Economic risk capital (ERC) consumption reached €30,034m as of December 31, 2013, a decrease of 15.6% over the year, using comparable data(1). The main risk continues to be credit risk on portfolios originated in the Group branch networks from its own customer base. This accounted for 57.1% of the total amount, with a year-on-year decrease of 14.3%, due mainly to the decline in lending activity in Spain. The ERC for equity reaches a relative weight of 18.4%, with a decrease of 20.4% influenced by the sale of 5.1% of BBVA’ stake in CNCB. Structural interest-rate and exchange-rate ERC fell jointly by 26.4%. This performance is explained by the impact of the sale of the stake in CNCB on the exchange-rate risk. Lastly, the relative weight of ERC from market operations remains unchanged, with a year-on-year decline of 14.9%.
BBVA group. Economic risk capital. Breakdown by type of risk
(Data in attributable terms as of 31-12-2013. Percentage)
In the breakdown by area, Spain registers a 16.3% fall in ERC due to the decline in the loan portfolio, highly influenced by the financial deleveraging process underway in the country. Eurasia has reduced its consumption by 31.6% compared to the previous year, due to the reduction in the equity risk following the sale of 5.1% of the stake in CNCB. In Mexico, ERC has declined 6.9%, due mainly to the reduced structural interest-rate risk. The United States, which increases its relative weight in ERC as a whole, has decreased its amount by 4.4% in year-on-year terms due to the area’s improved credit risk profile and a lower interest-rate risk. ERC in South America has increased by 3.2% due to strong lending activity in all the countries in which the Group operates, despite the depreciation of its currencies against the euro during the year.
BBVA Group. Economic risk capital. Breakdown by business area
(Data in attributable terms as of 31-12-2013. Percentage)
Lastly, the Group’s recurrent risk-adjusted return (RAR), i.e. that generated from customer business and excluding one-offs, stood at 17.7%, and remains at high levels in all business areas.
(1) The growth rates presented are calculated against the close as of the same time in December 2012 (€35,594m), which includes the annual effects of the updates carried out at the end of the year (Mexico, South America and the United States) in the credit risk parameters and the review of other risk models, as compared to the figure for end of 2013 (€30,034m).