile (though
foreign-owned ) with the largest loan portfolio at December 31, 2003. Some of
the banks established in Chile are classified as foreign-owned, including
ourselves, since a controlling participation in them is owned by foreign
institutions and/or individuals. See "Major Shareholders -- Principal
Shareholders".

In the retail banking business, we compete with other private Chilean
banks, and with BancoEstado. Among private Chilean banks, our strongest
competitors in the retail market were Banco Santander Santiago, Banco de Chile
and Banco de Credito e Inversiones. We consider that our most relevant
competitors in the corporate market are Banco de Chile, Banco Santander Santiago
and Banco de Credito e Inversiones.

Commercial banks in Chile also compete with other financial intermediaries
that can provide larger companies with access to the capital markets as an
alternative to traditional bank financing.

In the markets served by our subsidiaries, i.e., financial consulting,
leasing, securities and insurance brokerage, investment fund management services
and mutual fund management services, we compete with other financial
institutions that offer similar services.

Loans

At December 31, 2003, we accounted for 7.2% of all loans made by the
Chilean financial system and 8.3% of the loans made by private Chilean banks.

The following table sets forth the percentage of the aggregate outstanding
principal amount of all loans made by the Chilean financial system at the end of
each of the last three years, that was held by each of the 12 largest private
sector banks:

Market Share of Loans at December 31,
-------------------------------------
2001 2002 2003
---------- ---------- ----------
Banco Santander Santiago (1)........ 11.7 24.4 22.6
Banco de Chile (2).................. 11.9 18.6 18.1
Banco de Credito e Inversiones...... 8.9 10.4 11.0
BBVA Chile (3)...................... 5.9 6.6 7.2
Corpbanca........................... 4.8 5.4 6.3
Banco del Desarrollo................ 3.6 3.7 3.9
Scotiabank Sudamericano (4)......... 3.5 3.7 3.3
Citibank............................ 3.4 3.2 2.6
Banco Bice.......................... 2.6 2.6 2.8
Banco Santiago (1).................. 16.0 - -
Banco Edwards (2)................... 7.3 - -
---------- ---------- ----------
Subtotal............................ 79.6 78.6 77.8
========== ========== ==========
Total Private Banks................. 87.8 86.7 86.7
========== ========== ==========
Financial System.................... 100.0 100.0 100.0
========== ========== ==========
- ----------------------
Source: Superintendency of Banks

(1) Banco Santander and Banco Santiago merged, effective August 2002

(2) Banco de Chile and Banco Edwards merged effective January 2002

(3) BBVA Banco BHIF its name to BBVA Chile, effective March 17, 2003

(4) Banco Sud Americano changed its name to Banco Scotiabank Sud Americano
effective November 15, 2001

Risk Index

Our performance until 1996 was largely attributable to our policy of
charging off all D loans and certain C loans. Upon reaching a 1% risk level, we
abandoned this policy, and since then have relied on our credit approval process
and credit policies to keep control and enhance the quality of our loan
portfolio. For a complete explanation of Chilean regulations on loan portfolio,
see "--Selected Statistical Information--Classification of Loan Portfolio".

In 1997, the Superintendency of Banks established new rules applicable to
the definition of risk and provision requirements. This change was directed
towards a more adequate assessment of the true quality of the loans, reducing
the rating of consumer loans that had been subject to a certain degree of
rescheduling. This measure implicated a significant increase in the level of
provisions for those banks and finance companies that carried an old and
important consumer loan portfolio. That was not our case, and the increase in
provisions related to rescheduled consumer loans required by the rules adopted
in 1997 was not significant.

In 1998, soon after the BBVA Group took control of BBVA Chile, we conducted
an extensive revision of our loan portfolio, which resulted in the downgrading
of a part of our portfolio and a significant increase in the level of provisions
and in our risk level.

The following table illustrates the five year history of BBVA Chile `s
unconsolidated loan portfolio risk index compared to the unconsolidated loan
portfolio risk index of the largest private Chilean banks and that of the
financial system as a whole. See "--Selected Statistical
Information--Classification of Loan Portfolio".

Risk Index(1)
At October 31,
--------------------------------------------------------------
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
(Percentages)

Banco de Chile......................... 2.07 2.01 2.03 2.98 2.40
Banco del Desarrollo................... 3.25 3.49 2.85 2.61 2.49
Scotiabank Sudamericano................ 2.77 3.76 3.18 1.97 1.79
Corpbanca.............................. 2.00 1.87 1.80 1.95 1.66
BBVA Chile............................. 2.11 2.18 1.81 1.68 1.42
Banco Bice............................. 1.22 1.53 1.41 1.67 1.51
Banco Santander Santiago............... 1.23 1.42 1.38 1.61 1.85
Banco de Credito e Inversiones......... 1.57 1.95 1.63 1.34 1.30
Security............................... 1.12 0.87 0.99 1.21 1.30
Banco Edwards.......................... 2.79 2.9 3.23 - -
Banco Santiago......................... 1.39 1.34 1.26 - -
Financial System....................... 1.98 2.08 1.90 1.95 1.82

- ----------------------
Source: Superintendency of Banks
(1) Information with respect to the Chilean financial system as of a later date
in 2003 is not publicly available. The risk index of BBVA Chile was 1.3% at
December 31, 2003. See "--Selected Statistical Information--Allowance for
Loan Losses--Global Allowance for Loan Losses."

Deposits

We held total deposits of Ch$2,172,508 million at December 31, 2003, which
represented 10.2% of deposits held by Chilean private banks at that date. The
following table sets forth the percentage of the aggregate amount of all
deposits in the Chilean financial system at the end of each of the last three
years, that was held by each of the twelve largest private Chilean banks.

Market Share of Deposits at December 31,
----------------------------------------
2001 2002 2003
------ ------ ------

Banco Santander...................................................... 13.1 21.6 19.3
Banco de Chile....................................................... 12.8 16.3 16.7
Banco de Credito e Inversiones....................................... 7.8 8.8 9.5
BBVA Chile........................................................... 5.6 7.3 8.6
Corpbanca............................................................ 5.2 5.5 7.2
Citibank............................................................. 3.7 4.8 2.8
Security............................................................. 2.7 3.1 3.4
Scotiabank Sudamericano.............................................. 2.6 3.0 3.0
Banco del Desarrollo................................................. 2.8 2.9 3.1
Banco Bice........................................................... 3.2 2.6 2.8
Banco Santiago....................................................... 13.7 - -
Banco Edwards........................................................ 7.0 - -
------ ------ ------
Total................................................................ 80.3 76.0 76.4
====== ====== ======
Total Private Banks.................................................. 88.3 85.3 84.6
Financial System..................................................... 100.0% 100.0% 100.0%

- ----------------------
Source: Superintendency of Banks

Return on Equity

At December 31, 2003, our unconsolidated return on equity was 11.4%. It was
substantially lower than the 16.6% average for the entire Chilean financial
system, but a substantial improvement over the ROE obtained on the previous
years, with a consistent increase from the 6.5% ROE registered in 2001. During
the last three years, we have maintained a profitability index averaging around
7.3% for each such year.

The following table sets forth for the last three years, the unconsolidated
return on shareholders' equity of the largest private Chilean banks and the
Chilean financial system as a whole, in each case at December 31 in each of the
last three years.

Ranking at
Return on Equity At December 31, December 31,
----------------------------------- ------------
2001 2002 2003 2003
------ ------ ------ ------

Banco de Credito e Inversiones......................... 23.8% 22.6% 25.6% 1
Banco Santander........................................ 25.5% 19.5% 25.5% 2
Banco de Chile......................................... 18.0% 9.3% 23.1% 3
Banco Bice............................................. 25.7% 18.2% 17.7% 4
Corpbanca.............................................. 20.1% 13.3% 17.3% 5
Security............................................... 13.1% 12.9% 16.5% 6
Banco del Desarrollo................................... 14.2% 13.1% 14.8% 7
BBVA Banco............................................. 6.5% 9.1% 11.4% 8
Scotiabank Sudamericano................................ 6.2% 9.3% 10.8% 9
Citibank............................................... 15.1% 14.1% 6.2% 10
Banco Santiago......................................... 28.3% -- -- 11
Banco Edwards.......................................... 4.4% -- -- 12
Financial System....................................... 17.7% 14.4% 16.6%

- ----------------------
Source: Superintendency of Banks

CHILEAN REGULATION AND SUPERVISION

In Chile, only banks may maintain checking accounts for their customers,
conduct foreign trade operations by means of the issuance of letters of credit
and, together with finance companies, accept time deposits. The principal
authorities that regulate financial institutions in Chile are the
Superintendencia de Bancos e Instituciones Financieras (the "Superintendency of
Banks") and the Central Bank of Chile ( the "Central Bank"). Chilean banks are
subject to the General Banking Law and, to the extent not inconsistent
therewith, the Chilean Corporations' Act.

The Chilean banking system dates from 1925 and has been characterized by
periods of substantial regulation and state intervention, as well as periods of
deregulation. The most recent period of deregulation commenced in 1974 and
resulted in substantial amendment to the General Banking Law. As a result of the
amendment to the General Banking Law passed by the Chilean Congress in December
1997, Chilean banks are authorized in principle to conduct additional activities
such as, underwriting, transportation of securities, financial services
(portfolio management), and direct financial advisory services, and, through
subsidiaries, to engage in securitizations, brokerage of non-pension fund
insurance, loan collection, leasing, factoring, management of investment, mutual
and foreign capital investment funds, brokerage of securities, custody and
transportation of securities.

In response to the Chilean banking crisis during 1982 and 1983, the
Superintendency of Banks assumed control of 19 banks and financial institutions
accounting for approximately 51% of the total loans in the banking system. As
part of the solution to this crisis, the Central Bank permitted these
institutions to sell to the Central Bank certain of their non-performing loans
in exchange for cash, third party drafts and a promissory note of the Central
Bank. Each institution was to repurchase the loans sold by it to the Central
Bank out of its future income.

In addition, Law No. 18,818, promulgated in 1989, permitted institutions
with outstanding repurchase obligations with the Central Bank to evidence a
portion of such obligations by a subordinated obligation with no fixed term. In
the case of liquidation of the institution, the subordinated debt obligations
would be paid only after the bank's other debts had been paid in full. See
"--The Central Bank".

The Central Bank

The Central Bank is an autonomous legal entity created by the Chilean
Constitution. It is subject to the Central Bank Act and, to the extent
applicable and not inconsistent, to the laws and regulations applicable to the
private sector. It is governed and administered by a Board of Directors composed
of five members designated by the President of the Republic subject to prior
approval of the Senate.

The Central Bank's principal regulatory responsibilities is to provide for
the stability of the currency system and the due payment of both internal and
foreign debts. The Central Bank's powers include setting reserve requirements,
regulating the amount of money and credit in circulation, and establishing
regulations and guidelines regarding the financial system and the capitals
market, the Formal Exchange Market and banks' deposit-taking activities, and
operating as a bank's lender of last resort.

Background

During 1982 and 1983, the Chilean banking system experienced significant
instability due to, among other factors, a recession in the United States of
America and other countries accompanied by high international interest rates,
the overvaluation of the peso, a lack of stringent banking regulation and a lack
of effective credit policies at most Chilean banks. The situation resulted in a
banking crisis which required the Central Bank and the Chilean government to
provide assistance to most Chilean private sector banks and, in the case of
certain institutions (accounting for approximately 51% of the total loans in the
banking system), the Superintendency of Banks was required to assume control. We
were not among the institutions subjected to control by the Superintendency of
Banks.

As one form of assistance to private sector financial institutions, the
Central Bank permitted certain banks to sell to the Central Bank certain of
their non-performing loans in exchange for cash, third party drafts and a
promissory note of the Central Bank. Each bank which sold non-performing loans
to the Central Bank agreed to repurchase the loans out of its future income. In
1989, the Chilean government enacted Ley No. 18,818, which permitted banks with
outstanding repurchase obligations to reacquire the loans still being held by
the Central Bank for a price payable in cash equal to the actual economic value
of such loans at the time of repurchase as appraised by the Superintendency of
Banks. Ley No. 18,818 also provided that the obligation to pay the difference
between the price initially paid to each bank by the Central Bank for the loans
and the amount paid by such bank to the Central Bank to reacquire its loans
would constitute subordinated obligations of the bank with no fixed term, known
as deuda subordinada ("Central Bank Subordinated Debt"). In the case of
liquidation of the bank, the subordinated debt obligations were to be paid only
after the bank's other debts had been paid in full. The law provided, however,
that until the subordinated debt obligations of a bank were discharged in full,
the bank was required to make certain payments in respect of the subordinated
debt obligations to the Central Bank out of net profits. As a result, a bank
with subordinated debt obligations was limited in its ability to retain net
income to support its growth and for general corporate purposes. In addition,
the law provided that holders of common shares of the bank outstanding at the
time the subordinated debt obligations were created were not permitted to
receive dividends until the subordinated debt obligations were paid in full.
However, holders of shares issued after the creation of the subordinated debt
obligations and with the prior approval of the Central Bank ("shares of
preferred stock" or "preferred shares") could receive dividends, to the extent
declared, but only in an amount expressed as a percentage of the dividends that
would have been payable to a holder of common shares in the absence of the
prohibition on payment of dividends on common shares described above. Holders of
shares of preferred stock could therefore receive as dividends a portion of the
bank's income before provision for the subordinated debt obligations ("Surplus")
to the extent otherwise permitted by law unless such income was further
capitalized.

In 1995, the Chilean Congress enacted the Subordinated Debt Bill enabling
banks owing subordinated debt obligations to the Central Bank to agree with the
Central Bank to modify the repayment terms of such debt. Banks that elected not
to be governed by the Subordinated Debt Bill would be

obligated to repay their subordinated debt obligations in accordance with prior
law. Banks that elected to be governed by the Subordinated Debt Bill would be
required to repay and discharge their subordinated debt obligations in
accordance with a repayment schedule agreed upon with the Central Bank, and in
any event within 40 years. The amount of each installment depended upon whether
or not at the time the bank makes such election it was deemed capable of
repaying its subordinated debt obligation within 40 years, based on a series of
parameters set forth in the Subordinated Debt Bill. The Subordinated Debt Bill
further provided that if a bank was deemed incapable of repaying its
subordinated debt obligation within 40 years, such bank could enter into an
agreement with the Central Bank stipulating that its subordinated debt
obligation would be repaid with the proceeds of the sale of shares of such bank
in the context of a program approved by the Central Bank. Such program could
involve one or more offerings but had to be completed within a maximum of ten
years. The shares sold pursuant to the program established by the bank and the
Central Bank would be entitled to receive dividends, if and when such dividends
were declared by the shareholders, in accordance with Chilean corporate law and
subject to legal reserve requirements. Holders of record of shares of preferred
stock of any such bank on the day the program was approved by the Central Bank,
which were entitled to receive a percentage of the bank's annual Surplus, had
the right to subscribe for shares offered pursuant to the program in proportion
to such percentage.

We chose to be governed by the Subordinated Debt Bill, and pursuant thereto
agreed with the Central Bank to enter into a program involving the issuance and
sale of 91,348,388 Common Shares and the repayment and cancellation of the
Central Bank Subordinated Debt with the proceeds of the sale of such shares (the
"Program"). Pursuant to the Program and the Subordinated Debt Bill, the Central
Bank Subordinated Debt was repaid and discharged in full upon payment to the
Central Bank of the net proceeds of an offering of our shares of common stock in
Chile and internationally, completed on June 24, 1996.

The Superintendency of Banks

Banks are supervised and regulated by the Superintendency of Banks, an
independent Chilean governmental agency. The Superintendency of Banks authorizes
the creation of new banks and has broad powers to interpret and enforce legal
and regulatory requirements. Furthermore, in case of non-compliance, the
Superintendency of Banks has the ability to impose sanctions. In extreme cases
it can appoint, with the prior approval of the Board of Directors of the Central
Bank, a provisional administrator to manage a bank. It must also approve any
amendment to a bank's by-laws or any increase in its capital.

The Superintendency of Banks examines randomly all banks from time to time,
generally at least once a year. Banks are also required to submit their
financial statements monthly to the Superintendency of Banks, and the banks
financial statements are published four times a year at the end of each quarter,
in any newspaper with national coverage. In addition, banks are required to
provide extensive information regarding their operations at various periodic
intervals to the Superintendency of Banks. A bank's annual financial statements
and the opinion of its independent auditors must also be submitted for review by
the Superintendency of Banks.

Any person acquiring 10% or more of the share capital of a bank must obtain
the prior approval of the Superintendency of Banks. Noncompliance with this
requirement results in the suspension of the voting rights with respect to the
acquired shares.

Pursuant to the regulations of the Superintendency of Banks, the following
ownership disclosures are required: (a) banks are required to inform the
Superintendency of Banks of the identity of any person owning, directly or
indirectly, 5% or more of such bank's shares, (b) holders of ADRs must disclose
to the Depositary the identity of beneficial owners of ADRs registered under
such holders' names, and (c) the Depositary is required to notify either the
bank or the Superintendency of Banks as to the identity of beneficial owners of
ADRs which such Depositary has registered.

Limitations on Types of Activities

Chilean banks may only conduct activities expressly allowed by the General
Banking Law, which include the following activities: lend, accept deposits, and,
subject to limitations, invest and perform financial services. Investments are
restricted to real estate for their own use, gold, foreign exchange and debt
securities. Through subsidiaries, they may also engage in certain specific
activities, such as securities brokerage services and mutual fund management.
Subject to certain limitations and the prior approval of the Superintendency of
Banks and the Central Bank, Chilean banks may own majority or minority interests
in foreign banks. As a result of an amendment

to the General Banking Law passed by the Chilean Congress in December 1997,
Chilean banks and their subsidiaries are authorized in principle to conduct
additional activities. See "Chilean Regulation and Supervision--Other
Businesses".

Deposit Insurance

In Chile, the State guarantees up to 90% of the principal amount of certain
time deposits of individuals. The State guarantee is subject to a maximum
payment of UF108 per person for each calendar year (Ch$1.8 million, or US$3,048
at December 31, 2003).

Reserve Requirements

Deposits are subject to a reserve requirement of 9% for peso-denominated
demand deposits, 3.6% for Chilean peso-denominated time deposits, 9% for dollar
of the United States of America and other foreign currency-denominated demand
deposits, and 3.6% for dollar-denominated time deposits and other foreign
currency-denominated obligations of ours. The Central Bank has statutory
authority to increase reserve requirements up to an average of 40% for demand
deposits and up to 20% for time deposits, to implement monetary policy.

In addition, a 100% special reserve (reserva tecnica) applies to demand
deposits, deposits in checking accounts, other dividend deposits received or
obligations payable on sight incurred in the ordinary course of business, other
deposits unconditionally payable within a term of less than 30 days and other
time deposits payable within a term of 10 days to the extent their aggregate
amount exceeds 2.5 times the amount of a bank's paid-in capital and reserves.

Minimum Capital

Under the General Banking Law, a bank must have a minimum of UF800,000 of
paid-in capital and reserves (Ch$13,536 million or US$ 22.5 million at December
31, 2003).

Capital Adequacy Requirements

According to the current General Banking Law, banks should have a minimum
ratio of Total Capital to Risk Adjusted Assets of 8%, net of required allowances
for loans losses, and a minimum ratio of Basic Capital to Total Assets of 3%,
net of required allowances for loan losses. For these purposes, Total Capital
means the aggregate of: (a) a bank's paid-in capital and reserves, excluding
capital attributed to certain subsidiaries and foreign branches, (b) its
subordinated bonds, calculated at the placement price but not exceeding 50% of
its Basic Capital, and (c) its voluntary allowances for loan losses, up to 1.25%
of the Risk Adjusted Assets. Basic Capital includes paid-in capital and
reserves, but excludes the net income for the period. Risk Adjusted Assets are
based on total assets, which are then classified into five categories, each of
which has a different weight.

Lending Limits

Under the General Banking Law, Chilean banks are subject to certain lending
limits, including the following:

(i) a bank may not extend to any one entity (or group of related entities),
directly or indirectly, unsecured credit in an amount that exceeds 5%
of the bank's Total Capital; or secured credit in an amount that
exceeds 25% of its Total Capital. In the case of foreign export trade
financing, the 5% ceiling for unsecured credits is raised to 10% and
the 25% ceiling for secured credits to 30%. In the case of financing of
infrastructure projects under concession, the ceiling is raised to 15%
if secured by a pledge on the concession or if granted by two or more
banks or financial institutions that have executed a credit agreement
with the constructor or the holder of the concession;

(ii) a bank may not extend loans to another financial institution in an
aggregate amount exceeding 30% of its Total Capital;

(iii) a bank may not directly or indirectly grant a loan, the purpose of
which is to allow an entity or individual to acquire shares of the
lender bank;

(iv) a bank may not lend, directly or indirectly, to a director or any other
person who has the power to act on behalf of the bank or to certain
related parties of the same; and

(v) a bank may not grant loans to related parties (including holders of 1%
or more of its shares) on more favorable terms than those generally
offered to non-related parties. Loans to directors, management and
companies in which such individuals have a participation of 5% or more
of equity or net earnings are not permitted under the General Banking
Law. The aggregate amount of loans to related parties may not exceed a
bank's Total Capital. See "Related Party Transactions--Interest of
Management in Certain Transactions".

In addition, the General Banking Law limits the aggregate amount of loans
that a bank may grant to its employees to 1.5% of its Total Capital, and
provides that no individual employee may receive loans in excess of 10% of this
1.5% limit. Notwithstanding these limitations, a bank may grant to each of its
employees a single home mortgage loan for personal use once during such
employee's term of employment.

Loan Loss Reserves

Chilean banks are required to provide to the Superintendency of Banks
detailed information regarding their loan portfolio on a monthly basis. Each
bank is also required to maintain a global allowance for loan losses, the amount
of which must equal the aggregate amount of its outstanding loans multiplied by
the greater of (i) its "risk index", or (ii) 0.75%. See "Selected Statistical
Information--Allowance For Loan Losses" for an explanation of the "risk index"
and other information regarding our allowance for loan losses. At December 31,
2003, our risk index was 1.3% compared with an average for the financial system
as a whole (i.e., all banks and finance companies) of 1.8% as of October 31, the
last date in 2003 for which public information was available. See
"--Competition--Risk Index".

Banks in Chile are also required to maintain an individual allowance for
loan loss for each past due loan (loans that are overdue as to any payment of
principal or interest by 90 or more days). An individual allowance for loan loss
equal to 100% is required for each such past due loan or the part thereof that
is unsecured if (and to the extent) such past due loans exceed in the aggregate
a bank's global allowance for loan loss. At December 31, 2003, the aggregate
amount of our potential individual allowances for loan loss was 43.4% of our
global allowance for loan losses. A bank may also voluntarily maintain
additional allowances for loan losses in excess of the minimum amounts required
as global and individual allowances. See "--Selected Statistical
Information--Allowance for Loan Losses--Voluntary Allowance For Loan Losses" and
Note 1.k) to the Consolidated Financial Statements.

Foreign Exchange

The foreign exchange operations of Chilean banks are subject to the
following limitations: First, the balance, whether positive or negative, between
the bank's assets and liabilities denominated in foreign currency (including
assets and liabilities denominated in US$ dollars but payable in Chilean pesos,
as well as those denominated in Chilean pesos and adjusted by the variation of
the US$ dollar exchange rate) cannot exceed 20% of its paid-in capital and
reserves; provided that if its assets are higher than its liabilities it may
exceed such 20% in an amount equal to its allowances and reserves in foreign
currency (excluding those which correspond to profits to be remitted abroad).
Second, there is a reserve requirement of 13.6% applicable to all foreign
currency-denominated obligations owed by a bank including demand deposits, time
deposits and foreign loans (including international board offerings), regulated
under Chapter XIII of the Compendio de Normas de Cambios Internacionales (the
"Compendium"). The Central Bank has agreed to pay interest on 10% of the amounts
that are deposited to comply with the foregoing reserve requirements.

Capital Markets

Under the General Banking Law, banks in Chile may only purchase, sell,
place, underwrite and act as a paying agent with respect to certain debt
securities. Banks may also place and underwrite certain equity securities of
public companies. Bank subsidiaries may also engage in debt placement and
dealing, equity issuance advice and securities brokerage, as well as in mutual
funds, investment management advisory services, merger and acquisition services,

factoring, insurance brokerage (excluding insurance in connection with
pensions), securitization and leasing activities. These subsidiaries are
regulated by the Superintendency of Banks and, in some cases, also by the
Superintendency of Securities and Insurance.

Financial Institutions with Economic Difficulties

Unless under voluntary liquidation, banks may not be declared in
bankruptcy. The General Banking Law provides that if certain specified adverse
circumstances exist at any bank, its Board of Directors must correct the
situation within 30 days from the date of receipt of the relevant financial
statements. If the Board is unable to do so, it must call a special
shareholders' meeting to increase the capital of the bank by the amount
necessary to return the bank to financial stability. If the shareholders reject
the capital increase, if it is not effected within the term agreed at the
meeting or if the Superintendency of Banks does not approve the Board's
proposal, the bank will be barred from increasing its loan portfolio beyond that
stated in the financial statements presented to the Board and from making any
further investments in any instrument other than in instruments issued by the
Central Bank. In such a case, or in the event that a bank is unable to make
timely payment in respect of its obligations, the General Banking Law provides
that the bank may receive a two-year term loan from another bank. The terms and
conditions of such loans must be approved by the directors of both banks, as
well as by the Superintendency of Banks, but need not be submitted to the
borrowing bank's shareholders for their approval. In any event, a creditor bank
may not grant loans to an insolvent bank in an amount exceeding 25% of the
creditor bank's regulatory capital and reserves.

Dissolution and Liquidation of Banks

The Superintendency of Banks may determine that a bank should be liquidated
for the benefit of its depositors or other creditors when the bank does not have
the necessary solvency to continue its operations. The Superintendency of Banks
may revoke a bank's authorization to exist and order its mandatory liquidation
subject to agreement by the Board of Directors of the Central Bank. The
resolution by the Superintendency of Banks must state the reason for ordering
the liquidation and must name a liquidator, unless the Superintendency of Banks
itself assumes such responsibility. When a liquidation is declared, all deposits
on checking accounts, other demand deposits received or obligations payable on
sight incurred in the ordinary course of business, other deposits
unconditionally payable immediately or within 30 days, and any other deposits
and receipts payable within 10 days are required to be paid by using existing
funds of the bank, its deposits with the Central Bank or its investments in
instruments that represent its reserves. If these funds are insufficient to pay
these obligations, the liquidator may seize the rest of the bank's assets, as
necessary. If necessary, the Central Bank will lend the bank the funds necessary
to pay these obligations. Any such Central Bank loans are preferential to any
claims of other creditors of the liquidated bank.

Foreign Operations

Under current Chilean banking regulations, banks may invest in certain
foreign currency securities and may grant loans to foreign individual and
entities. With respect to equity securities, banks in Chile may only invest in
equity securities of foreign banks and certain other foreign companies in which
Chilean banks would be able to invest, if those companies were incorporated in
Chile. Banks may only invest in debt securities traded in formal secondary
markets located in countries where its sovereign rating is at least BB-. Such
debt securities shall qualify as (i) securities issued or guaranteed by foreign
sovereign states or their Central Banks or other foreign or international
financial entities, and (ii) bonds issued by foreign companies. Such debt
securities must have a minimum rating as follows:

Rating Agency Short-Term Long-Term
- -------------------------------------------------------- ---------- ---------
Moody's................................................. P2 Baa3
Standard & Poor's....................................... A3 BBB-
Fitch Ratings........................................... F2 BBB-

Banks may also invest in (i) unrated debt securities as long as such
securities are issued or guaranteed by foreign sovereign states or their Central
Banks. For this purpose, it will be assumed that the rating of the debt security
is the international rating of the country where the issuer is located, and (ii)
structured notes issued by investment banks that are rated higher than the
ratings described above, so long as such notes are linked to a debt instrument
issued by a sovereign or corporate entity and rated at least at the ratings
described above.

The debt securities to be purchased by Chilean banks may have a lower
rating, as long as certain other conditions specified in the regulations of the
Central Bank are met.

Subject to certain conditions, a bank may grant loans in foreign currency
to subsidiaries or branches of Chilean corporations located abroad, to companies
listed on foreign stock exchanges rated at least BB-, and in general to
individuals and entities domiciled abroad, as long as the Central Bank is kept
informed of such activities.

Additionally, banks may acquire loans granted to the individuals or
entities described in the foregoing paragraph as well as participation in
syndicated loans granted to individuals or entities domiciled abroad.

Lastly, banks may grant loans to finance export transactions to Chilean
residents or to individuals or entities domiciled abroad.

In the event the sum of the investments of a bank in foreign currency
securities and of the loans granted to foreign individuals and entities exceeds
70% of the Total Capital of such bank, the excess is subject to a mandatory
reserve of 100%.

Other Businesses

In December 1997, the Chilean Congress amended the General Banking Law,
authorizing Chilean banks in principle to conduct additional activities such as
factoring, underwriting, transportation of securities, financial services
(portfolio management), leasing and direct financial advisory services.
Furthermore, such amendment gave the Superintendency of Banks discretionary
power to allow banks to engage through subsidiaries in other types of
activities, such as securitizations, brokerage of non-pension fund insurance,
loan collection, factoring and custody and transportation of securities.

As a result of the amended General Banking Law, Chilean banks are now
allowed to establish, in addition to branches and representative offices outside
Chile, foreign subsidiaries (or have minority interests in foreign entities)
engaged in banking activities or in any of the types of non-banking activities
in which Chilean banks can engage through domestic subsidiaries. It also permits
Chilean-based banking offices, under certain conditions, to make loans to many
types of entities located in other countries.

Besides the activities linked to the subsidiaries, the operations profile
of the bank was expanded by permitting the execution of underwriting agreements
for public placement of stocks and the possibility of development for financial
services for third parties.

Mark to Market Requirements for Financial Investments

In September 1998, the Superintendency of Banks modified the regulations
regarding the valuation of financial investments. Pursuant to the new
regulations, a bank may differentiate its financial investments between
permanent investments and short-term investments. The value of the permanent
investment portfolio cannot exceed such bank's basic capital. In addition, once
a financial investment is classified as a permanent investment, it can only be
removed when it reaches maturity or when it is sold. The fluctuation in the
market value of the financial investments transferred to the permanent
investment account is not recorded in the income statement but is recorded in
other reserves in shareholders' equity.

Allowance Requirements for Consumer Lending

Pursuant to requirements for consumer lending established by the
Superintendency of Banks, a bank must revise the credit rating of all loans made
to a particular borrower if the bank renegotiates any loan with that borrower.
In addition, a bank must classify all consumer loans of a single borrower
according to the borrower's worst rated loan. Finally, a bank must establish and
abide by more stringent follow-up procedures relating to a borrower's consumer
loans with other financial institutions. For example, a bank must automatically
review a borrower's allowance amount when the borrower's records display a
non-performing loan or other kind of negative credit behavior in the databases
of the Superintendency of Banks or a private information service, even if the
borrower is not in default vis-a-vis the bank.

SELECTED STATISTICAL INFORMATION

The following information is included for analytical purposes and should be
read in conjunction with our Consolidated Financial Statements as well as
"Operating and Financial Review and Prospects". The financial data in the
following tables as of and for all year-end periods have been restated in
constant Chilean pesos of December 31, 2003. See Note 1.c) to Consolidated
Financial Statements.

Average Balance Sheets and Interest Rate Data

The average balances for interest earning assets and interest bearing
liabilities have been calculated on the basis of daily balances of BBVA Chile
and on the basis of month end balances for our subsidiaries. Such average
balances are presented in Chilean pesos (Ch$), in UF and in foreign currencies
(principally US$).

The nominal interest rate has been calculated by dividing the amount of
interest and principal readjustment gain or loss during the period by the
related average balance, both amounts expressed in constant Chilean pesos. The
nominal rates calculated for each period have been converted into real rates
using the following formulas:

1 + N(p) (1+N(d))(1+D)
R(p)= -------- -1 R(d)= ------------- -1
1+I 1+I

Where:

R(p) = real average rate for Chilean peso-denominated assets and liabilities
(in Ch$ and UF) for the period;

R(d) = real average rate for foreign currency-denominated assets and
liabilities for the period;

N(p) = nominal average rate for Chilean peso-denominated assets and
liabilities for the period;

N(d) = nominal average rate for foreign currency-denominated assets and
liabilities for the period;

D = depreciation rate of the Chilean peso to the dollar for the period;
and

I = inflation rate in Chile for the period (based on the variation of
the CPI).

The real interest rate can be negative for a portfolio of Chilean
peso-denominated loans when the inflation rate for the period is higher than the
average nominal rate of the loan portfolio for the same period. A similar effect
could occur for a portfolio of foreign currency-denominated loans when the
inflation rate for the period is higher than the sum of the depreciation rate
for the period and the corresponding average nominal rate of the portfolio.

The formula for the average real rate for foreign currency-denominated
assets and liabilities (Rd) reflects a gain or loss in purchasing power caused
by the difference between the depreciation rate of the Chilean peso and the
inflation rate in Chile during the period. The following example illustrates the
calculation of the real interest rate for a US$-denominated asset earning a
nominal annual interest rate of 10% (Nd = 0.10), assuming a 5% annual
depreciation rate (D = 0.05) and a 12% annual inflation rate (I = 0.12):

(1+0.10)(1+0.05)
R(d)= ---------------- -1=3.125% per year
1+0.12

In the example, since the inflation rate was higher than the depreciation
rate, the real rate is lower than the nominal rate in dollars. If, for example,
the annual depreciation rate were 15%, using the same numbers, the real rate in
Chilean pesos would be 12.9%, which is higher than the nominal rate in dollars.
Using the same numbers, if the annual inflation rate were greater than 15.5%,
the real rate would be negative.

Contingent loans (consisting of guarantees and outstanding and undrawn
letters of credit) have been treated as interest earning assets. Although the
nature of the income derived from such assets is similar to a fee, Chilean
banking regulations require that such income be accounted for as interest
revenue. As a result of this treatment, the

comparatively low rates of interest earned on these assets have a distorting
effect on the average interest rate earned on total earning assets.

The real rate for contingent loans has been stated as the nominal rate,
since we do not have an effective funding obligation for these loans. The
foreign exchange gains or losses on foreign currency-denominated assets and
liabilities have not been included in interest revenue or expense. Similarly,
interest on financial investments does not include trading gains or losses on
these investments.

Non-performing loans that are not yet 90 or more days overdue, as well as
restructured loans earning interest at two or more percentage points below our
average rate for similar types of performing loans at the date of the
restructuring, have been included in each of the various categories of loans
and, therefore, affect the various averages. Non-performing loans that are 90 or
more days overdue are shown as a separate category of loans ("Past due loans").
Interest and/or indexation readjustments received on all non-performing loans
during the periods are included as interest revenue.

Included in interbank deposits are current accounts maintained in the
Central Bank and overseas banks. Such assets have a distorting effect on the
average interest rate earned on total interest earning assets because (i)
balances maintained in the Central Bank only receive interest on the amounts
which are legally required to be held for liquidity purposes, and (ii) balances
maintained in overseas banks earn interest only for certain accounts in certain
countries. Consequently, the average interest earned on such assets is
comparatively low. These deposits are maintained by us in these accounts to
comply with statutory requirements and to facilitate international business,
rather than to earn income.

The monetary gain or loss on interest earning assets and interest bearing
liabilities is not included as a component of interest revenue or interest
expense because inflation effects are taken into account in the calculation of
real interest rates.

The following tables show, by currency of denomination, average balances
and, where applicable, interest amounts earned and paid average nominal rates
and average real rates for our interest earning assets and interest bearing
liabilities for the years ended December 31, 2001, 2002 and 2003.

Outstanding Mortgage finance bonds issued as of December 31, 2001, have
been presented net of its corresponding liability. Outstanding Mortgage finance
bonds issued prior to year 2001 have not been presented net of its corresponding
liability, the same presentation as in previous reports.

Year ended December 31,
--------------------------------------------------------------------------------------------------------------
2001 2002 2003
---------------------------------- ----------------------------------- -----------------------------------
Average Average Average Average Average Average
Average Interest nominal real Average Interest nominal real Average Interest nominal real
balance earned rate rate balance earned rate rate balance earned rate rate
------- ------ ------- ------- ------- -------- ------- ------- ------- -------- ------- -------
(in millions of constant Ch$ of December 31, 2003, except for rate data)

ASSETS
INTEREST EARNING
ASSETS
Interbank deposits
Ch$............. 22,657 487 2.1 (0.4) 23,940 436 1.8 (1.0) 27,242 315 1.2 0.1
UF.............. 0 0 0.0 0.0 0 0 0.0 0.0 0 0 0.0 0.0
Foreign currency 4,581 90 2.0 13.9 10,927 105 1.0 6.6 8,856 131 1.5 (15.5)
Total........ 27,238 577 2.1 2.0 34,867 541 1.6 1.4 36,098 446 1.2 (3.8)
Investments
Ch$............. 198,280 18,758 9.5 6.7 181,512 7,287 4.0 1.2 205,935 8,645 4.2 3.1
UF.............. 183,019 15,856 8.7 5.9 94,437 5,175 5.5 2.6 63,716 2,705 4.2 3.1
Foreign currency 67,530 2,029 3.0 15.0 240,758 27,475 11.4 17.7 370,249 (38,758) (10.5) (25.5)
Total........ 448,829 36,643 8.2 7.7 516,707 39,937 7.7 9.1 639,900 (27,408) (4.3) (13.4)
Commercial loans
Ch$............. 115,481 14,377 12.4 9.6 193,998 16,116 8.3 5.4 303,874 21,556 7.1 5.9
UF.............. 502,363 50,934 10.1 7.3 428,114 54,496 12.7 9.7 431,799 26,462 6.1 5.0
Foreign currency 102,196 2,384 2.3 14.3 158,687 8,219 5.2 11.1 158,831 (4,208) (2.6) (19.0)
Total........ 720,040 67,695 9.4 8.7 780,799 78,831 10.1 8.9 894,504 43,810 4.9 1.0
Consumer loans
Ch$............. 143,530 30,901 21.5 18.4 164,753 32,876 20.0 16.7 204,534 40,424 19.8 18.5
UF.............. 20,003 2,225 11.1 8.3 20,838 2,012 9.7 6.7 18,430 1,753 9.5 8.3
Foreign currency 193 0 0.0 11.7 196 3 1.5 0.0 216 0 0.0 (16.8)
Total........ 163,726 33,126 20.2 17.2 185,787 34,891 18.8 15.6 223,180 42,177 18.9 17.6
Mortgage loans
Ch$............. 0 0 0.0 0.0 0 0 0.0 0.0 0 0 0.0 0.0
UF.............. 241,500 37,103 15.4 12.4 240,143 25,474 10.6 7.6 259,371 23,277 9.0 7.8
Foreign currency 0 0 0.0 0.0 0 0 0.0 0.0 0 0 0.0 0.0
Total........ 241,500 37,103 15.4 12.4 240,143 25,474 10.6 7.6 259,371 23,277 9.0 7.8
Foreign trade loans
Ch$............. 0 0 0.0 0.0 30,175 512 0.0 0.0 16,090 737 4.6 3.4
UF.............. 0 0 0.0 0.0 0 0 0.0 0.0 3,169 77 2.4 1.3
Foreign currency 165,680 10,327 6.2 18.6 171,174 7,408 4.3 10.2 211,626 7,433 3.5 (13.8)
Total........ 165,680 10,327 6.2 18.6 201,349 7,920 3.9 8.6 230,885 8,247 3.6 (12.4)
Interbank loans
Ch$............. 2,884 152 5.3 2.6 3,138 706 22.5 19.2 2,904 0 0.0 0.0
UF.............. 0 0 0.0 0.0 791 466 58.9 54.6 0 0 0.0 0.0
Foreign currency 113 0 (0.2) 11.5 1 0 0.0 5.6 0 0 0.0 0.0
Total........ 2,997 152 5.1 2.9 3,930 1,172 29.8 26.3 2,904 0 0.0 0.0
Lease contracts
Ch$............. 12,699 97 0.8 (1.8) 22,405 85 0.4 (2.4) 4,227 341 8.1 6.9
UF.............. 46,928 6,786 14.5 11.6 42,079 6,452 15.3 12.2 74,812 5,550 7.4 6.2
Foreign currency 3,350 835 25.0 39.5 4,279 -18 (0.4) 5.2 12,644 (1,707) (13.5) (28.0)
Total........ 62,977 7,718 12.3 10.4 68,763 6,519 9.5 7.0 91,683 4,184 4.6 1.6
Other outstanding
loans
Ch$............. 52,359 1,889 3.6 1.0 54,952 6,766 12.3 9.3 51,593 1,205 2.3 1.2
UF.............. 236,360 20,928 8.9 6.1 265,896 15,026 5.7 2.8 381,200 23,279 6.1 5.0
Foreign currency 28 0 0.0 11.7 30 0 0.0 0.0 21 0 0.0 (16.8)
Total........ 288,747 22,817 7.9 5.2 320,878 21,792 6.8 3.9 432,814 24,484 5.7 4.5
Past due loans
Ch$............. 10,153 3,006 29.6 26.3 10,650 719 6.8 3.8 11,467 (571) (5.0) (6.0)
UF.............. 29,249 404 1.4 (1.2) 28,768 63 0.2 (2.5) 31,537 (520) (1.6) (2.7)
Foreign currency 1,615 0 0.0 11.7 1,273 0 0.0 5.6 2,225 43 1.9 (15.2)
Total........ 41,017 3,410 8.3 6.1 40,691 782 1.9 (0.6) 45,229 (1,048) (2.3) (4.2)
Contingent loans
Ch$............. 6,300 178 2.8 0.2 6,199 198 3.2 0.4 9,366 198 2.1 1.0
UF.............. 19,219 386 2.0 (0.6) 22,380 334 1.5 (1.3) 26,968 355 1.3 0.2
Foreign currency 44,812 244 0.5 12.3 45,415 238 0.5 6.2 38,670 84 0.2 (16.6)
Total........ 70,331 808 1.1 7.7 73,994 770 1.0 3.4 75,004 637 0.8 (8.4)
Total interest
earning assets
Ch$............. 564,343 69,834 12.4 9.6 691,722 65,701 9.5 6.5 837,232 72,850 8.7 7.5
UF.............. 1,278,641 134,633 10.5 7.7 1,143,446 109,498 9.6 6.6 1,291,002 82,938 6.4 5.3
Foreign currency 390,098 15,909 4.1 16.3 632,740 43,430 6.9 12.9 803,338 (36,982) (4.6) (20.6)
Total........ 2,233,082 220,376 9.9 9.7 2,467,908 218,629 8.9 8.2 2,931,572 118,806 4.1 (1.2)
NON-INTEREST EARNING
ASSETS
Cash and due from
banks
Ch$............. 218,399 237,235 234,713
UF.............. 0 0 0

Foreign currency 15,634 11,849 19,701
Total........ 234,033 249,084 254,414
(in millions of constant Ch$ of December 31, 2003, except for rate data)
Allowance for loan
losses
Ch$............. -39,183 (43,421) (43,935)
UF.............. 0 0 0
Foreign currency 0 0 0
Total........ -39,183 (43,421) (43,935)
Bank premises and
equipment
Ch$............. 58,233 57,067 56,600
UF.............. 0 0 0
Foreign currency 0 0 0
Total........ 58,233 57,067 56,600
Other assets
Ch$............. 120,548 81,498 107,129
UF.............. 724 647 701
Foreign currency 33,766 62,766 28,831
Total........ 155,038 144,911 136,661
Total non-interest
earning assets
Ch$............. 357,996 332,379 354,507
UF.............. 724 647 701
Foreign currency 49,400 74,615 48,532
Total........ 408,120 407,641 403,740
TOTAL ASSETS
Ch$............. 922,339 69,834 1,024,101 65,701 1,191,739 72,850
UF.............. 1,279,365 134,633 1,144,093 109,498 1,291,703 82,938
Foreign currency 439,498 15,909 707,355 43,430 851,870 (36,982)
Total........ 2,641,202 220,376 2,875,549 218,629 3,335,312 118,806

Year ended December 31,
--------------------------------------------------------------------------------------------------------------
2001 2002 2003
---------------------------------- ----------------------------------- -----------------------------------
Average Average Average Average Average Average
Average nterest nominal real Average Interest nominal real Average Interest nominal real
balance earned rate rate balance earned rate rate balance earned rate rate
------- ------ ------- ------- ------- -------- ------- ------- ------- -------- ------- -------
(in millions of constant Ch$ of December 31, 2003, except for rate data)

LIABILITIES AND
SHAREHOLDERS'
EQUITY
INTEREST BEARING
LIABILITIES
Savings accounts
Ch$............ 0 0 0.0 0.0 0 0 0.0 0.0 0 0 0.0 0.0
UF............. 57,953 3,129 5.4 2.7 58,012 2,201 3.8 1.0 57,340 889 1.6 0.4
Foreign
currency....... 0 0 0.0 0.0 0 0 0.0 0.0 0 0 0.0 0.0
Total........ 57,953 3,129 5.4 2.7 58,012 2,201 3.8 1.0 57,340 889 1.6 0.4
Time deposits
Ch$............ 249,042 15,662 6.3 3.6 536,443 22,080 4.1 1.3 784,854 28,201 3.6 2.5
UF............. 567,949 41,508 7.3 4.6 485,569 31,239 6.4 3.5 647,693 15,611 2.4 1.3
Foreign
currency....... 136,145 5,281 3.9 16.0 143,276 2,763 1.9 7.6 121,936 1,566 1.3 (15.7)
Total........ 953,136 62,451 6.6 6.0 1,165,288 56,082 4.8 3.0 1,554,483 45,378 2.9 0.6
Central Bank
borrowings
Ch$............ 13,217 888 6.7 4.0 7,094 298 4.2 1.4 5,463 147 2.7 1.6
UF............. 13,057 1,014 7.8 5.0 9,942 729 7.3 4.4 7,620 459 6.0 4.9
Foreign
currency....... 0 0 0.0 0.0 0 0 0.0 0.0 0 0 0.0 0.0
Total........ 26,274 1,902 7.2 4.5 17,036 1,027 6.0 3.1 13,083 606 4.6 3.5
Securities sold
under
agreements to
repurchase
Ch$............ 194,573 14,419 7.4 4.7 73,729 4,829 6.5 3.6 116,543 3,529 3.0 1.9
UF............. 17,799 1,177 6.6 3.9 375 23 6.1 3.2 214 (4) (1.9) (2.9)
Foreign
currency....... 355 6 1.7 13.6 152,364 1,458 1.0 6.6 125,990 1,907 1.5 (15.5)
Total........ 212,727 15,602 7.3 4.6 226,468 6,310 2.8 5.6 242,747 5,432 2.2 (7.1)
Mortgage finance
bonds
Ch$............ 0 0 0.0 0.0 0 0 0.0 0.0 0 0 0.0 0.0
UF............. 253,998 24,586 9.7 6.9 249,516 23,561 9.4 6.5 255,055 18,338 7.2 6.0
Foreign
currency....... 0 0 0.0 0.0 0 0 0.0 0.0 0 0 0.0 0.0
Total.......... 253,998 24,586 9.7 6.9 249,516 23,561 9.4 6.5 255,055 18,338 7.2 6.0
Other interest
bearing
liabilities
Ch$............ 84,590 4,208 5.0 2.3 38,585 5,343 13.8 10.7 41,474 1,359 3.3 2.2
UF............. 95,155 9,923 10.4 7.6 151,925 10,735 7.1 4.1 86,413 5,385 6.2 5.1
Foreign
currency....... 114,227 4,300 3.8 15.9 129,259 3,265 2.5 8.3 214,179 2,731 1.3 (15.7)
Total........ 293,972 18,431 6.3 9.3 319,769 19,343 6.0 6.6 342,066 9,475 2.8 (8.3)
Total interest
bearing liabilities
Ch$............ 541,422 35,177 6.5 3.8 655,851 32,550 5.0 2.1 948,334 33,236 3.5 2.4
UF............. 1,005,911 81,337 8.1 5.4 955,339 68,488 7.2 4.3 1,054,335 40,678 3.9 2.8
Foreign
currency....... 250,727 9,587 3.8 15.9 424,899 7,486 1.8 7.5 462,105 6,204 1.3 (15.7)
Total........ 1,798,060 126,101 7.0 6.4 2,036,089 108,524 5.3 4.3 2,464,774 80,118 3.3 (0.8)

NON-INTEREST BEARING
LIABILITIES
Non-interest bearing
demand deposits
Ch$............. 358,371 410,759 408,081
UF.............. 11,569 12,218 30,880
Foreign
currency....... 11,888 556 18,628
Total.......... 381,828 423,533 457,589
Contingent
liabilities
Ch$............. 6,283 30,852 9,360
UF.............. 19,178 3,194 26,952
Foreign
currency....... 44,965 40,341 38,869
Total.......... 70,426 74,387 75,181
Other non-interest
bearing
liabilities
Ch$............. 107,288 42,925 43,599
UF.............. 0 51 53
Foreign
currency....... 36,959 49,395 35,204
Total.......... 144,247 92,371 78,856
Shareholders' equity
Ch$............. 246,641 249,169 258,912
UF.............. 0 0 0
Foreign
currency....... 0 0 0
Total.......... 246,641 249,169 258,912
Total non-interest bearing
liabilities and
shareholders'
equity
Ch$............. 718,583 733,705 719,952
UF.............. 30,747 15,463 57,885
Foreign
currency....... 93,812 90,292 92,701
Total.......... 843,142 839,460 870,538
TOTAL LIABLITIES AND
SHAREHOLDERS' EQUITY
Ch$............. 1,260,005 35,177 1,389,556 32,550 1,668,286 33,236
UF.............. 1,036,658 81,337 970,802 68,488 1,112,220 40,678
Foreign
currency....... 344,539 9,587 515,191 7,486 554,806 6,204
Total.......... 2,641,202 126,101 2,875,549 108,524 3,335,312 80,118

Changes in Net Interest Revenue and Interest Expense-Volume and Rate Analysis

The following tables allocate, by currency of denomination, changes in our net
interest revenue and interest expense between changes in the average volume of
interest earning assets and interest bearing liabilities and changes in their
respective nominal interest rates for 2003 compared to 2002 and for 2002
compared to 2001. Volume and rate variances have been calculated based on
movements in average balances over the period and changes in nominal interest
rates on average interest earning assets and average interest bearing
liabilities. The net change attributable to changes in both volume and rate has
been allocated to the change due to rate.

