UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
| | | |
o | | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)OR(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR |
þ | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | | For the fiscal year ended December 31, 20082010 |
OR |
o | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from to |
OR |
o | | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | | Date of event requiring this shell company report |
| | For the transition period from to |
Commission filenumber: 1-10110
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
(Exact name of Registrant as specified in its charter)
BANK BILBAO VIZCAYA ARGENTARIA, S.A.
(Translation of Registrant’s name into English)
Kingdom of Spain
(Jurisdiction of incorporation or organization)
Plaza de San Nicolás, 4
48005 Bilbao
Spain
(Address of principal executive offices)
Javier Malagón Navas
Paseo de la Catellana,Castellana, 81
28046 Madrid
Spain
Telephone number +34 91 537 7000
Fax number +34 91 537 6766
(Name, Telephone,E-mail and /or facsimile numberFacsimile Number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
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| | Name Of Each Exchange on
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Title of Each Class | | whichName of Each Exchange on Which Registered
|
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American Depositary Shares, each representing | | New York Stock Exchange |
the right to receive one ordinary share, | | |
par value €0.49 per share | | New York Stock Exchange |
Ordinary shares, par value €0.49 per share | | New York Stock Exchange* |
Guarantee of Non-Cumulative Guaranteed | | New York Stock Exchange** |
Preferred Securities, Series C, liquidation preference $1,000 each, of BBVA International | | |
BBVA International Preferred, S.A. Unipersonal | | |
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| * | | The ordinary shares are not listed for trading, but are listed only in connection with the registration of the American Depositary Shares, pursuant to requirements of the New York Stock Exchange. |
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| ** | | The guarantee is not listed for trading, but is listed only in connection with the registration of the corresponding Non-Cumulative Guaranteed Preferred Securities of BBVA International Preferred, S.A. Unipersonal (a wholly-owned subsidiary of Banco Bilbao Vizcaya Argentaria, S.A.). |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
The number of outstanding shares of each class of stock of the Registrant as of December 31, 20082010, was:
Ordinary shares, par value €0.49 per share — 3,747,969,1214,490,908,285
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See definitionthe definitions of “large accelerated filer,” “accelerated filerfiler” and large accelerated filer”“smaller reporting company” in RuleRule 12b-2 of the Exchange Act. (Check One)one):
| | | |
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| | | | | |
U.S. GAAP o | | International Financial Reporting Standards as
Issued by the International Accounting Standards
Board o | | Other þ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o Item 18 þ
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).
Yes o No þ
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
TABLE OF CONTENTS
1
CERTAIN TERMS AND CONVENTIONS
The terms below are used as follows throughout this report:
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| | • | “BBVA”,“Bank”, the“Company” or“Group” means Banco Bilbao Vizcaya Argentaria, S.A. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires. BBVA was formed by the merger of Banco Bilbao Vizcaya, S.A. (“BBV”) and Argentaria, Caja Postal y Banco Hipotecario, S.A. (“Argentaria”), which was approved by the shareholders of each institution on December 18, 1999. |
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| | • | “BBVA Bancomer” means Bancomer S.A. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires. |
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| • | “BBVA Compass” means Compass Bancshares, Inc. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires. |
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| | • | “Consolidated Financial Statements” means BBVA’sour audited consolidated financial statements as of and for the years ended December 31, 2008, 20072010, 2009 and 20062008 prepared in accordance with the International Financial Reporting Standards adopted by the European Union (“EU-IFRS”) required to be applied under the Bank of Spain’s Circular 4/2004. |
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| | • | “Latin America” refers to Mexico and the countries in which we operate in South America and Central America. |
First person personal pronouns used in this report, such as“we”,“us”, or“our”, mean BBVA.
In this report,“$”,“U.S. dollars”, and“dollars” refer to United States Dollars and“€” and“euro” refer to Euro.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the“Securities Act”) Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the“Exchange Act”), and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include words such as “believe”, “expect”, “estimate”, “project”, “anticipate”, “should”, “intend”, “probability”, “risk”, “VaR”, “target”, “goal”, “objective” and similar expressions or variations on such expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. The accompanying information in this Annual Report, including, without limitation, the information underunder:
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| | • | “Item 3. Key Information — Risk Factors”; |
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| | • | “Item 4. Information on the Company”; |
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| | • | “Item 5. Operating and Financial Review and Prospects”; and |
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| | • | “Item 11. Quantitative and Qualitative Disclosures about Market Risk” |
identifies important factors that could cause such differences.
Other important factors that could cause actual results to differ materially from those in forward-looking statements include, among others:
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| | • | general political, economic and business conditions in Spain, the European Union (“EU”), Latin America, the United States and other regions, countries or territories in which we operate; |
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| | • | changes in applicable laws and regulations, including taxes; |
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| | • | the monetary, interest rate and other policies of central banks in Spain, the EU, the United States, Mexico and elsewhere; |
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| | • | changes or volatility in interest rates, foreign exchange rates (including the euro to U.S. dollar exchange rate), asset prices, equity markets, commodity prices, inflation or deflation; |
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| | • | ongoing market adjustments in the real estate sectors in Spain, Mexico and the United States; |
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| | • | the effects of competition in the markets in which we operate, which may be influenced by regulation or deregulation; |
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| | • | changes in consumer spending and savings habits, including changes in government policies which may influence investment decisions; |
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| | • | our ability to hedge certain risks economically; |
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| • | the success of our acquisitions (including the acquisition of a shareholding in Türkiye Garanti Bankası A.Ş., as described below), divestitures, mergers and strategic alliances; |
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| | • | our success in managing the risks involved in the foregoing, which depends, among other things, on our ability to anticipate events that cannot be captured by the statistical models we use; and |
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| | • | force majeureand other events beyond our control. |
Readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in our business or acquisition strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.
PRESENTATION OF FINANCIAL INFORMATION
Accounting Principles
Under Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, July 2002, all companies governed by the law of an EU Member State and whose securities are admitted to trading on a regulated market of any Member State must prepare their consolidated financial statements for the years beginning on or after January 1, 2005 in conformity with EU-IFRS. The Bank of Spain issued Circular 4/2004 of December 22, 2004 on Public and Confidential Financial Reporting Rules and Formats (the“Circular” or(“Circular 4/2004”), which requires Spanish credit institutions to adapt their accounting system to the principles derived from the adoption by the European Union of EU-IFRS.
On November 26, 2008, the Bank of Spain issued Circular 6/2008 (“Circular 6/2008”), modifying the presentation format for consolidated financial statements from the format stipulated in Circular 4/2004. Unless otherwise indicated herein, as used hereafter, “Circular 4/2004” refers to Circular 4/2004 as amended or supplemented from time to time, including by Circular 6/2008. The Group prepares its consolidated annual financial information in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. On November 26, 2008, the Bank of Spain issued Circular 6/2008, modifying the presentation format for consolidated financial statements from the format stipulated in Circular 4/2004. The Group’s consolidated annual financial statements as of and for the year ended December 31, 2008 included in the Consolidated Financial Statements have been prepared under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and taking into account the financial statement models established in Bank of Spain’s Circular 6/2008. Such consolidated annual financial statements are the first annual financial statements prepared by the Group on such basis. The information as of and for the years ended December 31, 2007 and 2006 contained in the Consolidated Financial Statements is presented on the same basis as the information as of and for the year ended December 31, 2008. The selected consolidated financial information included herein as of and for the year ended December 31, 2008, together with selected consolidated financial information as of and for the years ended December 31, 2007, 2006, 2005 and 2004 is derived from, and presented on the same basis as in, the Consolidated Financial Statements and should be read together with the Consolidated Financial Statements. As the Consolidated Financial Statements and such selected consolidated financial information have been prepared under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and taking into account the financial statement models established in Bank of Spain’s Circular 6/2008, they are not directly comparable with financial information prepared by the Group in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 (but without taking into account the financial statement models established in Bank of Spain’s Circular 6/2008), including financial information as of and for the years ended December 31, 2007 included and 2006 in our Annual Report for 2007 onForm 20-F (the“2007 20-F”).
The principal differences between the Consolidated Financial Statements prepared under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and taking into account the financial statement models established in Bank of Spain’s Circular 6/2008 and the financial statements prepared under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 (but without taking into account the financial statement models
4
established in Bank of Spain’s Circular 6/2008), as applied to the BBVA Group’s Consolidated Financial Statements as of and for the year ended December 31, 2008, 2007 and 2006 are described in Appendix VIII of the Consolidated Financial Statements. Preparation of the Consolidated Financial Statements under EU-IFRS required to be applied under Bank of Spain’s Circular 4/2004 and taking into account the financial statement models established in Bank of Spain’s Circular 6/2008 did not affect the line items “Net income” in the consolidated income statement nor “Stockholders’ equity” in the consolidated balance sheet when compared to such line items prepared under EU-IFRS required to be applied under Bank of Spain’s Circular 4/2004 (but without taking into account the financial statement models established in Bank of Spain’s Circular 6/2008). Unless otherwise indicated herein, as used hereafter“Circular 4/2004” refers to such Circular as amended or supplemented from time to time, including by the Bank of Spain’s Circular 6/2008.
As we describe in Note 2.2.1.b to the Consolidated Financial Statements, a loan is considered to be an impaired loan — and, therefore, its carrying amount is adjusted to reflect the effect of its impairment — when there is objective evidence that events have occurred which, in the case of loans, give rise to a negative impact on the future cash flows that were estimated at the time the transaction was arranged.
The potential impairment of these assets is determined individually or collectively.
The quantification of impairment losses inherent in deterioration is determined on a collective basiscalculated collectively, both in the following two cases:case of assets classified as impaired and for the portfolio of current assets that are not currently impaired but for which an imminent loss is expected.
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| • | Assets classified as impaired for customers in which the amount of their operations is less than € 1 million. |
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| • | Asset portfolio not currently impaired but which presents an inherent loss. |
Inherent loss, calculated using statistical procedures, is deemed equivalent to the portion of losses incurred on the date that the accompanying consolidated financial statements are prepared that has yet to be allocated to specific transactions.
The Group estimates collective inherent loss of credit risk corresponding to operations realized by Spanish financial entities of the Group (approximately 68.73%68.7% of the Loansloans and Receivablesreceivables of the Group as of December 31, 2008),2010) using the parameters set by Annex IX of the Bank of Spain’s Circular 4/2004 on the basis of its experience and
4
the Spanish banking sector information inregarding the quantification of impairment losses and provisions for insolvencies for credit risk.
Notwithstanding the above, the Group has historic statistical data which it used in its internal ratings models (IRBs)(“IRBs”) that were approved by the Bank of Spain for some portfolios in 2008,2009, albeit only for the purpose of estimating regulatory capital under the new Basel Accord (BIS II). It uses these internal models to calculate the economic capital required in its activities and uses the expected loss concept to quantify the cost of credit risk for incorporation in its calculation of the risk-adjusted return on capital of its operations.
To estimate the collective loss of credit risk corresponding to operations with non-Spanish residents registered in foreign subsidiaries of the Group, the Group applies similar methods and criteria, using the Bank of Spain’s parameters but adapting the default calendars to the particular circumstances of the country. Additionally, in Mexico for consumer loans, credit cards and mortgages portfolios, as well as for credit investment maintained by the Group in the United States internal models are used to calculate(which in the impairment losses based on historical experienceaggregate represent approximately 13.9% of the Group (approximately 13% of the Loansloans and Receivablesreceivables of the Group as of December 31, 2008).
2010), internal models are used to calculate impairment losses based on the historical experience of the Group. In either case,both of these cases, the aforementioned provisions required under the Bank of Spain’s Circular 4/2004 standards fall within the range of provisions calculated using the Group’s internal ratings models.
For the years ended December 31, 20072010, 2009 and 2006, the provisions required under Bank of Spain’sCircular 4/2004 standards represented the outermost range of acceptable estimates which were calculated using our historical experience. Therefore, those provisions did not represent the best estimate of allowance for loan losses under U.S. GAAP which provided a more moderate estimate within the acceptable range. As a consequence,2008, there was an adjustmentare no substantial differences in the reconciliation to U.S. GAAP in order to reflect in net income the reversal of the difference of estimates of the provisions recorded in under both GAAPs in each year and in stockholders’ equity the differences of estimates of the accumulated allowance for loan losses under both GAAPs.
5
For the year ended December 31, 2008, there is no substantial difference in the calculationcalculations made under both GAAPs because the allowance for loan losses calculated under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 isand U.S. GAAP because the allowance for loan losses for such years calculated under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 are similar to the best estimateestimates of allowance for loan losses under U.S. GAAP, which is the central scenario determined by using our internal risk models withbased on our historical experience. Therefore, the allowance for loan losses calculated under both GAAPs are the same and the Bank has included an adjustment in the reconciliation of net income for the year 2008 in order to make equivalent the allowance for loan losses under U.S. GAAP to the allowance for loan losses calculated under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.
Note 5860 to our Consolidated Financial Statements provides additional information about this reconciliation.
Business Areas
During 2007 and for purposes of the consolidated financial statements included in the 2007 20-F, BBVA’s organizational structure was divided into the following five business areas (the“2007 Business Areas”): Spain and Portugal; Global Businesses; Mexico and the United States; South America; and Corporate Activities. In December 2007, BBVA’s board of directors approved a new organizational structure for the BBVA Group, which was implemented as of January 1, 2008 and is the basis for the financial statements included herein (the“2008 Business Areas”): Spain and Portugal; Global Businesses (also named Wholesale Banking and Asset Management); Mexico; the United States; South America; and Corporate Activities. The transition from the 2007 Business Areas to the 2008 Business Areas has affected principally the Mexico and United States business area, which is now split into respective business areas and the Spain and Portugal area and the Global Businesses area which exchanged certain portfolios and units. The financial information for our business areas as of and for the years ended December 31, 2008, December 31, 2007 and December 31, 2006 presented in this Annual Report onForm 20-F have been prepared on a uniform basis, consistent with our organizational structure in 2008 in order to provide aperiod-on-period comparison. Due to the adoption of the new organizational structure, BBVA’s financial information by business area included in this Annual Report onForm 20-F is not directly comparable to its financial information by business area included in the 2007 20-F.
The management of our business during 2008 along six segmental lines is discussed in “Item 4. Information on the Company” and each area’s operating results are described in “Item 5. Operating and Financial Review and Prospects”.
Statistical and Financial Information
The following principles should be noted in reviewing the statistical and financial information contained herein:
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| | • | Average balances, when used, are based on the beginning and the month-end balances during each year. We do not believe that such monthly averages present trends that are materially different from those that would be presented by daily averages. |
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| | • | The book value of BBVA’s ordinary shares held by its consolidated subsidiaries has been deducted from stockholders’ equity. |
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| | • | Unless otherwise stated, any reference to loans refers to both loans and leases. |
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| | • | Interest income figures include interest income on non-accruing loans to the extent that cash payments have been received in the period in which they are due. |
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| | • | Financial information with respect to subsidiaries may not reflect consolidation adjustments. |
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| | • | Certain numerical information in this Annual Report may not sum due to rounding. In addition, information regardingperiod-to-period changes is based on numbers which have not been rounded. |
6
PART I
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| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
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A. | Directors and Senior Management |
Not Applicable.
Not Applicable.
Not Applicable.
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| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Not Applicable.
5
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| A. | Selected Consolidated Financial Data |
The historical financial information set forth below has been selected from, and should be read together with, the Consolidated Financial Statements included herein. For information concerning the preparation and presentation of financial information contained herein, see “Presentation of Financial Information”. Also see Note 5860 of the Consolidated Financial Statements for a presentation of our stockholders’shareholders’ equity and net income attributed to parent company reconciled to U.S. GAAP.
7
EU-IFRS (*)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | For Year Ended December 31, | |
EU-IFRS(*) | | | 2010 | | 2009 | | 2008 | | 2007 | | 2006 | |
| | | 2008 | | 2007(1) | | 2006(1) | | 2005(1) | | 2004(1) | | | (In millions of euros, except per share/ADS data (in euros)) | |
| | | (In millions of euros, except per share/ | |
| | | | | ADS data (in euros) | | | | | | |
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Consolidated Income Statement data | | | | | | | | | | | | | | | | | | | | | |
Consolidated Statement of Income data | | | | | | | | | | | | | | | | | | | | | |
| Interest and similar income | | | 30,404 | | | | 26,176 | | | | 20,042 | | | | 16,584 | | | | 13,108 | | | | 21,134 | | | | 23,775 | | | | 30,404 | | | | 26,176 | | | | 20,042 | |
| Interest expense and similar charges | | | (18,718 | ) | | | (16,548 | ) | | | (11,904 | ) | | | (9,500 | ) | | | (6,999 | ) | |
| | | | | | | | | | | | | |
| Interest and similar expenses | | | | (7,814 | ) | | | (9,893 | ) | | | (18,718 | ) | | | (16,548 | ) | | | (11,904 | ) |
Net interest income | | | 11,686 | | | | 9,628 | | | | 8,138 | | | | 7,084 | | | | 6,110 | | | | 13,320 | | | | 13,882 | | | | 11,686 | | | | 9,628 | | | | 8,138 | |
| Dividend income | | | 447 | | | | 348 | | | | 380 | | | | 295 | | | | 255 | | | | 529 | | | | 443 | | | | 447 | | | | 348 | | | | 380 | |
| Share of profit or loss of entities accounted for using the equity method | | | 293 | | | | 241 | | | | 308 | | | | 121 | | | | 97 | | | | 335 | | | | 120 | | | | 293 | | | | 241 | | | | 308 | |
| Fee and commission income | | | 5,539 | | | | 5,603 | | | | 5,133 | | | | 4,681 | | | | 4,057 | | | | 5,382 | | | | 5,305 | | | | 5,539 | | | | 5,603 | | | | 5,133 | |
| Fee and commission expenses | | | (1,012 | ) | | | (1,043 | ) | | | (943 | ) | | | (849 | ) | | | (738 | ) | | | (845 | ) | | | (875 | ) | | | (1,012 | ) | | | (1,043 | ) | | | (943 | ) |
| Net gains (losses) on financial assets and liabilities | | | 1,328 | | | | 1,545 | | | | 1,261 | | | | 885 | | | | 761 | | |
| Net gains(losses) on financial assets and liabilities | | | | 1,441 | | | | 892 | | | | 1,328 | | | | 1,545 | | | | 1,261 | |
| Net exchange differences | | | 231 | | | | 411 | | | | 376 | | | | 290 | | | | 298 | | | | 453 | | | | 652 | | | | 231 | | | | 411 | | | | 376 | |
| Other operating income | | | 3,559 | | | | 3,589 | | | | 3,413 | | | | 3,812 | | | | 2,815 | | | | 3,543 | | | | 3,400 | | | | 3,559 | | | | 3,589 | | | | 3,413 | |
| Other operating expenses | | | (3,093 | ) | | | (3,051 | ) | | | (2,923 | ) | | | (3,510 | ) | | | (2,553 | ) | | | (3,248 | ) | | | (3,153 | ) | | | (3,093 | ) | | | (3,051 | ) | | | (2,923 | ) |
| | | | | | | | | | | | | |
Gross income | | | 18,978 | | | | 17,271 | | | | 15,143 | | | | 12,810 | | | | 11,102 | | | | 20,910 | | | | 20,666 | | | | 18,978 | | | | 17,271 | | | | 15,143 | |
| Administration costs | | | (7,756 | ) | | | (7,253 | ) | | | (6,330 | ) | | | (5,763 | ) | | | (5,098 | ) | | | (8,207 | ) | | | (7,662 | ) | | | (7,756 | ) | | | (7,253 | ) | | | (6,330 | ) |
| Depreciation and amortization | | | (699 | ) | | | (577 | ) | | | (472 | ) | | | (449 | ) | | | (448 | ) | | | (761 | ) | | | (697 | ) | | | (699 | ) | | | (577 | ) | | | (472 | ) |
| Provisions (net) | | | (1,431 | ) | | | (235 | ) | | | (1,338 | ) | | | (454 | ) | | | (851 | ) | | | (482 | ) | | | (458 | ) | | | (1,431 | ) | | | (235 | ) | | | (1,338 | ) |
| Impairment on financial assets (net) | | | (2,941 | ) | | | (1,903 | ) | | | (1,457 | ) | | | (821 | ) | | | (728 | ) | |
| | | | | | | | | | | | | |
| Impairment losses on financial assets (net) | | | | (4,718 | ) | | | (5,473 | ) | | | (2,941 | ) | | | (1,903 | ) | | | (1,457 | ) |
Net operating income | | | 6,151 | | | | 7,303 | | | | 5,545 | | | | 9,104 | | | | 8,269 | | | | 6,742 | | | | 6,376 | | | | 6,151 | | | | 7,303 | | | | 5,545 | |
| Impairment on other assets (net) | | | (45 | ) | | | (13 | ) | | | (12 | ) | | | (0 | ) | | | (234 | ) | |
| Gains (losses) in written off assets not classified as non-current assets held for sale | | | 72 | | | | 13 | | | | 956 | | | | 51 | | | | 335 | | |
| Impairment losses on other assets (net) | | | | (489 | ) | | | (1,618 | ) | | | (45 | ) | | | (13 | ) | | | (12 | ) |
| Gains (losses) on derecognized assets not classified as non-current asset held for sale | | | | 41 | | | | 20 | | | | 72 | | | | 13 | | | | 956 | |
| Negative Goodwill | | | | 1 | | | | 99 | | | | — | | | | — | | | | — | |
| Gains (losses) in non-current assets held for sale not classified as discontinued operations | | | 748 | | | | 1,191 | | | | 541 | | | | 217 | | | | 59 | | | | 127 | | | | 859 | | | | 748 | | | | 1,191 | | | | 541 | |
| | | | | | | | | | | | | |
Income before tax | | | 6,926 | | | | 8,494 | | | | 7,030 | | | | 5,592 | | | | 4,137 | | | | 6,422 | | | | 5,736 | | | | 6,926 | | | | 8,494 | | | | 7,030 | |
| Income tax | | | (1,541 | ) | | | (2,079 | ) | | | (2,059 | ) | | | (1,521 | ) | | | (1,029 | ) | | | (1,427 | ) | | | (1,141 | ) | | | (1,541 | ) | | | (2,079 | ) | | | (2,059 | ) |
| | | | | | | | | | | | | |
Income from ordinary activities | | | 5,385 | | | | 6,415 | | | | 4,971 | | | | 4,071 | | | | 3,108 | | |
| Income from discontinued operations (net) | | | — | | | | — | | | | — | | | | — | | | | — | | |
| | | | | | | | | | | | | |
Income from continuing transactions | | | | 4,995 | | | | 4,595 | | | | 5,385 | | | | 6,415 | | | | 4,971 | |
| Income from discontinued transactions (net) | | | | — | | | | — | | | | — | | | | — | | | | — | |
Net income | | | 5,385 | | | | 6,415 | | | | 4,971 | | | | 4,071 | | | | 3,108 | | | | 4,995 | | | | 4,595 | | | | 5,385 | | | | 6,415 | | | | 4,971 | |
| Net income attributed to parent company | | | 5,020 | | | | 6,126 | | | | 4,736 | | | | 3,806 | | | | 2,923 | | | | 4,606 | | | | 4,210 | | | | 5,020 | | | | 6,126 | | | | 4,736 | |
| Profit or loss attributed to minority interest | | | 365 | | | | 289 | | | | 235 | | | | 264 | | | | 186 | | |
| | | | | | | | | | | | | |
Per share/ADS(2) Data | | | | | | | | | | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | | 389 | | | | 385 | | | | 365 | | | | 289 | | | | 235 | |
Per share/ADS(1) Data | | | | | | | | | | | | | | | | | | | | | |
| Net operating income(2) | | | 1.66 | | | | 2.03 | | | | 1.63 | | | | 2.68 | | | | 2.45 | | | | 1.79 | | | | 1.71 | | | | 1.66 | | | | 2.03 | | | | 1.63 | |
| Numbers of shares outstanding (at period end) | | | 3,747,969,121 | | | | 3,747,969,121 | | | | 3,551,969,121 | | | | 3,390,852,043 | | | | 3,390,852,043 | | | | 4,490,908,285 | | | | 3,747,969,121 | | | | 3,747,969,121 | | | | 3,747,969,121 | | | | 3,551,969,121 | |
| Net income attributed to the parent company(3) | | | 1.35 | | | | 1.70 | | | | 1.39 | | | | 1.12 | | | | 0.87 | | |
| Dividends declared | | | 0.501 | | | | 0.733 | | | | 0.637 | | | | 0.531 | | | | 0.442 | | |
| Income attributed to parent company(3)(4) | | | | 1.17 | | | | 1.08 | | | | 1.31 | | | | 1.64 | | | | 1.34 | |
| Dividends declared(4) | | | | 0.270 | | | | 0.420 | | | | 0.501 | | | | 0.733 | | | | 0.637 | |
| | |
| (*) | | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. |
| |
| (1) | | As previously explained and explained in Note 1.3 to our Consolidated Financial Statements, income statement and income statement derived information for the years 2007, 2006, 2005 and 2004 have been |
8
| | |
| | restated taking into account the financial statements models established in Bank of Spain Circular 6/2008 and are not comparable with the BBVA Group’s income statement information for each of the years 2007, 2006, 2005 and 2004 contained in previous annual reports onForm 20-F prepared under other formats. The principal differences between our consolidated income statements prepared taking into account the financial statements models established in Bank of Spain Circular 6/2008 and our consolidated income statement prepared prior to the implementation of the Bank of Spain Circular 6/2008 are described below and in Appendix VIII to the Consolidated Financial Statements. |
|
(2) | | Each American Depositary Share (“(“ADS” or“ADSs”) represents the right to receive one ordinary share. |
|
| (2) | | Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period excluding the weighted average of treasury shares during the period (3,762 million, 3,719 million, 3,706 million, 3,594 million and 3,406 million shares in 2010, 2009, 2008, 2007 and 2006, respectively). |
| |
| (3) | | Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period (3,706including the average number of estimated shares to be converted and, for comparative purposes, a correction factor to account for the capital increase carried out in November 2010, and excluding |
6
| | |
| | the weighted average of treasury shares during the period (3,983 million, 3,5943,899 million, 3,4063,846 million, 3,3913,730 million and 3,3693,535 million shares in 2010, 2009, 2008, 2007 and 2006, 2005respectively). See Note 5 to the Consolidated Financial Statements. |
|
| (4) | | At the date of the issuance of these financial statements, the scrip dividend (“Dividendo opción”) mentioned in Item 4, Item 8 and 2004, respectively).Note 4 to the Consolidated Financial Statements is not distributed. Therefore, the conditions to restate the Earning Per Share under IAS 33 and ASC260 are not met. |
EU-IFRS (*)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December, 31 | | | As of and for Year Ended December 31, | |
| | | 2008 | | 2007(1) | | 2006(1) | | 2005(1) | | 2004(1) | | | 2010 | | 2009 | | 2008 | | 2007 | | 2006 | |
| | | (In millions of euros, except %) | | | (In millions of euros, except percentages) | |
| |
Consolidated balance sheet data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | | 542,650 | | | | 501,726 | | | | 411,663 | | | | 392,389 | | | | 329,441 | | | | 552,738 | | | | 535,065 | | | | 542,650 | | | | 501,726 | | | | 411,663 | |
| Capital stock | | | 1,837 | | | | 1,837 | | | | 1,740 | | | | 1,662 | | | | 1,662 | | |
| Common stock | | | | 2,201 | | | | 1,837 | | | | 1,837 | | | | 1,837 | | | | 1,740 | |
| Loans and receivables (net) | | | 369,494 | | | | 337,765 | | | | 279,658 | | | | 249,397 | | | | 196,892 | | | | 364,707 | | | | 346,117 | | | | 369,494 | | | | 337,765 | | | | 279,658 | |
| Deposits from customers | | | 255,236 | | | | 219,610 | | | | 186,749 | | | | 183,375 | | | | 150,726 | | |
| Marketable debt securities and subordinated liabilities | | | 121,144 | | | | 117,909 | | | | 100,079 | | | | 76,565 | | | | 57,809 | | |
| Minority interest | | | 1,049 | | | | 880 | | | | 768 | | | | 971 | | | | 738 | | |
| Stockholders’ equity | | | 26,586 | | | | 24,811 | | | | 18,209 | | | | 13,034 | | | | 10,961 | | |
| Customer deposits | | | | 275,789 | | | | 254,183 | | | | 255,236 | | | | 219,610 | | | | 186,749 | |
| Debt certificates and subordinated liabilities | | | | 102,599 | | | | 117,817 | | | | 121,144 | | | | 117,909 | | | | 100,079 | |
| Non-controlling interest | | | | 1,556 | | | | 1,463 | | | | 1,049 | | | | 880 | | | | 768 | |
| Total equity | | | | 37,475 | | | | 30,763 | | | | 26,705 | | | | 27,943 | | | | 22,318 | |
Consolidated ratios | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Profitability ratios: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income(2) | | | 2.26 | % | | | 2.09 | % | | | 2.06 | % | | | 1.68 | % | | | 2.20 | % | |
| Net interest margin(1) | | | | 2.38 | % | | | 2.56 | % | | | 2.26 | % | | | 2.09 | % | | | 2.06 | % |
Return on average total assets(3)(2) | | | 1.04 | % | | | 1.39 | % | | | 1.26 | % | | | 1.12 | % | | | 0.97 | % | | | 0.89 | % | | | 0.85 | % | | | 1.04 | % | | | 1.39 | % | | | 1.26 | % |
Return on average equity(4)(3) | | | 21.5 | % | | | 34.2 | % | | | 37.6 | % | | | 37.0 | % | | | 33.2 | % | | | 15.8 | % | | | 16.0 | % | | | 21.5 | % | | | 34.2 | % | | | 37.6 | % |
Credit quality data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan loss reserve | | | 7,505 | | | | 7,144 | | | | 6,424 | | | | 5,589 | | | | 4,622 | | | | 9,473 | | | | 8,805 | | | | 7,505 | | | | 7,144 | | | | 6,424 | |
| Loan loss reserve as a percentage of total loans and receivables (net) | | | 2.03 | % | | | 2.12 | % | | | 2.30 | % | | | 2.24 | % | | | 2.35 | % | | | 2.60 | % | | | 2.54 | % | | | 2.03 | % | | | 2.12 | % | | | 2.30 | % |
Substandard loans | | | 8,540 | | | | 3,366 | | | | 2,500 | | | | 2,347 | | | | 2,202 | | | | 15,472 | | | | 15,312 | | | | 8,540 | | | | 3,366 | | | | 2,492 | |
Substandard loans as a percentage of total loans and receivables (net) | | | 2.31 | % | | | 1.00 | % | | | 0.89 | % | | | 0.94 | % | | | 1.12 | % | | | 4.24 | % | | | 4.42 | % | | | 2.31 | % | | | 1.00 | % | | | 0.89 | % |
| | |
| (*) | | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. |
| |
| (1) | | As previously explained and explained in Note 1.3 to our Consolidated Financial Statements, balance sheet and balance sheet derived informationRepresents net interest income as a percentage of December 31, 2007, 2006, 2005 and 2004 have been restated taking into account the financial statements models established in Bank of Spain 6/2008 and are not comparable with the BBVA Group’s balance sheet as of December 31, 2007, 2006, 2005 and 2004 contained in previous annual reports on Form 20-F prepared under other formats. The principal differences are described in Appendix VIII to the Consolidated Financial Statements.average total assets. |
| |
| (2) | | Represents net interest income as a percentage of average total assets. |
| |
| (3) | | Represents net income as a percentage of average total assets. |
|
(4) | | Represents net income attributed to parent company as a percentage of average stockholders’ equity. |
|
| (4) | | As of December 31, 2010, 2009 and 2008, non-performing assets, which include substandard loans and other non-performing assets, amounted to €15,936 million, €15,928 million and €8,859 million, respectively. As of December 31, 2010, 2009 and 2008, the non-performing assets ratios (which we define as substandard loans and other non-performing assets divided by loans and advances to customers and contingent liabilities) were 4.1%, 4.3% and 2.3%, respectively. |
97
Previous format financial statements
As explained previously, the format of the consolidated balance sheet, consolidated income statement, consolidated statement of recognized income and expense and consolidated statements of cash flows presented above and in the Consolidated Financial Statements differs from the presentation criteria of the consolidated financial statements included in the 2007 20-F and 2006 20-F because the former were prepared in accordance with the models contained in Bank of Spain Circular 6/2008.
