BBVA valuation 2012

BBVA Valuation and Analysis M&A Project

C.U.N.E.F/ 15th January 2013

Cristina Mari Jimenez, Alba Fernandez Barreiros y Jaime Sierra Puerta

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1. Executive Summary

2. BBVA Introduction & origins BBVA’s profile Dividend Strategy Sales Distribution

3. Environment Analysis Macro Outlook for Spanish Financial Sector Business evolution in 2011 Competitive Perspective

4. Financial Analysis Dividend Discount Method Ratio Analysis

5. BIBLIOGRAPHY

6. EXHIBITS

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1. EXECUTIVE SUMMARY

In this project we analyzed BBVA, one of the most important Spanish financial institutions, by using some of the several valuation methods that are available: the discounted dividend method, based on our assumptions and a previous stage of gathering information, and the comparison of some financial ratios we considered important. Both analyses have been made always by comparison with the situation of BBVA’s direct competitors and the Spanish financial sector. BBVA operates in the financial sector as a customer centric multinational group providing financial and non-‐financial products and services all over the world BBVA’s ongoing profitability in the last years compares favourably with the sector’s average. The Group maintains an outstanding position in terms of the main items on the income statement over average total assets which have been increasing at 1-‐2% because of several reasons: the incorporation of Garanti and UNNIM, the favourable business activity in the emerging markets, especially Latin America, the higher cost of customer funds and of wholesale funding… among others. On the other hand, even with the fall in net income for 2011 and 2012, BBVA, being a relatively mature company, has reiterated that it will maintain the total dividend at 0,42 euros, a trend that will be able to accomplish until 2014 in order to attract new investors and maintain those already in the company. They are even willing to pay a dividend higher than their EPS, as we estimate will happen in 2012 (making the payout ratio to increase).

BBVA has demonstrated a good efficiency ratio of 48% with a solid return on assets and more or less stable net interest marging (2,20-‐2,50% growth). Both, BBVA's solid efficiency and earnings ratios are not, however, translating into a credible return on equity, with BBVA having an expected return on equity of 3,97% in 2012. This is part of a downward trend which can be attributed to the funds diverted to loan-‐loss provisions that will not continue in 2013 and 2014. We can say BBVA is, with Santander, one of the Spanish Banks most prepared to face the restructuring of the domestic financial system and the new market requirements, especially due to its foreign exposure, which really is a significant advantage relative to other Spanish banks. Any exposure to Spain and increasing risk created by the deepening of the Spanish economic crisis is clearly mitigated by its geographic diversity and the fact that it derives 59% of its net attributable profit from markets outside of Spain (especially Mexico). Still the future of BBVA will inevitably be associated with the macroeconomics variables that may weigh negatively on some aspects such as the stock’s performance in the near term, profitability, or debt exposure, so it will have to continue to exhibit strong risk management practices, through reducing loan exposure to troublesome markets, de-‐leveraging its balance sheet and taking measures to increase liquidity.

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2. BBVA

2.1 INTRODUCTIONS & HISTORICAL BACKGROUND Banco Bilbao Vizcaya Argentaria (BBVA) is a customer-‐centric multinational group that provides financial and non-‐financial products and services, in over 30 countries and to 53 million customers throughout the world. It has its origins in 1857 when the Spanish Board of Trade sponsored the creation of Banco de Bilbao as a currency-‐issuing and discount bank, which until 1890s was practically the only bank in that part of Spain. Due to the economic development in 1960, Banco de Bilbao grew further, absorbing other banks and started to create a financial group. At the same time Banco de Vizcaya, set up in 1901, also continued to develop as a modern universal bank and began to emerge as an important financial group. Both of them merged in 1988 creating BBV. Parallel to this process, Corporación Bancaria de España was set up in 1991 as a government corporation and credit entity with bank status. It started out with a federated banking model, however in 1998 Corporación Bancaria de España (already privatized via IPOs), BEX (which had merged with BCI), BHE and Caja Postal were merged into a single bank called Argentaria. BBV and Argentaria announced their planned merger on 19th October 1999 thus creating BBVA and finally becoming a single BBVA brand in February 2001. 2.2 BBVA’s PROFILE BBVA operates in two cross-‐sectional business units segmented by customer type:

a. Corporate & Investment Banking which includes BBVA Group activity with large companies and corporations.

b. Global Retail & Business Banking, mainly a global unit joining Retail Banking, SME & Commercial banking, Insurance and Pensions, Payment Systems, Consumer Finance, Private Banking and Asset Management.

BBVA’s approach to banking is based on a business model focused on long-‐term and lasting relationships with its customer. It has therefore franchises with a sufficient critical customer base that allow the holding of leading positions: 1st/2nd in Spain, market leader in Mexico, 1st/2nd in South America, a leadership position in the US Sunbelt, and strategic alliances in Turkey and China.

Furthermore management based on anticipation; a corporate governance framework underpinned by principles of integrity, prudence and transparency; and finally, an appropriate diversification strategy in terms of geographical areas, businesses and customers, are also fundamental parts of BBVA’s banking methodology.

2.3DIVIDEND POLICIY BBVA’s share is currently trading at 7,45 euros. During 2011 and historically, BBVA has maintained one of the highest dividend payout ratios in its sector, with an established dividend floor of €0.42 per share. As their earnings have been around 0,61 that same year, we can say the company was paying out dividends lower than their earnings per share,

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which means that they have a dividend yield of 6.30%. But this ratio may not be maintained in the following years.

The fact that BBVA’s Chairman: Francisco González, made the commitment of maintaining the same levels of dividend per share (despite the rising loan loss provisions and falling profitability caused by ongoing bank solvency and economic crisis), makes us realise there is no much room for BBVA to keep on increasing their dividends in the short term. This will be something we estimate, might happen in 2014 as a direct result of their recovery/growth over that year.

2.4 GEOGRAPHICAL DISTRIBUTION As mentioned before, BBVA, from a geographical point of view and taking into account its core business (deposits and loans); is a well diversified bank with important businesses in Eurasia, Mexico, US and South America. It is particularly interesting to focus attention in Spain, USA and Mexico, countries in which BBVA has most of the investments or trades in the stock market. (Bolsa de Madrid, NYSE and so on). This is explained in detail in EXHIBIT1.

One can appreciate through the following figures the importance of diversification for BBVA especially since in 2011 almost 55% of the gross income was originated in emerging countries and the trend in 2012 seems to be increasing to a 59%. From this overview, one can even conclude that probably Mexico and the emerging countries will gain an important share of the loan book of BBVA in the long run as the economic activity in these countries is increasing and as BBVA, according to the financial reports, is increasingly gaining market share in Latam and Mexico.

