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January-September 2011
QUARTERLY REPORT
3Q11 3Q
11
Contents 2 BBVAGrouphighlights
3 Groupinformation Relevantevents........................................................................................................................................................................................................................................................... 3
Earnings................................................................................................................................................................................................................................................................................6
Balancesheetandbusinessactivity................................................................................................................................................................................................. 13
Capitalbase.....................................................................................................................................................................................................................................................................17
Riskmanagement...................................................................................................................................................................................................................................................19
TheBBVAshare......................................................................................................................................................................................................................................................... 21
Corporateresponsibility................................................................................................................................................................................................................................. 22
23 Businessareas Spain......................................................................................................................................................................................................................................................................................25
Eurasia.................................................................................................................................................................................................................................................................................. 31
Mexico..................................................................................................................................................................................................................................................................................34
SouthAmerica...........................................................................................................................................................................................................................................................38
TheUnitedStates...................................................................................................................................................................................................................................................42
CorporateActivities............................................................................................................................................................................................................................................. 46
Otherinformation:WholesaleBanking&AssetManagement....................................................................................................................... 49
January-September2011
QUARTERLYREPORT
2 BBVAGrouphighlights
BBVAGrouphighlights
BBVA Group highlights(Consolidatedfigures)
30-09-11 ∆% 30-09-10 31-12-10
Balance sheet (million euros)
Totalassets 584,438 4.8 557,761 552,738
Customerlending(gross) 352,633 2.8 343,084 348,253
Customerfundsonbalancesheet 282,050 10.3 255,798 275,789
Othercustomerfunds 136,588 (4.4) 142,902 146,188
Totalcustomerfunds 418,638 5.0 398,700 421,977
Totalequity 39,868 21.1 32,909 37,475
Shareholders’funds 41,552 31.5 31,610 36,689
Income statement (million euros)
Netinterestincome 9,676 (5.0) 10,182 13,320
Grossincome 15,052 (5.7) 15,964 20,910
Operatingincome 7,753 (16.8) 9,322 11,942
Incomebeforetax 4,145 (21.2) 5,260 6,422
Netattributableprofit 3,143 (14.3) 3,668 4,606
Data per share and share performance ratios
Shareprice(euros) 6.18 (37.6) 9.91 7.56
Marketcapitalization(millioneuros) 29,817 (19.7) 37,124 33,951
Netattributableprofitpershare(euros) 0.66 (26.9) 0.90 1.16
Bookvaluepershare(euros) 8.61 2.1 8.43 8.17
P/BV(Price/Bookvalue;times) 0.7 1.2 0.9
Significant ratios (%)
ROE(Netattributableprofit/Averageequity) 11.3 17.2 15.8
ROA(Netincome/Averagetotalassets) 0.83 0.95 0.89
RORWA(Netincome/Averagerisk-weightedassets) 1.46 1.75 1.64
Efficiencyratio 48.5 41.6 42.9
Riskpremium 1.10 1.38 1.33
NPAratio 4.1 4.1 4.1
NPAcoverageratio 60 62 62
Capital adequacy ratios (%)
BISRatio 12.6 12.8 13.7
Corecapital 9.1 8.2 9.6
TierI 9.8 9.2 10.5
Other information
Numberofshares(millions) 4,825 28.7 3,748 4,491
Numberofshareholders 981,348 10.4 889,104 952,618
Numberofemployees(1) 110,625 5.1 105,265 106,976
Numberofbranches(1) 7,436 1.0 7,362 7,361
NumberofATMs(1) 18,192 9.5 16,619 17,055
General note: These quarterly statements have not been audited. The consolidated accounts of the BBVA Group have been drawn up according to the International Financial Reporting Standards (IFRS) adopted by the European Union and in conformity with Bank of Spain Circular 4/2004, together with the changes introduced therein.
(1)ExcludingGaranti.
3Relevantevents
Stresslevelsinliquidityandsovereignriskreachedahighinthe
third quarter of 2011,particularlyintheeuroarea.Asaresult,
mostoftheEuropeanbankingsectorhasseensomemajor
sourcesoffundingreduced.Thisinturnhasincreasedtheuse
oftheliquidityfacilitiesprovidedbythecentralbanks.This
situationhasgivenrisetodoubtsinthemarketsaboutcertain
businessmodelswithahighlevelofleverage.Otherfactorsworth
highlightinghavebeenthelossofvalueinnumerousassetsasa
resultofincreasedfundingcostsandtheprevailinguncertainty.In
particular,thereweresignificantfallsintheequityandpublicand
privatedebtmarketsandalowlevelofbusinessactivity,above
allthatmostcloselyrelatedtothewholesalebusiness.Against
thisbackgroundoflossofconfidence,theGrouphasoncemore
demonstratedoverthequarterthatitsbusinessmodelissound,
particularlyintermsofitsliquidity position andgeneration of
earnings.
Intermsofliquidity,BBVAhasaprivilegedpositionwithrespect
tomostofitscompetitors,inthefollowingaspects:
• Thesmallestbalancesheetwithinitspeergroup,at€584
billion.
• Ahighlycustomer-centricretailmodel,withaverysolid
depositbase,asshownbythefactthatBBVAisthebankwith
thebiggestcustomerdeposit/totalassetratiowithinthepeer
group,at48.3%atthecloseofSeptember2011.
• Awholesalebankingbusinessbasedonastrongrelationship
withitscustomersandcharacterizedbylowleveragelevels.
BBVAisrecoveringcompetitivenessinanenvironmentin
whichotherbankshaveannouncedsignificantdeleveraging
plans.
• Inaddition,theGrouphasalwaysbeenproactiveinits
managementoflong-termwholesalefinance,andused
conservativelythe“windowsofopportunity”offeredbythe
markets.Infact,inJuneBBVAalreadyhaditsfinancingneeds
fullycoveredfor2011;andthecomingyearsithasthelowest
leveloflong-termfundingmaturitiesofanybankinitspeer
group.Itshouldalsobepointedoutthatthesematuritiesare
notconcentratedinanyspecificperiod.
• ItisworthnotingthatundertheBBVAmanagementmodel
eachbankingsubsidiaryorgroupmustbeself-sufficientinits
sourcesoffundingwithinitsrespectivegeographicalarea.
• Finally,itmustbepointedoutthatBBVAdoesnotdependon
theUSmarketforshort-termmarketfunding(oneofthekey
subjectsthisquarter),andithasonlyuseditinthepastwhen
appropriateasacheapsource.
Themostimportantpointwithrespecttogeneration of earnings
overtheperiodisthecontinuedgrowthofthemostrecurring
income,i.e.grossincomeexcludingdividendsorNTI:
• Therewasnocontributionfromnet trading income (NTI)over
thequarter,whichcharacterizestheprofileoftheaccount.The
slightlynegativeNTI(–€25m)canbeexplainedbythelowlevel
ofactivityinWholesaleBankingandthefallinassetpricesover
theperiod.
• Gross incomeforthequarterwas€4,627m.Thefallcompared
with€5,162minthepreviousquarteristheresultofthe
performanceofNTImentionedaboveandthedividendpaidin
MayfromthestakeinTelefónica.ExcludingdividendsandNTI,
thegrossrecurringincomegeneratedbyBBVAbetweenJuly
andSeptemberwas€4,602m,up0.8%quarter-on-quarter.This
givesafigureof€15,052myeartodateand€13,656m(about
91%)excludingNTIordividends.
• Operatingexpensesamountedto€2,461mforthequarter,
slightlybelowthefigureforthesecondquarter.Theefficiency
ratiowas48.5%atthecloseofSeptember,oneofthebest
amongtheBank’sEuropeanpeers.
• Impairment losses on financial assets,togetherwithallocation
toprovisionsandothergains(losses),remainatasimilarlevel
tothepreviousquarter.
• BetweenJulyandSeptember2011,theGroupobtainedanet
attributable profit of€804m.Thisfiguredoesnotincludethe
dividendsfromTelefónica(whicharepaidinthesecondand
fourthquarterofeachyear)andhasbeenaffectedbythezero
contributionfromNTI.
TheGrouphasmaintaineditsmainrisk indicatorsstableforyet
anotherquarter(theseventhsinceDecember2009).TheNPA
ratioclosed30-Sep-2011at4.1%andthecoverageratioat60%.
Withrespecttosolvency,BBVAcontinuestohaveanexcellent
capitalposition.AtthecloseofSeptemberthecoreratiowas9.1%,
supportedbythegenerationofearningsandtheimplementation
ofthe“DividendOption.”
Allthebusiness areashavecontributedpositivelytotheGroup’s
results.Themostsignificantaspectsforeachofthemaredetailed
below:
Groupinformation
Relevantevents
4 Groupinformation
customerfundsup27.4%)andearnings.Grossincomeis
up19.0%overthelast12months.Thisfact,combinedwith
outstandingmanagementofassetquality,hasenabledthe
banktocontinuetofinanceexpansionprojectsandtoshow
highratesofgrowthinnetattributableprofitwhichreached
€754myeartodate,up11.2%.
• TheUnited States iscontinuingwithitsprocessofchanging
itsloan-bookmix.Inthethirdquarterof2011,thefavorable
outcomeinthenewproductionoftargetportfoliosoflending
hasoffsetthereductioninloanstothedevelopersector.
Thisexplainsthequarter-on-quartergrowthof1.6%ingross
customerlendinginthearea.Thefocusincustomerfunds
continuestobeonthoseoflowercost.Themostimportant
aspectinearningscontinuestobetheimprovementinthe
costofrisk.Thenetattributableprofitintheareayeartodateis
€218m(up1.5%year-on-year).
Finally,itisimportanttomentionthatadividendof€0.10per
sharewaspaidoutinOctober2011undertheDividend Option
scheme.Thepercentageofshareholderswhohaveopted
toreceivenewBBVAshareswasover91%,thusoncemore
confirmingthepopularityofthisnewremunerationprogram.
Economic environment
Globaleconomicgrowthcontinuedinthethird quarter of
2011, thankstotheemergingcountries(EAGLES),anddespite
theslowdownindevelopedeconomies,asshownbythelatest
economicdatapublished.Thishasbeentheresultoftwofactors:
first,theeffortsmadeatthestartofthesummerbyEuropean
authoritieshavenotmanagedtodissipatedoubtsabouttheir
capacitytomanagethedebtcrisis;andsecond,thefinancial
turmoilinthedebtmarketshashadaneffectontheperception
ofsomesegmentsoftheEuropeanfinancialsystem,whereitis
extremelyexposedtothedebtofcountriesindifficulties.
IntheUnited States,growthhasslowedduetothesluggish
recoveryinemploymentandwages,aresidentialconstruction
sectorstilldeepintheprocessofcorrection,andthecontinued
householddeleveragingprocess.Despitepressureatthestartof
thequartertoimplementacredibleprocessoffiscalconsolidation,
doubtsaboutthestrengthofeconomicactivityhaveledto
thesearchforabalancebetweenlong-termconsolidationand
theneedtosustaintheeconomyintheshortterm,resultingin
• ThebusinessesinSpain showweaklendingactivityasaresult
ofthe(necessaryandpositive)deleveragingprocessbeing
undertakenintheeconomy.Itisimportanttohighlightthat
theliquiditygapintheareaiscontinuingtoimprove:onthe
onehand,throughtherestrictiononlending;andontheother
hand,duetothepositiveperformanceofdeposits,ascanbe
seenfromthehighrateofcustomerrenewalsoftermdeposits
writtenayearago,despitetheirbeingatasignificantlylower
interestrate.Asaresult,thequarterlynetinterestincome
stillshowsstrongresilience(€1,096mcomparedwiththe
€1,102minthesecondquarter).Thequarterlyfallof13.6%in
grossincome(€4,900myeartodate)canbeexplainedby
theeconomicsituation,thelowlevelofactivityinWholesale
Banking,andthedeclineinassetpricesingeneral,witha
majorimpactonNTI.Thearea’snetattributableprofityearto
datestandsat€1,162m.TheNPAandcoverageratiosremain
stable,at4.9%and42%respectivelyasof30-Sep-2011.The
IPOsinJulybyCaixaBank,BankiaandBancaCívica,combined
withrecentinterventionsinsomesavingsbanks,havebegun
toclearupuncertaintyintermsoftherestructuringofthe
bankingsector.
