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BBVA in 2013

Peru

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In 2013, the Peruvian economy has also performed well, with GDP growing at around 5.0%, thanks to the strength of domestic demand, which has offset weak exports. Specifically, there was outstanding expansion in consumption, within a favorable labor and credit context for household spending.

In this situation of moderate strength in economic activity and favorable financing conditions, lending to the private sector has increased in 2013 by around 14%, also boosted by the positive labor conditions. The segment with the best performance has once more been mortgages, with an increase over the same time period of 19.5%. It is important to note that to moderate loan growth and support its sustainability, the Superintendency of Banking, Insurance and AFPs (SBS) has introduced new capital adequacy requirements for mortgage and consumer loans, considering elements such as the currency, the residual maturity, whether it is for a first residence or not, and other factors.

With respect to sources of funding, customer deposits in the sector have grown year-on-year by 18.7%, especially in foreign-currency deposits.

The average profitability of the banking industry, measured as net annualized profit over average equity (ROE), has exceeded 20%, supported by a limited, though rising, NPA ratio.

It is also important to mention that the country’s banking industry has easily met the capital requirements imposed by its regulator (14% of risk-weighted assets, compared with the required 10%).

In this context, BBVA in Peru has increased its activity in 2013 at a significant rate. The bank’s performing loans as of 31-Dec-2013 are up 20.0% compared with the amount reported 12 months earlier. Mortgages have been outstanding, with an increase of 18.1%. On-balance-sheet customer funds have increased by 21.9%, thanks to the boost in transactional items, which have risen by 25.4% year-on-year.

This performance in activity has been reflected in the progress in net interest income (up 7.9%

year-on-year). Combined with increased income from fees and commissions (up 9.0%), despite the new regulatory requirements, and growth in NTI (up 15.5%), the result has been a 9.1% increase in gross income. Expenses and loan-loss provisions have also increased, the latter in line with activity growth, resulting in a net attributable profit of €167m, up 3.5% year-on-year.

A key objective of BBVA Continental is to be the leading bank in Peru in multi-channel experience. This goal is in line with that of being the most useful bank for businesses and satisfying customer needs. This multi-channel strategy is based on actions aimed at:

  • Standardizing and integrating customer experience through the various contact channels.
  • Strengthening interaction between the bank and each customer.
  • Simplifying the multi-channel experience for customers, maintaining high standards in information security.
  • Expanding this multi-channel experience to the wide range of tools and platforms available to customers.

In 2013, BBVA Continental has also maintained its commitment to innovation and the continuous improvement of its products. Thus, the bank has launched two major campaigns during the year, with the aim of making its customer experience simpler:

  • The first was aimed at small and medium-sized enterprises. With the slogan “No soy Pyme, soy empresario” (I’m Not an SME, I’m a Businessperson) the bank has given a new twist to communication, considering customers in this segment as “businesspeople”, and thus recognizing their efforts and achievements.
  • The second campaign has focused on boosting the use of channels other than branches. With the slogan “Ir al banco no es divertido” (It’s No Fun Going to the Bank), customers who at present carry out their operations at the traditional window are encouraged to switch to alternative channels (ATMs, correspondents, online banking and/or mobile devices).

Other highlights in 2013 in Peru are:

  • BBVA Continental has successfully placed several international issues of subordinated bonds in 2013, which were heavily oversubscribed. This proves the confidence of investors in Peru and the soundness of BBVA in the country.
  • The magazine Global Finance has once more chosen BBVA Continental as Best Bank in Peru in its new 2013 edition of “The Best Banks in Latin America”. BBVA Continental has now been in top spot for 10 years. The publication highlights that the winning banks offer the best solutions to customers combined with an excellent service.
  • The magazine Euromoney has named BBVA “Best Bank in Peru” at the Euromoney Awards for Excellence 2013. The magazine has highlighted that BBVA Continental is in first place in terms of efficiency an d profitability and emphasizes that the bank has a loan book of greater quality than its competitors.
  • BBVA Continental has been recognized as the best financial institution for quality of customer service, according to the analysis conducted by Ipsos Apoyo among the main banks operating in Peru.
  • BBVA Continental has also received the “Good Corporate Governance 2013” award from the Lima Stock Exchange for appearing on the list of 10 companies with the best corporate governance policies for the sixth year in a row. It also received recognition for its 60 years in the stock market.
  • In social responsibility initiatives, BBVA Asset Management Continental has launched the BBVA “Leer Es Estar Adelante” (Reading Means Keeping Ahead) fund, the first of its kind set up in the country to support a social cause: helping to improve children’s education.
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