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3. ENVIRONMENT ANALYSIS

3.1 MACRO OUTLOOK FOR SPANISH FINANCIAL SECTOR In 2011 the global economy suffered a visible slowdown due to the uncertainty generated by the financial markets, in particular the European sovereign debt markets. The Spanish economy was, and still is, immersed in its own adjustments in order to overcome this crisis, with a growth in 2011 that was a few decimal points below 1% and a trend for a gradual slowdown throughout the year. With this panorama and the slow pace of recovery of the European debt crisis, we estimate a downward trend for 2012, especially for the developed economies. We therefore assume the euro zone is expected to have a negative growth of 0.5% as a whole, which will be around -‐1.3% in Spain. For continuous years we estimate a slow recovery so that worldwide growth rate will at a rate of 3% and 3.5% in 2013 and 2014 respectively. Since BBVA operates in the financial Sector it is also important to note that in Spain there has been an important wave of reforms within the fiscal and the labor framework, that will inevitably affect BBVA’s performance.

• The RDL 2/2012 was developed so uncertainty associated to the Spanish Banking System (and the toxic assets coming from the construction and real state sector) could be eliminated. Thus, the total amount required as reserves for financial entities and principals, amounts to 53,842,000 euros, which add to the efforts of higher provisions made by banks since 2008, and have led some writedowns of 112,000 million euros.

• The EBA recapitalisation programme for major European banks involves raising Core Tier1 capital to 9% and the valuation at market prices of general government debt instruments. Requirements of BASIL III.

• On top of all the measures and developments mentioned, it is also important to factor in the assessment of the Spanish banking sector the structural measures adopted:

- Transformation of savings banks into commercial banks - Significant reduction in the number of former savings banks (from 45 before the

crisis to 11 institutions and ongoing even further). - Rapid crisis resolution scheme: the FROB has been able to initiate rapidly the

process of disposal of intervened institutions, and thus the creation of a big and inefficient public bank/banking sector has been avoided.

• In terms of solvency, BBVA comfortably passed Oliver Wyman’s stress test and continues to comply with the capital recommendations of the European Banking Authority (EBA) and without capital requirements.

As a direct consequence and even with all the measures taken to restructure the balance, the macroeconomic situation for BBVA is still considered an adverse scenario.

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3.2. BUSINESS EVOLUTION ON 2011 AND FUTURE ESTIMATIONS. In 2011 BBVA was able to maintain their recurring earnings and an organic capital generation, even if, as previously mentioned, there was a crisis with a negative impact on the Spanish financial sector. In order to be able to talk about BBVA’s evolution during this last year it is necessary to analyze some of the most significant Balance Sheets and Income Statement accounts.

Analyzing the most important IS accounts (see light blue EXHIBIT 2) we can see that:

-‐ Net interest income in 2011 amounted to €13,160m, which decreased only a 1.2% from data obtained on 2010. In quarterly terms, the net interest income increased throughout the entire year, which means it was somehow stable thanks to various factors: the increased volume of business in emerging countries, the contribution from Garanti acquisition (Turkey) and the appropriate price management. These elements will still guarantee somehow a growth in 2012, 2013 and 2014 for 15%, 3% and 6% respectively. In 2012 Garanti effect as well as a good price management through the repricing of loans and greater contribution from mortgage floors in Spain will lead to a much bigger increase than the following years.

-‐ Revenue from dividends, which basically includes BBVA’s stake in Telefonica (paid once in May and another time in November), went up 6.3% to €562m, and to a lesser extent, the dividends collected in the Global Markets unit.

-‐ The income from fees and commissions was very stable, with a visible rise of just 1% to €4,560m. This increase is relevant given the environment: regulatory limitations as previously explained, activity slowed in Spain and the fact that some fees were reduced to ensure customer loyalty. This situation will be even bigger in the future, especially in 2012 where strong activity in emerging markets and the greater contribution of Garanti offset the negative impacts previously mentioned. We estimate that such a great growth is not possible to maintain and will slowly stabilize again gradually growing at a 5% and 2% in 2013 and 2014 respectively.

-‐ Gross income, including the net gains on financial assets and liabilities, the exchange differences and the dividends (which all represents 90% of the Bank’s total revenue), summed €20,566m in 2011, that represents a fall of 2% from the previous year, which, on the other hand, represents a rise of 0.3% if we exclude the exchange-‐rate effect. This trend will not continue in the following years where growth will be observed, especially in 2012 (with a 13%)

-‐ Operating expenses in 2011 amounted to €9,951m, with an increase of 11.0%. The rise is due to the change in the scope of consolidation especially with the incorporation of Garanti. Also some of the investment made throughout the year, to the personnel training efforts in place for promoting talent in the Bank. Since the number of branches and employees will still be increasing during the following years, so will be these expenses.

-‐ Impairment losses on financial assets were €4,226m in 2011, a fall of 10.4% on the figure for the previous year. In the fourth quarter there was an increase in the level of the Group’s loan-‐loss provisions, aimed at taking advantage of the higher revenue over the last three months of the year. As a result, BBVA’s coverage ratio closed at 61% as of December 31, 2011.

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-‐ On the other hand provisions amounted to €510m in 2011, 5.7% up on the figure for the previous year. They basically cover early retirement, other allocations to pension funds and provisions for contingent liabilities. The strong generation of operating income enables the Group to absorb a significant increase in its loan-‐loss provisions in Spain in order to cover the ongoing impairment of its real estate portfolios and assets, which will also maintain the growth rate in 2012 at a 23%. However since the situation on 2013 and 2014 with the real state sector is expected to improve the provisions this two accounts will decrease a 4 and 6% respectively.

-‐ To sum up, the changes mentioned above in revenue and expenses resulted in an operating income of €5,879 in 2011 (€6,742 in 2010). An operating income that will continue to grow in the following years except in 2013.

-‐ Other gains and losses reported a negative €2,109m in 2011. This can be explained almost entirely by two concepts: a negative €665m corresponding to real estate provisions and assets from recoveries with the aim of maintaining coverage above 30%; and a negative €1,444m for goodwill impairment in the United States.

-‐ In general, 2011 income taxes were reduced because of tax-‐exempt or low-‐tax revenues (especially dividends and income accounted by the equity method) and the growing weight of earnings from Mexico, South America and Turkey, where effective tax rates are low.

-‐ Finally as a result there will be a Net income with a decreasing trend in the first years 2011 and 2012 but that will rebound again in 2013 and 2014.