• OfparticularnoteinEurasiaisthecontributionofthe
ChinesebankCNCBandthepaymentmadebyBBVAforits
capitalincrease.Twofactorshaveinfluencedthedecision
toundertakethisoperation:ontheonehand,theneedfor
it,duetothegreatstrengthofbankingactivity;andonthe
otherhand,thewishesoftheChinesesupervisortomaintain
ahighlysolventpartnersuchasBBVAwiththesamestakeas
beforetheoperation.Thenetattributableprofitforthequarter
is€257m,uponthefigureof€251mthepreviousquarter.The
yeartodatefigureis€705m.
• Mexico continuestopostsustainedqualitygrowthinbusiness
activity,aboveallinconsumerfinance,creditcardsand
customerfunds,withinahighlycompetitivefinancialsystem
andinterestratesatall-timelows.Netinterestincomehas
improveditsyear-on-yearrateofgrowth(up6.0%atconstant
exchangerates),whileloan-lossprovisionsremainstableand
thenetattributableprofityeartodateis€1,275m(up2.9%at
constantexchangerates).ItisimportanttohighlightthatBBVA
Bancomeristhemostprofitablebankwithinitspeergroup,
witharatioofnetinterestincomeoverATAof5.9%.
• South Americacontinuestoperformwell,inbothbusiness
activity(lendingup30.7%year-on-yearandon-balance-sheet
Interest rates (Quarterlyaverages)
2011 2010
3Q 2Q 1Q 4Q 3Q 2Q 1Q
OfficialECBrate 1.50 1.25 1.00 1.00 1.00 1.00 1.00
Euribor3months 1.54 1.44 1.10 1.02 0.87 0.69 0.66
Euribor1year 2.00 2.13 1.74 1.52 1.40 1.25 1.22
USAFederalrates 0.25 0.25 0.25 0.25 0.25 0.25 0.25
TIIE(Mexico) 4.81 4.85 4.85 4.87 4.91 4.94 4.92
5Relevantevents
biasedtowardsadropinthelendingrateattheendof2011ifthe
economicenvironmentworsens.
GrowthcontinuestobeverystronginSouth America,whereit
issustainedbydomesticdemandandsupportfromwhatisstill
alaxfiscalpolicy.Despitetheslowdowninadvancedeconomies,
commoditypricesremainhigh,whichexplainsthestrengthof
income.
TheChinese economystillappearssound.Althoughtheregionis
alreadynotingtheeffectsoftheslowdowncausedbythegreater
weaknessofforeigndemand,mostrecenteconomicdatahave
remainedsolid.Strongunderlyingdomesticdemandandwhatis
stillahighinflationratewillprobablypreventtheapplicationofa
policyofmonetaryeasing,althoughtheauthoritiesareprepared
toact(inthefiscalareaaswell)iftheglobalweaknesspersists.
Finally,theTurkisheconomyisgrowingatastrongrate,although
inflationisstillrelativelyhighduetothemajordropinvalueof
theTurkishlirainanenvironmentofhighglobalriskaversion,
whichhasingeneralaffectedtheTurkishfinancialmarkets.Inany
event,theCentralBank’stoneshowsitisclearlycommittedtoan
accommodativemonetarypolicy.
Intermsofexchange rates evolution,thefinalratesofthe
Mexicanpesohavedepreciatednotably,inbothyear-on-yearand
particularlyquarter-on-quarterterms.Thisisthecurrencywith
thebiggestinfluenceontheGroup’sfinancialstatements.The
ChileanandColombianpesohavefollowedsuit,althoughtoa
lesserextent.Incontrast,thefinalrateoftheUSdollarappreciated
inyear-on-year,andparticularlyquarter-on-quarterterms.This
isthesecondmostimportantcurrencyfortheGroup’sresults.
TherestoftheotherimportantcurrenciesinLatinAmericahave
alsogained.Theexceptionistheyear-on-yeardepreciationof
theArgentineanpeso.Overall,theimpactonboththebalance
sheetandbusinessactivityoverthelastyearandinthequarteris
negative.Thesameistrueforearningsinquarterlyand
year-on-yearterms.
theproposalofmeasuresparticularlygearedtojobcreation.
Meanwhile,theFedhasgivensignsofaccompanyingwithan
accommodativemonetarypolicy.
Theslowdownanddoubtsaboutgrowthhavealsobecome
consolidatedinEurope.Thistimeround,theyalsoaffectthe
coreeurozoneareas,whichhaveshownsomeweaknessin
domesticdemand,thoughsofarthishasbeenoffsetbystrength
intheforeignsector.ThecountriessubjecttoEuropeanUnion
andInternationalMonetaryFundprogramscontinuewithmajor
adjustments(exceptinthecaseofIreland,wherethemostrecent
figuressuggestarecovery).Nevertheless,thefocusofattention
isstilltheresolutionofthedebtcrisis,specificallythemeasures
totaketore-channeltheGreekdebttomoresustainablelevels.
Doubtsinthisrespectareaffectingthefinancialsystemofthe
eurozoneandleadingtofundingdifficultiesinthewholesale
markets.Theresurgenceoftensionhasledtoachangeinthe
prospectsofagradualtougheningofmonetarypolicybythe
EuropeanCentralBank(ECB).Infact,theECBhasinterruptedits
cycleofinterest-ratehikesandappearspreparedtocontinuewith
measuresthatsupportliquidity.
InSpain,theadjustmentprocesscontinuesandtheeconomy
hasslowedslightly.Evenso,thestrengthoftheforeignsector
hasoffsettheweaknessofdomesticdemand.Atthesametime,
thepublicadministrationcontinuestobeimmersedinamajor
processoffiscalconsolidation.
Despitetheslowdowninadvancedeconomies,emerging
economiescontinuetogrowsolidlytowardsmoresustainable
levels.InMexico,themostimportantindicators(industrialactivity,
formalemployment,retailsales)remainpositive,sotherateof
growthcouldhavecontinuedinthethirdquarteratlevelsthat
areevenslightlyhigherthanthepreviousquarter.Inflationisnot
aconcern,giventhedomesticenvironmentofcontainedactivity
andmoderateprospectsofglobalgrowth.Monetarypolicyis
thereforerespondingbyalongerpause,andthelendingrate
willremainat4.5%beyond2012.Theuncertaintyisifanything
Exchange rates (Expressedincurrency/euro)
Year-end exchange rates Average exchange rates
30-09-11 ∆% on
30-09-10 ∆% on
30-06-11∆% on
31-12-10 January-Sep. 11∆% on
January-Sep. 10
Mexicanpeso 18.5936 (7.9) (8.7) (11.0) 16.9273 (1.3)
U.S.dollar 1.3503 1.1 7.0 (1.0) 1.4065 (6.5)
Argentineanpeso 5.6773 (3.2) 4.6 (3.4) 5.7510 (9.7)
Chileanpeso 695.41 (4.8) (2.1) (10.1) 666.67 2.5
Colombianpeso 2,583.98 (4.9) (0.5) (1.0) 2,564.10 (2.0)
Peruviannewsol 3.7451 1.6 6.1 0.2 3.8930 (4.4)
Venezuelanbolivarfuerte 5.7991 1.1 7.0 (1.0) 6.0403 (8.1)
Turkishlira 2.5100 (21.1) (6.4) (17.6) 2.2920 (12.8)
Chineseyuan 8.6207 5.9 8.4 2.3 9.1378 (2.1)
6 Groupinformation
BBVAgeneratedanet attributable profitforthe
thirdquarterof2011of€804m.Therearetwo
mainfactorsthatcharacterizetheaccountsfor
thisperiod:ontheonehand,thezerocontribution
fromNTI;andontheotherhand,thegrowthofthe
mostrecurrentearningsintheGroup,i.e.thegross
incomeexcludingNTIordividends.Thefollowing
shouldbehighlightedinthisrespect:
• Thepositiveperformanceofnet interest
income,whichwasup2.2%inthequarter.This
isduetothepositivecontributionofemerging
marketsandtheresilienceofnetinterest
incomeindevelopedcountries.
• Thegreatercontributionfromnet income
by the equity method,thankstothepositive
performanceofCNCB.
• Asaresult,thequarterlygross income
excludingNTIordividendswas€4,602m,
continuingwiththeupwardtrendsincethe
startoftheyear.
• Finally,bothoperating expenses and
impairment on financial assetswereatsimilar
levelstothepreviousquarter.
Earnings
Consolidated income statement: quarterly evolution (Millioneuros)
2011 2010
3Q 2Q 1Q 4Q 3Q 2Q 1Q
Net interest income 3,286 3,215 3,175 3,138 3,245 3,551 3,386
Netfeesandcommissions 1,143 1,167 1,114 1,135 1,130 1,166 1,106
Nettradingincome (25) 336 752 252 519 490 633
Dividendincome 50 259 23 227 45 231 25
Incomebytheequitymethod 150 123 121 124 60 94 57
Otheroperatingincomeandexpenses 22 62 79 70 85 47 93
Gross income 4,627 5,162 5,263 4,946 5,084 5,579 5,301
Operatingcosts (2,461) (2,479) (2,359) (2,325) (2,262) (2,262) (2,118)
Personnelexpenses (1,325) (1,306) (1,276) (1,240) (1,211) (1,215) (1,149)
Generalandadministrativeexpenses (920) (964) (887) (887) (855) (855) (796)
Depreciationandamortization (216) (208) (196) (199) (197) (192) (174)
Operating income 2,166 2,683 2,904 2,621 2,821 3,317 3,183
Impairmentonfinancialassets(net) (904) (962) (1,023) (1,112) (1,187) (1,341) (1,078)
Provisions(net) (94) (83) (150) (75) (138) (99) (170)
Othergains(losses) (166) (154) (71) (273) 113 (88) (72)
Income before tax 1,002 1,484 1,659 1,162 1,609 1,789 1,862
Incometax (95) (189) (369) (127) (359) (431) (510)
Net income 907 1,295 1,290 1,034 1,250 1,358 1,352
Non-controllinginterests (103) (106) (141) (96) (110) (70) (113)
Net attributable profit 804 1,189 1,150 939 1,140 1,287 1,240
Basic earnings per share (euros) 0.17 0.25 0.25 0.22 0.28 0.32 0.31
Net attributable profit(Million euros)
(1) At constant exchange rate: –13.3%.
1,240
1Q
1,287
2Q
1,140
3Q
939
4Q
1,189
1Q
–14.3% (1)
2010 2011
804804
11891150
939
1140
12871240
0
200
400
600
800
1,000
1,200
1,400
1,150
2Q
3,668 3,143
804
3Q
7Earnings
ofincreasedbusinessinemergingmarkets,as
wellastheappropriatemanagementofspreads
indevelopedcountriesasvolumesofbusiness
fall.Thefigureyeartodateis€9,676m.