Increase (decrease)
from Net change Increase (decrease) from Net change
2001 to 2002 due to from 2002 to 2003 due to from
changes in 2001 to 2002 changes in 2002 to 2003
---------------------- ------------ ------------------------ ------------
Volume Rate Volume Rate
--------- --------- --------- ---------
(in millions of constant Ch$ of December 2003)

INTEREST EARNING ASSETS
Interbank deposits
Ch$............................. 24 (75) (51) 38 (159) (121)
UF.............................. - - - - - -
Foreign currency................ 60 (45) 15 (32) 58 26
Total......................... 84 (120) (36) 6 (101) (95)
Investments
Ch$............................. (673) (10,798) (11,471) 1,025 333 1,358
UF.............................. (4,854) (5,827) (10,681) (1,304) (1,166) (2,470)
Foreign currency................ 19,768 5,678 25,446 (13,556) (52,677) (66,233)
Total......................... 14,241 (10,947) 3,294 (13,835) (53,510) (67,345)
Commercial loans
Ch$............................. 6,522 (4,783) 1,739 7,793 (2,353) 5,440
UF.............................. (9,450) 13,012 3,562 227 (28,261) (28,034)
Foreign currency................ 2,926 2,909 5,835 (4) (12,423) (12,427)
Total......................... (2) 11,138 11,136 8,016 (43,037) (35,021)
Consumer loans
Ch$............................. 4,235 (2,260) 1,975 7,862 (314) 7,548
UF.............................. 81 (294) (213) (229) (30) (259)
Foreign currency................ - 3 3 - (3) (3)
Total......................... 4,316 (2,551) 1,765 7,633 (347) 7,286
Mortgage loans
Ch$............................. - - - - - -
UF.............................. (145) (11,484) (11,629) 1,725 (3,922) (2,197)
Foreign currency................ - - - - - -
Total......................... (145) (11,484) (11,629) 1,725 (3,922) (2,197)
Foreign trade loans
Ch$............................. 512 - 512 (645) 870 225
UF.............................. - - - 77 - 77
Foreign currency................ 238 (3,157) (2,919) 1,421 (1,396) 25
Total......................... 750 (3,157) (2,407) 853 (526) 327
Interbank loans
Ch$............................. 58 496 554 1 (707) (706)
UF.............................. 466 - 466 - (466) (466)
Foreign currency................ - - - - - -
Total......................... 524 496 1,020 1 (1,173) (1,173)
Lease contracts
Ch$............................. 36 (49) (13) (1,466) 1,722 256
UF.............................. (744) 410 (334) 2,428 (3,330) (902)
Foreign currency................ (3) (849) (852) (1,129) (560) (1,689)
Total......................... (711) (488) (1,199) (167) (2,168) (2,335)
Other outstanding loans
Ch$............................. 320 4,557 4,877 (77) (5,484) (5,561)
UF.............................. 1,669 (7,571) (5,902) 7,041 1,212 8,253
Foreign currency................ - - - - - -
Total......................... 1,989 (3,014) (1,025) 6,964 (4,272) 2,692
Past due loans
Ch$............................. 34 (2,321) (2,287) (41) (1,249) (1,290)
UF.............................. (1) (340) (341) (46) (537) (583)
Foreign currency................ - - - 18 25 43
Total.......................... 33 (2,661) (2,628) (69) (1,761) (1,830)

Contingent loans
Ch$............................. (3) 23 20 67 (67) -
UF.............................. 47 (99) (52) 60 (39) 21
Foreign currency................ 4 (10) (6) (14) (140) (154)
Total.......................... 48 (86) (38) 113 (246) (133)
Total interest earning assets
Ch$............................. 11,065 (15,210) (4,145) 14,557 (7,408) 7,149
UF.............................. (12,931) (12,193) (25,124) 9,979 (36,539) (26,560)
Foreign currency................ 22,993 4,529 27,522 (13,296) (67,116) (80,412)
Total.......................... 21,127 (22,874) (1,747) 11,240 (110,063) (99,823)

INTEREST BEARING LIABILITIES
Saving accounts
Ch$............................. - - - - - -
UF.............................. 2 (930) (928) (10) (1,302) (1,312)
Foreign currency................ - - - - - -
Total.......................... 2 (930) (928) (10) (1,302) (1,312)
Time deposits
Ch$............................. 11,829 (5,411) 6,418 8,926 (2,805) 6,121
UF.............................. (5,300) (4,969) (10,269) 3,908 (19,536) (15,628)
Foreign currency................ 138 (2,656) (2,518) (274) (923) (1,197)
Total.......................... 6,667 (13,036) (6,369) 12,560 (23,264) (10,704)
Central Bank borrowings
Ch$............................. (257) (333) (590) (44) (107) (151)
UF.............................. (228) (57) (285) (144) (130) (270)
Foreign currency................ - - -
Total.......................... (485) (390) (875) (184) (237) (421)
Securities sold under agreements - - -
to repurchase
Ch$............................. (7,915) (1,675) (9,590) 1,296 (2,596) (1,300)
UF.............................. (1,069) (85) (1,154) 3 (30) (27)
Foreign currency................ 1,455 (3) 1,452 (399) 848 449
Total.......................... (7,529) (1,763) (9,292) 900 (1778) (878)
Mortgage finance bonds
Ch$............................. - - - - - -
UF.............................. (423) (602) (1,025) 398 (5,621) (5,223)
Foreign currency................ - - - - - -
Total.......................... (423) (602) (1,025) 398 (5,621) (5,223)
Other interest bearing liabilities
Ch$............................. (6,370) 7,505 1,135 95 (4,079) (3,984)
UF.............................. 4,011 (3,199) 812 (4,083) (1,267) (5,350)
Foreign currency................ 380 (1,415) (1,035) 1,083 (1,617) (534)
Total.......................... (1,979) 2,891 912 (2,905) (6,963) (9,868)
Total interest bearing liabilities
Ch$............................. (2,713) 86 (2,627) 10,273 (9,587) 686
UF.............................. (3,007) (9,842) (12,849) 76 (27,886) (27,810)
Foreign currency................ 1,973 (4,074) (2,101) 410 (1,692) (1,282)
Total.......................... (3,747) (13,830) (17,577) 10,759 (39,165) (28,406)

Interest Earning Assets--Net Interest Margin

The following table analyzes, by currency of denomination, our levels of
average interest earning assets and net interest, and illustrates the
comparative margins realized, for each of the periods indicated:

Year ended December 31,
-----------------------------------------------
2001 2002 2003
--------- --------- ---------
(in millions of constant Ch$ of December 31, 2003,
except for percentages)

Total average interest earnings assets

Ch$........................................ 564,344 691,723 837,232
UF......................................... 1,278,641 1,143,444 1,291,002
Foreign currency........................... 390,098 632,740 803,338
--------- --------- ---------
Total.................................... 2,233,083 2,467,907 2,931,572
========= ========= =========
Net interest earned(1)
Ch$........................................ 34,666 33,151 39,614
UF......................................... 53,287 41,008 42,260
Foreign currency........................... 6,322 35,945 (43,186)
--------- --------- ---------
Total.................................... 94,275 110,104 38,688
========= ========= =========
Net interest margin(2)
Ch$........................................ 6.14% 4.79% 4.73%
UF......................................... 4.17 3.59 3.27
Foreign currency........................... 1.62 5.68 (5.38)
--------- --------- ---------
Total.................................... 4.22% 4.46% 1.32%
========= ========= =========

- ----------------------
(1) Net interest earned is defined as interest revenue earned less interest
expense incurred.

(2) Net interest margin is defined as net interest earned divided by average
interest earning assets

Return on Equity and Assets

The following table presents certain of our selected financial ratios for
the periods indicated:

Year ended December 31,
----------------------------------------------
2001 2002 2003
--------- --------- ---------
(in millions of constant Ch$ of December 31, 2003,
except for percentages)

Net income.................................... 15,488 20,458 27,108
Average total assets.......................... 2,641,203 2,875,549 3,335,312
Average shareholders' equity.................. 246,641 249,169 258,912
Net income as a percentage of:
Average total assets...................... 0.59% 0.71% 0.81%
Average shareholders' equity.............. 6.28 8.21 10.47
Average shareholders' equity as a
percentage of average total assets....... 9.34 8.67 7.76
Dividend paid ratio (percentage)(1)........... 99.98 99.99 99.99

- ----------------------
(1) Calculated by dividing dividends declared per share by net income per
share, for each year.

Investment Portfolio

The following table sets forth our investments in Chilean government and
corporate securities and certain other investments as of December 31, 2001, 2002
and 2003. All other investments are carried at market value.

December 31,
2003 Weighted
Year ended December 31, Average
-------------------------------------- -------------
2001 2002 2003 Nominal Rate
------- ------- ------- -------------
(in millions of constant Ch$ of December 31, 2003)

Government securities:
Central Bank securities............................... 189,530 290,665 209,698 3.78
Subtotal............................................ 189,530 290,665 209,698 3.78
Investments purchased under agreements to resell......... 9,675 56,616 8,421 2.55
Investment collateral under agreements to
.repurchase:
Central Bank securities............................... 149,291 205,613 128,567 3.81
Negotiable time deposits in Chilean financial
institutions........................................ 21,500 16,871 74,049 4.00
Subtotal........................................... 170,791 222,484 202,616 3.88
Other investments:
Negotiable time deposits in domestic financial
institutions........................................ 15,745 43,787 110,621 3.35
Other marketable securities........................... 8,428 38,788 51,234 5.64
Subtotal........................................... 24,173 82,574 161,855 4.07
------- -------
Total investments.................................. 394,169 652,339 582,590 3.88
======= =======

- ----------------------

The above table includes Central Bank securities available for sale which
have the following maturity dates:

At December 31, 2003
-----------------------
(in millions of constant
Ch$ of December 31, 2003)

Due in one year or less.......................................................... 88,881
Due from one year to five years.................................................. 11,474
Total...................................................................... 100,355

Loan Portfolio

The following table analyzes our loans by type of loan. Except where
otherwise specified, all loan amounts stated below are before deduction of
allowance for loan losses. Total loans reflect our loan portfolio, including
past due amounts.

1999 2000 2001 2002 2003
------- ------- ------- ------- -------

Commercial loans................... 627,520 692,522 827,556 836,807 958,741
Mortgage loans:
Residential loans.............. 178,619 160,731 148,333 147,615 148,964
Other.......................... 87,896 89,035 95,538 108,409 113,758
Subtotal.................... 266,515 249,766 243,871 256,024 262,722
Consumer loans..................... 129,251 156,320 177,875 206,635 233,435
Foreign trade loans................ 142,783 155,168 150,345 235,857 217,958
Interbank loans.................... 10,718 16,110 1,043 -- --
Lease contracts.................... 59,192 58,094 66,673 84,568 99,585

1999 2000 2001 2002 2003
------- ------- ------- ------- -------

Other outstanding loans:
Lines of credit--individuals.... 18,543 19,499 17,482 17,937 18,581
Lines of credit--companies...... 23,135 49,492 16,363 36,597 29,558
Mortgages financed by Central
Bank lines of credit........ 9,372 7,024 6,484 3,682 2,643
Mortgages financed by the
Bank's general borrowings... 118,180 214,917 239,316 313,244 469,670
Other.......................... 935 1,418 5,667 917 773
--------- --------- --------- ---------
Subtotal....................... 170,165 292,350 285,312 372,377 521,225
Past due loans..................... 25,730 30,679 39,040 41,743 45,869
--------- --------- --------- ---------
Subtotal....................... 1,431,874 1,651,009 1,791,715 2,034,011 2,339,535
Contingent loans................... 64,244 70,522 67,856 85,538 71,941
--------- --------- --------- ---------
Total loans................. 1,496,118 1,721,531 1,859,571 2,119,549 2,411,476
========= ========= ========= =========

The loan categories are as follows:

Commercial loans are long-term and short-term loans made in Chilean pesos,
on a variable or fixed rate basis, primarily to finance working capital or
capital expenditures. Loans to individuals and businesses with terms that do not
meet the definitions of any of the other loan categories below are also included
in commercial loans. See "--Lines of Business".

Mortgage loans are principally inflation-indexed, fixed-rate, long-term
loans financed specifically by mortgage finance bonds, with monthly payments of
principal and interest collateralized by real estate mortgages. At the time of
approval, the amount of a bond-financed mortgage loan may not be more than 75%
of the lower of the purchase price or appraised value of the mortgaged property.
Under Mortgage loans, unless specified separately, we also include other
mortgages ("Mutuos"), which are inflation-indexed, fixed or variable-rate,
long-term loans financed by the Bank's general borrowing, with monthly payments
of principal and interest collateralized by real estate mortgages. At the time
of approval, the amount of such mortgage loan usually does not exceed 80% of the
lower of the purchase price or appraised value of the mortgaged property.
Residential mortgage loans relate to loans to individuals for housing, and other
mortgage loans are made to finance the purchase of undeveloped land, office
buildings and other real estate. See "--Lines of Business". We offer a product
in which a mortgage loan is complemented by a commercial loan that covers the
remaining 20% of the price of the property, thus allowing qualified clients to
acquire the property without any down payment. The product has received
favorable reviews in the market.

Consumer loans are loans to individuals, made in Chilean pesos, generally
on a fixed rate basis, to finance the purchase of consumer goods or to pay for
services. They also include credit card balances financed by customers and thus
subject to interest charges. See "--Lines of Business--Retail Banking".

Foreign trade loans are fixed or variable rate, short-term loans made in
foreign currencies (principally US$) to finance imports and exports. See
"--Lines of Business--Corporate Banking".

Interbank loans are fixed-rate, short-term loans to financial institutions
that operate in Chile.

Lease contracts are agreements for direct financing leases relating to
capital equipment and other property.

Other outstanding loans include checking account lines of credit, bills of
exchange and mortgage loans which are financed by our general borrowings (as
opposed to mortgage finance bonds).

Past due loans include, with respect to any loan, the amount of principal
or interest that is 90 or more days overdue, and the entire outstanding balance
of any loan is recorded under past due loans once legal collection proceedings
have been commenced.

Contingent loans consist of guarantees granted by a bank's in Ch$, UF and
foreign currencies (principally US$), as well as outstanding and undrawn letters
of credit. Unlike US GAAP, Chilean GAAP requires such loans to be included on a
bank's balance sheet.

Any collateral provided generally consists of a mortgage on real estate or
a pledge of marketable securities, third party letters of credit, equipment or
inventory. The existence and amount of collateral generally vary from loan to
loan.

Risks of the Loan Portfolio

Our management believes that certain of our principal loan products have
the following risk characteristics:

Commercial Loans. Our loans for working capital, capital expenditures and
similar purposes have experienced an increase in the risk index from 0.79% at
December 31, 2002 to 1.28% at December 31, 2003.

The variation in the risk index of our commercial loan portfolio is
attributable mainly to a decrease in the volume of B category loans as a
percentage of total loans, from 3.5% in 2002 to 2.5% in 2003. Such decrease
comes from our policy, applied since the third quarter of 1998, of acknowledging
all real and potential risk in loans and of assigning loan classifications
according to the most unfavorable projections. See "--Competition--Risk Index".
The quality of our commercial loan portfolio has been adversely affected by a
decrease in the rate of growth of the Chilean economy during the years 1998 and
1999, a sharp increase in interest rates between late 1997 and September 1998,
and an increase in the general level of indebtedness of our customers due to the
economic crisis of 1998-1999, from which there has been no significant recovery
yet. Nevertheless, the stabilization of the economic conditions has resulted in
a slow improvement on the quality of our loan portfolio. The quality of our
commercial loan portfolio is likely to be adversely affected in the future by a
decrease in the rate of growth of the Chilean economy, an increase in interest
rates or an increase in the general level of indebtedness of our customers and
regulatory changes (such as tax rules and labor regulations) that could impose
additional operating costs on Chilean companies or on companies operating in
certain sectors of the Chilean economy.

Mortgage Loans. Our mortgage loans have shown a level of risk which has
decreased from 0.72% at December 31, 2002 to 0.61% at December 31, 2003.

The quality of our mortgage loan portfolio has been adversely affected by
the unfavorable conditions of the Chilean economy, favorably affected by a
decrease in interest rates, and adversely affected by an increase in the general
level of indebtedness of our customers due to the economic conditions prevailing
over recent years. As economic conditions improved, even though the level of
economic activity is still depressed, the quality of our mortgage loan portfolio
has begun a slow recovery.

Chilean banking regulations currently limit the amount of a residential
mortgage loan financed by a Mortgage Finance Bond to 75% of the value of the
property. If the loan is not financed with a Mortgage Finance Bond it can
finance up to 80% of the value of the property. Such value is established by the
regulations as the lesser of (i) the purchase price of the property securing the
loan, and (ii) the appraised value of such property. In addition, our policy is
not to make a residential mortgage loan if the monthly payments on such loan
exceed 25% of the household's monthly after-tax income.

Consumer Loans. The level of risk in our consumer loans has decreased from
approximately 2.85% at December 31, 2002 to approximately 2.82% at December 31,
2003. Such decrease in the risk level of our consumer loans is a consequence of
a year where the unemployment rate leveled and later decreased and the level of
economic activity in the Chilean economy began showing signs of recovery, though
the unfavorable economic conditions still remain.

The risks associated with both residential mortgage and consumer loans are
affected by, among other things, the following variables: the unemployment rate,
changes in real salaries, the level of economic activity and the overall level
of credit in the Chilean economy. These indices affect both high income and
lower and middle-income individuals but have an earlier impact on the latter
sector. Consumer credit risk also depends on the quality of financial
information obtained about the individual debtor. We receive relevant credit
information from DICOM with respect to existing and potential customers.

Foreign Trade Loans. Our loans for foreign trade are made to finance
working capital requirements of exporters and importers and, accordingly, risk
factors are similar to commercial loans for working capital. Additional
variables which specifically affect risk for our foreign trade loans include
fluctuations in real exchange

rates and international commodity prices as well as international foreign trade
policies (including tariffs and other barriers).

Leasing. The risk index from our leasing operations has not exceeded 4.13%
at the end of each of the previous five years and at December 31, 2003 was
approximately 2.22%.

Maturity and Interest Rate Sensitivity of Loans

The following table sets forth an analysis by type and time remaining to
maturity of our loans at December 31, 2003:

Balance at Due after Due after Due after Due after
December 1 month 6 months 1 year 3 years
31, Due within but within but within but within but within Due after
2003 1 month 6 months 12 months 3 years 5 years 5 years
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in millions of constant Ch$ of December 31, 2003)

Commercial loans........ 958,741 189,604 224,670 116,547 169,916 130,768 127,836
Mortgage loans:
Residential ......... 148,964 1,412 5,142 6,700 24,137 21,396 90,177
Other................ 113,758 753 3,831 4,638 19,076 19,436 66,024
---------- ---------- ---------- ---------- ---------- ---------- ----------
Subtotal........... 262,722 2,165 8,973 11,338 43,213 40,832 156,201
Consumer loans.......... 233,435 8,136 26,160 37,767 95,853 46,423 19,096
Foreign trade loans..... 217,958 39,039 104,323 33,330 31,756 9,510 0
Interbank loans......... 0 0 0 0 0 0 0
Lease contracts......... 99,585 3,368 9,626 9,957 18,675 22,701 35,258
Other outstanding loans. 521,225 7,496 32,021 19,152 37,944 31,856 392,756
Past due loans.......... 45,869 45,869 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Subtotal........... 2,339,535 295,677 405,773 228,091 397,357 282,090 730,547
Contingent loans........ 71,941 13,692 35,596 2,248 20,056 349 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total loans........ 2,411,476 309,369 441,369 230,339 417,413 282,439 730,547
========== ========== ========== ========== ========== ========== ==========

The following table presents the interest rate sensitivity of our
outstanding loans due after one year as of December 31, 2003 (not including
contingent loans). See also "Operating and Financial Review and Prospects--Asset
and Liability Management--Interest Rate Sensitivity."

At December 31, 2003
-------------------------
(in millions of constant
Ch$ of December 31, 2003)
Variable rate
Ch$ 80,895
UF ........................................... 74,057
Foreign currency............................... 96,117
Total........................................ 251,069
Fixed rate
Ch$ 215,611
UF ........................................... 917,397
Foreign currency............................... 25,916
Total........................................ 1,158,924
---------
Total..................................... 1,409,993
=========

Loans by Economic Activity

The following table sets forth at the dates indicated an analysis of our
loan portfolio based on the borrower's principal economic activity. Loans to
individuals for business purposes are allocated to their economic activity. The
table includes outstanding contingent loans amounting to Ch$67,856 million in
2001, Ch$85,538 million in 2002, and Ch$71,941 million in 2003.

At December 31,
-----------------------------------------------------------------------
2001 2002 2003
---------------------- ---------------------- ---------------------
Percentage Percentage Percentage
Loan of loan Loan of loan Loan of loan
portfolio portfolio portfolio portfolio portfolio portfolio
--------- ----------- --------- --------- --------- ---------
(in millions of constant Ch$ of December 31, 2003 except for percentages)

AGRICULTURE, LIVESTOCK, FORESTRY, FISHING
Agriculture............................ 36,084 1.94% 41,265 1.95% 40,526 1.68%
Livestock.............................. 11,241 0.60% 18,956 0.89% 21,540 0.89%
Forestry............................... 2,323 0.12% 2,208 0.10% 1,043 0.04%
Fishing................................ 34,378 1.85% 38,571 1.82% 35,019 1.45%
--------- ------- --------- ---------
Subtotal............................. 84,026 4.52% 101,000 4.77% 98,128 4.07%
MINING
Coal, stone and clay extraction........ 217 0.01% 9,842 0.46% 9,160 0.38%
Metallic mineral extraction............ 16,498 0.89% 56,859 2.68% 34,028 1.41%
Extraction of other minerals........... 10,650 0.57% 10,704 0.51% 6,422 0.27%
--------- ------- --------- ---------
Subtotal............................. 27,365 1.47% 77,405 3.65% 49,610 2.06%
MANUFACTURING
Automobile industry.................... 1,538 0.08% 510 0.02% - 0.00%
Food, beverages and tobacco............ 41,301 2.22% 67,747 3.20% 67,808 2.81%
Textiles, clothing and leather goods... 14,898 0.80% 6,496 0.31% 8,533 0.35%
Wood and wood products, including
furniture............................ 8,274 0.44% 35,890 1.69% 21,139 0.88%
Paper, paper products, printing and
publishing........................... 11,337 0.61% 30,895 1.46% 23,464 0.97%
Chemical products derived from oil,
coal, rubber and plastic............. 13,744 0.74% 14,608 0.69% 21,220 0.88%
Production of non-mineral products..... 7,026 0.38% 4,097 0.19% 7,131 0.30%
Basic metal industries................. 12,668 0.68% 11,770 0.56% 5,740 0.24%
Production of machines, equipment and
other metal goods.................... 9,672 0.52% 16,841 0.79% 15,306 0.63%
Other manufacturing industries......... 2,443 0.13% 648 0.03% 989 0.04%
--------- ------- --------- ---------
Subtotal............................. 122,901 6.61% 189,502 8.94% 171,330 7.10%
ELECTRICITY, GAS AND WATER
Electricity, gas and steam............. 42,311 2.28% 65,316 3.08% 85,053 3.53%
Collection and distribution of water... 29,864 1.61% 29,670 1.40% 62,981 2.61%
--------- ------- --------- ---------
Subtotal............................... 72,175 3.88% 94,986 4.48% 148,034 6.14%
CONSTRUCTION
Residential buildings.................. 115,082 6.19% 116,134 5.48% 132,130 5.48%
Non-residential buildings.............. 78,492 4.22% 20,585 0.97% 43,513 1.80%
Other constructions.................... 13,706 0.74% 35,891 1.69% 3 0.00%
--------- ------- --------- ---------
Subtotal............................. 207,280 11.15% 172,610 8.14% 175,646 7.28%
TRADE
Wholesale.............................. 25,482 1.37% 32,358 1.53% 128,707 5.34%
Retail................................. 114,027 6.13% 124,738 5.89% 122,191 5.07%
Restaurants and hotels................. 6,336 0.34% 9,629 0.45% 12,848 0.53%
Imports................................ 51,804 2.79% 27,612 1.30% - 0.00%
Exports................................ 33,023 1.78% 25,477 1.20% - 0.00%
--------- ------- --------- ---------
Subtotal............................. 230,672 12.40% 219,814 10.37% 263,746 10.94%
TRANSPORT, STORAGE AND COMMUNICATIONS
Transport and storage.................. 23,598 1.27% 60,385 2.85% 99,805 4.14%
Communications......................... 29,026 1.56% 5,353 0.25% 15,129 0.63%
---------- ------- --------- ---------
Subtotal............................. 52,624 2.83% 65,738 3.10% 114,934 4.77%
FINANCIAL SERVICES
Financial companies.................... 130,958 7.04% 108,962 5.14% 107,332 4.45%
Insurance.............................. 14,141 0.76% 732 0.03% 1,693 0.07%
Real estate............................ 85,589 4.60% 80,701 3.81% 67,743 2.81%

At December 31,
------------------------------------------------------------------------
2001 2002 2003
---------------------- ---------------------- ---------------------
Percentage Percentage Percentage
Loan of loan Loan of loan Loan of loan
portfolio portfolio portfolio portfolio portfolio portfolio
---------- ---------- --------- --------- --------- ---------
(in millions of constant Ch$ of December 31, 2003 except for percentages)

Subtotal............................. 230,688 12.41% 190,395 8.98% 176,768 7.33%
SERVICES
Public administration and defense...... 7,198 0.39% 5,682 0.27% 9,973 0.41%
Health services........................ 3,522 0.19% 3,698 0.17% 22,956 0.95%
Social services........................ 38,416 2.07% 102,224 4.82% 115,370 4.78%
Leisure services....................... 2,252 0.12% 1,624 0.08% 3,691 0.15%
Personal and home services............. 7,984 0.43% 4,578 0.22% 7,161 0.30%
International organizations............ 2 0.00% 3 0.00% 217 0.01%
Enterprise services.................... 127,208 6.84% 82,510 3.89% 57,253 2.37%
Other services......................... 68,472 3.68% 141,398 6.67% 141,162 5.85%
--------- ------- --------- -------
Subtotal............................. 255,054 13.72% 341,717 16.12% 357,783 14.84%
INDIVIDUALS
Consumer loans......................... 180,089 9.68% 207,079 9.77% 234,138 9.71%
Residential mortgage loans............. 396,697 21.33% 459,303 21.67% 621,359 25.77%
Subtotal............................. 576,786 31.02% 666,382 31.44% 855,497 35.48%
--------- ------- --------- -------
TOTAL.....................................1,859,571 100.00% 2,119,549 100.00% 2,411,476 100.00%
========= ======= ========= ======= ======

Foreign Country Loans Outstanding

Our cross-border loans are principally trade-related. These included loans
in 2001 and 2002, to foreign financial institutions, some of them under the
ALADI payments system. ALADI is a series of arrangements among Latin American
countries designed to facilitate trade financing by providing to a cross-border
lender in a participating country the guarantee of its own central bank of
amounts due in connection with a qualifying transaction. At December 31, 2003,
none of our outstanding loans to foreign borrowers were under the ALADI
programs. These percentages are lower than those observed in 2002 due to overall
decrease in foreign country loans. The Bank has a policy of decreasing its
exposure to Brazil and Venezuela.

2001 2002 2003
------ ------ ------
(in millions of constant Ch$ of December 31,
2002)
Argentina........................ 22,312 9,880 17,919
Brazil........................... 30,662 27,016 5,738
Cayman Islands................... 17,140 18,948 15,581
Peru............................. 140 168 108
Venezuela........................ 12,556 12,229 4,494
Mexico........................... 235 354 22
Costa Rica....................... 5,023 4,363 5,665
Italy ........................... 190 31 -
Colombia......................... 25 98 28
South Korea ..................... - 3,206 396
Aruba............................ 7,516 - -
China............................ 3,206 - 1,541
United States of America......... - 3,814 -
Uruguay.......................... 11,625 8,634 7,201
Panama........................... - - 2,149
Other............................ 1,573 131 94
------- ------ ------
Total....................... 112,203 88,872 60,936
======= ====== ======

We also maintain deposits abroad (primarily demand deposits) as needed to
conduct our foreign trade transactions. The table below lists the largest
amounts of foreign deposits by country for the years ended December 31, 2001,
2002 and 2003:

Year ended December 31, 2003
2001 2002 2003
------ ------ ------
(in millions of constant Ch$ of December 31,
2003)
United States.................... 36,402 738 923
Germany.......................... 82 98 266
Spain............................ 490 341 11,114
United Kingdom................... 32 83 37
Canada........................... 1 1 13
France........................... 2 - -
Japan............................ - 1,750 22
Other............................ 105 75 79
------- ------ ------
Total............................ 37,114 3,086 12,454
======= ====== ======

Credit Approval Process

We manage our credit risks in accordance with policies and rules developed
by the Credit Division and approved by the General Manager and the Board of
Directors. The policies and rules, which are set forth in our credit manual,
define, among other factors, (i) the responsibilities of the various units
participating in the credit approval process, (ii) the business segments and
markets which constitute our strategic targets, (iii) quantitative and
qualitative standards by business area (e.g., corporate banking, retail banking,
international operations), and (iv) the composition of the committee responsible
for the approval of each transaction.

Our credit risk policies and rules in effect since late 1998 are as
follows:

In the case of credit applications by companies, the evaluation is
conducted by the credit admission committee taking into account quantitative and
qualitative factors. See "--Lines of Business--Corporate Banking". Credit
analysis and evaluation of a customer's risk continue during the term of the
loan.

In the case of retail banking transactions, the most relevant parameters
used to evaluate an applicant's credit risk are (i) income and net worth, (ii)
seniority at employment, (iii) professional and academic qualifications, (iv)
indebtedness and credit reports, and (v) liquidity, measured in terms of
percentage of monthly income required to service indebtedness.

Once the evaluation of an application has been completed, the decision is
adopted by different committees, depending upon our total risk exposure to the
borrower and related parties, the amount of credit requested and the quality and
value of the collateral provided.

The following table lists our committees from which credit approval is
required depending upon total risk exposure:

Limit in Millions of Ch$(1)
----------------------------------------------------
Without
Level(3) Approved by: Collateral "B" Collateral(2) "A" Collateral(2)
- -------- ------------------------------------------ ----------- ----------------- -----------------

1. Sectorial Analysis & Risk Management
Committee (A.S.G.R.C) (Spain)........... Above 2,500 Above 2,500 Above 2,500
2. General Manager's Committee( CTO)......... Up to 7,000 Up to 7,000 Up to 7,000
3. Risk Division's Committee (CRD)........... Up to 5,000 Up to 5,000 Up to 5,000
4. Treasury and Fund Adm. Manager............ Up to 1,500 Up to 1,500 Up to 1,500
4. Corporate Banking Manager................. Up to 250 Up to 250 Up to 250
4. Commercial and Personal Banking
Division Manager........................ Up to 250 Up to 250 Up to 250
4. Commercial Banking Area Manager........... 25 50 100
4. Branches (Commercial Banking)............. 10/20 25/40 50/75
4. Branches (Personal Banking)............... 2/8 5/20 15/40

- ----------------------
(1) Amount limits are determined on the basis of total risk: direct debt,
indirect debt and affiliated party debt.

(2) "A" Collateral: mortgages on real estate, or pledges of term deposits or
similar instruments. "B" Collateral: all pledges on properties other than
real estate and liquid securities.

(3) In Level 1, the limit depends upon whether a series of conditions have been
previously met. In Level 4 the limit depends upon whether the client is a
firm or an individual, upon the specific area involved and upon the branch
category. There are 3 categories for Commercial Banking Branches and 5
categories for Personal Banking Branches.

The composition of each of the above approving committees is as follows:

Sectorial Analysis & Risk Management Committee BBVA Group's Risk Assessment Division
(A.S.G.R.C) (Spain)
General Manager's Committee: CEO/Commercial Manager/Corporate Manager Treasury & Fund
Manager/Credit Risk Manager
Risk Division's Committee: Credit Risk Manager/Commercial Admission Manager/
Corporate Admission Manager /Personal Banking Admission
Manager/Risk Monitoring Manager
Branch, Area or Division Committee: Branch, Area or Division Manager /Account Executive

After all conditions have been met and credit has been extended, we
maintain a surveillance of the loan portfolio to determine the level of risk of
its loans. This review is conducted by specialized analysts on the basis of
information available in our database as well as external information such as
that provided by DICOM. The purpose of this review is to evaluate, during the
term of a loan, our overall credit risk, the financial condition of the
borrowers and the risk classification in accordance with the regulations of the
Superintendency of Banks. After a payment in an amount equal or greater than
Ch$2 million becomes overdue, the loan becomes subject to continuous review by a
control committee comprised of officers of our Credit Risk Division.

Classification of Loan Portfolio

Chilean banks are required to classify their outstanding exposures on an
ongoing basis for the purpose of determining the amount of allowance for loan
losses. The guidelines used by Chilean banks for such classifications are
established by the Superintendency of Banks, although banks are given some
latitude in devising more stringent classification systems within such
guidelines. For purposes of classification, loans are divided into consumer
loans, residential mortgage loans and commercial loans. The Superintendency of
Banks regularly examines and evaluates each financial institution's credit
management process, including its compliance with the loan classification
guidelines, and on that basis classifies banks and other financial institutions
into one of three categories, I, II or III. Category I is reserved for
institutions that fully comply with the loan classification guidelines.
Institutions are rated in Category II if their loan classification system
reveals deficiencies that must be corrected by the bank's management. Lastly,
Category III indicates significant deviations from the Superintendency of Banks'
guidelines that clearly reflect inadequacies in the evaluation of the risk and
estimated losses associated with loans. We have been classified in Category I
since 1992.

Consumer Loans: Include financing arising from the use of credit cards and
loans granted to individuals. Their purpose is to finance the acquisition of
consumer goods and payment of services in an amount that does not exceed UF550.
Their repayment is generally made in equal monthly installments. Consumer loans
also include loans related to the use of credit cards.

Residential Mortgage Loans: Include loans for residential purposes that are
currently funded through the issuance by BBVA Chile of Mortgage Finance Bonds.
Generally, the purpose of these loans is to finance the acquisition,
improvement, restoration or construction of a residential home. They are granted
to the final user of the property and the collateral covers the entire credit.
All the remaining mortgage loans, in particular those granted for general
purposes, are considered as commercial loans.

Commercial Loans: Include all loans other than consumer loans and
residential mortgage loans.

In the case of consumer loans and residential mortgage loans, the
classification is determined by the extent to which payments are overdue. In the
case of commercial loans, the classification is based on the estimated losses on
all of the loans outstanding to the borrower, as determined by us. Residential
mortgage loans are classified A, B or B- (except for loans purchased from the
Asociacion de Ahorro y Prestamos ("ANAP"), the former Chilean savings and loans
association, which may be rated as C or D). Consumer and commercial loans are
classified in five categories as follows:

Required
Classification Commercial Loans (1) Residential Mortgage Loans Consumer Loans Provisions(2)
- -------------- ---------------------------- -------------------------- ----------------------- -------------

"A" Loans which are not expected Interest and principal Interest and principal 0%
to default payments are current payments are current
"B" Loans with probability of Payments are up to 6 Payments are up to 1 1%
default of less than 5% months overdue month overdue
"B-" Loans with probability of Payments are over 6 Payments are overdue by 20%
default between 5% and 39% months overdue 1 to 2 months
"C" Loans with probability of Not applicable(3) Payments are overdue by 60%
default between 40% and 79% 2 to 4 months
"D" Loans with probability of Not applicable(3) Payments are overdue by 90%
default between 80% and 100% over 4 months

- ------------

(1) We determine the "potential loss" of commercial loans based on (i) the
financial condition of the customer; (ii) the past payment behavior of the
customer; (iii) the collateral or guarantee, if any, provided to us in
connection with the loan, and the market or liquidation value of such
collateral or guarantee; and (iv) the outlook for the economic sector or
industry in which the customer is engaged in its business activities.
(2) Certain commercial loans in excess of UF25,000 classified as "A" or "B" are
deemed to present an additional level of risk and thus require an
additional allowance of 5% of the aggregate amount of such loans, even if
there is no evident loss. The additional level of risk is deemed to exist
when such loans cover over 50% of the total financing of a project or when
the loan term exceeds three years and no guarantees exist in addition to
those related directly to the project.
(3) These categories are not applicable to residential mortgage loans, except
in the case of loans acquired from the Asociacion Nacional de Ahorro
(National Association of Savings and Loans or "ANAP"). ANAP loans may have
additional levels of risk and thus require an allowance of between 40% and
79% in category "C" and greater than 79% in category "D".

The loan classification guidelines of the Superintendency of Banks
applicable to commercial loans require that we classify the greater of (i) the
commercial loans outstanding to our 400 largest debtors or (ii) the commercial
loans outstanding to the number of our largest debtors whose commercial loans
aggregate at least 75% of the total amount of loans included in our commercial
loan portfolio. Such guidelines also require us to classify 100% of our
residential mortgage loans and 100% of our consumer loans. For these purposes,
the loan amount includes outstanding principal (whether or not past due) and
accrued and unpaid interest.

In 2002 the Superintendency of Banks amended its guidelines applicable to
consumer loans, requiring us to classify our "A"-rated consumer loan portfolio
in five subcategories according to a formula developed by ourselves based on the
expected loss on the total amount of each loan. This regulation went into effect
on January 1, 2004.

Analysis of our Loan Classifications

The following tables provide statistical data regarding the classification
of our loans at the end of each of the last five years. As previously indicated,
the Superintendency of Banks requires that we prepare a risk analysis that
evaluates, for classification purposes only, a portion (but in no event less
than 75%) of our total commercial loan portfolio, including past due and
contingent loans.

At December 31, 1999
----------------------------------------------------------------------------
Residential Percentage of
Commercial Consumer mortgage evaluated
Category loans loans loans Total loans loans
- ------------------------------ ----------- -------- ----------- ----------- -------------
(in millions of constant Ch$ of December 31, 2003 except for percentages)

A............................. 643,176 112,256 275,978 1,031,410 74.21%
B............................. 245,075 10,572 27,803 283,450 20.39%
B-............................ 36,548 2,554 9,576 48,678 3.50%
C............................. 19,024 2,285 469 21,778 1.57%
D............................. 2,180 2,372 0 4,552 0.33%
--------- ------- ------- --------- ------
Total of evaluated loans... 946,003 130,039 313,826 1,389,868 100.00%
========= ======= ======= ========= ======
Total loans................ 1,052,255 130,039 313,826 1,496,120
========= ======= ======= =========
Percentage evaluated....... 89.90% 100.00% 100.00% 92.90%

At December 31, 2000
----------------------------------------------------------------------------
Residential Percentage of
Commercial Consumer mortgage evaluated
Category loans loans loans Total loans loans
- ------------------------------ ----------- -------- ----------- ----------- -------------
(in millions of constant Ch$ of December 31, 2003 except for percentages)

A............................. 766,241 140,169 340,578 1,246,988 77.54%
B(1).......................... 229,453 10,232 33,574 273,259 16.99%
B-............................ 49,224 2,658 11,050 62,932 3.91%
C............................. 13,423 2,149 406 15,978 0.99%
D............................. 7,346 1,768 0 9,114 0.57
--------- ------- ------- --------- ------
Total of evaluated loans... 1,065,687 156,976 385,608 1,608,271 100.00%
========= ======= ======= ========= ======
Total loans................ 1,178,945 156,976 385,608 1,721,529
========= ======= ======= =========
Percentage evaluated....... 90.41% 100.00% 100.00% 93.43%

At December 31, 2001
----------------------------------------------------------------------------
Residential Percentage of
Commercial Consumer mortgage evaluated
Category loans loans loans Total loans loans
- ------------------------------ ----------- -------- ----------- ----------- -------------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

A............................. 830,646 154,159 340,086 1,324,891 76.25%
B............................. 264,435 15,290 42,524 322,249 18.55%
B-............................ 50,136 4,272 13,717 68,125 3.92%
C............................. 14,072 2,753 369 17,194 0.99%
D............................. 3,077 1,932 0 5,009 0.29%
--------- ------- ------- --------- ------
Total of evaluated loans... 1,162,366 178,406 396,696 1,737,468 100.00%
========= ======= ======= ========= ======
Total loans................ 1,284,469 178,406 396,696 1,859,571
========= ======= ======= =========
Percentage evaluated....... 90.49% 100.00% 100.00% 93.43%

At December 31, 2002
----------------------------------------------------------------------------
Residential Percentage of
Commercial Consumer mortgage evaluated
Category loans loans loans Total loans loans
- ------------------------------ ----------- -------- ----------- ----------- -------------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

A............................. 944,730 173,347 398,947 1,517,024 76.34%
B............................. 310,892 22,586 46,804 380,282 19.14%
B-............................ 48,857 4,798 13,240 66,895 3.37
C............................. 11,558 3,800 311 15,669 0.79%
D............................. 4,563 2,700 0 7,263 0.37%
--------- ------- ------- --------- ------
Total of evaluated loans... 1,320,600 207,231 459,302 1,987,133 100.00%
========= ======= ======= ========= ======
Total loans................ 1,453,016 207,231 459,302 2,119,549
========= ======= ======= =========
Percentage evaluated....... 90.91% 100.00% 100.00% 93.77%

At December 31, 2003
----------------------------------------------------------------------------
Residential Percentage of
Commercial Consumer mortgage evaluated
Category loans loans loans Total loans loans
- ------------------------------ ----------- -------- ----------- ----------- -------------
(in millions of constant Ch$ of December 31, 2003 except for percentages)

A............................. 1,032,426 195,843 553,757 1,782,026 78.72%
B............................. 326,783 25,272 51,745 403,800 17.84%
B-............................ 37,068 6,075 15,607 58,750 2.60%
C............................. 9,446 4,134 249 13,829 0.61%
D............................. 2,452 2,942 5,394 0.24%
--------- ------- ------- --------- ------
Total of evaluated loans... 1,408,175 234,266 621,358 2,263,799 100.00%
========= ======= ======= ========= ======
Total loans................ 1,555,852 234,266 621,358 2,411,476
========= ======= ======= =========
Percentage evaluated....... 90.51% 100.00% 100.00% 93.88%

- ----------------------
Category B would include loans which are subject to an allowance equivalent to
5% of the balance due in accordance with regulations of the Superintendency of
Banks. We have no such loans as of December 31, 2003. See "--Classification of
Loan Portfolio".

Classification of Loan Portfolio Based on the Borrower's Payment Performance

Accrued interest and UF indexation readjustments from overdue loans are
only recognized when and to the extent effectively received. Overdue loans are
classified as such when the loan is 1-89 days overdue. Past due loans include,
with respect to any loan, the portion of principal or interest that is 90 or
more days overdue; the entire outstanding balance of any loan is included in
past due loans only after legal collection proceedings have been commenced. Once
a loan becomes more than 90 days overdue, a specific loan loss allowance is made
in an amount equal to 100% of the unsecured portion of the loan. Individual loan
loss allowances must be determined separately for the classified and
non-classified loan portfolios, but are required only to the extent that, in the
aggregate, they exceed the global allowance for each portfolio. See "--Allowance
for Loan Losses--Individual Allowances for Loan Losses".

The following table sets forth as of December 31 of each of the last five
years, the outstanding principal amount of loans that are current, overdue (1-89
days) and past due (90 or more days) as to payment of principal and interest.

At December 31,
-------------------------------------------------------------------------
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Current(1).................... 1,454,638 1,671,555 1,807,338 2,063,638 2,356,442
Overdue 1-29 days............. 10,210 8,047 3,611 3,856 3,316
Overdue 30-89 days............ 5,542 11,248 9,582 10,312 5,849
Overdue 90 days or more ("past
due")...................... 25,730 30,679 39,040 41,743 45,869
Total loans................... 1,496,120 1,721,529 1,859,571 2,119,549 2,411,476
Overdue loans (1-89 days)
expressed as a percentage of
total loans 1.05 1.12 0.71 0.67 0.38
Past due loans as a percentage
of total loans 1.72 1.78 2.10 1.97 1.91

- ----------------------
(1) Includes Ch$8,518 million in 1999, Ch$5,160 million in 2000, Ch$10,040
million in 2001, Ch$ 5,212 million in 2002, and Ch$11,843 in 2003 of
category C and D loans.

The following table shows the principal balances included in current and
overdue (up to 90 days) categories in the table above of loans that have any
amount of principal or interest included in the category "past due" in such
table, in accordance with the rules of the Superintendency of Banks.

Mortgage loans................ 10,138 15,154 15,986 19,163 20,863
Commercial loans.............. 20,480 16,532 16,332 24,146 28,491
Consumer loans................ 1,959 1,657 1,833 2,987 3,518
--------- --------- --------- ---------
Total...................... 32,577 33,343 34,151 46,296 52,872
========= ========= ========= =========

The following table sets forth, at December 31 of each of the last five
years, the amount of our past due loans per category of loan.

Mortgage loans................ 3,277 4,102 3,875 4,314 4,651
Commercial loans.............. 20,793 25,074 34,348 36,796 40,019
Consumer loans................ 578 465 424 444 703
Lease contracts............... 1,082 1,038 393 189 496
--------- --------- --------- ---------
Total......................... 25,730 30,679 39,040 41,743 45,869
========= ========= ========= =========

We suspend all accrual of interest and UF indexation readjustment of
principal on all loans classified in category C in excess of one year, all loans
classified in category D, all loans reclassified from category D to C and all
overdue loans, and on amounts not yet due for loans on which payments of
principal or interest are 90 days overdue. The amount of interest that would
have been recorded on such loans for the year ended December 31, 2003 had these
loans continued to accrue interest was approximately Ch$ 56 million.

The following table shows loans (included in the second table above) that
have been restructured. Restructured loans consist of loans which bear interest
at a rate two or more percentage points below our average rate for similar type
performing loans at the date of the restructuring.

Ch$.......................... -- -- 318 333 15
UF 942 750 866 1,416 1,953
Foreign...................... 336 129 31 -- --
--------- --------- --------- ---------
Total loans.................. 1,278 879 1,215 1,749 1,968
========= ========= ========= =========

The amount of interest that would have been recorded on these loans for the
year ended December 31, 2003 if these loans had been earning a market interest
rate was Ch$107 million.

Allowance for Loan Losses

Chilean banks are required to maintain allowances for loan losses in
amounts determined in accordance with regulations issued by the Superintendency
of Banks. A bank may also maintain voluntary allowances in excess of the minimum
required amount so as to provide additional coverage for potential loan losses.
Under these regulations, the minimum amount of required loan loss allowances is
the greater of (i) the bank's global loan loss allowances, and (ii) the
aggregate amount of its individual allowances for loan losses.

Global Allowance for Loan Losses

The amount of the global allowance for loan losses required to be
maintained by a bank is equal to the aggregate amount of its outstanding loans
multiplied by the greater of (i) the bank's "risk index" (as defined herein), or
(ii) 0.75%.

A bank's risk index is based on its classified loans, determined as
previously described. See "--Classification of Loan Portfolio". More
specifically, the index is computed as follows. First, the aggregate amount of
evaluated loans in each category from A through D is multiplied by the
corresponding required provision percentage. Such percentages are as follows:

Category Provision %
-------- -----------
A 0
B 1
B- 20
C 60
D 90

The risk index itself is then computed by dividing (i) the aggregate amount
so computed by (ii) the aggregate amount (i.e., the outstanding principal
(whether or not past due) and accrued and unpaid interest) of all evaluated
loans. Also, in accordance with regulations established by the Superintendency
of Banks, the risk index calculated for the classified loans must also be
applied to the non-classified commercial loan portfolio. The chart below
illustrates the evolution of our consolidated risk index at December 31 of each
of the last five calendar years:

Consolidated
Year Risk Index %
---- ------------
1999 2.11
2000 2.03
2001 1.83
2002 1.67
2003 1.29

Over a 5 year period, our consolidated risk index has decreased from 2.11%
at December 31, 1999 to 1.29% at December 31, 2003. The variation in the
consolidated risk index is due principally to (a) an increase of loans
classified in category A (for which no provisions are required) from 74.21% of
the evaluated loans in 1999 to 76.25% of the evaluated loans in 2001 and to
78.72% of the evaluated loans in 2003; (b) a decrease in loans classified in
categories C (for which 60% provisions are required) and D (for which 90%
provisions are required) from 1.90% of the evaluated loans in 1999 to 1.28% of
the evaluated loans in 2001 and to 0.85% of the evaluated

loans in 2003; and (c) a slight decrease in loans classified in categories B
(for which 5% provisions are required) and B- (for which 20% provisions are
required) from 23.89% of the evaluated loans in 1999 to 22.47 % of the
evaluated loans in 2001 and to 20.44 % of the evaluated loans in 2003. Such
evolution illustrates the fact that the drop in credit quality during the
crisis has been left behind. In the fourth quarter of 1998, soon after the BBVA
Group took control of Banco BHIF, we conducted an extensive revision of our
loan portfolio, which resulted in the downgrading of a portion of our portfolio
and a significant increase in the level of provisions and in our risk level.
Furthermore, the economic recession that affected the country over the
1998-1999 period caused a significant deterioration in loan quality across the
Chilean banking industry. The slow recovery that took place in 2000 enabled us
to slightly improve our portfolio quality over the year, and after a stagnation
in the year 2001 and the first half of 2002, our portfolio quality has
continued to improve at a steady pace. See "--Competition - Risk Index".

In 2003, we reviewed 93.88% of our loan portfolio. See "--Classification of
Loan Portfolio". We estimate that had we reviewed 100% of our loan portfolio,
the credit risk evaluation of all commercial loans (including commercial loans
having a principal amount outstanding greater than Ch$30 million) would increase
the Consolidated Risk Index to approximately 1.37% at December 31, 2003. See
"--Analysis of our Loan Classifications".

Individual Allowances for Loan Losses

Banks in Chile are also required to establish individual allowances for
loan losses for loans that are more than 90 days past due in an amount equal to
100% of each overdue loan or the part thereof that is unsecured. This individual
loan loss allowance must be determined separately for the classified and
non-classified loan portfolios, but is required only to the extent it exceeds in
the aggregate the global allowance for loan losses for each portfolio. At
December 31, 2003, the aggregate amount of our potential individual allowances
for loan losses was 66.7% of our global allowance for loan losses.

Voluntary Allowance for Loan Losses

We have maintained a voluntary allowance for loan losses from time to time
in addition to the allowance for loan losses required by the regulations of the
Superintendency of Banks. Our policy in this regard has been to maintain a
voluntary allowance for loan losses that, together with the required allowance
for loan losses, aggregates approximately 100% of our past due loans. We have
adopted this policy in an effort to provide for any losses that could affect our
loan portfolio and that might arise from unforeseen circumstances beyond known
potential losses and losses inherent in a portfolio of a size and nature as
ours. At December 31, 2003, the aggregate amount of our allowances for loan
losses was 97% of our past due loans; with some voluntary allowance maintained
by us.

Analysis of Substandard Loans and Amounts Past Due

The following table analyzes our substandard loans (i.e., all of the loans
included in categories B-, C and D) and past due loans and the allowances for
loan losses existing at the dates indicated.

At December 31,
----------------------------------------------------------------------
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Total loans.......................... 1,496,120 1,721,529 1,859,571 2,119,549 2,411,476
Substandard loans.................... 75,008 88,024 90,328 89,827 77,973
Amounts past due(1).................. 25,730 30,679 39,040 41,743 45,869
To the extent secured(2).......... 19,274 17,918 17,891 32,152 19,186
To the extent unsecured........... 6,456 12,761 21,149 9,591 26,683
Allowance for loan losses......... 39,133 38,656 43,697 45,495 44,632
Substandard loans as a percentage
of total loans.................. 5.01 5.11 4.86 4.24 3.23
Amounts past due as a percentage
of total loans.................. 1.72 1.78 2.10 1.97 1.90
To the extent secured(2).......... 1.29 1.04 0.96 1.52 0.80
To the extent unsecured........... 0.43 0.74 1.14 0.45 1.11

Allowance for loan losses as a
percentage of:
Total loans....................... 2.62 2.25 2.35 2.15 1.85
Total loans, excluding
contingent loans................ 2.73 2.33 2.44 2.24 1.91
Substandard loans................. 52.20 43.92 48.37 50.65 57.94
Total amounts past due............ 152.09 126.00 111.93 108.99 97.30
------- ------ ------ ------
Total amounts past due unsecured.. 606.16 302.94 206.62 474.36 167.27
====== ====== ====== ======

- ----------------------
(1) See "--Classification of Loan Portfolio Based on the Borrower's Payment
Performance" for the definition of past due loans.

(2) Collateral generally consists of a mortgage on real estate or a pledge of
marketable securities, equipment or inventory or a third party letter of
credit.

Analysis of Allowance for Loan Losses

The following table analyzes our allowance for loan losses, and changes in
the allowance attributable to charge-offs, new provisions, provisions released
and the effect of price-level restatement on the allowance for loan losses.

Allowance for loan losses at
beginning of period............... 26,760 39,133 38,656 43,697 45,495
Charge-offs.......................... (22,778) (23,997) (24,190) (28,557) (35,716)
Provisions established............... 35,572 24,704 31,872 31,629 35,303
Price-level restatement(1)........... (421) (1,184) (2,641) (1,274) (450)
Allowance for loan losses at
end of the period................. 39,133 38,656 43,697 45,495 44,632
Ratio of charge-offs to average
loans (2)......................... 1.61% 1.59% 1.38% 1.49% 1.58%
Allowance for loan losses at
end of period as a
percentage of total loans......... 2.62% 2.25% 2.35% 2.15% 1.85%

- ----------------------
(1) Reflects the effect of inflation on the allowances for loan losses at the
beginning of each year, adjusted to constant Chilean pesos of December 31,
2003

(2) Represents the aggregate amount of the allowance for loan losses released
during each year or period as a result of charge-offs, recoveries or a
determination by management that the level of risk existing in the loan
portfolio had been reduced.

Our policy with respect to charge-offs follows, and in the case of
installment loans, is stricter than, the regulations established by the
Superintendency of Banks. Under these regulations, (i) an unsecured loan (or
part thereof) must be charged off not more than 24 months after being classified
as past due and secured loans must be charged off within 36 months after being
classified as past due, (ii) a loan must be charged off when we do not have any
right to commence an action for collection in the courts, and (iii) in the case
of loans payable in installments, the aggregate amount of the loan must be
charged off when one installment is past due six months.

Based on information available to us regarding our debtors, we believe that
our aggregate allowance for loan losses is sufficient to cover known potential
losses and losses inherent in a loan portfolio of a size and nature as ours.

Allocation of Allowance for Loan Losses

The following tables set forth, at December 31 of each of the last five
calendar years, the proportions in which our required minimum allowance was
attributable to commercial, consumer and residential mortgage loans, and the
amount of allowance which is allocated to any particular category at each such
date.