Furthermore analyzing the most important accounts on the Balance Sheet (see light blue EXHIBIT 3) we can see BBVA closed 2011 with a balance sheet that reflects stability, prudent risk management, high solidity, low leverage and reduced funding needs, things that will be maintained in the continuous years.

-‐ In terms of stability, the Group’s total assets as of 31-‐Dec-‐2011 were €597,688 million, representing an increase of 8.1% from last years, mainly explained by the incorporation of Garanti. We expect this tendency to continue at a 1-‐2% in the following years (2012, 2013 and 2014) due to several factors, among them, it is worth mentioning the Inclusion of UNNIM. This implied the inclusion of a network with 556 branches and 3,028 employees that manage €18 billion in customer loans and €11 billion in customer deposits (data as of the close of September 2012).

-‐ The Group’s business volume that comes from the sum of gross customer lending plus total customer funds, came to €788 million as of December 31, 2011, with an increase of 2.3% compared to last year. Of this figure, €361 million corresponded to gross lending and €426 million to total customer funds, which incorporate both on-‐balance sheet and mutual and pension funds, as well as customer portfolios.

-‐ Loans and advances to customers is the main item on the asset side of the balance sheet, representing 58.9% of total assets as of December 31, 2011. On the liabilities side, deposits from customers stood at 47.2% of the total balance sheet at the end of 2011, and thus, the Loan-‐to-‐Deposit ratio closed the year at 101,7%, which reflects stability and even more important, liquidity. These loans and advances to customer can be separated in performance by geographical area and will be determinant in the trend for following years: which

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will consist on a reduction in the most problematic real-‐estate portfolios (basically in Spain and the United States) with a reduction in the Corporate & Investment Banking (CIB) portfolios in all developed countries and growth in the emerging markets. More specifically in Spain, gross lending to customers will fell as a result of the reduction in the country’s economy, even with an increase of the market share in the residential mortgage portfolio. In Europe, on the other hand, lending will probably remain stable and focused only on high added value customers, mainly corporate clients. In Garanti (Turkey), we estimate lending will continued to grow, above all in consumer loans. On the other hand, in United States there was a shift in its portfolio to increasing the weight of target portfolios (in residential and commercial real estate). Finally, in Latin America, a region where lending is clearly buoyant there will be a notable increase in practically all the portfolios and categories.

-‐ The more stable customer funds on the balance sheet (current and savings accounts with lower costs) performed particularly well. As a result, their weight on the liabilities side of the balance sheet increased, thus allowing the Group to continue to improve its funding structure through 2011, and following years.

3.3 COMPETITIVE POSITIONING In order to be able to evaluate some of the financial information of BBVA it is vital to be able to compare it to other similar institutions in the Spanish Financial sector such as: Banco Santander, Bankia, Banesto and Banco Popular (even though BBVA and Santander are also consider international banks with a much bigger geographical scope). EXHIBIT 4 These 5 banks have the highest number of total assets, being Santander the biggest one with €1,251,525 m. followed by BBVA with €597.688 million, then Bankia, LaCaixa, Banco Popular and Banesto, (even if the net income generated by each of them follows a completely different order and doesn’t depends solely in the number of assets they own). All these banks perform in the Spanish financial sector that has always been characterized for having a great amount of offices and branches (associated with connection and loyalty to the customer). However within recent years there has been a process of reducing branch numbers due to the financial crisis. Yet, at 31-‐Dec-‐2011, BBVA’s branch network numbered 7,457 units, having 96 more branches than at the close of 2010. Furthermore, this is a number we expect to grow in 2012 and the coming years due to the opening of branches in emerging countries, which are increasing as a result of the expansion processes and growth opportunities offered by their markets. Again while this is a great number that surpasses most of the Spanish Banks (Banesto, Popular, Bankia…), Banco Santander’s number of branches is even bigger, as it is also a Bank with an important international presence. It is also important to analyze the number of employees since they will be considered a key source of productivity and will constitute an important operating cost. Both, Banco Santander and BBVA have the highest number of employees, followed by Bankia and LaCaixa. More specifically the Bank’s employees numbered 110,645 people, a year-‐on-‐year growth of 3.4% which, given the circumstances is considered really stable growth of human capital resource and may explain the increase in personnel expenses.

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Despite these increased investments (branches, personnel and administrative expenses), the efficiency ratio closed December at a level of 48.4%, considered low in comparison to LaCaixa and a worldwide measure, yet not as low as the one from Banco Santander, Banesto and Banco Popular which prove to be much more efficient. Still we can say BBVA is delivering an outstanding efficiency ratio, which is an extremely positive sign for investors as it indicates that despite the extremely difficult operating conditions management has maintained control of costs and that the bank has continued to generate income. Other important factor to consider is the gross customer lending. While BBVA closed December 2011 at €361,310 million, which represents a rise over the year of 3.7% and constitutes a very strong position among its direct competitors; Banco Santander had a leading position with an amount almost as double as the one BBVA had: €750,100 million.

4. FINANCIAL ANALYSIS

4.1. RATIOS ANALYSIS We analyzed ratios and performance measurements (EXHIBIT 5) such as:

• (LTD) Loans To Deposits = (Loans/Deposits) A commonly used statistic for assessing a bank's liquidity by dividing the banks total loans by its total deposits. This number, also known as the LTD ratio, is expressed as a percentage. If the ratio is too high, it means that banks might not have enough liquidity to cover any unforeseen fund requirements; if the ratio is too low, banks may not be earning as much as they could be. At its most basic level it represents the ratio of funds loaned in proportion to funds taken as deposits and therefore is indicative of how much of a bank's loan portfolio is funded through wholesale or short-‐term loans, which leave a bank's costs base vulnerable to movements in interest rates.

A healthy loan deposit ratio is generally considered to be 95% to 105% and BBVA is expected to have a loan deposit ratio of 101,7% in 2012 which is considered among the range. However there is a decreasing trend through the following years due to the fact that banks may not be earning as much as they could be. The same phenomenon taken place when comparing this same ratio with the remaining financial institutions that have been taken into consideration for this project, with the exception of Caixa Bank which maintains its Ratio stable throughout the years.

• (LTA) Loans To Assets = (Loans/Total Assets) The loans to assets ratio measures the total loans outstanding as a percentage of total assets. The higher this ratio indicates a bank is loaned up and its liquidity is low. The higher the ratio, the more risky a bank may be to higher defaults. From our ratio analysis we obtained an estimated Loans to Assets ratio for BBVA in 2012 of 62.96%. This could be interpreted by saying that 62.96% of the corporation’s assets are financed with loans and financial obligations lasting more than one year. We can see that from 2011 to 2012, the Loans to Assets ratio for

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BBVA declined from 63.76% to 62.96%. The bank reduced its amount of loans outstanding as a percentage of total assets. However from 2012 onwards, the Loans to Assets Ratio for BBVA experiences an increase, that is, the amount of corporation’s assets financed with loans and financial obligations increased in number once again. As we can see in the ratio comparison, the same phenomenon happens with the other financial entities, as their Loans to Assets Ratio experiences an increase from the estimated period of 2013, to the estimated period of 2014.