The main differences between the income statements financial statement models set out in Circular 6/2008 of the Bank of Spain and the formats included in the Group’s consolidated financial statements at December 31, 2007, 2006, 2005 and 2004 are as follows:
| | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | |
| | | (In millions of euros) | |
| |
Previous Format: | | | | | | | | | | | | | | | | |
| Net interest income | | | 9,769 | | | | 8,374 | | | | 7,208 | | | | 6,160 | |
| Gross income | | | 18,133 | | | | 15,700 | | | | 13,023 | | | | 11,121 | |
| Net operating income | | | 10,544 | | | | 8,883 | | | | 6,823 | | | | 5,591 | |
| Income before tax | | | 8,495 | | | | 7,030 | | | | 5,591 | | | | 4,137 | |
| Income from continuing operations | | | 6,415 | | | | 4,971 | | | | 4,070 | | | | 3,108 | |
| Consolidated income for the year | | | 6,415 | | | | 4,971 | | | | 4,070 | | | | 3,108 | |
| Income attributed to the Group | | | 6,126 | | | | 4,736 | | | | 3,806 | | | | 2,923 | |
| Income attributed to minority interest | | | 289 | | | | 235 | | | | 264 | | | | 186 | |
| | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | |
| | | (In millions of euros) | |
| |
New Format: | | | | | | | | | | | | | | | | |
| Net interest income | | | 9,628 | | | | 8,138 | | | | 7,084 | | | | 6,110 | |
| Gross income | | | 17,271 | | | | 15,143 | | | | 12,810 | | | | 11,102 | |
| Net operating income | | | 7,303 | | | | 5,545 | | | | 9,104 | | | | 8,269 | |
| Income before tax | | | 8,494 | | | | 7,030 | | | | 5,592 | | | | 4,137 | |
| Income from ordinary activities | | | 6,415 | | | | 4,971 | | | | 4,071 | | | | 3,108 | |
| Net income | | | 6,415 | | | | 4,971 | | | | 4,071 | | | | 3,108 | |
| Net income attributed to parent company | | | 6,126 | | | | 4,736 | | | | 3,806 | | | | 2,923 | |
| Profit or loss attributed to minority interest | | | 289 | | | | 235 | | | | 264 | | | | 186 | |
Consolidated income statement: in contrast to the model consolidated income statement used in the consolidated financial statements included in the 2007 20-F and 2006 20-F, the consolidated income statement presented above and in the Consolidated Financial Statements:
| | |
| • | Includes new margin called “Net interest income” representing the difference between “Interest and similar income” and “Interest expense and similar charges”. Both captions include income and expenses of this nature arising on the insurance business and on non-financial activities. |
|
| • | As explained in the previous paragraph dealing with “Interest income” and “Interest expense”, income and expense arising on the Group’s insurance activities are no longer offset. Rather, they are now recognized in the corresponding income or expense captions of the consolidated income statement, with the resulting effect on each of the margins and on the captions comprising that statement. |
|
| • | The new “Gross income” is similar to the previous “Gross income” except for the fact that it includes other operating income and expense which previously did not form part of the ordinary margin. In addition, the |
10
| | |
| | new model includes interest income and charges arising on non-financial activities (see letter g, below) and comprises other items previously recognized under “Other gains” and “Other losses”. |
| | |
| • | Eliminates the headings “Sales and income from the provision of non-financial services” and “Cost of sales”. These amounts are now recognized primarily under “Other operating income” and “Other operating expenses”. |
|
| • | Includes in “Staff expenses” and “General and administrative expenses” amounts previously recognized under “Other gains” and “Other losses” in the earlier model. |
|
| • | “Impairment losses (net)” is now divided into two headings: “Impairment on financial assets (net)”, which comprises net impairment on the financial assets other than equity instruments classified as shareholdings; and “Impairment on other assets (net)”, which includes net impairment losses on equity instruments classified as shareholdings and on non-financial assets. |
|
| • | Eliminates the headings “Financial income from non-financial activities” and “Financial expense from non-financial activities.” These amounts are now recognized under “Interest and similar income” and “Interest expenses and similar charges”, respectively, in the consolidated income statement. |
|
| • | Changes “Net operating income”. These measures of profit mainly differ in that includes the financial interest income and expense arising on the Group’s non-financial activity, net impairment on financial instruments and net provisions, as well as the amounts previously recognized under “Other gains” and “Other losses” in the earlier statement format. |
|
| • | Does not include “Other gains” and “Other losses,” instead creating the following new headings: “Gains (losses) in written off assets not classified as non-current assets held for sale,” “Negative goodwill” and “Gains (losses) in non-current assets held for sale not classified as discontinued operations” which comprise, basically, the captions that previously formed part of the two eliminated headings mentioned above. |
U.S. GAAP Information
| | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2008 | | | 2007 | | | 2006 | | | 2005 | | | 2004 | |
| | | | | | (In millions of euros, except per share/ ADS data (in euros) or as otherwise indicated) | | | | |
| |
Consolidated statement of income data | | | | | | | | | | | | | | | | | | | | |
| Net income | | | 4,070 | | | | 5,409 | | | | 4,972 | | | | 2,018 | | | | 3,095 | |
| Basic earnings per share/ADS(1)(2) | | | 1.098 | | | | 1.505 | | | | 1.460 | | | | 0.595 | | | | 0.918 | |
| Diluted earnings per share/ADS(1)(2) | | | 1.098 | | | | 1.505 | | | | 1.460 | | | | 0.595 | | | | 0.918 | |
| Dividends per share/ADS (in dollars)(1)(2)(3) | | | 0.652 | | | | 1.011 | | | | 0.807 | | | | 0.658 | | | | 0.552 | |
Consolidated balance sheet data | | | | | | | | | | | | | | | | | | | | |
| Total assets(4) | | | 549,574 | | | | 510,569 | | | | 420,971 | | | | 401,799 | | | | 314,350 | |
| Stockholders’ equity(4) | | | 32,744 | | | | 35,384 | | | | 30,461 | | | | 25,375 | | | | 23,465 | |
| Basic stockholders’ equity per share/ADS(1)(2) | | | 8.84 | | | | 9.85 | | | | 8.94 | | | | 7.48 | | | | 6.96 | |
| Diluted stockholders’ equity per share/ADS(1)(2) | | | 8.84 | | | | 9.85 | | | | 8.94 | | | | 7.48 | | | | 6.96 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | As of and for Year Ended December 31, |
U.S. GAAP Information(*) | | 2010 | | 2009 | | 2008 | | 2007 | | 2006 |
| | | (In millions of euros, except per share/ADS data
|
| | | (in euros) or as otherwise indicated) |
| |
Consolidates Statement of income data | | | | | | | | | | | | | | | | | | | | |
| Net income(1) | | | 4,688 | | | | 4,210 | | | | 4,435 | | | | 5,698 | | | | 5,212 | |
| Net income attributed to parent company | | | 4,299 | | | | 3,825 | | | | 4,070 | | | | 5,409 | | | | 4,972 | |
| Net income attributed to the non controlling interest | | | 389 | | | | 385 | | | | 365 | | | | 289 | | | | 240 | |
| Basic earnings per share/ADS(2)(3) | | | 1.140 | | | | 1.028 | | | | 1.098 | | | | 1.505 | | | | 1.460 | |
| Diluted earnings per share/ADS(2)(3) | | | 1.100 | | | | 1.022 | | | | 1.098 | | | | 1.505 | | | | 1.460 | |
| Dividends per share/ADS (in dollars)(2)(3)(4) | | | 0.372 | | | | 0.586 | | | | 0.652 | | | | 1.011 | | | | 0.807 | |
Consolidated Balance sheet data | | | | | | | | | | | | | | | | | | | | |
| Total assets | | | 561,767 | | | | 543,594 | | | | 549,037 | | | | 510,569 | | | | 420,971 | |
| Total equity | | | 44,176 | | | | 37,467 | | | | 33,630 | | | | 36,076 | | | | 31,229 | |
| Basic shareholders’ equity per share/ADS(2)(3)(5) | | | 11.38 | | | | 9.73 | | | | 8.84 | | | | 9.85 | | | | 8.94 | |
| Diluted shareholders’ equity per share/ADS(2)(3)(5) | | | 11.38 | | | | 9.73 | | | | 8.84 | | | | 9.85 | | | | 8.94 | |
| |
| (*) | For 2009, BBVA is availing itself of the accommodation in Item 17(c)(2)(iv) ofForm 20-F with respect to the application of IAS 21 for highly inflationary economies (Venezuela). Therefore, this reconciliation has been prepared in accordance with Item 18 ofForm 20-F which is different from that required by US GAAP. See Note 60 to our Consolidated Financial Statements for additional information. |
|
| (1) | Includes “Net income attributed to parent company” and “Net income attributed to non controlling interest”. |
| |
(1) | (2) | Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period excluding the weighted average of treasury shares during the period. |
| |
|
(2) | (3) | Each ADS represents the right to receive one ordinary share. |
| |
(3) | (4) | Dividends per share/ADS are converted into dollars at the average exchange rate for the relevant year,period, calculated based on the average of the noon buying rates for euro from the Federal Reserve Bank of New York on the last date in respect of which such information is published of each month during the relevant period. |
| |
(4) | (5) | At the enddate of the reported period.issuance of these financial statements, the scrip dividend (“Dividendo opción”) mentioned in Item 4, Item 8 and Note 4 to the Consolidated Financial Statements is not distributed. Therefore, the conditions to restate the Earning Per Share under IAS 33 and ASC260 are not met. |
11
Exchange Rates
Spain’s currency is the euro. Unless otherwise indicated, the amounts that have been converted to euro in this Annual Report have been done so at the corresponding exchange rate published by the European Central Bank (“ECB”)ECB on December 31 of the relevant year.
For convenience in the analysis of the information, the following tables describe, for the periods and dates indicated, information concerning the noon buying rate for euro, expressed in dollars per €1.00. The term“noon buying rate” refers to the rate of exchange for euros, expressed in U.S. dollars per euro, in the City of New York for cable transfers payable in foreign currencies as certified by the Federal Reserve Bank of New York for customs purposes.
| | | | | | | | | |
Year Ended December 31 | | Average(1) | | | Average(1) |
| |
| 2004 | | | 1.2478 | | |
| 2005 | | | 1.2400 | | |
| 2006 | | | 1.2661 | | | | 1.2661 | |
| 2007 | | | 1.3797 | | | | 1.3797 | |
| 2008 | | | 1.4695 | | | | 1.4695 | |
| 2009 (through March 27) | | | 1.2924 | | |
| 2009 | | | | 1.3955 | |
| 2010 | | | | 1.3216 | |
| 2011 (through March 25, 2011) | | | | 1.3884 | |
| | |
| (1) | | TheCalculated by using the average of the noon buyingexchange rates for the euro on the last published date in respectday of which such information is in each month during the relevant period. |
8
| | | | | | | | | |
Month Ended | | High | | | Low | |
| |
| September 30, 2008 | | | 1.4737 | | | | 1.3939 | |
| October 31, 2008 | | | 1.4058 | | | | 1.2446 | |
| November 30, 2008 | | | 1.3039 | | | | 1.2525 | |
| December 31, 2008 | | | 1.4358 | | | | 1.2634 | |
| January 31, 2009 | | | 1.3946 | | | | 1.2804 | |
| February 28, 2009 | | | 1.3064 | | | | 1.2547 | |
| March 31, 2009 (through March 27) | | | 1.3730 | | | | 1.2549 | |
| | | | | | | | | |
Month Ended | | High | | Low |
| |
| September 30, 2010 | | | 1.3638 | | | | 1.2708 | |
| October 31, 2010 | | | 1.4066 | | | | 1.3688 | |
| November 30, 2010 | | | 1.4224 | | | | 1.3036 | |
| December 31, 2010 | | | 1.3395 | | | | 1.3089 | |
| January 31, 2011 | | | 1.3715 | | | | 1.2944 | |
| February 28, 2011 | | | 1.3794 | | | | 1.3474 | |
| March 31, 2011 (through March 25, 2011) | | | 1.4212 | | | | 1.3813 | |
The noon buying rate for euro from the Federal Reserve Bank of New York, expressed in dollars per €1.00, on March 27, 2009,25, 2011, was $1.3306.$1.4144.
As of December 31, 2008,2010, approximately 33%36% of our assets and approximately 42%39% of our liabilities were denominated in currencies other than euro. See Note 2.2.42.2.16 to our Consolidated Financial Statements.
For a discussion of our foreign currency exposure, please see “Item 11. Quantitative and Qualitative Disclosures About Market Risk — Market Risk in Non-Trading Activities in 20082010 — Structural Exchange Rate Risk”.
| |
| B. | Capitalization and Indebtedness |
Not Applicable.
| |
| C. | Reasons for the Offer and Use of Proceeds |
Not Applicable.
12
Risks relatingRelating to usUs
Since our loan portfolio is highly concentrated in Spain, adverse changes affecting the Spanish economy could have a material adverse effect on our financial condition.
We have historically have developed our lending business in Spain, which continues to be our main place of business. As of December 31, 2008,2010, business activity in Spain accounted for 61.4%58% of our loan portfolio. See “Item 4. Information on the Company — Selected Statistical Information — ASSETS — Loans and Advances to CustomerCustomers — Loans by Geographic Area”. After rapid economic growth of 3.7% and 3.9% inuntil 2007, and 2006, respectively, the rate of growth in Spanish gross domestic product slowed to 1.2%grew by 0.9% in 2008 and is expected to contract 2.8%contracted by 3.8% and 0.2% in 2009 accordingand in 2010, respectively. Our Economic Research Department estimates that the Spanish economy, will not recover a strong path of growth in terms of gross domestic product in 2011, growing at an estimated pace of 0.9%. It is estimated, however, that — given the current rate of growth of active population in Spain- the economy will need to grow by around 2.0% for jobs to be created and attain a sustained recovery. The persistence of high unemployment rates in Spain could have a negative influence on our non-performing loan ratio.
After a relatively good performance in the Banksubprime and liquidity crises in 2009, the Spanish economy has suffered the consequences of Spain. Becausethe peripheral sovereign crisis in 2010. The Greek and Irish rescue programs and the possibility of a Portuguese rescue program have spread doubts about the Spanish economy. Financial stress in Europe has increased the cost of financing of governments and financial institutions which, in some cases, have lost the access to international funding. As a result of this continued contraction, it is expected that economic conditions and employment in Spain will continue to deteriorate in 2009, and the rate of growth in gross domestic product, if any, in 2010 will be below that witnessed in 2006 and 2007.2011. Growth forecasts for the Spanish economy are beingcould be further revised downwards dueif measures adopted in response to lowerthe economic crisis, are not as effective as expected.
After making a relatively broad and effective use of expansionary fiscal policies in the most acute period of the financial crisis, the Spanish government launched in 2010 an ambitious program of fiscal consolidation and structural reforms, partly in response to the rise of international financial tensions following the first quarter of
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2010. As a result, domestic demand in 2010 was heavily impacted by fiscal policy: directly, through the progressive contraction on public sector demand (as a result, among other reasons, of tighter fiscal targets), and indirectly, through the impact of these reforms on the financial crisis. consumption and investment decisions of private agents. The effects of these measures are expected to continue having a negative effect on domestic demand in 2011, including as a result of the tight fiscal targets of regional governments for 2011. In addition, the pace of recovery in private domestic demand in the short and medium terms are expected to continue to be hampered by weak economic fundamentals and the effects of the final phase of certain adjustments in the private sector (such as private deleveraging and adjustments in the residential construction sector).
The Spanish economy ishas also been affected by the slowdown in global growth whichand is especially severeparticularly sensitive to economic conditions in the most important marketsrest of the Euro area, the primary market for Spanish goods and services exports, such asexports. In addition, the resteffects of the Euro area. Besides,financial crisis have been particularly pronounced in these tight international financial market conditions, one of the weaknesses of the Spanish economy is itsSpain given Spain’s heightened need for foreign financing as reflected by theits high current account deficit. If the Spanish economy facesand public deficits. Real or perceived difficulties to makein making the payments associated with this deficit, this willthese deficits can further damage Spain’s economic situation and increase the costs of financing its economic situation.public deficit.
Moreover, there are three factors affecting the Spanish economy that may interfere with our business. First, the adjustment in the real estate sector, which we expect will continue in the coming years. Residential investment contracted by approximately 17.7% in 2010. In addition, demand for property could decrease in 2011 as a result of the rise in the value added tax rate applicable to real estate transactions in mid-2010 and the elimination of government tax breaks for home purchases, as from January 2011, which partly incentivized demand for property last year. Second, the restructuring process in which the Spanish’s financial sector is immersed (which needs to be completed by September 2011 in accordance with the instruction of Bank of Spain). Such restructuring process seeks, among other things, to improve the solvency of the system, to achieve greater transparency in the balance sheets of institutions and a reduction of branch and labor overcapacity and will result in a more concentrated financial sector, with fewer incumbent institutions which will be more competitive. The recently announced Financial Sector Reinforcement Plan imposes a new minimum capital to Spanish banking institutions, above the minimum levels required in other countries. Thus, stricter requirements could affect Spanish institutions vis à vis other institutions in Europe. Third, the possibility of decoupling in the Euro area could lead to increased interest rates before the Spanish economy is able to resume its previous path of growth.
Our loan portfolio in Spain has been adversely affected by the deterioration of the Spanish economy.economy in 2010, 2009 and 2008. For example, substandard loans to other resident sectors in Spain increased in 2010, 2009 and 2008 mainly due to the sharp increase in substandard mortgage loans which increased sharply to €4,425 million as of December 31, 2010, from €3,651 million as of December 31, 2009 and €2,033 million as of December 31, 2008 from €421 million as of December 31, 2007.2008. Substandard loans to real estate and construction customers in Spain also increased substantially in 2010, 2009 and 2008 to account for 5.63%16.8%, 15.4% and 5.6% of loans in such category.category as of December 31, 2010, 2009 and 2008, respectively. Our total substandard loans to customers in Spain jumped to €5,700€10,954 million and €10,973 million as of December 31, 2008, compared to €1,5902010 and 2009, respectively, from €5,562 million as of December 31, 2007,2008, principally due to an increase in substandard loans to customers in Spain generally as a result of the less favorabledeterioration in the macroeconomic environment. As a result of the increase in total substandard loans to customers in Spain described above, our total substandard loans to customers in Spain as a percentage of total loans and receivables to customers in Spain increased sharply to 2.73%5.2% and 5.4% as of December 31, 2010 and 2009, respectively, from 0.78%.2.7% as of December 31, 2008. Our loan loss reserves to customers in Spain as a percentage of substandard loans to customers in Spain as of December 31, 20082010 and 2009 also declined significantly to 66.07%45% and 44%, respectively, from 213.51%67% as of December 31, 2007.2008.
Given the concentration of our loan portfolio in Spain, any adverse changes affecting the Spanish economy are likely to have a significant adverse impact on our loan portfolio and, as a result, on our financial condition, results of operations and cash flows.
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A substantial percentage of our customer base is particularly sensitive to adverse developments in the economy, which renders our lending activities relatively riskier than if we lent primarily to higher-income customer segments.
Medium- and small-sizesmall-sized companies and middle- and lower-middle-lower- middle- income individuals typically have less financial strength than large companies and high-income individuals and, accordingly, can be expected to be more negatively affected by adverse developments in the economy. As a result, it is generally accepted that lending to these segments of our existing and targeted customer base represents a relatively higher degree of risk than lending to other groups.
