The U.S. economy slowed its rate of growth slightly in the first quarter of 2014. This was expected, given the high growth rates achieved at the end of 2013. The slowdown was also partly the result of adverse weather conditions that impacted activity and the labor market.
The Fed has started the process of reducing its monetary expansion program, without this leading to financial tensions or additional rate hikes. However, it has slowed mortgage refinancing activity slightly. The Fed remains cautious and prepared to modulate the rate of tapering its quantitative easing program if it is not supported by economic data.
In exchange rates, the euro has remained strong against the dollar, supported by an improved perception of Europe’s peripheral countries. As a result, the impact of the U.S. currency on the Group’s financial statements was negative over the last 12 months, although in the quarter it was neutral on the balance sheet and business activity and slightly negative on earnings. As in previous reports, all the comments below on rates of change are expressed at a constant exchange rate, unless expressly stated otherwise.
The most notable event with respect to the financial system was the publication in March of the results of the stress tests carried out on the 30 largest banks in the country. This year for the first time the subsidiaries of foreign banks have been included. As mentioned, BBVA Compass has passed these tests and thus its capital plans have been accepted without any objections by the Fed.
With respect to activity trends in the system loan growth continues being moderate, the credit market is healthy and deposits grow at a moderate according to the latest available information as of March 2014.
