financial statements 2012

South America

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The South American area manages the BBVA Group’s banking, pension and insurance businesses in the region.

Industry Trends

In South America, the financial system in most countries remains sound and lending continues to grow strongly, fueled by monetary policies geared toward boosting economic activity. Faced with external monetary expansion and the ensuing increase in capital flows, many central banks have chosen to apply prudential measures to discourage capital inflows and to control the rise in domestic lending (particularly in Brazil and Peru).

Activity and Earnings

The year-on-year comparison of this area’s financial statements is affected by the change in the exchange rates of the region’s currencies against the euro, with widespread appreciation over the period, which generated a positive impact on activity and on the income statement. The most important figures include a reference to the percentage change at constant exchange rates.

This geographical area continued to enjoy outstanding performance in activity, earnings and asset quality across practically all the countries in the area. In 2012, the area generated a net attributable profit of €1,347 million, up 23.6% year-on-year at constant exchange rates. This result is underpinned, above all, by strong lending, a positive performance in customer deposits, and excellent spread and risk management.

Negotiations continued in the second half of the year for the sale of the pension business in Latin America, specifically of AFP Horizonte in Colombia, for which the sale agreement was signed at the end of the year. The earnings from this activity are therefore classified as discontinued operations in the income statement for 2012, and also for 2011 for comparison purposes.

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South America Millions of Euros
2012 2011 % Change
NET INTEREST INCOME 4,291 3,161 35.7
Net fees and commissions 910 720 26.4
Net gains (losses) on financial assets and liabilities and net exchange differences 443 485 (8.6)
Other operating income and expenses (281) (264) 6.4
GROSS INCOME 5,363 4,101 30.8
Operating expenses (2,328) (1,893) 23.0
Administration costs (2,154) (1,741) 23.7
Personnel expenses (1,165) (958) 21.6
General and administrative expenses (989) (783) 26.3
Depreciation and amortization (173) (152) 14.3
OPERATING INCOME 3,035 2,208 37.4
Impairment losses on financial assets (net) (593) (449) 32.1
Provisions (net) and other gains (losses) (202) (89) 127.7
INCOME BEFORE TAX 2,240 1,671 34.1
Income tax (486) (343) 41.6
Income from discontinued transactions (net) 241 160 51.2
NET INCOME 1,995 1,487 34.2
Net income attributed to non-controlling interests (649) (480) 35.1

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

“Net interest income” in 2012 stood at €4,291 million, an increase of 35.7% on the €3,161 million posted in 2011 (25.6% at constant exchange rates). This has been the result of strong growth in business, combined with good handling of spreads in both asset and liability products.

The balance of “Net fees and commissions” in 2012 totaled €910 million, up 26.4% (18.2% at constant exchange rates) on the €720 million posted the previous year, in line with the strong activity in the region.

The balance under the headings “Net gains (losses) on financial assets and liabilities” and “Exchange differences (net)” amounted to €443 million at the close of 2012. Despite the positive performance, this figure is down 8.6% (or 14.9% at constant exchange rates) on the €485 million posted in 2011, which reflected the revaluation of US dollar positions in BBVA Provincial in Venezuela.

As of December 31, 2012, the balance of “Other operating income and expenses” was a €281 million loss, 6.4% up on the €264 million loss in the previous year. This line mainly includes the adjustment for hyperinflation in Venezuela, the greater contribution of the deposit guarantee funds in the various countries and the earnings from the insurance business, which performed well over the year.

Based on the above, “Gross income” for 2012 amounted to €5,363 million, with an increase of 30.8% (21.6% at constant exchange rates) on the €4,101 million recorded as of December 31, 2011.

The balance under the heading “Operating expenses” for 2012 totaled €2,328 million, up 23% on the €1,893 million in 2011. Excluding the impact of the appreciation of the currencies, the rise is 15.4%. Apart from the high inflation recorded in the area, this increase is the result of the investments made to implement the expansion and technological transformation plans. This investment plan seeks to make the most of the growth opportunities in the region, due both to buoyant activity and the possibilities for bank penetration. It also seeks to improve the quality of customer service, based on the corporate customer-centric policy.