• LEVERAGE RATIO = (Tier 1/Total Adjusted Assets)

It indicates what proportion of equity and debt the company is using to finance its assets. The leverage ratio is generally expressed as Tier 1 capital as a proportion of total adjusted assets. Tier 1 capital is broadly defined as the sum of capital and reserves minus some intangible assets such as goodwill, software expenses, and deferred tax assets.3 In calculating the leverage ratio, these intangibles have to be removed from the total asset base as well, to make it comparable to Tier 1 capital. From the data we can see that the Leverage Ratio for BBVA from years 2009-‐2014 experiences an increase, starting at a ratio of 5.5%, and ending at an estimated ratio of 6.3%. This means an increase in the proportion of debt and equity that the company is using to finance its assets.

• (ROA) Return on Assets= (Net Operating Income/ Total Assets)

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment" but it also means how many dollars of earnings result from each dollar of assets the company controls. From our ratio analysis we obtained an estimated ROA for BBVA in 2012 of 0.98%. This could be interpreted by saying that, for every 100 million euros invested in the company, 0.98 million euros in earnings would be the result of the use of the assets. For BBVA we can see an expected decrease on the ROA in the period 2012-‐2013 followed by an increase in the following period. The decrease on the first period could be a consequence of the increase on total assets experimented by the firm, which increased by 1%, as well as a decrease in the Net Operating income of 1%. However, on the following period of 2013-‐2014, the ROA goes from 0.48 to 1.02, this is because the Net Operating Income will increase by 18% and the Total assets is expected to increase by 2%. Both of these positive expected increases are the determinants of the positive evolution of the ROA.

• (ROE) Return on Equity = (Net Income/ Stockholder Equity)

Return on Equity is determined by dividing net income (minus preferred dividends) by average common stockholders equity. It shows how many euros of earnings result from each euro of equity. From our ratio analysis we obtained an estimated ROE for BBVA in 2012 of 3.97%. This could be interpreted by saying, that for every 100 million euros invested in the bank, 3.97 million euros will be obtained as profit. The bank will be earning 3,97% on its equity. The higher the return on equity the better.

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This moderate return on equity is further concerning when it is considered that BBVA has a debt to equity ratio of 2.5 and it is unable to translate this high degree of leverage into a superior return on equity as would be expected. Again this can be attributed to the increased loan loss provisions set aside due to the worsening outlook of its Spanish loan portfolio and the difficulties of the current operating and economic environment. Furthermore, BBVA is delivering a superior return on equity with a lower degree of leverage than Banco Santander, which has a debt to equity ratio of 3.7 compared to BBVA's 2.5.

• (NIM) Net Interest Margin = (Net Interest income/ Total Assets) Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-‐earning) assets. It is similar to the gross margin of non-‐financial companies. It is usually expressed as a percentage of what the financial institution earns on loans in a time period and other assets minus the interest paid on borrowed funds divided by the average amount of the assets on which it earned income in that time period (the average earning assets). In the case of BBVA, its NIM ratio experiences an increase form year 2011 onwards. This could be interpreted by saying that the firm’s investment decisions are being more successful compared to its debt situations. Increased positive values denote that the firm made optimal decisions, as interest expenses turned out to be lower than the amount of returns generated by investments.

• EPS (Earnings per Share)

Is a measure used by investors to see how much of the company’s profit they own because part will stay in the firm (plowback ratio) and the rest can be used to pay dividends (payout ratio) or repurchase shares. It is very useful therefore to evaluate the growth evolution of a company, but cannot be used for a direct comparison with competitors since the number of shares differs from one company to another. Analyzing the results from BBVA’s Earnings per Share ratio we have obtained a drastic decrease (11.30–7.40) from 2012-‐2013, this could reflect investor’s opinion of a decrease in BBVA’s profit, maybe as a consequence of the financial crisis and the Spanish financial sector remodeling-‐ However the ratio experiences a new increase in the next period 2013-‐2014 and reaches a figure of 10.9, which could represent new confidence in the sector and more positive prospects for the bank.

• Payout ratio

Is a measure that will indicate the amount reinvested in the firm. The lower the payout ratio, the higher the amount reinvested and the higher the plowback ratio. This also can be interpreted as more investment projects with expected returns

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above the markets return (if returns are not above the cost of capital it will not plowback any amount). Companies with a low payout ratio are those companies with high growth expectations, also known as non matured companies. From our data we can conclude that the Net Income Attributable to Parent Company experienced a decrease in 2012 of 46%. This could be explained by saying that BBVA’s earnings per share decreased, and at the same time the number of shares outstanding increased, while maintaining the dividend per share constant, so this resulted in a decreasing dividend yield, and an increasing payout ratio.

• PER (Price to Earnings ratio)

Can be interpreted in numerous ways, but having to pick one, we will consider this ratio as the price investors are prepared to pay for each dollar or earnings. Companies with growth prospects will have higher PER ratios than those without. When these firms reinvest a big part of their earnings (at a ROE greater than the cost of capital) the price per share will increase due to increasing growth opportunities. The current EPS will stay the same but since the price will rise, the PER will increase as well. The Price Earnings Ratio experimented a decrease in the years 2012-‐2013, where it decreased from 11.30 to 7.40, investor were willing to pay less per dollar of earnings of the bank. This could be seen as a negative aspect as lower P/E are sometimes linked to decline o recessive prospects for companies. However, in the period 2013-‐2014, the P/E ratio is estimated to go back to similar figures from previous periods, reaching 10.9. So investors are predicted to re-‐gain confidence in the financial entity and support future growth prospects. This is a very positive change of trends for the bank.

4.1 DISCOUNTED DIVIDEND VALUATION METHOD The first method to value BBVA is the Dividend Discount Method, that will allow us to evaluate in the present time the projected shareholder cash flow for the next 3 years, starting in 2011 since this is the last year the company data was available. We have decided to use this method because, while on other type of companies such as Telefonica the value can be obtained by discounting future cash flows at a WACC discount rate (DFCF approach), for the financial sector and banks the core cashflows to analyze are dividends and it is much more representative. Under this valuation (EXHIBIT 6) the main tow tasks to accomplish are:

a) Estimate the future dividends of the company (as well as its perpetual growth rate)

b) Discount them with the most accurate cost of equity, calculated with the CAPM model.