Inbusinesswithcustomersinthedomestic
sectoroftheeuro area,yieldonloanswasup
Net interest income
TheGroup’squarterlynet interest income
continuestoshowgreatresilience.BetweenJuly
andSeptember2011,ittotaled€3,286m,1.3%up
onthesameperiodlastyearand2.2%abovethe
figureforthepreviousquarter.Thisistheresult
Consolidated income statement (Millioneuros)
January-Sep. 11 ∆%∆% at constant exchange rates January-Sep. 10
Net interest income 9,676 (5.0) (3.0) 10,182
Netfeesandcommissions 3,424 0.7 2.5 3,402
Nettradingincome 1,063 (35.3) (34.0) 1,642
Dividendincome 332 10.2 10.7 302
Incomebytheequitymethod 394 86.6 86.6 211
Otheroperatingincomeandexpenses 163 (27.5) (32.3) 225
Gross income 15,052 (5.7) (4.0) 15,964
Operatingcosts (7,299) 9.9 12.3 (6,642)
Personnelexpenses (3,907) 9.3 11.5 (3,575)
Generalandadministrativeexpenses (2,771) 10.6 13.2 (2,506)
Depreciationandamortization (620) 10.4 13.6 (562)
Operating income 7,753 (16.8) (15.6) 9,322
Impairmentonfinancialassets(net) (2,890) (19.9) (18.4) (3,606)
Provisions(net) (328) (19.7) (19.2) (408)
Othergains(losses) (391) n.m. n.m. (47)
Income before tax 4,145 (21.2) (20.1) 5,260
Incometax (652) (49.8) (49.0) (1,300)
Net income 3,492 (11.8) (10.6) 3,960
Non-controllinginterests (349) 19.3 24.5 (293)
Net attributable profit 3,143 (14.3) (13.3) 3,668
Basic earnings per share (euros) 0.66 (26.9) n.m. 0.90
Net interest income(Million euros)
32863286321531753138324535513386
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
(1) At constant exchange rate: –3.0%.
3,386
1Q
3,551
2Q
3,245
3Q
3,138
4Q
3,215
1Q
–5.0% (1)
2010 2011
3,175
2Q
10,182 9,676
3,286
3Q
Customer spread. Euros domestic sector(Percentage)
3Q 4Q 1Q 2Q2010 2011
Customerspread
Cost ofdeposits
Yield on totalnet lending
3.22 3.313.48
3.60
3.97
1.80
0
1
2
3
4
5
3Q
3.22 3.313.48
3.60
1.70
1.53
1.76 1.81
1.52
1.77
1.73 1.80
3.85
2.10
1.75
8 Groupinformation
CompetitivepressureremainshighinSouth
America.However,buoyantbusinessactivity
meansthatthenetinterestincomeyearto
dateintheareawasup28.4%year-on-yearat
constantexchangerates.
againinthethirdquarterof2011by19basis
pointsto3.50%,whilethecostoffundsslowed
itsrisesignificantly,andincreasedbyonly8
basispointsto1.72%.Asaresult,thecustomer
spreadwasup11basispointsonthefigure
forthesecondquarterof2011to1.78%.This
improvementpracticallyoffsetstheeffectsof
lowerlendingandmoreexpensivewholesale
funding.
InMexico,interbankratesarestilllowand
practicallyatthesamelevelsasatthecloseof
thesecondquarterof2011.Theyieldonloans
hasrisenby14basispointsonthefigureatthe
closeofthepreviousquarter,to13.10%,thanks
tothegoodnewproductionfigures,aboveall
inconsumerfinanceandcreditcards.Deposit
costsincreasedbybarely5basispointsinthe
quarterto1.96%.Thusthecustomerspread
stoodat11.14%atthecloseofthequarter(11.05%
inthefirstquarterof2011)andthenetinterest
incomeyeartodateintheareaisup6.0%
year-on-yearatconstantexchangerates.
Breakdown of yields and costs
3Q11 2Q 11 1Q11 4Q10 3Q10
% of ATA
% yield/Cost
% of ATA
% yield/Cost
% of ATA
% yield/Cost
% of ATA
% yield/Cost
% of ATA
% yield/Cost
Cashandbalanceswithcentralbanks 3.8 1.19 3.6 1.25 3.7 1.30 4.0 1.17 4.2 0.99
Financialassetsandderivatives 25.4 2.87 24.3 2.98 24.4 3.03 25.2 2.75 26.0 2.61
Loansandadvancestocreditinstitutions 4.4 2.88 5.3 2.35 4.5 2.23 4.7 1.97 4.2 2.14
Loansandadvancestocustomers 59.7 5.62 60.3 5.42 61.2 5.24 59.9 4.89 59.5 4.86
Euros 38.4 3.50 39.2 3.31 40.0 3.25 39.5 3.12 39.0 3.12
Domestic 33.1 3.85 34.0 3.60 35.4 3.48 35.6 3.31 35.4 3.22
Other 5.2 1.31 5.2 1.41 4.6 1.43 3.9 1.48 3.6 2.10
Foreigncurrencies 21.3 9.44 21.1 9.33 21.3 8.98 20.4 8.31 20.5 8.19
Otherassets 6.7 0.45 6.4 0.37 6.1 0.44 6.2 0.46 6.1 0.43
Total assets 100.0 4.29 100.0 4.19 100.0 4.12 100.0 3.79 100.0 3.73
Depositsfromcentralbanksandcreditinstitutions 14.3 2.73 13.7 2.52 11.3 2.68 12.9 2.15 15.1 1.82
Depositsfromcustomers 48.3 2.17 48.6 2.06 50.6 1.77 48.1 1.63 45.6 1.51
Euros 27.3 1.72 26.6 1.64 28.1 1.35 24.6 1.40 22.5 1.23
Domestic 16.6 1.75 17.7 1.80 17.7 1.73 17.3 1.77 16.6 1.52
Other 10.7 1.67 8.9 1.31 10.5 0.72 7.3 0.51 5.8 0.41
Foreigncurrencies 21.0 2.75 22.1 2.57 22.4 2.28 23.4 1.87 23.2 1.78
Debtcertificatesandsubordinatedliabilities 18.9 2.47 20.3 2.27 20.1 2.15 20.4 2.15 20.6 1.95
Otherliabilities 11.7 0.99 10.7 1.02 11.1 1.29 12.3 0.64 12.8 0.64
Equity 6.8 - 6.7 - 6.9 - 6.3 - 5.9 -
Total liabilities and equity 100.0 2.02 100.0 1.92 100.0 1.77 100.0 1.58 100.0 1.45
Net interest income/Average total assets (ATA) 2.27 2.27 2.35 2.21 2.28
Net interest income/ATABBVA Group (Percentage)
3Q 4Q 1Q 3Q2010 2011
2.282.21
2.352.27 2.27
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2.28 2.21 2.272.35
2Q
2.27
9Earnings
fallinassetvalues,reducedcustomeractivity
andthelackofearningsfromportfoliosales.As
aresult,thisitemamountedtoanaccumulated
figureof€1,063mtoSeptember(€1,642mayear
ago).
Dividendincome,whichbasicallyincludes
incomefromBBVA’sholdinginTelefónica,
amountedto€332m,10.2%uponthesame
periodin2010.However,itisimportanttonote
thattheTelefónicaremunerationispaidinthe
secondandfourthquartersof2011.
Income by the equity methodcontinueswithits
positivetrend,withyear-on-yeargrowthof86.6%
to€394m,thanksbasicallytothesignificant
contributionfromCNCB.
Finally,theitemofother operating income and
expensesamountedto€163m,down27.5%
comparedwiththesameperiodlastyear.This
fallistheresultofboth,thehyperinflationin
Venezuelaandtheincreasedallocationtothe
depositguaranteefund(up21.8%year-on-year),
whichhavenotbeenoffsetbythepositive
performanceofincomefromtheinsurance
business(up13.9%).
Tosumup,thestrongresilienceoftheGroup’s
recurringearnings,togetherwiththenegative
figuresfromNTI,combinetoexplainwhythe
gross incomeyeartodateis5.7%downon
thefigure12monthspreviously,at€15,052m.
However,itisimportanttopointoutBBVA’s
highcapacitytogeneraterecurringrevenues
quarterafterquarter.Thequarterlygross
incomenetofNTIanddividendsamountedto
€4,602m,ayear-on-yearincreaseof1.8%anda
quarterlyincreaseof0.8%.Intheyeartodate
figures,therecurringgrossincomeexcluding
NTIanddividendsamountedto€13,656m,2.6%
downonthesameperiodin2010.Thisisdue
toacustomer-centricretailmodelthatuses
technologyasleverageandishighlydiversified
geographically,withtheemergingcountries
gainingincreasingweight.
Operating income
Operating expensesamountedto€7,299myear
todate,slowingtheirrateofyear-on-yeargrowth
to9.9%.Thisitemcontinuestobeinfluencedby
theGroup’sinvestmentsinemergingcountries,
ininfrastructure,initsnewtechnological
platformandbrandimage.
Finally,intheUnited Statesnetinterestincome
betweenJulyandSeptember2011remained
atsimilarlevelstothoseoftheprevioustwo
quartersatconstantexchangerates,despitethe
continuedincreaseintheproportionoflower
riskloans,andthusloweryield.Theaboveisthe
resultofcontinuinggoodpricemanagementby
BBVACompass.
Gross income
Fees and commissionsamountto€3,424myear
todate,practicallythesame(up0.7%)asfor
thesameperiodin2010.Therewasapositive
contributionfromtheTurkishbankGaranti,
andgoodfiguresfromthebankingbusiness
fees,whichwereup1.4%year-on-year.However,
feesfromthefundmanagementbusinesswere
down1.1%duetotheadversemarketconditions.
ThenegativeperformanceofNTIoverthe
quartercanbeexplainedbyvariousfactors:a
Gross income(Million euros)
462746275162526349465084
55795301
0
1,000
2,000
3,000
4,000
5,000
6,000
(1) At constant exchange rate: –4.0%.
5,301
1Q
5,579
2Q
5,084
3Q
4,946
4Q
5,162
1Q
–5.7% (1)
2010 2011
5,263
2Q
15,964 15,052
4,627
3Q
Gross income net of NTI and dividends(Million euros)
4602460245664488446745204858
4643
0500
1,0001,500
2,0002,5003,0003,5004,0004,5005,000
(1) At constant exchange rate: –0.8%.
4,643
1Q
4,858
2Q
4,520
3Q
4,467
4Q
4,566
1Q
–2.6% (1)
2010 2011
4,488
2Q
14,020 13,656
4,601
3Q
10 Groupinformation
Asof30-Sep-2011therewere18,192units,9.5%up
year-on-yearand1.9%upquarter-on-quarter.
Tosumup,thistrendinincomeandcosts
hasresultedinanoperating incomeyearto
date(30-Sep-2011)of€7,753m(€9,322min
January-September2010).Excludingtheleast
recurringincome,NTIanddividends,this
figureis€6,358m,13.8%downonthatayear
ago.
AtthecloseofSeptember,theBankemployed
110,625people,ayear-on-yearincreaseof5.1%
andaquarter-on-quarterincreaseof0.9%.The
branch networknumbered7,436unitsasof
30-Sep-2011,9morethanatthecloseofJune
and74morethanthefigurefor30-Sep-2010.
Theincreaseistheresultoftheexpansion
processundertakeninemergingcountries
(basicallyMexicoandSouthAmerica).Finally,
thereistheongoingincreaseinATMnumbers.