At December 31, 1999
----------------------------------------------------------
Allowance Allowance Loans in a
amount as a amount as a category as
percentage percentage a percentage
Allowance of loans in of total of total
amount category loans loans
--------- ----------- ----------- ------------

(in millions of constant Ch$ of December 31, 2003,
except for percentages)
Commercial loans..... 25,674 2.44% 1.71% 70.33%
Consumer loans....... 5,204 4.00 0.35 8.69
Residential mortgage loans 2,479 0.79 0.17 20.98
Total allocated allowance 33,357 2.23 2.23 100.00%
Voluntary allowance.. 5,776 -- 0.39 --
------- --------- --------
Total allowance...... 39,133 2.62% 2.62%
======= ========= ========

At December 31,
-------------------------------------------------------------------------------------------------------
2000 2001
-------------------------------------------------- --------------------------------------------------
(in millions of constant Ch$ of December 31, 2003, except for percentages)
Allowance Allowance
amount Allowance Loans in a amount Allowance Loans in a
as a amount as category as a amount category
percentage a as a percentage as a as a
of percentage percentage of percentage percentage
Allowance loan in of total of total Allowance loans in of total of total
amount category loans loans amount category loans loans
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

Commercial loans..... 30.897 2.62% 1.79% 68.48% 30,601 2.50% 1.72% 69.04%
Consumer loans....... 4,969 3.17 0.29 9.12 5,988 3.36 0.32 9.60
Residential mortgage
loans............. 2,790 0.72 0.16 22.40 3,390 0.85 0.18 21.35
------ ------ ------ ------
Total allocated
allowance......... 38,656 2.24% 2.24 100.00% 39,979 2.15 2.15 100.00
Voluntary allowance.. -- -- 3,718 -- 0.20 --
------- ------ ------ ------ ------ ------ ------
Total allowance...... 38,656 43,697 -- --
======= ======

At December 31,
-------------------------------------------------------------------------------------------------------
2002 2003
-------------------------------------------------- --------------------------------------------------
Allowance Allowance
amount Allowance Loans in a amount Allowance Loans in a
as a amount as category as a amount category
percentage a as a percentage as a as a
of percentage percentage of percentage percentage
Allowance loans in of total of total Allowance loans in of total of total
amount category loans loans amount category loans loans
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Commercial loans.. 29,354 2.04% 1.40% 68.55% 22,818 1.47% 0.95% 64.52%
Consumer loans.... 10,135 5.28% 0.52% 9.78% 11,243 4.80% 0.47% 9.71%
Residential
mortgage loans. 3,064 0.72% 0.16% 21.67% 3,788 0.61% 0.16% 25.77%
------ ------ ------ ------
Total allocated
allowance...... 42,553 2.07% 2.07% 100.00% 37,849 1.57% 1.57% 100.00%
Voluntary
allowance...... 2,942 0.14% 6,783 0.28%
------ ------ ------ ------
Total allowance... 45,495 44,632
======

The allowance for commercial loans includes Ch$1,416 million due to
country risk.

As of December 31, 2003, we had no loans subject to the 5% additional
allowance requirement for certain commercial loans, and therefore made no
allowances to comply with the additional allowance requirement for such loans.

We do not collect comprehensive data regarding the allocation of
charge-offs or the allowance for loan losses among the various types of
economic activity set forth in the table under "Loans by Economic Activity".
During the years 1999, 2000, 2001, 2002 and 2003 all of our ten largest (per
year) loan charge-offs related to our commercial loans. Such loans were
outstanding to borrowers engaged in a wide variety of activities, and our
management is not otherwise aware of any concentration of loan charge-offs or
allowance for loan losses in any particular area of economic activity.

Composition of Deposits and Other Commitments

The following table sets forth the average balances of our deposits and
other commitments for the years 2001, 2002 and 2003.

For the years,
-------------------------------------------------------------------------------------
2001 2002 2003
------------------------ --------------------------- -------------------------
Average Average Average Average Average Average
Balance nominal rate balance nominal rate Balance nominal rate
--------- ------------ ----------- ------------ --------- ------------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Checking accounts................ 180,858 -- 194,322 -- 202,094
Other demand liabilities......... 200,970 -- 229,210 -- 255,495
Savings accounts................. 57,953 5.4 58,012 3.8 57,340 1.6
Time deposits.................... 953,136 6.6 1,165,288 4.8 1,554,483 2.9
Total 1,392,917 1,646,832 2,069,412
========= ========= =========

C. Organizational structure.

See "History and development of the Bank".

Below is a simplified organizational chart of our significant subsidiaries
as of March 2004.

BBVA Chile. BBVA Chile
Voting Power Ownership
Subsidiary Country Activity (%) (%) Total Assets
- ------------------------ ------- ------------ ------------ ---------- ----------------
(in millions of
Ch$ of December
30, 2003)

Stock
BBVA Brokerage Chile Brokerage 100.00 100.00 148,611.3
Financial
BBVA Advisory Chile Advisory 98.60 98.60 3,438.5
Residential
BBVA Residential Leasing Chile Leasing 97.48 97.48 11,966.5
Fund
BBVA General Fund Manager Chile Management 100.00 100.00 9,435.8
Insurance
BBVA Insurance Brokerage Chile Brokerage 100.00 100.00 4,982.4

D. Property, Plants and Equipment.

Description of Property

We are domiciled in Chile and own our principal executive offices at Pedro
de Valdivia 100, Providencia, Santiago, Chile. At December 31, 2003, we owned
the properties where 46 of our 87 branches are located, and the remaining 41
branch locations were leased. All of these facilities are adequate for our
present needs and suitable for their intended purposes. Our branches are
located in 10 of Chile's thirteen regions. We increased the number of
full-service branches to 85 during 2003 and plan to continue increasing the
number of full-service branches as the economic conditions recover. We also
plan to extend our network of automated and home-banking facilities.

Item 5. Operating and Financial Review and Prospects

A. Operating Results.

Introduction

The following discussion should be read in conjunction with our
Consolidated Financial Statements, including the Notes thereto. Certain amounts
(including percentage amounts) that appear herein have been rounded. Certain
tabular information and percentage amounts may not add due to rounding.

Our Consolidated Financial Statements included elsewhere in this Annual
Report have been prepared in accordance with Chilean GAAP (including the rules
of the Superintendency of Banks relating thereto), which differ in certain
significant respects from US GAAP. Note 28 to the Consolidated Financial
Statements describes the principal differences between Chilean GAAP and US GAAP
as they relate to us and includes a reconciliation to US GAAP of our net income
and shareholders' equity for and at the end of the covered periods.

Unless otherwise indicated, the financial data presented herein for all
full-year periods is restated in constant Chilean pesos of December 31, 2003.
See Note 1.c) to the Consolidated Financial Statements.

Critical Accounting Policies

As a Chilean bank, we prepare our consolidated financial statements in
conformity with accounting principles generally accepted in Chile and the rules
of the Superintendency of Banks relating thereto, which, together, differ in
certain significant aspects from US GAAP. See Note 28 to our audited
consolidated financial statements contained at the end of this Annual Report for
a description of the principal differences between Chilean GAAP and US GAAP as
they relate to us.

Note 1) to our audited consolidated financial statements contains a summary
of our significant accounting policies. Some of these policies demand management
to make difficult, complex or subjective judgments. As dictated by our
accounting procedures, these judgments are then submitted to our Audit Committee
and/or to our regulatory authorities and are always disclosed in the notes to
our financial statements.

Management's ability to make subjective decisions is more restricted by
Chilean GAAP than by US GAAP. For example, Chilean GAAP requires the level of
the allowances for loan losses to be determined on the basis of specific rules
rather than on the subjective judgment involved under the US GAAP impairment
process. Management can add voluntary allowances, which have a different
accounting treatment, but can not modify the allowances so determined.

We believe that of our critical accounting policies, the following may
involve higher degrees of judgment and complexity:

o Investments. Investments which have a secondary market are carried at
market value, except for investments held by the brokerage and other
subsidiaries which are carried at the lower of cost or market value.
Instructions issued by the Superintendency of Banks require market value
adjustments to be made against income, except in the case of securities
available for sale, in which case the adjustments are made directly
against the equity

account "Market value adjustments of available for sale securities",
included in Reserves. All other investments are carried at cost plus
accrued interest and UF indexation adjustment, as applicable.

We enter into repurchase agreements as a form of borrowing. In this
regard, our investments which are sold subject to a repurchase obligation
and which serve as collateral for the borrowing are reclassified as
"Investment collateral under agreements to repurchase". The liability to
repurchase the investments is classified as "Securities sold under
agreements to repurchase".

We also enter into resale agreements as a form of investment. Under these
agreements, we purchase securities which are included as an asset under
the caption "Investments purchased under agreements to resell".

o Derivatives. The Bank engages in derivative transactions for its own
account and on behalf of its customers, mainly corporate clients of the
import sector. These transactions arise from forward exchange contracts
which are of two types: (i) transactions covering two foreign currencies
and (ii) transactions covering Chilean pesos against the U.S. dollar.
Foreign exchange contracts involve an agreement to exchange the currency
of one country for the currency of another country or an agreed-upon price
and settlement date. These contracts are generally standardized contracts,
normally for periods between 30 and 90 days and are not traded in a
secondary market, however, in the normal course of business and with the
agreement of the original counterparty, they may be terminated or assigned
to another counterparty. When the Bank enters into a forward exchange
contract, it analyzes and approves the creditor's risk (the risk that the
counterparty might default on is obligation). Subsequently, on an ongoing
basis, it monitors the possible losses involved in each contract. To
manage the level of credit risk the Bank deals with counterparties of good
credit standing, enters into master netting agreements whenever possible
and when appropriate, obtains collateral.

The Central Bank requires that foreign exchange forward contracts be made
only in US dollars and other major foreign currencies. In the case of the
Bank, most forward contracts are made in US dollars against the Chilean
peso or the UF. From time to time, forward contracts are also made in other
currencies, but only when the Bank acts as an intermediary.

The Bank's counterparties in derivative transactions are mainly
international investment bank and domestic corporate and financial
institution clients.

Under Chilean GAAP, forward contracts between foreign currencies and U.S.
dollars are reported at fair value with realized and unrealized gains and
losses on these instruments recognized in other income. Forward contracts
between the U.S. dollar and the Chilean peso are valued at the closing spot
exchange rate of each balance sheet date with the initial discount or
premium being amortized over the life of the contract in accordance with
Chilean hedge accounting criteria.

Under Chilean GAAP, interest rate swap agreements that hedge part of the
Bank's investment portfolio are recorded on balance sheet at their
estimated fair market values. Unrealized gains or losses are credited or
charged to income for those agreements that are designated by the Bank's
management as hedges of part of the investment portfolio classified as
trading. In the case of the interest rate swap agreements designated by the
Bank's management as hedges of part of the investment portfolio as
permanent investments, unrealized gains and losses are credited or charged
to shareholders' equity.

Under Chilean GAAP, interest rate swap agreements that are not considered
to hedge part of the Bank's investment portfolio are treated as
off-balance-sheet financial instruments and the net interest effect, which
corresponds to the difference between interest income and interest expense
arising from such agreements, is recorded in net income in the period that
such differences originate.

o Allowance for loan losses. The allowance for loan losses is established
through a charge to the provision for loan losses. We have established
allowances to cover possible loan losses in accordance with regulations
issued by the Superintendency of Banks. The allowance for loan losses is a
significant estimate and is regularly evaluated by us for adequacy by
taking into consideration factors such as changes in the nature and volume
of the loan portfolio, trends in actual and forecasted portfolio credit
quality and current economic conditions that may affect the borrower's
ability to pay. See "Selected Statistical Information-- Risks of the Loan
Portfolio".

This allowance is always estimated according to specific rules set by the
Superintendency, who rates banks according, among other factors, by the
way they conduct this process.

Overview

As described below, our financial performance is substantially influenced
by factors such as changes in interest rates and inflation rates and economic
conditions prevailing in Chile, and by our policy with respect to charging off
loans and our recoveries on such loans.

Chilean Economy

All of our operations and substantially all of our customers are located in
Chile. Accordingly, our results of operations and financial condition are
substantially dependent upon economic conditions prevailing in Chile. The
Chilean economy has experienced continued growth during the last decade as
evidenced by a 4.8% annual compound average increase in GDP from 1993 to 2003,
which has resulted in increased demand for loans and credit facilities,
particularly from middle-market businesses and individuals. In addition, the
inflation rate has been declining from 12.3% in 1993 to 2.8% in 2002, and to
1.1% in 2003. The slow growth in Chilean gross domestic product has also led to
less significant wage growth in nominal terms, which has led to smaller
increases in both the number and aggregate amount of savings and demand
deposits.

In 1998, as an effect of the Asian crisis, there was a sharp slowdown in
the Chilean economy, as well as a steep decline in both copper prices and in
Chilean exports generally. In 1999, Chile's GDP decreased 0.8% in real terms.
This situation improved during 2000, when Chile's GDP increased 4.5% in real
terms. The reduction in the price of Chile's commodity exports and the continued
gap between aggregate expenditures and gross domestic product have decreased
Chile's current account surplus to almost 0.4% of GDP in 1999. In 2000, this
situation changed and the Chile's current account deficit was 0.6% of GDP. At
the same time, the financial turmoil in other emerging markets has placed
pressure on the Chilean peso. In order to support the Chilean peso and to reduce
the current account deficit, the Central Bank increased the overnight interbank
rate to 8.5% in February 1998 and to 14.0% in September 1998. Monetary policy
has been relaxed since then. The level of the Central Bank's overnight interbank
rate as of December 31, 2003 was 2.25%, and continued decreasing during the
first half of 2004.

Within this context, the Central Bank changed its reference interest rate
from a real interest rate definition to a nominal definition. Thus, on July 26,
2001, this rate was changed from a 3.5% real interest rate to a 6.5% nominal
interest rate, assuming a 3% inflation for the year. From then on, the reference
rate has been expressed in nominal terms.

The reduced level of inflation is explained by a low level of consumer
expenditures as well as by the decreasing dollar prices of imported consumer
goods. This moderate inflationary trend allowed the Central Bank to reduce the
reference interest rate several times, bringing it from 6.5% in January 2002 to
1.75% early this year. The downward trend was immediately followed (and at times
anticipated) by the interest rate on long term instruments from the Central
Bank.

Notwithstanding the actions taken by the Central Bank, there exists a
potential for a reduction in economic activity in Chile. Any such decline may
have a material adverse effect on our business, financial condition or results
of operations, including a decline in our net interest margin, a reduced rate of
growth in our loan portfolio, increased loan charge-offs, higher provisions for
loan losses and lower fee and trading income. In particular, we expect such
developments would reduce our net interest margin and result in higher loan loss
provisions and charge-offs and, although our management does not anticipate that
economic activity will materially decline or that we will be materially
adversely affected as a result of the current economic situation, there can be
no assurance that such a material adverse effect on us will not occur or that
the current economic situation in Chile will not materially deteriorate.

Inflation

Chile has experienced high levels of inflation in the past, which have
significantly affected our financial condition and results of operations.
However, the rate of inflation in Chile has had a downward trend for the last
seven years and was 2.3% in 1999, 4.5% in 2000, 2.6% in 2001, 2.8% in 2002 and
1.1% in 2003.

In accordance with Chilean GAAP, we reflect the effect of inflation on our
financial statements considering whether an asset or liability is of a monetary
nature or not. These adjustments measure the monetary gain or loss in purchasing
power from holding monetary assets and liabilities exposed to the effects of
inflation, other than those denominated in UF or foreign currencies.

Substantially all of our assets and liabilities are monetary. Substantially
all monetary assets and liabilities in Chile are denominated in (i) UF, a unit
of account developed during the 1960s whose value in Chilean pesos is indexed to
Chilean inflation, (ii) nominal Chilean pesos or (iii) dollars. The UF is
revalued once a month for each day in the period beginning on the tenth day of
such month through the ninth day of the succeeding month in order to reflect the
prior month's change in the CPI as determined by the INE. At December 31, 2003,
one UF was equal to Ch$16,920.00 (US$28.23 at the Observed Exchange Rate in
effect at such date). A significant portion of the loans made by us with a
maturity greater than 90 days is denominated in UF, as are savings deposits and
certain time deposits (generally those having maturities in excess of 90 days).
The nominal Chilean peso value of UF-denominated loans and deposits will
increase or decrease with changes in the CPI. The effect of any changes in the
nominal Chilean peso value of the UF on UF-denominated assets or liabilities is
reflected in our statement of income as an increase or decrease in interest
revenue or expense.

Our earnings will be positively affected by inflation to the extent that
our average UF-denominated assets exceed our average UF-denominated liabilities.
This positive effect will decrease as the rate of inflation decreases. See
"--Net Interest Revenue--Interest Revenue". Our earnings will be negatively
affected by inflation in any period in which our average UF-denominated
liabilities exceed our average UF-denominated assets. Net interest revenue on
Chilean peso-denominated consumer loans is more negatively affected by
decreasing inflation than net interest revenue on UF-denominated commercial
loans because consumer loans are unindexed short-term loans and the nominal
interest rates earned on consumer loans decrease with decreasing inflation.
Commercial loans are typically longer term loans and are denominated in UF. In
addition, we have Chilean peso-denominated, non-interest earning assets and
non-interest bearing liabilities whose value is particularly susceptible to
inflation, which causes them to decrease in real terms. Our earnings will be
positively affected by inflation in any period in which our Chilean
peso-denominated, non-interest bearing liabilities are greater than our Chilean
peso-denominated, non-interest earning assets and negatively affected by
inflation in any period in which our Chilean peso-denominated, non-interest
earning assets are greater than our Chilean peso-denominated, non-interest
bearing liabilities. Chilean GAAP requires that adjustments be made to
non-monetary assets and liabilities, primarily to our fixed assets and to our
shareholders' equity, to reflect the effects of inflation. The net effect of
this inflation adjustment is shown as "price-level restatement" in our income
statement. The inflation rate used for purposes of such adjustments is the
change in the CPI, with a lag of one month, which was 2.6%, 4.7%, 3.1%, 3.0% and
1.0% in the years ended December 31, 1999, 2000, 2001, 2002 and 2003
respectively.

Interest Rates

In Chile, the current account was adversely affected by the Asian crisis,
which resulted in lower volumes of exports to the affected countries, as well as
lower prices of commodities, such as copper, wood pulp, fish meal and fruits,
exported by Chile. See "--Chilean Economy". Apart from the effects of the Asian
crisis on the current account deficit, Chile's economy in the second half of
1997 and the first quarter of 1998 was showing signs of overheating since
aggregate demand (consumption plus investment) was expanding at a faster rate
than GDP. This gap, together with the current account deficit, prompted the
Central Bank to adopt a very tight monetary policy. The Central Bank increased
the overnight interbank rate to 8.5% in early January and to 14.5% in
mid-September 1998. As a result of these policies, economic growth decelerated
sharply in 1998. During this period, GDP grew 3.2% and the current account
reached 5.0% of GDP. The growth rate of aggregate demand also slowed to 3.7% in
1998 compared to 7.2% in 1997.

As a result of the sharp deceleration of GDP and aggregate demand in the
last quarter of 1998, the Central Bank began to relax its monetary policy and
continued to do so during the second half of 2000. The Central Bank's overnight
interbank rate was 5.0% as of December 31, 2000. Despite these lower rates, GDP
growth did not recover until the second quarter of 2000. GDP grew 3.4% in 2001,
below expectations, inflation rose 2.6% during the same period and domestic
spending estimated growth was approximately 2.3%. After bottoming at 2.2% in
2002, GDP started to recover, reaching 3.3% growth in 2003. Inflation has
continued to decrease to 1.1% in 2003 and domestic spending recorded an
improvement with a 3.5% growth in 2003.

The decreasing interest rate since early 2000 and the higher expected
growth in GDP are expected to positively affect the growth and quality of our
investment portfolio.

After the contractionary monetary policy adopted to deal with the Asian
crisis, in 1999 the Central Bank reassumed a normal monetary stance. As of
December 31, 2003, with overnight interest rates at 2.25% nominal, the Central
Bank has more freedom to confront higher international interest rates:

o On the inflationary side, the Central Bank has announced that in the 0-12
months horizon, the relevant inflationary target is core inflation. From
12-24 months it is the total CPI inflation that guides monetary policy. In
that context, there are no relevant threats to achieve inflation targets.

o The exchange rate was changed from a band to a floating system. This gives
the Central Bank the ability to allow wider variations in the exchange
rate without being forced to act, thus discouraging speculation on the
appreciation or depreciation of the Chilean peso.

o Until August 9, 2001, the Central Bank expressed its reference interest
rate in real terms. Effective that date, the Central Bank begun expressing
it in nominal terms, assuming an annual inflation of 3.5% for 2001. The
rate changed from 3.0% in real terms to 6.5% in nominal terms, without
further changes until year end. In 2002, the Central Bank has reduced the
rate on eight occasions, ending the year with a reference rate of 3.0%.
From then on, the reference rate has been expressed in nominal terms and
has fallen steadily, reaching its current level of 1.75% in January 2004.

Interest rates earned and paid on our assets and liabilities reflect to a
certain degree inflation and expectations regarding inflation as well as shifts
in short-term rates related to the Central Bank's monetary policies. The Central
Bank manages short-term interest rates based on its objectives of balancing low
inflation and economic growth. Because our liabilities generally reprice faster
than its assets, changes in the rate of inflation or short-term rates in the
economy are reflected in the rates of interest paid by us on our liabilities
before such changes are reflected in the rates of interest earned by us on our
assets. Accordingly, our net interest margin on assets and liabilities tends to
be adversely affected in the short term by increases in inflation or short-term
rates and to benefit in the short term from decreases in inflation or short-term
rates, although the existence of non-interest bearing Chilean peso-denominated
demand deposits tends to mitigate both effects. See "--Inflation". In addition,
because our Chilean peso-denominated liabilities have relatively short repricing
periods, they are generally more responsive to changes in inflation or
short-term rates than our UF-denominated liabilities. As a result, during
periods when current inflation or expected inflation exceeds the previous
month's inflation, customers often switch funds from UF-denominated deposits to
more expensive Chilean peso-denominated deposits, thereby adversely affecting
our net interest margin.

Business Strategy

The accelerating growth of the economy has generated a strengthening demand
for financial services from an increasing number of individuals in all income
segments of the population and from an increasing number of companies. Our
business strategy targets the growing demand for banking products and services
from upper to lower-middle income individuals and from large corporations to
small-size companies. Our strategy aims to increase lending and to provide
services through cross-selling to all customer segments. Our historical strength
in residential mortgages and with medium and small-size companies serves as a
natural and strong base for expansion in those markets. While we believe that
this strategy has the potential to provide higher net interest margins, it also
has the potential to expose us to a higher degree of credit risk. We
continuously seek to improve the quality of our loan portfolio and our risk
index through the adherence to stricter loan origination procedures and credit
management policies. See "Information on the Company -- Business Overview" and
"Selected Statistical Information-- Loans by economic activity".

Mortgage Finance Bonds Issued and Held by Us

Despite the increasing use of other sources of financing to fund our
residential mortgage loans, we generally fund our residential mortgage loans
through the issuance of mortgage finance bonds. These bonds are our recourse
obligations with payment terms matched to the related mortgage loans, bearing
interest at a spread below the interest rate applicable to such mortgage loans.
However, if we were ever to be liquidated, the mortgage finance bond holders
would be secured by a pool of mortgages.

Mortgage finance bonds are traditionally placed with institutions, such as
pension funds, mutual funds and insurance companies, seeking long-term
fixed-income investments. However, we also purchase mortgage finance bonds we
have issued for our own account and hold them as financial investments. At
December 31, 2003, we had issued and outstanding Ch$266,437 million of mortgage
finance bonds. At such date, we held Ch$22,927 million of such mortgage finance
bonds as financial investments.

According to the General Banking Law, if a bank faces solvency problems and
a reorganization plan has been proposed, its board of directors shall put up at
separate auctions its residential mortgage loans and its commercial real estate
loans funded through mortgage finance bonds. The board will transfer the loans
to the best offer as long as such offer is equal to or higher than the amount
that shall be paid to the other creditors of the bank pursuant to the
reorganization plan. If that is not the case, a new auction shall be carried out
and the same rules shall apply. If there is a successful bidder, it shall pay
the mortgage finance bonds, but the aggregate principal amount of such bonds
shall be reduced to the amount paid by the successful bidder. If the auction
does not succeed, the holders of the mortgage finance bonds shall be subject to
the provisions of the reorganization plan. In the event of mandatory liquidation
of a bank, the same rules apply; provided that in order for an offer to be
accepted, it shall be equal to or higher than 90% of the face value of the
mortgage finance bonds, unless the holders of a majority of the issued and
outstanding mortgage finance bonds approve the offer in a meeting specially
called for this purpose by the liquidator.

Pursuant to the regulations of the Superintendency of Banks, mortgage
finance bonds issued by us and held in our own investment portfolio were
required to be marked to market on an ongoing basis (as were mortgage finance
bonds issued by other banks and held by us in our investment portfolio). The
gains and losses resulting from the holding of mortgage finance bonds issued by
us (or issued by other banks) appear as "other operating income (gains and
losses from trading and brokerage activities)" in our consolidated statements of
income.

However, in September 1998, the Superintendency of Banks modified the
regulations regarding the valuation of financial investments. Due to this
modification, all mortgage finance bonds issued by us and held in our own
investment portfolio that were acquired prior to January 1, 1998 are recorded at
their December 31, 1997 carrying values until they reach maturity or are sold.
See "Description of Business--Chilean Regulation and Supervision--Recently
Enacted Banking Legislation--Mark to Market Requirements for Financial
Investments".

Contingent Loans

Contingent loans consist of unfunded letters of credit, guarantees,
performance bonds and other unfunded commitments. Chilean banks charge their
customers a fee on contingent loans as well as interest for the periods of the
contingent debt. Accordingly, contingent loans are treated by us as interest
earning assets. As a result of this treatment, the comparatively low rates of
interest earned on these assets have a distorting effect on the average interest
rate earned on total interest earning assets. See "Description of
Business--Selected Statistical Information--Average Balance Sheets and Interest
Rate Data".

In addition, under Chilean GAAP, rights and obligations with respect to
contingent loans are treated as contingent assets and liabilities on our
consolidated balance sheets. Except for performance loans, this practice differs
from US GAAP, under which such contingent amounts are not recognized on the
consolidated balance sheets but are disclosed off-balance sheet in memorandum
accounts. Accordingly, to the extent we maintain contingent loans and contingent
liabilities, our consolidated balance sheets will appear different than if they
had been prepared under US GAAP. See Notes 28.f) and q) to the Consolidated
Financial Statements.

At December 31, 2003, we had Ch$71,941 million contingent loans and
Ch$72,088 million contingent liabilities outstanding.

Executive Summary

Consolidated net income for the year ended December 31, 2003 increased to
Ch$27,108 million in 2003 from Ch$20,458 million in 2002 due principally to a
successful management of foreign exchange operations in an environment of
strongly appreciating Chilean peso, which reflected in a Ch$70,439 million
decrease in net interest revenue, and in a Ch$75,326 million increase in other
operating income, net, to offset it. The other main driver of this year's
increase in income was a Ch$7,324 million increase in income from services,
stemming from the

renewed pension payment contract and from increased activity in insurance
brokerage, partly offset by a Ch$3,674 million increase in provisions for loan
losses and a Ch$2,023 million increase in income taxes; and to a Ch$2,446
million decrease in the loss from price level restatement. All other items on
the income statement had variations of under Ch$1,000 million from 2002. The
continued expansion of our loan portfolio has not brought significant income
yet, due to the decreasing interest rates that prevailed over the period.

Charge-offs and Recoveries

At December 31, 2003, we had Ch$118,843 million in memorandum accounts
related to loans previously charged off, comprised of Ch$43,437 million of loans
reacquired from the Central Bank in connection with the Central Bank
Subordinated Debt (the "Reacquired Loans Previously Charged Off") and Ch$75,406
million of loans charged off by us as part of our operating policies (the
"Operational Loans Previously Charged Off"). See "Business Overview--Chilean
Regulation and Supervision--The Central Bank", "--Other Income--Recoveries of
Loans Previously Charged Off" and "Selected Statistical Information--Analysis of
our Loan Classifications". The following table provides information regarding
our loans previously charged off at the end of each of the last five years.

At December 31,
----------------------------------------------
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
(in millions of constant Ch$ of December 31, 2003)

Reacquired Loans Previously
Charged Off.................. 50,434 43,763 48,012 49,882 43,437
Operational Loans Previously
Charged Off.................. 116,572 81,166 68,283 66,583 75,406
Total........................ 167,006 124,929 116,295 116,465 118,843

Results of Operations for the Years Ended December 31, 2000, 2001 and 2002

The following table sets forth the principal components of our net income
for the years ended December 31, 2001, 2002 and 2003.

Year ended December 31, % Change
---------------------------------------- ------------------------
(in millions of constant Ch$ of December
31, 2003
2001 2002 2003 2001/2002 2002/2003
---- ---- ---- --------- ---------

Principal components of net income:
Net interest revenue................... 94,275 110,105 38,688 16.8% (64.9)%
Provision for loan losses.............. (31,872) (31,629) (35,303) (0.8)% 11.6%
Income from services, net.............. 17,400 21,980 29,304 26.3% 33.3%
Other operating income, net............ 4,436 (8,277) 67,049 (286.6)% (910.1)%
Other income and expenses, net:
Recovery of loans previously charged
off.................................. 7,575 9,793 9,998 29.3% 2.1%
Other income and expenses.............. 1,104 1,180 1,517 6.9% 28.6%
Operating expenses..................... (72,007) (75,910) (77,795) 5.4% 2.5%
Loss from price-level restatement (4,509) (4,206) (1,760) (6.7)% (58.2)%
Minority interest in consolidated
subsidiaries......................... (24) (34) (23) 41.7% (32.4)%
Income taxes........................... (890) (2,544) (4,567) 185.8% 79.5%
Net income............................. 15,488 20,458 27,108 32.1% 32.5%

Our net income for 2003 reached Ch$27,108 million, an increase of 32.5%
from Ch$20,458 million in 2002, which in turn had increased by 32.1% from
Ch$15,488 million in 2001. The increase in 2003 was attributable

principally to (i) a Ch$75,326 increase in other operating income, net, due to a
Ch$78,772 increase in income from foreign transactions, net; (ii) a 33.3%
increase in income from services, net, due mainly to a 53.2% increase in
commissions on pension payments, and to a 43.7% reduction in the commissions
paid on placement and servicing of loans, and (iii) to a 58.2% reduction in the
loss from price level restatement.

Return on total average assets for each of 2001, 2002 and 2003 was 0.59%,
0.71% and 0.81%, respectively. Return on average shareholders' equity was 10.47%
for 2003 compared to 8.21% for 2002 and 6.28% for 2001. The increase in return
on total average assets in 2003 is attributable mostly to the increase in
foreign exchange transactions results and to the increase in income from
services, net. Net interest revenue has decreased sharply despite loan growth,
due to the prevailing low levels of both interest rates and inflation, dampening
the growth of our return on average shareholders' equity. The slight increase in
provisions is mostly due to an increase in write-offs, to stricter risk criteria
and to adjustments in our loan classification structure in preparation for the
new classification guidelines effective January 1, 2004.

Net Interest Revenue

Our net interest revenue decreased 64.9% in 2003 compared to 2002. This
decrease reverses the 16.8% increase registered in 2002 and is completely
attributable to the reduction caused by the declining levels of the reference
interest rate.

The following table sets forth the elements of our net interest revenue for
the years ended December 31, 2001, 2002 and 2003:

Year ended December 31, % Change
-------------------------------------------------- -------------------------
(in millions of constant Ch$ of December 31, 2003)
2001 2002 2003 2002/2001 2003/2002
---- ---- ---- --------- ---------

Interest revenue.............. 220,376 218,629 118,806 (0.8) (45.7)
Interest expense.............. (126,101) (108,524) (80,118) (13.9) (26.2)
Net interest revenue....... 94,275 110,105 38,688 16.8% (64.9)%

The following table sets forth the effect on our net interest revenue of
changes in (i) the average volume of interest earning assets and interest
bearing liabilities, and (ii) their respective average nominal interest rates
during the relevant periods:

2002/2001 2003/2002
Increase (decrease) Increase (decrease)
------------------- -------------------
(in millions of constant Ch$ of December 31, 2003)

Due to changes in average volume of interest earning assets
and interest bearing liabilities............................ 24,874 481
Due to changes in average nominal interest rates............... (9,044) (71,898)
Net change..................................................... 15,830 (71,417)

Net interest revenue in 2003 decreased 64.9% from 2002, a Ch$71,417 million
decrease. Such decrease is a net result of a Ch$463,664 million increase in the
volume of interest earning assets and of a Ch$428,685 million increase in the
volume of interest bearing liabilities. Both effects offset each other, with a
net effect of only Ch$481 million due to volume. The fall in the average nominal
interest rate was more marked in assets (480 basis points or "bp") than in
liabilities (200bp), with a significant effect on both interest revenue and on
interest expense, and the net effect of such changes was a decrease of Ch$71,898
million in 2003.

Net interest revenue in 2002 increased 16.8% from 2001, a Ch$15,830 million
increase. Such increase was a net result of a 10.5% increase (Ch$234,826
million) in the volume of interest earning assets and of a 13.5% increase
(Ch$238,029 million) in the volume of interest earning liabilities. The higher
increase in interest bearing liabilities was more than offset by the lower
interest rates paid, and allowed the effect of the increase in asset volume to
prevail, with a net effect of Ch$24,874 million due to volume. The decrease in
the average nominal interest rate had

a significant effect on both interest revenue and on interest expense, but since
both effects offset each other, the net effect of the reduction in the average
nominal interest rate was a decrease of Ch$9,044 million in 2002.

Our net interest margin (net interest revenue over average interest earning
assets) decreased from 4.46% in 2002 to 1.32% in 2003, primarily due to the
significant decrease in the average interest rate earned, mainly as a result of
a decrease in the market rates in a context of very low inflation rate which was
not offset by the changes in the loan portfolio composition. Our net interest
margin increased from 4.22% in 2001 to 4.46% in 2002, primarily due to a 16.8%
increase in net interest revenue prevailing over the effect of the decreasing
interest rates.

Interest Revenue

The following table sets forth information as to our interest revenue and
average interest earning assets for the years ended December 31, 2001, 2002 and
2003:

Year ended December 31, % Change
------------------------------------------ --------------------------
2001 2002 2003 2002/2001 2003/2002
---- ---- ---- --------- ---------
(in millions of constant Ch$ of December 31, 2003)

Interest revenue................. 220,376 218,629 118,806 (0.8) (45.7)
Average interest earning assets:
Loans............................ 1,757,016 1,916,333 2,255,574 9.1 17.7
Investments...................... 448,829 516,707 639,900 15.1 23.8
Interbank deposits............... 27,240 34,867 36,098 28.0 3.5
Total............................ 2,233,085 2,467,907 2,931,572 10.5 18.8
Average nominal interest rates 9.90% 8.90% 4.10%

The following table sets forth the effect on our interest revenue of
changes in (i) the average volume of interest earning assets, and (ii) average
nominal interest rates during the relevant periods:

2002/2001 2003/2002
Increase (decrease) Increase (decrease)
------------------- -------------------
(in millions of constant Ch$ of December 31, 2003)

Due to changes in average volume of interest earning assets....... 21,127 11,240
Due to changes in average nominal interest rates.................. (22,874) (110,063)
Net change........................................................ (1,747) (98,823)

Interest revenue in 2003 decreased 45.7% from 2002. The decrease in
interest revenue is primarily the result of (i) the strong appreciation of the
Chilean peso which resulted in a significant decrease in interest stemming from
the restatement of Chilean peso-denominated assets which are restated according
to the exchange rate, and (ii) an increase in average interest earning assets
and of a 480 bp decrease in average nominal interest rates, which was due to a
stabilization in the annual rate of inflation, a decrease in the Central Bank
reference interest rate and an environment of low activity. In accordance with
the strategy established by us, the higher growth operations within the loan
portfolio continued to be consumer loans and mortgage loans. See "Business
Overview-Retail Market: Middle and Lower-Middle Income Individuals". See
"Selected Statistical Information--Loan Portfolio". The positive impact on
interest revenue resulting from the increase in average interest earning assets
was more than offset by the negative impact of changes in average nominal
interest rates.

Interest revenue in 2002 decreased 0.8% from 2002. The decrease in interest
revenue was primarily the result of a 100 bp decrease in average nominal
interest rates, which was due to a reduction in the annual rate of inflation,
and a decrease in the Central Bank reference interest rate, partly compensated
by an increase in the interest from the restatement of Chilean peso-denominated
assets that restate according to the exchange rate. In accordance with the
strategy established by us a few years ago, the higher growth operations within
the loan portfolio were consumer loans and mortgage loans, among them the
Crediton and the Hipotecon. See "Business Overview --Retail Market: Middle and
Lower-Middle Income Individuals". In fact, the average balance of consumer loans
grew 13.5% and the average balance of mortgage loans diminished 0.6%. See
"Selected Statistical Information--Loan Portfolio". The positive impact on
interest revenue resulting from the increase in average interest earning assets
was more than offset by a decrease in average nominal interest rates, which was
attributable to a reduction in the rate of inflation from 2001 to 2002 and to
the reduction of the overnight interest rate.

Interest Expense

The following table sets forth our interest expense, average interest
bearing liabilities and average non-interest bearing demand deposits for the
years ended December 31, 2001, 2002 and 2003:

Year ended December 31, % Change
-------------------------------------- ------------------------
2001 2002 2003 2002/2001 2003/2002
---- ---- ---- --------- ---------
(in millions of constant Ch$ of December 31, 2003)

Interest expense............................ 126,101 108,524 80,118 (13.9) (26.2)
Average interest bearing liabilities:
Deposits(1)................................. 1,011,090 1,223,300 1,611,823 21.0 31.8
Mortgage finance bonds(2)................... 253,998 249,516 255,055 (1.8) 2.2
Other interest bearing liabilities(3)....... 532,976 563,272 597,896 5.7 6.1
Total....................................... 1,798,064 2,036,088 2,464,774 13.2 21.1
Average nominal interest rates.............. 7.0 5.3 3.3
Average non-interest bearing demand
deposits................................. 381,826 423,532 457,589 10.9 8.0

- ----------------------
(1) Combines "Savings accounts" and "Time deposits" shown in the tables set
forth under "Selected Statistical Information--Average Balance Sheets and
Interest Rate Data".

(2) Unsecured bonds with maturities ranging from five to 30 years, the proceeds
of which are used to fund mortgage lending.

(3) Combines "Central Bank borrowings", "Securities sold under agreements to
repurchase" and "Other interest bearing liabilities" shown in the tables
set forth under "Selected Statistical Information--Average Balance Sheets
and Interest Rate Data".

The following table sets forth the effect on our interest expense of
changes in (i) average volume of interest bearing liabilities, and (ii) average
nominal interest rates during the relevant periods:

2002/2001 2003/2002
Increase (decrease) Increase (decrease)
------------------- -------------------
(in millions of constant Ch$
of December 31, 2003)
-------------------------------------------

Due to changes in average volume of interest bearing liabilities........ (3,747) 10,759
Due to changes in average nominal interest rates........................ (13,830) (39,165)
Net change.............................................................. (17,577) (28,406)

Interest expense in 2003 decreased 26.2% from 2002, despite the 31.8%
increase in average interest bearing deposits, mainly concentrated in time
deposits, due to a 200 bp decrease in the average nominal interest rate paid by
us on such liabilities. Such effects are accompanied by an 8.0% increase in
non-interest bearing demand deposits, mainly concentrated in checking accounts
and by further reductions on the Central Bank reference interest rates. The
effect of the decrease in the average nominal interest rate paid by us amounted
to Ch$39,165 million, more than offsetting the Ch$10,759 million effect of the
increase in the average volume of interest bearing liabilities. Within deposits,
time deposits, which represent close to 74.7% of total deposits, increased 33.4%
whereas savings accounts decreased 1.2%. See "--Overview".

Interest expense in 2002 decreased 13.9% from 2001, despite the 21%
increase in average interest bearing deposits, mainly concentrated in time
deposits, and primarily as a result of a 170 bp decrease in the average nominal
interest rate paid by us on such liabilities. Such effects are accompanied by a
10.9% increase in non-interest bearing demand deposits, mainly concentrated in
checking accounts, and by further reductions on the Central Bank reference
interest rates. The effect of the decrease in the average nominal interest rate
paid by us amounted to Ch$(13,830) million, more than offsetting the Ch$(3,747)
million effect of the increase in the average volume of interest bearing

liabilities. Within deposits, time deposits, which represent close to 73.0% of
total deposits, increased 22.3% whereas savings accounts increased 0.1%. See
"--Overview".

Provision for Loan Losses

Chilean banks are required to maintain reserves to cover possible credit
losses that at least equal their loans to customers multiplied by the greater of
(i) their risk index or (ii) 0.75%. The risk index is derived from management's
classification of our portfolio according to objective criteria relating to the
performance of the loans or, in the case of commercial loans, management's
estimate of the likelihood of default. Banks in Chile are also required to
establish individual loan loss reserves for loans that are more than 90 days
past due. The amount of the individual loan loss reserves is equal to 100% of
the unsecured past due portion of the loan if such amounts in the aggregate
exceed the global loan loss reserve. See "Business Overview--Selected
Statistical Information--Classification of Loan Portfolio" and "--Selected
Statistical Information--Loan Loss Reserves". Banks in Chile are also required
to maintain additional consumer loan loss reserves as a result of the new
provisioning requirements for consumer loans set by the Superintendency of
Banks. See "Business Overview --Chilean Regulation And Supervision--Recently
Enacted Banking Legislation--Allowance Requirements for Consumer Lending". A
bank may also maintain voluntary additional loan loss reserves in excess of the
minimum amounts required as global and individual loan loss reserves. Provisions
to such voluntary reserves are not deducted from income for tax purposes.

The following table sets forth information about us with respect to the
allowance for loan losses and its principal components, provision for loan
losses and charge-offs, at and for each of the years ended December 31, 2001,
2002 and 2003, respectively:

December 31, % Change
--------------------------------------------- -----------------------------
2001 2002 2003 2002/2001 2003/2002
---- ---- ---- --------- ---------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Provisions for loan losses....... 31,872 31,629 35,303 (0.8) 11.6
Charge-offs...................... 24,190 28,557 35,716 18.1 25.1
Total loans...................... 1,859,571 2,119,549 2,411,476 14.0 13.8
Risk index.................... 1.83 1.67 1.29
Required allowance for loan
losses based on risk index.. 34,030 35,396 40,272 4.0 13.8
Allowance for loan losses..... 43,696 45,495 44,632 4.1 (1.9)
Allowance for loan losses as
a percentage of total loans. 2.35 2.15 1.85

The amount charged to income as provision for loan losses increased 11.6%
to Ch$35,303 million in 2003 from Ch$31,629 million in 2002. This increase was
primarily the result of an increase in write-offs, of the application of
stricter risk criteria and of adjustments made in our loan classification
structure in preparation for the new classification guidelines effective January
1, 2004. These measures more than offset an improvement in portfolio quality due
to three years of applying more demanding criteria in loan origination and in
the implementation of credit scoring.

As a result of this improvement, our risk index decreased from 1.67% at
December 31, 2002 to 1.29% at December 31, 2003. In addition, 96.6% of our loans
were category A and category B loans in 2003, compared to 95.5% in 2002. See
"Selected Statistical Information--Analysis of Our Loan Classifications".

The amount charged to income as provisions for loan losses was increased in
part by the increase in the required allowance for loan losses based on risk
index, due to the increase in loan volume. The net effect on our coverage level
decreased the level of allowances for loan losses over the loan portfolio from
2.15% in 2002 to 1.85% in 2003. When compared with past due loans, allowances
for loan losses represented 112% of past due loans in 2001 and 109% in 2002. Our
coverage was 97% at year end 2003.

Mainly as a result of the changes in our loan classification, BBVA Chile's
risk index was 1.29% at December 31, 2003, down from 1.67% at December 31, 2002
and from 1.83% at December 31, 2001, compared to an average risk index for the
Chilean financial system of 1.8% at October 31, 2003 (the most recent available
information for the industry), 2.0% at October 31, 2002 and 1.9% at October 31,
2001. For a discussion of our policies and practices regarding loan loss
provisions and allowances, see "Business Overview--Selected Statistical
Information--Allowance for Loan Losses".

The amount charged to income as provisions for loan losses decreased 0.8%
to Ch$31,629 million in 2002 from Ch$31,872 million in 2001. This decrease was
primarily the result of the use of voluntary allowances and of an improvement in
portfolio quality due to the application of the new criteria and procedures. See
"Selected Statistical Information--Analysis of Our Loan Classifications".

Other Income

Income from Services, Net. The following table sets forth the components of
our income from services, net for the years ended December 31, 2001, 2002 and
2003:

Year ended December 31, % Change
--------------------------------------------- ---------------------------
2001 2002 2003 2002/2001 2003/2002
---- ---- ---- --------- ---------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Fees from services:
Contingent loans and letters of
credit fees 1,011 769 598 (23.9) (22.2)
Collections 381 338 360 (11.3) 6.5
On-line account fees 212 171 194 (19.3) 13.5
Purchases and sales of foreign
exchange 216 274 296 26.9 8.0
Credit cards 526 261 342 (50.4) 31.0
Automatic teller machines (336) 571 789 (269.9) 38.2
Current accounts 4,887 4,654 4,837 (4.8) 3.9
Lines of credit and overdraft fees 489 885 949 81.0 7.2
Service charges on deposit accounts 208 206 196 (1.0) (4.9)
Custody and trust service fees 60 131 121 118.3 (7.6)
Service charges on loans 384 540 713 40.6 32.0
Financial advisory service fees 436 -- -- (100.0) --
Pension payments 2,746 3,879 5,944 41.3 53.2
Commissions on mutual and
investment fund administration 2,324 2,603 2,580 12.0 (0.9)
Commissions on insurance
brokerage 1,971 2,192 2,410 11.2 9.9
Fees from collections of insurance
premiums 1,273 1,522 2,000 19.6 31.4
Fees charged on prepaid loans 579 1,716 1,846 196.4 7.6
Commission on syndicated loans 145 261 905 80.0 246.7
Commission on loan brokerage 195 120 890 (38.5) 641.7
Brokerage fees 282 436 712 54.6 63.3
Lease contracts fees 479 488 546 1.9 11.9
Commissions on placement and
servicing of loans (2,579) (1,795) (1,010) (30.4) (43.7)
Client service fees 142 356 498 150.7 39.9
Other............................... 1,369 1,402 2,588 2.4 84.6
Income from services, net 17,400 21,980 29,304 26.3 33.3

Our net income from services increased 33.3% to Ch$29,304 million in 2003
from Ch$21,980 million in 2002. This increase was primarily the result of (i) a
53.2% increase in commission on pension payments to Ch$5,944 million in 2003
from Ch$3,879 million in 2002; (ii) a 31.4% increase in fees from collection of
insurance premiums to Ch$2,000 million in 2003 from Ch$1,522 million in 2002;
and (iii) a Ch$785 million decrease in commissions on placement and servicing of
loans. These increases were partially offset by (i) a 22.2% decrease in fees
from contingent loans and letters of credit, and (ii) a 0.9% decrease in
commissions on mutual and investment funds administration to Ch$2,580 million in
2003 from Ch$2,603 million in 2002. See "Business Overview--Lines of
Business--Retail Banking".

Our net income from services increased 26.3% to Ch$21,980 million in 2002
from Ch$17,400 million in 2001. This increase was primarily the result of (i) an
196% increase in fees charged on prepaid loans to Ch$1,716 million in 2002 from
Ch$579 million in 2001 and (ii) a Ch$1,133 million increase in commissions on
pension payments to Ch$3,879 million in 2002 from Ch$2,746 million in 2001.
These increases were partially offset by: (i) a 100% decrease in financial
advisory fees and (ii) a 50.4% decrease in fees from credit cards.

The commission on pension payments stems from a clause in the pension
payment contract that states that a commission is due if the balances held at
the bank fall below a previously established level. This condition was met for
the first time in 1999.

For information related to our lines of businesses, see Note 28.2.e)
("Segment Information") to the Consolidated Financial Statements.

Other Operating Income, Net. The following table sets forth the components
of our other operating income, net for the years ended December 31, 2001, 2002
and 2003:

Year ended December 31, % Change
--------------------------------------- ------------------------
2001 2002 2003 2002/2001 2003/2002
---- ---- ---- --------- ---------
(in millions of constant Ch$ of
December 31, 2003)

Gains (losses) on financial
instruments, net................ 8,640 6,202 2,756 (28.2)% (55.6)%
Foreign exchange
transactions, net............... (4,204) (14,479) 64,293 244.4 (544.0)
-----
Other operating income, net........ 4,436 (8,277) 67,049 (286.6)% (910.1)%
=====

The significant increase registered under "Foreign exchange transactions,
net" is mostly due to accounting principles that reflect the effect of foreign
exchange operations on net income in two separate lines.

In order to minimize exchange rate risk, we hedge our foreign currency
position, which is short on foreign currency assets due to the increased sales
of dollar forward contracts (mostly to attend the needs of our corporate
clients), we invest in Central Bank's PRDs (Pagare Reajustable Dolar, a long
term instrument issued by the Central Bank) and similar instruments. Such
strategy allows us to maintain a low net foreign currency position, which as of
December 31, 2003 amounted to only US$15.3 million. Nevertheless, the accounting
principles make us acknowledge the effects without compensating them.

The income from the restatement of instruments that are denominated in
Chilean pesos but are restated according to the variations of the exchange rate,
such as PRDs, is registered as interest income. The income from dollar forward
contracts is acknowledged in "Foreign exchange transactions, net", and is shown
here.

In 2003, we recorded a gain of Ch$67,049 million in our other operating
income, net, primarily due to accounting gains in foreign exchange transactions
as a result of the strength exhibited by the Chilean peso, which meant a 18.9%
decrease in the exchange rate, compounded by a high level of activity, and to
small gains on financial instruments due to the declining interest rates.

In 2002, we recorded a loss of Ch$8,277 million in other operating income,
net, due to the losses from foreign exchange transactions which more than offset
the gains obtained on financial instruments. This loss was in a period of
depreciation of the local currency, with an 8.6% increase exhibited by the
exchange rate, and it was also more

apparent than real, since it was compensated by a similar gain in interest
revenue. See "--Asset and Liability Management" and "--Exchange Rate Risk".

Other Income and Expenses. The following table sets forth the principal
components of our other income and expenses for the years ended December 31,
2001, 2002 and 2003:

Year ended December 31, % Change
------------------------------------ ----------------------
2001 2002 2003 2002/2001 2003/2002
---- ---- ---- --------- ---------
(in millions of constant Ch$ as of
December 31, 2003)

Recoveries of loans previously charged
off....................................... 7,494 9,776 9,980 30.4 2.1
Recoveries of loans reacquired from the
Central Bank.............................. 81 17 18 (78.8) 5.9
Subtotal..................................... 7,575 9,793 9,998 29.3 2.1
Non-operating income......................... 3,987 4,625 6,813 16.0 47.3
Non-operating expenses....................... (2,849) (3,562) (5,450) 25.9 53.0
Subtotal..................................... 1,138 1,063 1,363 (6.6) 28.2
Participation in earnings of equity
investments............................... (34) 117 154 (444.1) 31.6
-----
Total........................................ 8,679 10,973 11,515 26.4% 4.9%
=====

Recoveries of loans previously charged off amounted to Ch$9,980 million in
2003, up from Ch$9,793 million in 2002. Recoveries of loans reacquired from the
Central Bank previously charged off, which will tend to decrease as the total
amount of such loans decreases, accounted for approximately 0.2% of total
recoveries in 2003. The increase in recoveries of loans previously charged off
during 2003 comes from of a continued effort by us, and is a result of the
economic conditions prevailing over the year and of the increase in the number
of operational loans charged off in recent years.

Other. In 2003, non-operating income increased by 47.3% while non-operating
expenses increased by 53.0% from 2002 levels. Such increase in net non-operating
income is mostly explained by the higher level of non-operating income attained
in 2003, through an increase in the sale of assets received in lieu of payment,
partly offset by the higher level of non-operating expenses caused by the losses
and write-offs associated with the sales of those assets. In 2002, non-operating
income increased by 16.0% while non-operating expenses increased by 25.9% from
2001 levels. The decrease in net non-operating income in 2002 was attributable
principally to an increase in losses on the sale of assets received in lieu of
payment and other assets.

Operating Expenses

The following table sets forth the principal components of our operating
expenses for the years ended December 31, 2001, 2002 and 2003:

Year ended December 31, % Change
---------------------------------------- ----------------------
2001 2002 2003 2002/2001 2003/2002
---- ---- ---- --------- ---------
(in millions of constant Ch$ as of December 31, 2003)

Personnel salaries and expenses.......... 33,430 33,449 33,504 0.1% 0.2%
Administrative and other expenses........ 28,423 29,339 31,007 3.2 5.7
Depreciation and amortization............ 10,154 13,122 13,284 29.2 1.2
----
Total................................. 72,007 75,910 77,795 5.4% 2.5%
====

The 2.5% increase in operating expenses to Ch$77,795 million in 2003 from
Ch$75,910 million in 2002 was primarily the result of a 5.7% increase in
administrative and other expenses and of a 1.2% increase in depreciation and
amortization. Such increase in operating expenses is mostly due to one-time
disbursements related to the grouping of the higher management of the Bank at a
new location (together with the higher management of the BBVA Group in Chile)
and to the significant investments made in technology with the implementation of
the new "Altamira" systems.

The 5.4% increase in operating expenses to Ch$75,910 million in 2002 from
Ch$72,007 million in 2001 was primarily the result of the significant
investments made in technology with the implementation of the new "Altamira"
systems platform and to expenses related to the process of concentrating
different units of the bank into a few locations.

Loss from Price-level Restatement

The net effect of the restatement of price-levels gave rise to a charge to
net income of Ch$4,509 million, Ch$4,206 million and Ch$1,760 million in 2001,
2002 and 2003, respectively. See Note 21 to the Consolidated Financial
Statements.

