The following are the most important features of the BBVA Group’ earnings in the third quarter of 2012:

• In terms of solvency, BBVA comfortably passed Oliver Wyman’s stress test and continues to comply with the capital recommendations of the European Banking Authority (EBA).
• Positive performance of recurring revenue in all geographical regions.
• This has enabled the Group to absorb again a significant increase in its loan-loss provisions in Spain, in order to cover the ongoing impairment of its real estate portfolios and assets.
• The Group continues to strengthen its liquidity position through comprehensive management in each of the geographical areas where it operates, while improving its financing structure.
• The Unnim consolidation on July 27.
• Maintenance of the current dividend policy.

These points are discussed below in more detail.

• BBVA comfortably passed Oliver Wyman’s stress test.
  • The results of the stress test conducted by Oliver Wyman on 14 Spanish banking groups (90% of the banking system) were published on September 28th. It focused on an analysis of the portfolio of loans to the domestic private sector (including foreclosed real estate assets). This work has been a decisive step in restoring market confidence in the sector.
  • The study enjoys a high level of credibility, since the European authorities have monitored the process very closely and agreed on the methodology used. In addition, the data provided by the banks and the Bank of Spain has been reviewed by external auditors and independent real estate appraisers.
  • The theoretical exercise considers a stress scenario that is more negative than the one used in other countries (Portugal, Ireland and Greece), and even more severe than the one conducted in June by the International Monetary Fund (IMF) for Spain.
  • The main results and conclusions are:
  • Aggregate capital needs for the financial industry under a very adverse scenario amount to €53,700m (including the tax effect and considering the merger processes underway). Therefore, in general terms there have been no major surprises with respect to the results of the top-down exercise conducted last June (between €51,000m and €62,000m). In addition, the amount is well below the €100,000m that the European Union has made available to the sector.
  • Even in the most adverse and highly unlikely economic scenario, seven banking groups, which account for more than 62% of the loan portfolio analyzed, have no capital needs. In short, the study once more showed the great disparity within the Spanish financial system, with a hard core of strong banks and vulnerability limited to a specific part of the industry. This clear distinction will make it easier to speed up the restructuring of the sector.
  • As expected, BBVA is one of the banks included in the group with no capital needs. It comfortably passed the stress test, thanks to its recurring revenue and soundness of its business model.
  • In fact, from a practical point of view, at the end of the third quarter the Bank continues to comply with the EBA’s recommendations. As of 30-Sep-2012 BBVA maintained the core ratio posted at the close of the first half of the year of 10.8% under Basel II.
• Recurring revenue continues to increase, as shown by the 2.6% growth in gross income in the quarter, excluding net trading income (NTI) and dividends. The average annual growth rate is 14.0%. The main reasons for this continue to be:
  • Strong activity in emerging markets.
  • Good management of spreads in all regions.
  • Positive performance of the insurance business.
• The above has enabled the Bank to absorb again a significant increase in loan-loss provisions aimed at reflecting the impairment of assets related to the Spanish real estate sector. So far this year, the Group has set aside provisions of €2.9 billion (€1.6 billion in the third quarter), including both loan-loss provisions and provisions for foreclosed and acquired assets within the scope of Royal Decree-Laws 02/2012 and 18/2012, thus complying with two-thirds of the provisions required in total by both RDL’s. After making these provisions, BBVA posted a cumulative net attributable profit of €1,656m (€146m in the third quarter).
• Comprehensive liquidity management, which enables the Group to maintain a comfortable position. The following is worth mentioning in this regard:
  • BBVA has successfully completed several issues of senior debt in Europe and other placements in the Americas (Mexico and Peru, among other countries) with a significant level of demand.
  • Growth in customer deposits. The increased proportion of retail deposits on the liability side of the balance sheet in all the geographical areas continues to allow the Group to improve its financing structure.
  • Reduction in the Corporate & Investment Banking (CIB) portfolios in all developed countries.
  • Improvement in available collateral.
• The acquisition of 100% of the capital stock of Unnim Banc, S.A. was completed on July 27, with a very limited impact on solvency and on credit and liquidity risks. The main effects of its incorporation into the Group’s financial statements are:
  • Inclusion of a network with 556 branches and 3,028 employees that manage €18 billion in customer loans and €11 billion in customer deposits (data as of the close of September 2012).
  • No impact on liquidity, since a high percentage of its loan book is collateralizable and it has a broad base of retail deposits.
  • Credit risk is strictly limited by the Asset Protection Scheme (EPA) that covers its more problematic portfolios, and by its high NPA coverage ratio. However, its high NPA ratio significantly affects that of the Group, adding 53 basis points to the figure for the close of the first half of 2012.
  • With respect to solvency, the impact of the incorporation of Unnim is practically neutral in terms of core capital, as the increase in risk-weighted assets is offset by the generation of badwill for €320m, and the exchange of hybrid instruments held by Unnim retail customers for BBVA shares (the latter will impact in October).
• The level of recurring earnings enables the Group to continue with the dividend policy approved at the last General Shareholders Meeting (AGM). In October 2012, the amount of €0.10 per share was paid under the “dividend-option” scheme. Around 80% of shareholders opted to receive newly issued BBVA shares, which once more confirms the success of this remuneration system.

The following is worth mentioning with respect to the business areas:

• Spain generated a cumulative operating income of €2,972m, 6.2% up on the figure 12 months earlier. The increase in interest income is outstanding thanks to good price management, and the control over operating expenses. Loan-loss provisions have increased significantly to offset the gradual impairment of real estate portfolios and assets. As regards activity, the most relevant aspect continues to be the favorable performance of on-balance-sheet customer funds.
• Eurasia generated a cumulative profit of €813m (up 13.0% year-on-year) thanks to the good performance of Garanti and the growing contribution of the stake in China Citic Bank (CNCB).
• Mexico maintains its sustained growth in activity, above all in the retail portfolio. Commercial campaigns have been launched that are boosting consumer finance, finance for small businesses and the gathering of lower-cost liabilities, such as current and savings accounts. As a result, net interest income continues to perform well, and increased 8.5% over the last year at constant exchange rates. This, combined with the positive performance of the insurance business, the year-on-year increase in operating expenses (at levels similar to those seen in previous quarters), and the stability of the risk premium, led to a cumulative net attributable profit of €1,300m (up 4.0% year-on-year, also at constant exchange rates).
• South America enjoyed once again outstanding performance in activity, customer spreads and asset quality. As a result, the region was able to maintain its expansion and growth plans while posting a 24.1% year-on-year increase (at constant exchange rates) in cumulative net attributable profit to €1,014m.
• The United States maintains a favorable trend in activity, asset quality, earnings and solvency, very much supported on the local business. The loan book of BBVA Compass grew 4.5% year-on-year thanks to the positive performance of the target portfolios (residential mortgages up 20.3% and commercial loans up 25.5%), while customer funds increased 9.5% due to the good performance of low-cost funds. The decrease on impairment losses on financial assets has had a very positive impact on earnings and offset the flat performance of net interest income in the current environment of low interest rates and a relatively flat curve. As a result, the area generated a cumulative net attributable profit of €341m (up 29.3% at constant exchange rates).