A substantial portion of our loan portfolio consists of residential mortgages and consumer loans to middle- and lower-middle-incomelower middle-income customers and commercial loans to medium- and small-sizesmall-sized companies. Consequently, during periods of slowdown in economic activity we may experience higher levels of past due amounts, which could result in higher levels of allowance for loan losses. We cannot assure you that we will not suffer substantial adverse effects on our base loan portfolio to these customer segments in the event of additional adverse developments in the economy.
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Increased exposure to real estate in Spain makes us more vulnerable to developments in this market.
In the years prior to 2008, the sound economic growth, the strength of thestrong labor marketmarkets and a decrease inlow interest rates in Spain caused an increase in the demand for housing, which resulted in an increase in demand for mortgage loans. This had repercussions inincreased demand and the widespread availability of mortgage loans affected housing prices, which rose significantly. After this buoyant period, demand started adjusting more than two years ago,began to adjust in mid-2006. InSince the last quarter of 2008, and first months of 2009,the supply of new homes has adjusted morebeen adjusting sharply downward in the residential market in Spain, but a significant excess of unsold homes still existexists in the market. In the remainder of 2009,2011, we expect housing supply and demand to adjust further, in particular if the current financial situation continues. In addition, in countries where the housing markets have been booming, the ongoing adjustment may intensify.adverse economic conditions continue. As Spanish residential mortgages are one of our main assets, comprising 25%32%, 26%31% and 26%25% of our loan portfolio as of December 31, 2008, 20072010, 2009 and 2006,2008, respectively, we are currently highly exposed to developments in the residential real estate markets.market in Spain. We expect the worseningcurrent problems in the financial conditionsmarkets and the deterioration of the economic activity already underwayconditions in Spain to intensify the adjustment processcontinue in the Spanish real estate sector.near future. As a result, we expect housing prices in Spain to decline further in the remainder of 2009. Adverse2011, which along with other adverse changes in the Spanish real estate sector could have a significant adverse impact on our loan portfolio and, as a result, on our financial condition, and results of operations.operations and cash flows.
Our exposure to the real estate sector represented 8.9% of our private individuals loan portfolio as of December 31, 2010 which is below the average in the Spanish financial sector according to the Bank of Spain. Our non-performing loans represented 21.3% of our real estate portfolio as of such date. Our substandard real estate loan portfolio comprised of non-performing loans and potential problem loans represented 35.6% of our real estate loan portfolio as of December 31, 2010.
Highly-indebted households and corporations could endanger our asset quality and future revenues.
Spanish households and businesses have reached, in recent years, a high level of indebtedness, which represents increased risk for the Spanish banking system. The high proportion of loans referenced to variable interest rates makes debt service on such loans more vulnerable to changes in interest rates than in the past. In fact, the average debt burden of the Spanish households onas a proportion of disposable income has increased substantially from 12.4% inapproximately 12% at the end of 2003 to 16.3% in 2008. Similarly, the debt burden of Spanish corporations has increased fromapproximately 16% at the end of 20042008, before moderating slightly to 29% in 2008, according toapproximately 13% at the Bankend of Spain. 2010. The deleveraging process, is taking more time than we had originally forecasted.
Highly indebted households and businesses are moreless likely to be unableable to service debt obligations as a result of adverse economic events, which could have an adverse affecteffect on our loan portfolio and, as a result, on our financial condition and results of operations. In addition, the increase in households’ and businesses’ indebtedness also limits their ability to incur additional debt, decreasing the number of new products we may otherwise be able to sell them and limiting our ability to attract new customers in Spain satisfying our credit standards, which could have an adverse effect on our ability to achieve our growth plans.
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Current economic conditions may make it more difficult for us to continue funding our business on favorable terms or at all.
Historically, one of our principal sources of funds has been savings and demand deposits. Time deposits represented 35.8%28%, 26.7%32% and 23.3%34% of our total funding as of December 31, 2008, 20072010, 2009 and 2006,2008, respectively. Large-denomination time deposits may, under some circumstances, such as during periods of significant changes in market interest ratesrate-based competition for these types of deposit products and resulting increased competition for such funds,deposits, be a less stable source of deposits than savings and demand deposits. TheMoreover, since we rely heavily on short-term deposits for our funding, we cannot assure you that, in the event of a sudden or unexpected shortage of funds in the banking systems or money markets in which we operate, we will be able to maintain our current levels of funding without incurring higher funding costs or having to liquidate certain of our assets. In addition, the financial crisis triggered by the U.S. subprime market has turned out to be deeper and more persistent than expected. Central banks’ interventions have had a limited effect so far. New issuances in wholesale markets have been scarce, expensive and restrictedIn response to a few countries, and the interbank markets have limited liquidity, in particular after the Lehman Brothers collapse. The global economic environment is particularly adverse, with a worsening financial crisis, that is spreading to previously-unaffected countries and areas of the economy. Governmentsgovernments around the world are implementingimplemented ambitious fiscal expansion programs trying to boost their economies. Announcements in Januaryduring 2008 and 2009, amount to a substantial fiscal stimulus for the global economy. Fiscal policy may offer the best chancetrying to limit economic deterioration but execution risksand boost their economies. However, concerns expressed during 2009 over the effectiveness of fiscal stimulus programs have given way to concerns over the sustainability of public deficits, and governments announced plans to remove the extraordinary fiscal and monetary measures implemented to confront the financial crisis. As public sources of liquidity, such as ECB extraordinary measures, and expansionary economic policies are large. In this context,removed from the market, we cannot assure you that we will be able to continue funding our business or, if so, maintain our current levels of funding without incurring higher funding costs or having to liquidate certain of our assets.
We face increasing competition in our business lines.
The markets in which we operate are highly competitive. Financial sector reforms in the markets in which we operate have increased competition among both local and foreign financial institutions, and we believe that this trend will continue. In addition, the trend towards consolidation in the banking industry has created larger and stronger banks with which we must now compete, some of which have recently received public capital.
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We also face competition from non-bank competitors, such as:
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| | • | department stores (for some credit products); |
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| | • | automotive finance corporations; |
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| | • | leasing companies; |
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| | • | factoring companies; |
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| | • | mutual funds; |
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| | • | pension funds; and |
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| | • | insurance companies. |
We cannot assure you that this competition will not adversely affect our business, financial condition, cash flows and results of operations.
Our business is particularly vulnerable to volatility in interest rates.
Our results of operations are substantially dependent upon the level of our net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Interest rates are highly sensitive to many factors beyond our control, including deregulation of the financial sectors in the markets in which we operate, monetary policies pursued by the EU and national governments, domestic and international economic and political conditions and other factors. In Spain, competition distortions in the term deposits market have intensified, and this situation is expected to continue due to the liquidity needs of certain financial institutions, which are offering high interest rates to attract additional deposits.
Changes in market interest rates could affect the spread between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities and thereby negatively affect our results of operations. For example, an increase in interest rates could cause our interest expense on deposits to increase more significantly and quickly than our interest income from loans, resulting in a reduction in our net interest income.
Since approximately 69%74% of our loan portfolio consistsas of December 31, 2010 consisted of variable interest rate loans maturing in more than one year, our business is particularly vulnerable to volatility in interest rates.
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Our financial statements and periodic disclosure under securities laws may not give you the same information as financial statements prepared under U.S. accounting rules and periodic disclosures provided by domestic U.S. issuers.
Publicly available information about public companies in Spain is generally less detailed and not as frequently updated as the information that is regularly published by or about listed companies in the United States. In addition, although we are subject to the periodic reporting requirements of the United States Securities Exchange Act of 1934 (the“Exchange “Exchange Act”), the periodic disclosure required of foreign issuers under the Exchange Act is more limited than the periodic disclosure required of U.S. issuers. Finally, we maintain our financial accounts and records and prepare our financial statements in conformity EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, which differs in certain respects from U.S. GAAP, the financial reporting standard to which many investors in the United States may be more accustomed. See Note 5860 of the Consolidated Financial Statements for the presentation of our stockholders’ equity and net income reconciled to U.S. GAAP.
We have a substantial amount of commitments with personnel considered wholly unfunded due to the absence of qualifying plan assets.
Our commitments with personnel which are considered to be wholly unfunded are recognized under the heading “Provisions — Funds for Pensions and Similar Obligations” in the accompanying consolidated balance sheets. These amounts include “Post-employment benefits”, “Early Retirements” and “Post-employment welfare benefits”, which amounted to €2,497 million, €3,106 million and €377 million, respectively, as of December 31, 2010, €2,536 million, €3,309 million and €401 million, respectively, as of December 31, 2009 and €2,638 million, €3,437 million and €284 million, respectively, as of December 31, 2008 (€2,683 million, €2,950 million and €300 million, respectively, as of December 31, 2007).2008. These amounts are considered wholly unfunded due to the absence of qualifying plan assets.
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We face liquidity risk in connection with our ability to make payments on these unfunded amounts which we seek to mitigate, with respect to “Post-employment benefits”, by maintaining insurance contracts which were contracted with insurance companies owned by the Group. The insurance companies have recorded in their balance sheets specific assets (fixed interest deposit and bonds) assigned to the funding of these commitments. The insurance companies also manage derivatives (primarily swaps) to mitigate the interest rate risk in connection with the payments of these commitments. We seek to mitigate liquidity risk with respect to “Early Retirements” and “Post-employment welfare benefits” through oversight by the Group’s Assets and Liabilities Committee (“(“ALCO”). The Group’s ALCO manages a specific asset portfolio to mitigate the liquidity risk regarding the payments of these commitments. These assets are government and cover bonds (AAA/AA rated) which are issued at fixed interest rates with maturities matching the aforementioned commitments. The Group’s ALCO also manages derivatives (primarily swaps) to mitigate the interest rate risk in connection with the payments of these commitments. Should we fail to adequately manage liquidity risk and interest rate risk either as described above or otherwise, it could have a material adverse effect on our business, financial condition, cash flows and results of operations.
EU sovereign risk.
We are a Spanish banking company and conduct substantial business activities in Spain. Like other banks operating in Spain and Europe, our performance and liquidity may be affected by economic conditions affecting Spain and other EU member states. There has been improvement in some macroeconomic indicators during 2010. Nevertheless, certain countries in Europe, including Spain, have relatively large sovereign debts or fiscal deficits, or both, which has led to tensions in the international debt capital markets and interbank lending market and euro exchange rate volatility during the year.
The situation in Portugal is particularly challenging. The resignation of the Prime Minister on March 24, 2011 has triggered a political crisis which outcome is difficult to predict. Opposition parties rejected government’s latest austerity measures, forcing him to resign and most likely to lead a government with limited powers until elections. In this context, the possibility of a deepening of Portuguese economic problems, triggering the need to resort to a European rescue package cannot be ruled out. The exposure of BBVA to Portugal accounted for arround 1% of our total assets and 2% of the Group’s outstanding credit as of December 31, 2010.
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The publication in July 2010 of the 2010 EU-wide stress test exercise coordinated by the Committee of European Banking Supervisors (CEBS), in cooperation with the European Central Bank (ECB), in the euro area partially alleviated pressures and helped restore confidence in the Spanish and European banking sector. However, new and stricter European stress tests are expected to be published in June or July of 2011, and the results of such tests may place additional pressure on the Spanish and European banking sector. Economic conditions remains uncertain in Spain and the European Union and may deteriorate in the future, which could adversely affect the cost and availability of funding available to Spanish and European banks, including BBVA, or otherwise adversely affect BBVA’s business, financial condition and results of operations.
We may be subject to more stringent capital requirements and new restrictions on our operation and business.
The new Basel III capital standards will be phased in from January 1, 2013 until January 1, 2019. The European transposition of these standards will be done through the CRD IV after the summer of 2011 but the Spanish Government has anticipated Basel III with the Royal-Decree Law 2/2011, of February 18 (RD-L 2/2011), as part of a wider plan of the Spanish Government for the strengthening of the financial sector. See “Item 4. Information on the Company — Supervision and Regulation — Capital Requirements.” There can be no assurance that implementation of these new standards, or any other new regulation, will not adversely affect our ability to pay dividends, or require us to issue securities that qualify as regulatory capital or to liquidate assets or curtail business, which may have adverse effects on our business, financial condition and results of operations.
This unexpected plan of the Spanish government is good news for the Spanish financial sector because it provides a clear roadmap for the continuation of the financial system restructuring, encouraging private capital participation and conversion into banks. It will also contribute to dispels market fears about the solvency of the Spanish financial market. Moreover new RD-L 2/2011 also paves the way for a good performance in the next EU stress tests (June) as well as compliance with Basel III, at least Basel III-2013 even if it requires as core capital a milder definition of what is considered in Basel III as common equity.
In addition, our operations may also be affected by other recent regulatory reforms in response to the financial crisis, including the enactment in the United States in July 2010 of the Dodd-Frank Act. Among other changes, beginning five years after enactment of the Dodd-Frank Act, the Federal Reserve Board will apply minimum capital requirements to U.S. intermediate bank holding company subsidiaries ofnon-U.S. banks. Although there remains uncertainty as to how regulatory implementation of this law will occur, various elements of the new law may cause changes that impact the profitability of our business activities and require that we change certain of our business practices, and could expose us to additional costs (including increased compliance costs). These changes may also cause us to invest significant management attention and resources to make any necessary changes.
Risks Relating to Latin America
Events in Mexico could adversely affect our operations.
We are substantially dependant on our Mexican operations, with approximately 39%37% and 32% of our net income attributed to parent company in 20082010 and 2009, respectively, being generated in Mexico. We face several types of risks in Mexico which could adversely affect our banking operations in Mexico or the Group as a whole. Given the internationalization of the financial crisis, the Mexican economy is feelingfelt the effects of the global financial crisis and the adjustment process that was underway is accelerating. This process has intensified since the end of the third quarter of 2008 and we expect ithas continued to continue at least duringintensify due to the first half of 2009 through a lower growth rate in production and employment.high dependence on the U.S. economy. The initial effects are in manufacturing and in those areas with a greater degree of exposure to the international environment, although internal demand is also showing clear signs of moderation. In 2011 we expect that macro economic recovery will only be maintained if there is a sustained U.S. recovery resulting in higher exports and foreign investment. Domestic demand will not recover unless there is a gradual recovery of confidence and employment, interest rates remain low and an expansionary fiscal policy is in place. We cannot rule out the possibility that in a more unfavorable environment for the global economy, and particularly in United States or otherwise growth in Mexico wouldwill be negative in 2009.2011.
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OurBeginning in 2008 and through 2009 and 2010, our mortgage and especially our consumer loan portfolio in Mexico started showing higher delinquency rates and, ifrates. If there is a persistent increase in unemployment rates, which could arise if there is a more pronounced or prolonged slowdown in the United States, it is likely that such rates will further increase.
In addition, although the Bank of Mexico (“Banxico”) is expected to maintain its current monetary stance throughout 2011, any tightening of monetary policy could make it more difficult for new customers of our mortgage and consumer loan products in Mexico to service their debts, which could have a material adverse effect on the business, financial condition, cash flows and results of operations of our Mexican subsidiary or the Group as a whole. In addition, price regulation and competition could squeeze the profitability of our Mexican subsidiary. For example, in order to increase competition and to deepen credit, Mexican financial regulators could elect to introduce price distortions not linked to the true risk premium. If this were to occur, the market share of our Mexican subsidiary could decrease given its risk management standards.
Finally, political instability or social unrest could weigh on the economic outlook, which could increase economic uncertainty and capital outflows. Additionally, if the approval of certain structural reforms is delayed, this could make it more difficult to reach potential growth rates in the Mexican economy.
Any of these risks or other adverse developments in laws, regulations, public policies or otherwise in Mexico may adversely affect the business, financial condition, operating results and cash flows of our Mexican subsidiary or the Group as a whole.
Our Latin American subsidiaries’ growth, asset quality and profitability may be affected by volatile macroeconomic conditions, including significant inflation and government default on public debt, in the Latin American countries where they operate.
The Latin American countries in which we operate have experienced significant economic volatility in recent decades, characterized by slow growth, declining investmentrecessions, foreign exchange crises and significant inflation. This volatility has resulted in fluctuations in the levels of deposits and in the relative economic strength of various segments of the economies to which we lend. Negative and fluctuating economic conditions, such as a changing interest rate environment, also affect our profitability by causing lending margins to decrease and leading to decreased demand for higher-margin products and services. In addition, significant inflation can negatively affect our results of operations as was the case in the year ended December 31, 2009, when as a result of the characterization of Venezuela as a hyperinflationary economy, we recorded a €90 million decrease in our net income attributed to parent company.
In spite of good inflation results in recent months, medium-term concerns are growing due to high domestic demand growth rates in almost every country. Argentina, Brazil, Peru and possibly Chile are getting close to eliminating excess production capacity, which means they will need to curb growth in demand over the coming months to avoid inflation pressures. Countries that are pursuing inflation targets have accordingly adjusted inflation rates. Although rates are not yet close to neutral levels, central banks have stopped or reduced the pace of interest rate increases earlier than we had expected.
Negative and fluctuating economic conditions in some Latin American countries could result in government defaults on public debt. This could affect us in two ways: directly, through portfolio losses, and indirectly, through
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instabilities that a default in public debt could cause to the banking system as a whole, particularly since commercial banks’ exposure to government debt is generally high in several Latin American countries in which we operate.
While we seek to mitigate these risks through what we believe to be conservative risk policies, no assurance can be given that our Latin American subsidiaries’ growth, asset quality and profitability will not be further affected by volatile macroeconomic conditions in the Latin American countries in which we operate.
Latin American economies can be directly and negatively affected by adverse developments in other countries.
Financial and securities markets in Latin American countries in which we operate are, to varying degrees, influenced by economic and market conditions in other countries in Latin America and beyond. Negative developments in the economy or securities markets in one country may have a negative impact on other emerging market economies. These developments may adversely affect the business, financial condition, operating results and cash flows of our subsidiaries in Latin America. In particular,These economies are also vulnerable to conditions in global financial markets and especially to commodities price fluctuations, and these vulnerabilities usually reflect
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adversely in financial market conditions through exchange rate fluctuations, interest rate volatility and deposits volatility. For example, at the current internationalbeginning of the financial crisis is startingthese economies were hit by a simultaneous drop in commodity export prices, a collapse in demand for non-commodity exports and a sudden halting of foreign bank loans. Even though most of these countries withstood the triple shock rather well, with limited damage to their financial sectors, we have seen non performing loan ratios rise as well as contraction in bank deposits and loans. As a negative impact on Latin American markets as commodities prices have declined significantly and risk premiums and funding costs have increased.global economic recovery remains fragile, there are risks of a relapse. If the global financial crisis continues and, in particular, if the effects on the Chinese and U.S. economies intensify the business, financial condition, operating results and cash flows of our subsidiaries in Latin America are likely to be materially adversely affected.
We are exposed to foreign exchange and, in some instances, political risks as well as other risks in the Latin American countries in which we operate, which could cause an adverse impact on our business, financial condition, results of operations.
We operate commercial banks in nineten Latin American countries and our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social and political conditions. We are confronted with different legal and regulatory requirements in many of the jurisdictions in which we operate. These include, but are not limited to, different tax regimes and laws relating to the repatriation of funds or nationalization or expropriation of assets. Our international operations may also expose us to risks and challenges which our local competitors may not be required to face, such as exchange rate risk, difficulty in managing a local entity from abroad, and political risk which may be particular to foreign investors. For example, on January 8, 2010, the Venezuelan monetary authorities decided to devalue the Bolivar fuerte by 50% from a fixed exchange rate of 2.15 per U.S. dollar since its creation to 4.30 per U.S. dollar. Our presence in theseLatin American markets also requires us to respond to rapid changes in market conditions in these countries. We cannot assure you that we will continue to succeed in developing and implementing policies and strategies that are effective in each country in which we operate or that any of the foregoing factors will not have a material adverse effect on our business, financial condition and results of operations.
We are also a major player in the private pension sector in place in most of these countries and are, therefore, affected by changes in the value of pension fund portfolios under management, as well as general financial conditions and the evolution of wages and employment. For example, while recovering in 2009 and 2010, most pension fund management companies (“AFPs” for their Spanish acronym) experienced a sharp contraction and posted negative results in 2008 as a consequence of the fall in the value of their portfolios, showing the vulnerability of the sector.
Regulatory changes in Latin America that are beyond our control may have a material effect on our business, financial condition, results of operations and cash flows.
A number of banking regulations designed to maintain the safety and soundness of banks and limit their exposure to risk are applicable in certain Latin American countries in which we operate. Local regulations differ in a number of material respects from equivalent regulations in Spain and the United States.
Changes in regulations that are beyond our control may have a material effect on our business and operations, particularly in Venezuela.Venezuela and Argentina. In addition, since some of the banking laws and regulations have been recently adopted, the manner in which those laws and related regulations are applied to the operations of financial institutions is still evolving. No assurance can be given that laws or regulations will be enforced or interpreted in a manner that will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
Private pension management companies are heavily regulated and are exposed to major risks concerning changes in those regulations in areas such as reserve requirements, fees and competitive conditions. They are also exposed to political risks. For example, at the end of 2008 the government of Argentina passed a law transferring pension funds, including those managed by our subsidiary in Argentina, from private managers to the government entity managing the remainder of the formerly public pension system.
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Risks Relating to Other Countries
Our strategic growth in Asia exposes us to increased regulatory, economic and geopolitical risk relating to emerging markets in the region, particularly in China.
In 2008 and 2009, we further increased our ownership interest in members of the CITIC Group, a Chinese banking group, by increasing our stake in CITIC International Financial Holdings Ltd (“(“CIFH”) up to 29.7% and China
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CITIC Bank (“(“CNCB”) up to 10.07%. CIFH is a banking entity headquartered in Hong Kong and previously listedCNCB is a banking entity headquartered in China. On December 3, 2009, we announced the exercise of the option to purchase 1,924,343,862 additional shares of CNCB. Furthermore, on April 1, 2010, after obtaining the Hong Kong stock exchange.corresponding authorizations, the purchase of an additional 4.93% of CNCB’s capital was finalized for €1,197 million. See “Item 4. Information on the Company — Business Overview — Global Businesses (WholesaleWholesale Banking and Asset Management)”Management”.
As a result of our expansion into Asia, we are exposed to increased risks relating to emerging markets in the region, particularly in China. The Chinese government has exercised, and continues to exercise, significant influence over the Chinese economy. Chinese governmental actions concerning the economy and state-owned enterprises could have a significant effect on Chinese private sector entities in general, and on CNCBCIFH or CIFHCNCB in particular.
We also are exposed to regulatory uncertainty and geopolitical risk as a result of our investments in Asia. Changes in laws or regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, could adversely affect our investments. Moreover, Asian economies can be directly and negatively affected by adverse developments in other countries in the region and beyond.
Any of these developments could have a material adverse effect on our investments in Asia or the business, financial condition, results of operations and cash flows of the Group.
Our continued expansion in the United States increases our exposure to the U.S. market.
Our expansion in the United States makes us more vulnerable to developments in this market, particularly the real estate market. In the years prior to 2008, the sound economic growth, the strength of the labor market and a decrease in interest rates in the United States caused an increase in the demand for mortgage loans. This had repercussions in housing prices, which also rose significantly. During the summer of 2007, the difficulties experienced by the subprime mortgage market triggered a real estate and financial crisis, which has had significant affectedeffects on the real economy and which has resulted in significant by volatility and uncertainty in markets and economies around the world. As we have acquired entities or assets in the United States, particularly BBVA Compass and certain deposits and liabilities of Guaranty Bank (“Guaranty”), our exposure to the U.S. market has increased. In addition, adverseAdverse changes to the U.S. economy in general, orand the U.S. real estate market in particular, has hadresulted in our determination to write down goodwill related to our acquisition of BBVA Compass and record additional loan loss provisions in the year ended December 31, 2009 in the aggregate amount of €1,050 million (net of taxes). Similar or worsening economic conditions in the United States could continue to have a material adverse effect on the business, financial condition, results of operations and cash flows of our subsidiary BBVA Compass, or the Group as a whole, and could require us to provide BBVA Compass with additional capital.
Risks Related to Acquisition of Shareholding in Garanti
We may incur unanticipated losses in connection with the acquisition of Garanti.
As of March 22, 2011, we have acquired a 24.89% interest in Türkiye Garanti Bankası A.Ş. (“Garanti”) (the “Garanti acquisition”). In preparing the terms of the Garanti acquisition, we relied on certain information regarding Garanti which may be inexact, incomplete or outdated. Furthermore, we made various assumptions regarding the future operations, profitability, asset quality and other matters relating to Garanti which may prove to be incorrect.
Garanti’s performance under International Financial Reporting Standards or Accounting Practice Regulations as promulgated by the Banking Regulation and Supervision Agency of Turkey (“BRSA”) may differ materially from our expectations or the expectations of research analysts, which could result in a decline in the market value of Garanti shares and the value of our proposed investment in Garanti.
In addition, we may be exposed to unknown risks relating to such acquisition that could significantly affect the value of our investment in Garanti. Furthermore, a variety of factors that are partially or entirely beyond our and
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Garanti’s control, such as negative market developments, increased competition, governmental responses to the global financial crisis and regulatory changes, could have a material adverse effect on Garanti’s business, financial condition and results of operations, which could result in a decline in the market value of Garanti shares and the value of our proposed investment in Garanti.
Since Garanti operates primarily in Turkey, economic and other developments in Turkey may have a material adverse effect on Garanti’s business, financial condition and results of operations and the value of our proposed investment in Garanti.
Most of Garanti’s operations are conducted, and most of its customers are located, in Turkey.