Breakdown of operating costs and efficiency calculation (Millioneuros)
January-Sep. 11 ∆% January-Sep. 10 2010
Personnel expenses 3,907 9.3 3,575 4,814
Wagesandsalaries 3,003 8.7 2,763 3,740
Employeewelfareexpenses 567 10.3 514 689
Trainingexpensesandother 337 13.0 298 386
General and administrative expenses 2,771 10.6 2,506 3,392
Premises 633 12.7 562 750
IT 462 8.9 424 563
Communications 223 6.4 209 284
Advertisingandpublicity 271 8.2 250 345
Corporateexpenses 77 19.1 65 89
Otherexpenses 829 8.1 767 1,040
Leviesandtaxes 276 20.8 228 322
Administration costs 6,678 9.8 6,080 8,207
Depreciation and amortization 620 10.4 562 761
Operating costs 7,299 9.9 6,642 8,967
Gross income 15,052 (5.7) 15,964 20,910
Efficiency ratio (Operating costs/Gross income, in %) 48.5 16.5 41.6 42.9
Operating costs(Million euros)
2461246124792359232522622262
2118
0
500
1,000
1,500
2,000
2,500
(1) At constant exchange rate: +12.3%.
2,118
1Q
2,262
2Q
2,262
3Q
2,325
4Q
2,359
1Q
+9.9% (1)
2010 20112Q
6,642 7,299
2,479
3Q
2,461
January-Sep.2010
January-Sep.2011
41,6 42,9
48,5
10
15
20
25
30
35
40
45
50
2010
15,964
20,910
15,052
6,6428,967
7,299
January-Sep.2010
January-Sep.2011
2010
41.6 42.9
48.5
15052
-7299
20910
-8967
15964
-6642-10,000-5,000
0
5,000
10,000
15,000
20,000
25,000
Efficiency
Grossincome
Operatingcost
(Million euros) (Percentage)
Efficiency ratio
11Earnings
to€2,890m,ayear-on-yearreductionof19.9%.
Asaresult,theGroup’sriskpremiumhas
improvedby8basispointsoverthequarterto
1.01%,andthecoveragerationowstandsat60%.
Provisionsamountto€328m,19.7%downon
lastyear.Theybasicallyincludeprovisionsfor
earlyretirements,othercontributionstopension
fundsandcontingentliabilitiesprovisions.
Other gains (losses)standatanegative€391m,
comparedwithlossesof€47mlastyear.These
lossesaremainlyrelatedtoprovisionsonreal
estateandforeclosedassetswiththeaimof
maintainingcoverageatlevelsofover30%.
Finally,therewasalsoalowtaxchargethis
quarter,mainlyduetothelowerNTI,revenues
withloworzerotaxrates(basicallydividends
andequityaccountedearnings),andthe
higherproportionofresultscomingfrom
TheAmericasandGaranti,whichcarryalow
effectivetaxrate.
Provisions and others
Impairment losses on financial assetscontinue
toshowaslightdecreaseontheprevious
quarter.UpuntilSeptember2011theyamounted
Operating income(Million euros)
21662166
26832904
26212821
33173183
0
500
1,000
1,500
2,000
2,500
3,000
3,500
(1) At constant exchange rate: –15.6%.
3,183
1Q
3,317
2Q
2,821
3Q
2,621
4Q
2,904
1Q
–16.8% (1)
2010 20112Q
9,322 7,753
2,683
3Q
2,166
5,061,0 5,138,0
5,258,0
6,558,0 6,760,07,293,0
3,910,0 4,079,04,540,0
1,090,0 1,078,0 1,101,0
sep-10 dic-10 sep-110
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
18,192
September2011
5,258
7,293
4,540
1,101
16,619
September2010
5,061
6,558
3,910
1,090
17,055
December2010
5,138
6,760
4,079
1,078
Number of ATMs (1)
Spain
Mexico
South America
The United States
(1) Excluding Garanti.
105,265
September2010
28,629,0 28,416,029,132,0
33,169,0 34,082,035,538,0
28,886,0 29,608,0 30,690,0
12,609,0 12,863,0 12,991,0
1,972,0 2,007,0 2,274,0
sep-10 dic-10 sep-110
20,000
40,000
60,000
80,000
100,000
120,000106,976
December2010
110,625
September2011
28,629 28,41629,132
33,169 34,082 35,538
28,886 29,608 30,690
12,609 12,863 12,991
Number of employees (1)
Spain
Mexico
South America
The United States
Rest of the world
(1) Excluding Garanti.
7,362
September2010
7,361
December2010
7,436
September2011
3,024,0 3,024,0 3,018,0
1,985,0 1,985,0 1,999,0
1,457,0 1,456,0 1,545,0
752,0 752,0 745,0
144,0 144,0 129,0
sep-10 dic-10 sep-110
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
3,024 3,024 3,018
1,985 1,985 1,999
1,457 1,456 1,545
752 752 745
Number of branches (1)
Spain
Mexico
South America
The United States
Rest of the world
(1) Excluding Garanti.
Impairment losses on financial assets(Million euros)
904904962
10231112
1187
1341
1078
0
200
400
600
800
1,000
1,200
1,400
(1) At constant exchange rate: –18.4%.
1,078
1Q
1,341
2Q
1,187
3Q
1,112
4Q
962
1Q
–19.9% (1)
2010 2011
1,023
2Q
3,606 2,890
904
3Q
12 Groupinformation
intheGroup’sshareholders’fundshasledtoa
2.1%year-on-yearincreaseinthebookvalueper
shareto€8.61.Finally,ROEwas11.3%andreturn
onaverageassets(ROA)0.83%,makingBBVA
oneofthemostprofitablebanksinitspeer
group.
Net attributable profit
Inconclusion,thepositiveperformanceof
recurringrevenuesandloan-lossprovisions
hasallowedtheBBVAGrouptocontinue
withitsexpansionplansdesignedtolaythe
foundationsforfuturegrowthwhilegenerating
anetattributableprofitof€804minthe
secondquarterand€3,143myeartodate.
Thisperformanceisinanadversemarket
environment,despitewhichallthebusiness
areasaregeneratingpositiveresults.Inthis
regard,Spaingenerated€1,162myeartodate,
Eurasia€705m,Mexico€1,275m,SouthAmerica
€754m,andtheUnitedStates€218m.
Earnings per share(EPS)yeartodate
(30-Sep-2011)stoodat€0.66compared
with€0.90inthesameperiodin2010,after
correctingfortheeffectsofthecapitalincreases
inNovember2010andApril2011.Theincrease
Earnings per share(Euros)
0.170.17
0.250.250.22
0.28
0.320.31
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.31
1Q
0.32
2Q
0.28
3Q
0.22
4Q
0.25
1Q
–26.9%
2010 2011
0.25
2Q
0.90 0.66
0.17
3Q
ROE(Percentage)
January-September2010
2010 January-September2011
17,215,8
11,3
0
10
20
30
40
50
17.2 15.8
11.3
ROA(Percentage)
0
1
2
0.95 0.89 0.83
January-September2010
2010 January-September2011
13Balancesheetandbusinessactivity
Atthecloseofthethird quarter of 2011,BBVA’s
balancesheetcontinuestoshowgreatstability,
at€584billion.ThemainfeaturesoftheGroup’s
balancesheetandbusinessactivityinthis
periodcanbesummedupasfollows:
• Giventhecurrenteconomicandfinancial
situation,itisimportanttostressthatBBVAhas
asoundbalance sheetwithlittleleverageand
its2011fundingrequirementscovered.For2012
theserequirementsarethelowestamongits
Balancesheetandbusinessactivity
Consolidated balance sheet (Millioneuros)
30-09-11 ∆% 30-09-10 30-06-11 31-12-10
Cashandbalanceswithcentralbanks 24,637 18.2 20,836 21,369 19,981
Financialassetsheldfortrading 74,859 8.0 69,306 63,421 63,283
Otherfinancialassetsdesignatedatfairvaluethroughprofitorloss 2,825 4.4 2,706 2,912 2,774
Available-for-salefinancialassets 58,768 2.1 57,558 60,599 56,457
Loansandreceivables 369,919 2.5 360,762 371,314 364,707
Loansandadvancestocreditinstitutions 23,756 (4.4) 24,846 22,890 23,636
Loansandadvancestocustomers 343,416 2.9 333,741 346,222 338,857
Other 2,747 26.3 2,175 2,202 2,213
Held-to-maturityinvestments 11,049 11.9 9,877 9,334 9,946
Investmentsinentitiesaccountedforusingtheequitymethod 5,352 25.9 4,250 4,518 4,547
Tangibleassets 7,026 6.6 6,593 6,965 6,701
Intangibleassets 10,068 29.3 7,785 9,722 8,007
Otherassets 19,935 10.2 18,087 18,551 16,336
Total assets 584,438 4.8 557,761 568,705 552,738
Financialliabilitiesheldfortrading 50,616 6.1 47,706 34,686 37,212
Otherfinancialliabilitiesatfairvaluethroughprofitorloss 1,716 9.7 1,565 1,815 1,607
Financialliabilitiesatamortizedcost 468,494 3.9 450,843 471,248 453,164
Depositsfromcentralbanksandcreditinstitutions 80,072 6.4 75,225 80,545 68,180
Depositsfromcustomers 282,050 10.3 255,798 278,496 275,789
Debtcertificates 83,107 (12.0) 94,394 86,669 85,180
Mortgagebondsandcoveredbonds 44,263 15.2 38,436 44,784 40,246
Otherdebtcertificates 38,844 (30.6) 55,957 41,885 44,933
Subordinatedliabilities 16,067 (13.4) 18,553 17,586 17,420
Otherfinancialliabilities 7,198 4.7 6,873 7,948 6,596
Liabilitiesunderinsurancecontracts 7,478 (6.1) 7,961 7,607 8,033
Otherliabilities 16,265 (3.1) 16,777 15,705 15,246
Total liabilities 544,569 3.8 524,852 531,062 515,262
Non-controllinginterests 1,730 21.3 1,426 1,562 1,556
Valuationadjustments (3,414) n.m. (128) (2,596) (770)
Shareholders’funds 41,552 31.5 31,610 38,677 36,689
Total equity 39,868 21.1 32,909 37,643 37,475
Total equity and liabilities 584,438 4.8 557,761 568,705 552,738
Memorandum item:
Contingentliabilities 38,530 13.9 33,819 36,360 36,441
14 Groupinformation
maincompetitors.Thisisbecauseitsbusiness
model,focusedontheretailsegmentandwith
ahighdegreeofcapillarityinitsdistribution
network,givesitagreatcapacitytogather
liquiditywithoutrecoursetothemarkets.In
fact,ithasthebestratioofcustomerdeposits
tototalassetswithinitspeergroupat48.3%at
thecloseofSeptember2011.
• Geographycontinuestobethemain
differentiatingfactorintheloan book.Onthe
onehand,thereisthepositiveperformance
ofLatinAmerica,ChinaandTurkey;onthe
other,weaknessinassetnewproduction
continuesinSpain.Finally,intheUnited
Statesgrowthisvariable,withthecorporate
segmentperformingparticularlywell.
• Customer fundsareperformingwell,
thankstothefavorabletrendindepositsin
practicallyallthegeographicalareas.Mexico
andSouthAmericastandoutinthisrespect.
InSpaintherewasahighrateofsuccessin
renewingtimedepositsgatheredayearago
andmaturingthisquarter.
• Theexchange rate hashadanegative
influenceoverthelast12months,andin
particularoverthequarter.Thefinalratesof
theMexicanpesohavedepreciatednotably,
inbothyear-on-yearandparticularly
quarter-on-quarterterms.Thisisthecurrency
withthebiggestinfluenceontheGroup’s
financialstatements.
Loans and advances to customers
Asof30-Sep-2011gross customer lending
amountedto€353billion,practicallythesame
figureasthepreviousquarter(down0.8%).This
ispartlyduetothenegativeimpactofexchange
ratesandalsothedeleveragingprocess
underwayinSpain.Overthelast12monthsthe
figurehasincreasedby2.8%.