This performance of income and expenses has resulted in an improvement in the efficiency ratio in the area, which closed the year at 43.4% (46.2% the previous year).

Based on the above, “Operating income” for 2012 amounted to €3,035 million, with an increase of 37.4% on the €2,208 million in 2011. The increase at constant exchange rates is 26.8%.

As of December 31, 2012, the balance under the heading “Impairment losses on financial assets (net)” stood at €593 million, with an increase of 32.1% on the €449 million registered in 2011. The increase in loan-loss provisions is 21.6% excluding the foreign-currency impact. Its performance is in line with the growth in lending activity, since both the NPA ratio (2.1%) and the risk premium (1.34%) and coverage ratio (146%) remain at similar levels to the previous year.

The balance under the headings “Provisions (net)” and “Other gains (losses)” in 2012 is €202 million, compared with €89 million in 2011.

The balance of “Income tax” in 2012 is €486 million, an increase of 41.6% on the €343 million posted in 2011.

As already mentioned, due to the negotiations for the sale of the mandatory pension business in the region, the earnings in 2012 (and likewise in 2011 for comparison purposes) have been reclassified in “Income from discontinued transactions” for the amount of €241 million, up 51.2% on the figure for 2011.

As a result of the above, “Net income” as of December 31, 2012 was €1,995 million, an increase of 34.2% on the €1,487 million recorded in 2011.

“Net income attributed to non-controlling interests” is €649 million, up 35.1% on the €480 million in 2011, corresponding mostly to subsidiaries in Venezuela and Peru.

“Net income attributed to parent company” for 2012 totaled €1,347 million, with an increase of 33.8% on the €1,007 million posted in 2011. At constant exchange rates, the figure is 23.5%. In conclusion, strong business activity, favorable price management and good risk quality in the loan portfolio allowed for the ongoing investment in the development and expansion of the franchise, generating good earnings figures.

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South America Millions of Euros
2012 2011 % Change
Total Assets 78,419 63,444 23.6
Loans and advances to customers 48,721 40,219 21.1
Total customer funds 56,937 45,279 25.7
Off-balance-sheet funds 57,820 50,855 13.7
Economic capital allocated 3,275 2,912 12.5
Efficiency ratio (%) 43.4 46.2
NPA Ratio (%) 2.1 2.2
NPA Coverage Ratio (%) 146 146
Risk premium (%) 1.34 1.31

The changes in the main headings of activity in this business area are as follows:

As of December 31, 2012, loans and advances to customers (gross) stood at €48,721 million, up 21.1% (18.6% at constant exchange rates) on the €40,219 million as of December 31, 2011. There was widespread growth in all countries. The biggest increases have been posted in the retail segment (up 38.6%), thanks to the positive trend in lending to businesses (up 105.8%) and consumer loans and credit cards (up 29.5%).

As regards risk indicators in the area, the NPA ratio has improved slightly to 2.1% as of December 2012 (from 2.2% on the same date of the previous year), thanks to the rigorous risk admission and recovery policies applied in the region, in line with corporate guidelines. The coverage ratio remains at 146%.

On-balance-sheet customer funds closed the year at €56,937 million, up 25.7% (24.1% excluding the impact of foreign currencies) on December 2011. There has been strong growth in lower-cost transactional items (checking and savings accounts), which are up 30.6%.

Off-balance sheet funds amounted to €57,820 million, up 13.7% on the previous year. The pension business, whose assets under management account for 94% of the balance as of December 31, 2012, grew over the year by 11.8%, due in part to foreign currency movements. Mutual funds, although with a lower weight, performed very well with an increase of 18.6% on the previous year.