Accordingly, Garanti’s ability to recover on loans, its liquidity and financial condition and its results of operations are substantially dependent upon the political, economic, financial and geopolitical conditions prevailing in or that otherwise affect Turkey. If the Turkish economy is adversely affected by, among other factors, a reduction in the level of economic activity, continuing inflationary pressures, devaluation or depreciation of the Turkish Lira, a natural disaster or an increase in domestic interest rates, then a greater portion of Garanti’s customers may not be able to repay loans when due or meet their other debt service requirements to Garanti, which would increase Garanti’s past due loan portfolio and could materially reduce its net income and capital levels. Furthermore, political uncertainty or instability within Turkey and in some of its neighboring countries has historically been one of the potential risks associated with investments in Turkish companies. In addition, a further deterioration in the EU accession process may negatively affect Turkey. Any of these risks could have a material adverse effect on Garanti’s business, financial condition and results of operations and the value of our proposed investment in Garanti.
Despite Turkey’s increased political and economic stability in recent years and the implementation of institutional reforms to conform to international standards, Turkey is an emerging market and it is subject to greater risks than more developed markets. Financial turmoil in any emerging market could negatively affect other emerging markets, including Turkey, or the global economy in general. Moreover, financial turmoil in emerging markets tends to adversely affect stock prices and debt securities prices of other emerging markets as investors move their money to more stable and developed markets, and may reduce liquidity to companies located in the affected markets. An increase in the perceived risks associated with investing in emerging economies in general, or Turkey in particular, could dampen capital flows to Turkey and adversely affect the Turkish economy and, as a result, Garanti’s business, financial condition and results of operations and the value of our proposed investment in Garanti.
Foreign exchange, political and other risks relating to Turkey could cause an adverse effect on Garanti’s business, financial condition and results of operations and the value of our proposed investment in Garanti.
As a result of the consummation of the Garanti acquisition, we will be exposed to foreign exchange, political and other risks relating to Turkey. For example, currency restrictions and other restraints on transfer of funds may be imposed by the Turkish government, Turkish government regulation or administrative polices may change unexpectedly or otherwise negatively affect Garanti, the Turkish government may increase its participation in the economy, including through expropriations or nationalizations of assets, or the Turkish government may impose burdensome taxes or tariffs. The occurrence of any or all of the above risks could have a material adverse effect on Garanti’s business, financial condition and results of operations and the value of our proposed investment in Garanti.
In addition, a significant majority of Garanti’s total securities portfolio is invested in securities issued by the Turkish government. In addition to any direct losses that Garanti might incur, a default, or the perception of increased risk of default, by the Turkish government in making payments on its securities or the possible downgrade in Turkey’s credit rating would likely have a significant negative impact on the value of the government securities held in Garanti’s securities portfolio and the Turkish banking system generally and make such government securities difficult to sell, and may have a material adverse effect on Garanti’s business, financial condition and results of operations and the value of our proposed investment in Garanti.
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We have entered into a shareholders’ agreement with Doğuş Holding A.Ş. in connection with the Garanti acquisition.
We have entered into a shareholders’ agreement with Doğuş in connection with the Garanti acquisition. Pursuant to the shareholders’ agreement, we and Doğuş have agreed to manage Garanti through the appointment of board members and senior management Doğuş is one of the largest Turkish conglomerates and has business interests in the financial services, construction, tourism and automotive sectors. Any financial reversal, negative publicity or other adverse circumstance relating to Doğuş could adversely affect Garanti or BBVA. Furthermore, we must successfully cooperate with Doğuş in order to manage Garanti and grow its business. It is possible that we and Doğuş will be unable to agree on the management or operational strategies to be followed by Garanti, which could adversely affect Garanti’s business, financial condition and results of operations and the value of our proposed investment and lead to our failure to achieve the expected returns on our acquisition of Compass.benefits from the Garanti acquisition.
Regulatory risksRisks
Governmental responses to recent market disruptions may be inadequate and may have unintended consequences.
In response to recent market disruptions,the global financial crisis, legislators and financial regulators have taken a number of steps to stabilize the financial markets. These steps have included various fiscal stimulus programs and the provision of direct and indirect assistance to distressed financial institutions, assistance by banking authorities in arranging acquisitions of weakened banks and broker/dealers, implementation of various programs by regulatory authorities to provide liquidity to various credit markets and temporary prohibitions on short sales of certain financial institution securities. Additional legislative and regulatory measures are under considerationwere adopted in various countries around the world, including, for example in the United States, where measures with respect to modifications of residential mortgages and an overhaul of the financial regulatory framework are under consideration. The overall effects of these and other legislative and regulatory efforts on the financial markets are uncertain and may not have the intended stabilization effects.were adopted. In addition to these actions, various regulatory authorities in member states of the European Union and the United States have takentook regulatory steps to support financial institutions, to guarantee deposits and to seek to stabilize the financial markets. Should these or other legislative or regulatory initiatives fail to stabilizePremature removal of such support measures as a result of perceived improvement in the financial markets our business,and concerns over the sustainability of public deficits, could result in a prolonged economic downturn and further instability in the financial condition, results of operations, cash flow and business plans could be adversely affected.markets.
In addition, whileregulatory proposals in the European Union and the United States, have pointed at splitting wholesale and retail activities, increasing minimum capital requirements, establishing a tax for systemic or relevant financial institutions, among other proposals. While these and previous measures have been proposed or taken to support the markets, they may have unintendedcertain consequences on the global financial system or our businesses, including reducing competition, increasing the general level of uncertainty in the markets or favoring or disfavoring certain lines of business, institutions or depositors. We cannot predict the effect of any other regulatory changes resulting from recent market disruptionsthe global financial crisis and any
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such changes can have a material adverse effect on our business, financial condition, results of operations, cash flow and business plans. Some of the most significant concerns are related to new liquidity standards, an increase of the minimum capital ratio or the regulation of systemic institutions, which may seriously affect our business model.
| |
| ITEM 4. | INFORMATION ON THE COMPANY |
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| A. | History and Development of the Company |
Our legal name is Banco Bilbao Vizcaya Argentaria, S.A. BBVA’s predecessor bank, (BBV), was incorporated in Spain as a limited liability company (a “sociedad anónimanima”or“S.A. “S.A.”) under the Spanish Corporations Law on October 1, 1988. BBVA was formed as the result of a merger by absorption of Argentaria into BBV that was approved by the shareholders of each institution on December 18, 1999 and registered on January 28, 2000. Itis incorporated for an unlimited term. The Company conducts its business under the commercial name “BBVA”. BBVA is registered with the Commercial Registry of Vizcaya (Spain). It has its registered office at Plaza de San Nicolás 4, Bilbao, 48005, Spain, telephone number +34 91 3746201. BBVA’s agent in the U.S. for U.S. federal securities law purposes is José María García Meyer (15 South 20th Street, Birmingham, AL 35233,Emilio Juan de las Heras Muela (1345 Avenue of the Americas, 45th Floor New York, NY 10105, telephone number + 1(205) 297 -3000 and fax number +1(205)+1297-3116)(212) 728-1660). BBVA is incorporated for an unlimited term.
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Recent Developments
Directors of Banco de Crédito Local de España, S.A. and BBVA Factoring E.F.C., S.A. (both sole shareholder companies), in their respective board meetings held on January 26, 2009, and Banco Bilbao Vizcaya Argentaria, S.A., in its board meeting of January 27, 2009, approved the proposal to merge Banco de Crédito Local de España, S.A. and BBVA Factoring E.F.C., S.A. into Banco Bilbao Vizcaya Argentaria, S.A. and the subsequent transfer all of their assets and obligations to BBVA.
The merger agreement was approved at the annual general meeting of shareholders on March 13, 2009.
Capital Expenditures
Our principal investments are financial: subsidiaries and affiliates. The main capital expenditures from 20062008 to the date of this Annual Report were the following:
2010
On April 1, 2010, after obtaining the corresponding authorizations, the purchase of an additional 4.93% of CNCB’s capital was finalized for €1,197 million. As of December 31, 2010, BBVA had a 29.68% holding in CIFH and a 15% holding in CNCB.
In May 2010, the Group announced that it had reached an agreement to acquire the Credit Uruguay Banco, from a French financial group, through its subsidiary BBVA Uruguay. On January 18, 2011, after obtaining the corresponding authorizations, the purchase of Credit Uruguay Banco was completed for approximately €78 million.
In November 2010, BBVA signed an agreement with the Doǧus group and the General Electric group, the primary shareholders of Garanti, a Turkish bank, concerning the acquisition of a 24.89% holding of the common stock of Garanti, for a total price of $5,838 million, which is equivalent to a payment of approximately €4,195 million (considering the exchange rate as of October 29, 2010 at $/€ 1.3916).
The agreement with Doǧus group includes an agreement for the joint management of Garanti and the appointment of some of the members of its board of directors. In addition, BBVA has an option to purchase an additional 1% of Garanti during the five years following the completion of the acquisition.
As of March 22, 2011 after having obtained the necessary authorizations, BBVA has completed the acquisition of 24.8902% of the total issued share capital of Garanti.
2009
On August 21, 2009, through our subsidiary BBVA Compass, we acquired certain assets and liabilities of Guaranty from the U.S. Federal Deposit Insurance Corporation (the “FDIC”) through a public auction for qualified investors. BBVA Compass acquired assets, mostly loans, for $11,441 million (approximately €8,016 million) and assumed liabilities, mostly customer deposits, for $12,854 million (approximately €9,006 million). These acquired assets and liabilities represented 1.5% and 1.8% of our total assets and liabilities on the acquisition date.
In addition, the purchase included a loss-sharing agreement with the FDIC under which the latter undertook to assume 80% of the losses on up to the first $2,285 million of the loans purchased by us and up to 95% of the losses, if any, on the loans exceeding this amount. This commitment has a maximum term of either five or ten years, depending on the portfolios.
2008
During 2008, there were no significant changes in the Group, except for the merger of our banking subsidiaries in Texas (Laredo National Bank, Inc., Texas National Bank, Inc., and State National Bank, Inc.) into BBVA Compass.
In 2008, we further increased our ownership interest in members of the CITIC Group, a Chinese banking group, by increasing our stake in CIFH up to 29.7% and CNCB up to 10.07%. CIFH is a banking entity headquartered in Hong Kong and previously listed on the Hong Kong stock exchange. Pursuant to an agreement between us and Gloryshare Investments Limited (the controlling shareholder of CIFH), CIFH’s shares were delisted from the Hong Kong Stock Exchange on November 5, 2008.
2007
On February 16, 2007, BBVA entered into a definitive agreement to acquire 100% of the share capital of Compass, an American banking group previously listed on NASDAQ, which conducts its main business activity in Alabama, Texas, Florida, Arizona, Colorado and New Mexico. On September 7, 2007, after obtaining the mandatory authorizations, we acquired 100% of the share capital of Compass. The consideration paid to former Compass stockholders for the acquisition was $9,115 million (€6,672 million). We paid $4,612 million (€3,385 million) in cash and delivered 196 million newly-issued shares.
In September 2007, we increased our ownership interest in Metropolitan Participations, S.L. to 40.67%, with an investment of €142 million.
On January 3, 2007, pursuant to the agreement entered into on June 12, 2006, and after obtaining the mandatory authorizations, we closed the transaction to purchase State National Bancshares Inc. (“State National Bancshares”), an American banking group based in Texas, with an investment of $488 million (€378 million).
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On December 22, 2006, we reached an agreement with CITIC Group to develop a strategic alliance in the Chinese market. In March 2007, in accordance with this agreement we acquired 4.83% of CNCB with an investment of €719 million. We also acquired a purchase option that permitted us to acquire up to 9.9% of the capital of the bank. Additionally we acquired a 14.58% ownership interest in CIFH. The price for this ownership interest was €483 million.
2006
On November 30, 2006 we acquired all the shares of Maggiore Fleet S.p.A., an Italian vehicle rental company, for €70.2 million. Goodwill of €35.7 million arose from this acquisition.
On November 10, 2006, pursuant to the agreement entered into on June 12, 2006 and after obtaining the mandatory authorizations, we acquired Texas Regional Bancshares through an investment of $2,141 million (€1,674 million). The goodwill recognized as of December 31, 2006 amounted to €1,257 million.
On July 28, 2006, we acquired 100% ownership of Uno-E Bank, S.A (“Uno-E”). The process to acquire all of Uno-E shares commenced on January 10, 2003 when Telefónica España, S.A., pursuant to the agreement entered into by Terra Networks, S.A. (subsequently merged into Telefónica España, S.A.) and BBVA, proceeded on January 10, 2003 to start selling to BBVA its 33% ownership interest in Uno-E for an aggregated amount of €148.5 million.
In May 2006, we acquired a 51% ownership interest in Forum, a Chilean company specializing in car purchase financing, through the Chilean entities Forum Distribuidora, S.A. and Forum Servicios Financieros, S.A. (which in turn own all the shares of ECASA, S.A.), giving rise to the incorporation of BBVA Financiamiento Automotriz. The goodwill recognized as of December 31, 2006 as a result of this transaction amounted to €51 million.
On March 3, 2006, we purchased 0.43% of BBVA Chile’s share capital for 2,318 million Chilean pesos (€3.7 million), increasing our share capital in BBVA Chile to 67.05%. As our share capital in BBVA Chile is higher than two thirds of BBVA Chile’s total share capital, we, in compliance with Chilean legislation, launched a public tender offer for all of BBVA Chile’s share capital. The public tender offer was effective from April 3, 2006 to May 2, 2006. After the acceptance of the public tender offer by 1.13% of BBVA Chile’s outstanding shares, our share capital in BBVA Chile increased to 68.18%.
Capital Divestitures
Our principal divestitures are financial, in subsidiaries and in affiliates. The main capital divestitures from 20062008 to the date of this Annual Report were the following:
2010
During 2010, we sold our participations in certain non-strategic associates and also we have concluded the liquidation and merger of several issuers, financial services and real estate affiliates. Additional information on these transactions is included in Appendix V to the Consolidated Financial Statements.
2009
During 2009, we sold our participations in certain non-strategic associates (including our 22.9% stake in Air Miles España, S.A.) which gave rise to no significant gains.
As a part of the reorganization process in the United States and Mexico, we concluded the liquidation and merger of several affiliates of BBVA Compass and of BBVA Bancomer.
2008
In March, 2008, we sold our 5.01% interest in the Brazilian bank, Banco Bradesco, S.A.(“Bradesco”) to Bradesco’s principal shareholders, Cidade de Deus — Companhia Comercial de Participaçoes and Fundaçao Bradesco, for a market price of €863 million. This sale gave rise to a gain of €727 million.
2007
In February 2007, we sold our 5.01% capital share in Iberdrola, S.A. This sale gave rise to a gain of €883 million.
2006
On June 14, 2006, we sold our 5.04% capital share in Repsol YPF, S.A. (“Repsol”). The selling procedure was executed through the closing and settlement of hedging equity swaps previously contracted. This sale gave rise to a gain of €523 million.
On May 19, 2006, we sold our ownership interest in the share capital of Banca Nazionale del Lavoro, S.p.A. (“BNL”) to BNP Paribas, for a price of €1,299 million following our adhesion on May 12, 2006, as shareholder of
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BNL, to the public tender offer launched by BNP Paribas to acquire 100% of BNL’s capital. The sale gave rise to a gain of €568 million.
On April 5, 2006, we sold our ownership interest of 51% in the share capital of Banc Internacional d’Andorra, S.A. (“Andorra”) to the rest of the shareholders of the entity, the Andorran founding partners of the bank, for a price of €395 million.
BBVA is a highly diversified international financial group, with strengths in the traditional banking businesses of retail banking, asset management, private banking and wholesale banking. We also have a portfolio of investments in some of Spain’s leading companies.
Business Areas
During 2007 and for purposes of the consolidated financial statements included in the 2007 20-F BBVA’s organizational structure was divided into the following five business areas: Spain and Portugal; Global Businesses; Mexico and the United States; South America; and Corporate Activities. In December 2007, BBVA’s board of directors approved a new organizational structure for the BBVA Group, which was implemented as of January 1, 2008 and is the basis for the financial statements included herein: Spain and Portugal; Global Businesses (also named Wholesale Banking and Asset Management); Mexico; the United States; South America; and Corporate Activities. The transition from the 2007 Business Areas to the 2008 Business Areas has affected principally the Mexico and United States business area, which is now split into respective business areas and the Spain and Portugal area and the Global Businesses area which exchanged certain portfolios and units. The financial information for2010, we focused our business areas as of and for the years ended December 31, 2008, December 31, 2007 and December 31, 2006 presented in this Annual Report onForm 20-F have been prepared on a uniform basis, consistent with our organizational structure in 2008 in order to provide aperiod-on-period comparison. Due to the adoption of the new organizational structure, BBVA’s financial information by business area included in this Annual Report onForm 20-F is not directly comparable to its financial information by business area included in the 2007 20-F.
In 2008, the Group focused its operations on six major business areas:areas, which are further broken down into business units, as described below:
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| | • | Spanish retail networkMexico |
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| | • | Corporate and business bankingSouth America |
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| • | Other units: Consumer finance, European insurance, BBVA Portugal and Dinero Express |
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| • | Global Businesses (Wholesale Banking and Asset Management) |
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| • | Corporate and investment banking |
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| • | Global markets |
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| • | Asset management |
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| • | Industrial and real estate holdings |
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| • | Asia |
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| • | Banking businesses |
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| • | Pensions and insurance |
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| • | BBVA Compass banking group |
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| • | Other units: BBVA Puerto Rico, BTS and BBVA Bancomer USA |
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| • | Banking businesses |
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| | • | PensionsWholesale Banking and insuranceAsset Management |
The foregoing description of our business areas is consistent with our current internal organization. The financial information for our business areas for 2008, 2007 and 2006 presented below has been prepared on a uniform basis, consistent with our organizational structure in 2008. Unless otherwise indicated, the financial information provided below for each business area does not reflect the elimination of transactions between companies of the Group within one business area or between different business areas, since we consider these transactions to be an integral part of each business area’s activities. For purposes of the presentation and discussion of our consolidated operating results in “Item 5. Operating and Financial Review and Prospects”, however, such intra- and inter-business area transactions are eliminated and the eliminations are generally reflected in the operating results of theCorporate Activitiesbusiness area.
In 2010, certain changes were made in respect of the criteria followed in 2009 to reflect the composition of our business areas. These changes affected:
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| • | The United States and Wholesale Banking & Asset Management (WB&AM). In order to give a global view of the Group’s business in the United States, we decided to include the New York branch activities, formerly |
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| | |
| | within WB&AM, in the United States area. This change is consistent with BBVA’s current method of reporting its business units |
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| • | South America and Corporate Activities. In 2009, when the Venezuelan economy was considered hyperinflationary for accounting purposes for the first time, this impact was registered under Corporate Activities. In 2010, an adjustment for the hyperinflation experienced in Venezuela has been recorded in the South America area which was also applied to the 2009 financial statements to maintain the figures of our business areas comparable. Therefore, the 2009 results of these business segments have been restated to make them comparable to their 2010 results. |
In addition, we have modified the allocation of certain costs relating mainly to rent expenses and, to a lesser extent, sales of IT services from the corporate headquarters to the business areas. As a result of this modification, data for the years 2009 and 2008 has been revised to ensure that the information provided for the different periods is comparable.
The financial information for our business areas for 2009 and 2008 presented below has been prepared on a uniform basis, consistent with our organizational structure in 2010.
During 2009, several factors occurred with respect to the Venezuelan economy that made us reconsider the accounting treatment we applied in the translation of the financial statements of our subsidiaries in that country: the inflation index reached in 2009, the cumulative inflation index over the last three years and restrictions in the official foreign exchange market. Consequently, according to the requirements of International Accounting Standard IAS 21, we considered the Venezuelan economy as hyperinflationary for 2009. In 2009, the characterization of Venezuela as a hyperinflationary economy, implied a €90 million decrease in our net income attributed to parent company.
On January 8, 2010, the Venezuelan monetary authorities decided to devaluate the Bolivar fuerte by 50% from a fixed exchange rate of 2.15 per U.S. dollar since its creation to 4.30 per U.S. dollar. On January 19, 2010 the Venezuelan authorities announced that they would grant a preferential rate of 2.60 Bolivar fuerte per dollar for new items, among which payment of dividends is included, as long as the request for Authorization of Acquisition of Foreign Exchange was filed before January 8, 2010.
Despite the uncertainty related to the final exchange rate of Venezuelan currency (Bolivar fuerte) compared to euro, the devaluation has had no significant impact on our consolidated financial statements in 2010 due to the fact that our investments in Venezuela represent approximately 2% of our consolidated assets and 1% of our consolidated equity as of December 31, 2010.
The following table sets forth information relating to net income attributed to parent company for each of our business areas for the years ended December 31, 2008, 20072010, 2009 and 2006:2008:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | % of Net Income/(Loss)
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| | | Income/(loss) Attributed to the
| | % of Income/(loss) Attributed to
| | | Net Income/(Loss) Attributed
| | Attributed
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| | | Parent Company | | Parent Company | | | to Parent Company | | to Parent Company | |
| | | Year Ended December 31, | | | Year Ended December 31, | |
| | | 2008 | | 2007 | | 2006 | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | | 2010 | | 2009 | | 2010 | |
| | | (In millions of euros) | | | (In millions of euros) | | (In percentage) | |
| |
| Spain and Portugal | | | 2,625 | | | | 2,381 | | | | 1,884 | | | | 52 | % | | | 39 | % | | | 40 | % | | | 2,070 | | | | 2,275 | | | | 2,473 | | | | 45 | % | | | 54 | % | | | 49 | % |
| Global Businesses (Wholesale Banking and Asset Management) | | | 754 | | | | 896 | | | | 859 | | | | 15 | % | | | 15 | % | | | 18 | % | |
| Mexico | | | 1,938 | | | | 1,880 | | | | 1,711 | | | | 39 | % | | | 31 | % | | | 36 | % | | | 1,707 | | | | 1,357 | | | | 1,930 | | | | 37 | % | | | 32 | % | | | 38 | % |
| South America | | | | 889 | | | | 780 | | | | 727 | | | | 19 | % | | | 19 | % | | | 14 | % |
| The United States | | | 211 | | | | 203 | | | | 64 | | | | 4 | % | | | 3 | % | | | 1 | % | | | 236 | | | | (950 | ) | | | 308 | | | | 5 | % | | | (23 | )% | | | 6 | % |
| South America | | | 727 | | | | 623 | | | | 509 | | | | 14 | % | | | 10 | % | | | 11 | % | |
| Wholesale Banking and Asset Management | | | | 950 | | | | 853 | | | | 722 | | | | 21 | % | | | 20 | % | | | 14 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 6,255 | | | | 5,983 | | | | 5,027 | | | | 125 | % | | | 98 | % | | | 106 | % | | | 5,852 | | | | 4,315 | | | | 6,160 | | | | 127 | % | | | 103 | % | | | 123 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Corporate Activities | | | (1,235 | ) | | | 143 | | | | (291 | ) | | | (25 | )% | | | 2 | % | | | (6 | )% | | | (1,246 | ) | | | (105 | ) | | | (1,140 | ) | | | (27 | )% | | | (2 | )% | | | (23 | )% |
| | | | | | | | | | | | | | | | | | | | | | | �� | | | | | |
Net income attributed to parent company | | | 5,020 | | | | 6,126 | | | | 4,736 | | | | 100 | % | | | 100 | % | | | 100 | % | |
Income Attributed to the Parent Company | | | | 4,606 | | | | 4,210 | | | | 5,020 | | | | 100 | % | | | 100 | % | | | 100 | % |
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The following table sets forth information relating to net interest income for each of our business areas for the years ended December 31, 2008, 20072010, 2009 and 2006.2008
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Net Interest Income | | | Net Interest Income | |
| | | Year Ended December 31, | | | Year Ended December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2010 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| Spain and Portugal | | | 4,828 | | | | 4,391 | | | | 3,800 | | | | 4,675 | | | | 4,910 | | | | 4,784 | |
| Global Businesses (Wholesale Banking and Asset Management) | | | 745 | | | | (7 | ) | | | 18 | | |
| Mexico | | | 3,716 | | | | 3,505 | | | | 3,220 | | | | 3,688 | | | | 3,307 | | | | 3,707 | |
| South America | | | | 2,495 | | | | 2,566 | | | | 2,149 | |
| The United States | | | 1,332 | | | | 763 | | | | 280 | | | | 1,794 | | | | 1,679 | | | | 1,471 | |
| South America | | | 2,199 | | | | 1,746 | | | | 1,376 | | |
| Wholesale Banking and Asset Management | | | | 831 | | | | 982 | | | | 618 | |
| | | | | | | | | | | | | | | |
Subtotal | | | 12,820 | | | | 10,398 | | | | 8,694 | | | | 13,483 | | | | 13,445 | | | | 12,729 | |
| | | | | | | | | | | | | | | |
| Corporate Activities | | | (1,134 | ) | | | (770 | ) | | | (556 | ) | | | (163 | ) | | | 437 | | | | (1,043 | ) |
| | | | | | | | | | | | | | | |
Net interest income | | | 11,686 | | | | 9,628 | | | | 8,138 | | | | 13,320 | | | | 13,882 | | | | 11,686 | |
| | | | | | | | | | | | | | | |
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Spain and Portugal
The Spain and Portugal business area focuses on providing banking services and consumer finance to private individuals, enterprises and businessesinstitutions in Spain and Portugal.