Taking into account the previous macroeconomic and internal environment factors we expect for the Dividend per Share to remain constant at 0,42 until 2014 where it will

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increase to 0,5 per share. We assume this is so, based on the fact that BBVA has mantained this rate since 2008 and due to the “signaling” effect. Principal Agent Theory suggests that company announcements of an increase in dividend payouts act as an indicator of the firm possessing strong future prospects. We would consider this theory only to some extent, so that even if in Spain the profit has been decreasing, foreign profit will enable to maintain those levels and in 2014 this will increase. On the other hand Number of shareholders as well as Outstanding Shares may slightly increase from non-‐Spanish investors in future years (between 2%-‐ 5% and 3%-‐7% respectively).

Therefore the dividend scheme looks as follows:

DIVIDEND SCHEME 2009* 2010* 2011 2012E 2013E 2014E

Dividend per share 0,42 0,42 0,42 0,42 0,42 0,5

Number of shares 3.748 4.491 4.903 5.067 5.407 5.677

Discount Dividend: 1.574 1.886 2.059 2.128 2.271 2.839

From 2014 onwards we estimate a constant growth in dividends of 3%. Next, we calculated the cost of equity of BBVA through the CAPM model that creates a regression of BBVA Spread versus the Market Spread, thus describing the relationship between risk and expected return. Even though this model is based on unrealistic assumptions such as the perfect market efficiency or homogeneous expectations among investors, it is one of the simplest methods to expose reality. The CAPM model is formulated by: [Ke – Rf] = β [ Rm – Rf] or Ke = Rf + β [ Rm – Rf] where:

• Rm: Return on the market. We have calculated the return on the market by extracting the market values of Ibex 35 during 2003 and 2012 from Yahoo Finance and calculating the yearly returns. Afterwards we have calculated the average of these values in order to have a representative value of the return on Spanish market during the last 10 years.

Even if returns on the market have been increasing during the first years of the decade and dropped due to the crisis during the last years, calculating the ten year average provides a more representative view of the iBex return in the medium/long run, resulting in a 7,10%

• Rf: Risk free rate. If risk free interest rate increases, BBVA Ke will also increase as investors expect more return for the extra risk assumed by buying BBVA shares and not government bonds. However, this is the main doubt of the whole European Banking System: what will happen to the EURO, to the weak countries (PIIGS) and therefore how will their sovereign risk be affected. For simplicity, we assume a 5,1% risk free rate which is taken from the annual return of a Spanish 10 year bond.

• β: Regression Coefficient. Once returns were calculated, we have obtained from Bloomberg the Beta of BBVA that amounted to 2.24. The beta is the regression coefficient that measures the percentage change in Ke (Cost of

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Equity) of BBVA, for a 1% increase in the Spread (Market Risk Premium -‐ Risk Free).

• Ke: Cost of equity. As a result BBVA’s cost of equity is 7,58%

Finally we discount the expected dividends with the cost of capital and, using the Gordon Growth Model, we add the Residual Value.

€

BBVA(NPV ) =Div1(1+ ke)

+Div2(1+ ke)2

+Div3(1+ ke)3

+ ...+ Div(ke − g)

So that BBVA value is 73.636 € mill from which the residual value is 63.891€ mill

5. REFERENCES:

• Financial Report BBVA 2011 and 2012.

• BBVA’s Annual Accounts 2011.

• “Informe de Estabilidad Financiera 4/2012”. Banco de España – Eurosistema. Madrid 2012.

• “IBEX 35: 1991-2012, Rentabilidad y Creación de Valor”. IESE Business

School/CIIF. Documento de investigación DI-‐890. Enero 2011. • Bloomberg

• Yahoo Finance

• World Bank Statistics (http://data.worldbank.org)

• “Financial Banking Ratios”. EXANE Report 7/01/2013

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6. EXHIBITS

EXHIBIT I: USA, SPAIN AND MEXICO

To gain further understanding it is imperative to have a quick look at the Macro-‐ picture of these countries.

It is easily to perceive that the economic crisis in Spain is critical and most challenging for the banking sector: economy is already in recession, economic activity will be low until it recovers. This together with the crisis of the European banking system and the low interest rates policy of the European Central Bank also reinforce the idea that the loan book in Europe won’t grow. If the loan book does not grow, neither does the net interest income. This view almost contrasts with the situation in Mexico where even if unemployment is still rising, definitely at much lower levels and economy is growing and a large potential growth is in view. USA presents a more stable view than Spain but also some doubts are in mind. The economy is still recovering from the financial crisis, for 2013 the Fiscal Cliff was the main worry, still the high public deficit can affect the economy and, in turn, the banking activity.

The last two graphs show the growing risk of deflation in Spain: even if along with the OMT policy of the ECB to acquire huge amounts of government bonds, money growth falls and inflation rates are still low. Moreover it is also necessary to take into account in the analyses some financial indicators of the banking industry in each country.

-‐20,00% 0,00% 20,00%

2000

2002

2004

2006

2008

2010

Annual GDP Growth (%)

MEX

ESP

USA

0,00%

5,00%

10,00%

15,00%

20,00%

2000 2002 2004 2006 2008 2010

InflaOon, GDP deflaror (annual %)

ESP

USA

MEX

-‐10 -‐5 0 5 10 15 20 25 30 35

2000 2002 2004 2006 2008 2010

Money and quasi money growth

ESP

USA

MEX

17

The high (6%) NPL ratios that Mexico presented at the beginning of the decade are now reached in Spain. This also supports the low expectation of Loan growth in Spain and a more attractive opportunity in Mexico. The gross saving indicators foresee an increment of Mexican deposits and similar financial products in the medium run while in USA and Spain the situation is more questionable:

• Spanish Banking Authority (BDE) is trying to penalize the deposit business as a consequence of the war for deposits (or for liquidity) that took place last year. It is important to make a point here: BBVA as one of the few diversified Spanish Banks is perceived in Spain as a refuge which enabled the bank to attract flight deposits. This together with the contraction of the loan book improves the Loan/Deposit ratio. In the long run the situation for BBVA Spain remains highly uncertain.

• In US the extremely strong competition is the main impediment for an important market positioning of the company

0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00% 7,00%

2000 2002 2004 2006 2008 2010

Bank NPL Loans

ESP

USA

MEX 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00%

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Gross savings (% GDP)

ESP

USA MEX

0,00%

50,00%

100,00%

150,00%

200,00%

250,00%

300,00%

199 0 199 3 199 6 199 9 200 2 200 5 200 8 201 1

DomesOc credit (% GDP)

ESP

USA

MEX

This graph shows Domestic credit provided by the banking sector, which includes all credit to various sectors on a gross basis. In line which was previously said, Mexico represents the highest growth potential of the business and domestic credit is expected to grow strongly.