Year ended December 31,
-----------------------------------------------
2001 2002 2003
---- ---- ----
(in millions of constant Ch$ as of December 31,
2003)

Restatement of non-monetary accounts based on CPI:
Bank premises and equipment.................................... 1,869 1,824 592
Other non-monetary assets and liabilities, net................. 815 939 352
Shareholders' equity........................................... (7,193) (6,969) (2,704)
Net loss from price-level restatement ......................... (4,509) (4,206) (1,760)

Income Tax

Our effective tax rate was (5.4)% in 2001, (11.1%) in 2002 and 14.4% in
2003 compared to an average rate which we estimate to be 6.6% in 2001, 14% in
2002 and 16.5% in 2003 for Chilean financial institutions as a whole for such
periods. The statutory rate on most of our income during these three years was
16%, 16.5% and 17% respectively. Our effective tax rate was different from the
statutory rate primarily because of the amortization of the effects of adopting
deferred income tax accounting in 1999. See Note 22 to the Consolidated
Financial Statements.

US GAAP Reconciliation

We prepare our financial statements in accordance with Chilean GAAP, which
differs in certain significant respects from US GAAP. The following table sets
forth net income (loss) for the years ended December 31, 2001, 2002 and 2003
under Chilean GAAP and US GAAP and shareholders' equity (including net income
(loss) for the year) at December 31, 2001, 2002 and 2003 under Chilean GAAP and
US GAAP.

At or for the year ended December 31
------------------------------------------
2001 2002 2003
---- ---- ----
(in millions of constant Ch$ of December 31, 2003)

Net income (Chilean GAAP)...................... 15,488 20,458 27,108
Net income (US GAAP).......................... 15,776 17,087 31,651
Shareholders' equity (Chilean GAAP)............ 252,621 259,593 264,578
Shareholders' equity (US GAAP)................. 254,877 257,900 265,779
======= ======= =======

The principal differences which affect net income under Chilean GAAP and US
GAAP relate to deferred income taxes and amortization of goodwill. The principal
differences in accounting for shareholders' equity relate to loan origination
fees and costs, amortization of goodwill on acquisition of Banesto Chile Bank,
deferred income taxes and the accrual for mandatory dividends. Note 28 to the
Consolidated Financial Statements provides a description of the principal
differences between Chilean GAAP and US GAAP and a reconciliation to US GAAP of
net income for the years ended December 31, 2001, 2002 and 2003 and of
shareholders' equity at December 31, 2002 and 2003.

Asset and Liability Management

We follow conservative policies and procedures for the management of our
assets and liabilities, both in terms of their maturities and currencies. These
policies have resulted in the formation of an adequate financing structure to
meet our increasing needs during our current expansion. In addition to the
guidelines established by the Superintendency of Banks and the Central Bank to
manage asset/liability mismatches, the Board of Directors together with the
General Manager (our chief executive officer) have implemented additional
procedures, such as limits for gaps in different currencies, trading stop
losses, investments and approval authorities, to control our asset/liability
position. Generally, the Finance and International Division Manager is in charge
of the implementation of our policies in this respect. Further, we distribute
three reports prepared by the Planning and Development Division to our senior
management on a daily basis: (i) Foreign Exchange Position, which reflects
potential gaps, (ii) Limits and Margins in Local Currency, which controls the
margins established by the external/internal authorities, and (iii) Assets and
Liabilities Management Report, which summarizes our position in terms of
maturities and currencies.

The composition of our assets and liabilities by currency and term and our
shareholders' equity at December 31, 2003 was as follows:

Foreign
Ch$ UF(1) Currency(2) Total Percentage
(in millions of constant Ch$ of December 31, 2003, except for
percentages)

Assets:
Cash and due from banks 235,325 - 30,502 265,827 7.80
Other assets:
Less than one year 704,848 298,904 484,436 1,488,188 43.67
From one to three years 4,534 9,993 37,627 52,154 1.53
More than three years 350,157 1,106,644 134,320 1,591,121 46.69
Bank premises and equipment and other - 55,329 - 55,329 1.62
Allowance for loan losses (44,632) - - (44,632) (1.31)
Total 1,250,232 1,470,870 686,885 3,407,987 100.00
Percentage of total assets 36.69 43.16 20.16 100.00
Liabilities and Shareholders' Equity
Non-interest bearing deposits 427,359 39,660 27,821 494,840 14.52
Other liabilities:
Less than one year 703,796 121,693 391,781 1,217,270 35.72
From one to three years 356,027 593,307 105,794 1,055,128 30.96
More than three years 19,678 355,626 867 376,171 11.04
Shareholders' equity - 237,470 - 237,470 6.97
Net income - 27,108 - 27,108 0.80
Total 1,506,860 1,374,864 526,263 3,407,987 100.00
Percentage of total liabilities and
shareholders' equity 44.22 40.34 15.44 100.00

- ----------------------
(1) Includes monetary assets and liabilities denominated in UF and non-monetary
assets, liabilities and shareholders' equity restated for inflation for
accounting purposes.

(2) Includes assets and liabilities denominated in foreign currency. Foreign
currency assets consist of U.S. dollars (57.7%), Ch$ readjusted by the
variations of the US$ (40.2%), Euros (1.9%), Japanese yen (0.03%), and
other currencies (0.05%). Foreign currency liabilities consist of U.S.
dollars (97.3%), Euros (2.5%), Japanese yen (0.03%) and other currencies
(0.01%),

We typically have more Chilean peso-denominated liabilities than Chilean
peso-denominated assets because our deposits, one of our principal sources of
funding, are denominated in Chilean pesos. See "Operating Results--Overview".

Exchange Rate Risk

At December 31, 2003, our net foreign currency exposure, including
Ch$169,777 million in dollar forward contracts, was Ch$9,155 million (US$15.3
million), equal to 3.5% of our capital and reserves. See Note 23 to the
Consolidated Financial Statements, "--Asset and Liability Management" and
"Business Overview--Chilean Regulation and Supervision--Foreign Exchange".

In recent years, our results of operations have not been significantly
affected by fluctuations in the exchange rate between the Chilean peso and the
U.S. dollar in part due to our policy and Central Bank regulations relating to
the control of material exchange rate mismatches. However, the rate of
depreciation or appreciation of the Chilean peso against the U.S. dollar could
be expected to have the following principal effects:

(i) If we maintain a net asset position in U.S. dollars and a
depreciation of the Chilean peso against the dollar occurs, we would record
a related gain, and if an appreciation of the Chilean peso occurs, we would
record a related loss;

(ii) If we maintain a net liability position in U.S. dollars and a
depreciation of the Chilean peso against the dollar occurs, we would record
a related loss, and if an appreciation of the Chilean peso occurs, we would
record a related gain;

(iii) If the inflation rate for a period exceeded the depreciation of the
Chilean peso against the U.S. dollar during the same period, we would
record a related gain if we had a net asset position in UF which exceeded a
net liability position in U.S. dollars, and we would record a related loss
if we had a net liability position in U.S. dollars which exceeded a net
asset position in UF. The same effect would occur if there were an
appreciation of the Chilean peso against the U.S. dollar; and

(iv) If the inflation rate for a period were lower than the rate of
depreciation of the Chilean peso against the U.S. dollar during the same
period, we would record a related gain if we maintained a net asset
position in U.S. dollars and a net liability position in UF and would
record a related loss if we had a net liability position in U.S. dollars
and a net asset position in UF. The same effect would occur if there were
an appreciation of the Chilean peso against the U.S. dollar.

The following table sets forth our foreign currency position.

Assets Liabilities
--------------- ------------
(in millions of constant Ch$ of
December 31, 2003)
Currency
US Dollars............................... 396,575 682,175
Ch$ readjusted by US$.................... 276,432 336
Japanese Yen............................. 177 155
Euro..................................... 13,377 13,296
Other Currency........................... 324 78
Total.................................... 686,885 696,040

We have exchange rate exposure with respect to the U.S. dollar and, to a
lesser extent, other currencies. The potential immediate loss that would result
from a hypothetical 10% change in foreign currency exchange rates based on this
position would be Ch$16,062 million. This sensitivity analysis assumes an
unfavorable 10% fluctuation in all of the exchange rates affecting all the
foreign currencies in which the assets and liabilities presented in the table
above are denominated.

We enter into forward exchange contracts which are fundamentally of two
types: (i) transactions between two foreign currencies, and (ii) transactions
among Chilean pesos, UF and U.S. dollars. The first type are done for hedging
purposes, such as when we take a liability position in foreign currency other
than the U.S. dollar; the second type, which are carried out only in the Chilean
local market, are utilized to take selling positions (liabilities) in foreign
currency, subject to the regulatory requirement that the forward foreign
currency exposure must be included in the maximum net foreign currency position
permitted by applicable regulations. See "Business Overview--

Chilean Regulation and Supervision--Foreign Exchange" and "Description of
Business--Selected Statistical Information--Average Balance Sheets and Interest
Rate Data".

B. Liquidity and capital resources.

Maturity of Deposits at December 31, 2003

The following table sets forth information regarding the currency and
maturity of our deposits at December 31, 2003, expressed in percentages.
UF-denominated deposits are similar to Chilean-peso denominated deposits in all
respects, except that the principal is readjusted periodically based on
variations in the Chilean CPI.

Foreign
Ch$ UF currency Total
---- ---- -------- -----

Demand deposits.................................... 32.6 5.4 22.3 22.8
Saving accounts.................................... - 7.5 - 2.6
Time deposits:
Maturity within 3 months....................... - 0.1 0.1 -
Maturity after 3 but within 6 months........... 39.0 4.7 77.1 29.5
Maturity after 6 but within 12 months.......... 6.7 4.3 0.5 5.5
Maturity after 12 months....................... 21.7 78.0 - 39.6
-------------------------------------------
Total time deposits................................ 67.4 87.1 77.7 74.6
Total deposits..................................... 100.0 100.0 100.0 100.0

The following table sets forth information regarding the maturity of
outstanding time deposits in excess of US$100,000 on deposit with us at December
31, 2003

Ch$ UF Foreign currency Total
--- -- ---------------- -----

Time deposits:
Maturity within 3 months.................. 351,557 195,672 66,688 613,917
Maturity after 3 but within 6 months...... 163,122 151,074 2,098 316,294
Maturity after 6 but within 12 months..... 96,300 218,313 - 314,613
Maturity after 12 months.................. 59,473 45,754 - 105,227
Total deposits in excess of US$100,000........ 670,452 610,813 68,786 1,350,051

Minimum Capital Requirements

According to the current General Banking Law, banks must have a minimum
ratio of Total Capital to Risk Adjusted Assets of 8%, net of required allowances
for loans losses, and a minimum ratio of Basic Capital to Total Assets of 3%,
net of required allowances for loan losses. For these purposes, Total Capital
means the aggregate of: (a) a bank's paid-in capital and reserves, excluding
capital attributed to subsidiaries and foreign branches, (b) its subordinated
bonds, calculated at the issue price but not exceeding 50% of its Basic Capital,
and (c) its voluntary allowances for loan losses, up to 1.25% of the Risk
Adjusted Assets. Basic Capital includes paid-in capital and reserves, but
excludes the net income for the period. Risk Adjusted Assets are based on total
assets on an unconsolidated basis, which are then classified into five
categories, each of which has a different weight.

At December 31, 2003, in accordance with the requirements of the General
Banking Law, our ratio of Total Capital to Risk Adjusted Assets was 11.3% or
Ch$74,636 million higher than the 8% minimum required by the first test under
the Banking Law. Our ratio of Basic Capital to Total Assets was 6.9% or
Ch$134,689 million higher than the 3% minimum Basic Capital required by the
second test under the General Banking Law.

Our mutual fund and securities brokerage subsidiaries are also subject to
minimum capital requirements as defined under Chilean regulations. All such
minimum regulatory capital requirements were being complied with at December 31,
2001, 2002 and 2003.

Short-Term Borrowings

Our short-term borrowings (excluding other obligations) totaled Ch$291,009
million as of December 31, 2001, Ch$389,315 million as of December 31, 2002 and
Ch$352,961 million as of December 31, 2003.

The principal categories of our short-term borrowings are amounts borrowed
under repurchase agreements, domestic interbank loans and foreign trade lines of
credit. The following table presents the amounts outstanding and the
weighted-average nominal interest rate at the end of each year for each type of
short-term borrowing:

At December 31,
---------------------------------------------------------------------------
2001 2002 2003
---------------------- ---------------------- ---------------------
Weighted Weighted Weighted
-average -average -average
nominal nominal nominal
Year end interest Year end interest Year end interest
Balance rate Balance rate Balance rate
-------- -------- -------- -------- -------- --------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Securities sold under
agreements to repurchase...... 174,350 6.48% 258,121 2.09% 171,721 1.50%
Domestic interbank loans......... 64,636 5.84 64,252 1.72 67,302 2.30
Borrowings under foreign
trade credit lines 52,023 2.05 66,942 1.73 113,938 1.30
------- -------
Total short-term borrowings 291,009 5.55% 389,315 1.97% 352,961 1.59%
======= =======

The following table shows the average balance and the average nominal rate
for each short-term borrowing category during the periods indicated.

For the year ended December 31,
--------------------------------------------------------------------------
2001 2002 2003
--------------------- --------------------- ---------------------
Average Average Average
nominal nominal nominal
Average interest Average interest Average interest
balance rate balance rate balance rate
------- -------- ------- -------- ------- --------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Securities sold under
agreements to repurchase....... 212,728 8.34% 226,467 2.80% 242,747 2.20%
Central Bank borrowings.......... 13,217 6.72 17,037 6.00 13,083 4.60
Domestic interbank loans......... 91,369 4.65 91,340 7.50 86,349 3.30
Subtotal......................... 317,314 334,844 342,179
Borrowings under foreign
trade credit lines 13,723 1.61 35,699 2.20 191,158 1.50
------- -------
Total short-term borrowings 331,037 6.98% 370,543 6.98% 533,337 6.98%
======= =======

The following table presents the highest month-end balances of our
principal sources of short-term borrowings during the periods indicated.

Highest 2001 Highest 2002 Highest 2003
month-end month-end month-end
balance balance balance
------------ ------------ ------------
(in millions of constant Ch$ of December 31, 2003)

Securities sold under agreements to repurchase............. 223,738 125,183 108,543
Domestic interbank loans................................... 73,840 100,798 87,900
Borrowings under foreign trade credit lines................ 60,036 132,922 114,329
Central Bank borrowings.................................... 7,147 27,747 9,000

Liquidity and Funding

The following table sets forth our average daily balance of liabilities for
the years ended December 31, 2002 and 2003, in each case together with the
related average nominal interest rates paid thereon:

Year ended December 31,
--------------------------------------------------------------------------
2002 2003
---------------------------------- ----------------------------------
Average Average
Average % of Total Nominal Average % of Total Nominal
Balance Liabilities Rate Balance Liabilities Rate
------- ----------- ------- ------- ----------- -------
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Checking accounts.................... 194,322 7.4% -- 202,094 6.6% --
Time deposits........................ 1,165,288 44.4% 4.8 1,554,483 50.5% 2.9
Savings accounts..................... 58,012 2.2% 3.8 57,340 1.9% 1.6
Mortgage finance bonds............... 249,516 9.5% 9.4 255,055 8.3% 7.2
Foreign borrowings................... 112,148 4.3% 2.4 191,158 6.2% 1.5
Bankers drafts and other demand
deposits.......................... 229,210 8.7% -- 255,495 8.3% --
Central Bank Borrowings.............. 17,037 0.6% 6.0 13,083 0.4% 4.6
Securities subject to agreements to
repurchase........................ 226,468 8.6% 2.8 242,747 7.9% 2.2
Subordinated bonds................... 31,244 1.2% 7.2 26,243 0.9% 8.0
Other bonds.......................... 42,567 1.6% 5.9 38,316 1.2% 5.4
Borrowings from domestic financial
institutions...................... 133,808 5.1% 6.5 86,349 2.8% 3.3
Contingent liabilities............... 74,388 2.8% -- 75,181 2.4% --
Other................................ 92,372 3.6% -- 78,856 2.6% --
-------
Total liabilities............... 2,626,380 100.00% 3,076,400 100.00%
=======

We, through our liquidity management, seek to ensure our ability to honor
withdrawals of deposits, make repayments at maturity of other liabilities,
extend loans and meet our own working capital needs. Our most important source
of funding is our customer deposits (which consist primarily of Chilean
peso-denominated non-interest bearing checking accounts and Chilean peso- and
UF-denominated interest bearing time and savings deposits). Checking account
deposits are the least expensive source of funding for us and represented
approximately 6.6% of our total average liabilities for the year ended
December 31, 2003. Time deposits represented 50.5% of our total average
liabilities for year ended December 31, 2003.

As part of our overall business strategy, we seek to minimize our cost of
funding by broadening our deposit base, particularly checking account balances,
by cross-selling to existing customers and by broadening our customer base. See
"Business Overview--Business Strategy".

Mortgage Finance Bonds are issued to fund residential mortgage loans and
certain of our commercial mortgage loans. Mortgage Finance Bonds have payment
terms matched to the related loans and bear interest at a fixed rate. See
"Business Overview--Lines of Business--Retail Banking--Residential Mortgage
Lending". Foreign borrowings, which are used primarily in connection with our
foreign trade operations, are mainly dollar-denominated short-term loans. See
Note 11 to the Consolidated Financial Statements.

Central Bank borrowings constitute our fourth source of liquidity. The
Central Bank provides credit to Chilean banks on a long-term basis to permit
dollar- and UF-denominated financing of industrial and agricultural projects.
The Central Bank also makes short-term credit lines, that generally mature
within five days, available to banks to assist in liquidity management.

Generally, we rely upon all sources of funding, choosing funding sources at
any given time on the basis of cost and availability, in light of our general
asset and liability management strategy. The minimum amount of liquidity
required by us is determined by the reserve requirements of the Central Bank.
See "Business Overview--Chilean Regulation and Supervision--Reserve
Requirements". These reserves are currently 3.6% of time deposits and 9%

of demand deposits. In addition, we are subject to a technical reserve
requirements (the reserva tecnica) pursuant to which a certain amount must be
held in cash or in highly liquid instruments. This amount is equal to the amount
by which the amounts on deposit in checking accounts and in instruments that
mature in less than 10 days exceed by 2.5 times our capital and reserves. The
Central Bank imposes a uniform reserve requirement of 13.6% with respect to
foreign currency-denominated liabilities. In June 1998, the Central Bank
announced a reduction in this reserve requirement from 30% to 10% and in
September 1998 announced a further reduction from 10% to 0%. We are able to
recover the costs of maintaining these reserves on foreign currency-denominated
liabilities by charging higher rates on foreign currency-denominated loans.
Liquidity is also derived from our capital, reserves, subordinated bonds and
investments, including government securities.

Interest Rate Sensitivity

A key component of our asset and liability policy is the management of
interest rate sensitivity. Interest rate sensitivity is the relationship between
market interest rates and net interest revenue due to the maturity or repricing
characteristics of interest earning assets and interest bearing liabilities. For
any given period, the pricing structure is matched when equal amounts of such
assets and liabilities mature or reprice in that period. Any mismatch of
interest earning assets and interest bearing liabilities is known as a gap
position. A positive gap denotes asset sensitivity and normally means that an
increase in interest rates would have a positive effect on net interest revenue
while a decrease in interest rates would have a negative effect on net interest
revenue.

Our interest rate sensitivity strategy takes into account not only the
rates of return and the underlying degree of risk, but also liquidity
requirements, including minimum regulatory cash reserves, mandatory liquidity
ratios, withdrawal and maturity of deposits, capital costs and additional demand
for funds. Our maturity mismatches and positions are monitored by us and are
managed within established limits.

The following table sets forth the repricing of our interest earning assets
and our interest bearing liabilities at December 31, 2003 and may not be
indicative of interest rate gap positions at other times.

Interest Rate Sensitivity
-------------------------------------------------------------------------------------
Up to 31-90 91-180 181-365 Over 3
30 days days days days 1-3 years years Total
------- ----- ------ ------- --------- ------ -----
(in millions of constant Ch$ of December 31, 2003, except for percentages)

Interest earning assets(1)
Ch$..................... 199,114 109,278 175,221 143,745 115,594 102,962 845,914
UF...................... 72,305 32,952 64,639 68,337 160,940 811,978 1,211,152
Foreign Currency........ 37,162 55,453 47,177 134,210 72,570 103,502 450,074
Total................. 308,581 197,684 287,037 346,293 349,103 1,018,442 2,507,140
Interest bearing
liabilities(2)
Ch$..................... 365,724 216,483 185,354 154,545 61,130 5,000 988,236
UF...................... 149,728 99,875 170,878 241,823 171,791 238,548 1,072,642
Foreign Currency........ 240,754 70,856 46,005 60,700 4,955 2 423,273
Total................. 756,207 387,213 402,236 457,068 237,877 243,550 2,484,151
Asset/liability Gap
Ch$..................... (166,610) (107,204) (10,133) (10,799) 54,463 97,962 (142,322)
UF...................... (77,423) (66,922) (106,238) (173,486) (10,851) 573,430 138,509
Foreign Currency........ (203,592) (15,403) 1,172 73,510 67,615 103,500 26,802
Total................. (447,625) (189,529) (115,199) (110,776) 111,227 774,892 22,990
Cumulative Gap
Ch$..................... (166,610) (273,814) (283,947) (294,747) (240,284) (142,322)
UF...................... (77,423) (144,345) (250,583) (424,069) (434,921) 138,509
Foreign Currency........ (203,592) (218,995) (217,823) (144,313) (76,698) 26,802
Total................. (447,625) (637,154) (752,353) (863,129) (751,902) 22,990
Ratio of cumulative gap to
cumulative total interest
earning assets
Ch$..................... (83.68)% (88.79)% (58.71)% (46.98)% (32.34)% (16.82)%
UF...................... (107.08)% (137.13)% (147.49)% (178.01)% (108.96)% 11.44%

Foreign Currency........ (547.85)% (236.46)% (155.82)% (52.67)% (22.13)% 5.95%
Total................. (145.06)% (125.85)% (94.84)% (75.74)% (50.51)% 0.92%

- ----------------------
(1) Includes loans (other than contingent loans) and investments.

(2) Includes deposits, Central Bank borrowings, repurchase agreements, mortgage
finance bonds and other interest bearing deposits (other than contingent
liabilities).

Variations in interest rate sensitivity may exist within the repricing
periods presented due to differing repricing dates within the period. Variations
may also arise among the different currencies in which interest rate positions
are held. As the above table reflects, our exposure to potential changes in
Chilean peso interest rates is increased by the fact that at December 31, 2003,
approximately 37.0% of our Chilean peso-denominated interest bearing liabilities
and 23.5% of our Chilean peso-denominated interest earning assets have a
repricing period of less than one month. Approximately 23.3% of our
UF-denominated interest bearing liabilities and 13.6% of our UF-denominated
interest earning assets have a repricing period of less than three months, which
is also the most common repricing period for UF-denominated time deposits. In
the case of interest earning assets and interest bearing liabilities denominated
in UF, our exposure to changes in interest rates is reduced by the fact that a
significant portion of the interest rate earned or paid on such assets or
liabilities is currently indexed to reflect the daily effect of inflation, and
as a result our exposure is limited to variations in the real interest rate
among such assets and liabilities. Further, a substantial part of our foreign
currency-denominated loans are funded by foreign currency borrowings and time
deposits with comparable maturity or repricing dates. Moreover, mortgage loans
which have five to 30 year terms, are financed through Mortgage Finance Bonds
issued for the same terms and in the same currency.

Cash Flow

The tables below sets forth our main sources of cash. The subsidiaries are
not an important source of cash flow for us and therefore have no impact on our
ability to meet our cash obligations. No legal or economic restrictions exist on
the ability of subsidiaries to transfer funds to us in the form of loans or cash
dividends as long as these subsidiaries abide by the regulations regarding loans
to related parties and minimum dividend payments.

Year ended December 31,
-------------------------------------------
2001 2002 2003
---- ---- ----
(in millions of constant Ch$ as of December
31, 2003)

Net cash (used in) provided by operating activities.......... (60,764) 32,954 219,661

Cash provided by operating activities decreased Ch$93,718 million in 2003
compared to 2002, reflecting a larger decrease in the net change in trading
investments in 2003 as in 2002, due to a better handling of the currency and
rate fluctuations prevailing over this two year period.

Year ended December 31,
-------------------------------------------
2001 2002 2003
---- ---- ----
(in millions of constant Ch$ as of December
31, 2003)

Net cash used in investing activities............................ (144,783) (535,387) (258,186)

Cash used in by investing activities decreased Ch$ 390,604 million in 2003
compared to 2002 as a result of a decrease in purchases of financial investments
and an increase in the proceeds from sales of investments in 2003 compared to
2002.

Year ended December 31,
-------------------------------------------
2001 2002 2003
---- ---- ----
(in millions of constant Ch$ as of December
31, 2003)

Net cash provided by financing activities........................ 159,889 617,690 87,037

Net cash provided by financing activities in 2003 decreased as compared to
2002, reflecting the decrease in securities sold under agreements to repurchase
(due to the improved handling of the currency and rate fluctuations), a smaller
increase in banker's drafts and other deposits (due to the economic environment)
and a 60% increase in the repayment of other long-term borrowings, due to the
prepayment of borrowings taking advantage of the appreciation of the Chilean
peso.

The table below provides information on our principal loans and liabilities
cash flows, based on the maturity or repricing period, the earlier and fair
values as of December 31, 2003.

Weighted- Weighted- Weighted- Weighted- Weighted
average average average average average
2003 Interest 2004 Interest 2005 Interest 2006 Interest 2007 Interest
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(in millions of constant Ch$ of December 31, 2003)

Assets
Commercial loans
$............... 272,892 3.40 25,263 6.65 11,199 6.96 12,977 3.36 38,331 0.99
UF.............. 199,999 2.93 47,001 3.83 39,749 4.61 31,095 4.68 18,950 6.01
Foreign Currency 57,930 1.08 18,167 0.28 28,536 0.97 15,839 0.35 13,575 2.39
Consumer loans
$............... 69,219 14.45 51,700 15.16 40,428 6.40 26,580 6.61 16,212 11.89
UF.............. 2,661 5.53 1,900 7.53 1,826 7.20 1,786 7.03 1,845 7.08
Foreign Currency 184 2.50 0 0.00 0 0.00 0 0.00 0 0.00
Mortgage loans
$............... 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
UF.............. 22,475 9.82 21,936 8.91 21,276 4.19 20,653 8.91 20,180 8.91
Foreign Currency 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
Foreign Trade
loans
$............... 18,949 4.08 3,736 2.30 926 0.00 140 0.00 0 0.00
UF.............. 2,082 1.68 40 0.00 0 0.00 0 0.00 0 0.00
Foreign Currency 155,661 2.22 15,502 0.33 11,551 0.17 6,318 0.20 3,052 0.03
Lease contracts
$............... 1,289 3.15 1,327 2.77 1 8.59 2,972 1.63 790 1.64
UF.............. 19,482 8.04 15,770 7.01 111 6.43 10,277 6.55 5,856 5.81
Foreign Currency 2,141 0.74 1,367 1.02 99 0.53 1,401 1.09 1,404 1.15
Other outstanding
loans
$............... 44,004 13.86 5,950 18.83 1,452 19.52 112 0.00 119 0.00
UF.............. 14,666 3.12 15,570 2.65 14,972 2.55 15,514 2.58 16,111 2.63
Foreign Currency 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
Total interest
earning assets
$............... 406,353 6.45 87,976 12.23 54,007 6.76 42,781 5.24 55,453 4.19
UF.............. 261,366 3.93 102,217 5.30 77,934 4.17 79,326 5.67 62,943 6.09
Foreign Currency 215,917 1.90 35,036 0.33 40,187 0.74 23,558 0.35 18,031 1.90
Liabilities
Time Deposits
$............... 833,189 3.74 59,449 5.22 1,681 8.47 1,000 7.20 0 0.00
UF.............. 569,621 1.55 43,907 2.49 13,069 3.25 6,218 4.05 212 5.09
Foreign Currency 89,008 1.63 0 0.00 0 0.00 0 0.00 0 0.00
Savings accounts
$...............
UF.............. 0 0.00 55,442 0.00 0 0.00 0 0.00 0 0.00
Foreign Currency
Central Bank
Borrowings
$............... 0 0 0 0 0 0 0 0 0 0
UF.............. 3,887 4.11 1,364 6.00 1,446 6.00 0 0.00 0 0.00
Foreign Currency 0 0 0 0 0 0 0 0 0 0

Weighted
average
2008 Interest
Amount Rate TOTAL Fair Value
------ -------- ----- ----------
(in millions of constant Ch$ of December 31, 2003)
Assets
Commercial loans
$............... 38,118 0.98 398,781 384,638
UF.............. 88,921 5.40 425,715 425,847
Foreign Currency 198 4.87 134,245 130,527
Consumer loans
$............... 13,577 10.44 217,714 223,176
UF.............. 5,518 6.58 15,536 15,539
Foreign Currency 0 0.00 184 184
Mortgage loans
$............... 0 0.00 0 0
UF.............. 156,202 4.97 262,722 311,010
Foreign Currency 0 0.00 0 0
Foreign Trade
loans
$............... 0 0.00 23,752 29,399
UF.............. 0 0.00 2,123 2,123
Foreign Currency 0 0.00 192,084 184,584
Lease contracts
$............... 395 8.49 6,775 6,734
UF.............. 29,879 5.84 81,375 81,611
Foreign Currency 5,022 1.43 11,435 11,366
Other outstanding
loans
$............... 4,200 0.00 55,837 55,837
UF.............. 388,555 2.16 465,388 465,253
Foreign Currency 0 0.00 0 0
Total interest
earning assets
$............... 56,290 3.24 702,859 699,783
UF.............. 669,075 3.45 1,252,859 1,301,384
Foreign Currency 5,220 1.56 337,948 326,661
Liabilities
Time Deposits
$............... 4,000 8.76 899,320 895,208
UF.............. 871 10.13 633,898 634,282
Foreign Currency 0 0.00 89,008 89,008
Savings accounts
$............... 0
UF.............. 0 0.00 55,442 55,442
Foreign Currency 0
Central Bank
Borrowings
$............... 0 0 0
UF.............. 0 0.00 6,697 6,049
Foreign Currency 0 0 0

Securities
subject to
agreements to
repurchase
$............... 22,266 2.25 0 0.00 0 0.00 0 0.00 0 0.00
UF.............. 0 0 0 0.00 0 0.00 0 0.00 0 0.00
Foreign Currency 149,455 1.97 0 0.00 0 0.00 0 0.00 0 0.00
Mortgage finance
bonds
$...............
UF.............. 43,648 7.53 21,195 6.58 20,162 6.71 19,581 6.68 18,725 6.69
Foreign Currency
Subordinated bonds
$...............
UF.............. 736 6.94 740 7.35 1,070 7.35 1,968 7.35 2,022 7.35
Foreign Currency
Other bonds
$...............
UF.............. 4,015 5.83 5,035 5.83 982 5.83 1,041 5.83 1,103 5.83
Foreign Currency
Borrowings from
domestic
financials
$............... 37,838 4.75 0 0.00 0 0.00 0 0.00 0 0.00
UF.............. 7,830 1.65 46 4.00 0 0.00 0 0.00 0 0.00
Foreign Currency 25,776 0.46 0 0.00 0 0.00 0 0.00 0 0.00
Foreign borrowings
$...............
UF..............
Foreign Currency 207,477 1.15 3,560 1.64 1,319 1.51 0 0.00 0 0.00
Other obligations
$............... 1,586 0 0 0 0 0 0 0 0 0
UF.............. 2,123 2.37 2,783 3.95 1,010 4.46 1,055 4.44 938 4.40
Foreign Currency 7,809 0.23 64 7.15 13 7.27 2 7.40 0 0.00
Total interest
bearing
liabilities
$............... 894,880 3.74 59,449 5.22 1,681 8.47 1,000 7.20 0
UF.............. 631,859 2.02 130,513 2.32 37,739 5.42 29,862 6.07 23,001 6.60
Foreign Currency 479,525 1.44 3,624 1.74 1,332 1.57 2 7.40 0

Weighted
average
2008 Interest
Amount Rate TOTAL Fair Value
------ -------- ----- ----------
(in millions of constant Ch$ of December 31, 2003)
Securities
subject to
agreements to
repurchase
$............... 0 0.00 22,266 22,266
UF.............. 0 0.00 0
Foreign Currency 0 0.00 149,455 149,455
Mortgage finance
bonds
$............... 0
UF.............. 143,126 6.23 266,437 297,088
Foreign Currency 0
Subordinated bonds
$............... 0
UF.............. 16,229 7.35 22,765 22,724
Foreign Currency 0
Other bonds
$............... 0
UF.............. 21,909 5.83 34,085 37,728
Foreign Currency 0
Borrowings from
domestic
financials
$............... 0 0.00 37,838 37,838
UF.............. 0 0.00 7,877 7,877
Foreign Currency 0 0.00 25,776 25,776
Foreign borrowings
$............... 0
UF.............. 0
Foreign Currency 0 0.00 212,355 212,355
Other obligations
$............... 0 0 1,586 1,586
UF.............. 3,551 4.14 11,460 11,974
Foreign Currency 0 0.00 7,888 7,888
Total interest
bearing
liabilities
$............... 4,000 8.76 961,010 956,898
UF.............. 185,686 6.26 1,038,659 1,073,164
Foreign Currency 0 484,482 484,482

Market Price Risk on Bonds Portfolio

Our investment policy is oriented principally to low risk instruments with
high liquidity. Over 58% of our portfolio consists of instruments from the
Central Bank. All investments are made in accordance with the limits for both
the instruments and for the specific issuer set by our Board of Directors. The
investment portfolio is valued on a daily basis to keep price risk under
control, and on a monthly basis to comply with the Superintendency's
requirements and to keep the instruments marked-to-market. See "Business
Overview--Chilean Regulation and Supervision". The potential loss to us over one
year that would have resulted from a hypothetical, instantaneous and unfavorable
change of 100 basis points in the interest rate applicable to our bonds
portfolio on December 31, 2003 would be approximately Ch$58,259 million. See
"--Asset and Liability Management" and "Business Overview--Chilean Regulation
and Supervision--Foreign Exchange".

Capital Expenditures

Capital expenditures in each of the years ended December 31, 2001, 2002 and
2003 totaled Ch$7,184 million, Ch$4,969 million and Ch$8,452 million,
respectively. Capital expenditures consist mainly of investments to upgrade our
communications and computer systems, improve existing branches and open new
branches. Such capital expenditures were funded with resources generated through
our operations. Our capital expenditures during 2004 will be used to further
improve our communications and computer systems and to develop additional
infrastructure.

Capital

According to the current General Banking Law, banks should have a minimum
ratio of Total Capital to Risk Adjusted Assets of 8%, net of required allowances
for loans losses, and a minimum ratio of Basic Capital to Total Assets of 3%,
net of required allowances for loan losses. For these purposes, Total Capital
means the aggregate of: (a) a bank's paid-in capital and reserves, excluding
capital attributed to subsidiaries and foreign branches, (b) its subordinated
bonds, calculated at the issue price but not exceeding 50% of its Basic Capital,
and (c) its voluntary allowances for loan losses, up to 1.25% of the Risk
Adjusted Assets. Basic Capital includes paid-in capital and reserves, but
excludes the net income for the period. Risk Adjusted Assets are based on total
assets on an unconsolidated basis, which are then classified into five
categories, each of which has a different weight.

Until 2003, the Bank's policy was to distribute 100% of its net income as
dividends. The Ordinary Shareholder's Meeting held on March 24, 2004, adopted a
new policy of distributing 50% of the dividends, effective in 2004, and
authorized the management to place newly issued subordinated bonds in order to
increase the Bank's capitalization, thus giving the Bank's room to continue its
accelerated growth.

C. Research and Development, Patent and License

Currently, we do not conduct any significant research and development
activities.

D. Trend Information.

Competition

outstanding. In the last five years, the average annual rate of increase in
outstanding loans for the Chilean financial system was 12.52% (compared with an
average annual rate of increase in GDP of 2.52% during the same period) and the
average annual return on average shareholders' equity was 13.12%.

Foreign-owned banks have been operating in Chile since the 1930s. More than
half of all Chilean banks are foreign-owned (considering those established in
Chile and those classified as subsidiaries of foreign banks), including us. Such
banks accounted for 40.0% of total loans made by the Chilean financial system at
December 31, 2003.

The Chilean market for financial services is highly competitive. We compete
with other Chilean private banks, and with Banco del Estado de Chile
("BancoEstado") that makes consumer credit available to an important portion of
the Chilean population. The middle and lower-middle income segments of the
Chilean population and the small and medium-size companies have become the
target of several banks and competition in those segments is likely to increase.

Limited barriers to entry and continued consolidation of the Chilean
banking industry have intensified price competition. We expect the trends of
increased competition and consolidation to continue, and result in the formation
of new large financial groups.

Regulations

Besides the activities linked to the subsidiaries, our operations profile
was expanded by permitting the execution of underwriting agreements for public
placement of stocks and the possibility of development for financial services
for third parties.

Regulators have stated that the above actions are part of a trend of
modernization that leads to an increasing internationalization of the
regulations. We expect such trends to continue, opening new windows of activity
for our business and increasing supervision. We believe such trend and the
globalization of the banking business will result in strategic alliances with
non-banking businesses and the formation of new and larger financial groups.

E. Off-Balance Sheet Arrangements

We do not have any off-balance sheet financings. We have no majority-owned
subsidiaries that are not included in our consolidated financial statements, nor
do we have any interests in or relationships with any special purpose entities
that are not reflected in our consolidated financial statements.

F. Tabular Disclosure of Contractual Obligations

The following table represents our contractual obligations and commercial
commitments as of December 31, 2003:

Payments due by Period
in millions of Ch$
Less than 1-3 4-5 After 5
Total 1 year years years years

Contractual obligations
Operating leases........................... 19,004 3,470 4,821 3,168 7,545
Unconditional purchase obligations......... 21,592 3,638 7,181 7,181 3,591
Other long-term obligations................ 15,140 1,620 4,056 2,704 6,760
Total contractual cash obligations......... 36,732 5,258 11,237 9,885 10,351

Commercial Commitments
Lines of credit............................ 89,142 76,917 6,679 1,995 3,551
Standby letters of credit.................. 211,603 206,724 4,879 -- --
Guarantees (contingent liabilities)........ 72,088 51,684 20,055 349 --
Standby repurchase obligations............. 111,098 111,098 -- -- --
Total commercial commitments............... 483,931 446,423 31,613 2,344 3,551

Our operating leases are leases of branch facilities, none of them
representing a relevant amount. Our only material contractual obligation
(registered under "Unconditional purchase obligations" together with a small
service contract with IBM) stems from a service contract signed with the BBVA
Group by which we process all of our data at the facilities of BBVA Bancomer, in
Mexico. See Note 15 to the Consolidated Financial Statements for information on
previous payments.

Other long-term obligations includes assorted service contracts (telephone,
maintenance, transportation of documents and of personnel, etc.). Other
contingencies and commitments with no specific maturity, as well as commitments
or responsibilities arising in the ordinary course of business are discussed in
Note 14 to the Consolidated Financial Statements.

See Note 14 to the Consolidated Financial Statements for more information
on our most relevant commercial commitments.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management.

Our administration is conducted by a Board of Directors which, in
accordance with our By-laws, consists of nine directors who are elected at
annual ordinary shareholders' meetings. The entire Board is elected every three
years; the current Board was elected at an Ordinary Shareholder's Meeting on
March 24, 2004. Cumulative voting is permitted for the election of directors.
The Board may appoint replacements to fill any vacancies that occur during
periods between elections. Our executive officers are appointed by the Board of
Directors and hold office at its discretion. Scheduled meetings of the Board of
Directors are held once a month. Extraordinary Board meetings are called when
summoned by the Chairman or when requested by at least five directors.

Our current directors and executive officers are as follows:

Directors Position
--------- --------

Jose Said Saffie(1)........... Director and Chairman
Vitalino Nafria Aznar........ Director and Vice Chairman
Gustavo Alcalde Lemarie....... Director
Ernesto Bertelsen Repetto..... Director
Gonzalo Torano Vallina........ Director
Ricardo Massu Massu........... Director
Antonio Martinez Jorquera..... Director
Jaime Said Handal(1).......... Director
Jose Fonollosa Garcia......... Director

Alternate Directors Position
------------------- --------

Carlos Area Usatorre.......... Alternate Director
Jose Domingo Eluchans U. ..... Alternate Director

- ----------------------
(1) Mr. Jose Said S. is the uncle of Mr. Jaime Said H.

Executive Officers Position
------------------ --------

Ramon Monell Valls............ General Manager
Maria Elisa Abovic W. ........ Manager-Legal Division(1)
Enrique Hosiasson............. Manager-Business Banking Division
Juan Escudero ................ Manager-Commercial and Personal Banking Division
Manuel Olivares............... Manager-Corporate Banking Division
Jaime Uribe .................. Manager-Treasury and Fund Management Division
Jose Joaquin Murguialday...... Manager-Credit Risk Division (2)
Jose Maria Jimenez............ Manager-Organization and Systems Division (3)
Marcos Balmaceda.............. Manager-Human Resources Division
Salvador Milan................ Manager-Planning and Financial Control Division
Jorge Cruz D. ................ Manager-Comptrolling Division
Magdalena Aninat S. .......... Manager-Development Division (4)

- ----------------------
(1) Ms. Abovic retired effective April 1, 2004. The current Manager of the
Legal Division is Mr. Rony Jara A.

(2) Mr. Murguialday was promoted to a position in Madrid, Spain, within the
BBVA Group, effective April 1, 2004. The current Manager of the Credit Risk
Division is Mr. Ignacio Perez-Caballero Martinez.

(3) The Administration Division was absorbed by the Organization and Systems
Division, effective May 2003.

(4) The Development Division was created on October 2003.

Subsidiaries
- ------------

Frank Leighton C. ............ General Manager-BBVA Brokerage
Alejandro Bertrand............ General Manager-BBVA Advisory
Eduardo Boizard............... General Manager-BBVA Residential Leasing
Ian Couso..................... General Manager-BBVA General Fund Manager
Ricardo Rosenbaum O. ......... General Manager-BBVA Insurance Brokerage

Set forth below are brief biographical descriptions of the directors and
executive officers of BBVA Banco BHIF, all of whom reside in Chile.

Directors

Jose Said S. has served as Chairman of our Board of Directors since 1994.
He also currently serves as Chairman of Parque Arauco and Envases Multipack and
as Vice-Chairman of Vital S.A. In addition, he serves as Director of
Embotelladora Andina and Envases del Pacifico. Mr. Said studied law at the
Universidad de Chile.

Vitalino Nafria A. currently serves as our Vice-Chairman. Mr. Nafria has
been a Director of BBVA Chile since 2002. He currently holds the position of
Director General for America at the BBVA Group. Prior to that, he was CEO of
BBVA Bancomer, a leading Mexican bank belonging to the BBVA Group. Mr. Nafria
joined the BBVA Group in 1966.

Ernesto Bertelsen R. has been a Director of BBVA Chile since 1987. He also
serves as Chairman of the Boards of Directors of BHIF Asesorias y Servicios
Financieros S.A. Mr. Bertelsen holds a degree in Finance and Administration from
the Universidad Adolfo Ibanez, Valparaiso, Chile.

Jose Fonollosa G. has been a Director of BBVA Chile since 2001. He
currently holds the position of Director General of Retail Banking for America
at the BBVA Group. Prior to that, he was Director for Europe and International
Operations and before that he was the CFO for the BBVA Group. Mr. Fonollosa
joined the BBVA Group in 1976.

Antonio Martinez-Jorquera L. has been a Director of BBVA Chile since 2001.
He currently holds the position of Director General of Corporate Banking for
America at the BBVA Group. Prior to that, he was the CEO at BBVA Banco Frances,
a leading bank in Argentina. Mr. Martinez-Jorquera joined the BBVA Group in
1969.

Ricardo A. Massu M. has been a Director of BBVA Chile since 1987, prior to
which time he lived in England and held positions at Bank of America
Corporation, Bank of America International Ltd. and Banco de Chile. Mr. Massu
received a Bachelors of Science and a Master in Business Administration from
Babson College in Wellesley, Massachusetts.

Gonzalo Torano V. has been a Director of BBVA Chile since 2003. Mr. Torano
is a managing Director at the BBVA Group and is currently the Head of Corporate
Development. He was previously Head of Corporate Finance and, prior to that, CEO
at Argentaria. Mr Torano holds a degree in Economics from the Universidad
Complutense de Madrid, Spain.

Gustavo Alcalde L. has been a Director of BBVA Chile since 2002. Since 2001
he is a member of the Senior Management Committee at the BBVA Group, and a board
member at BBVA Insurance. He is the CEO at AFP Provida since 1996. Mr. Alcalde
holds a degree in Finance and Administration from the Universidad de Chile.

Jaime Said H. has been a Director of BBVA Chile since 1987. Previously, he
served as the Vice-President and Chilean representative of the Republic Bank of
Dallas, USA. He received a degree from the Universidad Adolfo Ibanez,
Valparaiso, Chile and received a degree in Business Administration from Southern
Methodist University in Dallas, Texas.

Alternate Directors

Carlos Area has been an Alternate Director of BBVA Chile since 1998, prior
to which time he was the representative for the BBVA Group in Chile.

Jose Domingo Eluchans U. served as Director of BBVA Chile since 1987 to
1998, and from that date as Alternate Director. Since 1976, he has practiced law
at the offices of Edmundo Eluchans y Cia. He received his law degree from the
Escuela de Derecho de la Universidad Catolica de Chile in 1976.

Executive Officers

Ramon Monell V. became the General Manager of BBVA Chile on January 25,
2002. Prior to his appointment, Ramon Monell was an Assistant Director General
for BBVA, responsible for the Marketing and Development of Wholesale Business
and has a distinguished track record within the BBVA Group.

Maria Elisa Abovic W. has been the Manager of our Legal Division since
March 1997. Ms. Abovic has been employed by us since 1977 and held the position
of Assistant General Counsel from 1992 until she accepted her position as
Manager. She previously held the position of attorney to the Regional Planning
Secretariat of the Fifth Region and was a member of the Private Law Faculty of
the Universidad Catolica de Valparaiso. Ms. Abovic received her Law Degree from
the Universidad Catolica de Valparaiso.

Rony Jara A. has been the Manager of our Legal Division since April 2004.
He received his Law Degree from the Universidad Catolica de Chile. He also
obtained a M.Sc. LLM from Duke University. Mr. Jara has a distinguished
professional career at banking institutions such as Banco de A. Edwards and
Citibank.

Juan Escudero G. holds the position of Commercial and Personal Banking
Manager at BBVA Chile since April 2000. Prior to joining us, he was in charge of
Business Development at the Chile - Brazil region for BBVA. Mr. Escudero holds a
degree in Law.

Enrique Hosiasson S.. holds the position of Business Banking Manager at
BBVA Chile since April 2002. Previously he held the position of Regional Branch
Manager. Mr. Hosiasson holds a degree in Commercial Engineering from Universidad
Catolica de Chile.

Manuel Olivares R. holds the position of Corporate Banking Manager at BBVA
Chile since May, 2000. Previously he held senior credit officer positions at
Citibank (Chile). He holds a degree in Economics and Business Administration
from the Universidad de Chile.

Jaime Uribe currently holds the position of Division Manager for Treasury
and Fund Management at BBVA Chile since December 2001. He was previously
Treasury Manager at Banco Santander-Chile. Mr. Uribe holds a degree in
Engineering from the Universidad de Chile. He has a vast experience in the
finance areas of banks and subsidiaries in Chile.

Jose Joaquin Murguialday M. has been Credit Risk Manager of BBVA Chile
since October. Previously he held the positions of Corporate Banking Manager and
of Deputy Credit Risk Manager at the central offices of BBVA at Bilbao. Mr.
Murguialday holds a degree in Economics.

Ignacio Perez-Caballero Martinez, has been Credit Risk Manager of BBVA
Chile since April 14, 2004. He holds a degree in Economics and Management from
the Universidad de Zaragoza, Spain, an MBA from ESADE (Barcelona, Spain) and a
PDG from IESE (Madrid, Spain). Prior to his appointment at BBVA Chile, he worked
at the Credit Risk Division of Banco de Madrid, Deutsche Bank, Banco Exterior de
Espana, Argentaria and at the Central Credit Risk Unit at BBVA.

Jose Maria Jimenez T. has been Operations and Technology Manager of BBVA
Chile since August 2002. Prior to his current position, he was Director of the
America Organization at the BBVA Group, and before that he held senior
managerial positions at Argentaria. Mr. Jimenez obtained a degree in Economic
and managerial Sciences at the Universidad de Sevilla. He holds a master degree
from CEREM and an MBA from IESE.

Marcos Balmaceda M. has been Manager of Human Resources of BBVA Chile since
July, 2001. He received a degree in Agroindustrial Engineering and has also an
MBA from Universidad Adolfo Ibanez. Mr. Balmaceda has a vast experience at
multinational corporations.

Salvador Milan A. has been the Planning and Development Manager since
August 2002. Previously he held a similar position at AFP Provida, and a
position as Executive Vice-President and Finance and Logistics Director at BBV
Puerto Rico. Mr. Milan holds a degree in Economics and Managerial Sciences from
Universidad Central de Barcelona and followed graduate studies at CEPADE -
Universidad Politecnica de Madrid.

Jorge Cruz D. joined BBVA Chile in 1977. He serves as BBVA Chile's
Controller since April 23 2003. He previously held the position of Manager of
Administration since 1994 and, before that, the positions of Assistant Manager
of the Mortgage Loans Division, Assistant Manager of Operations and General
Accounting Manager, among others. Mr. Cruz was previously employed by the
Contraloria General of the Republic of Chile and Abaco S.A. He holds a degree in
Accounting.

Magdalena Aninat S. has been the Development Manager since October 2003.
Previously she was Human Resources Manager at Provida. She holds a degree in
Psychology from the Universidad Catolica de Chile.

Subsidiaries

Frank Leighton C. has been the General Manager of BBVA Corredores de Bolsa
S.A. since February 1998. Previously, he was the General Manager of Bancredito
S.A. Corredor de Bolsa. He received a degree in Business Administration from the
Universidad Diego Portales.

Alejandro Bertrand has been the General Manager of BBVA Asesorias y
Servicios Financieros S.A. (our investment banking team) since February 2001.
Mr. Bertrand holds an MBA from the Wharton School of the University of
Pennsylvania and an Engineering degree from Pontificia Universidad Catolica de
Chile.

Eduardo Boizard P. has been the General Manager of BBVA Residential Leasing
since its 2001. Previously, he was Branch Manager of our Corporate Office. He
holds a degree in Civil Engineering from the Universidad Catolica de Chile.

Ian Couso W. has been the General Manager of BBVA General Fund Manager
since October 2003, when all of our fund manager subsidiaries merged into one
General Fund Manager. At the time, he was the General Manager of BBVA Mutual
Fund. Previously, he was the Commercial Manager at Larrain Vial, a well known
brokerage house. He is an Industrial Civil Engineer from Universidad de Chile.
He also holds an MBA from Universidad Adolfo Ibanez.

Ricardo Rosenbaum O. has been the General Manager of BBVA Corredora Tecnica
de Seguros since February 2003. He has a degree in Agricultural Engineering with
a minor in Economics from the Universidad Catolica de Chile. Prior to joining
BBVA Corredora Tecnica de Seguros in 1998, Mr. Rosenbaum was Commercial Manager
at Tattersall Comercial S.A.

B. Compensation.

Compensation of Directors and Officers

For the year ended December 31, 2003, the aggregate amount of compensation
paid by us and our subsidiaries to all directors and executive officers was
Ch$1,590 million (US$2.65 million). Our policy is not to disclose to our
shareholders or otherwise make publicly available information relating to the
compensation of our individual directors and officers. Such disclosure is not
required under Chilean regulations.

No money was set aside or accrued by us to provide pension, retirement or
similar benefits for any of our directors or executive officers.

C. Board Practices.

Our administration is conducted by our Board of Directors which, in
accordance with our By-laws, consists of nine directors who are elected at an
annual ordinary shareholders' meetings. The entire Board is elected every three
years; the current Board was elected at an Ordinary Shareholder's Meeting on
March 24, 2004. Cumulative voting is permitted for the election of directors.
The Board may appoint replacements to fill any vacancies that occur during
periods between elections. Our executive officers are appointed by the Board of
Directors and hold office at its discretion. Scheduled meetings of the Board of
Directors are held once a month. Extraordinary Board meetings are called when
summoned by the Chairman or when requested by at least five directors.

Directors Committee

Law 19,705, published on December 20, 2000, established, among other
changes to corporate regulations, the need to create a Directors Committee in
order to reinforce self regulation strengthening the controls on the management
activities. This Committee has three members which are appointed by the Board of
Directors and holds office on January and July. It can also convene
extraordinary meetings any time as they see fit. On March 26, 2003,

the Board appointed Mr.Manuel Gonzalez Cid, Mr. Vitalino Nafria and Mr. Jose
Said. Afterwards Mr. Gonzalez resigned from the Board and was replaced by Mr.
Gonzalo Torano Vallina. On March 24, 2004, the Board appointed Mr. Gonzalo
Torano, Mr. Vitalino Nafria and Mr. Jose Said.