The principal figures relating to this business area as of December 31, 2010 and December 31, 2009 were:
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| • | Loans and advances to customers were €200,930 million as of December 31, 2010, an increase of 0.9% from €199,190 million as of December 31, 2009. This amount is particularly relevant if we take into account the adverse economic environment in which it was generated, with weak consumption, stagnation of mortgage lending and gradual deleveraging of companies. In this context, mortgage lending in the household segment grew by 4.0% in 2010. In addition, exposure to sectors and products of greater risk declined in 2010. |
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| • | Customers deposits were €103,469 million as of December 31, 2010 compared to €91,826 million as of December 31, 2009, an increase of 12.7%. During 2010, we attracted more than €12,000 million in customers deposits, which have a high level of stability and an average cost that is lower than the market (0.8% compared to the sector’s 1.4% in 2010). |
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| • | Mutual fund assets under management were €21,455 million as of December 31, 2010, a decrease of 28.2% from €29,898 million as of December 31, 2009. The decrease is due to the increasing demand for other products, such as time deposits and the decreasing returns in the stock markets. The main decreases were related to those assets under management with lowest added value, such as short-term fixed-income, money market funds, long-term fixed-income and those that do not involve active management. |
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| • | Pension fund assets under management were €9,986 million as of December 31, 2010, a decrease of 3.3% from €10,329 million as of December 31, 2009. |
The main business units included in the Spain and Portugal business area are:
| | |
| | • | Spanish Retail Network: manages individual customers, high net-worth individuals (private banking) and small companies and businessesretailers in the Spanish market; |
| |
| | • | Corporate and Business Banking: manages business with small and medium enterprises (“(“SMEs”), large companies, institutions and developers in the Spanish market; |
|
| • | Consumer Finance; and |
| |
| | • | European Insurance:Other units: manages the insurance business in Spain and Portugal; |
| | |
| | • | Consumer Finance: manages renting and leasing business, credit to individual and to enterprises for consumer products and internet banking; |
| | |
| | • | BBVA Portugal: manages the banking business in Portugal; and |
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| • | Dinero Express: specializes in the immigrant segment. |
The principal figures relating to this business area as of December 31, 2008 and December 31, 2007 were:
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| | • | Total net lending was €199,297 million, as of December 31, 2008, an increase of 0.4% from €198,524 as of December 31, 2007, reflectingEuropean Insurance: manages the significant slowdowninsurance business in lending growth in Spain. |
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| • | Total customer deposits were €100,893 million as of December 31, 2008 compared to €91,546 million as of December 31, 2007, an increase of 10.2%. |
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| • | Mutual funds under management were €31,270 million as of December 31, 2008, a decrease of 26.4% from €42,469 million as of December 31, 2007, reflecting declines in portfolio volumesSpain and withdrawals of mutual fund assets. |
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| • | Pension fund assets under management were €9,603 million as of December 31, 2008, a decrease of 4.7% from €10,072 million as of December 31, 2007.Portugal |
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Spanish Retail Network
The area’s business activity in 2010 took place within the framework of the launch of the “Plan Uno”, which involves a new banking distribution model that seeks to achieve sustainable business growth, under the premise that “BBVA only wins when the customer benefits”. The implementation of this plan has been based on the capabilities of a leading-edge technological platform that has made it possible, on the one hand, to generate customized commercial products with extra benefits based on the degree of loyalty, and on the other hand to integrate “physical” and “virtual” banking. Customer focus has been aimed at launching various asset and deposit products which have improved the area’s positioning.
In investment, the increase in mortgage demand by individual customers reflects the positive acceptance of the products “Sí, damos hipotecas” (Yes, we do give mortgages),“Ven a Casa” (Come home) and“Hipoteca On Line BBVA” (BBVA on-line mortgage). In the consumer finance segment,“Crédito Coche+Seguro gratis” (Car loan+free insurance) and the home improvements line have been launched. New consumer and mortgage payment protection insurance products have also been designed. In on-balance sheet funds, loyalty has increased and new deposits have been attracted from the transactional schemes“Ventajas Uno” (Benefits One) and“Cuenta Uno” (Account One), which have resulted in over 3 million individual customers and self-employed people being exempt from paying fees and commissions; the two new“Quincenas del Libretón” (Passbook Fortnights); a new“La Jornada de tu Vida” (Day of your Life) promotion and stable saving products, such as: a new edition of the“Depósitos Fortaleza” (Strength Deposits)“Depósito BBVA Uno” (BBVA One Deposit) and“Depósito Líder” (Leader Deposit). In off-balance sheet funds, the most significant products are the guaranteed mutual funds“BBVA Acción Europa” (BBVA Europe Share), “BBVA Ranking”, “BBVA 4x3”,“BBVA Gama Solidez” (BBVA Soundness Range) and“Planes Renta” (Income Plans).“BBVA Tranquilidad 14B” (BBVA Peace of Mind 14B),“BBVA Tranquilidad 14C” (BBVA Peace of Mind 14C) and“BBVA Tranquilidad 16” (BBVA Peace of Mind 16) have been added to the pension fund range.
Various campaigns have been launched in order to boost product contracting over the Internet such as a new edition of“Crédito Coche” (Car Loan),“Depósito BBVA Uno Online” (BBVA One Deposit On-line),“Compra de Vivienda con Garantía Hipotecaria” (Home Purchase with Secured Loan) and“Venta de Activos” (Sale of Assets). A dynamic microsite has also been developed for offering commercial products to companies and institutions. In this latter segment, BBVA has been awarded public contracts by CIEMAT (Research Center for Energy, Environment and Technology), BOE (Official Gazette), State Council, General Treasury of the Social Security, Madrid Regional Government, AECID (Spanish Agency for International Cooperation) and Spanish Retail Network unit servicesFleet of Official Cars.
Specific segments of individual customers, such as the young and over 59s, have benefited from the use of social networks and the promotional campaign “59+ Program”, with financial and non-financial needsproducts tailored to their needs.
The management model of households, professional practices, retailersBBVA Patrimonios, based on principles of guidance, closeness to the customer, differentiation and small businesses. It also managesinnovation, is focused on winning new customers. To this end,we have implemented“Planifica” (Plan), a tax advice tool, along with thehigh-net-worth segment of private customers. As of December 31, 2008, the loan portfolio of this unit was €100,906 million and customer funds were €112,528 million. new“Centro de Soluciones de Inversión” (Investment Solutions Center), which have enabled 1,600 new guided portfolios to be opened.
In order to offer better customer service, in 2008 we engaged in a thorough reorganization process of the commercial network, making it possible for us to increase our commercial capacity and work more closely with our customers. To this end, each group of officesbusinesses,“Plan Convenios” (Agreement Plan) has been given a pool of managers specializedput in given units, and the quality of the operating processes has been improved by concentrating these administrative tasks in Retail Banking Centers, thereby enhancing our efficiency.
In 2008, we launched several new products and promotionsplace with three different management models:“Plan Asociaciones” (Association Plan) aimed at the Spanish retail customer, including loans with pre-authorized limits for theprimary representative associations of self-employed workers (National Association of Self-employed Workers, Professional and mortgage loans directed towards younger customers. In 2008, we also carried out theSelf-employed Worker Union, Hotel and Restaurant Trade Federation, Cab Driver Association, Tobacco Dealer Association and Lottery Ticket Seller Association),Ven a Casa-200“Plan Colegios Profesionales”campaign whereby we offered €200 per month for one year to customers who transfered their mortgage from one of our competitors to us. We also offered a wide variety of deposits to our existing customers, including BBVADepósito Doble(Double Deposit), theDepósito CrecienteBBVA (Growing Deposit) (Professional Association Plan) (Pharmacists, Dentists, Architects, Attorneys, Lawyers and Tax Accountants) and theDepósito Fortaleza“Plan Franquicias”(Strength Deposit) and broadened our range of guaranteed products to include BBVA Top 4, BBVA Top 5, BBVA Inflation andFondplazo 2009 B (Franchise Plan).
BBVA Patrimonios, directly manages high net worth private clients, and has continued to increase its range of products particularly those products designed for business people who are also clients of the corporate and business banking unit. BBVA Patrimonios has also launched new products related to (structured) deposits as well as lending (portfolio-financing plan). In addition, it has opened two new wealth management centers, in the Canary Islands and Galicia. In the family office sphere, tourism projects have been approved within the Real Estate México I, II and III
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mutual funds, and rights have been issued by these funds. In addition, BBVA Patrimonios has provided its clients with many investment opportunities in the solar energy industry.
BBVA Patrimonios launched theMás Cobertura Profesional(More Professional Coverage) insurance plan, which provides disability coverage for independent contractors and risk coverage with the three-year Stockpyme plan for small businesses, as well as the PoS Voucher for merchants and theCompromiso Negocios(Business Commitment) andCompromiso Autónomos (Independent Contractor Commitment) plans.
Corporate and Business Banking
The Corporate and Business Banking unit manages our business with SMEs, large companies and institutionsBBVA has confirmed its leading role in the Spanish market through specialized networks. Asdistribution of December 31, 2008, the loan portfolio had risen 1.8% to €87,651 million and customer funds increased 6.8% from December 31, 2007 to €31,292 million.
In the sphere of corporate and business banking, we have marketed new lines of financing in collaborationcredit under preferential conditions with the Instituto de Crédito Oficial (signing of the ICO-2010 agreement, with the lines“ICO”)Inversión Nacional” (National Investment),“Inversión Internacional” (International Investment),“Emprendedores” (Entrepreneurs),“ICO liquidez” (ICO Liquidity), including“ICO-FuturE”,“ICO-Economía Sostenible” (ICO-Sustainable Economy) and those intended for the manufacturing
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sector, foreign and domestic trade, and tourism, among others. In addition, BBVA was one of the two awardees of the“ICO SME 2008 Line,Directo” (ICO Direct) line for SMEs and theself-employed workers. It has also expanded its range of products, relatedwhich include:“Límite No Comprometido” (Uncommitted Limit),“Cuenta de Crédito Flexible” (Flexible Charge Account),“Bonos TPV BEC” (TPV BEC Bonds),“Depósito BEC Plus” (BEC Plus Deposit),“Cuenta de Crédito Vinculación” (Loyalty Charge Account) and“Cuenta de Crédito Tipo Cero” (Zero Rate Charge Account). Finally, the insurance offer (“D&O” and “Environmental Responsibility”) and non-financial services (principally “Training”, “General Expenses”, “Vehicles” and “Security”) improved once again in 2010. Agreements have also been signed with the European Investment Bank (EIB) to risk coverage has been broadened. The most noteworthy ofhelp companies carry out their business activity, with the new productslines“PYMES” (SMEs) and services include financing for solar energy facilities (leasing and renting), new types of payment cards including Ingreso Express (Express Entry), Tarjeta Recarga Empresas (Business Recharge Card) and Tarjeta Solred Empresas (Business Solred Card), new solutions in electronic banking such “Energías factoring and Autocobro Express (Express Auto-Collection), and nonfinancial services for enterprises (BBVA Solutions Catalog): Activo a RRHH (Human Resources Assets), management subsidies for innovation, environmental consulting and Solium and new forms of customer relationships (such as the Premium Human Resources Program and Enterprise Newsletter)Renovables” (Renewable Energy).
Other Units
Consumer Finance
ThisThe Consumer Finance unit manages online banking, consumer finance credit cards and leasing plans. These activities are conducted byon-line banking, via Uno-e, BBVA Finanzia S.p.A. (“Finanzia”) and other companiessubsidiaries in Spain, Portugal and Italy.
InAs of December 31, 2010, loans and advances to customers of the Consumer Finance we have acquired 50%Unit in Spain was €5,546 million, a decrease of Rentrucks, an industrial vehicle rental company, complementing our business renting and financing business. In terms1.5% from December 31, 2009. The car loan unit, through prescription, was able to respond to the market’s needs with the“Cero Pelotero” campaign that facilitated the purchase of forms of payment, we have launched a credit card for Inditex Portugal,automobiles after the first co-branded card launched by BBVA outside of Spain. In terms of deposit-related products, we launched a promotion featuring a cash refund of 20%withdrawal of the payrollrelevant government aid program. At the same time, it was able to increase cross-selling mainly as a result of currentits high level of assurance.
BBVA Portugal
As of December 31, 2010, total loans and new clients who domicile their payrolladvances to customers in BBVA Portugal rose to €7,448 million (an increase of 22.8%year-on-year), boosted by the increase in mortgages (an increase of 26.0%year-on-year) and three receipts,corporate lending (an increase of 16.2%year-on-year) as a result of the various campaigns launched throughout the year, such asHipoteca Blue BBVAandNos Adaptamos. Customer funds in 2010 closed with an increase of 10.7%, due to the advantagesincreased demand for customer deposits under management (an increase of an account without fees16.7%year-on-year). In Italy, loans and with all transaction services. We have also launched several new deposit products with varying maturity and interest rate features.advances to customers reached €663 million as of December 31, 2010 (an increase of 41.3%year-on-year).
European Insurance
Our European Insurance unit’s activities are conductedThis unit manages an extensive range of insurances through various insurance companies that provide direct insurance, reinsurancebrokerage and reassurance, using different networks.
A total of €1,084 million was written in premiums over 2010, of which €900 million corresponds to the individual business (life and non-life) and €184 million to groups. The life and accident insurance brokering servicesbusiness remained positive, contributing €365 million in Spainpremiums (an increase of 9.1%year-on-year), boosted by the activity in payment protection products. BBVA Seguros is the market leader in individual life and Portugalaccident insurance policies. In non-life policies, the €186 million (an increase of 1.7%year-on-year) from multi-risk home and market products for different typesfire insurance stand out. The volume of customers (private individuals, SMEs, retailers, professional service firmsfunds under management in private savings policies reached €8,140 million, of which €3,115 million correspond to individual clients and providers and self-employed individuals) through this unit’s branch offices.the rest to company insurance schemes. Moreover, BBVA has brokered premiums of €180 million in 2010.
Mexico
The Europeanprincipal figures relating to this business area as of December 31, 2010 and December 31, 2009 were:
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| • | Loans and advances to customers were €34,743 million as of December 31, 2010, an increase of 26.9% (an increase of 11.0% at constant exchange rates) from €27,373 million as of December 31, 2009. |
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| • | Customer deposits were €37,013 million as of December 31, 2010, an increase of 15.7% (an increase of 1.2% at constant exchange rates) from €31,998 million as of December 31, 2009. |
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| • | Mutual fund assets under management were €15,341 million as of December 31, 2010, a significant increase of 45.5% (an increase of 27.2% at constant exchange rates) from €10,546 million as of December 31, 2009. |
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| • | Pension fund assets under management were €12,781 million as of December 31, 2010, an increase of 34.3% (an increase of 17.4% at constant exchange rates) from €9,519 million as of December 31, 2009. |
The Mexican peso exchange rate as of December 31, 2010, appreciated against the euro, increasing 14.4% compared to the exchange rate as of December 31, 2009. Comparing average exchange rates, the Mexican currency also increased to the euro 12.3%year-on-year. The aforementioned changes had a positive impact on the area’s financial statements and activity. See “Item 5. Operating and Financial Review and Prospects — Operating Results — Factors Affecting the Comparability of our Results of Operations and Financial Condition”. To provide a better picture of how the business has evolved the comments below will refer toyear-on-year change at constant exchange rates unless otherwise indicated.
The business units included in the Mexico area are: Retail and Corporate banking, and Pensions and Insurance.
Retail and Corporate banking
In 2010, BBVA Bancomer put in place the“2010-2012 Growth Plan”, the overriding goals of which are: the customer being the focus of the business, improved product distribution and the attainment of greater process efficiency. Technology and innovation are an integral part of this plan. The Bank launched the “Bancomer Express account”, the first cell phone account in Mexico linked to the customer’s cell phone and debit card, which offers the option of making transfers between accounts, withdrawing money, checking balances and buying in stores. This account gives new customers access to financial services for the low-income segment, as it charges no fees or commissions for account administration and maintenance, and requires no minimum balances. Another example of technological innovation was the launch of the“Bancomer Cell Phone” product, which has promoted the use of virtual channels.
As for the distribution network, BBVA Bancomer had 6,760 ATMs as of December 31, 2010, 523 more than as of December 31, 2009. The productivity of the branch network has increased by 17%year-on-year. One of the reasons for this is the introduction ofpracticajas(a new kind of ATM), which reduce the volume of operations in branches and increase the sale of products. The following mortgage products were launched:“Ahorra y Estrena” (Save and Move In), a mortgage loan for people with variable income that enables them to finance their home with monthly installments equivalent to the balances of their monthly savings; and the“Alia2 Plus” loan in partnership with Fovissste (Housing Fund of the Security and Social Services Institute for State Workers), which allows affiliates to increase the amount of their loan and buy a home at a fixed interest rate with set repayment amounts. The Bank also launched the product “Bancomer Cofinavit AG”in similar conditions, this time in partnership with Infonavit (National Housing Fund for Workers Institute). In 2010, for the third year in a row, BBVA Bancomer was awarded the 2009 National Housing Prize. This time the award was granted for offering a variety of solutions as a response to the crisis, supporting more than 50,000 affected customers.
In the business segment, the unit specializing in micro-enterprises and small businesses launched the“Micro-Business Card”, with lines of credit from 20,000 to 180,000 Mexican pesos, designed to finance mainly their working capital. This product is backed by guarantees from Nacional Financiera. The risk is therefore shared with the Federal Government.
In customer deposits, there was a new edition of the“Quincena del Ahorro”(Two Weeks of Saving) campaign, through which 1 million prizes were given out for the first time, more than €572 million of funds were attracted and over 300,000 new accounts were opened. We should also note the“Equipa tu Negocio” (Equip your Business) campaign for attracting demand deposits in the SMEs segment, pursuant to which more than 37,800 clients were awarded prizes.
In exchange-traded funds (ETF), BBVA Bancomer launched an ETF called “BRTRAC” which invests in Brazil’s top 15 companies. It also launched “BBVANDQ”, which offers customers the opportunity to invest in a fund that replicates the NASDAQ in the United States. In addition, the Bank launched the“Fondo Triple Líquido” (Triple Liquidity Fund), offering capital protection, monthly reinvestment of interest and money availability every 28 days. Five new international funds were launched, expanding the range available to include new regions and
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countries (in particular, Asia not including Japan, Latin America, and other emerging countries), technological companies and dollar-denominated government debt. We believe BBVA Bancomer has the most comprehensive international fund portfolio on the market.
Pensions and Insurance unit
In 2010, Seguros BBVA Bancomer continued with its model focused on offering products differentiated by segment and sales channel which have enabled it to uphold its leadership within the bancassurance segment, with a 41% market share as of September 30, 2010 (source: AMIS). Similarly, it became the country’s fourth largest insurance company, of the 67 companies operating in the country, and the number two in terms of net profit, generating 19.5% of the sector’s earnings in Mexico.
In 2010, the sales network issued 1,078,069 policies, the highest figure since 2003. This growth is based primarily on car insurance products and on“VidaSegura Preferente” (Preferential SecureLife) and“HogarSeguro” (SecureHome).
Outside the branch network, alternative channels continued to grow and reached an all-time sales record with approximately 64,000 policies in force as of December 31, 2010.
South America
The South America business area includes our banking, insurance and pension businesses in South America.
The principal figures relating to this business area as of December 31, 2010 and December 31, 2009 were:
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| • | Loans and advances to customers were €30,408 million as of December 31, 2010, an increase of 20.4% (an increase of 21.9% at constant exchange rates) from €25,256 million as of December 31, 2009. |
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| • | Customer deposits were €33,496 million as of December 31, 2010, an increase of 14.3% (22.1% at constant exchange rates) from €29,312 million as of December 31, 2009. |
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| • | Mutual fund assets under management were €3,063 million as of December 31, 2010, an increase of 17.0% (4.0% at constant exchange rates) from €2,617 million as of December 31, 2009. |
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| • | Pension fund assets under management were €48,800 million as of December 31, 2010, an increase of 35.2% (17.1% at constant exchange rates) from €36,104 million as of December 31, 2009. |
The following is a brief description of our operations on acountry-by-country basis in the South America business area. The operating results described below refer to each individual unit’s contribution to the South America business area’s operating results, unless otherwise stated.
The business units included in the South America business area are:
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| • | Retail and Corporate Banking;includes banks in Argentina, Chile, Colombia, Panama, Paraguay, Peru, Uruguay and Venezuela; |
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| • | Pension businesses;includes pensions businesses in Bolivia, Chile, Colombia, Ecuador and Peru ; |
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| • | Insurance businesses;includes insurance businesses in Argentina, Chile, Colombia, and Venezuela. |
Retail and Corporate Banking
Argentina
The Argentinean economy performed well in 2010, with GDP growth of 8%, boosted by the good performance of both the foreign sector and domestic demand, as well as a relatively stable political climate. Inflation, however, remains high.
In 2010, BBVA Banco Francés has broadenedimplemented important initiatives to improve relations with its portfoliocustomers, both individuals (through the alliance with the entertainment producerTime for Fun, the agreement with LAN, the Francés GO campaign and the launch of the first car leasing scheme) and companies (through the launch of credit
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lines for SMEs, greater range of products in 2008, both in non-life insurance,for the agricultural segment and an agreement with the launchingBMW Group). In funds under management, variable-interest deposits were launched (linked, respectively, to commodity prices, stock market indices and currency trading rates).
Theyear-on-year growth in lending was 43.0% as of December 31, 2010, There were notable increases in consumer finance (with an increase of 88 basis points) and credit cards (with an increase of 79 basis points),and no deterioration in asset quality (while the NPA ratio continued to be lower than the average NPA of our peers in Argentina, according to our estimates). Customer funds increased by 22.7% and were highly concentrated in transactional accounts (which increased by 22.2% year-on -year).
The net interest income of BBVA Banco Frances, which grewyear-on-year by 16.5% in 2010, while net fees and commissions increased by 15.6%. Operating expenses increased by 28.5% in 2010, affected by the upturn in inflation and the expansion projects launched by the unit. The high asset quality has enabled loan-loss provisioning to remain at similar levels to 2009. The net attributable profit of this unit in 2010 was €111 million.
Chile
The Chilean economy grew by over 5% in 2010, mainly as a result of the strength of domestic demand and the favorable impact of high commodity prices, particularly copper. Inflation as of December 31, 2010 was less than 3%, within the Central Bank’s target. The Central Bank has gradually reduced its monetary incentives over 2010 and raised the interest rate by 300 basis points to 3.5%. In this environment BBVA Auto InsuranceChile has strengthened its positioning in the retail businesses by transforming its branch network and Family Protection insurancethe virtual channels, as well as the commercial and Más Cobertura Profesional (More Professional Coverage)distribution models. As a result, the sales volume has doubled, the product range has grown and customer satisfaction levels have improved.
The loan book grew by 12.2% in2010 year-on-year. There was a notable increase in credit cards (which increased by 80.4%year-on-year) through new products(“Signature and MasterCard”), as well as life-savings insurance,associations with the Systematic Savings Plans, individual savings products with tax advantages,other brands (“Enjoy”) and variable yield income products, which offer yieldsstores. Increased lending led to an increase in market share in 2010 of 46 basis points in consumer finance and credit cards and 17 basis points in mortgages, according to our estimates. The consumer finance unit Forum strengthened its leading position and extended its product range and penetration in its different brands. Finance experienced an increase of 31% in2010 year-on-year, without any deterioration in risk indicators (the NPA ratio was 1.9% as of December 31, 2010). In customer funds, current accounts were up by 22.1%, a gain of 13 basis points in market share of transactional deposits, according to our estimates. Long — term bonds were issued in an aggregate amount of over €300 million.
BBVA Chile and Forum contributed a net attributable profit of €115 million in 2010 (an increase of 41.9%year-on-year). This increase was mainly attributable to the market situation at any given time, with a guaranteed minimum.increase in net interest income (which increased by 12.1%year-on-year) and net fees and commissions (an increase of 27.6%), even though net trading income was below 2009 levels, which included high capital gains from the sale of equity holdings. Expenses increased 7.4% in 2010,year-on-year. In addition, loan-loss provisions decreased by 39.4%year-on-year due to the improved asset quality.
BBVA PortugalColombia
Colombia also experienced an improvement of its economy, particularly in the second half of 2010, due to a significant increase in public and private investment, as well as a notable recovery in exports and the maintenance of interest rates at all-time lows. As a result, GDP grew by 5% in 2010.
Under the guidelines set out by thePlan Unidos (“United Plan”) and the“New Model of Customer Service”, BBVA Portugal managesColombia has performed well, in both lending and funds. This has led to ayear-on-year gain in market share of 17 basis points in 2010, according to our bankingestimates. Mortgage loans and corporate lending played a significant role in this respect, with increases in the market share of 78 and 16 basis points, respectively. In business with individual customers the product range was extended (in cards, real estate leasing and payroll bank accounts and others), while in Portugal.the corporate segment the Bank’s presence in the agroindustrial sector was strengthened and theCash Nettool was consolidated as a method of customer cash management.
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In customer funds, there was ayear-on-year growth of 22.3% in current and savings accounts. In 2010, BBVA Colombia was recognized as the “Bank of the Year” in the country by The Banker. It also received an award as the best Colombian bank for good corporate governance practices, social responsibility and ethics from Latin Finance.
The remarkable fall in interest rates over the year had a negative effect on the results in the sector in 2010. BBVA Colombia has offset much of this impact by greater growth in lending and by applying a strategy of strict defense of spreads, which has limited the decrease in net interest income (which decreased by 4.9% year-on year). Expenses remained in check, with a slight increase of 1.4%. There was a significant limitation of loan-loss provisions (which decreased by 32.4%year-on-year), which benefited from the reduction in non-performing assets (which decreased by 26.6%year-on-year). As of December 31, 2008, BBVA Portugal’s loan portfolioa result, the net attributable profit in 2010 amounted to €5,736€184 million, an increase of 15.1%12.0% from €4,983the previous year.
Panama
The Panamanian economy has improved over the year, boosted by the recovery in international trade, higher liquidity and its achievement of an investment grade rating. BBVA Panamá has focused its strategy on improving its recognition in the market through various sponsorship deals (including the Panamanian Soccer League) that have supported the product range for individuals, helped by the opening of a new branch. In the corporate segment, efforts have been aimed at the agricultural sector and the Free Zone, with improvements in COMEX and insurance products.