18

EXHIBIT II: INCOME STATEMENT

EXHIBIT III: BALANCE SHEET

EXHIBIT IV: COMPETITIVE POSITION

!"#$%&'(()'*+',-&'.()'*/!0!10!!Bankia B. Santander BBVA Caixa Banesto B. Popular Banking Sector

!"#$%&'(()#( 298.367 1.251.525 597.688 282.406 108.848 130.926 23.684.590*+(#",)-&.)/01/2&2-"(( ND 750.100 361.310 182.661 69.198 98.873 9.436.488!"#$%&3+(#",)-&4+/0( ND 984.353 426.464 248.326 55.155 61.285 8.430.9085#"367"%0)-8(&9+/0( 12.078 80.629 40.952 17.619 5.424 9.124 1.017.019:)#&;/3",) -3.031 24.373 3.485 972 122.627 480 24.139<=31)/3>&?@AB?C)-("//)%&)DC)/()(E"#7)-&$0,1/1(#-$FG)&)(C)/()(AHI-"((&;/3",) ND 45,00% 48,40% 50,50% 43,00% 42,15% 57,43%:+,J)-&"4&K=3)(HL-$/37)( 4.101 14.756 7.457 5.196 1.714 2.203:+,J)-&"4&),C%">))( 22.683 193.349 110.645 28.529 8.613 14.062

!"#"$%&'()&&*

"((&*( +,,- +,., +,.. +,.+& +,./& +,.0& 1'+,.,2+,,- 1'+,..2+,., 1'+,.+2+,..'& 1'+,./2+,.+'& 1'+,.02+,./'&

CASH AND BALANCES WITH CENTRAL BANKS 16.344 19.981 30.939 22% 55%FINANCIAL ASSETS HELD FOR TRADING 69.733 63.283 70.602 69.190 66.422 65.094 -9% 12% -2% -4% -2%!!!!!!!!!!!!!!!!"#$%&!$%'!$'($%)*&!+#!),&+#-*.& 0 0 0 0% 0%!!!!!!!!!!!!!!!!/*0+!&*),.12*& 34.672 24.358 20.975 -30% -14%!!!!!!!!!!!!!!!!34,1+5!1%&+.,-*%+& 5.783 5.260 2.198 -9% -58%!!!!!!!!!!!!!!!!6.$'1%7!'*.1($2(*& 29.278 33.665 47.429 15% 41%OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS 2.337 2.774 2.977 19% 7%AVAILABLE-FOR-SALE FINANCIAL ASSETS 63.521 56.456 58.144 51.167 48.353 46.128 -11% 3% -12% -6% -5%!!!!!!!!!!!!!!!!34,1+5!1%&+.,-*%+& 57.071 50.875 52.914 -11% 4%!!!!!!!!!!!!!!!!6.$'1%7!'*.1($2(*& 6.450 5.581 5.230 -13% -6%LOANS AND RECEIVABLES 346.117 364.707 381.076 381.495 392.177 407.080 5% 4% 0% 3% 4%!!!!!!!!!!!!!!!!"#$%&!$%'!$'($%)*&!+#!).*'1+!1%&2+,2#%& 22.239 23.637 26.107 6% 10% Loans and advances to customers 323.442 338.857 351.900 364.217 372.593 387.497 5% 4% 4% 2% 4%!!!!!!!!!!!!!!!!/*0+!&*),.12*& 436 2.213 3.069 408% 39%HELD-TO-MATURITY INVESTMENTS 5.437 9.946 10.955 11.337 11.564 12.027 83% 10% 3% 2% 4%HEDGING DERIVATIVES 3.595 3.563 4.552 -1% 28%NON-CURRENT ASSETS HELD FOR SALE 1.050 1.529 2.090 46% 37%INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD 2.922 4.547 5.843 56% 29%TANGIBLE ASSETS 6.507 6.701 7.330 3% 9%INTANGIBLE ASSETS 7.248 8.007 8.677 8.667 8.667 8.667 10% 8% 0% 0% 0%!!!!!!!!!!!!!!!8##'91:: 6.396 6.949 6.798 9% -2%!!!!!!!!!!!!!!!;+<*.& 852 1.058 1.879 24% 78%TAX ASSETS 6.273 6.649 7.841 6% 18%!!!!!!!!!!!!!!/*=*..*' 5.086 5.536 6.332 9% 14%!!!!!!!!!!!!!!!>,..*%+ 1.187 1.113 1.509 -6% 36%OTHER ASSETS 3.981 4.595 6.662 15% 45%

*3*"#'"((&*( 535.065 552.738 597.688 605.896 611.683 626.373 3% 8% 1% 1% 2%

#4"!4#4*4&( +,,- +,., +,.. +,.+& +,./& +,.0& 1'+,.,2+,,- 1'+,..2+,., 1'+,.+2+,..'& 1'+,./2+,.+'& 1'+,.02+,./'&

FINANCIAL LIABILITIES HELD FOR TRADING 32.830 37.212 51.303 55.317 57.605 59.089 13% 38% 8% 4% 3%!!!!!!!!!!!!!6.$'1%7!/*.1($2(*& 29.000 33.166 46.692 14% 41%!!!!!!!!!!!!!?<#.+!@#&12#%& 3.830 4.046 4.611 6% 14%OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH P&L 1.367 1.607 1.825 18% 14%FINANCIAL LIABILITIES AT AMORTIZED COST 447.936 453.164 479.904 1% 6%!!!!!!!!!!!!!/*A#&1+&!=.#-!)*%+.$:!0$%B&!$%'!).*'1+!1%&2+,2#%& 70.312 68.180 92.503 92.503 98.978 103.927 -3% 36% 0% 7% 5%!!!!!!!!!!!!!>,&+#-*.!/*A#&1+&! 254.183 275.789 282.173 316.034 338.156 354.895 9% 2% 12% 7% 5%!!!!!!!!!!!!!/*0+!)*.2C)$+*& 99.939 85.179 81.930 -15% -4%!!!!!!!!!!!!!?,0#.'1%$+*'!:1$01:12*& 17.878 17.420 15.419 -3% -11%!!!!!!!!!!!!!;+<*.!C%$%)1$:!:1$01:12*& 5.624 6.596 7.879 17% 19%HEDGING DERIVATIVES 1.308 1.664 2.710 27% 63%PROVISIONS 8.559 8.322 7.561 7.780 5.610 4.712 -3% -9% 3% -28% -16%!!!!!!!!!!!!!@.#(1&1#%&!=#.!A*%&1#%&!$%'!&1-1:$.!#0:17$2#%& 6.246 5.980 5.577 -4% -7%!!!!!!!!!!!!!@.#(1&1#%&!=#.!+$D*&!$%'!#+<*.!:*7$:!)#%2%7*%)1*& 299 304 350 2% 15%!!!!!!!!!!!!!@.#(1&1#%&!=#.!)#%2%7*%+!.1&B&!$%'!)#--1+-*%+& 243 264 291 9% 10%!!!!!!!!!!!!!;+<*.!A.#(1&1#%& 1.771 1.774 1.343 0% -24%TAX LIABILITIES 2.208 2.195 2.330 -1% 6%!!!!!!!!!!!!!>,..*%+ 539 604 772 12% 28%!!!!!!!!!!!!!/*=*..*' 1.669 1.591 1.558 -5% -2%OTHER LIABILITIES 10.094 11.099 11.997 10% 8%