The Directors Committee has the following duties:

i) To examine the reports form the external auditors and, as required,
balances and statements of income presented by the management to the
shareholders, and to issue a verdict about them before they are
brought to the shareholders for their approval.

ii) To present to the Board a proposal on the external auditors and the
rating firms to be retained for the annual period, before the Board
makes the forma proposal to the Annual Shareholders' Meeting.

iii) To review the salaries and compensation plans for the senior
management.

iv) To examine all operations described in articles 44 and 89 of the
Corporate Law, and to issue a verdict about them. A copy of such
verdict shall be sent to the President of the Board, who will read it
at the Board meeting in which the operation is to be approved.

Audit Committee

Our Audit Committee was established on October 23, 1995, as described in
the Minutes of the board of directors dated October 23, 1995, on a
recommendation issued by the Superintendent of Banks on a note dated October
11, 1995. This committee meets quarterly in March, June, September and December
of each year. As of this date, the committee is composed of one director, Mr.
Ernesto Bertelsen; the CEO, Mr. Ramon Monell; the Controller, Mr. Jorge Cruz;
and the General Counsel, Mr. Rony Jara. If needed, the Committee can request
the additional participation of the external auditors. As of December 31, 2002,
the Audit Committee members were Mr. Bertelsen, Mr. Monell, Ms. Abovic (General
Counsel at that time) and Mr. Daniel Planas. Mr. Planas was promoted to a
position in another bank of the Group, and was replaced by Mr. Cruz on April
23, 2003. On April 2004, Ms. Abovic resigned from the Bank and was substituted
by Mr. Jara.

The Audit Committee presently has specific functions, approved by the Board
of Directors, as well as procedures that enable it to comply with its mission.
Its functions currently are:

o To supervise the sufficiency, adequacy and efficient functioning of
internal control systems in such a manner that ensures the
correctness, reliability, sufficiency and clarity of (i) our financial
statements as contained in the annual and quarterly reports, and (ii)
the accounting or financial information which may be required by the
Superintendency of Banks or other regulatory bodies, including those
pertaining to countries where we carry out activities;

o To monitor our compliance with applicable domestic or international
regulations in matters relating to money laundering, conduct in the
securities markets, data protection, and competition, as well as to
ensure that requests for information or action made by official bodies
holding competency in these areas are fulfilled in time and form;

The board member that integrates the Committee reports each month to the
Board.

On May 6, 2003, the Superintendency of Banks issued new regulations that
make the Audit Committee an obligatory and essential part of the internal
control systems in all Chilean financial institutions. Under the new
regulations, this committee will be vested with the powers and resources
necessary for the exercise of its fundamental function within the corporation.
In accordance with the regulations and with our principles of corporate
governance, it will be formed exclusively by independent directors, with the
dedication, capacity and experience necessary for carrying out this duty. This
Committee shall have specific rules, approved by the Board of Directors, which
determine its functions, and establish the procedures to enable it to comply
with its mission. Among its functions will be:

o To monitor our compliance with applicable domestic or international
regulations relating to money laundering, conduct in the securities
markets, data protection, and competition, as well as to ensure that
requests for information or action made by official bodies holding
competency in these areas are fulfilled in time and form;

o To ensure that the code of ethics and code of conduct applicable to
our personnel meet regulatory requirements and are adequate; and

o To monitor compliance of directors with the provisions contained in
the Directors' Code, as well as with regulations applicable to conduct
in the securities markets.

The committee shall be able to outsource the contracting of advisory
services in material matters when it is considered that, due to reasons of
specialization or independence, these cannot be rendered by our experts or
technical staff. This new regulation will be effective no later than the year
2004, and is presently in the process of being implemented at our bank.

Compensation Committee

Currently we do not have a Compensation Committee.

D. Employees.

At December 31, 2003, we had 1,771 employees, approximately 47% of whom
belonged to one union, the Sindicato Unificado de Trabajadores del BBVA Banco
BHIF. All management positions are held by non-union employees. We are party to
one collective bargaining agreement which covers all of our unionized employees
and which was renewed in April 2001 for 36 additional months, commencing in May
2001. We have only experienced a one-week strike since the union's formation in
1983 and consider relations with our employees to be good. Of our 1,771
employees, 59 were employed by our subsidiaries at December 31, 2003.

E. Share Ownership.

As of May 31, 2004, the members of our Board of Directors owned an
aggregate of 338,008,893 shares of BBVA Chile as shown in the table below.

Directly % of
Owned Indirectly Capital
Name Shares Owned Shares Total Shares Stock
---- -------- ------------ ------------ -------

Chairman:
Jose Said...................... 971 61,078,536 61,079,507 16.91%
Vice Chairman:
Vitalino Nafria (1)........... - 238,498,607 238,498,607 66.03%
Directors:
Gustavo Alcalde (1)............ - - - 0.00%
Gonzalo Torano (1)............. - - - 0.00%
Jose Fonollosa (1)............. - - - 0.00%
Antonio Martinez (1)........... - - - 0.00%
Ernesto Bertelsen (2).......... - - - 0.00%

Directly % of
Owned Indirectly Capital
Name Shares Owned Shares Total Shares Stock
---- -------- ------------ ------------ -------

Jaime Said (2)................. - 19,567,147 19,567,147 5.42%
Ricardo Massu (2).............. - 18,863,632 18,863,632 5.22%
Total............................. 971 338,007,922 338,008,893 93.57%

- ----------------------
(1) These Directors have been appointed to act on behalf of the BBVA Group.
(2) These Directors have been appointed to act on behalf of the local
shareholders who signed the Shareholders Agreement with the BBVA Group.

As of May 31, 2004, the executive officers and their families owned less
than 1,000,000 shares. None of our senior executives holds 1% or more of our
shares.

See Item 7 for other share ownership information.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders.

Principal Shareholders

We are controlled by BBVA. As of December 31, 2003, BBVA controlled 66.03%
of our outstanding shares ("the Shares"). Our former principal shareholders, the
Said Group, the Massu Group, the Sumar Group and Fundacion (the "Former
Principal Shareholders"), held 30.55% of our outstanding shares as of December
31, 2003 with the balance of the outstanding shares being held by the public.
Our principal shareholders do not have different voting rights from the public.

BBVA, a banking corporation organized in Spain, of which no natural or
legal person owns more than 2%, obtained control of BBVA Chile through: (i) the
acquisition of 40,637,415 shares of Banco BHIF for an aggregate price of
Ch$20,821,157,368 and (ii) the subscription, on September 24, 1998, of
158,034,393 newly-issued shares of Banco BHIF that were issued in accordance
with the shareholders' resolution passed at the Extraordinary Shareholders'
Meeting held on August 21, 1998. Ch$69,301,321,035 of the total purchase price
of Ch$126,002,401,882 was paid by BBVA in cash, and the balance of
Ch$56,701,080,847 was paid within two years from the date of the subscription.

BBVA undertook the above-referenced transactions in accordance with a
subscription and share purchase agreement which had been entered into by BBVA
and the Former Principal Shareholders on June 18, 1998. In addition, pursuant to
such agreement, BBVA and the Former Principal Shareholders entered into a
separate agreement which governs our future administration. The Former Principal
Shareholders also entered into an agreement among themselves with respect to our
future administration.

Since 1996, we have only Common Shares, all of which have equal voting
rights. Each of the ADSs represent 10 Common Shares and each has the voting
power of the corresponding 10 shares.

The Said Group

The Said Group controlled 22.33% of our outstanding Shares as of December
31, 2003. The Said Group plays a major role in certain industrial and commercial
sectors in Chile, controlling Embotelladora Andina (Coca-Cola bottling company
in Santiago) and Parque Arauco (one of Chile's largest shopping centers), among
other entities. In addition, the Said Group is a controlling shareholder in Rio
de Janeiro Refrescos (Coca-Cola bottler in Brazil). The Said Group is jointly
controlled by Mr. Jose Said S., who is the Chairman of our Board of Directors,
and Mr. Jaime Said D, who is also a member of our Board of Directors.

100

The Massu Group

The Massu Group controlled 5.22% of our outstanding Shares as of December
31, 2003. In addition to BBVA Chile, the Massu Group holds significant interests
in Banco Boliviano Americano, Bifactoring, BHIF America Life Insurance Co. and
certain real estate businesses. Mr. Ricardo Massu, the head of the Group, is a
member of our Board of Directors.

The Sumar Group

The Sumar Group controlled 3.0% of our outstanding Shares as of December
31, 2003. In addition to its significant minority interest in BBVA Chile, the
Sumar Group is primarily engaged in the textile industry through Manufacturas
Sumar, one of the largest textile companies in Chile.

101

The following table shows the percentage of shares owned by the Principal
Shareholders, as of May 31, 2004.

Common Shares
Owner(1) (Thousands) Voting Power
-------- ------------- ------------

BBVA...................................... 238,498,607 66.03%
Said Group................................ 80,646,654 22.33%
Massu Group............................... 18,863,632 5.22%
Sumar Group............................... 10,840,918 3.00%
Other..................................... 12,372,216 3.43%
----------- ------
Total................................ 361,222,027 100.00%
=========== ======
- ----------------------
(1) Certain shares owned by the Principal Shareholders have been pledged to
secure obligations the aggregate amount of which is not material compared
to the value of the shares pledged.

At December 31, 2003, there were 5 holders of record of Common Shares
in the form of ADSs. It is not practicable for us to determine the number of
ADSs or Common Shares beneficially owned in the United States. Approximately
0.8% of the shares were property of non-Chilean stockholders.

B. Related Party Transactions.

Interest Of Management In Certain Transactions

In accordance with the General Banking Law, related parties are defined as
individuals and companies who are directors, officers or shareholders who own
more than 1% of our shares. Companies in which a director, officer or
shareholder holds more than a 5% interest are also considered to be related
parties, as well as companies that have common directors with us. In addition,
the Superintendency of Banks can classify any individual or company as "related
party" based on its own judgment. Article 89 of the Chilean Corporations' Act
requires that a Chilean company's transactions with related parties be on a
market basis or on terms similar to those customarily prevailing in the market.

Under the General Banking Law, a bank may not grant loans to related
parties (including holders of 1% or more of its shares) on more favorable terms
than those generally offered to non-related parties. Loans to directors,
management and companies in which such individuals have a participation of 5% or
more of equity or net earnings are not permitted under the General Banking Law.
The aggregate amount of loans to related parties may not exceed a bank's Total
Capital. Under the General Banking Law, transactions between a bank and its
affiliates are subject to certain additional restrictions. See "Regulation and
Supervision--Lending Limits".

At December 31, 2003, loans to directors and officers amounted to Ch$12,334
million (US$ 20.6 million), or 4.7% of our regulatory capital at such date. The
total amount of these loans was distributed among 1,462 borrowers, with the
average loan being Ch$8.4 million. All of such loans are current and were made
in substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons. See
Note 15 to the Consolidated Financial Statements. Expenses incurred by us in
connection with services rendered by related parties were Ch$3,140 million
(US$5.2 million), Ch$2,803 million (US$4.7 million) and Ch$2,764 million (US$4.6
million) for 2001, 2002 and 2003.

102

C. Interests of Experts and Counsel.

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and other Financial Information.

See Item 18 for the Company's Financial Statements.

See Item 10 for the BBVA Chile's dividend distribution policy.

Legal or Arbitration Proceedings

Until July 23, 1999, Banco BHIF, currently BBVA Chile, had an obligation to
administer the adjustment account (the "Adjustment Account"), arising from the
purchase agreement for the shares of the former Banco Nacional, dated as of July
23, 1989.

Our management and legal counsel believe that we would not suffer
additional material losses due to claims brought by the selling party in
connection with the administration of the "Adjustment Account". Our reasons are
as follows:

In the purchase agreement, certain principal shareholders of ours acquired
97% of the shares of Banco Nacional from a group of companies and individuals
related to the selling party. The acquisition was undertaken with a view to the
merger of the former Banco Nacional with Banco BHIF, which was completed on
November 15, 1989.

In connection with the acquisition of the shares of former Banco Nacional
and its subsequent merger with Banco BHIF, we agreed that certain loans due from
the sellers to Banco Nacional would be consolidated into UF-denominated loans,
scheduled to be repaid over a period of 12 years. The purchase agreement
provided that (i) the amount of recoveries on certain of Banco Nacional's loans,
selected by the sellers under the terms of the purchase agreement (Adjustment
Account), exceeding the net book value of the loans, and (ii) an amount equal to
the amount of allowance for loan losses released as a result of improvements in
the classification of the loans included in the Adjustment Account, would be
credited on a quarterly basis to the Adjustment Account and treated as the
payment of interest and principal due from the sellers.

The purchase agreement also provided that any dispute relating to the
interpretation of the agreement or the fulfillment of the parties' respective
obligations thereunder would be submitted to arbitration.

On July 23, 1989, the Adjustment Account was divided in two parts with
terms of five and ten years, respectively. The latter, together with the
sellers' right to the Adjustment Account, expired on July 23, 1999, as mentioned
above.

Due to several disagreements between the sellers, us, our former management
and the buyers, the parties signed an agreement on November 27, 1996 in which
they agreed to submit all present and future disputes relating to the purchase
agreement to arbitration, including those relating to the Adjustment Account,
but excluding any possible future legal actions relating to the collection of
loans which would be submitted to the ordinary courts.

The arbitrators accepted their appointment on February 3, 1997 and the
arbitration court was constituted on April 8 of that year. On June 9, 1997, the
parties agreed on the procedures to be followed in the arbitration process.

To date, the sellers and we have submitted various claims to the
arbitration court, giving rise to several trial procedures that have been
labeled as "Claims" and assigned a correlative number.

During 2001, judgments were rendered on two of the Claims". With respect to
Claim 1 we were sentenced to pay UF 19,062 plus interest, totaling UF38,003.20.
We complied and credited the equivalent amount in Chilean pesos to the
liabilities due to us by Cidef S.A., the lowest rated company of the Errazuriz
Group. With respect to

103

Claim 2 we were required to pay UF8,292.12 plus interest, totaling UF11,216.55.
The payment was remitted to the court in the equivalent amount of Chilean pesos.
A significant portion of the latter amount was retained in favor of BBVA Chile
in relation to the proceedings brought against the Errazuriz Group of companies,
that were submitted to the ordinary courts.

In 2002, judgments were rendered on seven of the Claims, and four judgments
were against us. With respect to Claim 3, we were sentenced to pay a total of
UF10,206.67, and we complied by crediting the equivalent amount in Chilean pesos
to the liabilities due to us by Cidef S.A. With respect to Claim 12, we were
required to pay UF6,053.33 plus interest, and we complied partially by
crediting the equivalent of the principal amount in Chilean pesos to the
liabilities due to us by Cidef S.A., while waiting for the interest to be
established. With respect to Claim 5, we were sentenced to pay UF27,431.02 plus
interest. We have not been able to comply because the Errazuriz Group improperly
transferred its right to collect from us in connection with Claim 5 and it has
not been possible to determine who the present creditor is. With respect to
Claim 6, we were sentenced to pay UF42,715.55 plus interest. This payment is on
hold pending the outcome of an appeal we have filed with respect to this
judgment.

Judgments for three of the seven Claims were in our favor. With respect to
Claim 17, the arbitration panel accepted arguments and determined that Comercial
Las Dalias S.A. was not our creditor. With respect to Claim 9, the arbitration
panel disallowed an allegation asking us to pay UF4,071.44 plus interest as
indemnification. With respect to Claim 4, the arbitration panel rejected both
our claim and the Errazuriz Group`s counterclaim.

In 2003, judgment was rendered on Claim 10, requiring us to pay a total of
UF2,311. The credit is still in the process of being liquidated. Judgment was
also rendered on Claim 7, and we complied by crediting the equivalent of
UF9,261.29 in Chilean pesos to the liabilities due to us by companies of the
Errazuriz Group who are beneficiaries of the Adjustment Account. Judgment was
also rendered on Claim 11, requiring us to pay a total of UF65,373 plus
interest. This payment is on hold pending the outcome of an appeal we have filed
with respect of this judgment.

The following is the status of the remaining claims: Two will begin the
discussion period and three have already concluded it; seven will begin the
period of producing evidence, one is in the process of evidence production and
three have concluded such period; three are in the process of sentencing and two
are pending documentation to this effect; and finally, four claims are in the
process of resolution of certain issues which will determine their procedural
status.

Considering the procedural stage of some of the pending proceedings and the
complexity of the matters dealt with in others, it is not possible to determine
the likely outcome of the actions brought against us. Although our management
believes that the legal arguments presented by the sellers in support of these
actions lack merit, no assurance can be given that the final outcome will not be
adverse to us.

By the end of year 2000, the Bank was notified of seven payments in court
and set off effected by debtors of the Errazuriz Group, beneficiaries of the
Adjustment Account, with the purpose of satisfying the total amount of their
liabilities. In all of them, it was declared the absolute incompetence of the
court, resolution(s) that has (have) been appealed.

Due to the aforementioned, the Bank filed with the ordinary courts several
actions requesting payment of all amounts due by each of the companies of the
Errazuriz Group, based on their waiver of term. As of this date, in six of these
actions sentence has already been rendered, and in one case is about to be
rendered. From the cases sentenced, three of the judgments favored the Bank, and
the others were rejected due to formal causes, as the payment offers and
subsequent in court payments would not imply a waiver of term; however, all of
these judgments recognize the existence of such credits. All sentences were
appealed by the Bank and/or the defendants, and these appeals are awaiting
public hearing.

Also in year 2000, the Bank was notified of other payments into court and
set off effected by debtors of the Errazuriz Group that are not beneficiaries of
the Adjustment Account, aimed at paying off the total amount of their
obligations. Due to this, the Bank also filed an action against these three
debtors demanding full payment of the amounts due; as of this date, a sentence
favorable to the Bank was obtained in two of such actions; the other has not yet
been sentenced.

104

As of this date, the Errazuriz Group has filed with the Ordinary Courts
four legal actions against the Bank based on the arbitration judgments issued in
claims 1, 3, 5, 6, 7, 10 and 12. In all these actions, the Bank presented the
respective defenses, as they are founded on an intention of demanding cash
payment of liabilities that the Bank applied to certain indebtedness (claims 1,
3, 7, 10 and 12); on the irregular assignment of credits (claim 5); or on
demanding payment of obligations not yet due and payable (claim 6). The status
of these actions is, respectively, the following: one, which discussion period
has ended; one in a preliminary investigation stage; one about to be sentenced,
and one that was declared as abandoned; this latter resolution was appealed.

During year 2003, the Bank filed two challenge actions against the
arbitrators, one of which was rejected or denied in first instance, and the
other is in the period of producing evidence. During year 2004, on April 1st the
Bank filed one challenge action against the arbitrators, which is in the course
of litigation. During year 2003, the Bank filed two disciplinary proceedings,
which were rejected; and one proceeding for total nullity of payment, which is
still in the period of producing evidence.

The Bank also filed two criminal complaints, one for breach of duties
against an expert, and the other for forgery and misuse of public instrument;
both are in the course of litigation. During year 2004, the Bank also filed
three criminal complaints, for different types of fraud, which are in the course
of litigation.

Finally, the Errazuriz Group filed three criminal complaints for fraud,
which are still in a preliminary stage of investigation, and one criminal
complain for infraction to the General Banking Law. Notwithstanding the
procedural status of these complaints, it is expected that no guilty verdict
will be rendered against any executive or employee of the Bank.

CORFO-Inverlink Case

A filing was made by Corporacion de Fomento de la Produccion (CORFO) of a
civil action against BBVA Corredores de Bolsa S.A., as per Article 103 bis of
the Criminal Procedure Code, assigning the latter the capacity of liable third
party as former employer of Mr. Juan Pablo Prieto. CORFO filed this second
complaint at the 2nd Criminal Court of Santiago (Case File No.: 176,739-MV) to
complement, among others, the one filed against the aforementioned ex operator.

Course of litigation: Exercise of the civil action filed results in the
interruption of the running of the statute of limitations, as complaint must be
formalized at the plenary. Alternatively, CORFO may as of now file a complaint
with the civil courts, something that, according to information available to us,
has not yet done. A bail was furnished for Banco Bilbao Vizcaya Argentaria,
Chile to guarantee payment of any pecuniary obligation that may be imposed on
the Broker in the final sentence. On March 19, 2004, and as a result of an
accusation made personally by the Bank's external lawyers in order to obtain an
investigation of possible illicit penalized acts (simulation of operations,
false instruments and others) the Court opened a criminal investigation. On
May 27, 2004, it was ruled that Corfo's accountants had incurred in accounting
misrepresentations, punishable acts included in Article 100 of the Tax Code, a
proceeding that may only be initiated as a result of a lawsuit filed by the
Internal Revenue Service or the Council for Defense of the State, which has not
occurred to this date.

Sanction imposed by the SVS: This institution fined BBVA Corredora de
Bolsa S.A. in the amount of UF1,200 because of its supposed administrative
responsibility. This sanction was challenged by BBVA Corredora de Bolsa S.A. on
the ordinary courts. As of this date the sentence is pending to be rendered.

Item 9. The Offer and Listing.

A. Offer and Listing Details.

Nature Of Trading Market

On June 24, 1996, we completed the public offering in Chile and
internationally (the "Combined Offering") of our Series G common shares ("Series
G Shares") and American Depositary Shares each representing ten Series G Shares.
Prior to the Combined Offering, we had six series of shares (A through F)
outstanding. Upon discharge in

105

full of the Central Bank Subordinated Debt, each outstanding share of Series A
through F was converted into a Series G Share. Following the Combined Offering,
the public market for the ADSs and for Series G Shares in the United States,
Chile or elsewhere improved significantly. At an Extraordinary Shareholders'
Meeting held on April 1, 1997, the name of the Series G Shares was changed to
Common Shares. As of December 31, 2003, 66.03% of the outstanding Shares of our
capital stock was held by BBVA, 30.55% was held by the Former Principal
Shareholders (and entities controlled by or affiliated with them), 0.80% was
held by investors abroad in the form of ADSs and 2.63% was held by Chilean
institutional investors, with no significant stock being held by the public.

Market Volume and Price Information

During 2003, Common Shares were traded daily on the Santiago Stock Exchange
at a rate of 0.010% of the average number of Common Shares outstanding during
2003, accounting for approximately 0.29% of the trading volume on the Santiago
Stock Exchange over the same period. During 2003, the ADSs were also traded
daily on the NYSE, at a rate of 0.03% of the average number of Common Shares
outstanding during 2003.

The table below sets forth, for the periods indicated, the reported low and
high closing prices and daily average trading volumes for Common Shares, where
indicated, on the Santiago Stock Exchange and on the New York Stock Exchange.
See "Exchange Rates" for the exchange rates applicable during the periods set
forth below. The information set forth in the table below reflects actual
historical amounts at the trade dates and has not been restated in constant
Chilean pesos.

Daily Average
Shares Ch$ per Share Daily Average ADR US$ per ADR
------------- ------------- ----------------- -----------
Year ended December 31, Trading Trading
Volume Low High Volume Low High
------------- ---- ----- ----------------- --- ----

1999...................... 27,836 343 875 14,035 7 17
2000...................... 12,259 740 950 2,836 14 19
2001 ..................... 40,237 830 1,080 12,761 12 18

2002
First Quarter............. 60,506 770 920 5,259 12 14
Second Quarter............ 127,719 760 840 5,025 11 13
Third Quarter............. 128,837 700 850 14,332 10 12
Fourth Quarter............ 270,148 800 950 14,482 11 14

2003
First Quarter............. 47,549 935 1,010 4,187 13 14
Second Quarter............ 15,089 1,000 1,120 1,476 13 15
Third Quarter............. 48,219 1,050 1,325 1,001 15 19
Fourth Quarter............ 33,934 1,290 1,800 2,581 19 30
December.................. 60,133 1,569 1,600 143 24 25

2004
January................... 3,427 1,425 1,569 1,886 23 27
February.................. 21,130 1,425 1,600 1,150 23 27
March..................... 7,256 1,550 1,685 1,070 26 29
April..................... 884 1,500 1,600 268 25 26
May....................... 2,694 1,500 1,600 648 24 26

Source: Santiago Stock Exchange, New York Stock Exchange.

On December 31, 1999, the closing sale price per ADS on the New York Stock
Exchange was US$14.88. On December 31, 2000, the closing sale price per Common
Share on the Santiago Stock Exchange was US$1.47 On December 31, 2000, the
closing sale price per ADS on the New York Stock Exchange was US$14.8. On
December 31, 2001, the closing sale price per Common Share on the Santiago Stock
Exchange was Ch$920 (equivalent to US$1.4 at Ch$656.20 per US$1.00, the Observed
Exchange Rate on such date). On December 31, 2001, the closing

106

sale price per ADS on the New York Stock Exchange was US$13.40. On December 31,
2002, the closing sale price per Common Share on the Santiago Stock Exchange was
Ch$940 (equivalent to US$1.32 at Ch$712.38 per US$1.00, the Observed Exchange
Rate on such date). On December 31, 2002, the closing sale price per ADS on the
New York Stock Exchange was US$13.17. On December 31, 2003, the closing sale
price per Common Share on the Santiago Stock Exchange was Ch$1,569 (equivalent
to US$2.62 at Ch$599.42 per US$1.00, the Observed Exchange Rate on such date).
On December 31, 2003, the closing sale price per ADS on the New York Stock
Exchange was US$24.90. On April 30, 2004 the closing sale price per Common Share
on the Santiago Stock Exchange was Ch$1,500 (equivalent to US$2.40 at Ch$624.84
per US$1.00, the Observed Exchange Rate on such date). On April 30, 2004, the
closing sale price per ADS on the New York Stock Exchange was US$25.40. On
May 31, 2004, the closing sale price per ADS on the New York Stock Exchange was
US$24.10.

At December 31, 2003, there were 5 holders of record of Common Shares. It
is not practicable for us to determine the number of ADSs or Common Shares
beneficially owned in the United States. Approximately 0.80% of the shares were
property of non-Chilean stockholders.

The ADSs and the Common Shares have been listed on the New York Stock
Exchange and on the Santiago Stock Exchange since June 18, 1996, respectively.

Dividends

The terms of the Central Bank Subordinated Debt imposed a limit on the
amount of dividends we could pay on its Shares. See "Central Bank Subordinated
Debt". After repayment in full of the Central Bank Subordinated Debt, there are
no legal restrictions on the payment of dividends from our net income. The
shareholders may determine upon recommendation of the Board of Directors to
distribute a percentage of net income in any given year in order to maintain our
ability to meet the targets of the annual Investment and Financing Policy
approved by the shareholders' meeting.

Dividends payable to holders of ADSs will be paid net of foreign currency
conversion fees and expenses of the Depositary and will be subject to Chilean
withholding tax currently imposed at a rate of 35% (subject to credits in
certain cases as described under "Taxation"). Owners of the ADSs will not be
charged any dividend remittance fees by the Depositary with respect to cash
dividends. See "Taxation".

Chilean law requires that holders of shares of Chilean companies that are
not residents of Chile register as foreign investors under one of the foreign
investment regimes established by Chilean law in order to have dividends, sale
proceeds or other amounts with respect to their shares remitted outside Chile
through the Formal Exchange Market. Under the Foreign Investment Contract, the
Depositary, on behalf of ADS holders, will be granted access to the Formal
Exchange Market to convert cash dividends from Chilean pesos to U.S. dollars and
to pay such U.S. dollars to ADS holders outside Chile. See "Exchange Controls
and Other Limitations Affecting Security Holders".

Under the current Ley General de Bancos (the "General Banking Law"), a
Chilean bank may only pay a single dividend per year (i.e., interim dividends
are not permitted). Pursuant to our By-laws, the annual dividend is proposed by
the Board of Directors and approved by the shareholders at the annual ordinary
shareholders' meeting held in the first four months of the year following the
year with respect to which the dividend is proposed. Following shareholder
approval, the dividend is declared and paid to shareholders of record on the
fifth business day preceding the date set for payment of the dividend. The
applicable record dates for the payment of dividends to holders of ADSs will, to
the extent practicable, be the same. Under the Chilean Corporations' Act,
Chilean public corporations are generally required to distribute at least 30% of
their earnings (calculated in accordance with Chilean GAAP) as dividends, but a
bank is permitted to distribute less than such minimum amount in any given year
if the holders of at least two-thirds of the bank's outstanding stock so
determine.

A. Plan of Distribution

Not applicable.

107

B. Markets

The ADSs and the Common Shares have been listed on the New York Stock
Exchange and on the Santiago Stock Exchange since June 18, 1996, respectively.

C. Selling Shareholders

Not applicable.

D. Dilution

Not applicable.

E. Expenses of the Issue

Not applicable.

Item 10. Additional Information.

A. Memorandum and Articles of Association.

Set forth below is certain information concerning our share capital and a
brief summary of certain significant provisions of our By-laws and Chilean law.
This description contains all material information concerning the Shares, and is
qualified in its entirety by reference to the By-laws (a copy of which has been
filed as an exhibit to this 20-F), the General Banking Law, the Chilean
Corporations' Act and the Ley de Mercado de Valores No. 18,045 (the "Securities
Market Law"), each referred to below.

General

Shareholders' rights in a Chilean bank that is also an open-stock (public)
corporation are governed by the corporation's estatutos (which effectively serve
the purpose of both the articles or certificate of incorporation and the by-laws
of a company incorporated in the United States), by the General Banking Law and
by the provisions of the Chilean Corporations' Act applicable to open stock
corporations. Article 41 of the General Banking Law establishes that the banks
are governed by this law and, in subsidy, by the provisions of the Law on
Joint-stock Companies, as soon as they can conciliate or they are not against
its rules; also, Article 137 of the Chilean Corporations' Act provides that all
provisions of the Chilean Corporations' Act take precedence over any contrary
provision in a corporation's estatutos. Both the Chilean Corporations' Act and
our By-laws provide that legal actions by shareholders against us (or our
officers or directors) to enforce their rights as shareholders or by one
shareholder against another in their capacity as such are to be brought in Chile
in arbitration proceedings or, at the option of the plaintiff, in the ordinary
courts in Santiago, Chile.

The Chilean securities markets are principally regulated by the SVS under
Securities Market Law and the Chilean Corporations' Act. In the case of banks,
compliance with these laws is supervised by the Superintendency of Banks. These
two laws provide for disclosure requirements, restrictions on insider trading
and price manipulation, and protection of minority investors. The Securities
Market Law sets forth requirements relating to public offerings, stock exchanges
and brokers and dealers, and outlines disclosure requirements for companies that
issue publicly offered securities. The Chilean Corporations' Act sets forth
rules and requirements for establishing open stock corporations while
eliminating government supervision of closed (closely-held) corporations. Open
stock (public) corporations are those with 500 or more shareholders, or
companies in which 100 or more shareholders own at least 10% of the subscribed
capital, excluding those shareholders who individually, or through other
individuals or companies, exceed such percentage, and all other companies that
publicly offer their stock.

Ownership Restrictions

Under Article 12 of the Securities Market Law and the regulations of the
Superintendency of Banks, certain information regarding transactions in shares
of banks must be reported to the SVS and the Chilean stock exchanges.
Shareholders of a bank who are holder of 10% or more of such bank's capital or
directors, general managers or

108

managers of such bank are required to report to the SVS and the Chilean stock
exchanges any direct or indirect acquisition or sale of shares or options to buy
or sell shares, in any amount.

Additionally, there are also reporting requirements for any shareholder who
controls 10% or more of a bank, to identify in each purchase of shares, whatever
its number may be, if his final intent is to control the company or to make an
investment.

A beneficial owner of ADSs representing 10% or more of our share capital
will be subject to these reporting requirements under Chilean law.

Under Article 54 of the Securities Market Law and the regulations of the
Superintendency of Banks, any person who directly or indirectly, pretends to
take over the control of a bank that makes a public offer of its shares,
regardless of the form of acquisition of the shares, including that which could
be made by direct subscriptions or private transactions, shall previously report
such fact to the public in general.

For the purposes indicated in the preceding paragraph, written notice will
be sent to such effect to the stock corporation that it is intended to control,
to the companies that are the controllers and are controlled by the company
whose control it is intended to obtain, to the SVS and to the Stock Exchanges
where such securities are traded. With the same purpose, a prominent notice will
be published in two newspapers of national circulation. The communication and
the publication just mentioned shall be made, at least, ten business days in
advance from the date on which it is pretended to implement the act that will
permit obtaining the control of the respective stock corporation and, in any
event, as soon as negotiations have commenced tending to achieve its control,
through the delivery of information and documents of that company. Violation of
this article will not invalidate the operation, but shall give the shareholders
or third parties who are interested the right to demand indemnification for
damages caused, apart from the pertinent administrative penalties.

Should it be intended to obtain control through an offer regulated in Title
XXV of the Securities Market Law the provisions of such Title shall be applied
exclusively. On December 20, 2000, it was enacted the new tender offer law
(known as "OPA Law") which in general terms, regulates transactions through
which control of a corporation that makes public offer of its shares changes, as
well as transactions in which a controlling shareholder or group increases
control to over 66 2/3%. For this purpose, "control" means de facto control,
being the acquisition of a sufficient shareholding to permit the acquirer to
exercise the majority of the votes in shareholders' meetings, thus allowing for
the election of a majority of the board of directors of the target company, or
to allow the acquirer to have decisive power in the administration of the target
company. The first requirement of the new OPA Law is enhanced disclosure of the
intention to accumulate shares or acquire control. The OPA Law has further
elaborated on the amount of information to be provided by the intended purchaser
to the market, through a publication to be made in the newspapers providing a
full disclosure on the terms of the proposed transaction to be carried out to
obtain control. If a transaction which will result in the acquisition of control
of a Chilean open stock corporation is to occur, the OPA Law requires the
acquirer to launch a tender offer subject to the rules established in Title XXV
of the Securities Market Law, including the obligation to carry out the tender
offer on a pro-rata and a non discriminatory basis, and the obligation of making
available for the shareholders a prospectus which discloses the terms and
conditions of the offer.

The OPA Law also contemplates anti-avoidance rules aimed at the acquisition
of control of a company that controls an open stock corporation where the shares
of the open stock company constitute more than 75% of the book value of the
consolidated assets of the controlling company. In such circumstances, the
purchaser will be required to make an offer for the remaining shares of the open
stock company at the same pro rated price as is paid for the controlling
company. While the legislation could be more specific, the end result is that if
the acquirer ends up with control of the company in a transaction fairly close
to other small transactions, he may be liable for a breach of these rules and
fined for up to 30% of the value of the transaction and criminal sanctions. In
addition, the OPA Law contains a number of limited exemptions from the
obligations to make a bid in accordance with article 54 of the Securities Market
Law as set forth above.

Finally, the OPA Law also contemplates transitional rules which would
exclude the operation of the OPA Law in the following cases: (i) When a present
controlling shareholder sells to an unrelated new controlling shareholder within
a three year period after the OPA Law comes into effect. To be entitled to this
right a special shareholders meeting must agree, within 6 months following to
the enactment of the law, that the corporation is going to be

109

subject to the transitional rule. (ii) The sales and purchases that are
performed in fulfillment of the rights granted by a shareholders agreement
executed prior to the enactment of the law.

The shareholders of BBVA Chile have not passed any decision regarding such
transitory rule therefore making it non applicable.

Article 36 of the General Banking Law states that as a matter of public
policy, no person or company may acquire, directly or indirectly, more than 10%
of the shares of a bank without the prior authorization of the Superintendency
of Banks, which may not be unreasonably withheld. The prohibition would also
apply to beneficial owners of ADSs. In the absence of such authorization, any
person or group of persons acting in concert would not be permitted to exercise
voting rights with respect to the shares or ADSs acquired. In determining
whether or not to issue such an authorization, the Superintendency of Banks
considers a number of factors enumerated in the General Banking Law, including
the financial stability and probity of the purchasing party.

Article 84 No. 2 of the General Banking Law creates the presumption that
natural persons who are holders of Shares and who beneficially own more than 1%
of the Shares are related to us and imposes certain restrictions on the amounts
and terms of loans made by banks to related parties. This presumption would also
apply to beneficial owners of ADSs representing more than 1% of the Shares.
Finally, according to the regulations of the Superintendency of Banks, Chilean
banks that issue ADSs are required to inform the Superintendency of Banks if any
person, directly or indirectly, acquires ADRs representing 5% or more of the
total amount of shares of capital stock issued by such bank.
Neither Chilean law nor the By-laws impose specifically on nonresident or
foreign owners any limitations on the rights of such owners to hold or vote the
Shares.

Capitalization

Under Chilean law, the shareholders of a company, acting at an
extraordinary shareholders' meeting, have the power to authorize an increase in
such company's capital. This shareholders' meeting resolution that increases the
bank's capital must be approved or rejected by the Superintendency of Banks
within a term of 30 days. The Superintendency of Banks may extend this term up
to 30 days more. When an investor subscribes for issued shares, the shares are
issued and registered in such investor's name, even if not paid for, and the
investor is treated as a shareholder for all purposes except with respect to
receipt of dividends and the return of capital. The investor becomes eligible to
receive dividends once it has paid for the shares (if it has paid for only a
portion of such shares, it is entitled to receive a corresponding pro rata
portion of the dividends declared with respect to such shares unless the
company's by-laws provide otherwise). If an investor does not pay for shares for
which it has subscribed on or prior to the date agreed upon for payment, the
company is entitled under Chilean law to auction the shares on the stock
exchange where such shares are traded, and it has a cause of action against the
investor for the difference, if any, between the subscription price and the
auction proceeds. However, until such shares are sold at auction, the subscriber
continues to exercise all the rights of a shareholder (except the right to
receive dividends and return of capital). In the case of banks, authorized
shares and issued shares which have not been paid for within the period fixed
for their payment by the Superintendency of Banks are cancelled and are no
longer available for issuance by the company.

Article 22 of the Chilean Corporations' Act states that the purchaser of
shares of a company implicitly accepts its by-laws and any agreements adopted at
shareholders' meeting.

Preemptive Rights and Increases of Share Capital

The Chilean Corporations' Act provides that whenever a Chilean company
issues new shares for cash, it must offer its existing shareholders the right to
purchase a sufficient number of shares to maintain their existing ownership
percentages in the company. The OPA Law now requires that ADS holders be given
the same rights as local shareholders. Pursuant to this requirement, preemptive
rights in connection with any future issue of shares will be offered by us to
the Depositary as the registered owner of the Shares underlying the ADSs. See
"Cash Dividends and Other Distributions".

110

Under Chilean law, preemptive rights are exercisable or freely transferable
by shareholders during a period which cannot be less than 30 days following the
granting of such rights. During such period (for shares as to which preemptive
rights have been waived), and for an ensuing period (up to the term fixed by the
shareholders' meeting to pay the increase in capital, which cannot exceed three
years), a Chilean open stock corporation is permitted to offer any unsubscribed
shares for sale to third parties on terms which are equal to or less favorable
to such purchasers than those offered to its shareholders. At the end of a
30-day period following the preemptive rights period, a Chilean open stock
corporation is authorized to sell non-subscribed shares to third parties on more
favorable terms to such purchasers, provided they are sold on a stock exchange.

Shareholders' Meetings and Voting Rights

An ordinary annual meeting of shareholders is held within the first four
months of each year, but in any case following the preparation of our financial
statements for the previous year. The ordinary annual meeting of shareholders is
the corporate body that approves the annual financial statements, approves all
dividends in accordance with the dividend policy determined by the Board of
Directors, elects the Board of Directors and approves any other matter which
does not require an extraordinary shareholders' meeting. The last ordinary
annual meeting of our shareholders was held on March 24th, 2004. Extraordinary
meetings may be called by the Board of Directors when deemed appropriate, and
ordinary or extraordinary meetings must be called by the Board of Directors when
requested by shareholders representing at least 10% of the issued voting shares
or when requested by the Superintendency of Banks. Notice to convene the
ordinary annual meeting or an extraordinary meeting is given by means of three
notices which must be published in a newspaper published in our corporate
domicile (currently Santiago) in a prescribed manner, and the first notice must
be published not fewer than 15 days nor more than 20 days in advance of the
scheduled meeting. Notice must also be mailed no fewer than 15 days in advance
to each shareholder and given to the Superintendency of Banks and the Chilean
Stock Exchanges. Currently, we publish our official notice in La Nacion.

The quorum for a shareholders' meeting is established by the presence, in
person or by proxy, of shareholders representing at least an absolute majority
of the issued Shares; if a quorum is not present at the first meeting, the
meeting can be reconvened within 45 days (in accordance with the procedures
described in the previous paragraph) and, upon the meeting being reconvened,
shareholders present or represented at the reconvened meeting are deemed to
constitute a quorum regardless of the percentage of Shares represented. The
shareholders' meetings pass resolutions by the affirmative vote of an absolute
majority of those Shares with voting rights present or represented at the
meeting. The vote required at any shareholders' meeting to approve any of the
following actions, however, is a two-thirds majority of issued Shares: (i) a
change of organization, merger or spin-off, (ii) an amendment to our term of
existence or early dissolution, (iii) a change in corporate domicile, (iv) a
decrease of corporate capital, (v) a modification of the powers of shareholders
or limitations on the powers of the Board of Directors, (vi) a reduction in the
number of members of the Board of Directors, with prior approval of the
Superintendency of Banks. (vii) the transfer of all corporate assets and
liabilities or of all corporate assets. (viii) the way to distribute the social
benefits; and, (ix) the others set forth by the by-laws.

Shareholders may accumulate their votes for the election of directors and
cast the same in favor of one person. The vote required to change the number of
members who make up the Board of Directors is 91% of voting shares present or
represented, and the same majority is needed to change this requirement.

In general, Chilean law does not require a Chilean open stock corporation
to provide the level and type of information that United States securities laws
require a reporting company to provided to its shareholders in connection with a
solicitation of proxies. However, shareholders are entitled to examine the books
of the company within the 15-day period before the scheduled meeting. Under
Chilean law, a notice of a shareholders' meeting listing matters to be addressed
at the meeting must be mailed not less than 15 days prior to the date of such
meeting, and, in the cases of an ordinary annual meeting, shareholders holding a
prescribed minimum investment must be sent an annual report of the company's
activities which includes audited financial statements. Shareholders who do not
fall into this category but who request it must also be sent a copy of the
company's annual report. In addition to these requirements, we regularly
provide, and our management currently intends to continue to provide, together
with the notice of shareholders' meeting, a proposal for the final annual
dividend.

The Chilean Corporations' Act provides that wherever shareholders
representing 10% or more of the issued voting shares so request, a Chilean
company's annual report must include, in addition to the materials provided by

111

the Board of Directors to shareholders, such shareholders' comments and
proposals in relation to the company's affairs. Similarly, the Chilean
Corporations' Act provides that whenever the Board of Directors of an open stock
corporation convenes an ordinary meeting of the shareholders and solicits
proxies for that meeting, or distributes information supporting its decisions,
or other similar material, it is obligated to include as an annex to its annual
report any pertinent comments and proposals that may have been made by
shareholders owning 10% or more of the company's voting shares who have
requested that such comments and proposals be so included.

Only shareholders registered as such with us on the fifth business day
prior to the date of a meeting are entitled to attend and vote their shares. A
shareholder may appoint another individual (who need not be a shareholder) as
his proxy to attend and vote on its behalf. Every shareholder entitled to attend
and vote at a shareholders' meeting has one vote for every share subscribed.

Approval of Financial Statements

The Board of Directors is required to submit our audited financial
statements to the shareholders annually for their approval. The approval or
rejection of such financial statements is entirely within the shareholders'
discretion. If the shareholders reject the financial statements, the Board of
Directors must submit new financial statements not later than 60 days from the
date of such rejection. If the shareholders reject the new financial statements,
the entire Board of Directors is deemed removed from office and a new Board is
elected at the same meeting. Directors who individually approved such financial
statements are disqualified for re-election for the ensuing period.

Registration and Transfers

We act as our own registrar and transfer agent, as is customary among
Chilean companies. In the case of jointly owned Shares, a single person must be
appointed to represent the joint owners in dealings with us. This person may be
either one of the joint owners or their legal representative.

B. Material Contracts.

Shareholders' Agreement

On September 24, 1998, Banco Bilbao Vizcaya, S.A., (now BBVA) entered into
an agreement (the "Agreement") with Inversiones Caburga S.A., Inversiones del
Pacifico S.A., Compania de Leasing y Arriendo S.A., Inversiones Santa Virginia
Limitada, Panamerican Holdings Limited Agency in Chile, Inversiones Valparaiso
S.A., Inversiones Corinto Limitada and Fundacion Educacional de Beneficencia
Maria Teresa Brown de Ariztia; and Jose Domingo Eluchans Asesorias Limitada
(collectively, "the former controllers"). We refer to all the parties to the
Agreement as the "Shareholders".

In their capacities as our controlling Shareholders, the parties agreed to
coordinate their actions in order to jointly manage and develop our business. To
this end, they agreed upon operating standards for us and our subsidiaries,
which complement those required by law, regulations and our By-laws. The
principal standards refer to:

Board of Directors. According to the Agreement, the Board shall be composed
of 9 office holders and two alternates and, in the event of a merger or
acquisition, the number of members may be increased to 11. Given the composition
of the Shareholders, the parties to the Agreement may appoint all of the
directors, with BBVA presently entitled to appoint a majority of the Board. In
addition the parties agreed upon rules to be applied to the appointment of the
Chairman, to the replacement of directors, for setting dates for Board meetings,
for passing resolutions and to the appointment of the General Manager and the
exercise of some of his most important faculties.

Shareholders' Meeting. Resolutions will be passed pursuant to requirements
prescribed by law and the By-laws, with the requirement that at least one of the
former controllers must form part of the majority vote for the following
matters: mergers, early dissolution, a combined sale of the assets and the
liabilities or all of the assets, or a substantial portion thereof, modification
of the dividend distribution policy or the By-laws, or any matters that,
pursuant to the Agreement, require the approval of at least one director
appointed by each party of the agreement.

112

Transfer of shares. The parties recognize a preemptive right in the event
that any of them intend to sell their Shares.

Purchase of Shares on the market by the parties. Purchase and sale of
Shares on the Stock Exchange. Third-party purchases are freely authorized,
provided the purchases are made on the Stock Exchange and the purchaser fulfills
the obligation of offering the other Shareholder a percentage of the Shares
purchased at unit acquisition cost, which percentage must be equal to the
relative holdings of the Shareholders at the time. The sale of shares on the
Stock Exchange is only permitted if, having fulfilled the obligation of offering
its acquisition to the other party, that party is not interested.

New business. The parties declare their intention to look into new business
in Chile in the future, in the form of holdings substantially similar to what
they had at that time.

Dividend policy. Dividend policy will be to make annual distributions of at
least 50% of the income that pursuant to applicable regulations would be subject
to distribution.

Starting date, duration and term. The Agreement took effect on
September 24, 1998 for an indefinite duration unless an event that enables any
party to terminate the agreement occurs.

Irreconcilable differences, mediation. In cases in which the Board or
Shareholders are not able to pass resolutions in fulfillment of this Agreement,
differences shall be submitted to a neutral mediator. If no agreement can be
reached, the parties have the right to terminate the Agreement.

Data Processing Agreement

During year 2003 and as of this date, the Bank's data processing has been
performed, on a test basis, by BBVA Bancomer at the Regional Computing Center of
Monterrey, Mexico.

To this end, the Bank and BBVA Bancomer subscribed on August 28, 2002, a
preparatory agreement aimed at verifying whether BBVA Bancomer has the necessary
capacity to provide such service.

On December 18, 2002, a second agreement was executed with the purpose of
regulating the second testing phase, which contemplated the provision of
transmission support services, data processing services and an electronic
services center; expansion of the tests' purposes; connection in real time of
all branches, and running of all processes on a continuous basis. Said agreement
was extended on April 24, 2003, June 30, 2003, and December 18, 2003, and its
effective period expires on April 30, 2004.

Based on the fact that the testing period has been successful, the approval
for subscribing a Final Agreement should be requested in order for BBVA Bancomer
to provide all data processing services required.

Additional Benefits. Considering the growth experienced by the Bank, and
particularly the increase in the volume of transactions, if such growth
continues in the medium term, an investment in new equipment would be required
if the data is to be processed internally; such investment would not be required
if the services of BBVA Bancomer are contracted.

Authorization from the Superintendency of Banks. By Letter No. 10213 of
November 4, 2002, the Superintendency of Banks authorized the Bank to perform
all data processing abroad, through BBVA Bancomer.

Upon reviewing the background information provided, the Committee decided
to recommend the execution of such agreement, as per the terms and conditions
proposed, as it deemed that such terms and conditions agree with those usually
prevailing in the market for this type of transactions. According to the above
this contract became effective as of April 1, 2004.

113

D. Exchange controls.

Exchange Controls

The Central Bank is responsible for, among other things, monetary policy
and exchange controls in Chile. Foreign investments in Chile (including
investments in shares or Common Stock) can be made under the following
regulations: (i) registration with the "Foreign Investment Committee" under
Decree Law No. 600 of 1974 as amended ("Decree Law No, 600") or (ii) according
to Chapter XIV of the Compendium.

Foreign investment made under Decree Law No. 600 gives foreign investors
access to the Formal Exchange Market once the foreign currency is converted into
Chilean pesos. Under Decree Law No. 600 foreign investors may transfer abroad
their capital and the net profits from their investments in Chile. Capital may
be remitted after one year has elapsed counted from the date on which the
foreign currency it was brought in. Profits can be remitted with no time limit.
Decree Law No. 600 gives the foreign investors access to the Formal Exchange
Market in order to remit capital and net profits abroad.

Since April 19, 2001 foreign investments made under Chapter XIV are not
subject to restrictions other than the requirement that all foreign currency
brought into the country or remitted abroad by the foreign investor should be
made through the Formal Exchange Market and to provide certain information to
the Central Bank. Under Chapter XIV, foreign investors do not have granted
access to the Formal Exchange Market as is the case under Decree Law No. 600,
however, for the purpose of remitting capital and net profit abroad, foreign
investors are entitled to purchase foreign currency either in the Formal
Exchange Market or in the informal exchange market. Foreign investments made
prior to April 19, 2001 are subject to the regulations of Chapter XIV that were
in place at the time such foreign investment was made, unless the foreign
investor, voluntarily, decides to be subject to the current regulations of
Chapter XIV.

Pursuant to Article 47 of the Central Bank Act, the Central Bank may enter
into agreements with investors or creditors, both foreign or local, and other
parties in a foreign exchange transaction, to regulate the terms and conditions
under which the capital, interest, profits and benefits generated by such
foreign exchange transaction may be utilized, remitted abroad or reimbursed to
the local investor or creditor and to assure them free access to the Formal
Exchange Market. According to Article 47 of the Central Bank Act, agreements
entered into by the Central Bank pursuant to Article 47 may only be modified by
mutual agreement of all parties to the contract.

Until April 19, 2001, Chapter XXVI, Title I of the Compendium ("Chapter
XXVI") regulated the issuance of ADSs by a Chilean company and the access to the
Formal Exchange Market for the purpose of converting Chilean pesos to U.S.
dollars and repatriating from Chile amounts received in respect of shares
deposited or shares withdrawn from deposit or surrender of ADRs (including
amounts received as cash dividends and proceeds from the sale in Chile of the
underlying shares and any rights with respect thereto).

On April 19, 2001, Chapter XXVI was derogated by the Central Bank and it
established under Chapter XIV that will be considered "investments", for the
purpose of Chapter XIV, the acquisition of shares of Chilean open stock
corporations to be withdrawn in exchange for a certificate representing such
shares, as is the case of ADRs, that are traded in foreign markets.
Additionally, the Central Bank sets forth on Chapter XIV that the withdrawn of
shares in exchange for a certificate representing such shares or reverse will be
subject to the rules applicable under Chilean law.

Even though the Central Bank eliminated Chapter XXVI, all ADRs that have
been issued according to Article 47 of the Central Bank Act and Chapter XXVI
will be subject to such regulations and to their own Foreign Investment
Contract, without regard of the derogation of Chapter XXVI.

The ADSs representing Common Shares are the subject of a contract dated
June 19, 1996 (the "Foreign Investment Contract") between the Central Bank, us
and the Bank of New York as Depositary, pursuant to Article 47 of the Central
Bank Act and Chapter XXVI.

The following is a summary of material provisions in the Foreign Investment
Contract. This summary does not purport to be complete and is qualified in its
entirety by reference to the Foreign Investment Contract.