Bybusiness areas,Mexicoisgrowingat8.0%
atconstantexchangerates(excludingtheold
mortgageportfolio),mainlyduetotheincrease
inconsumerfinanceandcreditcards(up23.4%
year-on-year).InSouthAmericaallitemsand
countriesintheregioncontinuedwithstrong
overallgrowth(up30.7%atconstantexchange
rates).IntheUnitedStates,thetarget
lower-riskportfoliossuchascorporatelending
Customer lending (Millioneuros)
30-09-11 ∆% 30-09-10 30-06-11 31-12-10
Domestic sector 191,330 (4.3) 199,991 201,053 198,634
Publicsector 26,096 8.8 23,986 25,966 23,656
Otherdomesticsectors 165,234 (6.1) 176,005 175,087 174,978
Securedloans 101,552 (4.0) 105,736 101,898 105,002
Commercialloans 5,918 (3.1) 6,107 6,102 6,847
Financialleases 5,151 (11.8) 5,839 5,338 5,666
Othertermloans 42,043 (10.3) 46,896 44,309 46,225
Creditcarddebtors 1,542 21.0 1,275 1,579 1,695
Otherdemandandmiscellaneousdebtors 2,713 9.3 2,482 3,783 2,222
Otherfinancialassets 6,314 (17.7) 7,671 12,077 7,321
Non-domestic sector 145,614 13.9 127,875 138,957 134,258
Securedloans 58,202 27.2 45,742 57,430 45,509
Otherloans 87,413 6.4 82,133 81,528 88,750
Non-performing loans 15,689 3.1 15,218 15,515 15,361
Domesticsector 11,156 2.4 10,894 11,112 10,953
Publicsector 133 38.8 96 132 111
Otherdomesticsectors 11,024 2.1 10,798 10,980 10,841
Non-domesticsector 4,533 4.8 4,324 4,403 4,408
Customer lending (gross) 352,633 2.8 343,084 355,526 348,253
Loan-lossprovisions (9,217) (1.3) (9,343) (9,304) (9,396)
Customer lending (net) 343,416 2.9 333,741 346,222 338,857
15Balancesheetandbusinessactivity
Customer lending (gross)(Billion euros)
343
September2010
331
September2009
352
September2011
(1) At constant exchange rate: +5.3%.
+2.8% (1)352343
331
0
50
100
150
200
250
300
350
400
andresidentialrealestatehavemorethanoffset
thefallinloanstothedevelopersector.This
indicatesthattheshiftinthemixtowardsamore
sustainablebalancesheetisbeingcompleted.In
Eurasiatheloanbookgrewby45.4%
year-on-year,duepartlytotheincorporation
oftheTurkishbankGarantianditspositive
performanceinlending,andalsototheslight
riseinCorporateandInvestmentBanking(up
3.0%inthequarter).Finally,inSpain(andinline
withtherestofthesystem)therewasafallof
2.4%comparedwithSeptemberlastyear,dueto
thedeleveragingprocessmentionedabove.
Withinthedomesticsector,thegeneraltoneis
weaknessinnewproduction,aboveallinthose
itemsthataremostcloselyrelatedtocorporate
andbusinessactivity(corporatelending,
financialleasingandothertermloans).Secured
loans,whicharethosewiththebiggestrelative
weightandlowestassociatedrisk,showeda
notablestabilitycomparedwiththecloseof
30-Jun-2011,atatotalof€102billionasof
30-Sep-2011.
Inthenon-domestic sector,theannualincrease
of13.9%isduetothestrengthofbusiness
activity,particularlyinSouthAmerica,andthe
additionofGaranti.Theeffectofexchangerates
wasnegative.
Finally,NPAhaveremainedstablesince
December2009.
Customer funds
Thebalanceofcustomerfundsasof30-Sep-2011
was€419billion,ayear-on-yearincreaseof5.0%.
Off-balance-sheetfundsperformedworst,witha
fallof4.4%.Theywerestronglyhitbythecurrent
turmoilinthemarkets.
On-balance-sheet customer fundstotaled
€282billionasof30-Sep-2011(up10.3%
year-on-year).Ofnoteherewasthegood
performanceoftimedepositsinthedomestic
sectorthankstothehighratioofrenewalsover
thequarterofthetimedepositsgatheredayear
ago.Asaresult,thislineitemgrewby7.5%
Customer funds (Millioneuros)
30-09-11 ∆% 30-09-10 30-06-11 31-12-10
Deposits from customers 282,050 10.3 255,798 278,496 275,789
Domestic sector 146,284 33.2 109,848 135,420 133,629
Publicsector 30,672 n.m. 7,409 24,905 17,412
Otherdomesticsectors 115,612 12.9 102,438 110,515 116,217
Currentandsavingsaccounts 42,215 (7.7) 45,740 44,061 43,225
Timedeposits 51,182 7.5 47,599 52,188 49,160
Assetssoldunderrepurchaseagreementandother 22,215 144.1 9,100 14,266 23,832
Non-domestic sector 135,766 (7.0) 145,951 143,076 142,159
Currentandsavingsaccounts 78,127 15.0 67,930 75,002 74,681
Timedeposits 54,958 (25.4) 73,697 63,320 61,626
Assetssoldunderrepurchaseagreementandother 2,681 (38.0) 4,324 4,754 5,852
Other customer funds 136,588 (4.4) 142,902 144,175 146,188
Mutualfunds 38,361 (9.6) 42,422 40,527 41,991
Pensionfunds 73,870 (2.2) 75,567 77,051 78,763
Customerportfolios 24,357 (2.2) 24,913 26,596 25,434
Total customer funds 418,638 5.0 398,700 422,672 421,977
16 Groupinformation
year-on-year.Combinedwiththefallinthe
loan-bookinSpain,ithascontributedtothe
steadynarrowingoftheliquiditygapinBBVA’s
balancesheet.Inaddition,customerdeposits
inthenon-domesticsectorhavefallenby7.0%
year-on-year,basicallyduetothenegative
impactofexchangerates.
Off-balance sheet customerfundsclosedthe
thirdquarterat€137billion,4.4%downonthe
figureforthesamedatelastyear,and5.3%down
onthecloseofthepreviousquarter.Ofthese
funds,36.8%(€50billion)arelocatedinSpain,a
year-on-yeardropof8.4%andadeclineof3.9%
overthequarter.Thiscanbeexplainedlargely
duetothereductioninthevalueoftheassets
undermanagement,mainlyinmutualfunds
(down16.4%year-on-yearand3.6%
quarter-on-quarter).Itisworthpointingout
thataccordingtothelatestdatafromAugust
2011theeffectofthisfallinBBVAismuchless
significantthanintherestofthesystem,given
themoreconservativeprofileofitsmutual
funds.Inthethirdquarterof2011,thereal-estate
fundBBVAPropiedadchangeditslegalstatus
andbecameapubliccorporation(sociedad
anónima),whichmeansthatitisnolonger
accountedforasamutualfund.Becauseofthis,
thepreviousdatahavebeenrestatedtoensure
thattheyarecomparable.Pensionfundstotaled
€17billion(down1.6%year-on-yearand1.4%
quarter-on-quarter).BBVAhasmaintainedits
positionastheleadingpensionfundmanager
inSpain,withamarketshareof18.3%(June2011
data,thelatestavailable).
Intherestoftheworld,off-balance-sheetfunds
totaled€86billion,withayear-on-yearfallof
2.0%atcurrentexchangerates.Thesefunds
werealsoaffectedbythefallinthevalueof
assetsundermanagement.
Statement of changes in equity
Asof30-Sep-2011,BBVA’sequitytotaled
€39,868m,ariseoverthequarterof5.9%,despite
thenegativeeffectoftheexchangerate.Thiswas
thecombinedresultoftheearningsgenerated
inthequarter,thenewimplementationofthe
dividendoptionschemeandtheconversionof
theconvertiblebondintosharesinJuly2011.
Other customer funds (Millioneuros)
30-09-11 ∆% 30-09-10 30-06-11 31-12-10
Spain 50,225 (8.4) 54,802 52,254 52,482
Mutualfunds 20,220 (16.4) 24,179 20,966 22,316
Pensionfunds 16,741 (1.6) 17,019 16,986 16,811
Individualpensionplans 9,600 (2.6) 9,856 9,799 9,647
Corporatepensionfunds 7,141 (0.3) 7,162 7,186 7,164
Customerportfolios 13,265 (2.5) 13,604 14,302 13,355
Rest of the world 86,363 (2.0) 88,100 91,922 93,707
Mutualfundsandinvestmentcompanies 18,141 (0.6) 18,243 19,562 19,675
Pensionfunds 57,129 (2.4) 58,548 60,066 61,952
Customerportfolios 11,092 (1.9) 11,309 12,294 12,080
Other customer funds 136,588 (4.4) 142,902 144,175 146,188
398
September2010
382
September2009
418
September2011
+5.0% (1)
133 142136
249 255282
050100150200250300350400450
142133136
255249282
Customer funds(Billion euros)
(1) At constant exchange rate: +5.4%.
Othercustomer
funds
Customerfunds onbalance
sheet
17Capitalbase
Asof30-Sep-2011,theBBVAGroup’scapital base,
calculatedaccordingtotheBISIIregulation,totaled
€41,120m,averysimilarfigureto30-June-2011
(down0.3%).Themostsignificantdifferencesin
thequarterinclude:anincreaseincorecapitalof
€855m,explainedbythegenerationofearnings
intheperiod,andthehigherdeductionfromthe
investmentmadeinCNCB.Inaddition,therewas
significantmovementincurrenciesinthequarter,
specificallythedepreciationoftheMexicanpeso,
whichhashadanegativeimpactonthecapital
base.
Risk-weighted assets(RWAs)wereup1.3%
inthequarterto€325,458m.Thisgrowth
isfundamentallyexplainedbythestrong
performanceofactivityinLatinAmerica
andbytheappreciationofthedollarand
othercurrenciesinSouthAmerica.Another
differentiatingkeyqualityaspectofBBVAversus
itsEuropeanpeersisthehighRWAdensityand
itsstabilitythroughtime.
Theminimum capital requirements(8%of
RWA)totaled€26,037m,makingthecapital
basesurplusatthecloseofSeptemberreach
€15,083m,thatis,57.9%abovetheminimum
requiredlevels.
Asof30-Sep-2011,core capitalwasup3.0%with
respecttotheJune2011figureandamountedto
Capitalbase
Capital base (BIS II Regulation) (Millioneuros)
30-09-11 30-06-11 31-03-11 31-12-10 30-09-10
Shareholders'funds 41,552 38,677 38,107 36,689 31,610
Adjustmentsanddeductions (11,923) (11,904) (11,654) (8,592) (8,642)
Mandatoryconvertiblebonds - 2,000 2,000 2,000 2,000
Core capital 29,628 28,773 28,452 30,097 24,969
Preferenceshares 5,157 5,114 5,128 5,164 5,165
Deductions (2,733) (2,452) (2,367) (2,239) (1,900)
Capital (Tier I) 32,053 31,435 31,214 33,023 28,234
Subordinateddebtandother 11,800 12,266 12,613 12,140 12,955
Deductions (2,733) (2,452) (2,367) (2,239) (1,900)
Other eligible capital (Tier II) 9,067 9,814 10,246 9,901 11,055
Capital base 41,120 41,249 41,460 42,924 39,289
Minimumcapitalrequirement(BISIIRegulation) 26,037 25,703 25,523 25,066 24,506
Capital surplus 15,083 15,547 15,937 17,858 14,783
Risk-weighted assets 325,458 321,282 319,044 313,327 306,319
BIS ratio (%) 12.6 12.8 13.0 13.7 12.8
Core capital (%) 9.1 9.0 8.9 9.6 8.2
Tier I (%) 9.8 9.8 9.8 10.5 9.2
Tier II (%) 2.8 3.1 3.2 3.2 3.6
54.956.7 56.8 56.5 56.5
0
15
30
45
60
75
RWA’s / Total assets(Percentage)
September2008
September2009
September2010
December2007
September2011
53.5 53.3 54.1 54.9 55.7
18 Groupinformation
andinsuranceentities,standsat€9,067m.This
representsa7.6%decreaseinthequarterdue
totheinvestmentinCNCBandtothefallin
unrealizedcapitalgains.
