financial statements 2012

1. The BBVA Group. Highlights

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Banco Bilbao Vizcaya Argentaria, S.A. (the “Bank” or “BBVA”) is a private-law entity governed by the rules and regulations applicable to banks operating in Spain and is the parent company of the financial group whose object is to engage directly or indirectly in activities, transactions, agreements and services relating to the banking business. The Bank conducts its business through branches and offices located throughout Spain and abroad.

The Banco Bilbao Vizcaya Argentaria Group (the “Group” or “BBVA Group”) is an internationally diversified financial group with a significant presence in traditional retail banking, asset management, private banking and wholesale banking.

The financial information included in this management report is presented in accordance with the criteria established by the International Financial Reporting Standards approved by the European Union (EU-IFRS) and taking into account Bank of Spain Circular 4/2004, and its subsequent amendments, as well as other provisions of the regulatory framework on financial reporting applicable to the Group.

BBVA Group highlights in 2012

In 2012, the BBVA Group reported a net attributable profit of €1,676 million. The main feature of this result is the high quality of revenue, despite the hugely difficult and demanding background in which it has been generated. In this regard, for yet another year the Group has continued to show its high capacity for generating recurrent earnings. This standout performance is due to BBVA’s approach to banking based on four pillars:

  • A portfolio model shaped by:
    • A well balanced diversification in terms of geographical areas, businesses and segments, which is essential for ensuring resilience in any environment. This diversification has become increasingly important in 2012, when emerging economies contributed 56% of the gross income of the business areas.
    • Franchises with leading positions in all markets in which the Group operates and with important stakes and strategic alliances in Turkey and China.
  • A business model based on three elements:
    • A retail banking model focused on long-lasting relationships (customer-centric approach) with a very broad customer base. This ensures highly recurrent earnings and very stable funding in the form of customer deposits.
    • A distribution network with high capillarity. The number of branches and ATMs has continued to increase over the year.
    • Technology is a pillar that BBVA has supported strongly in recent years to improve efficiency. A good example of this is the implementation of the technological platform in the United States.
  • A management model based on:
    • Prudence with respect to the decisions made, largely in the field of risks.
    • Proactiveness in terms of the need to anticipate events and to have the flexibility to adapt easily to them. In this respect, over the year BBVA has been particularly active in the wholesale funding market.
    • A global approach, which consists of using the whole potential of the businesses, customers and BBVA’s current footprint. In 2012, insurance activity performed outstandingly well.
  • A governance model founded on the principles of integrity, prudence and transparency, whose primary objective is to create value for its shareholders.
    • The most relevant features of the BBVA Group’s earnings in 2012 are summarized below:
    • As regards solvency, core capital under Basel II has improved and closed at 10.8%, up 45 basis points on the figure for December 2011. This reflects the Group’s capacity to generate capital in the present adverse environment, while maintaining its dividend policy.

The Group complies with the recommendations issued by the European Banking Authority (EBA).

BBVA comfortably passed the stress test conducted by Oliver Wyman on 14 Spanish banking groups (90% of the financial system), published on September 28. This analysis focused on the portfolio of loans to the domestic private sector, including foreclosed real estate assets. This study is highly credible, as it was monitored very closely by the European authorities, which agreed on the methodology used. In addition, the data provided by the entities and by the Bank of Spain was reviewed by external auditors and independent real estate appraisers. This theoretical exercise considers a more negative stress scenario than the one used in other countries (Portugal, Ireland and Greece), and even more severe than the one conducted in July by the International Monetary Fund (IMF) for Spain.

  • Positive performance of the more recurrent revenue in all geographical areas, i.e. of gross income excluding net trading income (NTI) and dividends, thanks to strong activity in emerging markets, good spread management in each geographical area and positive trend in the insurance business.
    • The strong revenue figures enabled the Group to absorb the increase in loan-loss provisions arising from the impairment of real estate sector assets in Spain. In 2012, the Group put aside €4,437 million for loan-loss provisions and provisions for foreclosed and acquired assets.
    • The Group continues to strengthen its liquidity position through comprehensive management in each geographical area and to improve its financing structure. In 2012, the BBVA Group successfully carried out several issues in Europe and in America, with a very significant level of demand. Specifically, in the fourth quarter two senior debt operations were carried out in Europe, amounting to €2.5 billion, one in the United States, amounting to USD 2 billion, and mortgage-covered bonds for €2 billion.

In customer deposits, the increased proportion of retail deposits on the liability side of the balance sheet in all geographical areas has allowed the Group to continue improving its financing structure and reduce its liquidity gap.

The deleveraging process in Spain and the reduction in Corporate & Investment Banking (CIB) portfolios in developed countries continue.

  • Maintenance of the dividend policy. The level of recurrent earnings enables the Group to continue with its dividend payment policy approved at the last General Shareholders’ Meeting (AGM).
    • Acquisition of 100% of Unnim Banc, S.A. on July 27, with a very limited impact on solvency and on credit and liquidity risk. (Note 3 to the Consolidated Financial Statements).
    • Signing of the sale agreements for the pension business in Latin America, specifically Afore Bancomer in Mexico and AFP Horizonte in Colombia (Note 3 to the Consolidated Annual Accounts).
    • Sale of BBVA Puerto Rico in the United States. (Note 3 to the Consolidated Financial Statements).

The most relevant data and ratios of the BBVA Group as of December 31, 2012 and 2011 are as follows:

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BBVA Group Highlights Millions of Euros
2012 2011 % Variación
Balance sheet (Millions Euros)

Total assets 637,785 597,688 6.7
Total lending (gross) 367,415 361,310 1.7
Customer deposits 292,716 282,173 3.7
Other customer funds 159,285 144,291 10.4
Total customer funds 452,001 426,464 6.0
Total equity 43,802 40,058 9.3
Income statement

Net interest income 15,122 13,152 15.0
Gross income 22,441 20,028 12.1
Operating income 11,655 10,290 13.3
Income before tax 1,659 3,446 (51.9)
Net attributable profit 1,676 3,004 (44.2)
Data per share and share performance ratios

Share price (euros) 6.96 6.68 4.2
Market capitalization (Millions Euros) 37,924 32,753 15.8
Net attributable profit per share (euros) (1) 0.32 0.62 (47.3)
Book value per share (euros) 8.04 8.35 (3.8)
P/BV (Price/book value; times) 0.9 0.8
Significant ratios (%)

ROE (Net attributable profit/average equity) 4.0 8.0
ROTE (Net attributable profit/average equity excluding goodwill) 5.0 16.0
ROA (Net income/average total assets) 0.37 0.61
Efficiency ratio 48.06 48.62
Risk premiun 2.16 1.20
NPA Ratio 5.1 4.0
NPA Coverage ratio 72 61
Capital adecuacy ratios (%)

BIS Ratio 13.0 12.9
Tier I 10.8 10.3
Core capital 10.8 10.3
Other information

Number of shares (millions) 5,449 4,903 11.1
Number of shareholders 1,012,864 987,277 2.6
Number of employees (2) 115,852 110,645 4.7
Number of branches (2) 7,978 7,457 7.0
Number of ATMs (2) 20,177 18,794 7.4
(1) Earnings per share according to the Note 5 of the Consolidated Financial Statements (2) Garanti is not included