114

Under Chapter XXVI and the Foreign Investment Contract, the Central Bank
agrees to grant to the Depositary, on behalf of ADR holders, and to any investor
not residing or domiciled in Chile who withdraws Common Shares upon delivery of
ADSs (such Common Shares being referred to herein as "Withdrawn Shares"), access
to the Formal Exchange Market to convert pesos to dollars (and remit such
dollars outside of Chile) in respect of Common Shares represented by ADSs or
Withdrawn Shares, including amounts received as (a) cash dividends, (b) proceeds
from the sale in Chile of Withdrawn Shares (subject to receipt by the Central
Bank of a certificate from the holder of the Withdrawn Shares (or from an
institution authorized by the Central Bank) that such holder's residence and
domicile are outside Chile and a certificate from a Chilean stock exchange (or
from a brokerage or securities firm established in Chile that such Withdrawn
Shares were sold on a Chilean Exchange) or from shares distributed because of
the liquidation merger or consolidation of the Bank, (c) proceeds from the sale
in Chile of rights to subscribe for additional Common Shares, (d) proceeds from
the liquidation, merger or consolidation of BBVA Banco BHIF, and (e) other
distributions, including without limitation those resulting from any
recapitalization, as a result of holding Common Shares represented by ADSs or
Withdrawn Shares. Transferees of Withdrawn Shares will not be entitled to any of
the foregoing rights under Chapter XXVI unless the Withdrawn Shares are
re-deposited with the custodian. Investors receiving Withdrawn Shares in
exchange for ADRs will have the right to redeposit such Common Shares in
exchange for ADRs, provided that the conditions to redeposit are satisfied. For
a description of the Formal Exchange Market, see "Exchange Rates". Chapter XXVI
provides that access to the Formal Exchange Market in connection with dividend
payments is conditioned upon certification by BBVA Banco BHIF to the Central
Bank that a dividend payment has been made and any applicable tax has been
withheld, which certification BBVA Banco BHIF has agreed to provide at the
appropriate time.

Chapter XXVI also provides that access to the Formal Exchange Market in
connection with the sale of Withdrawn Shares or distributions thereon is
conditioned upon receipt by the Central Bank of certification by the custodian
that such Common Shares have been withdrawn in exchange for ADSs and receipt of
a waiver of the benefit of the Foreign Investment Contract with respect thereto
(except in connection with the proposed sale of the Common Shares) until such
Withdrawn Shares are re-deposited.

Chapter XXVI and the Foreign Investment Contract provide that a person who
brings foreign currency into Chile to purchase Common Shares with the benefit of
the Foreign Investment Contract must convert it into Chilean pesos on the same
date and has five banking business days within which to invest in Common Shares
in order to receive the benefits of the Foreign Investment Contract. If such
person decides within such period not to acquire Common Shares, he can access
the Formal Exchange Market to reacquire dollars, provided that the applicable
request is presented to the Central Bank within seven banking business days of
the initial conversion into Chilean pesos. Common Shares acquired as described
above may be deposited for ADSs and receive the benefits of the Foreign
Investment Contract, subject to receipt by the Central Bank of a certificate
from the Depositary that such deposit has been effected and that the related
ADSs have been issued and receipt by the Custodian of a declaration from the
person making such deposit waiving the benefits of the Foreign Investment
Contract with respect to the deposited Common Shares.

Access to the Formal Exchange Market under any of the circumstances
described above is not automatic. Pursuant to Chapter XXVI, such access requires
approval of the Central Bank based on a request therefore presented through a
banking institution established in Chile. The Foreign Investment Contract
provides that if the Central Bank has not acted on such request within seven
banking days, the request will be deemed approved.

Until June 26, 1998, foreign investors acquiring shares or securities in
the Chilean secondary market should maintain a mandatory reserve ("Reserve")
with the Central Bank in an amount equal to 30% of the amount of the investment
or alternatively foreign investors might choose to satisfy such reserve
requirements by making a payment to the Central Bank of a non-refundable amount
calculated in regard to the amount that must have been deposited. The deposit
had to be done for one year in the form of a non-interest bearing U.S. dollars
deposit.

On June 26, 1998, the Reserve was reduced to 10% and on September 17, 1998
to 0% of the investment. Notwithstanding the mentioned reserve reduction, the
Central Bank can increase the Reserve at any moment until 40% of the amount of
the investment. No assurance can be given that the Central bank would not
increase the amount of the Reserve. However, under Chilean law such increase
would only be imposed upon investments brought into Chile after the increase of
the Reserve becomes effective.

115

Under current Chilean law, the Foreign Investment Contract cannot be
changed unilaterally by the Central Bank. No assurance can be given, however,
that additional Chilean restrictions applicable to the holders of ADRs, the
disposition of underlying Common Shares or the repatriation of the proceeds from
such disposition could not be imposed in the future, nor can there be any
assessment of the duration or impact of such restrictions if imposed. See also
"Description of By-laws--Ownership restrictions"

E. Taxation.

Chilean Tax Considerations

The following discussion summarizes the principal Chilean income tax
consequences of the purchase, ownership and disposition of ADSs or Common Shares
by an individual who is not domiciled or resident in Chile or by a legal entity
that is not organized under the laws of Chile and does not have a permanent
establishment located in Chile (any such individual or entity, a "Foreign
Holder"). For purposes of Chilean tax law, an individual holder is a resident of
Chile if he has resided in Chile for more than six consecutive months in one
calendar year or for a total of more than six months, whether consecutive or
not, in two consecutive tax years. The discussion is not intended as tax advice
to any particular investor, which can be rendered only in light of that
investor's particular tax situation.

This summary is based upon the tax laws of Chile and relevant
interpretations thereof (including Ruling No. 324 of January 29, 1990 of the
Chilean Internal Revenue Service and other applicable regulations and rulings)
in effect on the date of this Annual Report, all of which are subject to change.
There is no income tax treaty in force between Chile and the United States.

HOLDERS OF ADSs OR COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISERS AS
TO THE CHILEAN, U.S. OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF ADSs OR COMMON SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF
ANY FOREIGN, STATE OR LOCAL TAX LAWS.

Cash Dividends and Other Distributions

Cash dividends paid by us with respect to the ADSs or Common Shares held by
a Foreign Holder will be subject to a 35% Chilean withholding tax, which is
withheld and paid over to the Chilean tax authorities by us (the "Withholding
Tax"). If we have paid corporate income tax (the "First Category Tax") on the
income from which the dividend is paid, a credit for the First Category Tax
effectively reduces the rate of Withholding Tax, though not on a one-for-one
basis because it also increases the base on which the Withholding Tax is
imposed. In addition, if we distribute less than all of our distributable
income, the credit for First Category Tax paid by us is proportionately reduced.
It must be considered that the First Category Tax rate for earnings from
commercial year 1991 until 2001 was 15%, for the year 2002 was 16%, for the year
2003 was 16.5% and for years 2004 and thereafter a rate of 17% is and will be
applicable. Therefore, it is possible that different rates of credits may be
available for a single dividend.

When a credit is available, the Withholding Tax is computed by applying the
35% rate to the pre-tax amount needed to fund the dividend and then subtracting
from the tentative withholding tax so determined the amount of First Category
Tax actually paid on that pre-tax income. For purposes of determining the rate
at which First Category Tax was paid, dividends are treated as paid from our
oldest retained earnings.

The example below illustrates the effective Chilean Withholding Tax rate
burden on a cash dividend received by a Foreign Holder assuming a Withholding
Tax rate of 35%, an effective First-Category Tax rate of 17% and a distribution
of 30% of the consolidated net income of BBVA distributable after payment of the
First Category Tax:

BBVA Chile.................................................... 100.0
First Category Tax (17% of Ch$100)............................ (17)
Net distributable income...................................... 83
Dividend distributed (30% of net distributable income)........ 24.90
Withholding Tax (35% of the sum of Ch$ 24.90 dividend
Plus Ch$5.10 First Category Tax paid).................... (10.5)
Credit for 17% of First-Category Tax.......................... 5.10

116

Net additional tax withheld................................... 5.40
Net dividend received......................................... 19.5
Effective dividend withholding rate........................... 21.7%

The effective Withholding Tax Rate, after giving effect to the credit for
the First Category Tax, can be calculated using the following formula:

(Withholding Tax rate) - (First Category Tax effective rate)
------------------------------------------------------------
1 - (First Category Tax effective rate)

The effective rate of Withholding Tax to be imposed on dividends paid by us
will vary depending upon the amount of First Category Tax paid by us on the
earnings to which the dividends are attributed.

The overall tax rate for the foreign (non-domiciled and non-resident)
investor is 35%.

Any dividend distributions made in property (other than Common Shares) will
be subject to the same Chilean tax rules as cash dividends. Stock dividends are
not subject to Chilean taxation. The distribution and exercise of preemptive
rights relating to Common Shares will not be subject to Chilean taxation.

As is stipulated in number 8 of the Shareholders Agreement signed on
September 24, 1998 by BBVA Chile, (then BBVA), Inversiones Caburga S.A. and
other shareholders, our policy on dividend distribution is defined as "to
distribute every year at least 50% of the distributable net income from the
corresponding fiscal year". The distributable net income is the net income that
can be distributed according to law and regulations.

Capital Gains

Disposition of ADSs

Gain realized on a sale or other disposition by a Foreign Holder of the
ADSs (or ADRs evidencing ADSs) will not be subject to Chilean taxation, provided
that such sale or other disposition occurs outside Chile and that such ADSs (or
ADRs) are also located outside Chile. The deposit and withdrawal of Common
Shares in exchange for ADSs will not be subject to any Chilean taxes.

Disposition of Common Shares

Gain recognized on a sale or exchange of Common Shares (as distinguished
from sales or exchanges of ADSs representing such Common Shares) will be
subject to Chilean income taxes at an effective rate of 35% if (i) the Foreign
Holder has held the Common Shares for less than one year since exchanging ADSs
for the Common Shares, (ii) the Foreign Holder acquired and disposed of the
Common Shares in the ordinary course of its business or as a regular trader of
shares (i.e., the holder is "usually engaged in the purchase and sale of
shares"), or (iii) the Foreign Holder and the purchaser of the Common Shares
are "related parties." For this purpose, a "related party" is any entity in
which the foreign holder is (a) a partner, (b) a shareholder if such entity is
a closed stock corporation, or (c) a shareholder with more than 10% of the
shares if such entity is an open stock corporation. In all other cases (i.e.,
if the foreign holder is not habitual and has held the shares for at least one
year prior to their sale and such sale was not made to a related party), gain
on the disposition of Common Shares will be subject only to a capital gains tax
which is assessed at the same rate as the First Category Tax (currently imposed
at a rate of 17%) as a sole tax.

For purposes of determining gain upon their sale, the tax basis of Common
Shares received in exchange for ADSs will be the acquisition value of the Common
Shares on the date of the exchange, adjusted for the Chilean Consumer Price
Index (domestic inflation) variation between the month preceding the exchange
and the month preceding the sale. The valuation procedure set forth in the
Deposit Agreement, which values Common Shares which are being exchanged at the
highest reported sales price at which they trade on the Santiago Stock Exchange
on the date on which the exchange is recorded, will determine the acquisition
value for this purpose.

In case of conversion of ADSs into Common Shares and the immediate sale of
such Common Shares, because of the mechanisms under which the Santiago Stock
Exchange operates, the sales price of the Common Shares is determined two days
prior to the date on which the exchange is recorded and the ownership transfer
of the Common

117

Shares resulting from the exchange actually takes place. Therefore, if the price
of the Common Shares does not fluctuate within those two days or goes up, no
capital gain shall be generated. However, if the value of the Common Shares on
the Santiago Stock Exchange goes down within those two days, a capital gain
subject to taxation in Chile should be generated equal to the difference between
(i) the sales price determined two days prior to the date the conversion of ADSs
into Common Shares is recorded, and (ii) the highest reported sales price of the
Common Shares on the Santiago Stock Exchange on such recording date.

The above has been clarified by the Internal Revenue Service of Chile by
Ruling No. 3708 of October 1, 1999 upon consultation by the Santiago Stock
Exchange. Such ruling also accepts as valid (for the purposes of determining if
capital gains are generated) the amendment of the Deposit Agreement by the
parties thereto setting forth that the acquisition value of the Common Shares
resulting from an exchange of ADSs should be the price registered in the
relevant invoice issued by the stock broker through whom the sale of such Common
Shares took place, provided, however, that such sales price is determined within
no more than two Santiago business days prior to the date on which the
conversion of ADSs into Common Shares and the subsequent transfer of such Common
Shares are recorded.

Any gains on the sale or transfer of common shares will not be subject to
any Chilean tax, regardless of whether the seller performs such operations in a
regular basis or not, if the gains are obtained on the sale or transfer of
common shares which had presence at the stock exchange no more than 90 days
prior to the date of the operation, given that the operation is carried at a
Chilean stock exchange, at a foreign stock exchange authorized by the regulating
body of the country, or in a public offering ruled by Title XXV of the
Securities Market Law.

Disposition of Preemptive Rights

Amounts received in exchange for the sale or assignment of preemptive
rights relating to Common Shares will be subject to both the First Category Tax
and the Withholding Tax (the former being creditable against the latter to the
extent described above) as it is considered income and is taxed accordingly.

Other Chilean Taxes

There are no Chilean inheritance, gift or succession taxes applicable to
the ownership, transfer or disposition of the ADSs by a Foreign Holder, but such
taxes generally will apply to the transfer at death or by gift of Common Shares
by a Foreign Holder. There are no Chilean stamp, issue, registration or similar
taxes or duties payable by Foreign Holders of ADSs or Common Shares.

Withholding Tax Certificates

Upon request, we will provide to Foreign Holders appropriate documentation
evidencing the payment of the Chilean Withholding Tax (net of applicable First
Category Tax).

U.S. Federal Income Tax Considerations

The following is a discussion of material U.S. federal income tax
consequences of purchasing, owning and disposing of Common Shares or ADSs, but
it does not purport to be a comprehensive description of all of the tax
considerations that may be relevant to a particular person's decision to acquire
such securities. The discussion applies only if you hold Common Shares or ADSs
as capital assets for tax purposes and it does not describe all of the tax
consequences that may be relevant to holders subject to special rules, such as:

o certain financial institutions;

o insurance companies;

o dealers and traders in securities or foreign currencies;

o persons holding Common Shares or ADSs as part of a hedge, straddle or
conversion transaction;

o persons whose functional currency for U.S. federal income tax purposes
is not the U.S. dollar;

118

o partnerships or other entities classified as partnerships for U.S.
federal income tax purposes;

o persons liable for the alternative minimum tax;

o tax-exempt organizations;

o persons holding Common Shares or ADSs that own or are deemed to own
more than ten percent of any class of our stock; or

o persons who acquired our ADSs or Common Shares pursuant to the
exercise of any employee stock option or otherwise as compensation.

This discussion is based on the Internal Revenue Code of 1986, as amended,
administrative pronouncements, judicial decision and final, temporary and
proposed Treasury regulations, all as currently in effect. These laws are
subject to change, possibly on a retroactive basis. It is also based in part on
representations by the Depositary and assumes that each obligation under the
Deposit Agreement and any related agreement will be performed in accordance with
its terms. Please consult your own tax advisers concerning the U.S. federal,
state, local and foreign tax consequences of purchasing, owning and disposing of
Common Shares or ADSs in your particular circumstances.

The discussion below applies to you only if you are a beneficial owner of
Common Shares or ADSs and are, for U.S. federal tax purposes:

o a citizen or resident of the United States;

o a corporation, or other entity taxable as a corporation, created or
organized in or under the laws of the United States or any political
subdivision thereof; or

o an estate or trust the income of which is subject to U.S. federal
income taxation regardless of its source.

In general, if you hold ADSs, you will be treated as the holder of the
underlying shares represented by those ADSs for U.S. federal income tax
purposes. Accordingly, no gain or loss will be recognized if you exchange ADSs
for the underlying shares represented by those ADSs.

The U.S. Treasury has expressed concerns that parties to whom ADSs are
released may be taking actions that are inconsistent with the claiming of
foreign tax credits for United States holders of ADSs. Such actions would also
be inconsistent with the claiming of the reduced rate of tax, described below,
applicable to dividends received by certain non-corporate holders. Accordingly,
the analysis of the creditability of Chilean taxes and the availability of the
reduced tax rate for dividends received by certain non-corporate holders, each
described below, could be affected by the actions of parties to whom the ADSs
are released.

Taxation of Distributions

Distributions paid on ADSs or Common Shares, other than certain pro rata
distributions of common shares, will be treated as a dividend to the extent paid
out of current or accumulated earnings and profits (as determined under United
States federal income tax principles). Subject to applicable limitations,
dividends paid to non-corporate U.S. Holders in taxable years beginning before
January 1, 2009, will be taxable at a maximum rate of 15%. You should consult
your own tax advisors regarding the implications of this new legislation in your
particular circumstances. The amount of a dividend will include any amounts
withheld by us or our paying agent in respect of Chilean taxes. The amount of
the dividend will be treated as foreign source dividend income to you and will
not be eligible for the dividends received deduction generally allowed to U.S.
corporations under the Code. Such dividends will constitute passive income for
foreign tax credit purposes.

Dividends paid in Chilean pesos will be included in your income in a U.S.
dollar amount calculated by reference to the exchange rate in effect on the date
of your (or in the case of ADSs, the Depositary's) receipt of the dividend,
regardless of whether the payment is in fact converted into U.S. dollars. If the
dividend is converted into U.S. dollars on the date of receipt, you generally
should not be required to recognize foreign currency gain or loss in

119

respect of the dividend income. You may have foreign currency gain or loss if
you do not convert the amount of such dividend into U.S. dollars on the date of
its receipt.

Chilean taxes withheld from dividends on Common Shares or ADSs will be
creditable against your U.S. federal income tax liability, subject to applicable
limitations that may vary depending upon your circumstances. Instead of claiming
a credit, you may elect to, deduct otherwise creditable Chilean taxes in
computing your taxable income, subject to generally applicable limitations under
U.S. law. You should consult your own tax advisers to determine whether you are
subject to any special rules that limit your ability to make effective use of
foreign tax credits.

Sale and Other Disposition of Common Shares or ADSs

For U.S. federal income tax purposes, gain or loss you realize on the sale
or other disposition of Common Shares or ADSs will be capital gain or loss, and
will be long-term capital gain or loss if you held the Common Shares or ADSs for
more than one year. The amount of your gain or loss will be equal to the
difference between your tax basis in the Common Shares or ADSs disposed of and
the amount realized on the disposition. Such gain or loss will generally be U.S.
source gain or loss for foreign tax credit purposes. Consequently, any Chilean
taxes imposed on gain from Common Shares or ADSs may not be creditable against
your U.S. federal income tax liability.

Passive Foreign Investment Company Rules

Based on proposed Treasury regulations, which are proposed to be effective
for taxable years after December 31, 1994, we believe that we will not be
considered a "passive foreign investment company" ("PFIC") for U.S. federal
income tax purposes for 2003. However, since PFIC status depends upon the
composition of a company's income and assets and the market value of its assets
(including, among others, less than 25 percent owned equity investments) from
time to time, there can be no assurance that we will not be considered a PFIC
for any taxable year. If we were treated as a PFIC for any taxable year during
which you held ADSs or Common Shares, certain adverse consequences could apply
to you.

If we are treated as a PFIC for any taxable year, gain recognized by you on
a sale or other disposition of ADSs or Common Shares would be allocated ratably
over your holding period for the ADSs or Common Shares. The amounts allocated to
the taxable year of the sale or other exchange and to any year before the
Company became a PFIC would be taxed as ordinary income. The amount allocated to
each other taxable year would be subject to tax at the highest rate in effect
for individuals or corporations, as appropriate, and an interest charge would be
imposed on the amount allocated to such taxable year. Further, any distribution
in respect of ADSs or Common Shares in excess of 125 percent of the average of
the annual distributions on ADSs or Common Shares received by you during the
preceding three years or your holding period, whichever is shorter, would be
subject to taxation as described above. Certain elections (including a mark to
market election) may be available to you that may mitigate the adverse
consequences of PFIC status.

Information Reporting and Backup Withholding

Payment of dividends and sales proceeds that are made within the United
States or through certain U.S.-related financial intermediaries generally are
subject to information reporting and to backup withholding unless (i) you are a
corporation or other exempt recipient, or (ii) in the case of backup
withholding, you provide a correct taxpayer identification number and certify
that you are not subject to backup withholding.

The amount of any backup withholding from a payment to you will be allowed
as a credit against your United States federal income tax liability and may
entitle you to a refund, provided that the required information is furnished to
the Internal Revenue Service.

F. Dividends and Paying Agents.

Dividends

Not applicable.

G. Statement by Expert.

120

Not applicable.

H. Documents on Display.

We file annual and special reports and other information with the SEC. You
may read and copy any document we file at the Public Reference Room of the SEC
at 450 Fifth Street, N.W., Washington, DC 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
You may also inspect our filings at the regional offices of the SEC located at
Citicorp, 500 West Madison, Suite 1400, Chicago, Illinois 60661. You may request
a copy of these filings by writing or telephoning the offices of BBVA in
New York, 1345 Avenue of the Americas, 45th Floor, New York, NY 10105. BBVA's
telephone number is (212) 728-1660.

Item 11. Quantitative and Qualitative Disclosures About Market Risk.

General

Through our normal operations, we are exposed to a number of risks, the
most significant of which are market risk, liquidity risk, credit risk and
operational risk. Management of these risks is a process which involves
different levels of our organization and covers a wide range of policies. The
extent to which we properly and effectively identify and manage our risk is
critical to our profitability. Risk management seeks to optimize the
relationship between risk and reward and to limit the possible maximum absolute
loss. For a discussion of our risk management policies and Chilean regulation on
managing market risk in the banking sector, see "Business Overview-Chilean
Regulation and Supervision", "Business Overview-Selected Statistical
Information" and "Operating and Financial Review and Prospects-Asset and
Liability Management".

Market Risk

Market risk is the risk that changes in interest rates, currency exchange
or bond prices will have an adverse impact on our earnings, cash flows or the
fair values of our assets, liabilities or off-balance sheet positions. We are
exposed to market risk in both our trading and non-trading activities.

Trading Risk

The estimation of potential losses that could arise from reasonably likely
adverse changes in market conditions is the key element of managing market risk.
As from 2002 we have installed institutional tools that enable us to use the
value at risk methodology ("VAR"). VAR is an estimate (made with a given
confidence interval) of the maximum potential loss in the fair or market value
of a certain instrument or portfolio likely to occur over a specified time
period, or "time horizon," if that portfolio were held unchanged for that time
period. This methodology is based on statistical methods that take into account
numerous variables that may cause a change in the value of BBVA Chile's
portfolios, including interest rates, foreign exchange rates, securities prices
and volatility and any correlations among the foregoing.

Additionally, we are involved in a continuous process of improvement of our
systems, in order to adapt them to the latest methodological advances in market
risks measurement and control.

Our VAR estimates provide us with a consistent and uniform measure of
market risk in our trading portfolios. VAR uses historical movements in these
variables to estimate reasonably likely potential losses in trading activities
assuming normal market conditions and market liquidity. The historical
observation involves constructing a distribution of hypothetical daily changes
in trading portfolio value. These hypothetical changes are based on daily
observed percentage changes in key market indices or other market factors to
which the portfolio may be sensitive. Our VAR analysis is updated regularly by
recalculating the historic volatilities and correlations that serve as the basis
for this analysis. In the case of our VAR analysis, the period for estimating
risk factors is approximately two years and we assume a one-day holding period
and adverse market movements of 2.33 standard deviations as the standard for
risk measurement and comparison. This range approximates a 99% one-tailed
confidence interval. For a given portfolio, this implies that changes in market
value are statistically likely to deviate adversely from VAR estimates
approximately 1% of the time or one day out of 100 days. The volatility and
correlation used in the

121

calculation process are obtained by the technique known as "exponential smooth,"
which confers a higher relative weight to the last historical data considered
within the one-year series.

We use VAR as a tool to estimate and limit market risks related to all of
our trading activities. Two types of limits will be used to seek to control
market risk arising from our trading activities: limits based on VAR and
stop-loss. Currently, the limit based on VAR is at Ch$1,800 million
(US$3 million), and the actual VAR as of December 30, 2003 was of Ch$1,169
million (64.9% of the limit), mostly on interest rate (Ch$1,155 million). Limits
on particular portfolios, products and individual traders are established within
each business. The VAR model incorporates numerous variables that could impact
the fair value of our trading portfolio, as well as correlations that exist
among these variables. It takes into account our exposures to price and interest
rate risk and our exposure to implied volatility risks.

Non-Trading Risk

Our principal non-trading market risks are interest rate, foreign exchange
and equity price risk.

Interest Rate Risk. Interest rate risk arises as a result of timing
differences on the re-pricing of the assets and liabilities, unexpected changes
in the slope and shape of yield curves and changes in correlation of interest
rates between different financial instruments. Exposure to interest rate
movements arises when there is a mismatch between interest rate sensitive assets
and liabilities.

Currency Risk. Currency risk arises as a result of our having assets,
liabilities and off-balance sheet items that are denominated in currencies other
than Chilean pesos and Unidades de Fomento, either as a result of trading or in
the normal course of banking activities including investments. The most
significant currency in which we have transactions is the U.S. dollar. Exposure
to exchange rate movements is controlled by ensuring that mismatches are managed
and monitored by individual business divisions.

For a discussion of our trading and non-trading interest rate risk, foreign
currency risk and market price risk of our bonds portfolio, see "Operating and
Financial Review and Prospects-Asset and Liability Management" and "Business
Overview-Selected Statistical Information".

Liquidity Risk

Liquidity risk is the risk that we might be unable to meet payment
obligations and potential payment obligations when they fall due without
incurring unacceptable losses and that asset commitments cannot be funded on an
economic basis over their life. Liquidity management seeks to ensure that we
have access to funds necessary to cover client needs, maturing liabilities and
capital requirements, even under adverse market conditions. See "Operating and
Financial Review and Prospects-Asset and Liability Management-Liquidity and
Funding".

Credit Risk

We have drawn up a system to measure credit risk both at the level of
operation as well as the level of the whole loan portfolio. For a discussion of
our credit risk, see "Business Overview--Selected Statistical Information".

Operational Risk

Operational risk can result from any of the following: failures to obtain
proper internal authorizations, failure to properly document transactions,
equipment failures, fraud, inadequate training or errors by employees. Losses
that are characterized as operational include, but are not limited to the
following examples: losses due to a failure of internal controls, personnel
unavailability or injury and external events including natural disasters or the
failure of external systems. We manage these risks with internal rules based on
tolerance limits for operational failures set by management. Legal risk includes
the possibility that transactions may not be enforceable under applicable law or
regulation and also the possibility that changes in law or regulation could
adversely affect our position. The risk is greater with respect to derivative
financial instruments, as applicable law and regulation is relatively recent and
in some cases incomplete. We manage legal risk by seeking to ensure that
transactions are properly authorized and by submitting new or unusual
transactions to our legal advisors for review.

122

Item 12. Description of Securities Other than Equity Securities.

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies.

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds.

None.

Item 15. Controls and Procedures

As of December 31, 2003, the Bank, under the supervision and with the
participation of the Bank's management, including the Chief Executive Officer
and the Chief Financial Officer, performed an evaluation of the effectiveness of
the Bank's disclosure controls and procedures. The Bank's management necessarily
applied its judgment in assessing the costs and benefits of such controls and
procedures, which by their nature can provide only reasonable assurance
regarding management's control objectives. Based on this evaluation, the Bank's
Chief Executive Officer and Chief Financial Officer concluded that the Bank's
disclosure controls and procedures are effective at the reasonable assurance
level for gathering, analyzing and disclosing the information the Bank is
required to disclose in the reports it files under the Securities Exchange Act
of 1934 within the time periods specified in the SEC's rules and forms.

There has been no change in the Bank's control over financial reporting that
occurred during the period covered by this annual report that has materially
affected, or is reasonably likely to materially affect, the Bank's internal
control over financial reporting.

Item 16.

Item 16A. Audit Committee Financial Expert

Our Board of Directors has determined that Mr. Ernesto Bertelsen qualifies
as an audit committee financial expert.

Item 16B. Code of Ethics

The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, and to all persons performing functions of any
kind as employees of the Bank. Such document is called "Codigo de Conducta del
Grupo BBVA" ("BBVA Group Code of Conduct"), and it applies to all officers and
employees of all subsidiaries of the BBVA Group all over the world. A copy of
the code will be provided to any person without charge upon request made in
writing to: Corporate Secretary and General Counsel, Banco Bilbao Vizcaya
Argentaria, Chile S.A., Pedro de Valdivia 100, Providencia, Santiago, Chile.

123

Item 16C. Principal Accountant Fees and Services.

Our principal auditors were chosen by the Board on a proposal by the
Directors Committee. The firm chosen was PricewaterhouseCoopers, which has been
approved by the Superintendency of Banks to perform audit services for banking
institutions.

Audit and Non-Audit Fees

The following table sets forth the fees billed to us by our independent
auditors, PricewaterhouseCoopers, during the fiscal years ended December 31,
2002 and 2003.

Year ended December 31,
-----------------------
2003 2002
---- ----
(Ch$ millions)

Audit fees.................................. 184 191
Tax fees.................................... 17 1
Total fees..................... 201 192

Audit fees in the above table are aggregate fees billed by
PricewaterhouseCoopers in connection with the audit of our annual consolidated
financial statements and services that are normally provided by
PricewaterhouseCoopers in connection with statutory and regulatory filings or
engagements, and attest services.

Tax fees in the above table are fees billed by PricewaterhouseCoopers for
tax services related to tax compliance and other tax services. Other tax
services consist of fees billed for other miscellaneous tax consulting and
planning.

Board of Directors' Committee Pre-Approval Policies and Procedures

Since May 2003, foreign private issuers have been subject to "pre-approval"
requirements under which all audit and non-audit services provided by the
independent auditor must be pre-approved by an audit committee. Our Board of
Directors' committee approves all audit, audit-related services, tax services
and other services provided by PricewaterhouseCoopers. Any services provided by
PricewaterhouseCoopers that are not specifically included within the scope of
the audit must be pre-approved by the Board of Directors' committee prior to any
engagement.

124

PART III

Item 17. Financial Statements.

Our financial statements have been prepared in accordance with item 18
hereof.

Item 18. Financial Statements.

Reference is made to item 19 for a list of all financial statements filed
as a part of this Form 20F.

Item 19. Financial Statements and Exhibits.

(a) Index to Financial Statements.

Report of independent auditors
Audited consolidated financial statements:
Consolidated balance sheets at December 31, 2002 and 2003
Consolidated statements of income for each of the three years ended
December 31, 2003
Consolidated statements of cash flows for each of the
three years ended December 31, 2003
Consolidated statements of
shareholders' equity for each of the three years ended December 31,
2003
Notes to the consolidated financial statements

(b) Index to Exhibits

o 1.1* o Estatutos of Registrant, which serve as the
Registrant's articles of
incorporation and By-laws,
together with an English translation.
o 1.2** o English translation of amendments to
Estatutos of Registrant.
o 8.1*** o List of Subsidiaries of BBVA Chile
o 12.1*** o Certification pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
o 12.2*** o Certification pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
o 13.1*** o Certification pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
- --------
* Incorporated by reference to our Registration Statement No. 333-4918 on
Form F-1 filed with the Commission on June 17, 1996.
** Incorporated by reference to our annual report on Form 20-F filed with the
Commission on May 31, 1999.
*** Filed herewith.

125

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Annual Report on Form 20-F to be
signed on its behalf by the undersigned, thereunto duly authorized, in Santiago,
Chile on June 30, 2004.

o Banco Bilbao Vizcaya Argentina, Chile S.A.

By: /s/ Ramon Monell V.
------------------------------------------
Name: Ramon Monell V.
Title: Chief Executive Officer

Dated: June 30, 2004

126

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

Consolidated financial statements as of
December 31, 2003

[PriceWaterhouseCoopers LOGO]

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

Page
----
Report of independent auditors F-2
Audited consolidated financial statements:
Consolidated Balance Sheets at December 31, 2003 and 2002 F-4
Consolidated Statements of Income for each of the three years
ended December 31, 2003 F-6
Consolidated Statements of Cash Flows for each of the three years
ended December 31, 2003 F-7
Consolidated Statements of Shareholders' Equity
for each of the three years ended December 31, 2003 F-8
Notes to the consolidated financial statements F-9

Ch$ - Chilean pesos
MCh$ - Millions of Chilean pesos
US$ - United States dollars
ThUS$ - Thousands of United States dollars
UF - A UF is a daily-indexed, peso-denominated monetary unit. The UF
rate is set daily in advance based on the previous month's
inflation rate.

Application of Constant Pesos

The above December 31, 2003, 2002 and 2001 consolidated financial statements
have been restated for general price-level changes and expressed in constant
Chilean pesos of December 31, 2003 purchasing power.

F-1

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Banco Bilbao Vizcaya Argentaria, Chile

We have audited the accompanying Consolidated Balance Sheets of Banco
Bilbao Vizcaya Argentaria, Chile (formerly BBVA Banco BHIF) and its
subsidiaries (the "Bank") as of December 31, 2003 and 2002 and the related
Consolidated Statements of Income, of Cash Flows and of Shareholders' Equity
for each of the three years ended December 31, 2003, all expressed in millions
of constant Chilean pesos. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in Chile and the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of Banco Bilbao Vizcaya
Argentaria, Chile (formerly BBVA Banco BHIF) and its subsidiaries as of
December 31, 2003 and 2002 and the results of their operations and their cash
flows for each of the three years ended December 31, 2003, in conformity with
accounting principles generally accepted in Chile and the rules of the
regulatory agencies referred to in Note 1.

Accounting principles generally accepted in Chile vary in certain
significant respects from accounting principles generally accepted in the
United States of America. Information relating to the nature and effect of such
differences is presented in Notes 27 and 28 to the consolidated financial
statements.

/s/ PricewaterhouseCoopers
- ------------------------------

Santiago, Chile
January 16, 2004

F-2

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

CONSOLIDATED BALANCE SHEETS

Adjusted for general price-level changes and expressed
in millions of constant Chilean pesos (MCh$) of December 31, 2003

At December 31,
------------------------
ASSETS 2003 2002
------ ---------- ----------
MCh$ MCh$

CASH AND DUE FROM BANKS
Non-interest bearing (Note 2) ............................. 226,110 287,308
Interest bearing .......................................... 39,717 26,825
---------- ----------
Total cash and due from banks ......................... 265,827 314,133
---------- ----------

INVESTMENTS (Note 3)
Government securities ..................................... 209,698 290,665
Investments purchased under agreements to resell .......... 8,421 56,616
Investment collateral under agreements to repurchase ...... 202,616 222,484
Other investments ......................................... 161,855 82,574
---------- ----------
Total investments ..................................... 582,590 652,339
---------- ----------

LOANS, NET (Note 5)
Commercial loans .......................................... 958,741 836,807
Consumer loans ............................................ 233,435 206,635
Mortgage loans ............................................ 262,722 256,024
Foreign trade loans ....................................... 217,958 235,857
Lease contracts (Note 6) .................................. 99,585 84,568
Other outstanding loans ................................... 521,225 372,377
Past due loans ............................................ 45,869 41,743
Contingent loans .......................................... 71,941 85,538
Allowance for loan losses (Note 7) ........................ (44,632) (45,495)
---------- ----------
Total loans, net ...................................... 2,366,844 2,074,054
---------- ----------

OTHER ASSETS
Assets received in lieu of payment ........................ 15,145 15,600
Bank premises and equipment (Note 8) ...................... 55,329 56,225
Investments in other companies (Note 9) ................... 1,158 1,171
Other (Note 10 a) ......................................... 121,094 114,645
---------- ----------
Total other assets .................................... 192,726 187,641
---------- ----------
Total assets .......................................... 3,407,987 3,228,167
========== ==========

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.

F-3

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

CONSOLIDATED BALANCE SHEETS

Adjusted for general price-level changes and expressed
in millions of constant Chilean pesos (MCh$) of December 31, 2003

At December 31,
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY 2003 2002
------------------------------------ ---------- ----------
MCh$ MCh$

DEPOSITS
Non-interest bearing:
Current accounts ......................................... 226,655 227,038
Banker's drafts and other deposits ....................... 268,185 235,341
---------- ----------
Total non-interest bearing ............................ 494,840 462,379
---------- ----------

Interest bearing:
Saving accounts and time deposits ........................ 1,677,668 1,469,231
---------- ----------
Total deposits ........................................ 2,172,508 1,931,610
---------- ----------

BORROWINGS (Note 11)
Central Bank borrowings .................................... 6,697 8,930
Securities sold under agreements to repurchase ............. 171,721 258,120
Mortgage finance bonds ..................................... 266,437 253,509
Other borrowings:
Subordinated bonds ....................................... 22,765 31,923
Other bonds .............................................. 34,085 40,122
Borrowings from domestic financial institutions .......... 71,491 69,623
Foreign borrowings ....................................... 212,355 176,795
Other obligations ........................................ 20,934 38,360
---------- ----------
Total borrowings ...................................... 806,485 877,382
---------- ----------

OTHER LIABILITIES
Contingent liabilities (Note 10 c) ......................... 72,088 86,312
Other (Note 10 b) .......................................... 92,190 73,155
---------- ----------
Total other liabilities ............................... 164,278 159,467
---------- ----------

MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES ................................................. 138 115
---------- ----------

COMMITMENTS AND CONTINGENCIES (Note 14)
SHAREHOLDERS' EQUITY (Note 12)
Capital .................................................... 153,396 153,396
Reserves ................................................... 84,074 85,739
Net income for the year .................................... 27,108 20,458
---------- ----------
Total shareholders' equity ............................ 264,578 259,593
---------- ----------
Total liabilities and shareholders' equity ............ 3,407,987 3,228,167
========== ==========

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.

F-4

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

CONSOLIDATED STATEMENTS OF INCOME

Expressed in millions of constant Chilean pesos (MCh$) of December 31, 2003

Year ended December 31,
--------------------------------
2003 2002 2001
-------- -------- --------
MCh$ MCh$ MCh$

INTEREST REVENUE AND EXPENSE
Interest revenue ....................................... 118,806 218,629 220,376
Interest expense ....................................... (80,118) (108,524) (126,101)
-------- -------- --------
Net interest revenue ............................... 38,688 110,105 94,275
-------- -------- --------
PROVISION FOR LOAN LOSSES (Note 7) .......................... (35,303) (31,629) (31,872)
-------- -------- --------

INCOME FROM SERVICES, NET (Note 17)
Income from services ................................... 33,575 26,598 22,505
Services expenses ...................................... (4,271) (4,618) (5,105)
-------- -------- --------
Income from services, net .......................... 29,304 21,980 17,400
-------- -------- --------

OTHER OPERATING INCOME, NET
Gains on financial instruments (Note 18) ............... 12,146 13,232 11,757
Losses on financial instruments (Note 18) .............. (9,390) (7,030) (3,117)
Foreign exchange transactions, net ..................... 64,293 (14,479) (4,204)
-------- -------- --------
Total other operating income, net .................. 67,049 (8,277) 4,436
-------- -------- --------

OTHER INCOME AND EXPENSES
Recovery of loans previously charged-off (Note 19) ..... 9,998 9,793 7,575
Non operating income (Note 20) ......................... 6,813 4,625 3,987
Non operating expenses (Note 20) ....................... (5,450) (3,562) (2,849)
Participation in earnings (losses) of equity investments 154 117 (34)
-------- -------- --------
Total other income and expenses .................... 11,515 10,973 8,679
-------- -------- --------

OPERATING EXPENSES
Personnel salaries and expenses ........................ (33,504) (33,449) (33,430)
Administrative and other expenses ...................... (31,007) (29,339) (28,423)
Depreciation and amortization .......................... (13,284) (13,122) (10,154)
-------- -------- --------
Total operating expenses ........................... (77,795) (75,910) (72,007)
-------- -------- --------

LOSS FROM PRICE-LEVEL RESTATEMENT (Note 21) ................. (1,760) (4,206) (4,509)
-------- -------- --------

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES .............. (23) (34) (24)
-------- -------- --------
INCOME BEFORE INCOME TAXES .................................. 31,675 23,002 16,378
Income taxes (Note 22) ................................. (4,567) (2,544) (890)
-------- -------- --------
Net income for the year ............................ 27,108 20,458 15,488
======== ======== ========

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.

F-5

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in millions of constant Chilean pesos (MCh$) of December 31, 2003

Year ended December 31,
--------------------------------
2003 2002 2001
-------- -------- --------
MCh$ MCh$ MCh$
CASH FLOWS FROM OPERATING ACTIVITIES

Net income ...................................................................... 27,108 20,458 15,488
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................. 13,284 13,122 10,154
Provision for loan losses ..................................................... 35,303 31,629 31,872
Provision for assets received in lieu of payment .............................. 704 685 1,037
Net change in trading investments ............................................. (164,066) (11,427) 151,580
Minority interest in earnings of subsidiaries ................................. 23 34 24
Net gain on sales of bank premises and equipment .............................. (216) (7) (163)
Net gain on sales of assets received in lieu of payment and leasing assets .... (1,781) (412) (317)
Recovery of assets received in lieu of payment previously charged - off ....... (982) (814) (783)
Write-offs of assets received in lieu of payment .............................. 3,114 1,419 545
Price-level restatements ...................................................... 1,760 4,206 4,509
Deferred income taxes ......................................................... 2,898 (3,780) (5,307)
Other charges not representing cash flows ..................................... 878 2,159 1,891
Net change in interest accruals ............................................... 4,272 (5,853) 3,445
Net change in other assets and liabilities .................................... 16,937 (18,465) 5,686
-------- -------- --------
Net cash (used in) provided by operating activities ....................... (60,764) 32,954 219,661
-------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans ........................................................... (326,244) (355,392) (189,177)
Purchases of investments ........................................................ (143,771) (321,611) (116,058)
Proceeds from sales of investments .............................................. 320,307 141,626 49,688
Dividends received from investments in other companies ......................... 125 51 90
Additional investments in other companies ....................................... 32 (15) (366)
Proceeds from sales of bank premises and equipment .............................. 384 109 1,868
Purchases of bank premises and equipment ........................................ (7,184) (4,969) (8,452)
Proceeds from sales of assets received in lieu of payment ....................... 11,568 4,814 4,221
-------- -------- --------
Net cash used in investing activities ..................................... (144,783) (535,387) (258,186)
-------- -------- --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in current accounts ................................................ (383) 46,724 33,591
Net increase in savings accounts and time deposits .............................. 216,485 351,243 168,624
Net increase (decrease) in banker's drafts and other deposits ................... 29,402 91,516 (138)
Net (decrease) increase in securities sold under agreements to repurchase ....... (86,304) 83,915 (86,123)
Proceeds from issuance of mortgage finance bonds ................................ 67,393 77,102 44,466
Repayment of mortgage finance bonds ............................................. (50,024) (58,626) (40,941)
Repayments of Central Bank borrowings (long-term) ............................... (2,204) (2,855) (3,145)
Net increase (decrease) in other short-term borrowings .......................... 28,454 13,981 (17,606)
Repayment of bonds .............................................................. (15,066) (4,530) (4,007)
Proceeds from other long-term borrowings ........................................ 155,015 136,127 22,586
Repayment of other long-term borrowings ......................................... (162,792) (101,828) (14,477)
Dividends paid .................................................................. (20,087) (15,079) (15,793)
-------- -------- --------
Net cash provided by financing activities ................................. 159,889 617,690 87,037
-------- -------- --------

NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS ................................. (45,658) 115,257 48,512
-------- -------- --------
EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS ................................... (2,648) (8,285) (7,495)
-------- -------- --------
CASH AND DUE FROM BANKS, BEGINNING OF YEAR ......................................... 314,133 207,161 166,144
-------- -------- --------
CASH AND DUE FROM BANKS, END OF YEAR ............................................... 265,827 314,133 207,161
======== ======== ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest ...................................................................... 58,306 31,013 58,886
Income taxes paid ............................................................. 6,738 (424) 4,856

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.

F-6

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Expressed in millions of constant Chilean pesos (MCh$) of December 31, 2003
(except for number of shares)

Number
of shares Net
issued and income for
fully paid Capital Reserves the year Total
----------- ------- -------- ---------- --------
MCh$ MCh$ MCh$ MCh$

Balances at January 1, 2003 (historical) ........ 361,222,027 151,877 84,890 20,255 257,022
Capitalization of undistributed earnings ........ -- -- 26 (26) --
Dividend paid ................................... -- -- -- (20,229) (20,229)
Market value adjustments of available for sale
securities .................................... -- -- (2,027) -- (2,027)
Price-level restatement ......................... -- 1,519 1,185 -- 2,704
Net income for the year ......................... -- -- -- 27,108 27,108
----------- ------- -------- ---------- --------
Balances at December 31, 2003 ................... 361,222,027 153,396 84,074 27,108 264,578
=========== ======= ======== ========== ========

Balances at January 1, 2002 (historical) ........ 361,222,027 147,454 80,493 14,888 242,835
Capitalization of undistributed earnings ........ -- -- 2 (2) --
Dividend paid ................................... -- -- -- (14,886) (14,886)
Market value adjustments of available for
sale securities ............................... -- -- 1,918 -- 1,918
Price-level restatement ......................... -- 4,423 2,477 -- 6,900
Net income for the year ......................... -- -- -- 20,255 20,255
----------- ------- -------- ---------- --------
Balances at December 31, 2002 ................... 361,222,027 151,877 84,890 20,255 257,022
=========== ======= ======== ========== ========
Balance at December 31, 2001 restated in constant
Chilean pesos of December 31, 2003 ............ 153,396 85,739 20,458 259,593
======= ======== ========== ========

Balances at January 1, 2001 (historical) ........ 361,222,027 143,020 78,731 14,035 235,786
Capitalization of undistributed earnings ........ -- -- 2 (2) --
Dividend paid ................................... -- -- -- (14,033) (14,033)
Market value adjustments of available for sale
securities .................................... -- -- (720) -- (720)
Price-level restatement ......................... -- 4,434 2,480 -- 6,914
Net income for the year ......................... -- -- -- 14,888 14,888
----------- ------- -------- ---------- --------
Balances at December 31, 2001 ................... 361,222,027 147,454 80,493 14,888 242,835
=========== ======= ======== ========== ========
Balance at December 31, 2001 restated in constant
Chilean pesos of December 31, 2003 ............ 153,396 83,737 15,488 252,621
======= ======== ========== ========

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.

F-7

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Expressed in millions of constant Chilean pesos (MCh$)
of December 31, 2003 (except as indicated)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation

Banco Bilbao Vizcaya Argentaria, Chile (formerly BBVA Banco BHIF) is a
corporation organized under the laws of the Republic of Chile whose stock is
quoted on the Santiago Stock Exchange and the Chilean Electronic Exchange and
whose American Depositary Receipts ("ADR") are quoted on the New York Stock
Exchange (NYSE). It is regulated by the Chilean Superintendencia de Bancos e
Instituciones Financieras ("Superintendency of Banks") and the United States
Securities and Exchange Commission ("SEC").

Banco Bilbao Vizcaya Argentaria, Chile provides a broad range of general
banking services to customers ranging from individuals to major corporations.
Banco Bilbao Vizcaya Argentaria, Chile and its subsidiaries (collectively the
"Bank"), offer general commercial and consumer banking services. The Bank's
subsidiaries provide other services to customers in Chile including securities
and insurance brokerage, mutual fund management, investment fund management,
residential housing fund management and financial advisory services.

The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Chile and regulations of the
Superintendency of Banks (in the case of the bank and its residential housing
leasing and financial advisory services subsidiaries) and the Chilean
Superintendency of Securities and Insurance (in the case of the securities
brokerage and mutual fund, investment residential housing fund management and
insurance brokerage subsidiaries).

The Bank has issued its statutory consolidated financial statements in
Spanish and in conformity with accounting principles generally accepted in
Chile, which include certain notes and additional information required by the
Superintendency of Banks for statutory purposes. Management believes that these
additional notes and information are not essential for the complete
understanding of the consolidated financial statements and, accordingly, these
notes and additional information have been excluded from the accompanying
financial statements.

The consolidated financial statements include Banco Bilbao Vizcaya
Argentaria, Chile and its majority-owned subsidiaries. The accounts of
subsidiaries are included when the Bank's ownership interest exceeds 50%. All
significant intercompany transactions and balances have been eliminated in
consolidation. The participation of minority shareholders in subsidiaries has
been given effect in the consolidated financial statements under Minority
interest.

F-8

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The consolidated financial statements for the years 2003, 2002 and 2001
include the following subsidiaries:

Percentage of ownership
------------------------
2003 2002 2001
------ ------ ------
% % %

BBVA Corredores de Bolsa S.A ...................... 100.00 100.00 99.96
BBVA Administradora General de Fondos S.A .......... 100.00 100.00 100.00
BBVA Corredora Tecnica de Seguros Limitada ......... 100.00 100.00 100.00
BHIF Asesorias y Servicios Financieros S.A ......... 98.60 98.60 98.60
BBVA Sociedad de Leasing Inmobiliario S.A .......... 97.48 97.48 97.17
BHIF Administradora de Fondos de Inversion S.A ..... -- 100.00 100.00
BHIF Administradora de Fondos para la Vivienda S.A . -- 100.00 100.00

On August 29, 2003 and pursuant to resolution No. 260, the Chilean
Superintendency of Securities and Insurance approved the modification to the
by-laws of BBVA Administradora de Fondos Mutuos BHIF S.A., a stock corporation,
and its merger with BHIF Administradora de Fondos de Inversion S.A. and BHIF
Administradora de Fondos para la Vivienda S.A., the latter being absorbed by
the former. The reform to the by-laws of BBVA Administradora de Fondos Mutuos
consisted of a change in the type of management company, BBVA Administradora de
Fondos Mutuos became a General Fund Management Company and changed their name
to BBVA Administradora General de Fondos S.A., as set foth in Title XXVII of
Law No. 18.045.

b) Use of estimates in the preparation of financial statements

The preparation of the consolidated financial statements requires the use
of estimates and assumptions that affect the reported amounts of assets and
liabilities, the reported amounts of revenues and expenses and the disclosure
of contingent liabilities. Management makes its best estimate of the ultimate
outcome for these items based on historical trends and other information
available when the financial statements are prepared. Changes in estimates are
recognized in accordance with the accounting rules for the estimate, which is
typically in the period when new information becomes available to management.
Areas where the nature of the estimate makes it reasonably possible that actual
results could materially differ from amounts estimated include: allowance for
loan losses, investments and deferred income taxes.

In certain cases generally accepted accounting principles require that
assets or liabilities be recorded or disclosed at their fair values. The fair
value is the amount at which an asset could be bought or sold or in the case of
a liability could be incurred or settled in a current transaction between
willing parties, other than in a forced or liquidation sale. Where available
quoted market prices in active markets have been used as the basis for the
measurement, however, where quoted market prices in active markets are not
available the Bank has estimated such values based on the best information
available, including using modeling and other valuation techniques.

F-9

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

c) Price-level restatements

The consolidated financial statements are prepared on the basis of general
price-level accounting in order to reflect the effect of changes in the
purchasing power of the Chilean peso during each year. At the end of each
reporting period, the consolidated financial statements are restated in terms
of the general purchasing power of the Chilean peso using changes in the
Chilean consumer price index ("CPI") as follows:

- - Non monetary assets, liabilities and shareholders' equity accounts are
restated in terms of year-end purchasing power.

- - Consistent with general banking practices in Chile, no specific purchasing
power adjustments of income statement amounts are made.

- - Monetary items are not restated as such items are, by their nature, stated
in terms of current purchasing power in the financial statements.

- - The price-level restatement credit or charge in the income statement
represents the monetary gain or loss in purchasing power from holding
monetary assets and liabilities exposed to the effects of inflation.

- - All the amounts contained in the accompanying consolidated financial
statements have been restated in Chilean pesos of general purchasing power
of December 31, 2003 ("constant pesos") applied under the "prior month
rule", as described below, to reflect changes in the CPI from the
financial statement dates to December 31, 2003. This updating does not
change the prior years' statements or information in any way except to
update the amounts to constant pesos of similar purchasing power.

The general price-level restatements are calculated using the official CPI
of the Chilean National Institute of Statistics and are based on the
"prior month rule", in which the inflation adjustments at any balance
sheet date are based on the consumer price index at the close of the
preceding month. The CPI is considered by the business community, the
accounting profession and the Chilean government to be the index which
most closely complies with the technical requirement to reflect the
variation in the general level of prices in the country and, consequently,
is widely used for financial reporting purposes in Chile.

The values of the CPI used for price-level restatement purposes are as follows:

Year-end
Year CPI* Change in CPI
- ---- ------ -------------
%
2003 114.44 1.0
2002 113.36 3.0
2001 110.10 3.1

* Index as of November 30 of each year, under the prior month rule described
above.

F-10

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The price-level adjusted consolidated financial statements do not purport
to represent appraised values, replacement cost, or any other current value of
assets at which transactions would take place currently and are only intended
to restate all non monetary financial statement components in terms of local
currency of a single purchasing power and to include in the net result for each
year the gain or loss in purchasing power arising from the holding of monetary
assets and liabilities exposed to the effects of inflation.