*3*"#'#4"!4#4*4&( 504.302 515.263 557.630 565.370 567.818 578.488 2,2% 8,2% 1,4% 0,4% 1,9%

&564*7 +,,- +,., +,.. +,.+& +,./& +,.0& 1'+,.,2+,,- 1'+,..2+,., 1'+,.+2+,..'& 1'+,./2+,.+'& 1'+,.02+,./'&

STOCKHOLDER'S FUNDS 29.362 36.689 40.952 40.993 43.862 47.371 25% 12% 0% 7% 8%!!!!!!!!!!!!3%'#9-*%+!E,%'F!G*&*.(*&!$%'!#+<*. 25.152 32.083 37.948 39.365 39.763 42.504 28% 18% 4% 1% 7%!!!!!!!!!!!!!H%)#-*!$I.10,+*'!+#!+<*!A$.*%+!)#-A$%5 4.210 4.606 3.004 1.628 4.099 4.867 9% -35% -46% 152% 19%VALUATION ADJUSTMENTS -62 -770 -2.787 -2.787 -2.787 -2.787 1142% 262% 0% 0% 0%NON-CONTROLLING INTEREST 1.463 1.556 1.893 2.320 2.790 3.301 6% 22% 23% 20% 18%

*3*"#''&564*7 30.763 37.475 40.058 40.526 43.865 47.885 22% 7% 1% 8% 9%*3*"#'#4"!4#4*7'8'&564*7 535.065 552.738 597.688 605.896 611.683 626.373 3% 8% 1% 1% 2%

!"#$%&'()*)&%&") +,,-. +,/,. +,// +,/+& +,/0& +,/1& 2'+,/,3+,,- 2'+,//3+,/, 2'+,/+3+,//'& 2'+,/03+,/+'& 2'+,/13+,/0'&

!"#$%$&#&'(")'&*+*,(%'*"-.+$ 23.775 21.134 24.188 -11% 14%!"#$%$&#&'(")'&*+*,(%'$/0$"&$& -9.893 -7.814 -11.028 -21% 41%NET INTEREST INCOME 13.882 13.320 13.160 15.134 15.588 16.523 -4% -1% 15% 3% 6%1*2*)$")'!"-.+$ 443 529 562 19% 6%34(%$'.5'6%.7#'(")'8.&&'.5'$"99$&'(--.:"#$)'5.%':&*";'#4$'$<:*#='+$#4.) 120 335 600 179% 79%>$$'(")'?.++*&&*."'"$#'*"-.+$ 4.430 4.537 4.560 5.062 5.315 5.421 2% 1% 11% 5% 2%@$#';(*"&'."'7"("-*(,'(&&$#&'(")',*(A*,*9$&'B'$/-4(";$')*C$%$"-$&'D"$#E' 1.544 1.894 1.479 23% -22%F#4$%'.0$%(9";'*"-.+$'D"$#E 247 295 205 19% -31%GROSS INCOME 20.666 20.910 20.566 23.240 23.472 24.646 1% -2% 13% 1% 5%6$%&.""$,'$/0$"&$& -4.651 -4.814 -5.311 4% 10%G)+*"*&#%(9."'-.&#& -3.011 -3.393 -3.793 13% 12%1$0%$-*(9."'(")'(+.%9H(9." -697 -761 -847 9% 11%6%.2*&*."&'D"$#E'(")'!+0(*%+$"# -5.931 -5.200 -4.736 -5.825 -5.592 -5.257 -12% -9% 23% -4% -6%NET OPERATING INCOME 6.376 6.742 5.879 6.232 6.176 7.284 6% -13% 6% -1% 18%F#%.&'%$&:,#().&'"$#.&' -739 -321 -2.109 -57% 557%@$;(92$'I..)J*,, 99 1 0 -99% -100%INCOME BEFORE TAX 5.736 6.422 3.770 2.187 5.991 7.070 12% -41% -42% 174% 18%!"-.+$'#(/ -1.141 -1.427 -285 25% -80%NET INCOME 4.595 4.995 3.485 2.241 4.773 5.584 9% -30% -36% 113% 17%@$#'*"-.+$'(K%*A:#$)'#.'"."-."#%.,,*";'*"#$%$&# 385 389 481 1% 24%@$#'*"-.+$'(K%*A:#$)'#.'0(%$"#'-.+0("= 4.210 4.606 3.004 1.628 4.099 4.867 9% -35% -46% 152% 19%*456785')9:7;'*<<5:< =1+>-?-' ==@>@,@' =A/>0//' 1?1>=?=' 1?->,,+' 1@,>+??' 02 +2 B/-2 /2 +2*456785'5CDE:F +?0>/+=' +-/>=/-' 1-+>1=-' 1-@>+//' =0->+??' =@@>?@=' //2 ?-2 /2 @2 @2

19

EXHIBIT V: RATIOS

!"#$%&'#()%*+,-,#%).#/012'13%)40#50%,610, !""#$ !"%"$ !"%% !"%!& !"%'& !"%(&

)*+,*-*./012345!"#$%&'"(#)*+%%,(% -./-01 -2/031 -4/5-1 -6/0-1 -./771 -./001!'89*!"#$%&8,:"%;(% 7<-/--1 7<-/<41 7<7/571 04/431 30/561 33/561