Lending increased in 2010 by 6.8% over the year and customer funds increased by 5.8% over the same period. In 2010, BBVA Panama had a net attributable profit of €31 million, with a positive performance in 2007, supportedboth income and expenses.
Paraguay
The Paraguayan economy performed very well in 2010, boosted by the strong agricultural sector and the reactivation plans implemented by the country’s economic authorities. In 2010, BBVA Paraguay showed commercial strength, with the launch of numerous commercial campaigns, in both the corporate and institutions and retail businesses. Two highlights were the strategic alliance with John Deere, in corporate and institutions, and the launch of the VIP segment in retail banking. Eight new branches were opened over the year as part of an expansion plan which will continue in 2011.
The foregoing has enabled ayear-on-year growth in lending of 45.2% in 2010 and an increase in customer funds of 24.3%, without any deterioration of the NPA ratio, which continues at minimum levels, or profitability.
BBVA Paraguay had a net attributable profit of €39 million in 2010, an increase of 21.7%year-on-year. Euromoney named it the “Best Bank” in the country for the fourth year in a row.
Peru
In 2010, the Peruvian economy grew almost by 10%, mainly as a result of the recovery in private consumption, high levels of business confidence and favorable financing conditions. This recovery has led the economic authorities to start a cycle of rises in policy rates with the aim of keeping inflationary pressures in check.
BBVA Banco Continental undertook numerous commercial initiatives in all segments in 2010 and increased its sales capacity with an 8% increase in its branch network, a 23% increase in the number of ATMs and a 184% increase in its “express” agent network. As a result, lending portfolio increased by 19.5%year-on-year and customer funds by 20.6%. There was a particularly notable increase in consumer finance (35 basis points) and corporate lending (46 basis points). Our market share in customer funds increased by 203 basis points according to SMEs.our estimates. In the private individuals segment, mainly as a result of the“Mundo Sueldo”product, the number of customers who deposit their payroll into their accounts increased in 2010 by 23%year-on-year, and the number of companies making salary payments directly increased by 38%year-on-year. The VIP individuals segment saw the launch of the“Black”card in partnership with MasterCard. In Corporate and Investment Banking, the aim was to create closer links with customers, with improved financial advice and a broader range of products. A number of hedging derivatives were launched for corporate customers for this purpose.
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In 2010, the bank was recognized as the Best Bank in Peru by Global Finance and the Best Foreign Trade Bank in Peru by Trade Finance. It also ranked third as Best Bank in Latin America in the ranking prepared by América Economía, and ranked third in the sustainability ranking drawn up by Management & Excellence and Latin Finance.
In 2010, BBVA Banco Continental had a net attributable profit of €134 million (an increase of 6.5%year-on-year), mainly as a result of the effect of improved economic activity on revenues. Net interest income grew by 4.8% in 2010, despite the downward pressure on spreads, and net fees and commissions were up by 12.7%year-on-year, with a high recurrent component. Expenses were up by 9.7%, a moderate rate given the expansion in the commercial network, while the efficiency ratio remained low (30.6%). The NPA ratio as of December 31, 2010 remained low (1.9%), with no pressure on the volume of loan-loss provisioning.
Uruguay
The positive performance of the foreign sector, particularly due to agricultural and livestock production, has contributed to GDP growth of 9% in 2010. The most important event of the year for BBVA Uruguay was the agreement to purchase Crédit Uruguay. The deal has converted the unit in the second biggest financial institution in the country. Within its organic business, BBVA Uruguay has shown commercial strength in 2010, in both the individuals and corporate segments. In the corporate segment, the bank has focused its efforts on the agricultural and livestock business, with the launch of new products such as leasing, the“Cuenta Pymes”(SME account) and special financing lines.
In 2010, the banking business benefited from the recovery in economic growth, although it continued to suffer from an environment of low interest rates. In this context BBVA Banco Uruguay generated a net attributable profit of €3 million.
Venezuela
Despite high oil prices in 2010, the Venezuelan economy posted a negative growth, due mainly to the limitation on currency flows settled on the official exchange market, a deteriorating business environment, restrictions on electricity in the first half of 2010 and sluggish private demand.
Despite this situation, BBVA Banco Provincial has continued to invest in improving infrastructures with the aim of guaranteeing security, adapting spaces for the preferential treatment of customers with disabilities, and carrying on with the extension of the“express” zones. In addition, it launched the“BBVA Provinet”and“Provinet Móvil”portals to provide customers easier access to accounts. Of particular importance in the individuals segment were the credit card initiatives, with the launch of numerous promotions in partnership with VISA and MasterCard, as well as the re-launch of theCrédit Autoproduct in partnership with General Motors and Chrysler. A new fund called“Nómina Estándar”was launched aimed at low-income individuals. It introduces a “popular card” as a way of payment adapted to the financial needs of this customer segment.
The loan book increased over the year 2010 by 41.0%. Customer funds increased 16.3%in 2010 by 46.6%year-on-year. In 2010 BBVA Banco Provincial generated a net attributable profit of €115 million (an increase of 23.0%year-on-year), based on the excellent performance of business and positive handling of spreads, which has been reflected in the progress of net interest income (an increase of 28.9%year-on-year). As a result of the positive performance of other revenues and a moderate increase in expenses (below the rate of inflation), from December 31, 2007, as customers moved their money from mutual fundsthe efficiency ratio has improved to deposits.48.0%. In 2010, BBVA Banco Provincial was once again named Best Bank in Venezuela by three prestigious publications: Euromoney (for the fourth year in a row), Global Finance (also for the fourth year in a row) and The Banker.
Pensions and Insurance
In 2010 the Pensions and Insurance unit contributed with a net attributable profit of €191 million, 28.4% more than in the previous year. There was positive progress in the pension-fund business (€126 million, an increase of 19.3% year-on year) and the insurance business (€64 million, an increase of 50.9%year-on-year).
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Dinero ExpressPensions
The Dinero Express branch network, which specializesyear was positive for the pension fund business, despite the more moderate performance of the financial markets compared to 2009. The recovery of the labor markets in the immigrant segmentregion has improved the volume of fund revenues, which has in Spain,turn boosted net fee income in the sector. This has been in an environment in which the impact of regulatory changes in some countries has been negative. At the close of the year, assets under management by all fund managers amounted to €48,800 million (an increase of 17.1%year-on-year), while the funds attracted over the year were up by 16.6% from 2009. BBVA thus remains the biggest pension business group in the region according to our estimates.
In 2010, AFP Provida in Chile transformed its customer relationship models, with particular focus on pension advice and building customer loyalty, strengthening links with the highest-income segments and providing a range of new voluntary pension savings products. It generated a profit of €89 million, 20.8% more than in the previous year, mainly as a result of increased fund revenues (an increase of 9.9%year-on-year) and its positive effect on the institution’s net fee income (an increase of 21.5%year-on-year). Funds under management increased by 14.0% in 2010. AFP Horizonte in Colombia increased its assets by 24.3%, its number of pension-savers by 3.8%, and its fund revenues by 32.9%.Profit in 2010 was set up to attract€26 million. Finally, AFP Horizonte in Peru had a profit of €16 million, and also increased its fund revenues (an increase of 9.0%year-on-year), number of pension savers (an increase of 5.3%year-on-year) and assets under management (an increase of 25.8%year-on-year).
Insurance
The insurance business also had a very positive year. The BBVA companies were very buoyant commercially with the launch of new customers who make money transfers and to provide them with products and services suitedtheir new distribution and sales channels were consolidated. Thanks to their needs. It has proved an effective entry pointthis, the volume of written premiums by all the companies (excluding those in Colombia, which decreased for new customers. As part of a strategy adopted atstrategic reasons) increased by 28.2% over the start of 2008, BBVA has been gradually closing branches of Dinero Expressyear. Combined with the goalmoderate levels of integrating immigrants intoclaims and expenses, the Spanish retail network as an additional customer segment. Although it now has fewer outletsresult was a net attributable profit of €64 million, of which €26 million were from the unit increasedGrupo Consolidar in Argentina, €17 million from the number of money transfers 10%Group’s companies in terms of euro amount transferred to €543Chile, €13 million from the Colombian companies and €8 million from Seguros Provincial in 2008 despite unfavorable market conditions associated with the adverse economic situation.Venezuela.
Global Businesses (Wholesale Banking and Asset Management)The United States
The Global Businesses (Wholesaleprincipal figures relating to this business area as of December 31, 2010 and December 31, 2009 were:
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| • | Loans and advances to customers were €38,408 million as of December 31, 2010, a decrease of 4.1% (a decrease of 11.1% at constant exchange rates) from €40,056 million as of December 31, 2009. |
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| • | Customer deposits were €42,343 million as of December 31, 2010, a decrease of 31.9% (36.9% at constant exchange rates), compared to €62,200 million as of December 31, 2009. This is mainly as a result of the fall in term deposits in the New York branch. |
On August 21, 2009, through our subsidiary BBVA Compass, we acquired certain assets and liabilities of Guaranty from the FDIC through a public auction for qualified investors. BBVA Compass acquired assets, mostly loans, for $11,441 million (approximately €8,016 million) and assumed liabilities, mostly customer deposits, for $12,854 million (approximately €9,006 million). These acquired assets and liabilities represented 1.5% and 1.8% of our total assets and liabilities on the acquisition date. The agreement with the FDIC limits the credit risk associated with the acquisition. The purchase included a loss-sharing agreement with the FDIC under which the latter undertook to assume 80% of the losses, if any, on up to the first $2,285 million of the loans purchased by us and up to 95% of the losses on the loans exceeding this amount. This commitment has a maximum term of either five or ten years, depending on the type of portfolio. This investment, which included 164 branches and 300,000 customers in Texas and California, offers us an opportunity to strengthen our United States’ banking franchise in the retail market, while limiting our investment risk.
The business units included in the United States area are:
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| • | BBVA Compass Banking Group |
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| • | Other units: BBVA Puerto Rico and Bancomer Transfers Services (“BTS”) |
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BBVA Compass Banking Group
BBVA Compass represents approximately 74% of the area’s total assets and garners the retail and corporate banking business in the United States (excluding Puerto Rico).
As of December 31, 2010 the loan portfolio was down 7.1%year-on-year to €31,256 million. The fall in lending is the result of reduced finance for real estate construction and the planned run-off in consumer finance for car dealerships and students. This drop has in part been offset by the increase in residential real estate, which was up 34.7% over the year; and to a lesser extent, by commercial loans, which were up by 11.2%year-on-year. It is worth noting that $3,294 million in new residential mortgages was generated during the year, 22.3% up from the previous year. In all, the residential real estate portfolio accounted for 20.8% of total lending in BBVA Compass as of December 31, 2010, compared to 14.8% in 2009, and commercial loans accounted for 29.7% (25.7% the previous year). In contrast, real estate construction was down 8.1 percentage points to 12.6% and consumer finance was down 2.2 percentage points to 16.3%.
Customer deposits decreased from €33,105 million as of December 31, 2009 to €32,493 million as of December 31, 2010 (a decrease of 1.8% year-on year at constant exchange rates) as a results of the fall in term deposits (a decrease of 21%year-on-year). However, lower-cost funds, as current accounts, increased by 7.7%, and as of December 31, 2010 represented 73.4% of all the unit’s funds compared to 66.9% as of December 31, 2009. This change in the deposit mix, has resulted in a reduction of the average cost of deposits from 1.03% in 2009 to 0.65% in 2010.
The mix in the loan portfolio and deposits has led to an increase in customer spread of 16 basis points over the year. This is because the interest rates accrued on customer deposits have fallen more than the yield on loans (despite the change in the mix towards items with lower risk and spread). As a result, the net interest income of €1,566 million is 7.1% up from 2009, while net fees and commissions have increased by 1.0% over the same period. Although both net trading income and the other gains (losses) item were down, gross income ended the year at €2,168 million, 2.7% up from 2009. However, the increased operating expenses, due to the process of integrating Guaranty, led to a 1.7% fall in the operating income over the previous year to €816 million. Impairment on financial assets improved significantly, reflecting the exceptional measures taken in 2009 and the risk control mechanisms implemented over 2010. As a result, the net attributable profit increased to €149 million (compared to a loss of €1,063 million in 2009, or a loss of €42 million without one-off charges, at constant exchange rates).
Below are the highlights of each of the units making up BBVA Compass:
As of December 2010,Commercial Banking, the unit that handles business with SMEs, managed a loan portfolio of €15,927 million (down 13.9%year-on-year) and customer deposits of €8,789 million (an increase of 7.2%year-on-year). This is the result of a reduction in finance for real-estate developers (a decrease of 45.2%year-on-year), which was partly offset by a notable effort made by BBVA Compass with respect to SMEs. A number of products have been launched aimed at SMEs, such as“Integrated Payables”, which offer a way of combining payments into a single file and route them using the lowest cost method, and allow the updating of the“Controlled Disbursement Account”, which provides customers with the“CDA Perfect Presentation”reports notifying them of all the checks entering their accounts each day and thus enabling companies to maximize their liquidity management.
Corporate Banking, specialized in large corporations, has increased its loan portfolio by 3.2%, with a major rise in deposits (up 80.5%year-on-year).
Retail Bankinghas a volume of loans of €10,730 million (up 4.3%year-on-year). The reduction in the auto dealer and student loan portfolios was more than offset by an increase in the residential real estate portfolio. Customer funds fell by 6.8%, due to the 9.0% reduction in higher-cost funds, while more liquid funds increased by 2.8%. BBVA Compass and SmartyPig concluded a strategic alliance in 2010 through which BBVA Compass will act as a depositary for SmartyPig customers in the United States. “Compass for your Cause”, a program designed for NGOs and launched at the end of 2009, has not only tripled the number of organizations involved, but increased the number of donors to NGOs by more than 700% as of December 31, 2010. Finally, in the health sector, joint teams have been formed by representatives from the Retail, Commercial, Wealth Management and Insurance units. They offer a wide variety of products, including a new service that allows payments to be collected from patients at medical consultations.
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TheWealth Managementunit had a total loan portfolio of €2,047 million, deposits of €3,686 million and assets under management of €13,188 million as of December 31, 2010. In 2010 it launched the fixed-income product“Fixed Annuity”, which has attracted €350 million in similar assets from other banks throughout 2010. The“Managed Money plan” offers customers who do not meet the typical Wealth Management profile the chance to have an investment account managed by professionals.
Finally, the business in the New York branch followed the same pattern as the rest of the WB&AM units in the Group: a focus on higher added-value and more loyal customers, price management and the promotion of cross-selling. As a result, the loan portfolio was down by 31.4% in 2010, while gross income fell by 17.9%. Non-performing assets (“NPA”) remain low, and the greater loan-loss provisions compared to 2009 have resulted in increased coverage.
Other units
As of December 31, 2010, BBVA Puerto Rico managed a loan portfolio of €2,850 million, down 9.3% from the previous year. Customer deposits amounted to €1,588 million, at similar levels to the close of 2009. The operating income fell over the year by 10.0% to €70 million, but the reduced impairment losses on financial assets (which experienced ayear-on-year fall of 64.1%) resulted in a net attributable profit of over €1 million, compared to a loss of €71 million in the previous year.
Finally, BTS reported a net attributable profit of €11 million, €1.7 million down from the previous year. Revenues dropped by 9.5% as the number of transactions declined by 4.0%.
Wholesale Banking and Asset Management)Management
The Wholesale Banking and Asset Management area focuses on providing services to large international companies and investment banking, capital markets and treasury management services to clients.
The principal figures relating to this business area as of December 31, 2010 and December 31, 2009 were:
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| • | Loans and advances to customers were €35,754 million as of December 31, 2010, an increase of 16.5% from €30,684 million as of December 31, 2009. |
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| • | Customer deposits were €43,819 million as of December 31, 2010 compared to €34,864 million as of December 31, 2009, an increase of 25.7%. |
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| • | Mutual fund assets under management were €3,576 million as of December 31, 2010, a decrease of 8.6% from €3,914 million as of December 31, 2009. |
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| • | Pension fund assets under management were €7,209 million as of December 31, 2010, a decrease of 0.2% from €7,224 million as of December 31, 2009. |
The business units included in the Global Businesses (WholesaleWholesale Banking and Asset Management)Management area are:
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| | • | Corporate and Investment Banking: coordinates origination, distribution and management of a complete catalogue of corporate and investment banking products (corporate finance, structured finance, syndicated loans and debt capital markets) and provides global trade finance and global transaction services with coverage of large corporate customers specialized by sector (industry bankers); |
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| | • | Global Markets: handles the origination, structuring, distribution and risk management of market products, which are placed through our trading rooms in Europe, Asia and the Americas; |
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| | • | Asset Management: designs and manages the products that are marketed through our different branch networks including traditional asset management, alternative asset management and Valanza (the Group’s(our private equity unit); |
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| | • | Industrial and Real EstateOther Holdings: helps to diversify the area’s businesses with the aim of creating medium-medium and long-term value through active management of a portfolio of industrial holdings and real estate projects (Anidaother Spanish and the Duch Project);international projects; and |
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| | |
| | • | Asia: representsrelates to our increased stakes in CIFH in Hong Kong (approximately 30%) and in CNCB (approximately 10%15%) and our commitment to China as demonstrated by aggregate historic investments that now exceed €2,000 million.€4,000 million as of the date of this Annual Report. This unit also manages the operational branches and representative offices established at this region and other agreements such as the recent joint-venture with the Indian bank Baroda to create a credit card company operating in India. |
The principal figures relating to this business area as of December 31, 2008 and December 31, 2007 were:
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| • | Total net lending was €48,683 million, an increase of 30.4% from €37,337 million as of December 31, 2007. |
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| • | Total customer deposits were €62,568 million as of December 31, 2008 compared to €42,243 million as of December 31, 2007, an increase of 48.1%. |
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| • | Mutual funds under management were €4,014 million as of December 31, 2008, an increase of 65.5% from €2,425 million as of December 31, 2007. |
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| • | Pension fund assets under management were €6,810 million as of December 31, 2008, a decrease of 7.5% from €7,363 million as of December 31, 2007. |
Corporate and Investment Banking
WithinA number of organizational changes in the Mexico business were made inCorporate and Investment Banking (C&IB), with a separation of customer and product activity in investment banking. A global unit of investment products has been created covering business with these products in 2008 we openedall geographical areas. With these changes,C&IBis making progress in the separation of responsibilities associated with the management of balance-sheet products and fees, and is strengthening its global management model, both in relation to customer spread and product range.
The following changes were also made in 2010:
The area ofDebt Capital Marketslaunched a Frankfurt office, launchedglobal dollar distribution platform to provide a comprehensive debt service to clients. The origination teams in the Investment Banking Client for enterprises, institutions and corporations as a mid-term growth project; segmented our global clients at allmain offices in Europe, (Madrid, London, Paris, MilanAsia and Frankfurt)the Americas have also been reinforced. In Europe, a group providing debt advice and streamlinedratings has been created to help the management modelorigination of business in the different product areas, and to offer a variety of high-added-value services to customers.
TheStructured Trade Financearea has consolidated the operation of its units in Mexico and Frankfurt, and reinforced its teams there. It has also gained market recognition with the signing of a significant number of transactions. As a result of the unitagreement signed with five differentiated industries. We also implementedCITIC, our partner in China, the first operation ever with Sinosure coverage (ECA China) has been signed in favor of a new relationship modelSpanish company. Customer relations have continued to be strengthened in the Asia-Pacific region, with special emphasis on high-value-added products, project finance,BIBEC (Investment Banking for Companies and trade finance. In addition, withinCorporations) segment by extending the Corporate and Investment Banking unit, Global Clients and Investment Banking in America have been reorganized, in order to be closer to customers and place greater emphasis on products, with a matrix structure that combines product managers with the managers responsible for each geographic area.
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Through the Global Transaction Services business we launched several new products, technologies and servicesregional teams in Spain and PortugalPortugal.
In theGlobal Transaction Servicesunit, the first global connection channel for companies and corporations via SWIFT andHost-to-Host was launched in 2008, includingAutoCobro Express(Express Auto-Collection),e-factoring, Spain-Brussels centralization, file-normalizationthe International Cash Management department. This enables information to be sent between the bank and double “Token Plus” security forthe customer. BBVA net cash. In addition, in Portugal we introduced Single Euro Payments Area (“SEPA”) transfers and offered customersNet Cash, the ability to pay taxes and bills through BBVA net cash. In Mexico, Bancomer launched severalelectronic banking channel, has increased its product range with new products technologies and services to better serve customers and comply with new Mexican regulations, including TIB 2.0 integral treasury, SIT dispersion, check protection with beneficiary, transparency law-compliant statements, expanded host-to-host and SWIFT services and increased functionality at Bancomer.com. Through the Global Transaction Services business, we also introduced several new products, services and technologies to better serve ourfor customers in Puerto Ricothe United Kingdom and Colombia.France, and a new Securities Depositary model. A security device called Token Plus has been incorporated to enable BBVA customers with a visual disability to validate operations through this channel. In the United States, Compasse-Access, the unique-use validation code for electronic banking was incorporated, offering an alternative to the use of security tokens. The float pricing system used to assign the availability of check funds deposited by customers in the Bank was also updated.
The area ofC&IBin the U.S. and South America has completed the implementation of Master Plans to consolidate the new model of coverage and segmentation of the customer base.
Global Markets
In 2008, the TheGlobal Markets (“GM”)unit demonstrated notable commercial activity is undertaking significant investments to reinforce itsDistribution teamin its new treasury desks in Dusseldorf (inaugurated in January 2008), where a team of sales persons provide specialized coverage in market products to institutional clients; andthe main international financial centers, Hong Kong where market teams have been formed that will broadenand London, with the rangerecruitment of senior teams. At the same time, investment is being undertaken to improve access technology to Latin American stock exchanges. GM has integrated BBVA Bancomer into the BBVA global markets services with Asian assets. The commercial activityequity platform. This means a move from having local operational capacity in Mexico to more global functions for the management of the Hong Kong treasury desk has focused primarily on Asian clients, while also servicing clients in Europe and Latin America.equity orders.
In 2010, product innovation was consolidated in Latin America with the launch, in 2008,collaboration with the Regional Derivatives Center commenced operations andAsset Managementunit, of a new Exchange Traded Fund (ETF) called BRTRAC that aims to hold all the Riskpyme Latam project has been implemented throughout the region to promote the marketing of derivatives through the Group’s networks as we do in Spain and Mexico. In addition, in Mexico the first listed exchange traded fund (ETF)common stocks of the leading companies that are traded on the International Market of Latin American Securities (Latibex) was launchedBMV Brasil 15 index (the first index constructed by the Global Markets unit.Mexican Stock Exchange with foreign securities).
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Asset Management
In the 2010,Asset Management unit, the following product launches were madeManagement’sactivity in 2008: BBVA Bonos Corto Plazo Gobiernos and Fondo Liquidez, which are short-term fixed-income funds; BBVA Estructurado Finanzas BP and BBVA Estructurado Telecomunicaciones BP, which are global funds that primarily target private banking clients and the FTSE 4Good Ibex ETF variable income listed fund. Among the new guaranteed mutual funds offered in 2008, we should stressBBVA Inflación(the first guaranteed fund with the Spanish inflation rate as the underlier),BBVA Elite Protegido,BBVA Top 4 Guaranteed, andBBVA Top 5 Guaranteed,products has continued to be focused on responding to customer needs, as well as 11 on innovation. In the first half of 2010, at a time of major concerns about the situation in peripheral countries and high risk aversion, we reinforced our conservative product range with the launch of a Fixed Income fund whose portfolio is made up exclusively of government bonds from “core countries” in the euro zone, theBBVA Bonos Core. The product catalog was also strengthened with the launch of two new funds:BBVA Bolsa España Dividendo, an equity fund whose management is focused on companies with high dividend payments; andBBVA Bonos Corporativos Flotantes, a fixed-income fund that aims to benefit from the opportunities currently offered by the credit market. A range of dynamic asset distribution management funds was launched in the second half of the year: theGama Evolucion (V5 and V10).
In guaranteed products, 2010 has again been a year with many maturities and most of the activity was focused on renewals. Thus, in Commercial Banking eight guaranteed equity funds suchwere launched (seven of which were renewed from 2009), nine guaranteed fixed-income funds of thePlanes Rentatype (all of which were renewed from 2009) and nine guaranteed fixed-incomeFon-Plazotype funds (four of which were renewed from 2009). In addition, four guaranteed fixed-income funds in the Gama Solidez have again been launched by HNWI, continuing with the success this range had the previous year. In Quality Funds, three new products began to be sold as Fon-plazo 2009funds of funds. All three have a very dynamic management philosophy through international fund managers.
The activity of Pensions in 2010 has included the incorporation of new plans into the unit and 2009 D and F.strengthened BBVA’s position in pensions in Spain.
Industrial and Real EstateOther Holdings
The IndustrialThis unit diversifies the area’s businesses with the aim of creating value in the medium and Real Estate Holdings business unit also handleslong terms through the Group’sactive management of a portfolio of industrial holdings and private equity, international and real estate business, through the Anida Group, as well as its private equity business.funds. The management fundamentals are profitability, asset turnover, liquidity and optimal use of economic capital.
AsCurrently, it manages a portfolio of December 31, 2008,holdings in more than 50 companies from a wide variety of sectors. Among them are Corporación IBV, Bolsas y Mercados Españoles (BME), Técnicas Reunidas, Tubos Reunidos, Desarrollo Urbanístico Chamartín, the industrialinternational funds Darby Latin American Private Equity Fund L.P., Palladium Equity Partners III L.L.C. and CITIC Capital China Real Estates Fund III.
Investments were made in equity holdings for €47 million in 2010, and sales of minor stakes of portfolio had latent capital gains of €120holdings for approximately €30 million.
Asia
The wholesale business in Asia performed very well in 2010 and continues to be the basis for organic growth in the region. The loan portfolio was up 13.8% from December 31, 2009, with customer funds increasing by 74.1%, attributable in part to GM Asia. The accumulated net attributable profit increased by 95.6%. Over the year, BBVA has strengthened its trading capacity in the zone, with the opening of trading floor in Singapore and Tokyo.