For comparison purposes, the financial statements and their respective
notes are adjusted by the percentage changes in the CPI to December 31, 2003 as
follows:

Year Adjustment factor
- ---- -----------------
2002....................................................... 1.0
2001....................................................... 4.0 (1)

(1) Equivalent to the amounts for 2001, multiplied by the change in the CPI
for 2002 and then by the change in the CPI for 2003.

d) Index-linked assets and liabilities

Certain of the Bank's interest-earning assets and interest-bearing
liabilities are expressed in index-linked units of account. The principal
index-linked unit used in Chile is the Unidad de Fomento (UF), a unit of
account which changes daily from the ninth day of the current month to the
tenth day of the next month, to reflect the changes in the Chilean CPI over the
previous month. The carrying amounts of such assets and liabilities change with
the changes in the UF and serve to offset the price-level restatement gains or
losses from holding such assets and liabilities. As the Bank's UF assets exceed
its UF liabilities, any increase in the index results in a net gain on
indexation. Values for the UF as of December 31 of each year are as follows in
historical Chilean pesos:

Year Ch$
- ---- ---
2003............................................................... 16,920.00
2002............................................................... 16,744.12
2001............................................................... 16,262.66

e) Interest revenue and expense recognition

Interest revenue and expense are recognized on the accrual basis using the
effective interest method. The carrying amounts of loans, investments and
liabilities include accrued interest and the indexation adjustment applicable
to balances that are denominated in UFs or other indices. The effect of changes
in the UF index on interest-earning assets and interest-bearing liabilities is
reflected in the income statement as an increase or decrease in interest
revenue or expense.

The Bank suspends the accrual of interest and indexation adjustment of
principal on loans beginning on the first day that such loans are overdue and
on amounts not yet due for loans on which any installments of principal or
interest are 90 days overdue. Interest accrued prior to the loan becoming
overdue remains on the Bank's books and is considered to be a part of the loan
balance when determining the allowance for loan losses. Payments received on
overdue loans are first applied to reduce the recorded balance of accrued
interest receivable, if any, and thereafter are recognized as income to the
extent of interest earned but not recorded.

F-11

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

f) Assets and liabilities in foreign currency and foreign currency
transactions

The Bank makes loans and accepts deposits in amounts denominated in
foreign currencies, principally the US dollar. Such assets and liabilities are
translated at the applicable rate of exchange at each balance sheet date.

Foreign exchange transactions, net, in the consolidated statements of
income include the recognition of the effects that variations in the exchange
rates have on assets and liabilities denominated in foreign currencies and the
gains or losses on foreign exchange spot and forward transactions (see Note 1
h) undertaken by the Bank.

g) Investments

Investments which have a secondary market are carried at market value,
except for investments held by the brokerage and other subsidiaries which are
carried at the lower of cost or market value. Instructions issued by the
Superintendency of Banks require market value adjustments to be made against
income, except in the case of securities available for sale, in which case the
adjustments are made directly against the equity account "Market value
adjustments of available for sale securities" included in Reserves. All other
investments are carried at cost plus accrued interest and UF-indexation
adjustment, as applicable.

The Bank enters into repurchase agreements as a form of borrowing. In this
regard, the Bank's investments which are sold subject to a repurchase
obligation and which serve as collateral for the borrowing are reclassified as
"Investment collateral under agreements to repurchase". The liability to
repurchase the investments is classified as "Securities sold under agreements
to repurchase".

The Bank also enters into resale agreements as a form of investment. Under
these agreements, the Bank purchases securities which are included as an asset
under the caption "Investments purchased under agreements to resell".

h) Derivatives

The Bank enters into foreign exchange forward contracts for its own
account and the accounts of its customers. The Bank's forward contracts, held
for trading or hedging purposes, are valued at the spot rate of exchange at the
balance sheet date and the resulting gains or losses are recognized in income;
the discount or premium on a forward contract is included in net income over
the life of the forward contract.

The Bank entered into interest rate swap agreements to hedge part of its
investment portfolio. These agreements are recorded on balance sheet at
estimated fair market values. Unrealized gains or losses are credited or
charged to income for those agreements that are designated by the Bank's
management as hedges of part of the investment portfolio classified as trading.
In the case of the interest rate swap agreements designated by the Banks'
management as hedges of part of the investment portfolio classified as
permanent investments, unrealized gains and losses are credited or charged to
shareholders' equity.

The Bank's interest rate swap agreements are treated as off-balance-sheet
financial instruments and the net interest effect, which corresponds to the
difference between interest income and interest expense arising from such
agreements, is recorded in net income in the period that such differences
originate.

F-12

The Bank's brokerage subsidiary enters into financial futures as part of
its portfolio management and trading activities. Financial futures contracts
are valued at their estimated market values. Gains on such contracts are
generally recognized when the transactions are closed and losses are recognized
immediately as incurred. However, gains are also recognized in income to the
extent of any previously recognized losses.

i) Bank premises and equipment

Bank premises and equipment are stated at acquisition cost net of
accumulated depreciation and have been restated for price-level changes.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the underlying assets.

The cost of maintenance and repairs is charged to income. The cost of
significant renovations and improvements is capitalized.

j) Investments in other companies

Investments in companies which are integral to the operations of the Bank
and where the Bank holds a less than majority interest are principally
accounted for under the equity method. Other minority investments are carried
at cost restated for price-level changes.

k) Allowance for loan losses, charge-offs and recoveries

The Bank has established allowances to cover possible loan losses in
accordance with regulations issued by the Superintendency of Banks. In general,
the Bank is required to maintain a minimum allowance for loan losses based on
the greater of the global loan loss allowance and the individual loan loss
allowance.

Global loan loss allowance

A global loan loss allowance is calculated by multiplying the Bank's
outstanding loans by the greater of its "risk index" and 0.75%. The Bank's risk
index is based upon a classification of a portion of its customers' outstanding
loans into five categories based upon risk of loss for commercial loans and
overdue status for consumer and residential mortgage loans. The loan
classification guidelines of the Superintendency of Banks require that the Bank
classify the greater of (i) the commercial loans outstanding to its 400 largest
debtors or (ii) the commercial loans outstanding to its largest debtors whose
commercial loans aggregate at least 75% of the total amount of loans included
in the commercial loan portfolio. Such guidelines also require that the Bank
classify its entire portfolio of consumer and residential mortgage loans.

Once the customers' outstanding loans have been classified, specified
percentage allowances for each category are applied. The resulting
weighted-average allowance rate is the risk index utilized in the calculation
of the global loan loss allowance.

Also in accordance with regulations of the Superintendency of Banks, the
risk index calculated for the classified loans must also be applied to the
non-classified commercial loan portfolio.

All consumer loans to an individual are classified in the same category as
the loan with the lowest classification (i.e., highest level of risk and
provision requirements).

F-13

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Individual loan loss allowance

Once a loan becomes overdue for more than 90 days, a specific allowance is
calculated for 100% of the uncollateralized portion of the loan. Individual
loan loss allowances must be determined separately for the classified and
nonclassified loan portfolios, but are required only to the extent that, in the
aggregate, they exceed the global loan loss allowance for each portfolio.

Voluntary loan loss allowance

In 2003 and 2002, the Bank has recorded voluntary allowances in addition
to those required by the regulations of the Superintendency of Banks. The Bank
has adopted this policy in an effort to provide for any losses that could
affect its loan portfolio and that might arise from unforeseen circumstances
beyond known potential losses and losses inherent in a portfolio of the size
and nature of the Bank's portfolio. At December 31, 2003 and 2002, these
voluntary allowances amounted to MCh$ 6,783 and MCh$ 2,942, respectively. The
effects of this provision for loan losses in the Consolidated Statement of
Income are MCh$ (3,870), MCh$ 667 and MCh$ (3,718) for the years ended December
31, 2003, 2002 and 2001, respectively.

Charge-offs and recoveries

In accordance with the regulations of the Superintendency of Banks,
commercial and mortgage loans must be charged-off no later than when they are
contractually past due 24 months (for loans without collateral) and 36 months
(for loans with collateral). The Bank will also charge-off commercial loans
prior to the meeting of this criteria when the Bank no longer considers such
loans to be collectible.

Consumer loans must be charged off no later than when overdue for six
months.

Charge-offs on loans are taken against the allowance for loan losses and
recoveries on charged-off loans are recorded directly to income.

Assets received in lieu of payment of loans are carried at market value.

l) Income taxes

Effective January 1, 1999, the effects of deferred income taxes arising
from temporary differences between the basis of assets and liabilities for tax
and financial statement purposes are recorded in accordance with Technical
Bulletins Nos. 60, 68 and 69 of the Chilean Institute of Accountants. The
effects of deferred income taxes at January 1, 1999 that were not previously
recorded, were recognized, in accordance with the transitional period provided
by Technical Bulletin No. 60, against a contra asset or liability account
("complementary accounts") and were recorded to offset the effects of the
deferred tax assets and liabilities not recorded prior to January 1, 1999.
Complementary accounts are amortized to income over the estimated average
reversal periods corresponding to underlying temporary differences to which the
deferred tax asset or liability related. Deferred income taxes at December 31,
1998 are recognized in income beginning in 1999 as the temporary differences
are reversed.

Deferred income tax assets are reduced by a valuation allowance if, based
on the weight of available evidence, it is more likely than not that some
portion or all of the deferred income tax assets will not be realized. The
valuation allowance should be sufficient to reduce the deferred income tax
asset to an amount that is more likely than not to be realized.

F-14

m) Statement of cash flows

For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks.

n) Business combinations

In accordance with Chilean GAAP for banks, assets acquired and liabilities
assumed in a business combination are included in the consolidated financial
statements of the acquirer at their net book value on the date of acquisition.
The difference between the purchase price and the net book value of the assets
and liabilities acquired is considered to be goodwill and is amortized on a
straight-line basis over a period not exceeding ten years.

o) Reclassifications

Certain balances from prior years have been reclassified to conform with
the current year presentation.

NOTE 2 - CASH AND DUE FROM BANKS

In accordance with the rules of the Superintendency of Banks, the Bank
must maintain certain non-interest bearing balances on deposit with the Central
Bank. The required balances are based upon specified financial criteria,
including the amounts of foreign borrowings and average liabilities.

NOTE 3 - INVESTMENTS

Investments are summarized as follows:

December 31,
------- -------
2003 2002
------- -------
MCh$ MCh$

Government securities
Central Bank securities ..................................... 209,698 290,665

Investments purchased under agreements to resell ................. 8,421 56,616

Investment collateral under agreements to repurchase
Central Bank securities ..................................... 128,567 205,613
Time deposits in Chilean financial institutions ............. 74,049 16,871
------- -------
202,616 222,484
------- -------
Other investments
Negotiable time deposits in Chilean financial institutions .. 110,621 43,787
Other marketable securities ................................. 51,234 38,787
------- -------
161,855 82,574
------- -------
Total investments ....................................... 582,590 652,339
======= =======

For investments stated at market value, there were net unrealized holding
gains (losses) of MCh$ (570) MCh$ (996) and MCh$ 445 included in the
Consolidated Statements of Income for the years ended December 31, 2003, 2002
and 2001, respectively. The adjustment for the Bank's available-for-sale
investments resulted in a charge to equity of MCh$ 2,027 and a credit to equity
of MCh$ 1,937 at December 31, 2003 and 2002, respectively.

F-15

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS

The Bank and its brokerage subsidiary enter into derivative transactions
as part of their asset and liability management (which include contracts for
hedging purposes) and trading activities and in acting as dealers to satisfy
their clients' needs. The notional amounts of these contracts are carried
off-balance-sheet.

a) Forward contracts and futures

Foreign exchange forward contracts involve an agreement to exchange the
currency of one country for the currency of another country at an agreed-upon
price and settlement date. These contracts are generally standardized
contracts, normally for periods between 1 and 180 days and are not traded in a
secondary market; however, in the normal course of business and with the
agreement of the original counterparty, they may be terminated or assigned to
another counterparty.

When the Bank enters into a forward exchange contract it analyzes and
approves the credit risk (the risk that the counterparty might default on its
obligation). Subsequently, on an ongoing basis, it monitors the possible losses
involved in each contract. To manage the level of credit risk, the Bank deals
with counterparties of good credit standing, enters into master netting
agreements whenever possible and, when appropriate, obtains collateral.

The Central Bank requires that foreign exchange forward contracts be made
only in US dollars and other major foreign currencies. In the case of the Bank,
most forward contracts are made in US dollars against the Chilean peso or the
UF. From time to time, forward contracts are also made in other currencies, but
only when the Bank acts as an intermediary.

The movement and balances of the notional amounts of foreign exchange
forward contracts during the years 2003 and 2002 are as shown below. The
notional amounts of these contracts, which are not included in the Consolidated
Balance Sheet, significantly exceed the amount of potential credit risk.

Year ended December 31,
----------------------------------------------------
2003 2002
------------------------ ------------------------
Asset Liability Asset Liability
position position position position
(forward (forward (forward (forward
purchased) sales) purchased) sales)
---------- ---------- ---------- ----------
MCh$ MCh$ MCh$ MCh$

Balance at January 1 .............. 309,654 619,184 306,304 393,958
New contracts ..................... 3,327,203 3,539,404 1,861,105 2,335,226
Terminated and matured contracts .. (3,079,302) (3,395,669) (1,874,293) (2,131,270)
Foreign exchange adjustment ....... (51,679) (80,492) 16,538 21,271
---------- ---------- ---------- ----------
Balance at December 31 ............ 505,876 682,427 309,654 619,185
========== ========== ========== ==========

Accounting polices followed for derivatives are described in Note 1 h).
Receivables and payables for unrealized gains, losses, premiums and discounts
arising from foreign exchange forward contracts are shown on a net basis under
Other assets or Other liabilities (see Note 10).

F-16

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Net realized and unrealized gains on foreign exchange forward contracts
amounted to ThCh$ 41,053 in 2003, ThCh$ 11,853 in 2002 and ThCh$ 12,880 in 2001
and are included in the Consolidated Statement of Income under the account
"Foreign exchange transaction, net."

b) Interest rate swap agreements

The table below presents outstanding interest rate swap agreements at
December 31, 2003 by maturity. Variable interest rates presented are based on
the London Interbank Offered Rate (LIBOR) in effect on the swap agreements at
period-end. The table was prepared under the assumption that these variable
interest rates remain constant. The variable rates to be received or paid will
change to the extent that rates fluctuate.

During de year
ending December 31,
-------------------
MCh$
Pay fixed/receivable variable swap agreements
Notional amounts:
2004 ................................................... 165,256
2005 ................................................... 397,177
2006 ................................................... 55,290
2007 ................................................... 251,770
2008 and thereafter ................................... 785,650
---------
Total .............................................. 1,655,143
=========
Weighted average:
Received rate .......................................... 2.62
Paid rate .............................................. 2.98

Accounting polices followed for derivatives are described in Note 1 h).
The net interest accrual arising from the interest rate swap agreements is
recorded in net income in the period that it arises.

The Bank has designated certain interest rate swaps with a notional amount of
MCh$152,972 as hedges of its trading investment portfolio. At December 31,
2003, unrealized losses amounted to MCh$ 1,495 and are included in the
Consolidated Statement of Income under Losses on financial instruments. The
Banks has also designated certain interest rate swaps with a notional amount of
MCh$23,587 as hedges of its available for sale investment portfolio. At
December 31, 2003, unrealized losses amounted to MCh$ 127 and are included in
the Consolidated Balance Sheet under the equity account "Market value
adjustments of available for sale securities" included in Reserves.

NOTE 5 - LOANS

The loans included in the accompanying Consolidated Balance Sheets are
classified into subcategories as described below.

Commercial loans are long-term and short-term loans made on a variable or
fixed-rate basis primarily to finance working capital or investments. Loans to
individuals or businesses which do not fit the definition of any of the other
loan categories below are classified as commercial loans.

Consumer loans are long-term and short-term installment loans to
individuals generally on a fixed-rate basis. Credit card balances subject to
interest rates are also included in this category.

F-17

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Mortgage loans are inflation-indexed, fixed-rate, long-term loans with
monthly payments of principal and interest collateralized by mortgages on real
estate. These loans are specifically funded through the issuance of mortgage
finance bonds. In accordance with regulations of the Superintendency of Banks,
at the time of approval the amount of a mortgage loan cannot be more than 75%
of the lower of the purchase price or appraised value of the mortgaged
property.

Foreign trade loans are fixed or variable-rate short-term loans made in
foreign currencies (principally US dollars) to finance imports and exports.

Interbank loans are fixed-rate, short-term loans to financial institutions
that operate in Chile.

Lease contracts are agreements for direct financing leases of capital
equipment and other property. Leasing contracts include the aggregate of lease
payments receivable, less the amount of unearned income and value added tax.
These contracts are denominated in either US dollars or UFs and are adjusted
based on the variation of the Chilean peso against the US dollar or the rate of
inflation based on the CPI.

Other outstanding loans include the following:
December 31,
2003 2002
------- -------
MCh$ MCh$

Current account lines of credit - individuals and companies. 48,139 54,534
Mortgage loans financed by Central Bank lines of credit .... 2,643 3,682
Mortgage loans financed by the Bank's general borrowings ... 469,670 313,244
Other ...................................................... 773 917
------- -------
521,225 372,377
======= =======

Past due loans include, with respect to any loan, the amount of principal
or interest that is 90 days or more overdue, and the entire outstanding balance
of any loan is recorded under past due loans once the legal collection
procedures have been commenced.

Contingent loans consist of open and unused letters of credit together
with guarantees granted by the Bank in Chilean pesos, UFs and foreign
currencies (principally US dollars). Contingent loans (including accrued fees
receivable) are detailed as follow:

December 31,
2003 2002
------- ------
MCh$ MCh$

Standby letters of credit and other guarantees .............. 43,303 43,832
Open and unused letters of credit ........................... 28,638 41,706
------- ------
71,941 85,538
======= ======

The Bank's liabilities under these agreements are included in contingent
liabilities (see Note 10 c).

F-18

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Bank has certain loans on which the accrual of interest income has
been discontinued. These loans amounted to MCh$ 133,599, MCh$ 128,089 and MCh$
122,949 at December 31, 2003, 2002 and 2001, respectively. If these loans had
been accruing interest, net income would have decreased MCh$ 1,044 in 2003 and
increased by MCh$ 9,239 in 2002 and MCh$ 2,269 in 2001.

The following table summarizes the loan concentration by economic
activity, expressed as a percentage of total loans, excluding contingent loans
and before the allowance for loan losses:

December 31,
2003 2002
------ ------
% %

Services .................................................... 14.86 16.11
Trade ....................................................... 10.95 10.37
Financial services .......................................... 7.34 8.98
Construction ................................................ 7.30 8.15
Manufacturing ............................................... 7.12 8.94
Electricity, gas and water .................................. 6.15 4.48
Transport. storage and communications ....................... 4.77 3.10
Agriculture, livestock, forestry and fishing ................ 4.08 4.77
Mining ...................................................... 2.06 3.65
Individuals:
Residential mortgage loans .............................. 25.65 21.68
Consumer ................................................ 9.72 9.77
------ ------
Total .............................................. 100.00 100.00
====== ======

Substantially all of the Bank's loans are to borrowers doing business in
Chile. Thus, the recoverability of the Bank's loans could be affected by an
economic downturn in Chile.

F-19

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 6 - LEASE CONTRACTS

The amounts shown as lease contracts are receivables under direct
financing leases and have the following maturities as of December 31, 2003:

During the years Total Unearned Value-added Net lease
ending December 31, repayments income tax receivable
------------------- ------- ------- ------- -------
MCh$ MCh$ MCh$ MCh$

2004 ........................... 33,443 (7,030) (4,031) 22,382
2005 ........................... 25,126 (5,396) (2,782) 16,948
2006 ........................... 19,221 (2,605) (2,035) 14,581
2007 ........................... 10,858 (1,945) (900) 8,013
2008 ........................... 8,346 (1,506) (550) 6,290
2009 and thereafter ............ 44,851 (12,270) (1,210) 31,371
------- ------- ------- -------
Total lease contracts . 141,845 (30,752) (11,508) 99,585
======= ======= ======= =======

During 2002, the Bank securitized certain leasing contracts as follows:

Book value of Effect on
leasing contracts Sale value net income
----------------- ---------- ----------
MCh$ MCh$ MCh$
2002 5,272 6,536 1,264

NOTE 7 - ALLOWANCE FOR LOAN LOSSES

The changes in the allowance for loan losses are as follows:

Year ended December 31,
-------------------------------
2003 2002 2001
------- ------- -------
MCh$ MCh$ MCh$

Balances as of January 1 ................... 45,495 43,697 38,656
Charge-offs ................................ (35,716) (28,557) (24,190)
Provision charged to operations ............ 35,303 31,629 31,872
Price-level restatement (1) ................ (450) (1,274) (2,641)
------- ------- -------
Balances as of December 31 ................. 44,632 45,495 43,697
======= ======= =======

(1) Reflects the effect of inflation on the allowance for loan losses at the
beginning of each period, adjusted to constant pesos of December 31, 2003.

F-20

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 8 - BANK PREMISES AND EQUIPMENT

The major categories of Bank premises and equipment, net of accumulated
depreciation, are as follows:

December 31, Estimated useful
2003 2002 lives (in years)
------ ------ ---------------
MCh$ MCh$

Buildings ..................................... 29,494 29,409 20 to 50
Land .......................................... 11,212 11,220
Office equipment .............................. 10,490 14,492 3
Furniture and fixtures ........................ 1,517 157 7
Vehicles ...................................... 119 145 7
Others ........................................ 2,497 802 10
------ ------
Total bank premises and equipment, net 55,329 56,225
====== ======

Certain Bank facilities and equipment are leased under various operating
leases. Rental expense was MCh$ 2,583 in 2003, MCh$ 1,820 in 2002 and MCh$
2,283 in 2001. Future minimum rental commitments under non-cancelable leases
are:

Payable during the years
ending December 31, MCh$
------------------- ------
2004.................................................................. 3,470
2005.................................................................. 2,826
2006.................................................................. 1,995
2007.................................................................. 1,729
2008.................................................................. 1,439
2009 and thereafter................................................... 7,545
------
Total lease contracts........................................ 19,004
======

F-21

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 9 - INVESTMENTS IN OTHER COMPANIES

Investments in other companies consist of the following:

At December 31, Ownership
2003 2002 interest
----- ----- --------
MCh$ MCh$ %

Investments in other companies accounted
for under the equity method:
Nexus S.A ......................................... 370 331 9.70
Transbank S.A ..................................... 303 302 6.25
Santiago Stock Exchange ........................... 273 321 2.08
Electronic Stock Exchange ......................... 62 62 2.50
Valparaiso Stock Exchange ......................... 11 13 2.22
----- -----
Investments carried at cost: ........................... 1,019 1,029
Sociedad Interbancaria de Depositos de Valores S.A 91 95
Other ............................................. 48 47
----- -----
Total investments in other companies .......... 1,158 1,171
===== =====

The Bank is authorized to invest in other entities which support its
banking business and in consequence has ownership interests in Nexus S.A.
(credit card processing services), Transbank S.A. (credit card operator) and
Redbanc S.A. (a system of automatic teller machines). The securities brokerage
subsidiary also maintains investments in the Santiago, Valparaiso and
Electronic stock exchanges in connection with its primary business activities.

Dividends received from investments accounted for under the equity method
aggregated MCh$ 93 in 2003, MCh$ 49 in 2002 and MCh$ 71 in 2001. Dividends
received from investments accounted for under the cost method aggregated MCh$
32 in 2003, MCh$ 1 in 2002 and MCh$ 19 in 2001.

F-22

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 10 - OTHER ASSETS AND OTHER LIABILITIES

a) Other assets

2003 2002
------- -------
MCh$ MCh$

Deferred income taxes (Note 22) ........................... 31,277 26,385
Amounts receivable from forward contracts ................. 22,852 --
Deferred expenses ......................................... 17,904 18,306
Amounts receivable under spot foreign exchange transactions 13,103 15,469
Brokerage receivables ..................................... 7,585 26,615
Common stock purchased under agreements to resell by
brokerage subsidiary .................................... 7,407 9,136
Recoverable taxes ......................................... 4,409 3,302
Rentals guarantee deposit ................................. 3,804 3,322
Accounts and notes receivable ............................. 3,183 2,002
Credit card charges in process ............................ 2,175 1,826
Goodwill, net (1) ......................................... 1,837 2,203
Deferred commissions ...................................... 1,482 2,108
Transactions in process (suspense accounts) ............... 1,118 1,103
Prepaid expenses .......................................... 774 526
Office material ........................................... 292 233
Advances pending settlement ............................... 22 16
Accrued interest receivable ............................... -- 111
Others .................................................... 1,870 1,982
------- -------
Total other assets ............................... 121,094 114,645
======= =======

b) Other liabilities

December 31,
2003 2002
------- -------
MCh$ MCh$

Amounts payable under spot foreign exchange transactions .. 51,742 15,998
Deferred income taxes (Note 22) ........................... 11,325 9,160
Brokerage liabilities ..................................... 7,646 26,675
Taxes payable ............................................. 4,293 1,521
Legal bonuses ............................................. 3,473 3,007
Transactions in process (suspense accounts) ............... 2,420 2,144
Provision for staff vacation and indemnities .............. 2,167 2,519
Deferred commissions ...................................... 1,289 1,376
Amounts payable from forward contracts ................... -- 2,359
Others .................................................... 7,835 8,396
------- -------
Total other liabilities .......................... 92,190 73,155
======= =======

F-23

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(1) Goodwill consists of the following:

Net book value at
Acquisition of: 2003 2002
- -------------- ------- -------
MCh$ MCh$

BBVA Corredora Tecnica de Seguros Limitada ................ 1,833 2,198
BBVA Sociedad de Leasing Inmobiliario S.A ................. 4 5
------- -------
1,837 2,203
======= =======

Accumulated amortization amounted to MCh$ 1,826 and MCh$ 1,460 at December
31, 2003 and 2002, respectively.

c) Contingent liabilities

Contingent liabilities consist of open and unused letters of credit,
together with guarantees by the Bank in Chilean pesos, UFs and foreign
currencies (principally US dollars). These liabilities represent the Bank's
obligations under such agreements. The Bank's rights under these agreements are
recognized as assets as contingent loans (see Note 5).

NOTE 11 - BORROWINGS

The Bank's long-term and short-term borrowings are summarized below.
Borrowings are generally classified as short-term when they have original
maturities of less than one year or are due on demand. All other borrowings are
classified as long-term, including the amounts due within one year on such
borrowings.

A summary of short-term and long-term borrowings is as follows:

December 31, 2003
Long-term Short-term Total
--------- ---------- -----
MCh$ MCh$ MCh$

Central Bank borrowings:
Borrowings for renegotiation of loans ..... 2,581 -- 2,581
Other Central Bank borrowings ............. 4,116 -- 4,116
Securities sold under agreements to repurchase.. -- 171,721 171,721
Mortgage finance bonds ......................... 266,437 -- 266,437
Subordinated bonds ............................. 22,765 -- 22,765
Other bonds .................................... 34,085 -- 34,085
Borrowings from domestic financial institutions. 4,189 67,302 71,491
Foreign borrowings ............................. 98,417 113,938 212,355
Other obligations .............................. 11,791 9,143 20,934
------- ------- -------
Total borrowings ...................... 444,381 362,104 806,485
======= ======= =======

F-24

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2002
-----------------------------
Long-term Short-term Total
--------- ---------- -----
MCh$ MCh$ MCh$

Central Bank borrowings:
Borrowings for renegotiation of loans ...... 3,597 -- 3,597
Other Central Bank borrowings .............. 5,333 -- 5,333
Securities sold under to agreements to repurchase -- 258,120 258,120
Mortgage finance bonds .......................... 253,509 -- 253,509
Subordinated bonds .............................. 31,923 -- 31,923
Other bonds ..................................... 40,122 -- 40,122
Borrowings from domestic financial institutions . 5,371 64,252 69,623
Foreign borrowings .............................. 109,854 66,941 176,795
Other obligations ............................... 7,479 30,881 38,360
Total borrowings ....................... 457,188 420,194 877,382
======= ======= =======

a) Central Bank borrowings

Borrowings for the renegotiations of loans are as follows:

December 31,
2003 2002
----- -----
MCh$ MCh$

Renegotiation of mortgage loans............................. 2,581 3,597
----- -----
2,581 3,597
===== =====

These borrowings were provided by the Central Bank to fund renegotiated
loans, which arose from the economic recession and the crisis of the banking
system in the early 1980s. The borrowings for the renegotiation of mortgage
loans is linked to the UF index and carried annual real interest rates of 3.0%
at December 31, 2003 and 2002.

F-25

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The maturities of the outstanding amounts due under these borrowings at
December 31, 2003, are as follows:

During the year
ending December 31, MCh$
- ------------------- -----

2004.................................................................. 220
2005.................................................................. 216
2006.................................................................. 209
2007.................................................................. 203
2008.................................................................. 198
2009 and thereafter................................................... 1,535
-----
Total borrowings for the renegotiation of loans.............. 2,581
=====

Other Central Bank borrowings are as follows:

December 31,
2003 2002
===== =====
MCh$ MCh$

Credit line for acquisition of ANAP mortgage loans.......... 4,116 5,333
----- -----
4,116 5,333
===== =====

The line of credit for the acquisition of mortgage loans from ANAP (the
former National Savings and Loan Association) was provided by the Central Bank
and is linked to the UF index. The line of credit carried an annual real
interest rate of 6.0% at December 31, 2003 and 2002.

The maturities of these borrowings at December 31, 2003 are as follows:

During the year
ending December 31, MCh$
- ------------------ -----

2004.................................................................. 1,306
2005.................................................................. 1,364
2006.................................................................. 1,446
-----
Total Other Central Bank borrowings.......................... 4,116
=====

F-26

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

b) Securities sold under agreements to repurchase

Securities sold under agreements to repurchase generally mature within 7
to 182 days from the transaction date and are entered into principally with
companies which are the Bank's clients. At December 31, 2003, the annual real
interest rates ranged between 1.3% and 3.1% (1.4% and 3.0% at December 31,
2002) on these agreements.

c) Mortgage finance bonds

These bonds are used to finance the granting of residential mortgage loans
and certain commercial loans secured by real estate. The outstanding principal
amounts of the bonds are amortized quarterly; the range of maturities of these
bonds is between 3 and 30 years. These bonds principally are linked to the UF
or similar indices and carried a weighted-average annual rate of interest of
5.84% at December 31, 2003 (6.48% at December 31, 2002). The maturities of
these bonds at December 31, 2003 are as follows:

During the year
ending December 31, MCh$
- ------------------ -------

2004 ............................................................. 22,677
2005 ............................................................. 22,257
2006 ............................................................. 21,587
2006 ............................................................. 20,955
2008 ............................................................. 20,475
2009 and thereafter .............................................. 158,486
-------
Total mortgage finance bonds ............................ 266,437
=======

d) Subordinated bonds

The following are the different series of UF-denominated subordinated bonds:

Fixed
real annual
December 31, interest rate
------------------- --------------
Series 2003 2002 2003 2002
------ ------ ------ ---- ----
MCh$ MCh$ % %

A bonds ......................... -- 5,104 -- 8.5
B1, B2, B3 and B4 bonds ......... 6,797 6,784 7.6 7.6
B5 and B6 bonds ................. -- 3,441 -- 7.7
B7 and B8 bonds ................. 15,968 16,594 6.5 6.5
------ ------
22,765 31,923
====== ======

F-27

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Payments of interest on the subordinated bonds are made semiannually. The
Series A bonds had an original term of ten years and the entire principal was
repaid in April 2003. The Series B1, B2, B3 and B4 bonds have an original term
of twenty years and principal is payable in equal semiannual installments
during the fourteenth through twentieth year. The final payment is due in 2013
for the Series B1 bonds and 2014 for the Series B2, B3 and B4 bonds. The Series
B5 and B6 bonds had an original maturity of ten years and the entire principal
balance was repaid in 2003. The Series B7 and B8 bonds have an original term of
twenty one years and principal is payable in equal semiannual installments
during the sixth through twenty-first year.

The outstanding amount of subordinated bonds is included at their issue
price in the calculation of the Bank's minimum capital requirement, but can
only represent up to 50% of the amount of its Basic Capital (see Note 13). For
this purpose, the amount that can be included in the Bank's minimum capital
requirement in respect of bonds must be reduced annually by 20% as from the
sixth year prior to their maturity.

The maturities of the subordinated bonds at December 31, 2003 are as
follows:

During the year
ending December 31, MCh$
- ------------------ -----

2004 ................................................................ 736
2005 ................................................................ 740
2006 ................................................................ 788
2007 ................................................................ 840
2008 and thereafter ................................................. 19,661
------
Total subordinated bonds ................................... 22,765
======

e) Other bonds

Other bonds are summarized as follows:

December 31,
Series 2003 2002
------ ------ ------
MCh$ MCh$

D-1 bonds ..................................... 949 2,596
D-2 bonds ..................................... 948 2,592
D-3 bonds ..................................... 5,024 5,634
D-4 bonds ..................................... 5,013 5,634
D-5 bonds ..................................... 7,384 7,888
D-6 bonds ..................................... 14,767 15,778
------ ------
Total other bonds .................... 34,085 40,122
====== ======

F-28

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

These bonds were issued to finance lease contracts having a maturity
greater than one year. They are linked to the UF index and carry a real annual
weighted-average interest rate of 5.98% (5.94% at December 31, 2002) with
interest and principal payments due semiannually. The balance of the bonds
outstanding at December 31, 2003 mature as follows:

During the year
ending December 31, MCh$
- ------------------ -----

2004 ............................................................... 3,644
2005 ............................................................... 2,066
2006 ............................................................... 2,587
2007 ............................................................... 2,742
2008 and thereafter ................................................ 23,046
------
Total other bonds ......................................... 34,085
======

f) Borrowings from domestic financial institutions

Borrowings from domestic financial institutions are summarized as follows:

December 31,
2003 2002
------ ------
MCh$ MCh$

Long-term .................................................... 4,189 5,371
Short-term ................................................... 67,302 64,252
------ ------
Total borrowings from domestic financial institutions 71,491 69,623
====== ======

These borrowings are used to fund direct financing leases and the Bank's
general activities. At December 31, 2003, borrowings from domestic financial
institutions aggregating MCh$ 5,873 were linked to the UF index and carried a
real annual weighted-average interest rate of 1.56% (1.80% at December 31,
2002), borrowings aggregating MCh$ 2,402 were denominated in US dollars and
carried a real annual weighted-average interest rate of 2.3%, and borrowings
aggregating MCh$ 63,216 were denominated in Chilean pesos and carried a
weighted-average annual nominal interest rate of 2.37% (4.32% at December 31,
2002).

F-29

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Borrowings from domestic financial institutions at December 31, 2003 have
the following maturities:

During the year
ending December 31, MCh$
- ------------------ ------

2004 ............................................................... 4,147
2005 ............................................................... 42
Total long-term ........................................... 4,189
Short-term ................................................ 67,302
------
Total borrowings from domestic financial institutions ..... 71,491
======

g) Foreign borrowings

Outstanding foreign borrowings are summarized as follows:

December 31,
2003 2002
------- -------
MCh$ MCh$

Long-term .............................................. 98,417 109,854
Short-term ............................................. 113,938 66,941
------- -------
212,355 176,795
======= =======

The proceeds from foreign borrowings are used primarily to make loans to
borrowers in the Chilean export and import sector. These loans are denominated
principally in US dollars and carried an annual nominal weighted-average
interest rate of 1.5% at December 31, 2003 (2.01% at December 31, 2002).

The maturities of these borrowings are as follows:

During the year
ending December 31, MCh$
- ------------------ -------

2004 ............................................................. 93,538
2005 ............................................................. 3,560
2006 ............................................................. 1,319
Total long-term ......................................... 98,417
Short-term .............................................. 113,938
-------
Total foreign borrowings ................................ 212,355
=======

F-30

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

h) Other obligations

Other obligations are summarized as follows:

December 31,
2003 2002
------ ------
MCh$ MCh$
Long-term obligations:
CORFO ........................................ 11,791 7,479
------ ------
Subtotal ................................. 11,791 7,479
------ ------

Short-term obligations:
Acceptance of letters of credits ............. 9,143 30,881
------ ------
Subtotal ................................. 9,143 30,881
------ ------

Total .................................... 20,934 38,360
====== ======

The CORFO borrowings have been provided by Corporacion de Fomento de la
Produccion (CORFO), the Chilean government development agency, to fund export
loans, loans to manufacturing companies and leasing operations. These
obligations are linked to the UF index or to the US dollar. At December 31,
2003, CORFO obligations aggregating MCh$ 11,456 were linked to the UF index and
carried a real annual weighted-average interest rate of 4.23% (5.41% at
December 31, 2002) and obligations aggregating MCh$ 335 were linked to the US
dollar and carried an annual nominal weighted-average interest rate of 7.19%
(7.18% at December 31, 2002).

Other long-term obligations at December 31, 2003 have the following
maturities:

During the year
ending December 31, MCh$
- ------------------ ------

2004 ......................................................... 1,360
2005 ......................................................... 2,847
2006 ......................................................... 1,023
2007 ......................................................... 1,057
2008 ......................................................... 938
2009 ......................................................... 4,566
------
Total long-term obligations ......................... 11,791
======

F-31

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 12 - SHAREHOLDERS' EQUITY

a) Shares outstanding

The Bank's capital consists of 361,222,027 no par value common shares
authorized, issued and outstanding at December 31, 2003, 2002 and 2001.

b) Movements in Shareholders' Equity

Year ended December 31, 2003

At the Ordinary Shareholders' Meeting held on March 17, 2003, the
shareholders agreed to distribute a dividend amounting to MCh$ 20,229
(historical).

Year ended December 31, 2002

At the Ordinary Shareholders' Meeting held on April 23, 2002, the
shareholders agreed to distribute a dividend amounting to MCh$ 14,886
(historical).

Year ended December 31, 2001

At the Ordinary Shareholders' Meeting held on March 16, 2001, the
shareholders approved a capital increase of MCh$ 2 (historical) through the
capitalization of earnings without the issue of new shares and the distribution
of MCh$ 14,033 (historical) as a dividend.

NOTE 13 - MINIMUM CAPITAL REQUIREMENTS

According to the current General Banking Law, banks should have a minimum
ratio of Total Capital to Risk Adjusted Assets of 8%, net of required
allowances for loans losses, and a minimum ratio of Basic Capital to Total
Assets of 3%, net of required allowances for loan losses. For these purposes,
Total Capital means the aggregate of: (a) a bank's paid-in capital and
reserves, excluding capital attributed to subsidiaries and foreign branches,
(b) its subordinated bonds, calculated at the issue price but not exceeding 50%
of its Basic Capital, and (c) its voluntary allowances for loan losses, up to
1.25% of the Risk Adjusted Assets. Basic Capital includes paid-in capital and
reserves, but excludes the net income for the period. Risk Adjusted Assets are
based on total assets on an consolidated basis, which are then classified into
five categories, each of which has a different weighting factor.

At December 31, 2003, in accordance with the requirements of the General
Banking Law, the ratio of Total Capital to Risk Adjusted Assets was 11.3% or
Ch$ 74,636 million higher than the 8% minimum required by the first test under
the Banking Law. The ratio of Basic Capital to Total Assets was 6.9% or Ch$
134,689 million higher than the 3% minimum Basic Capital required by the second
test under the General Banking Law.

The Bank's mutual fund and securities brokerage subsidiaries are also
subject to minimum capital requirements as defined under Chilean regulations.
All such minimum regulatory capital requirements were being complied with at
December 31, 2003 and 2002.

F-32

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 14 - CONTINGENCIES AND COMMITMENTS

a) Contingencies arising from contractual commitments

Until July 23, 1999, Banco BHIF, now Banco Bilbao Vizcaya Argentaria,
Chile, had an obligation denominated the "Adjustment account", corresponding to
the purchase agreement, signed on July 23, 1989, for the shares of the former
Banco Nacional.

The Bank's management and legal counsel believe that no material loss will
result from any claim brought by the vendors of the above-mentioned shares in
relation to the Adjustment account, after taking into consideration the
following information.

i) Per the purchase agreement, certain principal shareholders of Banco BHIF
acquired 97% of the shares of Banco Nacional from a group of companies and
individuals; owners of Banco Nacional. The acquisition was effected in
order to merge the former Banco Nacional with Banco BHIF, an operation
which was completed on November 15, 1989.

ii) In connection with the acquisition of the shares of the former Banco
Nacional and its subsequent merger with Banco BHIF, the Bank agreed that
certain debt owed by the vendors of Banco Nacional would be restructured
into UF-denominated loans, to be repaid over a period of 12 years. The
purchase agreement provided that a) the amounts recovered on certain of
Banco Nacional's loans included in the Adjustment account, less the net
book value of the loans, and b) an amount equal to the allowance for loan
losses released as a result of improvements in the classification of the
loans included in the Adjustment account, would be credited on a quarterly
basis to the Adjustment account and treated as payment of interest and
principal on debt owed by the vendors.

iii) The purchase agreement also provided that any dispute relating to its
interpretation, or the fulfillment of the obligations therein, would be
submitted to arbitration.

iv) On July 23, 1989, the Adjustment account was divided in two parts,
maturing within five and ten years respectively from that date. The latter
of these two parts, together with the vendors' rights in relation to to
the Adjustment account, expired on July 23, 1999.

v) Due to disagreements between the Bank and the vendors with regard to the
Adjustment account, a court hearing was convened in April 8, 1997. Several
legal actions are in process, each of which were named "Claims" and have
been assigned numbers.

vi) During 2001, two of the above-mentioned claims were settled. In respect of
Claim No. 1, the Bank was required to pay UF 38,003, and this was settled
by a corresponding reduction in obligations to CIDEF S.A., a former
creditor of Banco Nacional. For Claim No. 2, the Bank paid the agreed
damages of UF 11,217 before the respective court. A significant part of
this latter sum was seized, in favor of the Bank, subsequent to its
payment, due to appeals brought by the Bank against companies of the
Errazuriz Group; beneficiaries of the Adjustment account.

F-33

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

vi) During 2002, seven of the above-mentioned claims were settled. Claim No.
12, settled for UF 10,762 plus interest, was settled by a corresponding
reduction of debt held with the Bank by the Errazuriz Group. Claim No. 5
was settled for UF 27,431 plus interest but has not been paid due to
certain, as yet unresolved issues. Claim No. 6, amounting to UF 42,716
plus interest, was appealed by the Bank and remains unsettled. With
respect to the remaining four judgments pronounced in 2002: Claim No. 3
was settled in the amount of UF 10,207, resulting in a reduction against
the loans payable to the beneficiaries of the Adjustment account; claim
No.s 9 and 17 and Claim No. 4 is in process.

vii) During 2003, four of the above-mentioned claims were settled. Claim No.s 7
and 10 resulted in the Bank paying UF 9,261 plus interest, and UF 2,311
plus interest, respectively. Such payments were made as reductions against
loans of Errazuriz Group. Claim No. 11, for UF 65,373, was settled against
the Bank, however the Bank's subsequent appeal is in process. Claim No. 8
was settled in favor of the Bank.

The Bank has disputed the amounts ceded by it against the obligations to
the Errazuriz Group; this dispute is pending resolution.

In 2003, the Bank brought a claim for damages against the Errazuriz Group
for obstruction of payment, a case that has been named Claim No. 28.

Due to the legal complexity of the cases in process and to the early stage
of certain of the cases, it is not yet possible to determine the likely
outcome. Although management believes that the legal arguments presented by the
sellers are flawed, no assurance can be given that the final outcome of such
claims will not be adverse to the Bank.

At the end of 2000, the Bank was ordered to make seven payments to the
Errazuriz Group, beneficiaries of the Adjustment account, in order to
extinguish its total liabilities; however, the court was declared null and
these payments are under appeal.

Consequently, the Bank filed claims for the collection of the total amount
due from each of the beneficiaries of the Errazuriz Group, based on the
disclaimer to the due date by them. Judgment has already been rendered in six
lawsuits to date and a further one is pending judgement. In three of the cases,
the Bank obtained favorable sentences and the remaining three cases were
rejected based on technical reasons, as the offer of total and subsequent
consignment payments does not imply a waiver of the period granted. Therefore,
the loans would not have been required to be paid upon filing the claim and
none of the debtors disclaim the existence of such credits. All the sentences
have been appealed by the Bank and/or the defendants.

Also in 2000, the Bank was notified of three further payments to members
of the Errazuriz Group that are not beneficiaries of the Adjustment account,
seeking to discharge their liabilities. This led to the Bank bringing three
legal actions, two of these being settled in favor of the Bank. The remaining
action is pending judgement.

To date, the Errazuriz Group has brought further actions against the Bank
with respect to Claim No.s 1, 3, 5, 6, 7, 10 and 12. The Bank has opposed such
actions and these are pending judgement.

F-34

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Bank has filed two further actions, one for prevarication against an
expert, and the other for forgery and malicious use of public instrument, both
being pending resolution.

Finally, the Errazuriz Group has filed three fraud complaints, all of
which are in preliminary stages. In spite of their being in early stages,
management and its legal counsel believe that no verdicts of guilty shall be
rendered against any executive or employee of the Bank.

BBVA Corredores de Bolsa S.A.
- -----------------------------

Nature of the action: Civil action against BBVA Corredores de Bolsa S.A.
("the Broker") by the Corporacion de Fomento de la Produccion (CORFO) pursuant
to Article 103 of the Code of Criminal Conduct, and in relation to an
ex-employee of the Broker, Mr. Juan Pablo Prieto. The action was filed by CORFO
as an extension of a complaint filed against Mr. Prieto, amongst others.

Status: The case has been interrupted. CORFO could elect to file a
complaint immediately before the civil courts; however, according to available
information such a filing has not been made. A surety bond was granted by the
Bank in order to guarantee the eventual liability that may be imposed on the
Broker in the final sentence.

b) Commitments and responsibilities recorded in memorandum accounts

The Bank and its subsidiaries maintain the following memorandum accounts
relating to commitments or responsibilities arising in the ordinary course of
business:

2003 2002
------- -------
MCh$ MCh$

Safekeeping ............................................. 783,879 593,170
Documents in domestic collection ........................ 51,660 46,110
Documents in foreign collection ......................... 8,838 9,192
Loans approved not yet disbursed ........................ 111,528 87,590
Leasing contracts signed prior to delivery of assets .... 8,886 5,862

The above table includes only the most significant balances. Contingent
loans and liabilities are recorded in the consolidated balance sheets.

c) Guarantees

BBVA Corredores de Bolsa S.A.
- -----------------------------

In accordance with Article 30 of Law 18,045, the Broker took out an
insurance policy with Compania de Seguros de Credito Continental S.A. to insure
against non-compliance with its obligations as a stockbroker to present and
future creditors in relation to its brokerage operations. The creditors include
the Santiago Stock Exchange and Chilean Electronic Stock Exchange. In addition,
the Broker took out a stockbroker's insurance policy with Compania MAPFRE
Seguros Generales as agreed with the Board of the Santiago Stock Exchange at
the meeting held on November 24, 1997.

F-35

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The terms of the policies are as follows:

Insurance Commencement Expiry
Company date date Coverage
------- ---- ---- --------

Compania de Seguros de
Credito Continental S.A. 04/22/2002 04/22/2004 UF 20,000

Cia. de Seguros Generales
MAPFRE Seguros Generales 04/01/2002 03/31/2004 US$ 15,000,000

BBVA Corredora Tecnica de Seguros Limitada
- ------------------------------------------

As set forth in article N(degree) 58, D of DFL law 251, at December 31,
2003, the company maintains two insurance polices to cover eventual damages
that could affect it as a consequence of infringements to the laws, regulations
and complementary standards that regulate brokers, in particular with respect
to non-compliance due to actions, errors or omissions by the broker, its
representatives, proxies or employees that participate in the trading.

The polices include:

- - Errors and omissions liability insurance policy: Coverage of US$
1,000,000, with deductible of US$ 15,000.

- - Civil liability policy: Coverage of UF 60,000 in order to cover the Broker
against eventual complaints by third parties. The insuror reserves the
right to any reimbursement to the Broker of amounts paid by the Broker to
a third party claimant.

d) Securities in guarantee

BBVA Corredores de Bolsa S.A.
- -----------------------------

At December 31, 2003 and 2002, the shares received as guarantees on common
stock purchased under agreements to resell operations are held in the Custody
Department of the Santiago Stock Exchange and the Chilean Electronic Stock
Exchange. These shares are presented under the caption Investments - Other
investments and amount to MCh$ 7,418 in 2003 (MCh$ 9,022 in 2002).

e) Other contingencies

At the date of these financial statements, the Bank was involved in other
litigation arising in the ordinary course of business. In the opinion of
management and its legal counsel, the final outcome of such litigation will not
have a significant effect on the Bank's financial position, results of
operations or cash flows.

F-36

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 15 - TRANSACTIONS WITH RELATED PARTIES

In accordance with the General Banking Law, related parties are defined as
individuals and companies who are directors, officers or shareholders who own
more than one percent of the Bank's shares. Companies in which a director,
officer or shareholder of the Bank holds more than a 5% interest are also
considered to be related parties, as well as companies that have common
directors with the Bank.

a) Loans made to related parties

Loans made to related parties, all of which are current, are as follows:

December 31,
-------------------------------------
2003 2002
----------------- -----------------
Collateral Collateral
Loans Pledged Loans Pledged
------ -------- ------ --------
MCh$ MCh$ MCh$ MCh$

Operating companies:
Conavicoop ............................. 3,127 174 3,483 490
Grupo Eulen Chile S.A .................. 141 -- 155 --
Taz S.A ................................ 56 -- 1 --
Jardin Infantil Casanueva .............. 20 20 22 22
Transbank S.A .......................... 34 -- -- --
Ohio National Seguros S.A .............. 3 -- -- --
Vina Selentina S.A ..................... 1 -- 1 --
Consorcio Persa de Chile ............... -- -- 506 --
Investment companies:
AFP Provida S.A ........................ 9,901 -- 4 --
Factoring S.A .......................... 1,706 -- 2,026 --
BBV Banco Frances ...................... 517 -- 94 --
Banco Bilbao Vizcaya Argentaria New York 449 -- 10,482 --
Banco Provincial S.A ................... 245 -- 25 --
Banco Continental ...................... 108 -- 179 --
BBVA Banco Ganadero S.A ................ 28 -- -- --
Sociedad de Inversiones Rio Side Ltda .. 27 23 30 24
Banco Bilbao Vizcaya Argentaria Brasil . -- -- 6,860 --
Banco BNL do Brasil .................... -- -- 3,332 --
Banco Frances Uruguay .................. -- -- 1,714 --
Banco Bilbao Vizcaya Argentaria Mexico . -- -- 291 --
Banco Bilbao Vizcaya Argentaria Madrid . -- -- 48 --
Individuals (UF 3,000 or more) ......... 3,475 3,265 2,025 1,912
Individuals (less than UF 3,000) ....... 1,475 1,265 1,418 1,156
------ -------- ------ --------
21,313 4,747 32,696 3,604
====== ======== ====== ========

In the above table, operating companies are defined as commercial or
manufacturing companies and investment companies are defined as companies whose
purpose is to hold shares in other companies.

F-37

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

b) Other transactions with related parties

During the years ended December 31, 2003, 2002 and 2001 the Bank had the
following significant revenues (expenses) from services provided to (by)
related parties:

Year ended December 31
--------------------------------------------------------------------
2003 2002 2001
Company Relationship Revenues Expenses Revenues Expenses Revenues Expenses
-------- -------- -------- -------- -------- --------
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$

BBVA Compania de Shareholder in
Seguros de Vida S.A common 660 (80) 286 -- -- (167)

A.F.P. Provida S.A Shareholders in
common 279 (666) -- -- -- --

Banco Bilbao Vizcaya
Argentaria S.A Shareholder 1 (455) 20 (1,742) -- (1,553)

Redbanc S.A Equity investee -- (539) -- (486) -- (469)

Parque Arauco S. A Shareholder in
common -- (121) -- (121) -- (97)

E. Bertelsen Asesorias Director of Bank is
S.A shareholder in
related company -- (114) -- (117) -- (114)

Jose Domingo Eluchans Shareholder in
Asesorias Ltda common -- (64) -- (64) -- (65)

Other Shareholder in
common -- (725) 44 (273) -- (271)

Article 89 of the Chilean Companies Law requires that the Bank's
transactions with related parties be on a market basis or on terms similar to
those customarily prevailing in the market.