678-*.01239:012345=>"?;%;"$&!"#$% 6/.51 6/631 7/031 6/<.1 7/.41 7/7-1

)8;872:8012345!,?,>#@,9*';,>*7&A'"(#)*+%%,(%B*C$(#$@;D),*#%%,(%E* ./21 2/.1 2/41 2/41 2/31 -/418,D(&*FGH;(I 7-40/41

&279*9:012345J,(*C$(,>,%(*K#>@;$@*AJCKE9*J,(*C$(,>,%(*C$L"M,&'"(#)*+%%,(% 6/201 6/.71 6/6<1 6/2<1 6/221 6/-.1N,(H>$*O$*+%%,(%*ANO+E9*J,(*O:,>#P$@*C$L"M,&'"(#)*+%%,(% </321 </301 </-71 </.31 7/<61 7/7-1N,(H>$*O$*FGH;(I*ANOFE9*J,(*C$L"M,&Q("LRS")T,>*FGH;(I 7./4.1 76/221 5/4.1 4/051 0/421 7</651F#>$;$@*=,>*QS#>,*AF=QE 1,12 1,03 0,61 0,32 0,76 0,86

<.=87=>;L,*F#>$;$@%*N#P"*A=FNE 11,30 7,40 10,90 20,01 8,34 7,57=#I*"H(*>#P" 0,37 0,41 0,69 1,31 0,55 0,58

!"#$%&$'(")*++$, -./-0 -./10 -./20

3",4*"%5!"#$%&'"(#)*+%%,(% -./.01 -./231 -./0.1!'45*!"#$%&4,6"%7(% 882/991 889/991 89:/991;<+ =8/-81 9/8>1 9/391;<? =39/:81 3/0:1 0/381@?; =8/9A1 2/3>1 3/>:13",6+7$%5!"#$%&'"(#)*+%%,(% 02/301 02/9>1 02/A>1!'45*!"#$%&4,6"%7(% 8A:/991 8A-/991 8A9/991;<+ =9/8.1 9/A-1 9/2A1;<? =3/.31 -/8:1 :/831@?; =-/A01 89/A-1 >/891&"*8"%3",4%5!"#$%&'"(#)*+%%,(% 02/A>1 02/991 02/301!'45*!"#$%&4,6"%7(% 822/991 822/991 822/991;<+ 9/9A1 9/9:1 9/-81;<? 9/3>1 8/A21 >/A81@?; =32-/331 8-/:.1 :/2.13",9$%:$(;<")%5!"#$%&'"(#)*+%%,(% >A/.-1 >A/>:1 >A/.21!'45*!"#$%&4,6"%7(% 8-3/991 8-0/991 8-2/991;<+ =9/821 9/9>1 9/291;<? =A/>-1 8/3>1 :/8-1@?; =3/>>1 80/201 0/3213",9$%=",7",>6)%5!"#$%&'"(#)*+%%,(% -0/901 -0/901 -0/.>1!'45*!"#$%&4,6"%7(% 8A3/991 8AA/991 8AA/991;<+ 9/3A1 9/2:1 9/-:1;<? :/001 8A/>91 83/3.1@?; 82/381 89/9.1 :/-3133?@!"#$%&'"(#)*+%%,(% 0A/.01 02/881 02/..1!'45*!"#$%&4,6"%7(% 898/>81 .3/3:1 :./>A1;<+ 9/081 9/2:1 8/9A1;<? 3/.>1 ./3-1 89/A>1@?; 11,30 7,40 10,90=697$)%A*,",9*6)$%5!"#$%&'"(#)*+%%,(% 3./0.1 3./.A1 29/3:1!'45*!"#$%&4,6"%7(% 89>/>21 890/021 890/A21;<+ 9/A01 9/301 9/2A1;<? >/-91 ./>81 89/>91@?; 8A/2-1 ./021 :/A:1

20

EXHIBIT VI: DIVIDEND DISCOUNT METHOD

!"#$%&'(%)*+,#-'(#./0!"#$%%&'%(%%)*%+#,-%,.#-,/# -0123%%425%6**& -0123%425%6**7 -0123%%425%6**' -0123%425%6**8 -0123%%425%6**9 -0123%425%6**: -0123%%425%6**; -0123%425%6*)* -0123%%425%6*)) -0123%425%6*)6

!"#$% &&"&&% #'"&(% ($"&)% &#"$'% *)"#$% *&'"#(% ()"++% *#"()% *($"(+% *$",'%

<=>?%=@%#AB!?+

C2D-EF"G-H(-EI

-. +"#$%/012 #"(3-4 !"#$%567428908406:29;<=-4*->? ("$$%C2 9J':K

4!.!4#L4%><M#N# 6**;O 6*)*O 6*)) 6*)6# 6*)&# 6*)7# LPQH RQPSTU%QVT2

@7A790B98C068DE260 0,42 0,42 0,42 0,42 0,42 0,50 2.923,83 0,03FG4H068;.8DE260I 3.747,97 4.490,91 4.903,21 5.067,46 5.406,98 5.677,33@7A790B9IJ 1.574,15 1.886,18 2.059,35 2.128,34 2.270,93 2.838,67

LW.%=@%"".,@7A790B9I8@7I:;GB18>K;L 9.744,29-0I79G2K8M2KG0 63.891,81NOPFPQRO8MSTUN 73.636,10

!"#"$%&$'(%)'*"+,-%. /0012 /0302 /033 /03/4 /0354 /0364 7'/0308/001 7'/0338/030 7'/03/8/033'4 7'/0358/03/'4 7'/0368/035'4

!"#$%&'(%)*#$"%+$,-"%.&/01 12,73 7,56 6,68 6,43 6,32 6,49 -41% -12% -4% -2% 3%

2#$3"4%5#6,4#7,8#9:'%.;,77%&/01 47.712 33.951 32.753 32.584 34.172 36.846 -29% -4% -1% 5% 8%

<"4%=::3%>#7?"%6"$%@*#$"%.&/01 7,83 8,17 8,35

<?;A"$%:B%@*#$"*:7("$@%#@%:B%C"-";A"$%DE 884.373 952.618 987.277 1.008.010 1.050.346 1.102.864 8% 4% 2% 4% 5%

<?;A"$%:B%F?4@4#'(,'G%)*#$"@%#@%:B%C"-";A"$%DE%.;,77,:'1 3.748 4.491 4.903 5.067 5.407 5.677 20% 9% 3% 7% 5%

=::3%>#7?"%6"$%@*#$" 7,83 8,17 8,35

+$,-"%4:%=::3%>#7?"%6"$%@*#$" 1,60 0,90 0,80

+&0% 11,30 7,40 10,90

C,H,("'(%I,"7(%.J1 3,30 5,60 6,30

C,H,("'(%6"$%@*#$" 0,42 0,42 0,42 0,42 0,42 0,50 0% 0% 0% 0% 19%

Documents

BBVA valuation 2012