In 2008 BBVA increased itsaddition, the acquisition of an additional 4.93% stake in CIFHCNCB was made effective in April 2010 for approximately €1,000 million, increasing the Group’s holding in the entity to its current 15%. BBVA is one of Hong Kong and in CNCB. BBVAthe few strategic international investors that has thereby further consolidatednot only maintained but actually increased its position in the region, reinforcingChinese banking sector during the crisis. CNCB carried out a capital increase in 2010 (at a ratio of 2.2 new shares for 10 existing shares). The Board of the Chinese bank approved this increase to support the development and high rate of growth of its commitmentbanking business. The bank closed an excellent year in 2010, with strong growth rates in practically all its lines of business. Profit generation was above market expectations, with the accumulated figure to September 2010 up 47.6%year-on-year. In 2010 the collaboration agreement for pensions was also concluded with CNCB. Its aim is to take advantage of BBVA’s capacity and CNCB’s local presence to develop pension plans in China.
Mexico
The business units includedIn India, another of the strategic markets in the Mexico area are:Asian continent and in the sphere of retail banking, BBVA and the Bank of Baroda entered into an agreement in December to create a joint company for credit cards. Once approval from the regulatory authorities has been obtained, the Group will be able to acquire a 51% interest in the
| | |
| • | Banking Businesses, and |
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| • | Pensions and Insurance Businesses |
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The principal figures relating tocredit card unit of the Bank of Baroda, BobCards. BBVA will invest €34 million in this business area astransaction, which will also give it a strategic position in India through a leading bank that has a network of December 31, 20083,100 branches and December 31, 2007 were:36 million customers.
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| • | Total net lending was €25,543 million as of December 31, 2008, a decrease of 5.0% from €26,899 million as of December 31, 2007. |
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| • | Total customer deposits were €29,677 million as of December 31, 2008 compared to €31,408 million as of December 31, 2007, a decrease of 5.5%. |
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| • | Mutual funds under management were €9,180 million as of December 31, 2008, a decrease of 18.1% from €11,214 million as of December 31, 2007. |
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| • | Pension fund assets under management were €7,196 million as of December 31, 2008, a decrease of 16.8% from €8,648 million as of December 31, 2007. |
The Mexican peso fell against the euro in 2008, with a resulting negative impact on our consolidated financial statements as of and for the year ended December 31, 2008. See “Item 5. Operating and Financial Review and Prospects— Operating Results — Factors Affecting the Comparability of our Results of Operations and Financial Condition”.
Banking Businesses
Bancomer, our subsidiary in Mexico, has continued to expand its distribution network. In 2008, 20 offices were opened, 761 ATMs and more than 20,000 point-of-sale terminals were installed, special offices were inaugurated for the foreign-client segment, and efforts were made to promote a specialized network for the small-business segment, with ten business centers opened and close to 140 specialized executives dedicated to related activities.
As part of the strategy designed to attract customers’ funds, the now-traditionalLibretón(Passbook) promotions were conducted including the,Quincenas del Ahorro(Two-Weeks of Savings), through which record levels of prizes were given away to the bank’s customers. In addition, efforts were made to promote products such as the Winner Card, to encourage saving among young people and children through a commercial partnership with a leading cereal brand. Also noteworthy in 2008 were the promotions aimed at incorporating new payroll accounts, such as a specialized campaign in the small-business segment.
To promote credit, technology-based solutions and products have been launched, intended to facilitate the process for customers, such as Mortgage Banking Remote Sale, immediate service, and telephone advice, which make it possible to channel clients interested in a mortgage loan to specialized offices. For housing promoters, a Multiproduct Simulator has been created which makes it possible to calculate a desired credit for an entire range of mortgage products.
In assets management, B+Real has been launched, which is a fund that seeks to pay yields above inflation, as well as the BBVABRIC fund, which invests in stock markets in Brazil, Russia, India and China. For its part, the investment banking unit has handled an initial public offering on the Mexican Stock Exchange and the refinancing and coverage of a convertible bond of Petróleos Mexicanos.
In 2008, Bancomer conducted an ambitious debt-placement program on local markets, which has included subordinated debt, stock certificates, and securitizations, and has become a point of reference for the Mexican market.
Pensions and Insurance
In Mexico, the BBVA Group operates in the pensions business through Afore Bancomer, in insurance through Seguros Bancomer, in annuities through Pensiones Bancomer and in health through Preventis. The Group’s pensions and insurance unit in Mexico generated net income attributed to parent company of €210 million in 2008, an increase of 35.1% from 2007.
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The United States
The business units included in the United States area are:
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| • | BBVA Compass banking group |
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| • | Other units: BBVA Puerto Rico, BTS and BBVA Bancomer USA |
The principal figures relating to this business area as of December 31, 2008 and December 31, 2007 were:
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| • | Total net lending was approximately €31,066 million as of December 31, 2008, an increase of 18.7% from €26,161 million as of December 31, 2007. |
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| • | Total customer deposits were €26,240 million as of December 31, 2008 compared to €23,784 million as of December 31, 2007, an increase of 10.3%. |
The dollar appreciated against the euro in 2008, with a resulting positive impact on our consolidated financial statements as of and for the year ended December 31, 2008. See “Item 5. Operating and Financial Review and Prospects — Operating Results — Factors Affecting the Comparability of our Results of Operations and Financial Condition”.
During 2008, the four U.S. banks of the Group in the sunbelt region have been successfully integrated into the Compass group. In the first quarter of 2008, a legal merger was carried out and State National Bank was integrated into Compass. In the third quarter of 2008, Texas State Bank was integrated into Compass, and in the fourth quarter of 2008 Laredo National Bank was integrated into Compass. Within this process, some 500,000 accounts and 50,000 preferred customers have been integrated into the Compass platform.
In 2008 the Group decided to implement a new brand, BBVA Compass. Moreover, in the fourth quarter of 2008, a new management team was appointed to further the integration of BBVA’s organizational and business model in the United States and continue developing the strategic plan.
A new customer relations program was implemented in 2008, which provides employees information on the opportunities to sell additional products and services to each client by enabling such employees to send clients messages through different channels, in order to carry out cross sales and help ensure customer retention. We have continued to improve the service and the range of products for preferred clients, and we have created a preferred client program for businesses. In addition, a mobile bank program has been launched, using the online banking platform and an electronic check-transfer system has been implemented, making it possible for companies to make deposits without visiting a branch.
BBVA Compass banking group
As of December 31, 2008, BBVA Compass banking group’s loan portfolio had risen 14.2% to €27,982 million from December 31, 2007 and customer funds were €24,712 million (up 4.1% from December 31, 2007).
Other units
BBVA Puerto Ricomanaged customer loans of €3,023 million as of December 31, 2008, a decrease of 3.7% from December 31, 2007. Customer funds amounted to €1,445 million as of December 31, 2008, an increase of 6.9% from December 31, 2007.
BTSprocessed €28.4 million transfers during 2008. This was 7.8% more than during 2007. Of these, €22.5 million went to Mexico and 5.8 million to other countries.
BBVA BancomerUSA deposits increased 13.0% as of December 31, 2008 from December 31, 2007 and opened 21,000 new accounts during 2008, handling over 495,000 money transfers.
South America
The South America business area includes the banking, insurance and pension businesses of the Group in South America.
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The business units included in the South America business area are:
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| • | Banking Businesses, including banks in Argentina, Chile, Colombia, Panama, Paraguay, Peru, Uruguay and Venezuela; |
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| • | Pension businesses in Argentina, Bolivia, Chile, Colombia, Ecuador, Peru and Dominican Republic; and |
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| • | Insurance businesses in Argentina, Chile, Colombia, Dominican Republic and Venezuela. |
The principal figures relating to this business area as of December 31, 2008 and December 31, 2007 were:
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| • | Total net lending was €24,475 million as of December 31, 2008, an increase of 12.0% from €21,845 million as of December 31, 2007. |
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| • | Total customer deposits were €29,382 million as of December 31, 2008, an increase of 15.1% from €25,525 million as of December 31, 2007. |
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| • | Mutual funds under management were €1,300 million as of December 31, 2008, a decrease of 24.6% from €1,725 million as of December 31, 2007. |
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| • | Pension fund assets under management were €24,531 million as of December 31, 2008, a decrease of 29.6% from €34,826 million as of December 31, 2007. |
Local currencies in South America fell against the euro in 2008, with a resulting negative impact on our consolidated financial statements as of and for the year ended December 31, 2008. See “Item 5. Operating and Financial Review and Prospects— Operating Results — Factors Affecting the Comparability of our Results of Operations and Financial Condition”.
Economic conditions in all the region’s countries were favorable in 2008, which provided for substantially improved key variables in the Latin American financial services industry, most notably profitability and solvency.
The following is a brief description of our operations on acountry-by-country basis in the South America business area. The operating results described below refer to each individual unit’s contribution to the South America business area’s operating results, unless otherwise stated.
Banking Businesses
Argentina
BBVA Banco Francés, our subsidiary in Argentina obtained net income attributed to parent company of €140 million in 2008 an increase of 4.2% compared to 2007.
In Argentina, most of the growth of BBVA Banco Francés has taken place as a result of sales of products and services to individuals (personal loans, guaranteed loans, and credit cards); whereas, products and services sold to business custumers, have been primarily related to advance payments, documents, and foreign-trade operations.
Chile
BBVA Chile’s net income attributed to parent company for 2008 amounted to €63 million an increase of 81.4% compared to 2007, due to growth in BBVA Chile’s loan portfolio and the active management of spreads.
Chile had a very dynamic year in the retail-segment, especially in consumer credit and auto financing (including loans to acquire industrial vehicles and the “Instant Purchase” product). In terms of savings, thePlan Preferente Remunerado(Remunerated Preferential Plan), as well as several funds with guaranteed investments, have been launched: Ultradepósito, Top Markets II, Siempre Ganas (which invests in commodities) and Panda II, which invests in China.
Colombia
BBVA Colombia’s net income attributed to parent company for 2008 amounted to €133 million an increase of 25.2% compared to 2007, due to strong growth in its loans portfolio and the active management of spreads.
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Sales of retail products have also been fundamental for BBVA Colombia in 2008. BBVA launched theCuota regaloproduct in the consumer credit segment which allows the customer to make only 11 payments a year. Nearly 200,000 new credit cards were issued in 2008. In addition, we also launched the VIS mortgage credit in pesos for the mortgage segment and Paquete Blue for the youth segment. At the end of 2008, BBVA Colombia securitized a mortgage portfolio.
Panama
BBVA Panama’s net income attributed to parent company for 2008 was €27 million, an increase of 25.2% compared to 2007.
Paraguay
BBVA Paraguay’s net income attributed to parent company for 2008 was €25 million, an increase of 26.3% compared to 2007.
Peru
BBVA Banco Continental’s net income attributed to parent company for 2008 was €86 million, an increase of 37.0% compared to 2007.
At BBVA Banco Continental de Perú, our Peruvian subsidiary, the priorities in investments in 2008 were credit cards, consumer credit (including auto financing and theTu préstamoproduct for low-income workers, as well as Préstamo 60, a60-month loan) and mortgage loans. In terms deposits, products such asAhorro Cero Mantenimiento(Zero Maintenance Savings),Tasa Creciente (Growing Rate),Super Tasa(Super Rate),Super Regalo(Super Gift), and the Vuela Vuela and Mundo Sueldo campaigns have been launched.
Uruguay
BBVA Uruguay’s net income attributed to parent company for 2008 was €9 million, an increase of 57.6% compared to 2007.
Venezuela
BBVA Banco Provincial’s net income attributed to parent company for 2008 was €205 million, an increase of 77.4% compared to 2007, due to strong growth in its loan portfolio and the efficient management of costs. BBVA Banco Provincial de Venezuela, our Venezuelan subsidiary, has conducted a policy aimed at raising its profitability and optimizing the cost of resources.
Among lending products, priority has been given to products for private parties, especially consumer credit and credit cards (most notably, the launching of the 365-protection debit card). Regarding savings products, the certificate of deposit product was launched in 2008. This is a short-term instrument aimed at customers who handle large volumes of cash.
Pensions and Insurance
The pensions and insurance unit in South America achieved an income attributed to parent company of €67 million in 2008, a decrease of 43.3% compared to 2007. The decrease was due to the performance of pension funds, which contributed €18 million in 2008, 74.1% less than in the previous year.
In the pension and insurance unit, 2008 was a year of intense commercial activity, which translated into a substantial increase in revenue and policies issued. Alternative selling channels also demonstrated increased importance in 2008, despite the fact that during the year the performance of the financial markets was not favorable, especially for voluntary pension products. Near the end of 2008, the Argentine government nationalized the private pension business in which the BBVA Group participated through Consolidar AFJP, and in the insurance business, we sold our stake in Consolidar Salud.
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Corporate Activities
The Corporate Activities area handles the Group’sour general management functions. These mainly consist of structural positions for interest rates associated with the euro balance sheet and exchange rates, together with liquidity management and shareholders’ funds.
This area also books the costs from central units that have a strictly corporate function and makes allocations to corporate and miscellaneous provisions, such as early retirement and others of a corporate nature. In 2009 it also incorporated the newly created Real-Estate Management unit, which brings together our Spanish real-estate business.
The business units included in the Corporate Activities business area are:
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| | • | Financial Planning, carried out by the ALCO:Asset/Liabilities Management: administers the Group’s interest-our interest and exchange-rate structure as well as itsour overall liquidity and shareholders’ funds.funds; |
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| | • | Holdings in Industrial and FinancialOther Companies: manages the Group’sour investment portfolio in industrial and financial companies applying strict criteria for risk control, economic capital consumption and return on investment, with diversification over different industries.industries; and |
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| • | Real Estate Management: manages the real estate assets in Spain, including assets from foreclosures, repossessions, purchases from distressed customers and the assets in BBVA Propiedad, the real estate fund. |
Financial PlanningAsset/Liability Management
ALCO managesThe Asset/Liability Management is responsible for actively managing structural interest-rate and foreign exchange positions, as well as the Group’s overall liquidity and shareholders’ funds.
Liquidity management aims to fund the growth of the banking business at suitable maturities and costs, using a wide range of instruments that provide access to a large number of alternative sources of finance. A core principle in the BBVA Group’s overall financing needsliquidity management is to encourage the financial independence of its banking subsidiaries in the Americas. This aims to ensure that the cost of liquidity is correctly reflected in price formation and interestthe sustainable growth in the lending business.
The Group’s capital management has a twofold aim: to maintain the levels of capitalization appropriate to the business targets in all the countries in which it operates; and, exchange rate risks. ALCO also managesat the BBVA Group’s investments and capital resources in an effortsame time, to improvemaximize the return on shareholders’ funds through efficient allocation of capital to different units, good management of the balance sheet and proportionate use of the various instruments that comprise the Group’s equity: stock, preferred stock and subordinate debt. In the last quarter of 2010, BBVA has successfully executed a capital increase after the announcement of its purchase of 24.9% of the Turkish bank Garanti.
Foreign exchange risk management of BBVA’s long-term investments, basically stemming from its franchises in the Americas and soon also its business in Turkey, aims to preserve the Group’s capital ratios and ensure stability of its income statement, while controlling the impact on reserves and the costs of this management. In 2010, BBVA has maintained a policy of actively hedging its investments in Mexico, Chile, Peru and the dollar area. Its aggregate hedging was close to 30%. In addition to this corporate-level hedging, dollar positions are held at a local level by some of the subsidiary banks. The Group also hedges its foreign exchange exposure on expected 2011 results in the Americas. In 2010, the favorable performance of most of the currencies in the Americas has had a positive effect on the Group’s equity and income statement. For 2011, the same policy will be pursued in managing the Group’s foreign exchange risk from the perspective of its effect on capital ratios and on the income statement.
The unit also actively manages the structural interest-rate exposure on the Group’s balance sheet. This aims to keep the performance of short and medium-term net interest income more uniform by cutting out interest-rate fluctuations. In 2010, the results of this management have been satisfactory. Strategies were implemented to provide
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a hedge against a less positive economic outlook in Europe for our shareholders.the whole of 2010 and 2011, with relatively limited risk on the balance sheets in the United States and Mexico. These strategies are managed both with hedging derivatives (caps, floors, swaps, FRAs) and with balance-sheet instruments (mainly government bonds with the highest credit and liquidity ratings). At the close of the year, the Group held asset portfolios denominated in euros, U.S. dollars and Mexican pesos.
Holdings in Industrial and FinancialOther Companies
This unit manages our investmentthe portfolio of industrial and financial investments in companies operating in the telecommunications, media, electricity, oil, gas and finance sectors, principally Telefónica, S.A. financial sectors. Like Asset/Liability Management, this unit lies within the Group’s Finance Division.
BBVA applies strict requirements to this portfolio regardingin terms of risk-control procedures, economic-capital consumptionuse of economic capital and return on investment, diversifying investments overacross different sectors. It also applies dynamic monetizationhedging and coveragemonetization management strategies to holdings.
In 2008, it invested €1,2592010, investments were made totaling €434 million and divested €2,382 million. The largest single transaction was the sale of our 5.01% holding in Bradesco in March 2008 with capital gains of €727divestitures amounted to €409 million.
As ofOn December 31, 2008,2010, the market value of the holdingsHoldings in industrial and financial companiesIndustrial & Financial Companies portfolio was €4,067€4,168 million, with unrealized capital gains of €995€993 million.
In 2010, the management of the industrial and financial holdings generated €317 million before tax.in dividends and €142 million in trading income, giving a net attributable profit of € 404 million.
Real Estate Management
The Group has always counted with expert teams for the management of the real estate and developer sector. Thus, theReal Estate Managementunit’s focus is to provide specialized management of the real estate assets it has acquired from foreclosures, repossessions, purchases from distressed customers and the assets in BBVA Propiedad, the real estate fund. In 2010, the Group has continued to make an important effort to provision for these assets (€657 million) with the aim to maintain their coverage above 30%, taking as reference updated appraisals.
Supervision and Regulation
The Spanish government traditionally has been closely involved with the Spanish banking system, both as a direct participant through its ownership of ICO and as a regulator retaining an important role in the regulation and supervision of financial institutions.
The Bank of Spain
The Bank of Spain was established in 1962 as a public law entity (entidad de derecho público) that operates as Spain’s autonomous central bank. In addition, it has the ability to function as a private bank. Except in its public functions, the Bank of Spain’s relations with third parties are governed by private law and its actions are subject to the civil and business law codes and regulations.
Until January 1, 1999, the Bank of Spain was also the sole entity responsible for implementing Spanish monetary policy. For a description of monetary policy since the introduction of the euro, see “— Monetary Policy — General”Policy”.
Since January 1, 1999, the Bank of Spain has performed the following basic functions attributed to the European System of Central Banks (“ESCB”):
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| | • | defining and implementing the ESCB’s monetary policy, with the principal aim of maintaining price stability across the euro area; |
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| | • | conducting currency exchange operations consistent with the provisions of Article 109111 of the Treaty on European Union (“(“EU Treaty���Treaty”), and holding and managing the Member States’ official currency reserves; |
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| | • | promoting the sound working of payment systems in the euro area; and |
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| | • | issuing legal tender banknotes. |
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Recognizing the foregoing functions as a fully-fledged member of the Eurosystem, theLey de Autonomía del Banco de España(the Bank of Spain Law of Autonomy) stipulates the performance of the following functions by the Bank of Spain:
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| | • | holding and managing currency and precious metal reserves not transferred to the ECB; |
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| | • | supervising the solvency and behavior of credit institutions, other entities and financial markets, for which it has been assigned supervisory responsibility, in accordance with the provisions in force; |
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| | • | promoting the sound working and stability of the financial system and, without prejudice to the functions of the ECB, of national payment systems; |
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| | • | placing coins in circulation and the performance, on behalf of the State, of all such other functions entrusted to it in this connection; |
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| | • | preparing and publishing statistics relating to its functions, and assisting the ECB in the compilation of the necessary statistical information; |
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| | • | providing treasury services and acting as financial agent for government debt; |
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| | • | advising the government, preparing the appropriate reports and studies; and |
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| | • | exercising all other powers attributed to it by legislation. |
Subject to the rules and regulations issued by the Ministry of Economy, the Bank of Spain has the following supervisory powers over Spanish banks:
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| • | Subject to the rules and regulations issued by the Ministry of Economy, the Bank of Spain has the following supervisory powers over Spanish banks: |
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| | • | conducting periodic inspections of Spanish banks to evaluate a bank’s compliance with current regulations including the preparation of financial statements, account structure and credit policies; |
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| | • | advising a bank’s board of directors and management on its dividend policy; |
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| | • | undertaking extraordinary inspections of banks; and |
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| | • | collaborating with other regulatory entities to impose penalties for infringement or violation of applicable regulations. |
Fondo de Garantía de Depósitos
TheFondo de Garantía de Depósitos en Establecimientos Bancarios(“(“FGD”) (the GuarantedGuaranteed Bank Deposits Fund), which operates under the guidance of the Bank of Spain, guarantees both bank and securities deposits up to €100,000 per customer for each type of deposit, which is the minimum insured amount for all EU member banks. Pursuant to Bank of Spain regulations, the FGD may purchase doubtful loans or may acquire, recapitalize and sell banks that are experiencing difficulties.
The FGD is funded by annual contributions from member banks. The rate of such contributions in 20082010 was 0.06% of the year-end amount of bank deposits to which the guarantee extended and 0.06% over the 5% of the securities held on clients’clients behalf, in accordance with legislation in effect. Nevertheless, once the capital of the FGD exceeds its requirements, the Minister of Economy may reduce the member banks’ contributions and, when the FGD’s funds exceed the capital requirements by one percent or more of the member banks’ deposits, such contributions may be suspended.
In order to safeguard the stability of its members, the FGD may also receive contributions from the Bank of Spain. As of December 31, 2008,2010, all of the Spanish banks belonging to the BBVA Group were members of the FGD and thus obligated to make annual contributions to it.
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Fondo Garantía Inversores
Royal Decree 948 of August 3, 2001 regulates investor guarantee schemes related to both investment firms and to credit institutions. These schemes are set up through an investment guarantee fund for securities broker and
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broker-dealer firms and the deposit guarantee funds already in place for credit institutions. A series of specific regulations have also been enacted, defining the system for contributing to the funds.
The General Investment Guarantee Fund Management Company was created in a relatively short period of time and is a business corporation with capital in which all the fund members hold an interest. Member firms must make a joint annual contribution to the fund equal to 0.06% over the 5% of the securities that they hold on their client’s behalf. However, it is foreseen that these contributions may be reduced if the fund reaches a level considered to be sufficient.
Liquidity Ratio
In an effort to implement European Union monetary policy, effective January 1, 1999, the ECB and the national central banks of the member states of the European Monetary Union (“(“EMU”) adopted a regulation that requires banks to deposit an amount equal to two percent of their qualifying liabilities, as defined by the regulation, with the central bank of their home country. These deposits will earn an interest rate equal to the average interest rate of the ESCB. Qualifying liabilities for this purpose include:
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| | • | deposits; |
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| | • | debt securities issued; and |
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| | • | monetary market instruments. |
Furthermore, the liquidity ratio is set at 0% instead of 2% for those qualifying liabilities that have a maturity over two years and are sold under repurchase agreements.
Investment Ratio
In the past, the government used the investment ratio to allocate funds among specific sectors or investments. As part of the liberalization of the Spanish economy, it was gradually reduced to a rate of zero percent as of December 31, 1992. However, the law that established the ratio has not been abolished and the government could re-impose the ratio, subject to applicable EU requirements.
Fondo de Restructuración Ordenada Bancaria (Ordered Banking Restructuring Fund)
The crisis that has affected the financial markets since 2007 obliged the Spanish authorities to create theOrdered Banking Restructuring Fund(FROB) by Decree-Law 9/2009 of June 26, 2009. Its purpose is to help the restructuring processes undertaken by credit institutions and strengthen their capital positions subject to certain conditions. The FROB will support the restructuring strategy of those institutions that require assistance, in three distinct stages:
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| • | search for a private solution by the credit institution itself; |
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| • | adopt measures to tackle any weaknesses that may affect the viability of credit institutions; and |
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| • | initiate a restructuring process in which the Fund itself has to intervene directly. |
The FROB has to act in what is an absolutely exceptional situation that is closely linked to the development of the financial crisis. In order to comply with its objectives, FROB will be funded jointly from the Spanish national budget and the deposit guarantee funds of credit institutions. The FROB will be able to raise funds on securities markets through the issue of debt securities, lending and engaging in any other debt transaction necessary to fulfill its objects.
Capital Requirements
Bank of Spain Circular 3/2008 (“(“Circular 3/2008”), of May 22, May, on the calculation and control of minimum capital requirements, regulates the minimum capital requirements for Spanish credit institutions, on an individual and consolidated groupsgroup basis, and sets forth how to calculate capital meeting such requirements, as well as the
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various internal capital adequacy assessment processes credit institutions should have in place and the information they should disclose to the market.
Circular 3/2008 is the final implementation, for credit institutions, of the legislation on capital and consolidated supervision of financial institutions, which was contained in Law 36/2007, of November 16, November, amending Law 13/1985, of May 25, May, on the investment ratios, capital and reporting requirements of financial intermediaries, and other financial regulations, which also includes Royal Decree 216/2008, of 15 February, on the capital of financial institutions. Circular 3/2008 also conforms Spanish legislation to Directive 2006/48/EC of the European Parliament and of the Council, of June 14, 2006, and Directive 2006/49/EC of the European Parliament and of the Council, of 14 June 2006. The minimum capital requirements for credit institutions and their consolidated groups were thoroughly revised in both EC directives based on the new Capital Accord adopted by the Basel Committee on Banking Supervision (“(“Basel II”).
