South America

Income statement (Million euros)
						Units:
	South America					Banking business					Pensions and Insurance
	Ene.-Sep. 11	∆%	∆% (1)	Ene.-Sep. 10		Ene.-Sep. 11	∆%	∆% (1)	Ene.-Sep. 10		Ene.-Sep. 11	∆%	∆% (1)	Ene.-Sep. 10
Net interest income	2,255	22.4	28.4	1,843		2,211	22.1	28.1	1,811		45	29.4	32.6	35
Net fees and commissions	780	10.0	13.4	709		561	11.2	16.8	505		222	3.3	2.0	215
Net trading income	355	(11.8)	(7.0)	402		335	9.2	15.4	306		21	(78.1)	(77.2)	96
Other income/expenses	(176)	25.5	39.2	(141)		(288)	24.6	35.7	(231)		120	22.8	29.5	97
Gross income	3,214	14.2	19.0	2,814		2,818	17.9	23.4	2,391		408	(8.1)	(6.5)	443
Operating costs	(1,463)	20.5	26.1	(1,215)		(1,261)	20.7	26.9	(1,044)		(179)	3.0	6.1	(173)
Personnel expenses	(747)	19.3	24.7	(626)		(640)	19.6	25.5	(535)		(87)	(0.5)	2.4	(88)
General and administrative expenses	(604)	22.9	28.8	(491)		(514)	23.0	29.4	(417)		(86)	7.2	10.5	(80)
Depreciation and amortization	(113)	15.6	21.6	(98)		(107)	16.6	23.0	(92)		(6)	(0.7)	0.6	(6)
Operating income	1,751	9.5	13.7	1,599		1,558	15.6	20.7	1,347		229	(15.2)	(14.5)	270
Impairment on financial assets (net)	(322)	7.0	11.2	(301)		(322)	7.0	11.2	(301)		-	-	-	-
Provisions (net) and other gains (losses)	(44)	105.5	114.3	(21)		(47)	211.0	225.8	(15)		3	n.s.	n.s.	(6)
Income before tax	1,385	8.5	12.6	1,277		1,188	15.3	20.5	1,030		226	(14.2)	(13.6)	264
Income tax	(282)	(0.1)	5.1	(282)		(246)	14.0	20.6	(215)		(47)	(25.0)	(23.1)	(63)
Net income	1,103	10.9	14.7	994		943	15.7	20.5	815		179	(10.9)	(10.7)	201
Non-controlling interests	(349)	18.0	23.0	(296)		(308)	26.8	33.7	(242)		(42)	(21.9)	(22.4)	(53)
Net attributable profit	754	7.9	11.2	698		635	11.0	15.0	573		137	(6.8)	(6.4)	148

(1) At constant exchange rate

Balance sheet (Million euros)
						Units:
	South America					Banking business					Pensions and Insurance
	30-09-11	∆%	∆% (1)	30-09-10		30-09-11	∆%	∆% (1)	30-09-10		30-09-11	∆%	∆% (1)	30-09-10
Cash and balances with central banks	7,833	44.3	44.9	5,429		7,833	44.3	44.9	5,429		-	-	-	-
Financial assets	9,891	13.2	15.7	8,736		8,441	18.3	(0.6)	7,136		1,396	(13.1)	7.8	1,605
Loans and receivables	38,853	24.7	26.8	31,152		38,238	25.1	27.2	30,563		404	(42.8)	(40.6)	706
Loans and advances to customers	35,135	28.6	30.8	27,324		35,062	29.1	31.3	27,159		85	(51.1)	(49.3)	174
Loans and advances to credit institutions and other	3,718	(2.9)	(1.6)	3,828		3,176	(6.7)	(5.7)	3,405		319	(40.1)	(37.7)	532
Tangible assets	728	14.9	16.5	634		677	17.0	18.3	578		51	(7.3)	(3.2)	55
Other assets	2,403	14.6	17.4	2,097		2,008	13.3	16.5	1,773		152	(14.2)	(11.0)	177
Total assets/Liabilities and equity	59,707	24.3	26.4	48,048		57,196	25.8	27.7	45,480		2,033	(21.3)	(18.1)	2,544
Deposits from central banks and credit institutions	5,623	30.3	33.2	4,314		5,622	30.5	33.3	4,309		5	7.2	8.7	5
Deposits from customers	38,866	28.9	30.5	30,145		38,983	28.8	30.4	30,255		-	-	-	-
Debt certificates	2,144	0.2	3.4	2,139		2,144	0.2	3.4	2,139		-	-	-	-
Subordinated liabilities	1,451	14.1	17.0	1,272		1,088	10.2	13.9	987		-	-	-	-
Inter-area positions	1,373	50.9	57.8	910		1,373	50.9	57.8	910		-	-	-	-
Financial liabilities held for trading	7,582	10.0	12.4	6,893		5,616	13.6	15.2	4,944		1,708	(18.6)	(15.4)	2,100
Other liabilities	2,668	12.4	15.1	2,374		2,370	22.5	24.8	1,935		290	(34.1)	(31.4)	440