Tosumup,theBISratioasof30-September-2011
was12.6%withaclearpositiveevolutioninthe
qualityofitscomponentssincethestartofthe
crisis.
Ratings
Severalactionsweretakenontheratingsin
EuropeinOctober.InSpain,Fitchdowngraded
thesovereign(KingdomofSpain)bytwo
notches,fromAAtoAA–withanegativeoutlook,
whichresultedinactionsfortheSpanish
bankingsystem.BBVA’sratingdecreasedtoA+
fromAA–.Likewise,Standard&Poor’suniversally
downgradeditsratingsfortheSpanishbanking
system.BBVA’sratingfelltoAA–fromAA,with
anegativeoutlook.Thesovereignratingwas
alsodowngradedtothesamelevelasthatof
BBVA.Inlinewiththeothertworatingagencies,
Moody’scompletedinOctoberitsSpanish
sovereignratingrevision,whichimpliedatwo
notchdowngradetoA1(negativeoutlook).This
actionhasalsohadadirectimpactonSpanish
banks’ratings.BBVA’sratingwasdowngraded
onenotchtoAa3(negativeoutlook).Thisrating
isonenotchaheadofthesovereignone.
€29,628m,andacoreratioof9.1%.Theorganic
generationofcapitalinthequarterwas15
basispoints,netoftheimpactofthecurrency
evolutionandotherfactors.
TheTier Iratio,9.8%,fellwithrespectto
30-Jun-2011by6basispoints.Thelevelof
preferencesharesissimilartothatinthe
previousquarter,at€5,157m,or16.0%oftotal
bankcapital.
Therestoftheeligiblecapital,Tier II,which
mainlyconsistsofsubordinateddebt,surplus
genericprovisions,eligibleunrealizedcapital
gainsandthedeductionforholdingsinfinancial
Ratings
Long term Short term Financial strength Outlook
Moody’s Aa3 P–1 B– Negative
Fitch A+ F–1+ B Negative
Standard&Poor’s AA– A–1+ – Negative
Capital base: BIS II ratio(Percentage)
Tier II
Core capital
Tier I
5.74.5
4.13.6 2.8
7.37.8
9.4 9.29.8
5.86.4
8.0 8.2
9.1
0
2
4
6
8
10
12
14
December2007
13.0
5.8
7.3
5.7
September2008
12.3
6.4
7.8
4.5
September2009
13.4
8.0
9.4
4.1
September2010
12.8
8.2
9.2
3.6
September2011
12.6
9.1
9.8
2.8
19Riskmanagement
Credit risk
The third quarter of 2011oncemorefeatured
stabilityinthemainindicatorsofcreditquality
withrespecttothecloseof2010.TheNPAratio
closedat4.1%,thecoverageratioat60%andthe
riskpremiumforthequarterstoodat1.01%.
AsofSeptember30,2011,thevolumeoftotal
riskswithcustomers(includingcontingent
liabilities)totaled€390,723m,whichisvery
similartothefigurefromthepreviousquarter
(€391,380m).Thisflatdevelopmentisexplained
inpartbythedepreciationofthemaincurrencies
againsttheeuro(atconstantexchangerates,
lendingfell0.1%inthequarter)andalsobythe
deleveragingprocessobservedinSpain.This
trendmightincreaseinthecomingmonths,
thoughBBVAwillbeaffectedtoalesserdegree
thanthesystemaverage.
Non-performing loans haveremainedstable
sinceDecember2009andreached€15,970m.
Therehasbeenadecreaseinnew
Riskmanagement
Variations in non-performing assets (Millioneuros)
3Q11 2Q11 1Q11 4Q10 3Q10
Beginning balace 15,790 15,528 15,685 15,560 16,137
Entries 2,918 3,713 2,804 3,852 3,051
Recoveries (1,874) (2,484) (1,882) (2,479) (2,116)
Net variation 1,044 1,229 922 1,373 935
Write-offs (876) (939) (1,140) (1,269) (1,119)
Exchangeratedifferencesandother 12 (28) 61 21 (393)
Period-end balance 15,970 15,790 15,528 15,685 15,560
Memorandum item:
Non-performingloans 15,689 15,515 15,210 15,361 15,218
Non-performingcontingentliabilities 281 275 319 324 342
Credit risk management (1) (Millioneuros)
30-09-11 30-06-11 31-03-11 31-12-10 30-09-10
Non-performingassets 15,970 15,790 15,528 15,685 15,560
Totalrisks 390,723 391,380 383,043 384,069 376,421
Provisions 9,503 9,576 9,490 9,655 9,641
Specific 6,584 6,485 6,516 6,823 6,552
Genericandcountry-risk 2,919 3,090 2,974 2,832 3,089
NPAratio(%) 4.1 4.0 4.1 4.1 4.1
NPAcoverageratio(%) 60 61 61 62 62
(1)Includingcontingentliabilities.
Non-performing assets(Million euros)
15560 15685 15528 1579015970
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,00015,970
September2011
December2010
15,685
March2011
15,528
September2010
15,560+1.1%
15,790
June2011
20 Groupinformation
improvedto140%inSouthAmerica(138%asof
30-Jun-2011).Inturn,itfellinEurasiato118%(144%
asof30-Jun-2011)andto128%inMexico(134%as
of30-Jun-2011).Additionally,itisworthnotingthat
58.9%oftheGroup’srisksarecollateralized.
Economic capital
Attributableeconomicriskcapital(ERC)
consumptionamountedto€28,946masof
30-Sep-2011,7.2%uponthefigureasof
30-Jun-2011.Thisincreaseisduetothe
recalibrationofthecreditriskmodelsinSpainin
themonthofAugust.
AsistobeexpectedfromBBVA’sprofile,most
ofthisfigure(64.3%)iscreditriskonportfolios
originatedintheGroup’sbranchnetworkfromits
owncustomerbase.
Marketriskcontinuestobetheleastrelevant
item(1.8%),giventhenatureofBBVA’sbusiness
anditspolicyofminimalproprietarytrading.It
remainsatasimilarleveltothepreviousquarter.
Equityrisk(10.1%)basicallyreflectstheportfolio
ofHoldingsinIndustrial&FinancialCompanies
andthestakeinCNCB.Itslevelisalsosimilar
tothatatthecloseofthepreviousquarter.The
structuralbalance-sheetrisk,originatingfromthe
managementoftheGroup’sstructuralinterest-rate
riskandexchange-raterisk,stoodat7.7%.Finally,
operationalriskstoodat6.9%oftotalERC.
non-performingassetswithrespecttothe
previousquarter,aswellasinrecoveries.The
latter,however,isdueprimarilytotheseasonal
natureofthisperiod,especiallyconsideringthe
summervacationperiodinSpain.Nevertheless,
therateofrecoveriesovernewNPAremainsata
solidlevel(64.2%).
TheNPA ratio oftheGroupstoodat4.1%and
remainedinastablerangewithrespectto
recentquarters.Brokendownbybusinessarea,
theNPAratioroseslightlyinSpain,Mexicoand
Eurasia.ThisvariationinSpainisduetothe
aforementioneddecreaseinlending,astheNPA
asof30-Sep-2011remainedstableascompared
tothefigureasof30-Jun-2011.TheUnitedStates
maintaineditsdownwardtrendintheNPAratio,
andSouthAmericaclosedanotherquarterwith
animprovementof9basispointswithrespectto
thefigureforJune2011.
Coverage provisionsforriskswithcustomers
amountedto€9,503m,averysimilarfigureto
thatfromthesecondquarteroftheyear.Ofthis
total,genericprovisionsreached2,886mand
represented30.4%.
Finally,theNPA coverage ratio stoodat60%,
whichissimilartothatofthepreviousquarter.By
businessarea,itstoodat42%inSpain(43%atthe
endofthepreviousquarter),itincreasedto69%
intheUnitedStates(67%asof30-Jun-2011)and
62.0 62.0 61.0 61.0 60.0
4.1 4.1 4.1 4.0 4.1
0
10
20
30
40
50
60
70
September2011
December2010
March2011
June2011
September2010
62 62 61 61 60
4.1 4.1 4.1 4.0 4.1
NPA and coverage ratios(Percentage)
NPA ratio
Coverageratio
Recoveries over entries to NPA(Percentage)
69.4
64.467.1 66.9
64.2
0
15
30
45
60
75
4Q 1Q 2Q2010
3Q 3Q2011
69.464.4
67.1 66.964.2
21TheBBVAshare
Therewasrenewedturmoilinthefixed-incomeandequity
marketsinthethirdquarterof2011,mainlyduetothedeepening
sovereigndebtcrisisandworseningexpectationsofeconomic
growth,bothinEuropeandglobally.Thishasledtoriskaversion,
mainlyfocusedontheeurozone,andasignificantfallinthemain
stock market indices. TheIbex35wasdownby17.5%,inlinewith
thedropintheStoxx50,whichlost15.7%.Theperformanceofthe
U.S.marketwassimilar,withtheS&P500indexlosing14.3%.
TheEuropean banking sectorwasaffectedbothbythe
perceptionofsovereignriskandbyfinancialpressuredueto
uncertaintyregardingthescopeandpossiblesolutionofthe
Europeancrisis.Inthisenvironment,thebankswithlower
exposuretoperipheralcountriesdebtandbettermanagement
oftheirliquidityandbalancesheethaveperformedbetteronthe
equitymarkets.Thekeystockmarketindicatorforthesector,the
StoxxBanksindexofEuropeanbanks,wasdown27.9%.
BBVA’s resultsforthesecondquarterof2011werebetterthanthe
consensusestimatesandwerefavorablyreceived.Analystsvalue
thefactorsthatsetBBVAapart,aboveallintermsofcreditquality,
thepotentialofitsinternationalbusinessanditssolidcapitalbase.
TheyalsocontinuetovaluethestrengthofitsearningsinMexico
andSouthAmerica.Elsewhere,theyhavealsovaluedpositively
theimprovedmarginsintheUnitedStatesfranchise,aswellas
BBVA’sstableNPAratiosinSpain,whereithasperformedbetter
thanitsdomesticcompetitors.
TheBBVA sharewasdown23.6%inthequarter,closingat
€6.18pershare,resultinginamarketcapitalizationof€29,817
million.Thisputstheprice/bookvalueratioat0.7,theP/Eratio
(calculatedonestimatedmedianearningsfor2011according
totheconsensusamongBloomberganalysts)at6.5,andthe
dividendyield(alsocalculatedonthemediandividendsper
shareestimatedbyanalystsfor2011ascomparedtothequoted
priceasofSeptember30)at6.8%.ThefallintheBBVAshare
pricewasgreaterthanthatregisteredbytheIbex,butbelowthe
performanceofthesectorinEurope(StoxxBankswasdown
27.9%)andtheeurozone(EuroStoxxBanksdown34.3%).In
thecurrentenvironmentofmacroeconomicweaknessandthe
difficultaccesstofinance,themarkethasvaluedtheprofileof
BBVA’sresults,itsdiversificationviaemergingmarketsandthe
advantagesofaretailcustomer-centricbusiness.
Inthethirdquarteroftheyear,theaveragedailytrading volume
was70millionshares,withanaveragevalueof€475million.
