BBVA in 2013

Macro and industry trends

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Toward the end of 2013 the Spanish economy put an end to a long process of recession that had accumulated a fall in GDP of 1.2% in 2013, following a contraction of 1.6% in 2012. This incipient recovery is underpinned by sustained growth in exports thanks to the continuous improvement in competitiveness and a less contractive domestic demand which has in turn benefited from two factors. Firstly, a more limited fiscal effort was made in 2013. Secondly, in 2013 there was a clear change in the perception of prospects for the Spanish economy and an improvement in market confidence. This led to financial tension easing, a reduction of the sovereign risk premium and an opening up to international financing flows. This is simply a reflection of the progress made by the Spanish economy in correcting the imbalances accumulated during the previous expansive phase, some of which are close to completion. The process of restructuring and reorganizing the weakest part of the financial system has continued at a steady pace. In addition, the gradual process of reducing the high levels of debt in the private sector is speeding up, although it is still far from the European average. Even so, the starting point for this recovery is modest, particularly in terms of unemployment, which is still over 25% of the active population.

As far as the financial system is concerned, the restructuring and reorganization process has continued at a good pace, and in late 2013 it was confirmed that the financial assistance program agreed with the European Commission, European Central Bank and International Monetary Fund (IMF), known as the “Troika”, would be ended. In November, the IMF and the European Commission separately published the fourth monitoring report on the restructuring of the sector, highlighting the progress made in bank recapitalization and restructuring and in reinforcing the system’s supervision and monitoring. At the same time, the financial sector has continued with its deleveraging process, although the flow of new credit transactions granted in recent months in Spain shows an improvement driven by the corporate portfolio. However, the outstanding balance of loans continues to decline, having a negative impact on the sector’s NPA ratio, which at the end of November 2013 amounted to 13% for the system as a whole. This figure has also been influenced by the decline in lending as well as the classification of refinanced loans.

Lastly, the following points are worth noting with regard to BBVA:

  • In the first half of 2013, the integration of the Unnim Banc network into BBVA was completed, thus ending the process of integration which began in July 2012. The balance for the first year with Unnim as part of the Group is very positive: the swap of Unnim’s preferred and subordinated securities, for BBVA shares, the labor agreement with Unnim’s staff and the partnership agreement signed with Unnim’s social projects area have all been successfully completed.
  • The court ruling on May 9 on the elimination of the “floor clauses”, which prevented BBVA from applying them in residential mortgage loans.
  • The impact on loan-loss provisions and the NPA ratio of the classification of refinanced loans carried out in the third quarter.
  • The accounting for the exceptional payment to the Deposit Guarantee Fund in compliance with Royal Decree-Law 6/2013.