Trends by country

The most significant aspects over the year for each country are detailed below:

In Argentina, despite the slowdown of the economy, BBVA Francés has once again proved its great flexibility and fast capacity to adapt, not only developing new products and services, but also managing its funds more efficiently. The bank posted high year-on-year increases in both the loan portfolio and customer funds. In earnings, Argentina has improved its net attributable profit by 23.9% thanks to the increase in net interest income and fees and commissions, and the excellent performance of the insurance business. This is despite the increase in operating expenses, which is mainly the result of the general increase in prices.

In Chile, the macroeconomic and competitive environment has been favorable for BBVA, with a strong increase in the loan book, focused mainly on the private individual segment. These results have been boosted by the successful development of the strategic plan, with strong growth in the installed capacity, which in turn has allowed the customer base to be increased. Forum, the unit specializing in customer finance and leader in car loans in Chile, has also been helped by strong car sales and has increased its market penetration rate in new car sales in the country. The trend in the insurance business has also been positive thanks to the limited level of claims. From the point of view of earnings, this year has been more difficult for Chile than the previous one as a result of investor perception of the macroeconomic situation in Europe and, particularly, in Spain. The uncertainty in the euro zone has resulted in an increase in the cost of funding, which has slowed down growth in more recurring revenue. However, net attributable profit is 11.2% up on the same period in 2011.

In Colombia, BBVA closed 2012 with excellent earnings figures, above those achieved by its competitors. The lending business once again saw significant growth in 2012. Both the loan portfolio and customer funds posted strong year-on-year growth. This has been accompanied by the excellent performance of the asset quality indicators, which has enabled the bank to lead the sector. The insurance business has also performed well, driven by bankassurance and NTI. As a result, the country’s net attributable profit grew year-on-year by 18.7%.

As for the pension business in Colombia, on December 24, 2012, the BBVA Group reached an agreement for the sale of its stake in its subsidiary in Colombia BBVA Horizonte Sociedad Administradora de Fondos de Pensiones y Cesantías S.A. to Sociedad Administradora de Fondos de Pensiones y Cesantías Porvenir, S.A., belonging to Grupo Aval Acciones y Valores, S.A. The final price was set at USD 530 million, but this will be adjusted according to the company’s earnings from January 1, 2013 to the operation’s closing date.

Activity in Peru, has increased significantly, in line with the country’s strong economic performance. This can be seen in the growth of the country’s loan book. The trend is reflected in the country’s net interest income, which together with the increase in fees and commissions, despite the new regulations, and strong growth in NTI has enabled net attributable profit for the year to increase by 12.5% on the figure for the previous year, even though expenses and loan-loss provisions increased in line with the stronger activity seen in the country.

In Venezuela, BBVA Provincial continued to show signs of strong business activity. Lending and funds grew around 45% and 60%, respectively, as did net interest income. Fees and commissions also grew significantly as a result of strong performance of the banking and insurance business, with the net attributable profit for the period increasing by more than 51.4% on the previous year.

Products and Services


During 2012, there was a strong focus on developing strategic alliances. In January, the bank signed commercial agreements with the two most important Argentinean football clubs, becoming their official sponsor. In addition to extending the bank’s customer base, these agreements also allowed it to improve loyalty among its existing customers.

In the business segment, the bank has added improvements to “Francés net cash”, the Internet banking service for businesses, in order to provide a user-friendly transaction-centered platform, allowing its customers more flexibility in their daily operations.

It has also launched an innovative financing application on the market: pre-financing and financing facilities in pesos for companies engaged in foreign trade. These initiatives have been extremely well received and have allowed BBVA Francés to maintain its leading position in the foreign trade business.

BBVA Francés has also launched new cards for companies with special benefits.


During 2012, Chile has focused its efforts on retail banking, attracting customers to the newly opened branches while ensuring quality service. Progress has also been made in developing and opening new branch formats, with the aim of offering customers a service model which is modern, simple and highly advanced technologically.