Intermsofshareholder remuneration,onSeptember15a
dividendpayoutwasannouncedof€0.10pershare(up11.0%
comparedwiththeequivalentdividendpaymentlastyear)as
partofthe“dividendoption”systemofflexibleremuneration
agreedattheGeneralShareholdersMeetingon11-Mar-2011.
Thisplanoffersshareholdersthechancetoreceiveanamount
equivalenttooneofthetraditionalinterimdividendsfor2011
ineithernewordinarysharesorincash.Thepercentageof
shareholderswhohaveoptedtoreceivenewBBVAshareswas
over91%,whichoncemoreconfirmsthepopularityofthisnew
remunerationprogram.
TheBBVAshare
The BBVA share and share performance ratios
30-09-11 30-06-11
Numberofshareholders 981,348 921,650
Numberofsharesissued 4,824,793,497 4,551,602,570
Dailyaveragenumberofsharestraded 69,688,609 47,764,365
Dailyaveragetrading(millioneuros) 475 387
Maximumprice(euros) 8.38 8.95
Minimumprice(euros) 5.03 7.34
Closingprice(euros) 6.18 8.09
Bookvaluepershare(euros) 8.61 8.50
Marketcapitalization(millioneuros) 29,817 36,822
Price/Bookvalue(times) 0.7 1.0
PER(Price/Earnings;times) 6.5 7.7
Yield(Dividend/Price;%) 6.8 5.2
Share price index(30-09-10=100)
31-12-10 31-03-1130-09-10 30-06-11 30-09-11
Stoxx 50
BBVA
Europe StoxxBanks
50
60
70
80
90
100
110
120
130
140
50
60
70
80
90
100
110
120
130
140
22 Groupinformation
AtBBVAweareconcernednotonlyabouthowwespendthe
moneyweearn,butaboveallhowweearnit.Thatiswhywe
areworkingtointegratecorporateresponsibility(CR)across
thevaluechain,fromthedesignoftheproduct,itsadvertising
andmarketing,tothemanagementofitsrisks.Asaresult,
BBVAremainsoneoftheleadingglobalcompaniesinterms
ofsustainabilityandrepeatsitslistingontheDowJones
SustainabilityIndex(DJSI).BBVAhasalsobecomeamodelat
theEuropeanlevelinCRcommunication.Itwasdistinguishedat
theDigitalCommunicationAwards2011foritscommunication
strategybasedonitsongoingdirect,transparentandsimple
conversationwithallitsstakeholders.Thisperiodhasalsoseen
thepublicationoftheCR2010reportsforBBVACompassand
BBVAChile.Belowisasummaryofthemostoutstandingactivity
relatedtocorporateresponsibilityduringthequarter.
Financial Literacy
BBVABancomerhasincludedapersonalfinanceworkshopdealing
withlifeinsuranceinits‘Adelante con tu futuro’(Forwardwithyour
future),afinancialeducationprogram.Theaimistogivepeople
theknowledgeandskillstheyneedtomakethebestlifeinsurance
choicesandbettermanagetheirpolicy.In2011BBVACompass
hasalsobeguntheCrédito Inteligente(Smartcredit)scheme,in
whichthebank’semployeesvolunteertheirtimeinschoolsinthe
communitieswheretheyworkinordertoshareinformationwith
youngpeopleabouttheresponsibleuseofcredit.
Responsible Banking
Human Resources.ThemagazineActualidad EconómicahaschosenBBVAas‘thebestcompanytoworkfor.’Theaward
recognizestheeffortandcommitmentmadebytheGroupto
the110,000employeesontheBBVAteam.Criteriasuchastalent
management,remunerationpolicy,theworkingenvironment,
employeetrainingandtheirownopinionswerekeyfactorsin
decidingthattheGroupisthebestplacetowork.BBVAChilehas
alsobeenrecognizedasbeingamongthemostsociallyresponsible
companiesinthecountry,accordingtothenationalrankingof
CorporateSocialResponsibility2011drawnupbythemagazineQué
PasaandtheProhumanaFoundation.InSpain,BBVAhasreached
anagreementwiththetradeunionstoregulateandimprovethe
conditionsunderwhichteleworkschemesareimplemented.
The Environment. BBVAhasreinforceditscommitmentandstrategyonquestionsrelatingtoclimatechange,ascanbeseenin
thelatesteditionoftheGlobal500Report2011publishedbythe
CarbonDisclosureProject(CDP).TheGrouphasimprovedits
ratingby10pointsinthisanalysis,whichassessesclimate
change-relatedstrategyandmanagementatthe500biggest
companiesbymarketcapitalization.
Customer focus. BBVABancomerhasworkedwithNacionalFinancieratolaunchtheMicronegocios(micro-enterprise)card,
whichisdesignedtocoverthefinancingneedsofmicro-enterprises
andthussupportthecountry’sproductivesector.
Community Involvement
FranciscoGonzálezpresentedthethirdBBVAINTEGRAAwardto
thefirmLantegiBatuakfromVizcaya,whichhasbeengenerating
innovativeandqualityjobopportunitiesforpeoplewithdisabilities
overthelast25years.TheBBVAINTEGRAAwardcarrieswithit
prizemoneyof200,000euros.Itsaimistofosterexcellenceand
innovationintheintegrationofpeoplewithdisabilitiesintothe
workforceandtopromoteequalopportunitiesandabetterqualityof
lifeforthisgroup.BBVAEspañaandFundosa,thebusinessdivision
oftheFundaciónONCE,havealsosignedafinancialagreement
throughwhichtheBankmakesavailable10millioneurostothe
companytosupportthedevelopmentofSpecialEmployment
Centersandpromotethehiringofpeoplewithdisabilities.
BBVA and Sustainability Indices
Asoftheendofthequarter,BBVA’sweightingsinthemain
sustainabilityindiceswereasfollows:
Formoreinformationandcontactdetails,pleasevisit
www.bancaparatodos.com
Corporateresponsibility
Main sustainability indices in which BBVA participates
Weighting (%)
DJSIWorld 0.52
DJSIEurope 1.18
DJSIEurozone 2.48
ASPIEurozoneIndex 2.13
EthibelSustainabilityIndexExcellenceEurope 1.47
EthibelSustainabilityIndexExcellenceGlobal 0.85
MSCIWorldESGIndex 0.36
MSCIWorldexUSAESGIndex 0.69
MSCIEuropeESGIndex 1.24
MSCIEAFEESGIndex 0.78
FTSE4GoodGlobal 0.35
FTSE4GoodGlobal100 0.58
FTSE4GoodEurope 0.81
FTSE4GoodEurope50 1.31
23Businessareas
Inthissectionwediscussthemoresignificantaspectsofthe
activitiesandearningsoftheGroup’sdifferentbusinessareas,along
withthoseofthemainunitswithineach,plusCorporateActivities.
Specifically,wedealwiththeincomestatement,thebalancesheet
andthemainratios:efficiency,NPAratio,NPAcoverageratioand
theriskpremium.
Followingtheacquisitionof24.9%oftheTurkishbankGaranti
anditsincorporationintothefinancialstatementsoftheGroup
startinginMarch2011,BBVAbegantohaveasignificantpresence
inEuropeandAsiaintermsofitsbalancesheetandearnings.
Inaddition,sincethestartofthecrisis,theimportanceofthe
geographicallocationofbusinesshasbeenclearforproviding
aproperperceptionofrisksandanimprovedestimateofthe
capacityforfuturegrowth.Finally,thenewregulationsfavoralocal
managementofstructuralrisksthatavoidspossiblecontagion
betweenfinancialsystems.Forthesemotives,thebusinesses
includedinSpainandPortugalandWB&AMduring2010havebeen
regroupedintothefollowingareas:
• Spain:includesBBVAbusinessesinallsegments,withinthe
country.
• Eurasia:coversallBBVAactivityintherestofEuropeandAsia,
includingtheGroup’sstakeinGaranti.
Thisrespondstotheincreaseddemandforgeography-specific
informationfromdifferentusers,includingtheregulators.
Inaddition,itisworthnotingthatin2010liquidityconditionson
thefinancialmarketshavemadeaccesstofinancemoreexpensive
forSpanishcreditinstitutions.BBVAhasbeennoexceptiontothis,
andthussinceJanuary2011,andwithretroactiveeffectfor2010
data,theliquiditypremiumimputedtobusinessareasthroughthe
systemofinternalreferencerateshasbeenincreased.Theaimisto
adapttothenewrealityofthefinancialmarkets.
Thebusiness areasarenoworganizedasfollows:
• Spain,whichincludes:Theretailnetwork,withthesegmentsof
individualcustomers,privatebanking,andsmallbusinessand
retailbankinginthedomesticmarket;CorporateandBusiness
Banking(CBB),whichhandlestheneedsofSMEs,corporations,
governmentanddevelopersinthecountry;Corporateand
InvestmentBanking(C&IB),whichincludesactivitywithlarge
corporationsandmultinationalgroups;GlobalMarkets(GM),
withthetradingflooranddistributionbusinessinthedomestic
market;andotherunits,amongthemBBVASegurosandAsset
Management(managementofmutualandpensionfundsin
Spain).
• Eurasia,whichincludesbusinessintherestofEuropeandAsia.In
2010itwasreportedeitherinSpainandPortugal(BBVAPortugal,
ConsumerFinanceItalyandPortugal,andtheretailbusinessof
branchesinParis,LondonandBrussels),orinWB&AM(Corporate
andInvestmentBanking,Markets,CNCBandCIFH).Additionally,it
alsoincludestheinformationonGaranti.
• Mexico:includesthebanking,pensionsandinsurance
businessesinthecountry.
• United States:encompassestheGroup’sbusinessintheUnited
StatesandintheCommonwealthofPuertoRico.
• South America:includesthebanking,pensionsandinsurance
businessesinSouthAmerica.
Aswellastheunitsindicated,alltheareasalsohaveallocations
ofotherbusinessesthatincludeeliminationsandotheritemsnot
assignedtotheunits.
Finally,theaggregateofCorporate Activitiesincludestherest
ofitemsthatarenotallocatedtothebusinessareas.These
basicallyincludethecostsofheadofficeswithastrictlycorporate
function,certainallocationstoprovisionssuchasearlyretirements
andothersalsoofacorporatenature.CorporateActivitiesalso
performsfinancialmanagementfunctionsfortheGroupasawhole;
essentiallymanagementofassetandliabilitypositionsforinterest
ratesintheeuro-denominatedbalancesheetandforexchange
rates,aswellasliquidityandcapitalmanagementfunctions.The
managementofassetandliabilityinterest-rateriskincurrencies
otherthantheeuroisrecordedinthecorrespondingbusiness
areas.ItalsoincludestheIndustrialandFinancialHoldingsunitand
theGroup’snon-internationalrealestatebusinesses.
Inaddition,supplementary informationisprovidedoftheglobal
business(WB&AM)carriedoutbytheBBVAGroup.Homogeneous
productsandrisks,andcommoncharacteristicsofthecustomers
served,makethisaggregateofbusinessesrelevanttobetter
understandtheBBVAGroup.
Furthermore,asusualinthecaseofTheAmericas,bothconstant
andcurrentexchange rateshavebeenappliedwhencalculating
year-on-yearvariations.
TheGroupcompilesreportinginformationonalevelas
disaggregatedaspossible,andalldatarelatingtothebusinesses
theseunitsmanageisrecordedinfull.Thesebasicunitsare
thenaggregatedinaccordancewiththeorganizationalstructure
establishedbytheGroupathigher-levelunitsand,finally,the
businessareasthemselves.Similarly,allthecompaniesmakingup
theGrouparealsoassignedtothedifferentunitsaccordingtothe
geographicalareaoftheiractivity.