NOTE 16 - DIRECTORS' EXPENSES AND REMUNERATION

The following items were charged to expense for services provided by the
members of the Board:

Year ended
December 31,
------------------
2003 2002 2001
---- ---- ----
MCh$ MCh$ MCh$

Remuneration established by the General
Shareholders' Meeting .................................. 497 487 490
Advisory fees ............................................ 64 64 65
Travel allowance ......................................... 37 15 7
---- ---- ----
Total ........................................... 598 566 562
==== ==== ====

F-38

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 17 - INCOME FROM SERVICES, NET

Income from services and the related expenses are summarized as follows:

Year ended December 31,
------------------------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$
Income from services:
Pension payments .............................. 5,944 3,879 2,746
Current accounts .............................. 4,837 4,654 4,887
Commissions on mutual and investment
funds administration ........................ 2,580 2,603 2,324
Commissions on insurance brokerage ............ 2,410 2,192 1,971
Fees from automatic teller machines ........... 2,223 1,612 546
Fees from collections of insurance premiums ... 2,000 1,522 1,273
Fees charged on prepaid loans ................. 1,846 1,716 579
Credit cards .................................. 1,407 1,288 1,312
Brokerage fees ................................ 973 745 616
Lines of credit and overdraft fees ............ 949 885 489
Commission on syndicated loans ................ 905 261 145
Commission on loan brokerage .................. 890 120 195
Service charges on loans ...................... 713 540 384
Contingent loans and letters of credit fees ... 598 769 1,011
Lease contracts fees .......................... 546 488 479
Client service fees ........................... 498 356 142
Collections ................................... 381 358 393
Purchases and sales of foreign exchange ....... 296 274 216
Service charges on deposit accounts ........... 196 206 208
On-line account fees .......................... 194 171 212
Custody and trust service fees ................ 121 131 60
Financial advisory service fees ............... -- -- 436
Other ......................................... 3,068 1,828 1,881
------ ------ ------
Total income from services ................ 33,575 26,598 22,505
====== ====== ======

F-39

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Year ended December 31,
--------------------------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$
Services expenses:
Automatic teller machines ................. (1,434) (1,041) (882)
Credit card operators ..................... (1,065) (1,027) (786)
Commissions on placement and
servicing of loans .................... (1,010) (1,795) (2,579)
Brokerage fees ............................ (261) (309) (334)
Brokerage expenses ........................ (32) (40) (75)
Collection expenses ....................... (21) (20) (12)
Other ..................................... (448) (386) (437)
------ ------ ------
Total services expenses ............... (4,271) (4,618) (5,105)
====== ====== ======

NOTE 18 - GAINS AND LOSSES ON FINANCIAL INSTRUMENTS

Gains and losses on financial instruments are summarized as follows:

Year ended December 31,
--------------------------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$

Gains on sales and mark-to-market valuations
of financial instruments ..................... 12,146 13,232 11,757
====== ====== ======
Losses on sales and mark-to-market valuations
of financial instruments ..................... (9,390) (7,030) (3,117)
====== ====== ======

NOTE 19 - RECOVERY OF LOANS PREVIOUSLY CHARGED-OFF

Recovery of loans previously charged-off include the following items:

Year ended December 31,
--------------------------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$

Recoveries on loans previously charged-off ..... 9,980 9,776 7,494
Recoveries of loans reacquired from
the Central Bank .......................... 18 17 81
------ ------ ------
9,998 9,793 7,575
====== ====== ======

F-40

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 20 - NON OPERATING INCOME AND EXPENSES

Non-operating income and expenses are set forth below:

Year ended December 31,
----------------------------------
2003 2002 2001
----- ----- -----
MCh$ MCh$ MCh$

Non-operating income:
Recovery of expenses from customers........................... 2,745 2,946 1,874
Gain on sales of assets received in lieu of payment........... 1,470 273 232
Recovery of assets received in lieu of payment previously
charged-off................................................. 982 814 783
Rental income................................................. 356 221 204
Gains on sales of leasing assets.............................. 311 139 85
Gain on sales of Bank premises and equipment.................. 217 18 178
Other......................................................... 732 214 631
------ ------ ------
Total non-operating income............................... 6,813 4,625 3,987
====== -===== ======
Non-operating expenses:
Write-offs of assets received in lieu of payment.............. (3,114) (1,419) (545)
Provisions for losses on assets received in lieu of payment... (704) (685) (1,037)
Amortization of goodwill...................................... (366) (393) (422)
Expenses incurred on management of assets received in lieu
of payment.................................................. (355) (234) (212)
Provision for Adjustment account (Note 14 a).................. (274) (103) -
Discounts to customers on ANAP mortgage loans................. (102) (123) (109)
Loss on sales of Bank premises and equipment.................. (1) (11) (15)
Other......................................................... (534) (594) (509)
------ ------ ------
Total non-operating expenses............................. (5,450) (3,562) (2,849)
====== ====== ======

NOTE 21 - PRICE-LEVEL RESTATEMENT

The price-level restatement loss is determined by restating the following
non-monetary assets and liabilities:

Year ended December 31,
---------------------------- ------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$

Restatement of non-monetary accounts based on the Consumer Price Index:
Bank premises and equipment................................... 592 1,824 1,869
Other non-monetary assets and liabilities..................... 352 939 815
Shareholders' equity.......................................... (2,704) (6,969) (7,193)
------ ------ ------
Net price-level restatement loss......................... (1,760) (4,206) (4,509)
====== ====== ======

F-41

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 22 - INCOME TAXES

a) Income tax provision

The provision for income taxes charged to income is summarized as follows:

Year ended December 31,
-----------------------------------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$

Provision for current income tax.................................. (7,465) (6,324) (6,197)
Deferred income taxes for the year................................ 2,554 3,482 5,114
Amortization of effects of deferred income taxes
accumulated at the beginning of the year........................ 344 298 193
------ ------ ------
Total income tax expense................................. (4,567) (2,544) (890)
====== ====== ======

b) Deferred income tax balances are as follows:

Balances at
----------------------------------------
December 31, 2003 December 31, 2002
----------------- -----------------
MCh$ MCh$
ASSETS

Lease contracts.................................................. 14,309 9,825
Charged-off loans that are tax assets............................ 10,163 7,814
Allowance for loan losses........................................ 4,059 5,511
Interest on overdue and past-due loans........................... 1,788 3,643
Accrual for employee vacations................................... 298 274
Allowance for losses from high-risk rated countries.............. 241 236
Tax loss carryforward............................................ - 25
Others........................................................... 1,820 968
------ ------
Subtotal.................................................... 32,678 28,296
Less: Unamortized complementary account............................. (1,401) (1,911)
- ---- ------ ------
Net assets.................................................. 31,277 26,385
====== ======
LIABILITIES
Accelerated depreciation of bank premises and equipment.......... 11,069 9,144
Deferred expenses................................................ 1,199 1,060
Others........................................................... 124 182
------ ------
Subtotal.................................................... 12,392 10,386
Less: Unamortized complementary account......................... (1,067) (1,226)
---- ------ ------
Net liabilities............................................. 11,325 9,160
------ ------
Net position................................................ 19,952 17,225
====== ======

F-42

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 23 - FOREIGN CURRENCY POSITION

The Consolidated Balance Sheets include assets and liabilities payable in
foreign currencies which have been translated into Chilean pesos at the
applicable exchange rates as of December 31, 2003 and 2002, and assets and
liabilities which are payable in Chilean pesos subject to exchange rate
fluctuations, as detailed below:

December 31, 2003 December 31, 2002
----------------------------------- ---------------------------------
Payable Payable Payable Payable in
in foreign in Chilean in foreign Chilean
currency pesos Total currency pesos Total
---------- ---------- --------- ---------- ---------- ---------
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$

ASSETS
Cash and due from banks..... 30,493 - 30,493 25,717 - 25,717
Loans....................... 318,042 24,159 342,201 344,538 57,270 401,808
Investments................. 10,576 252,977 263,553 59,303 364,236 423,539
Other assets................ 565,352 - 565,352 374,042 - 374,042
------- ------- --------- ------- ------- ---------
Total assets........... 924,463 277,136 1,201,599 803,600 421,506 1,225,106
========= ======= ========= ========= ======= =========
LIABILITIES
Deposits and other
obligations.............. 125,388 - 125,388 122,931 - 122,931
Foreign borrowings.......... 212,355 - 212,355 190,850 - 190,850
Other liabilities........... 872,085 334 872,419 906,285 767 907,052
------- ------- --------- ------- ------- ---------
Total liabilities...... 1,209,828 334 1,210,162 1,220,066 767 1,220,833
========= ======= ========= ========= ======= =========
Net assets (liabilities) in
foreign currency............. (285,365) 276,802 (8,563) (416,466) 420,739 (4,273)
========= ======= ========= ========= ======= =========

In addition, as disclosed in Note 4, at December 31, 2003 the Bank had
notional amounts of foreign exchange contracts with an asset position of MCh$
519,046 (2002: MCh$ 309,654) and a liability position of MCh$ 633,953 (2002:
MCh$ 620,510).

F-43

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 24 - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Bank's financial instruments, their
carrying values and the major assumptions and methodologies used to estimate
fair values at December 31, 2003 and 2002 are presented hereunder. The fair
value of a financial instrument is defined as the amount at which the
instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale.

For those financial instruments with no quoted market prices available,
fair values have been estimated using present value or other valuation
techniques. These techniques are inherently subjective and are significantly
affected by the assumptions used, including the discount rates, estimates of
future cash flows and prepayment assumptions. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instruments.

In addition, the fair values presented below do not attempt to estimate
the value of the Bank's revenue generating businesses and anticipated future
business activities, that is, they do not represent the Bank's value as a going
concern.

The estimated fair values of financial instruments are as follows:

December 31, 2003 December 31, 2002
----------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
--------- ---------- ---------- ----------
MCh$ MCh$ MCh$ MCh$

ASSETS
Cash and due from banks.............. 265,827 265,827 314,133 314,133
Investments.......................... 582,590 582,590 652,339 652,339
Loans................................ 2,294,903 2,302,449 1,988,516 2,028,773
Other assets......................... 192,726 192,726 187,641 187,641

LIABILITIES
Deposits............................. 2,172,508 2,168,781 1,931,610 1,928,438
Central Bank borrowings.............. 6,697 6,049 8,930 9,133
Securities sold under agreements
to repurchase...................... 171,721 171,721 258,120 252,120
Mortgage finance bonds............... 266,437 297,089 253,509 288,789
Other borrowings..................... 361,630 365,747 356,823 376,734
Other liabilities ................... 92,190 92,190 73,155 73,155

The carrying amounts of loans in the above table exclude contingent loans
since they represent undisbursed amounts under undrawn letters of credit and
other credit guarantees granted by the Bank. The offsetting liability amount,
recorded as contingent liabilities in the Consolidated balance sheets, has also
been excluded.

F-44

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments:

Short-term financial instruments

Short-term financial instruments are valued at their carrying amounts
included in the Consolidated Balance Sheets, which are believed by the Bank to
be reasonable estimates of fair value due to the relatively short period to
maturity of the instruments. This approach applies to cash and due from banks,
other assets, short-term Central Bank borrowings, securities sold under
agreements to repurchase and other liabilities.

Investments

The estimated fair value of these financial instruments was determined
using either quoted market prices or dealer quotes where available, or quoted
market prices of financial instruments with similar characteristics.

Loans

Estimated fair values have been determined for loan portfolios with
similar financial characteristics. Loans were segregated by type such as
commercial and consumer, and each category was further segmented based on fixed
and variable rates and accrual vs. non-accrual status. The fair values of
fixed-rate loans were estimated by discounting scheduled cash flows using
prevailing market rates for those loans at the end of 2003 and 2002,
respectively. For variable-rate loans, their carrying amounts were considered
to be equivalent to their fair values.

For non-accruing loans, the estimated fair values were based on the
discounted value of estimated cash flows arising from the liquidation of the
collateral or other expected sources at an estimated discount rate. The value
of these loans was then adjusted for the higher risk involved by deducting the
specific provisions for the loans from the discounted cash flow amounts.

Derivatives

Foreign exchange contracts (included in other assets or liabilities in the
table above) are carried at market value in the Consolidated Balance Sheets,
based on the Observed Exchange Rate at the end of the year.

For interest rate swaps, estimated fair values were obtained from dealer
quotes. The total of MCh$ 364 (MCh$ 305 at December 31, 2002) is included in
other assets in the table of fair values of financial instruments set forth
above.

Deposits

The fair value of deposits with no defined maturity, such as non-interest
bearing deposits and savings accounts, is considered to be the amount payable
on demand at the reporting date. The fair value of fixed-maturity deposits is
estimated using rates currently offered for deposits of similar remaining
maturities. The value of long-term relationships with depositors is not taken
into account in estimating the fair values disclosed.

F-45

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Long-term borrowings

The fair value of long-term borrowings (included in Mortgage finance bonds
and Other borrowings in the table above) is estimated based on the present
value of future cash flows, discounted at interest rates available to the Bank
for new debt of similar type and remaining maturity at December 31, 2003 and
2002.

NOTE 25 - FIDUCIARY ACTIVITIES

The following items are recorded in memorandum accounts by the Bank and
represent fiduciary safekeeping and custody services:

December 31,
---------------------
2003 2002
------- -------
MCh$ MCh$
Securities held in safekeeping.......................... 783,879 593,170
Amounts to be collected on behalf of third parties...... 60,499 55,302
------- -------
Total.......................................... 844,378 648,472
======= =======

NOTE 26 - SUBSEQUENT EVENTS

On January 8, 2004, Banco Bilbao Vizcaya Argentaria, Chile filed a request
to issue indexed subordinated Series-A bonds in the amount of U.F. 6,000,000.
This issue was registered before the Chilean Superintendency of Securities and
Insurance under No. 01/2004.

NOTE 27 - INCOME STATEMENTS AND BALANCE SHEETS (SEC FORMAT)

The presentation of the financial statements prepared in accordance with
Chilean GAAP differs significantly from the format required by the SEC under
Rules 210.9 to 210.9-07 of Regulation S-X ("Article 9"). The Chilean GAAP
financial statements set forth below have been restated in constant Chilean
pesos of December 31, 2003 purchasing power using the adjustment factor arising
from the CPI and are shown in accordance with the format required by Article 9.

The principal reclassifications which were made to the basic Chilean GAAP
financial statements in order to present them in the Article 9 format are as
follows:

1. Elimination of contingent assets and liabilities from the balance sheet.
2. Presentation of Recoveries of loans previously charged-off as a reduction
of the Provision for loan losses instead of as Other income.
3. Reclassification of fees relating to contingent loans from interest income
under Chilean GAAP to Non-interest income under Article 9.

In connection with the preparation of the Article 9 income statements, the
price-level restatement includes the effect of inflation primarily resulting
from interest-earning assets and interest-bearing liabilities. As the Bank does
not compute the price-level adjustment for separate categories of assets and
liabilities, such adjustment is presented as a component of interest expense.

F-46

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Consolidated income statements

Year ended December 31,
--------------------------------------
2003 2002 2001
-------- -------- --------
MCh$ MCh$ MCh$

Interest income
Interest and fees on loans.................................... 145,092 177,376 182,339
Interest on investments....................................... 24,270 39,938 36,643
Interest on deposits with banks............................... 356 541 577
-------- -------- --------
Total interest income.................................... 169,718 217,855 219,559
-------- -------- --------

Interest expense
Interest on deposits.......................................... (46,267) (58,283) (65,581)
Interest on securities sold under agreements to repurchase.... (5,432) (6,310) (15,602)
Interest on other borrowed funds.............................. (2,868) (8,525) (5,547)
Interest on long-term debt.................................... (25,551) (35,406) (39,371)
Price-level restatement....................................... (1,760) (4,206) (4,509)
-------- -------- --------
Total interest expense................................... (81,878) (112,730) (130,610)
-------- -------- --------

Net interest income............................................... 87,840 105,125 88,949
Provision for loan losses......................................... (25,323) (21,853) (24,378)
-------- -------- --------
Net interest income after provision for loan losses...... 62,517 83,272 64,571
-------- -------- --------

Other income
Fees and commissions.......................................... 33,629 26,627 22,706
Brokerage and securities income............................... 712 436 282
Gain on investment activities................................. 2,756 6,202 8,640
Net gains (losses) on foreign exchange........................ 12,615 (14,479) (4,204)
Recoveries and restatements of loans
reacquired from the Central Bank............................ 18 17 81
Other revenue................................................. 6,967 4,742 3,953
-------- -------- --------
Total other income....................................... 56,697 23,545 31,458
-------- -------- --------

Other expenses
Salaries...................................................... (33,504) (33,449) (33,430)
Net premises and equipment expenses........................... (6,201) (4,793) (4,006)
Administration expenses....................................... (32,699) (31,394) (30,589)
Other expenses................................................ (15,135) (14,179) (11,626)
-------- -------- --------
Total other expenses..................................... (87,539) (83,815) (79,651)
-------- -------- --------

Income before income taxes........................................ 31,675 23,002 16,378
Income taxes.................................................. (4,567) (2,544) (890)
-------- -------- --------
Net income............................................... 27,108 20,458 15,488
======== ======== ========

F-47

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Consolidated Balance Sheets

December 31,
--------------------------
2003 2002
--------- ---------
MCh$ MCh$

ASSETS
Cash and due from banks............................................... 226,110 287,308
Interest bearing deposits in other banks.............................. 39,717 26,825
Securities purchased under agreements to resell....................... 8,421 56,616
Trading securities.................................................... 473,812 315,146
Available for sale securities......................................... 100,357 280,577

Loans................................................................. 2,370,287 2,057,430
Unearned income....................................................... (30,752) (23,419)
Allowance for loan losses............................................. (44,632) (45,495)
--------- ---------
Loans, net............................................................ 2,294,903 1,988,516
Premises and equipment, net........................................... 55,329 56,225
Other assets.......................................................... 137,250 130,642
--------- ---------
Total assets...................................................... 3,335,899 3,141,855
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing.................................................. 494,840 462,379
Interest bearing...................................................... 1,677,668 1,469,231
--------- ---------
2,172,508 1,931,610
--------- ---------

Short-term borrowings................................................. 190,383 162,074
Securities sold under agreements to repurchase........................ 171,721 258,120
Other liabilities..................................................... 92,190 73,155
Long-term debt........................................................ 444,381 457,188
--------- ---------
Total liabilities................................................. 3,071,183 2,882,147
--------- ---------

Minority interest in consolidated subsidiaries............................. 138 115
--------- ---------

Shareholders' equity
Common stock.......................................................... 153,396 153,396
Reserves.............................................................. 111,182 106,197
--------- ---------
Total shareholders' equity........................................ 264,578 259,593
--------- ---------
Total liabilities and shareholders' equity........................ 3,335,899 3,141,855
========= =========

F-48

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Total assets set forth in the basic Chilean GAAP Consolidated Balance
Sheets are reconciled to Total assets in the Article 9 balance sheets above as
follows:

At December 31,
--------------------------
2003 2002
--------- ---------
MCh$ MCh$

Total assets under Chilean GAAP format..................................... 3,407,987 3,228,167
Elimination of contingent liabilities...................................... (72,088) (86,312)
--------- ---------
Total assets under Article 9 format............................... 3,335,899 3,141,855
========= =========

The activity in the balances of loans to related parties in accordance
with the Article 9 definition of related parties (which is different than the
Chilean GAAP definition of related parties) as follows:

MCh$
--------

Balance at January 1, 2002................................................................... 24,480
New loans.................................................................................... 107,067
Repayments................................................................................... (114,143)
--------
Balance at December 31, 2002................................................................. 17,404
New loans.................................................................................... 150,225
Repayments................................................................................... (153,029)
--------
Balance at December 31, 2003................................................................. 14,600
========

NOTE 28 - DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES

Accounting principles generally accepted in Chile vary in certain
important respects from the accounting principles generally accepted in the
United States of America ("US GAAP"). Such differences involve certain methods
for measuring the amounts shown in the consolidated financial statements, as
well as additional disclosures required by US GAAP.

1 Differences in measurement methods

Set forth below is a description of the significant differences between
accounting principles generally accepted in Chile and accounting principles of
the Superintendency of Banks (collectively, "Chilean GAAP") and US GAAP. The
effects of differences in the presentation of the financial statements are
shown in Note 27. References below to "SFAS" are to Statements of Financial
Accounting Standards in the United States of America.

F-49

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The cumulative inflation rate in Chile as measured by the Consumer Price
Index for the three-year period ended December 31, 2003 was approximately 7.1%.
Chilean accounting principles require that financial statements of banks be
restated to reflect the full effects of the loss in the purchasing power of the
Chilean peso on the financial position of reporting entities. The method,
described in Note 1 c), is based on a model which enables calculations of net
inflation gains or losses caused by monetary assets and liabilities exposed to
changes in the purchasing power of local currency by restating all non-monetary
accounts in the financial statements. The model prescribes that the historical
cost of such accounts be restated for general price-level changes between the
date of origin of each item and the period-end. The inclusion of price-level
adjustments in the accompanying financial statements is considered appropriate
under the prolonged inflationary conditions affecting the Chilean economy.
Accordingly, and as allowed by Item 18 to Form 20-F, the effect of price-level
changes is not eliminated in the reconciliation to US GAAP included under
paragraph 1 s) below.

a) Loan origination fees and costs

The Bank recognizes commissions (origination fees) on credit card loans,
lines of credit and fees on mortgage loans when collected and records related
direct costs when incurred. Under SFAS No. 91, "Accounting for Nonrefundable
Fees and Costs Associated with Origination or Acquiring Loans and Initial
Direct Costs of Leases", loan origination fees and certain direct loan
origination costs should be recognized over the life of the related loan as an
adjustment of yield. The effect of this difference would be to increase
shareholders' equity by MCh$ 6,519 and MCh$ 6,575 at December 31, 2003 and
2002, respectively. In addition, had US GAAP been applied, net income would
have increased (decreased) by MCh$ (56) in 2003, MCh$ 523 in 2002 and MCh$
(331) in 2001.

b) Income taxes

Under Chilean GAAP, effective January 1, 1999 the Bank began recognizing
the effects of deferred income taxes on net income on a prospective basis,
using an asset and liability approach. Prior to 1999, income taxes were
recognized on the basis of amounts due in accordance with Chilean tax
regulations and no deferred income taxes were recognized. For US GAAP purposes,
the Bank applies SFAS No. 109, "Accounting for Income Taxes", whereby income
taxes are also recognized using substantially the same asset and liability
approach, with deferred income tax assets and liabilities established for
temporary differences between the financial reporting basis and the tax basis
of the Bank's assets and liabilities at enacted rates expected to be in effect
when such amounts will be realized. Deferred tax assets must be reduced by a
valuation allowance when it is more likely than not that such assets will not
be realized. After the year ended December 31, 1998, Chilean GAAP and US GAAP
differ due to the recognition for US GAAP purposes of the reversal of deferred
income taxes included in the US GAAP reconciliation prior to 1999 which are
being recognized under Chilean GAAP beginning in the year ended December 31,
1999 as prescribed by Technical Bulletin No. 60 of Chilean Institute of
Accountants. The effect of this difference would be to decrease shareholders'
equity by MCh$ 1,277 and MCh$ 456 at December 31, 2003 and 2002, respectively.
In addition, had US GAAP been applied, net income would have decreased by MCh$
1,167 in 2003, MCh$ 38 in 2002 and MCh$ 362 in 2001.

F-50

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

c) Mandatory dividend

As required by the Chilean Company law, unless otherwise decided by the
holders of a majority of the shares represented at the General Shareholders'
Meeting, the Bank has to distribute a cash dividend in an amount equal to at
least 30% of the Bank's net income under Chilean GAAP. Since the payment of the
dividend out of each year's net income is a legal requirement in Chile, an
accrual would have been made for US GAAP purposes to recognize the dividend
obligation under Chilean law. The effect of this accrual would be to decrease
Shareholders' equity by MCh$ 8,132 and MCh$ 6,137 at December 31, 2003 and
2002, respectively.

d) Interest recognition on non-accrual loans

The Bank suspends the accrual of interest on loans on the first day that
such loans are overdue. Previously accrued but uncollected interest on overdue
loans is not reversed at the time the loan ceases to accrue interest. Under US
GAAP, recognition of interest on loans is generally discontinued when, in the
opinion of management, there is an indication that the borrower may be unable
to meet payments as they become due. As a general practice, this occurs when
loans are 90 days or more past due. Any accrued but uncollected interest is
reversed against interest income at that time.

In addition, under Chilean GAAP any payment received on overdue loans is
first applied to reduce the recorded balance of accrued interest receivable, if
any, and thereafter is recognized as income to the extent of interest earned
but not recorded. Any remaining amount is then applied to reduce the
outstanding principal balance. Under US GAAP, any payment received on loans
when the collectibility of the principal is in doubt is treated as a reduction
of the outstanding principal balance of the loan until such doubt is removed.
Management believes that the effect of the difference in interest recognition
on non-accrual loans is not material to the Bank's results of operations and
has not reflected an adjustment for this difference in the reconciliation of
Chilean GAAP to US GAAP.

e) Troubled debt restructurings

Under Chilean GAAP, troubled debt restructurings are accounted in a manner
similar to US GAAP. The Bank, however, is not required under Chilean GAAP to
identify all loans which may qualify as troubled debt restructurings and, as a
result, it is not feasible to obtain the necessary information that should be
disclosed under US GAAP.

f) Contingent loans

The Bank recognizes rights and obligations with respect to contingent
loans as contingent assets and liabilities. Under US GAAP, such contingent
amounts are not recognized on the balance sheet but are accounted for in
memorandum accounts. Had US GAAP been followed, the total assets and
liabilities of the Bank would have been reduced as of December 31, 2003 and
2002 by MCh$ 72,088 and MCh$ 86,312 respectively. This reclassification is
included in the Article 9 financial statements in Note 27.

F-51

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

g) Allowance for loan losses

Under Chilean GAAP, the allowance for loan losses is calculated according
to specific guidelines issued by the Superintendency of Banks as detailed in
Note 1 k). Under US GAAP, allowances for loan losses should be provided for
impaired and other loans in amounts adequate to cover inherent losses in the
loan portfolio at the respective balance sheet dates. The process followed
under Chilean GAAP differs in some respects from the process a bank would
follow under US GAAP. In this regard, the Bank has estimated its required
allowance for US GAAP purposes in the following manner:

o All loans of the Bank were classified in accordance with the rules of
the Superintendency of Banks.

o The allowances assigned to each loan category were analyzed and
adjusted to reflect estimated inherent losses for such category.

o In addition, specific additional allowances were determined for loans
on the following basis:

i) Commercial loans with balances exceeding MCh$ 30 which were
considered to be impaired in accordance with the criteria established by
SFAS No. 114 "Accounting by Creditors for Impairment of a Loan" were
valued at the present value of the expected future cash flows discounted
at the loan's effective contractual interest rate or at the fair value of
the collateral if the loans were collateral dependant.

ii) Commercial loans with balances under MCh$ 30 and consumer loans
were reviewed in order to account for all inherent losses in these loans.
Such amounts were considered to approximate losses calculated under SFAS
No.114, as applicable.

Based on the above calculation, the Bank believes that there is no
significant difference between the amount of the allowance for loan losses
recorded for Chilean GAAP purposes and the amount calculated based on US GAAP
requirements and therefore has not reflected an adjustment for this difference
in the reconciliation of Chilean GAAP to US GAAP.

h) Investments in other companies

Under Chilean GAAP, certain permanent investments of less than 20% of the
outstanding shares of other companies have been recorded using the equity
method of accounting. Under US GAAP, those investments would have been recorded
at cost. The effect of this difference resulted in an increase in shareholders'
equity under Chilean GAAP of MCh$ 366 and MCh$ 354 at December 31, 2003 and
2002, respectively. In addition, had US GAAP been applied, net income would
have increased (decreased) by MCh$ 12 in 2003, MCh$ (121) in 2002 and MCh$
(258) in 2001.

F-52

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

i) Derivative financial instruments

The Bank engages in derivative transactions for its own account and on
behalf of its customers, mainly corporate clients of the import sector. These
transactions arise from interest rate swap agreements and forward exchange
contracts which are of two types: (i) transactions covering two foreign
currencies and (ii) transactions covering Chilean pesos against the U.S.
dollar. Foreign exchange contracts involve an agreement to exchange the
currency of one country for the currency of another country at an agreed-upon
price and settlement date. These contracts are generally standardized
contracts, normally for periods between 30 and 90 days and are not traded in a
secondary market; however, in the normal course of business and with the
agreement of the original counterparty, they may be terminated or assigned to
another counterparty. When the Bank enters into a forward exchange contract, it
analyzes and approves the creditor's risk (the risk that the counterparty might
default on is obligation). Subsequently, on an ongoing basis, it monitors the
possible losses involved in each contract. To manage the level of credit risk,
the Bank deals with counterparties of good credit standing, enters into master
netting agreements whenever possible and, when appropriate, obtains collateral.
The Bank's counterparties in derivative transaction are mainly international
investment banks and domestic corporate and financial institution clients.

The Central Bank requires that foreign exchange forward contracts be made
only in US dollars and other major foreign currencies. In the case of the Bank,
most forward contracts are made in US dollars against the Chilean peso or the
UF. From time to time, forward contracts are also made in other currencies, but
only when the Bank acts as an intermediary.

Under Chilean GAAP, forward contracts between foreign currencies and U.S.
dollars are reported at fair value with realized and unrealized gains and
losses on these instruments recognized in other income. Forward contracts
between the U.S. dollar and the Chilean peso are valued at the closing spot
exchange rate of each balance sheet date with the initial discount or premium
being amortized over the life of the contract in accordance with Chilean hedge
accounting criteria.

Under Chilean GAAP interest rate swap agreements are treated as
off-balance-sheet financial instruments and the net interest effect, which
corresponds to the difference between interest income and interest expense
arising from such agreements, is recorded in net income in the period that such
differences originate.

Under Chilean GAAP, interest rate swap agreements that hedge part of the
Bank's investment portfolio are recorded on the balance sheet at their
estimated fair market values. Unrealized gains or losses are credited or
charged to income for those agreements that are designated by the Bank's
management as hedges of part of the investment portfolio classified as trading.
In the case of the interest rate swap agreements designated by the Bank's
management as hedges of part of the investment portfolio as permanent
investments, unrealized gains and losses are credited or charged to
shareholders' equity.

F-53

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

For US GAAP purposes, the Bank applies SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities -
an amendment of FASB Statement No. 133" (collectively "SFAS 133"), which
establishes comprehensive accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and hedging activities. SFAS No. 133 requires that all derivative
instruments be recorded in the balance sheet at fair value. However, the
accounting for changes in fair value of the derivative instruments depends on
whether the derivative instrument qualifies as a hedge. SFAS No. 133 also
requires formal documentation procedures of the hedging relationship and
effectiveness testing when hedge accounting is to be applied. If the derivative
instrument does not qualify as a hedge, changes in fair value are reported in
earnings when they occur. If the derivative instrument qualifies as a hedge,
the accounting treatment varies based on the type of risk being hedged.

While the Bank enters into derivatives for the purpose of mitigating its
global interest and foreign currency risks, these operations do not meet the
requirements to qualify for hedge accounting under SFAS No. 133. Therefore,
changes in the respective fair values of all derivative instruments are
reported in earnings when they occur.

Current Chilean accounting rules do not consider the existence of
derivative instruments embedded in other contracts and therefore they are not
reflected in the financial statements. For U.S. GAAP purposes, certain implicit
or explicit terms included in host contracts that affect some or all of the
cash flows or the value of other exchanges required by the contract in a manner
similar to a derivative instrument must be separated from the host contract and
measured and accounted for as freestanding derivatives at fair value. As of
December 31, 2003 and 2002, the Bank did not have embedded derivatives
requiring bifurcation.

The effects of the adjustments with respect for foreign exchange contracts
and interest rate and foreign currency swaps agreements on the net income and
net equity of the Bank are included in paragraph s) below. The effect of this
difference would be to increase shareholders' equity by MCh$ 1,261 and MCh$
1,018 at December 31, 2003 and 2002, respectively. In addition, had US GAAP
been applied, net income would have been increased (decreased) by MCh$ 5,302 in
2003, MCh$ (1,552) in 2002 and MCh$ (119) in 2001.

j) Employee benefits

Employee benefits and post-employment benefits are provided by independent
pension funds and health insurance companies, which are funded by employees'
contributions. The Bank has no responsibility as an employer for payments under
these plans, other than withholding amounts from employees' salaries. No
adjustment is necessary in the reconciliation of Chilean GAAP to US GAAP.

k) Accrued interest and indexation adjustments

Accrued interest and indexation adjustments are presented with the related
principal amounts. Under US GAAP, accrued interest and indexation adjustments
would be separately recorded. The amount of this reclassification is not
readily determinable and therefore no adjustment has been reflected in the
reconciliation of Chilean GAAP to US GAAP.

l) Recoveries of loans previously charged-off

Under US GAAP, recoveries of loans previously charged-off are reflected as
a reduction of the allowance for loan losses; under Chilean GAAP they are
included as Other income. This reclassification is included in the Article 9
financial statements in Note 27.

F-54

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

m) Fees relating to contingent loans

Under US GAAP, fees relating to contingent loans are recorded as
non-interest income and not as interest income. This reclassification is
included in the Article 9 financial statements in Note 27.

n) Investment securities

Under Chilean GAAP, investment securities held by the Bank which have a
secondary market (and an original maturity of more than one year) are carried
at market value. Securities held by the Bank's brokerage subsidiary and other
subsidiaries are carried at the lower of cost or market value. Investment
securities not falling under these categories are carried at cost.

Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", investment securities, which include debt and certain equity
securities, are accounted for as follows:

o Debt securities that the Bank has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and are
reported at amortized cost.

o Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as trading
securities and are reported at fair value, with unrealized gains and
losses included in earnings.

o Debt and equity securities not classified as either held-to-maturity
or trading securities are classified as available-for-sale securities
and reported at fair value, with unrealized gains and losses excluded
from earnings and reported in a separate component of shareholders'
equity.

The effect of the difference between Chilean GAAP and US GAAP in the
accounting treatment for investment securities had no impact on shareholders'
equity at December 31, 2003 and 2002. Net income would have increased
(decreased) by MCh$ -, MCh$ (2,160) and MCh$ 959 for the years 2003, 2002 and
2001, respectively, had US GAAP been applied.

o) Fees on Automatic Teller Machines (ATM) and other services

The Bank recognizes fees on Automatic Teller Machine (ATM) cards and other
services on a cash basis. Under US GAAP, recognition of this income should be
recorded on an accrual basis. The effect of this difference resulted in a
decrease in shareholders' equity under Chilean GAAP of MCh$ 998 and MCh$ 770,
at December 31, 2003 and 2002, respectively. In addition, had US GAAP been
applied, net income would have (decreased) increased by MCh$ (228) in 2003,
MCh$ (415) in 2002 and MCh$ 387 in 2001.

F-55

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

p) Business combination

Effective January 1, 2002, for US GAAP purposes, the Bank adopted SFAS No.
142, "Goodwill and Other Intangible Assets, " which establishes the following:

o The accounting for a recognized intangible asset is based on its
useful life to the reporting entity. An intangible asset with a finite
useful life is amortized over the life of the asset, but goodwill and
other intangible assets with indefinite useful lives are not
amortized.
o The remaining useful lives of intangible assets being amortized are
evaluated each reporting period to determine whether events and
circumstances warrant a revision to the remaining period of
amortization. If the estimate of an intangible asset's remaining
useful life is changed, the remaining carrying value of the intangible
asset is amortized prospectively over the revised remaining useful
life.
o Goodwill and other intangible assets with indefinite useful lives that
are not subject to amortization are tested for impairment at least
annually.
o All goodwill must be assigned to a reporting unit, which is defined as
an operating segment or one level below an operating segment.

SFAS No. 142 became effective for years beginning after December 15, 2001.
Accordingly, no goodwill amortization expense was recorded for US GAAP purposes
in 2003 and no impairment charge was deemed necessary.

The effect of this difference would be to increase shareholders' equity by
MCh$ 764 and MCh$ 398 at December 31, 2003 and 2002, respectively. In addition,
the effect of eliminating goodwill amortization reduced Chilean GAAP net income
by MCh$ 366 in 2003, MCh$ 392 in 2002 and MCh$ 12 in 2001.

Under Chilean GAAP, the difference between the purchase price and the net
book value of assets and liabilities acquired in a purchase transaction is
considered to be goodwill and is amortized on a straight-line basis over a
period not exceeding ten years. The purchases of ownership interests in BHIF
S.A. Corredores de Bolsa in 1993 and 1997 and in Corredora Tecnica de Seguros
Ltda. in 1998, and the assets and liabilities of Banesto Chile Bank in 1995,
were recorded in accordance with Chilean GAAP.

Under US GAAP, in a business combination accounted for under the purchase
method of accounting, the acquired company's assets and liabilities are
adjusted to give effect to the purchase price paid by the acquiring company.
If, after the assets and liabilities of the acquired company have been adjusted
to their fair value at the acquisition date, the purchase price exceeds the
amount of such fair value, the excess is recorded as goodwill. The financial
statements of the constituent companies are combined as of the date of the
acquisition and are not restated for prior periods.

F-56

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In a business combination accounted for by the purchase method involving
the acquisition of a banking institution, intangible assets acquired that can
be separately identified are assigned a portion of the total cost of the
acquired banking institution if the fair values of those assets can be reliably
determined. The fair values of such assets that relate to depositor or borrower
relationships are based on the estimated benefits attributable to the
relationship that exist at the date of acquisition without regard to new
depositors or borrowers that may replace them. Those identified intangible
assets are amortized over the estimated lives of those existing relationships.
If the fair value of liabilities assumed in the purchase exceeds the fair value
of identifiable assets acquired and such assets do not include a significant
amount of long-term interest-bearing assets, the unidentifiable intangible
asset (goodwill) is amortized over a period not exceeding the estimated average
remaining life of the existing customer (deposit) base acquired.

q) Accounting for guarantees issued

Under Chilean GAAP, the Bank recognizes a liability for fees charged on
guarantees issued, specifically performance bonds, when collected. Income is
then recognized on an accrual basis over the term of the guarantees issued.
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN
45"), which became effective on a prospective basis for guarantees issued or
modified after December 31, 2002, requires that upon issuance of a guarantee,
the guarantor must recognize a liability for the fair value of the obligation
it assumes under the guarantee. In the case of performance bonds, FIN 45
requires that the liability recognized at the inception of the guarantee should
be the premium received or receivable by the guarantor. FIN 45 does not
prescribe how the guarantor's liability for its obligation under the guarantee
should be measured subsequent to its initial recognition. The Interpretation
does recognize that in subsequent periods, the initial liability would
typically be reduced (by a credit to earnings) as the guarantor is released
from the risk under the guarantee. As such, for US GAAP purposes, the Bank
recognized, on an accrual basis over the term of the guarantees issued, the
reduction in the liability recorded. The effect of this difference would be to
increase shareholders' equity by MCh$ 314 at December 31, 2003. In addition,
had US GAAP been applied, net income would have increased by MCh$ 314 in 2003.

r) Comprehensive income

Comprehensive income (loss) is the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For US GAAP purposes, companies are required to report
comprehensive income and its components in a full set of general purpose
financial statements. US GAAP requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The information required by this standard is shown
in paragraph 1 s).

F-57

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

s) Effects of conforming to US GAAP

The following is a reconciliation of consolidated net income under Chilean
GAAP and the corresponding amounts under US GAAP:

For the year ended December 31,
------------------------------------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$

Net income in accordance with Chilean GAAP........................ 27,108 20,458 15,488
Loan origination fees and costs (par. 28.1. a).................... (56) 523 (331)
Deferred income taxes (par. 28.1. b).............................. (1,167) (38) (362)
Investments in other companies (par. 28.1. h)..................... 12 (121) (258)
Derivative financial instruments (par. 28.1. i)................... 5,302 (1,552) (119)
Investment securities (par. 28.1. n).............................. - (2,160) 959
Fees on services (par. 28.1. o)................................... (228) (415) 387
Amortization of goodwill (par. 28.1. p)........................... 366 392 12
Accounting for guarantees issued (par. 28.1. q)................... 314 - -
------ ------ ------
Net income in accordance with US GAAP............................. 31,651 17,087 15,776
Other comprehensive income (par. 28.1. r)
Net unrealized gains (par. 28. 2. c)............................ (1,690) 2,506 34
------ ------ ------
Comprehensive income in accordance with
US GAAP (par. 28.1. r).......................................... 29,961 19,593 15,810
====== ====== ======

Accumulated other comprehensive income amounted to MCh$ 850, MCh$ 2,540
and MCh$ 34 as of December 31, 2003, 2002 and 2001, respectively.

F-58

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following is a reconciliation of consolidated shareholders' equity under Chilean GAAP and under US GAAP:

Year ended
December 31,
------------------------
2003 2002
------- -------
MCh$ MCh$

Shareholders' equity in accordance with Chilean GAAP............................ 264,578 259,593
Loan origination fees and costs (par. 28.1. a).................................. 6,519 6,575
Deferred income taxes (par. 28.1. b)............................................ (1,277) (456)
Accrual for mandatory dividends (par. 28.1. c).................................. (8,132) (6,137)
Investments in other companies (par. 28.1. h)................................... 366 354
Fees on services (par. 28.1. o)................................................. (998) (770)
Amortization of goodwill (par. 28.1. p)........................................ 764 398
Derivative financial instruments (par. 28.1. i)................................. 3,645 (1,657)
AccouNting for guArantees issued (par. 28.1. q)................................. 314 -
------- -------
Shareholders' equity in accordance with US GAAP................................. 265,779 257,900
======= =======

The following summarizes the changes in shareholders' equity under US GAAP
during the years ended December 31, 2003, 2002 and 2001:

MCh$
-------

Balance at January 1, 2001..................................................................... 254,990
Reversal of accrual for minimum dividend-prior year............................................ 4,516
Dividend paid ............................................................................ (15,793)
Minimum dividend at year end required by law.............................................. (4,646)
Other incomprehensive income for the year................................................. 34
Net loss for the year..................................................................... 15,776
-------
Balance at December 31, 2001................................................................... 254,877
Reversal of accrual for minimum dividend-prior year....................................... 4,646
Dividend paid ............................................................................ (15,079)
Minimum dividend at year end required by law.............................................. (6,137)
Other incomprehensive income for the year................................................. 2,506
Net income for the year................................................................... 17,087
-------
Balance at December 31, 2002................................................................... 257,900
Reversal of accrual for minimum dividend-prior year....................................... 6,137
Dividend paid ............................................................................ (20,087)
Minimum dividend at year end required by law.............................................. (8,132)
Other incomprehensive income for the year................................................. (1,690)
Net income for the year................................................................... 31,651
-------
Balance at December 31, 2003................................................................... 265,779
=======

F-59

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2 Additional disclosure requirements

a) Earnings per share
The following disclosure of earnings per share information is not required
for presentation in the financial statements under Chilean GAAP but is required
under US GAAP.

Year ended December 31,
----------------------------------------
2003 2002 2001
----------- ----------- -----------

Basic and diluted earnings per share-US GAAP.................... 87.62 47.30 43.67
Weighted-average number of shares outstanding................... 361,222,027 361,222,027 361,222,027

b) Income taxes

The provision for income taxes charged to income is as follows:

Year ended December 31,
-----------------------------------
2003 2002 2001
------ ------ ------

Current income tax provision for the year under Chilean GAAP..... (7,465) (6,324) (6,197)
Effect of deferred income taxes under Chilean GAAP............... 2,898 3,780 5,307
US GAAP adjustment:
Deferred tax effect of applying SFAS 109......................... (1,167) (38) (362)
------ ------ ------
Income tax expense for the year under US GAAP.................... (5,734) (2,582) (1,252)
====== ====== ======

Deferred tax assets (liabilities) under US GAAP are summarized as follows:

Year ended December 31,
------------------------
2003 2002
------- ------
MCh$ MCh$

Deferred tax assets
Allowance for loan losses, lease contracts
and charged-off of assets................................................ 28,531 23,150
Allowance for losses from high-risk rated countries........................ 241 237
Tax loss carryforward...................................................... - 24
Others..................................................................... 3,233 5,150
------- ------
32,005 28,561
======= ======
Deferred tax liabilities
Depreciation............................................................... (11,069) (9,144)
Loan origination fees and cost and deferred expenses....................... (2,137) (1,989)
Others..................................................................... (124) (181)
------- ------
(13,330) (11,314)
======= ======
Net deferred tax assets ........................................................ 18,675 17,247
======= ======

F-60

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The US GAAP provision for income taxes differs from the amount of income
tax determined by applying the applicable Chilean statutory income tax rate to
US GAAP pre-tax income as a result of the following differences:

Year ended December 31,
--------------------------------------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$
At statutory Chilean income tax rate (16.5% in 2003,

16% in 2002 and 15% in 2001).................................... (6,168) (3,147) (2,554)
Increase (decrease) in rates resulting from:
Nondeductible expenses........................................ (884) (513) (361)
Nontaxable income............................................. 195 386 349
Amortization of goodwill...................................... - - 2
Tax credits................................................... (38) (59) (48)
Effect of change in enacted tax rates......................... 700 813 1,168
Prior-year tax expense adjustment............................. 593 (243) -
Other......................................................... (132) 181 192
------ ------ ------
At effective tax rate............................................. (5,734) (2,582) (1,252)
====== ====== ======

c) Investment securities

Gross realized gains (losses) on sales of securities available for sale
were:

Year ended December 31,
--------------------------------------
2003 2002 2001
------ ------ ------
MCh$ MCh$ MCh$
Gross realized gains (losses):

Central Bank Securities....................................... (2,909) 2,827 33
Other Government Agencies..................................... (168) 168 -
Domestic Financial Institutions............................... 282 (28) (3)
Other......................................................... 155 16 3
------ ------ ------
Total.................................................... (2,640) 2,983 33
====== ===== ===

F-61

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The scheduled maturities of securities to be held to maturity at December
31, 2003 were as follows:
Securities to be
held to maturity
--------------------------
Fair
Amortized value cost
--------- ----------
MCh$ MCh$
Due in one year or less.......................... - -
Due from one year to five years.................. 1,555 -
----- ----
Total................................... 1,555 -
===== ====

d) Impaired loans

A loan is considered to be impaired when, based upon current information
and events, it is probable that the Bank will be unable to collect all amounts
due according to the contractual terms of the loan. Impairment is primarily
measured based on the fair value of the loan's collateral.

At December 31, 2003 and 2002, the recorded investment in loans for which
impairment has been recognized was as follows:

At December 31,
------------------------
2003 2002
------- -------
MCh$ MCh$
Impaired loans with related allowances........... 43,192 59,409
Impaired loans with no related allowance......... 20,023 14,597
------- -------
Impaired loans................................... 63,215 74,006
Allowance on impaired loans...................... (14,000) (19,524)
------- -------
Net balance of impaired loans........... 49,215 54,482
======= =======

F-62

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Charge-offs and recoveries of loans previously charged-off

As discussed in note 1 k) of these financial statements, under Chilean
GAAP the Bank charges-off loans when collection efforts have been exhausted.
Under the rules and regulations established by the Superintendency of Banks,
charge-offs must be made within the following maximum prescribed limits:

- 24 months after a loan is past due (3 months for consumer loans) for
loans without collateral;
- 36 months after a loan is past due for loans with collateral.

Under U.S. GAAP loans should be written-off in the period that they are
deemed uncollectible. The Bank believes that the charge-off policies it applies
in accordance with Chilean GAAP are substantially the same as those required
under U.S. GAAP, and therefore that differences are not significant to the
presentation of its financial statements.

e) Segment information

The Bank applies SFAS No. 131 "Disclosure about Segments of an Enterprise
and Related Information". This standard establishes standards for reporting
information about operating segments and related disclosures about products and
services and geographic areas. Operating segments are defined as components of
an enterprise about which separate financial information is available that is
regularly used by the chief operating decision maker in deciding how to
allocate resources and assess performance.

The Bank has strategically aligned its operations into three business
segments based on its market segmentation and the needs of its clients and
trading partners. The three business segments are Retail banking (Residential
mortgage lending and consumer lending); Corporate banking; and Business
banking. The Bank manages these business segments using an internal
profitability reporting system. The accounting policies of the operating
segments are the same as those described in the summary of significant
accounting policies, except as noted below. The information generated is not
necessarily comparable with similar information from any other financial
institution.

The Bank uses total operating income excluding provisions for loan losses
(TOIBP) in measuring the financial performance of its operating segments. For
this purpose, the internal profitability reporting system uses a transfer rate
method that assumes perfect matching in maturities or repricing periods and
currencies when the net interest revenue has to be allocated across segments.
The difference between the actual total net interest revenue and that arising
from the abovementioned method, called "gap difference", is allocated to the
Corporate banking segment.

Descriptions of each business segment are as follows:

o Mortgage lending is the Bank's oldest and most developed retail business.
In particular, the residential mortgage lending business continues to play
a significant role as part of the Bank's strategy of cross-sellings its
products to the retail market.

o Consumer lending includes personal loans, automotive financing and credit
cards.

o Corporate banking includes a full range of financial products and services
to large size companies in Chile, including commercial loans, working
capital lines of credit, trade financing, payment services and short-term
and other deposits.

F-63

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

o Business banking includes a full range of financial products and services
to small and medium size companies.

The following table presents summary information in millions of Chilean
pesos related to the Bank's lines of business for the years ending December 31,
2003, 2002 and 2001.

2003
--------------------------------------------------------------------------------
Residential
mortgage Consumer Business Corporate Reconciling
lending lending banking banking items (2) Total
----------- --------- -------- -------- ----------- ---------

Operating net interest income (1) 8,542 40,374 24,300 29,583 2,938 105,737
Income from services, net...... 3,192 8,986 885 8,821 7,420 29,304
TOIBP.......................... 11,734 49,360 25,185 38,404 10,358 135,041
Interest earning assets (3).... 599,663 286,879 581,854 741,967 - 2,210,363

2002
--------------------------------------------------------------------------------
Residential
mortgage Consumer Business Corporate Reconciling
lending lending banking banking items (2) Total
----------- --------- -------- -------- ----------- ---------
Operating net interest income (1) 6,341 32,532 26,072 31,302 5,581 101,828
Income from services, net...... 2,075 7,629 782 6,332 5,162 21,980
TOIBP.......................... 8,416 40,161 26,854 37,634 10,743 123,808
Interest earning assets (3).... 459,208 230,781 556,004 748,993 - 1,994,986

2001
--------------------------------------------------------------------------------
Residential
mortgage Consumer Business Corporate Reconciling
lending lending banking banking items (2) Total
----------- --------- -------- -------- ----------- ---------
Operating net interest income (1) 8,447 29,795 37,430 19,088 3,951 98,711
Income from services, net...... - 10,103 1,063 1,971 4,263 17,400
TOIBP.......................... 8,447 39,898 38,493 21,059 8,214 116,111
Interest earning assets (3).... 393,164 200,626 463,856 738,893 - 1,796,539

(1) Operating net interest income includes: Net interest revenue and Other
operating income, net, because, with respect to the latter, the Bank
considers gains and losses from financial instruments and from foreign
exchange transactions to be an integral part of the generation of interest
income and the incurrence of interest expense.

(2) Reconciling items mainly include the amounts related to the earnings of
the subsidiaries mentioned in Note 1.a).

(3) For purposes of this table, interest earnings assets include only the
Bank's average balances of loans.

F-64

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(4) Reconciliations

Set forth below are reconciliations of segment information to the
consolidated financial statements:

2003 2002 2001
------- ------- ------
MCh$ MCh$ MCh$
Net interest revenue....................... 38,688 110,105 94,275
Total other operating income, net.......... 67,049 (8,277) 4,436
------- ------- ------
Operating net interest income, total....... 105,737 101,828 98,711
======= ======= ======

There are no significant intersegment results, except for the gap
difference mentioned above for 2003, 2002 and 2001.

As the Bank's business activity is exclusively carried out in Chile, no
information by geographic area is provided.

f) Recent accounting pronouncements

Effective January 1, 2003, the Bank adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities" (SFAS No. 146), which
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employees Termination Benefits and
Other costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". The adoption of SFAS No. 146 did not have a material effect on
the Bank's consolidated financial position, results of operation or cash flows.

Effective January 1, 2003, the Bank adopted FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that
upon issuance of a guarantee, the Bank must disclose and may be required to
recognize a liability for the fair value of the obligation it assumes under
that guarantee. The initial recognition and measurement requirement of FIN 45
is effective for guarantees issued or modified after December 31, 2002. The
adoption of FIN 45 did not have a material effect on the Bank's consolidated
financial position, results of operation or cash flows.

Effective February 1, 2003, the Bank adopted FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 (an
interpretation of ARB 51) has recently introduced a new consolidation model
focused on identifying entities for which a controlling financial interest is
achieved through means other that voting rights. Under this interpretation, a
variable interest entity must be consolidated if certain consolidation
requirements are met. An enterprise should consolidate an entity if that
enterprise has a variable interest in the entity that will absorb a majority of
the entity's expected losses, receive a majority of the entity's expected
residual returns, or both. FIN 46, as revised by FIN 46R, was effective on
February 1, 2003 for new transactions and is effective for reporting periods
after March 15, 2004 for transactions entered into prior to February 1, 2003.
The Bank has not entered into any new transactions subject to FIN 46 since
February 1, 2003.

F-65

BANCO BILBAO VIZCAYA ARGENTARIA, CHILE

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities". This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Bank adopted the provisions of SFAS No. 149 on July 1, 2003,
which did not have a material effect on the Bank's consolidated financial
position, results of operation or cash flows.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity".
This Statement establishes standards of how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective July 1, 2003. The Bank adopted the
provisions of SFAS No. 150 on July 1, 2003, which did not have a material
effect on the Bank's consolidated financial position, results of operation or
cash flows.

F-66

Exhibit Index

1.1* Estatutos of Registrant, which serve as then Registrant's articles of
incorporation and by-laws, together with an English translation.

1.2** English translation of amendments to Estatutos of Registrant.

8.1*** List of Subsidiaries of BBVA Chile

12.1*** Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

12.2*** Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

13.1*** Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

- ----------
* Incorporated by reference to our Registration Statement No. 333-4918 on
Form F-1 filed with the Commission on June 17, 1996.
** Incorporated by reference to our annual report on Form 20-F filed with the
Commission on May 31, 1999.
*** Filed herewith.