Letter from the Chairman

“ The year 2010 has been a good year for BBVA,with a new boost to our competitivepositioning with respect to the future”

Dear Shareholder:

The year 2010 has been an uneven year from the macroeconomic point of view, as not all regions have performed similarly. The GDP of the G7 countries increased by 2.8%, with Japan growing by 3.9%, the United States by 2.9%, and Germany by 3.5%. Meanwhile, economic growth in emerging countries has been very strong, at an aggregate of 8%.

For organizations with a balanced global competitive position such as BBVA, the macroeconomic environment in 2010 was complex but, overall, favorable. However, as I anticipated last year, 2010 was once again a difficult year for our sector, marked by the rescues of Greece and Ireland amid a climate of uncertainty in the financial markets. Our industry has continued to face new regulations, significant changes in the financial markets and pressure on profits.

In this complex environment, BBVA’s results have been excellent. As a result, we are, again, one of the best-performing banks in the world.

BBVA’s net attributable profit in 2010 was up 9.4% to €4,606m, thanks to the solid management of the Group’s revenues and costs. The diversification of our business model has allowed us to offset the effects of this difficult situation and increase our gross income by 1.2% to nearly €21,000m, once again an all-time high for BBVA. Regarding costs, we have continued to invest in people and technology in the fastest-growing markets. In doing so, we have again anticipated the next phase of the cycle, and our costs have risen by 7.3%. We have been able to make this investment in the future while maintaining our leading position in the industry, with an efficiency ratio of 42.9%, a return on equity (ROE) of 15.8% and a return on assets (ROA) of 0.89%.

In 2010 we also improved the main indicators of asset quality on our balance sheet. The NPA ratio fell to 4.1%, the coverage ratio increased to 62%, new net additions to NPA fell by 61% and the balance of NPA has stabilized. This again sets BBVA apart from the rest and demonstrates the soundness of the anticipatory measures we took in the fourth quarter of 2009.

At the same time, we have improved our solvency. Following the share capital increase in November, we closed the year with a core capital of 9.6%, which we estimate will be around 8.6% once the investment in Garanti is completed. BBVA continues to be one of the soundest financial institutions in the world, one of only four major financial institutions at a global level that maintain an AA rating.

“ These results demonstrate BBVA’s management capacity and solid business model”

These results demonstrate BBVA’s management capacity and solid business model. Our model is resilient to the environment, diversified, focused on recurrent business and characterized by prudent management, the capacity to anticipate and long-term vision. These factors have enabled us to maintain our commitment to our shareholders, and accordingly the Board of Directors will propose to the Annual General Meeting a total remuneration of €0.42 per share. This year, in response to many of your requests, you will now be able to be paid the April and October dividends in shares.

In 2010 we have also taken major steps towards future growth. Our entry into Turkey, with the acquisition of 24.9% of Garanti, is a very important operation. Garanti is an excellent franchise, with a magnificent management team and an innovative approach to the banking business that is very similar to that of BBVA. It offers services to nearly 10 million customers through a commercial network of 863 branches and over 3,000 ATMs. The transaction includes a shareholder agreement with the Turkish business group Dogus to manage Garanti jointly. It also includes an option for BBVA to appoint the majority of the members on Garanti’s Board of Directors in the future.

In Asia, we have increased our holding in China Citic Bank to 15%, and we are continuing to develop joint projects in the private banking and car finance segments. In addition, we have taken an important first step in India by creating a joint company in the credit card business with the Bank of Baroda, an Indian bank with more than 36 million customers and 3,000 branches.

In South America, we have strengthened our franchise in Uruguay with the acquisition of Crédit Uruguay, making us the second largest bank in the country.

To conclude, 2010 has been a good year for BBVA, with our results resisting the strain, improving solvency and the main risk indicators. We have also given a new boost to our competitive positioning with respect to the years to come. This future is one in which technological changes and the growing importance of emerging countries will play a very significant role. Technology is transforming the financial industry. We at BBVA we are adapting our business models and investing strongly in technology, in projects designed to change the Bank. In 2010 we made very significant progress in our new technological platform in Spain and have begun its development in the United States and in our Wholesale Banking & Asset Management division. We have the vision and we are continuing to invest in it. In addition, BBVA has continued to position itself in high-growth countries. In 2010 we identified a group of countries dubbed EAGLE (Emerging and Growth Leading Economies), whose contribution to global growth over the next decade we estimate to be far above those in the G7. We already have a significant presence in two of them, Mexico and China, and with our investment in Garanti, we will also be in Turkey, a European EAGLE.

“ For the first time, the information on corporate responsibility has been fully integrated into the Financial Report. In this way, we have anticipated the most innovative trends at the global level”

In 2010 we have also strengthened our community involvement by working towards a better future for people. We have made progress to integrate corporate responsibility across the Group’s whole value chain. At the same time, we have reaffirmed our commitment to the United Nations Global Compact, in particular to the Millennium Development Goals. For the first time, the information on corporate responsibility has been fully integrated into the Financial Report. In this way, we have anticipated the most innovative trends at the global level promoted by the Global Reporting Initiative.

In the field of financial inclusion, the BBVA Microfinance Foundation is already present in Colombia, Peru, Argentina, Chile, Costa Rica and Puerto Rico. It provides microcredits for an average of €700 to more than 620,000 people in Latin America, nearly 25% more than the previous year.

In terms of financial literacy, the second core element of our corporate responsibility policy, we have already reached a million beneficiaries through programs in Spain, Latin America and the United States. Finally, in 2010 we joined forces with the Organization of Ibero-American States to form the largest alliance between a private entity and an international institution to promote education in Ibero-America. This alliance is part of the Educational Goals for 2021 project, which will benefit more than eight million people by 2021.

The year 2011 will also be a difficult one. At BBVA we are clear about the path we have to take. We have a great team of people: nearly one hundred and seven thousand professionals around the world who make up the BBVA team. Thanks to their efforts, enthusiasm and dedication we have emerged from this year with strength and we will do so again in 2011.

“ The year 2011 will also be a difficult one. At BBVA we are clear about the path to take. We have a great team of people, so we will once more emerge from this year with strength”

I would like to end by thanking you all, our shareholders for your continued support for BBVA. I can assure you that this Group will work hard with the objetive of becoming a better bank every day, continuing to deserve your trust and maintaining our progress in constructing the best universal bank in the world.

March 1, 2011

Francisco González Rodríguez