(1) At constant exchange rate.

The South American area manages the BBVA Group’s banking, pension and insurance businesses in the region. The first half of 2011 saw the incorporation of Crédit Uruguay (purchased at the end of 2010 and merged with BBVA Uruguay in May 2011) and the sale of the Group’s holding in the insurance company Consolidar Retiro of Argentina. An additional 24.5% holding in the company Forum Chile was also purchased in September 2011.

Economic growth continues very strong in South America, sustained by domestic demand and also the support from what is still a lax fiscal policy. Growth rates in the consumption of durable goods and bank lending in most countries are very high. Employment figures also continue to be very positive and are providing significant support for domestic demand. Commodity prices remain high, which explains the buoyancy of income.

With respect to the main currencies in the region, the final exchange rates of the Argentinean, Chilean and Colombian peso have fallen over the last 12 months and, except in the case of Argentina, over the quarter. In contrast, the Peruvian nuevo sol and Venezuelan bolivar gained over the year, and particularly over the quarter. The overall impact on business activity and the balance sheet in the area is slightly negative compared with the figures for the same date last year. In terms of average exchange rates, all the currencies except the Chilean peso lost in year-on-year terms, so the effect on the income statement is also negative and more significant than in the balance sheet and business activity figures. Unless otherwise indicated, all comments below refer to changes at constant exchange rates.

South America highlights in the third quarter

• Positive activity in all the geographical areas.
• New gains in market share highly focused on the individual segment.
• Strong revenues.
• Improvement in risk indicators.

The persistent positive economic climate continues to favor growth in activity in the region. The loan book in the area at the end of September amounted to €36,403m, a year-on-year increase of 30.7% and a gain of 29 basis points in market share over the last 12 months (August figures, the latest available). The figures for customer funds are also very positive, particularly in the case of lower-cost funds such as current and savings accounts, which grew by 31.0% over the 12 months.

South America. Operating income (Million euros at constant exchange rate)	South America. Net attributable profit (Million euros at constant exchange rate)

Including the assets under management in mutual funds, customer funds managed by the banks amounted to €43,926m as of 30-Sep-2011, 25.4% up on the same date in 2010. In the pension business, the high level of volatility in the financial markets has impacted the profitability of the managed portfolios, and led growth of the assets under management to slow over the last twelve months to only 1.9%, amounting to €44,708 as of 30-Sep-2011.

This level of growth in business activity has been reflected in the net interest income in the area, which totaled €2,255m year to date (30-Sep-2011), 28.4% up on the same period last year. There was also growth of 13.4% year-on-year in net fees and commissions to €780m. NTI, at €355m, was influenced strongly by the value of US dollar positions in Banco Provincial and by the turmoil on the markets. As a result of the above, combined with the other income/expenses item, the gross income year to date was €3,214m, 19.0% up on the same period last year.

Expenses in the area were up 26.1% to €1,463m, due to the expansion and positioning projects undertaken by most of the units. However, thanks to the positive revenue figures, the efficiency ratio remains at a reasonable level of 45.5%. The operating income to September was €1,751m, up 13.7%.

It is of particular note that the major growth in business activity has been accompanied by maintenance of asset quality. This is reflected in the reduction in the NPA ratio, which as of 30-Sep-2011 stood at 2.3% (2.4% as of 30-Jun-2011). Impairment losses on financial assets were up 11.2% to €322m as a result of increased lending activity, while the coverage ratio has improved over the quarter by more than 2 percentage points to 140%.

To sum up, there has been a significant growth in activity reflected in the boost provided by revenues. This, together with the performance of expenses and loan-loss provisions have led to a growth of 11.2% in the net attributable profit to €754m in the nine months ended 30-Sep-2011.