The call center has also been consolidated as a channel for sales, building loyalty and servicing.

In business banking, the institutional segment has been developed. This is a new market niche with excellent results which services public bodies and institutions, such as ministries and municipalities.


In March 2012, BBVA Colombia launched its highly successful “Olímpicos” campaign (147% compliance with targets). This campaign helps to promote consumer products, credit cards, free insurance, SME loans and payroll direct deposits, and also includes products geared toward attracting time deposits. The initiative has also boosted the products offered to the SMEs segment and given greater appeal to the leasing product.

Between July and September, the bank carried out the “Techos” campaign, which brought about a 16% year-on-year growth in mortgage loans, while a significant number of AFC ("savings for construction") accounts, which have tax benefits, were opened.

Lastly, the “Campeones” campaign ran from September to November, with a 128.5% target compliance rate. In this campaign, the bank achieved record rates of sales in both consumer and SME finance. As far as fund gathering is concerned, there have been very considerable increases in the balances of savings and checking accounts.

In November, the “Personal Banking” campaign was launched, offering a new range of products and services designed to fit the needs of the high value segment.

Corporate & Investment Banking brought 2012 to a close with excellent results on three fronts: transactional banking, fixed-income and investment banking. The implementation of e-commerce with clients such as Adidas, Herbalife, Argos, UNE and FEMSA reinforces the transactional business. In fixed income and equity, BBVA Colombia has taken part as a provider of structured finance and lead broker in commercial paper of FIndeter, and also as joint bookrunner & joint global coordinator for the CEMEX bond issue. Lastly, the project finance operation between American Tower – Coltel and Movistar has boosted activity in investment banking.


In 2012, the bank reinforced segment-centered management, using the concept of “New Peru, New Bank”, with the ultimate goal of offering its customers a simpler banking experience.

In the personal banking segment, the bank has focused on increasing the loyalty of its Premium customers. It has done so by strengthening advisory services for investments and improving its range of products offered.

In the mortgage business the “Hipotecario joven” product was launched, designed for young people between the ages of 25 and 35, who are university graduates and in employment.

In business banking, the bank launched registration for the “Electronic Account Statement” for checking accounts, consolidated registration to “Suppliers Payment” and “Credit Payments”, and boosted the “Tax Payment” service.

The “International Synergies” project was executed throughout the BBVA Group with the aim of maintaining loyalty and boosting service to customers at a global level.

In SMEs, the “Working Capital” card, one of the leading products, has achieved increased growth in earnings. The “Business Multi-Risk Insurance” product, which is designed to safeguard small companies’ assets, was consolidated during the year.


Throughout the year, BBVA Provincial has focused its efforts on building on the profitable and sustainable growth seen in recent years, offering the broadest possible range of financial products and services adapted to he needs of each customer segment, leveraging its management on ongoing innovation and development of new technologies, and strengthening brand image, which has a strong connection with sports.

Along these same lines, new credit cards were also launched during the year.

In terms of technological innovation, the bank has launched a system for pre-arranging finance for goods and services, via the “Crédito Nómina Instantáneo”, “Crédito Líquido” and “Auto” products on the “Provinet” electronic channel. Using this channel, customers can manage their own loans, more conveniently and more quickly, leading to greater efficiency and better service quality.

Another goal has been to reinforce the bank’s image as a pioneering force in mobile banking services in Venezuela. The bank has thus launched the new versions of the “Provinet Móvil” service for Blackberry and Android cell phones. BBVA Provincial not only offers the most complete mobile banking service in Venezuela, but it is the only one which has two security systems: the coordinates card and the digital password for new transactions, thus giving customers the security they demand.

The bank has also continued to adapt its branches in 2012, installing state-of-the-art “Zonas Express” devices for customers, which allow them to carry out their transactions more quickly, more efficiently and with more security and comfort. Special "self-service points" have also been installed, so that users can consult their account and credit card balances and movements without having to step into the branch.