39. Interest income and expense and similar Items

39.1 Interest and similar income

The breakdown of the interest and similar income recognized in the accompanying consolidated income statement is as follows:

Download Excel

Interest and Similar Income. Breakdown by Origin.	Millions of Euros
	2013	2012	2011
Central Banks	262	259	250
Loans and advances to credit institutions	356	382	501
Loans and advances to customers	18,092	19,247	18,001
Government and other government agency	842	901	767
Resident sector	4,491	5,784	6,069
Non resident sector	12,758	12,562	11,165
Debt securities	3,465	3,651	3,144
Held for trading	980	1,225	1,087
Available-for-sale financial assets and held-to-maturity investments	2,484	2,426	2,057
Rectification of income as a result of hedging transactions	(292)	(369)	(198)
Insurance activity	1,137	1,049	991
Other income	492	596	540
Total	23,512	24,815	23,229

The amounts recognized in consolidated equity in connection with hedging derivatives and the amounts derecognized from consolidated equity and taken to the consolidated income statement during these periods are given in the accompanying “Consolidated statements of recognized income and expenses.

The following table shows the adjustments in income resulting from hedge accounting, broken down by type of hedge:

Download Excel

Adjustments in Income Resulting from Hedge Accounting	Millions of Euros
	2013	2012	2011
Cash flow hedging	51	52	62
Fair value hedging	(343)	(421)	(260)
Total	(292)	(369)	(198)

39.2 Interest and similar expenses

The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:

Download Excel

Interest and Similar Expenses. Breakdown by Origin	Millions of Euros
	2013	2012	2011
Bank of Spain and other central banks	161	350	164
Deposits from credit institutions	1,165	1,499	1,357
Customers deposits	4,516	4,644	5,127
Debt certificates	3,067	3,008	2,836
Subordinated liabilities	516	668	689
Rectification of expenses as a result of hedging transactions	(1,182)	(1,180)	(1,025)
Cost attributable to pension funds (Note 26)	199	256	259
Insurance activity	855	742	694
Other charges	315	354	404
Total	9,612	10,341	10,505

The following table shows the adjustments in expenses resulting from hedge accounting, broken down by type of hedge:

Download Excel

Adjustments in Expenses Resulting from Hedge Accounting	Millions of Euros
	2013	2012	2011
Cash flow hedging	1	9	-
Fair value hedging	(1,183)	(1,189)	(1,025)
Total	(1,182)	(1,180)	(1,025)

39.3 Average return on investments and average borrowing cost

The detail of the average return on investments in the year ended December 31, 2013, 2012 and 2011 is as follows:

Download Excel

Asset	Millions of Euros
	2013			2012			2011
	Average Balances	Interest and Similar Income	Interest Rates (%)	Average Balances	Interest and Similar Income	Interest Rates (%)	Average Balances	Interest and Similar Income	Interest Rates (%)
Cash and balances with central banks	26,463	262	0.99	24,574	259	1.05	19,991	250	1.25
Securities portfolio and derivatives	166,013	4,385	2.64	164,435	4,414	2.68	139,644	3,969	2.84
Loans and advances to credit institutions	25,998	411	1.58	25,122	442	1.76	25,209	606	2.40
Loans and advances to customers	335,248	18,325	5.47	347,336	19,497	5.61	334,898	18,190	5.43
Euros	204,124	5,835	2.86	217,533	7,267	3.34	219,864	7,479	3.40
Foreign currency	131,125	12,489	9.52	129,802	12,230	9.42	115,034	10,712	9.31
Other assets	45,982	128	0.28	46,613	203	0.44	37,074	214	0.58
Totals	599,705	23,512	3.92	608,081	24,815	4.08	556,816	23,229	4.17

The average borrowing cost in the year ended December 31, 2013, 2012 and 2011 is as follows:

Download Excel

Liabilities	Millions of Euros
	2013			2012			2011
	Average Balances	Interest and Similar Expenses	Interest Rates (%)	Average Balances	Interest and Similar Expenses	Interest Rates (%)	Average Balances	Interest and Similar Expenses	Interest Rates (%)
Deposits from central banks and credit institutions	86,600	1,551	1.79	104,231	2,089	2.00	74,027	1,881	2.54
Customer deposits	290,105	4,366	1.51	271,828	4,531	1.67	269,842	5,176	1.92
Euros	153,634	1,734	1.13	146,996	1,828	1.24	153,773	2,295	1.49
Foreign currency	136,470	2,632	1.93	124,832	2,703	2.16	116,069	2,881	2.48
Debt certificates and subordinated liabilities	94,130	2,812	2.99	102,563	2,783	2.71	108,735	2,590	2.38
Other liabilities	82,257	883	1.07	86,627	938	1.08	65,515	858	1.31
Equity	46,614	-	-	42,832	-	-	38,696	-	-
Totals	599,705	9,612	1.60	608,081	10,341	1.70	556,816	10,505	1.89

The change in the balance under the headings “Interest and similar income” and “Interest and similar expenses” in the accompanying consolidated income statements is the result of changing prices (price effect) and changing volume of activity (volume effect), as can be seen below:

Download Excel

Interest Income and Expense and Similar Items. Change in the Balance	Millions of Euros
	2013 / 2012			2012/ 2011
	Volume Effect (1)	Price Effect (2)	Total Effect	Volume Effect (1)	Price Effect (2)	Total Effect
Cash and balances with central banks	20	(16)	4	57	(48)	9
Securities portfolio and derivatives	42	(71)	(29)	705	(260)	445
Loans and advances to credit institutions	15	(46)	(31)	(2)	(162)	(164)
Loans and advances to customers	(679)	(494)	(1,173)	676	631	1,307
In Euros	(448)	(984)	(1,432)	(79)	(133)	(212)
In other currencies	125	135	259	1,375	143	1,519
Other assets	(3)	(72)	(75)	55	(66)	(11)
Interest and similar incomes	(342)	(961)	(1,303)	2,139	(552)	1,586
Deposits from central banks and credit institutions	(353)	(185)	(538)	768	(560)	208
Customer deposits	305	(469)	(164)	38	(683)	(645)
In Euros	83	(176)	(94)	(101)	(366)	(467)
In other currencies	252	(323)	(71)	217	(396)	(178)
Debt certificates and subordinated liabilities	(229)	257	28	(147)	341	194
Other liabilities	(47)	(7)	(55)	277	(197)	79
Interest and similar expenses	(142)	(586)	(729)	967	(1,131)	(164)
Net Interest Income			(575)			1,750

(1) The volume effect is calculated as the result of the interest rate of the initial period multiplied by the difference between the average balances of both periods. (2) The price effect is calculated as the result of the average balance of the last period multiplied by the difference between the interest rates of both periods.