Industry Trends

In the United States, the health of the banking system is continuing to recover, and there are now fewer institutions facing problems. Most banks are increasing earnings, asset quality, capital and liquidity.

The main reason for better earnings is the improvement in asset quality, which has had a positive impact on loan-loss provisions, as it has freed up loan-loss reserves. However, revenue growth has been limited due to the current environment of low interest rates and a relatively flat curve. This has put strong pressure on net interest income in the sector.

In lending, the commercial and industrial sectors continued to perform well, despite the uncertainty regarding fiscal policy. In the fourth quarter, this growth is even clearer in commercial real estate (companies with collateral) and in credit card balances (due to the Christmas holiday season). Lending conditions are likely to remain strict in 2013, particularly for residential loans, in light of the high financial burden of households.

The main indicators of asset quality continue to show a positive trend. This marks the 11th consecutive quarter of improvement. In spite of this, the NPA ratio in the residential portfolio rose slightly in the third quarter of 2012.

Deposit growth remained robust throughout the year, as a lack of high-yielding investment alternatives and fiscal cliff uncertainties likely aided balances.

Income statement

(Million euros)

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					Units:
	The United States				BBVA Compass
	2012	Δ%	Δ% (1)	2011	2012	Δ%	Δ% (1)	2011
Net interest income	1,682	2.8	(4.7)	1,635	1,467	4.3	(3.2)	1,400
Net fees and commissions	603	(4.8)	(11.1)	633	511	(2.3)	(10.0)	525
Net trading income	160	14.5	7.5	140	120	24.9	17.9	94
Other income/expenses	(49)	(41.8)	(46.3)	(84)	(44)	(41.5)	(50.2)	(83)
Gross income	2,395	3.1	(4.2)	2,324	2,054	5.5	(2.0)	1,936
Operating costs	(1,583)	5.8	(1.7)	(1,497)	(1,394)	6.5	(1.0)	(1,300)
Personnel expenses	(875)	6.7	(0.8)	(820)	(770)	7.0	(0.5)	(715)
General and administrative expenses	(521)	2.8	(4.5)	(507)	(442)	4.6	(2.9)	(420)
Deprecation and amortization	(188)	10.4	2.0	(170)	(182)	9.5	2.1	(165)
Operating income	812	(1.8)	(8.6)	827	659	3.3	(4.2)	636
Impairment on financial assets (net)	(90)	(73.8)	(75.9)	(346)	(53)	(75.5)	(85.1)	(332)
Provisions (net) and other gains (losses)	(54)	(96.4)	(96.7)	(1,501)	(45)	(87.3)	(97.2)	(1,480)
Income before tax	667	n.s.	n.s.	(1,020)	561	n.s.	n.s.	(1,175)
Income tax	(192)	n.s.	n.s.	329	(174)	n.s.	n.s.	362
Net income	475	n.s.	n.s.	(691)	387	n.s.	n.s.	(814)
Non-controlling interests	0	n.s.	n.s.	(0)	-	-	-	-
Net attributable profit	475	n.s.	n.s.	(691)	387	n.s.	n.s.	(814)
Net one-offs (2)	0	(100.0)	(100.0)	(1,011)	0	(100.0)	-	(1,011)
Net attributable profit (excluding one-offs) (2)	475	48.4	39.6	320	387	96.1	81.1	197

(1) At constant exchange rate. (2) In 2011, during the fourth quarter, US goodwill impairment charge.

Balance sheet

(Million euros)

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					Units:
	The United States				BBVA Compass
	31-12-12	Δ%	Δ% (1)	31-12-11	31-12-12	Δ%	Δ% (1)	31-12-11
Cash and balances with central banks	5,384	59.3	62.4	3,380	4,339	95.7	110.4	2,103
Financial assets	7,584	(9.9)	(8.1)	8,418	7,508	0.3	2.3	7,486
Loans and receivables	38,311	(9.6)	(7.9)	42,397	34,945	4.7	7.2	33,228
Loans and advances to customers	36,068	(11.3)	(9.6)	40,677	33,018	2.5	4.8	32,118
Loans and advances to credit institutions and other	2,243	30.4	33.0	1,720	1,927	66.2	77.0	1,110
Inter-area positions	-	-	-	-	416	n.s.	n.s.	0
Tangible assets	745	(10.5)	(8.8)	833	729	(7.3)	(6.4)	794
Other assets	1,825	(16.2)	(14.6)	2,179	1,704	(10.4)	(9.8)	1,927
Total assets/Liabilities and equity	53,850	(5.9)	(4.0)	57,207	49,641	8.1	11.2	45,538
Deposits from central banks and credit institutions	6,652	(8.6)	(6.8)	7,278	3,901	(4.6)	(3.3)	4,112
Deposits from customers	39,132	1.9	4.0	38,384	38,378	9.7	12.9	34,659
Debt certificates	-	(100.0)	(100.0)	363	-	-	-	-
Subordinated liabilities	848	(30.0)	(28.6)	1,211	800	(15.2)	(15.3)	963
Inter-area positions	203	(91.8)	(91.6)	2,466	-	-	-	-
Financial liabilities held for trading	352	(22.6)	(21.0)	454	351	(18.2)	(18.6)	440
Other liabilities	4,025	9.6	11.7	3,673	3,837	32.7	39.0	2,814
Economic capital allocated	2,638	(21.9)	(20.4)	3,379	2,374	(6.2)	(5.0)	2,549

(1) At constant exchange rate

Significant ratios

(Percentage)

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	The United States
	31-12-12	30-09-12	31-12-11
Efficiency ratio	66.1	65.2	64.4
NPA ratio	2.4	2.4	3.5
NPA coverage ratio	90	94	73
Risk premium	0.23	0.30	0.89

The United States. Operating income

(Million euros at constant exchange rate)

(1) At current exchange rate: –1.8%.

The United States. Net attributable profit (adjusted)

(Million euros at constant exchange rate)

(1) At current exchange rate: +48.4%.