Oncethecompositionofeachbusinessareahasbeendefined,
certainmanagement criteriaareapplied,ofwhichthefollowingare
particularlyimportant:
Businessareas
24 Businessareas
• Capital:Capitalisallocatedtoeachbusinessaccordingto
economicriskcapital(ERC)criteria.Thisisbasedontheconcept
ofunexpectedlossataspecificconfidencelevel,depending
ontheGroup’scapitaladequacytargets.Thesetargetshave
twolevels:thefirstiscoreequity,whichdeterminesthecapital
allocated.Thisamountisusedasabasisforcalculating
theprofitabilityofeachbusiness.Thesecondlevelistotal
capital,whichdeterminestheadditionalallocationintermsof
subordinatedebtandpreferredsecurities.Thecalculationofthe
ERCcombinescreditrisk,marketrisk,structural
balance-sheetrisk,equitypositions,operationalriskandfixed
assetandtechnicalrisksinthecaseofinsurancecompanies.
Thesecalculationsarecarriedoutusinginternalmodelsthat
havebeendefinedfollowingtheguidelinesandrequirements
establishedundertheBaselIIcapitalaccord,witheconomic
criteriaprevailingoverregulatoryones.
ERCisrisk-sensitiveandthuslinkedtothemanagementpolicies
ofthebusinessesthemselves.Itstandardizescapitalallocation
betweentheminaccordancewiththerisksincurredandmakes
iteasiertocompareprofitabilityacrossunits.Inotherwords,itis
calculatedinawaythatisstandardandintegratedforallkinds
ofrisksandforeachoperation,balanceorriskposition,allowing
itsrisk-adjustedreturntobeassessedandanaggregatetobe
calculatedfortheprofitabilitybyclient,product,segment,unitor
businessarea.
• Internal transfer prices:Internaltransferratesareappliedto
calculatethenetinterestincomeofeachbusiness,onboththe
assetsandliabilities.Theseratesarecomposedofamarket
ratethatdependsontherevisionperiodoftheoperation,
andaliquiditypremiumthathasbeenrevisedasindicated
above.Earningsaredistributedacrossrevenue-generatingand
distributionunits(e.g.,inassetmanagementproducts)atmarket
prices.
• Assignment of operating expenses:Bothdirectandindirect
costsareassignedtothebusinessareas,exceptwherethereis
noclearlydefinedrelationshipwiththebusinesses,i.e.whenthey
areofaclearlycorporateorinstitutionalnaturefortheGroupas
awhole.
• Cross selling:insomecases,consolidationadjustmentsare
requiredtoeliminateshadowaccountingentriesintheresultsof
twoormoreunitsasaresultofcross-sellingincentives.
Recurrent economic profit by business area (January-September2011.Millioneuros)
Adjusted net
attributable profitEconomic profit
(EP)
Spain 1,339 571
Eurasia 654 265
Mexico 1,316 955
SouthAmerica 577 323
TheUnitedStates 222 12
CorporateActivities (553) (549)
BBVA Group 3,555 1,576
Mayor income statement items by business area and presence in emerging and developed countries(Millioneuros)
Business areas Geography
BBVA Group Spain Eurasia Mexico
South America
The United States
Corporate Activities Emerging (1) Developed
January-September 11
Netinterestincome 9,676 3,308 516 2,874 2,255 1,182 (460) 5,398 4,738
Grossincome 15,052 4,900 1,319 4,208 3,214 1,711 (300) 8,228 7,124
Operatingincome 7,753 2,806 887 2,686 1,751 613 (991) 5,001 3,742
Incomebeforetax 4,145 1,633 837 1,722 1,385 305 (1,737) 3,620 2,262
Net attributable profit 3,143 1,162 705 1,275 754 218 (970) 2,508 1,605
January-September 10
Netinterestincome 10,182 3,734 247 2,748 1,843 1,384 226 4,614 5,343
Grossincome 15,964 5,461 743 4,126 2,814 1,963 857 7,205 7,901
Operatingincome 9,322 3,389 528 2,717 1,599 828 260 4,540 4,522
Incomebeforetax 5,260 2,653 495 1,716 1,277 308 (1,188) 3,211 3,236
Net attributable profit 3,668 1,881 418 1,254 698 223 (808) 2,172 2,304
(1)Mexico,SouthAmerica,TurkeyandAsia.
25Spain
Spain
Income statement (Millioneuros)
Spain
January-Sep. 11 ∆% January-Sep. 10
Net interest income 3,308 (11.4) 3,734
Netfeesandcommissions 1,135 (10.8) 1,273
Nettradingincome 91 (4.6) 95
Otherincome/expenses 365 1.9 358
Gross income 4,900 (10.3) 5,461
Operatingcosts (2,093) 1.0 (2,072)
Personnelexpenses (1,274) 1.2 (1,259)
Generalandadministrativeexpenses (745) 0.6 (741)
Depreciationandamortization (74) 2.5 (72)
Operating income 2,806 (17.2) 3,389
Impairmentonfinancialassets(net) (1,246) 36.1 (916)
Provisions(net)andothergains(losses) 73 (59.3) 179
Income before tax 1,633 (38.4) 2,653
Incometax (472) (38.8) (770)
Net income 1,162 (38.3) 1,883
Non-controllinginterests - n.m. (2)
Net attributable profit 1,162 (38.2) 1,881
Balance sheet (Millioneuros)
Spain
30-09-11 ∆% 30-09-10
Cashandbalanceswithcentralbanks 9,142 74.2 5,249
Financialassets 73,128 5.6 69,232
Loansandreceivables 222,449 (2.1) 227,204
Loansandadvancestocustomers 207,980 (2.2) 212,693
Loansandadvancestocreditinstitutionsandother 14,469 (0.3) 14,512
Tangibleassets 932 (4.8) 979
Otherassets 3,310 12.8 2,933
Total assets/Liabilities and equity 308,960 3.4 305,597
Depositsfromcentralbanksandcreditinstitutions 37,664 14.0 33,047
Depositsfromcustomers 120,530 7.1 112,564
Debtcertificates - n.m. 1
Subordinatedliabilities 5,880 2.7 5,727
Inter-areapositions 71,376 (13.6) 82,645
Financialliabilitiesheldfortrading 45,442 3.4 43,929
Otherliabilities 17,626 1.7 17,336
Economiccapitalallocated 10,443 0.9 10,349
26 Businessareas
TheareaofSpainincludesallthesegmentsof
BBVA’sbankingandnon-bankingbusinessinthe
country.
Inthethird quarter of 2011,Spanishcredit
institutionshaveoperatedunderasetofspecial
circumstancesaffectingthesector:abank
restructuringprocess,gradualdeleveraging,
growingdifficultiesininternationalwholesale
fundingmarkets,moderateeconomicgrowth,
andnegativedevelopmentsinthefinancial
markets.Amongthehighlightsofthebank
restructuringprocesshavebeentheIPOs
ofBankia,CaixaBankandBancaCívica,the
announcementofmergersbetween
medium-sizedbanks(suchasPopularand
Pastor),recentinterventionsinsomesavings
banks,morebranchclosuresinthesectorsince
theonsetofthecrisis(1,768fewerinthefirsthalf
oftheyear,thelatestavailabledata),andthe
trendtowardsareturntonormalintheasset
andliabilitypricesinthesystem.Therewillbe
opportunitiesforbanksthatarewellpositioned
inthisenvironment.
Thegradualdeleveragingprocess,whichis
necessaryandpositivefortheSpanisheconomy,
hasledtoayear-on-yearfallof3.5%incorporate
andhouseholdlending(latestavailablefigures
forAugust).Individualshavecontinuedto
reducetheirconsumerspending,whilenew
homemortgageshavefallenby46%inthe
sametimeframe(alsoAugustfigures);atthe
sametime,companieshavesteadilyreduced
theirhighlevelsofcreditleverage.Asaresult,
thestockofcreditonthebalancesheetsofthe
commercialnetworkshasfallenby€56,100m
sincethestartoftheyear.Thecostofnew
financehasincreasedby75basispointsinthis
period,duetothemoreexpensiveinterbank
marketconditions.However,thevolumeofnew
depositsandotheron-balance-sheetfundsis
upby€12,264msinceSeptember2010,thus
reducingdependenceonwholesalemarkets
overthelast12months.Therateofrenewalof
themostconservativedepositproductsunder
betterconditionsthanlastyearhasbeenhigh,
thusincreasingcustomerspreadsinthesector.
BBVAhasconsolidateditsleadingposition
inbothlendingandcustomerfundsinthe
householdandcorporatesegments.Ithasalso
increasedprofitability,measuredasthenet
interestincomeoverATA,fromtheminimum
levelsofthefourthquarterof2010.Thisis
largelytheresultofincreasingmarketsharein
theproductsinvolvingthebiggestcustomer
loyalty,adaptingcommercialproductand
servicestothespecificneedsofeachcustomer,
andadequateriskcontrolprocedures.
Gross lending to customersintheareaasof
30-Sep-2011amountedto€212,639m,afallof
2.4%year-on-year;however,yieldonloanswas
upby46basispointsonthefourthquarterof
2010.
Customer fundsundermanagement(deposits,
mutualfundsandpensionfunds)amountedto
€150,182m.BBVAmadeasignificantgainof16
basispointsinmarketshareinhouseholdand
corporatecurrentandsavingsaccountstoreach
9.6%(latestavailabledatatoAugust).Inaddition,
theareahasimproveditspositioningintime
depositsandmutualfundsby76basispoints
sincethestartoftheyear.Morethan73%of
fundscorrespondtohouseholdcustomers,who
haveincreasedtheirloyaltytotheBank.
Inoff-balance-sheet fundstheGrouphas
maintaineditsmarketshareinmutualfunds
at16.8%(Septemberdata),withassetsunder
managementinSpainof€20,220m.Theamount
fellby3.6%inthethirdquarterasthevalueof
assetsundermanagementdeteriorateddue
tothemarketturmoil.Itisworthpointingout
that,accordingtothelatestdatafromAugust
2011,theeffectofthisfallinBBVAismuchless
significantthanintherestofthesystem,given
themoreconservativeprofileofitsmutual
Significant ratios (Percentage)
Spain
30-09-11 30-06-11 30-09-10
Efficiencyratio 42.7 40.7 37.9
NPAratio 4.9 4.7 4.8
NPAcoverageratio 42 43 47
Riskpremium 0.77 0.79 0.40
Spain highlights in the third quarter
• Improvedmarketsharesandspreads.
• Stabilizationofthenetinterestincome.
• Expensesremainflat.
• Riskindicatorskeptincheck.
27Spain
resultedingross incomefortheninemonths
ended30-Sep-2011of€4,900m.
Operatingcostsinthearearemaincloselyin
check.Intheninemonthsended30-Sep-2011
theytotaled€2,093m,ayear-on-yearincreaseof
1.0%,belowtherateofinflation(3.1%).Asaresult,
theoperating incomefortheninemonths
ended30-Sep-2011was€2,806m(€3,389mfor
thesameperiodof2010).
Themainasset qualityindicatorsshowaslight
increaseintheNPAratio,to4.9%(4.7%asof
30-Jun-2011).Thisisbasicallybecauseofthe
reductioninlendingmentionedabove,since
thebalanceofNPAasof30-Sep-2011isstable
comparedwiththefigurefor30-Jun-2011.The
figureforBBVAcompareswithanincreasingNPA
ratiointhemarketthatstandsat7.2%according
tothelatestavailablefigures(August).The42%
coverageratioremainsatsimilarlevelstothe
previousquarter(43%asof30-Jun-2011).Finally,
thelevelofnewNPAhasfallensignificantly
andtheratioofrecoveriesovernewNPAhas
alsoimproved