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financial statements 2012

Corporate activities

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The aggregate of Corporate Activities includes the rest of items that are not allocated to the business areas, as in previous years. These basically include the costs of the head offices with a strictly corporate function, certain allocations to provisions such as early retirement, and others also of a corporate nature. Corporate Activities also includes the Financial Management unit, which performs financial management functions for the Group as a whole, essentially management of structural asset and liability positions in interest rates on the balance sheet and in exchange rates, as well as liquidity and capital management functions. The management of asset and liability interest-rate risk in currencies other than the euro is registered in the corresponding business areas. Finally, it includes certain portfolios and assets, with their corresponding earnings or costs, whose management is not linked to relations with customers, such as Holdings in Industrial & Financial Companies and the Group’s real-estate assets in Spain, corresponding to holding services, resulting from purchases, or received as payment of debt.

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Corporate Activities Millions of Euros
2012 2011 % Change
2012-2011
NET INTEREST INCOME (697) (614) 13.6
Net fees and commissions (304) (196) 55.6
Net gains (losses) on financial assets and liabilities and net exchange differences 828 436 89.7
Other operating income and expenses 105 366 (71.2)
GROSS INCOME (69) (8) n.s.
Operating expenses (1,107) (976) 13.5
Administration costs (734) (706) 4.0
Personnel expenses (627) (546) 14.8
General and administrative expenses (107) (160) (32.9)
Depreciation and amortization (373) (270) 38.1
OPERATING INCOME (1,176) (984) 19.6
Impairment losses on financial assets (net) 60 (392) n.s.
Provisions (net) and other gains (losses) (1,569) (1,049) 49.6
INCOME BEFORE TAX (2,686) (2,425) 10.8
Income tax 1,020 1,012 0.9
INCOME FROM CONTINUING TRANSACTIONS (1,665) (1,413) 17.9
Income from discontinued transactions (net) 15 5 177.3
NET INCOME (1,651) (1,407) 17.3
Net income attributed to non-controlling interests 2 2 (26.1)
NET INCOME ATTRIBUTED TO PARENT COMPANY (1,649) (1,405) 17.3

The changes in the main headings of the income statement of this business area are:

“Net interest income” is slightly less negative than in 2011, at -€697 million, compared with -€614 million in 2011, due to the increased wholesale funding costs arising from the current situation in the euro zone over the year. However, all the issues have been at below the price of Spanish sovereign debt.

The balance under the headings “Net gains (losses) on financial assets and liabilities” and “Exchange differences (net)” for 2012 stood at €828 million, up 89.7% on the €436 million posted as of December 31, 2011, basically as a result of the capital gains from buybacks of securitization bonds in June and subordinated debt throughout the fourth quarter.

The balance of “Other operating income and expenses” at the close of 2012 was €105 million, a 71.2% increase on the €366 million registered in 2011. Its main component continues to be the dividends from BBVA’s investment in Telefónica, which suspended its second interim dividend for 2012.

The balance of “Operating expenses” as of December 31, 2012 amounted to €1,107 million, up 13.5% on the €976 million recorded in 2011. They continue to reflect the Group’s investment effort in staff training, technology, brand and infrastructure.

“Operating income” for 2011 is a €1,176 million loss, up 19.6% on the €984 million loss in 2011, for the reasons mentioned already.

The balance under the heading “Impairment losses on financial assets (net)” for 2012 amounted to recoveries of €60 million, compared with €392 million in provisions registered in 2011, aimed at improving the Group’s coverage ratio.

The balance under the headings “Provisions (net)” and “Other gains (losses)” for 2012 stood at €1,569 million. It basically includes the provisions for early retirement and write-offs for acquired and foreclosed assets, which increased significantly over the period, to absorb the impairment of those assets, and which together with the income for badwill generated by the acquisition of Unnim, has resulted in a 49.6% increase on the balance of €1,049 million reached in 2011.

As a result of the above, “Income before tax” for 2012 is €2,686 million in losses, compared with losses of €2,425 million in 2011.

The balance of “Income tax” in 2012 is €1,020 million in income, compared with €1,012 million in 2011.

Lastly, “Net income attributed to parent company” for 2012 registered losses of €1,649 million, up 17.3% on the €1,405 million loss in 2011, due basically to the increase already mentioned in loan-loss provisions for real estate assets.

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