The minimum capital requirements established by Circular 3/2008 are calculated on the basis of the Group’s exposure to (i) credit risk and dilution risk (on the basis of the assets, obligations and contingent exposures and commitments that present these risks, depending on their amounts, characteristics, counterparties, guarantees, etc.);
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(ii) to counterparty risk and position and settlement risk in the trading book; (iii) to foreign exchange risk (on the basis of the overall net foreign currency position); and (iv) to operational risk. Additionally, the Group is subject to compliance with the risk concentration limits established in Circular 3/2008 and with the requirements related to corporate governance, internal capital adequacy assessment, measurement of interest rate risk and certain additional public disclosure obligations set forth therein. With a view to guaranteeing compliance with the aforementioned objectives, the Group performs integrated management of these risks, in accordance with its internal policies. See Note 7 to the Consolidated Financial Statements.
As of December 31, 2008, 20072010, 2009 and 2006,2008, the eligible capital of the Group exceeded the minimum required under the regulations then in force. See Note 3133 to the Consolidated Financial Statements.
Under Basel II calculation of the minimum regulatory capital requirements under the new standards, referred to as “Pillar 1”, is supplemented with an internal capital adequacy assessment and supervisory review process, referred to as “Pillar 2”. The Group’s internal capital adequacy assessment process is based on the internal model for the quantification of the economic capital required on the basis of the Group’s overall risk profile. Finally, Basel II standards establish, through what is referred to as “Pillar 3”, strict transparency requirements regarding the information on risks to be disclosed to the market.
Circular 3/2008 has been recently modified by Circular 9/2010, of December 22, in order to proceed with the implementation in Spain of part of the changes to the solvency framework approved at a European level (Directives 2009/111/EC, 2009/83/EC and 2009/27/EC).
The main changes considered in these directives are:
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| • | European harmonization of large exposures limits: a bank will be restricted in lending beyond a certain limit (25% of regulatory capital) to any one party. |
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| • | Improved quality of banks’ capital: clear EU-wide criteria for assessing whether ‘hybrid’ capital, i.e. including both equity and debt, is eligible to be counted as part of a bank’s overall capital |
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| • | Improved liquidity risk management: for banking groups that operate in multiple countries, their liquidity risk management — i.e. how they fund their operations on aday-to-day basis — will also be discussed and coordinated within ‘colleges of supervisors’. |
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| • | Improved risk management for securitized products: rules on securitized debt — the repayment of which depends on the performance of a dedicated pool of loans — have been tightened. Firms that re-package loans into tradable securities will be required to retain some risk exposure to these securities, while firms that invest in the securities will be allowed to make their decisions only after conducting comprehensive due diligence. If they fail to do so, they will be subject to capital penalties. |
As part of a wider plan of the Spanish Government for the strengthening of the financial sector, the Royal Decree- Law 2/2011, of February 18, has established higher minimum capital requirements for Spanish credit
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institutions, with a new core capital requirement for all credit institutions of up to a minimum of 8%. This ratio will be of 10% for those institutions that are not listed on a Spanish Stock Exchange, which have a small presence of private investors, and are dependent upon wholesale funding markets for over 20% of their assets, since they have more limited access to the capital markets.
Capital Management
New Basel Capital Accord — Basel II — Economic Capital
The Group’s capital management is performed at both the regulatory and economic levels.
Regulatory capital management is based on the analysis of the capital base and the capital ratios (core capital, Tier 1, etc.) using Basel (“(“BIS”) and Bank of Spain criteria. See Note 3133 to the Consolidated Financial Statements.
The aim is to achieve a capital structure that is as efficient as possible in terms of both cost and compliance with the requirements of regulators, ratings agencies and investors. Active capital management includes securitizations, sales of assets, and preferred and subordinated issues of equity and hybrid instruments.
The Bank has obtained the approval of its internal model of capital estimation (“(“IRB”) in 2009 and 2008 for certain portfolios.
From an economic standpoint, capital management seeks to optimize value creation at the Group and at its different business units.
The Group allocates economic capital (“(“CER”) commensurate with the risks incurred by each business. This is based on the concept of unexpected loss at a certain level of statistical confidence, depending on the Group’s targets in terms of capital adequacy. These targets are applied at two levels: the first is core equity, which determines the allocated capital. The Group uses this amount as a basis for calculating the return generated on the equity (“(“ROE”) in each business. The second level is total capital, which determines the additional allocation in terms of subordinatesubordinated debt and preference shares. The CER calculation combines lending risk, market risk (including structural risk associated with the balance sheet and equity positions), operational risk and fixed asset and technical risks in the case of insurance companies.
Stockholders’ equity, as calculated under BIS rules, is an important metric for the Group. However, for the purpose of allocating capital to business areas the Group prefers CER. It is risk-sensitive and thus better reflects management policies for the individual businesses and the business portfolio. This procedure anticipates the approach likely to be adopted by the future Basel II rules on capital. These provide an equitable basis for assigning capital to businesses according to the risks incurred and make it easier to compare returns.
To internal effects of management and pursuit of the business areas, the Group realizes a capital allocation to each business area.
Concentration of Risk
The Bank of Spain regulates the concentration of risk. Since January 1, 1999, any exposure to a person or group exceeding 10% of a group’s or bank’s regulatory capital has been deemed a concentration. The total amount of exposure represented by all of such concentrations may not exceed 800% of regulatory capital. Exposure to a single
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person or group may not exceed 25% (20% in the case of non-consolidated companies of the economic group) of a bank’s or group’s regulatory capital.
Legal and Other Restricted Reserves
We are subject to the legal and other restricted reserves requirements applicable to Spanish companies. Please see “— Capital Requirements”.
Allowance for Loan Losses
For a discussion of the Bank of Spain regulations relating to allowances for loan losses and country risk, see “— Selected Statistical Information — “Loan Loss Reserve”.Note 2.2.1.b) to the Consolidated Financial Statements.
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Regulation of the Disclosure of Fees and Interest Rates
Interest rates on most kinds of loans and deposits are not subject to a maximum limit. Banks must publish their preferential rates, rates applied on overdrafts, and fees and commissions charged in connection with banking transactions. Banking clients must be provided with written disclosure adequate to permit customers to ascertain transaction costs. The foregoing regulations are enforced by the Bank of Spain in response to bank client complaints.
Law 44/2002 concerning measures to reform the Spanish financial system contained a rule concerning the calculation of variable interest applicable to loans and credit secured by mortgages, bails, pledges or any other equivalent guarantee.
Employee Pension Plans
Under the relevant collective labor agreements, BBVA and some of its subsidiaries provide supplemental pension payments to certain active and retired employees and their beneficiaries. These payments supplement social security benefits from the Spanish state. See Note 2.2.32.2.12 and Note 2526 to the Consolidated Financial Statements.
Dividends
If a bank meets the Bank of Spain’s minimum capital requirements described above under “— Capital Requirements”, it may dedicate all of its net profits to the payment of dividends, although, in practice, banks consult with the Bank of Spain before declaring a dividend. We calculate that as of December 31, 2008,2010, we had approximately €7,041€11,241 million of unrestricted reserves in excess of applicable capital and reserve requirements available for the payment of dividends. Compliance with such requirements notwithstanding, the Bank of Spain may advise a bank against the payment of dividends on grounds of prudence. In no event may dividends be paid from non-distributable reserves. Banks which fail to comply with the capital adequacy ratio by more than 20% are required to devote all of their net profits to increasing their capital ratios. Banks which fail to meet the required ratio by 20% or less must obtain prior approval of the Bank of Spain to distribute any dividends and must devote at least 50% of net profits to increasing their capital ratios. In addition, banks, and their directors and executive officers that do not comply with the liquidity and investment ratios and capital adequacy requirements may be subject to fines or other sanctions. Compliance with the Bank of Spain’s capital requirements is determined on both a consolidated and individual basis. Our Spanish subsidiaries are in compliance with these capital adequacy requirements on both a consolidated and individual basis. If a bank has no net profits, the board of directors may propose at the general meeting of the stockholders that a dividend be declared out of retained earnings.
The Bank of Spain recommends that interim dividends not exceed an amount equal to one-half of net income attributed to parent company from the beginning of the corresponding fiscal year. No interim dividend may be declared when a bank does not meet the minimum capital requirements and, according to the recommendations of the Bank of Spain, interim dividends may not be declared until the Bank of Spain has sufficient knowledge with respect to the year’s profits. Although banks are not legally required to seek prior approval from the Bank of Spain before declaring interim dividends, the Bank of Spain had asked that banks consult with it on a voluntary basis before declaring interim dividends. It should be noted that the Bank of Spain had recently recommended in 2008 to Spanish
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banks general moderation on the distribution of dividends, to increase their voluntary reserves in order to strengthen their financial situation and to distribute any dividends in treasury stock.
At the annual general meeting of shareholders on March 13, 2009, BBVA’s shareholders adopted a resolution amending itsOur bylaws to allow for dividends to be paid in cash or in kind as determined by shareholder resolution. As of the date of this Annual Report, this amendment is pending registration at the Commercial Registry of Vizcaya.
Scrip Dividend
At the same annual general meetingBBVA Annual General Meeting held on March 11, 2011, the shareholders passed a resolution adopting a scrip dividend scheme called “Dividendo Opción”. This is an alternative remuneration scheme for BBVA shareholders, who may now opt to receive an amount equivalent to one of the interim dividends of 2011 and the final dividend corresponding to 2010 in cash or new shares to be issued in twofree-of-charge capital increases. The aim of this new remuneration scheme is to provide BBVA shareholders with a flexible and tax efficient instrument and to
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offer BBVA shareholders the shareholders resolvedoption to supplementreceive newly-issued shares of the 2008Bank, without altering BBVA’s policy of cash dividendremuneration, in line with a dividend payable in BBVA shares out of treasury stock.more efficient, flexible remuneration policies followed by other international banks.
Consequently, shareholders will have the “Dividendo Opción” available to them on the dates when the final dividend of 2010 and one of the interim dividends of 2011 are typically paid out. They may then decide which option suits them best at the time, whilst always continuing to be able to receive all their remuneration in cash if they wish.
Each capital increase is independent of the other, such that one or the other may be made on different dates and one or the other may not be made.
Limitations on Types of Business
Spanish banks are subject to certain limitations on the types of businesses in which they may engage directly, but they are subject to few limitations on the types of businesses in which they may engage indirectly.
Mortgage Legislation
During 2007 there were significant legal developments approved by the Spanish Congress, with the purpose of affecting the mortgage market by amending the regulations related to the mortgage and financial systems.
Law 41/2007 reformsreformed an important part of Law 2/1981 of March 25, March on mortgage markets as well as specific provisions of Law 2/1994 of March 30, March on the subrogation and modification of mortgage loans and the Mortgage Law of February 8, February 1946 all with the purpose of providing the Spanish mortgage market with greater flexibility, sophistication and efficiency. A number of reforms have been introduced relating to (i) asset or financing transactions carried out by credit institutions and (ii) liability transactions, i.e., those of moving of mortgage loans and credits that credit institutions carry out as refinancing mechanisms.
Royal Decree 716/2009, implements several aspects of Law 41/2007 also establishes a framework for new Spanish legal concepts such as the reverse2/1981, of March 25, 1981, on mortgage market regulation and other mortgage and long term care insurance,financial system rules, reformed by Law 41/2007. It replaces Royal Decree685/1982 of March 17, 1982 which also implemented several aspects of Law 2/1981 and which is thus repealed. The most significant developments introduced are (i) the minimum transparencymodification on theloan-to-value ratio requirement intending to improve the quality of Spanish mortgage-backed securities; (ii) the elimination of many of the administrative requirements for the issuance of covered bonds and disclosure duties applicable to credit institutions withinmortgage bonds; and (iii) the contextimplementation of mortgagea special accounting record of the loans and credits (including limits on the prepayment penalties on floating rate mortgage loanscredit facilities used to back issuances of covered bonds and limits on the notarial costs and registration fees charged to borrowers in connection with renegotiation of mortgage terms on fixed and floating rate mortgages) and the legal statutes applicable to appraisal companies.
A new Royal Decree formalizing some of the above mentioned reforms is currently being discussed in the Spanish Congress, and it is foreseeable that it will be enacted during the following months.mortgage-backed bonds.
Mutual Fund Regulation
Mutual funds in Spain are regulated by theDirección General del Tesoro y Política Financiera del Ministerio de Economía(the Ministry of the Economy) and by theComisión Nacional del Mercado de Valores(“(“CNMV”). All mutual funds and mutual fund management companies are required to be registered with the CNMV. Spanish mutual funds may be subject to investment limits with respect to single sectors or companies and overall portfolio diversification minimums. In addition, periodic reports including a review of the fund’s performance and any material events affecting the fund are required to be distributed to the fund’s investors and filed with the CNMV.
Reform of the Spanish Companies Act
The consolidated text of the Spanish Capital Companies Act, adopted under Legislative Royal Decree 1/2010, of July 2, has repealed the former Companies Act, adopted under Legislative Royal Decree 1564/1989, of December 22. This royal legislative decree stems from the authorization set out in the Law 3/2009, of April 3, on structural changes in companies, enabling the Government to proceed to consolidate the legislation for joint stock (“sociedades anónimas”) and limited liability (“sociedades de responsabilidad limitada”) in a single text, bringing together the contents of the two aforementioned acts, as well, the part of the Securities Exchange Act that regulates the most purely corporate-related aspects of joint stock companies whose securities are traded on an official secondary market. The consolidated text also includes the articles of the Commercial Code that address limited partnerships, a derivative corporate device that is barely used in practice.
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Reform of the Spanish Auditing Law
Law 12/2010, of June 30, amends Law 19/1988, of July 12, on Account Audits, Law 24/1988, of July 28, on Securities Exchanges and the consolidated text of the former Companies Act adopted by Legislative Royal Decree 1564/1989, of December 22 (currently, the Capital Companies Act), for its adaptation to EU regulations. This new law transposes Directive EU/2006/43 which regulates aspects, among others, related to: authorization and registry of auditors and auditing companies, confidentiality and professional secrecy which the auditors may observe, rules on independency and liability as well as certain rules on the composition and functions of the auditing committee.
U.S. Regulation
Banking Regulation
BBVA is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (the“BHC “BHC Act”). As such it is subject to the regulation and supervision of the Board of Governors of the Federal Reserve System (the“Federal “Federal Reserve”). Among other things, the Group’s direct and indirect activities and investments in the United States are limited to thoseretail and commercial banking and other activities that are “financial in nature” or “incidental” or “complementary”“closely related to a financial activity,banking”, as determined by the Federal Reserve. BBVA is also required to obtain the prior approval of the Federal Reserve before acquiring, directly or indirectly, the ownership or control of more than 5% of any class of voting stock of any U.S. bank or bank holding company.
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Under current Federal Reserve policy, BBVA is required to act as a source of financial strength for its U.S. bank subsidiaries.subsidiaries and U.S. branch. Among other things, this source of strength obligation may implyresult in a requirement for BBVA, as onlysole shareholder, to be required to inject capital into any of its U.S. bank subsidiaries.
The Group’s U.S. bank subsidiaries and BBVA’s U.S. branchesbranch are also subject to supervision and regulation by a variety of other U.S. regulatory agencies. In addition to supervision by the Federal Reserve, BBVA’s New York and Miami branches are supervisedBranch is licensed by the New York State Banking Department (the “NYSBD”) and is supervised by both the NYSBD and the Florida Office of Financial Regulation, respectively.Federal Reserve. BBVA’s wholly-owned direct U.S. subsidiary, BBVA USA Bancshares, Inc., and its wholly-owned subsidiary, Compass Bancshares, Inc., are both bank holding companies within the meaning of the BHC Act and are subject to supervision and regulation by the Federal Reserve. BBVA Compass, wholly-owned by Compass Bancshares, Inc., is a financialstate-chartered bank that is a member of the Federal Reserve System and therefore is supervised by the Federal Reserve and the State of Alabama Banking Department. BBVA Compass has branches in Alabama, Texas, Arizona, Florida, Colorado, California, and New Mexico. BBVA Compass is a depository institution insured by, and subject to the regulation of, the Federal Deposit Insurance Corporation. BBVAPR Holding Corporation, wholly-owned by BBVA, is a bank holding company within the meaning of the BHC Act and is subject to supervision and regulation by the Federal Reserve. Compass Bank is state-chartered bank that is member of the Federal Reserve System and is supervised by the Federal Reserve and the State of Alabama Banking Department. Compass Bank also has branches in Texas, Arizona, Florida, Colorado, and New Mexico, which are supervised by their respective state banking regulators. BBVA Bancomer USA and BBVABanco Bilbao Vizcaya Argentaria Puerto Rico, arewholly-owned by BBVAPR Holding Corporation, is a state non-member bank chartered and supervised by the State of California Department of Financial Institutions and theOficina del Comisionado de Instituciones Financieras de Puerto Rico, respectively. Compass Bank, BBVA Bancomer USA and BBVA Puerto Rico are also depository institutions insured by, and subject to the regulation of,its primary federal regulator is the Federal Deposit Insurance Corporation.Corporation
Bancomer Transfer Services is an affiliate of BBVA, which is licensed as a money transmitter by the State of California Department of Financial Institutions and as a money services business by the Texas Department of Banking.Banking and certain other state regulators. Bancomer Transfer Services is also registered as a money services business with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury.
A major focus of U.S. governmental policy relating to financial institutions in recent years has been aimed at fighting money laundering and terrorist financing. Regulations applicable to BBVA and its affiliates impose obligations to maintain appropriate policies, procedures, and controls to detect, prevent, and report money laundering. In particular, Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), as amended, requires financial institutions operating in the United States to (i) give special attention to correspondent and payable-through bank accounts, (ii) implement enhanced reporting due diligence, and ‘know“know your customer’customer” standards for private banking and correspondent banking relationships, (iii) scrutinize the beneficial ownership and activity of certainnon-U.S. and private banking customers (especially for so-called politically exposed persons), and (iv) develop new anti-money laundering programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement any existing compliance programs for
44
purposes of requirements under the BanksBank Secrecy Act and the Office of Foreign Assets Control regulations. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious legal and reputational consequences for the institution.
Regulation of Other U.S. Entities
The Group’s U.S. broker-dealers are subject to the regulation and supervision of the SEC and the Financial Industry Regulatory Authority (FINRA) with respect to their securities activities.
Dodd-Frank Act
On July 21, 2010, the United States enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, which we refer to as the Dodd-Frank Act, which provides a broad framework for significant regulatory changes that will extend to almost every area of U.S. financial regulation. The Dodd-Frank Act addresses, among other issues, systemic risk oversight, bank capital standards, the liquidation of failing systemically significant U.S. financial institutions,over-the-counter derivatives, the ability of banking entities to engage in proprietary trading activities and invest in hedge funds and private equity funds (known as the “Volcker Rule”), consumer and investor protection, hedge fund registration, securitization, investment advisors and the role of credit-rating agencies.
Implementation of the Dodd-Frank Act will require detailed rulemaking over multiple years by various regulators and could result in additional costs or limit or restrict the way we conduct our business, although uncertainty remains about the final details, impact and timing of the rules.
Among other changes, beginning five years after enactment of the Dodd-Frank Act, the Federal Reserve Board will apply minimum capital requirements to U.S. intermediate bank holding company subsidiaries ofnon-U.S. bank holding companies (such as BBVA USA Bancshares, Inc., Compass Bancshares, Inc. and BBVAPR Holding Corporation). The exact requirements that will apply to such U.S. intermediate bank holding companies are currently unknown; however, the Federal Reserve Board is expected to require a minimum tier 1 risk-based capital ratio of at least 4% and a total risk-based capital ratio of at least 8%. The Dodd-Frank Act also provides regulators with tools to impose greater capital, leverage and liquidity requirements and other prudential standards, particularly for financial institutions that pose significant systemic risk and bank holding companies with greater than $50 billion in assets. In imposing such heightened prudential standards onnon-U.S. bank holding companies such as BBVA, the Federal Reserve Board is directed to take into account the principle of national treatment and equality of competitive opportunity, and the extent to which the foreign bank holding company is subject to comparable home country standards.
The Dodd-Frank Act also limits the ability of banking entities, except solely outside the United States in the case ofnon-U.S. banking entities, to sponsor or invest in private equity or hedge funds (including an aggregate investment limit of 3% of tier 1 capital in funds that are sponsored by the bank holding company) and to engage in certain types of proprietary trading unrelated to serving clients. The Dodd-Frank Act also changes the Federal Deposit Insurance Corporation (FDIC) deposit insurance assessment framework (the amounts paid by FDIC-insured institutions into the deposit insurance fund of the FDIC), primarily by basing assessments on an FDIC-insured institution’s total assets less tangible equity rather than U.S. domestic deposits, which is expected to shift a greater portion of the aggregate assessments to large banks (such as BBVA Compass).
Under the so-called swap “push-out” provisions of the Dodd-Frank Act, the derivatives activities of U.S. banks (such as BBVA Compass) and U.S. branch offices of foreign banks (such as BBVA’s New York branch) will be restricted, which may necessitate changes to how we conduct our derivatives activities. Entities that are swap dealers, security-based swap dealers, major swap participants or major security-based swap participants will be required to register with the SEC or the U.S. Commodity Futures Trading Commission, or both, and will become subject to the requirements as to capital, margin, business conduct, recordkeeping and other requirements applicable to such entities.
There are various qualitative and quantitative restrictions on the extent to which we and our nonbank subsidiaries can borrow or otherwise obtain credit from our U.S. banking subsidiaries or engage in certain other transactions involving those subsidiaries. When permissible, these transactions must be on terms that would
45
ordinarily be offered to unaffiliated entities, must be secured by designated amounts of specified collateral in most cases and are subject to volume limitations. These restrictions also apply to certain transactions of our New York Branch with our New York broker-dealer and certain of our other affiliates. Effective in July 2012, Dodd-Frank subjects credit exposure arising from derivative transactions, securities borrowing and lending transactions, and repurchase/reverse repurchase agreements to these collateral and volume transactionslimitations.
Regulations which the Financial Stability Oversight Council or the Consumer Financial Protection Bureau established under the Dodd-Frank Act may adopt could affect the nature of the activities that a bank (including BBVA Compass ) may conduct, and may impose restrictions and limitations on the conduct of such activities.
Furthermore, the Dodd-Frank Act requires issuers with listed securities, which may include foreign private issuers such as BBVA, to establish a “clawback” policy to recoup previously awarded compensation in the event of an accounting restatement. The Dodd-Frank Act also grants the SEC discretionary rule-making authority to impose a new fiduciary standard on brokers, dealers and investment advisers, and expands the extraterritorial jurisdiction of U.S. courts over actions brought by the SEC or the United States with respect to violations of the antifraud provisions in the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.
Monetary Policy
The integration of Spain into the EMU on January 1, 1999 implied the yielding of monetary policy sovereignty to the ESCB. The ESCB is composed of the ECB and the national central banks of the 16 member countries that form the EMU (Slovakia joined the Monetary UnionEMU on January 1, 2009).
The ESCB determines and executes the single monetary policy of the 16 member countries of the EMU. The ESCB collaborates with the central banks of member countries to take advantage of the experience of the central banks in each of its national markets. The basic tasks to be carried out by the ESCB include:
| | |
| | • | defining and implementing the single monetary policy of the EU; |
| |
| | • | conducting foreign exchange operations in accordance with the set exchange policy; |
| |
| | • | lending to national monetary financial institutions in collateralized operations; |
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| | |
| | • | holding and managing the official foreign reserves of the member states; and |
| |
| | • | promoting the smooth operation of the payment systems. |
In addition, the EU Treaty establishes a series of rules designed to safeguard the independence of the system, in its institutional as well as in its administrative functions.
Reform of the Spanish Securities Markets
During 2007 and 2008, there have been significant legal developments approved by the Spanish Congress, with the purpose of reforming the Spanish legal system, and in particular the Spanish Securities Markets Act of 1988 (the“Securities Markets Act”) and the regulations developing the Securities Market Act, in order to adapt the Spanish legal framework to several European Directives.
Law amending the Securities Market Act
Law 47/2007 amends the Securities Markets Act in order to adapt it to Directive 2004/37/EC on markets in financial instruments (MiFID), Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions, and Directive 2006/73/EC implementing Directive 2004/39/EC with respect to organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive.
The new organizational requirements and operating conditions for investment firms and entities rendering financial services has been further developed by Royal Decree 217/2008 (which implements Directive 2006/73/EC in the Spanish legal framework). The amendments introduced by Royal Decree217/2008 represent important reforms on the regulations governing investment firms and entities rendering financial services, and the applicable rules of conduct to those entities acting in the securities markets. With respect to the rules of conduct, Royal Decree 217/2008 introduces (i) new client categorization; (ii) new rules on inducements; and (iii) new information obligations, includingBest Executionrules and assessments of suitability and appropriateness.
Law amending the Securities Markets Act on takeover bids and transparency requirements for issuers (6/2007)
Law 6/2007 has amended several provisions of the Securities Market Act in order to adapt it to Directive 2004/25/EC on takeover bids, and Directive 2004/109/EC on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market.
With respect to the transparency of listed companies, Law 6/2007 (i) amends the reporting requirements with respect to periodic financial information of listed companies and issuers of listed securities; (ii) amends the disclosure regime for significant stakes; (iii) adds new information and disclosure requirements for issuers of listed securities, including disclosure regarding significant events; (iv) establishes a civil liability system of the issuer and board of directors in connection with the financial information disclosed by issuers of securities; and (v) establishes new developments in the supervision system, conferring new supervisory powers upon the CNMV with respect to the review of accounting information.
The transparency requirements have been further developed by Royal Decree 1362/2007 developing the Securities Markets Act on transparency requirement for issuers of listed securities, which establishes the requirements relating to the content, publication and disclosure of regulated information for issuers for which Spain is the country of origin and whose shares are admitted to trading in a Spanish market. This regulated information includes: (i) periodic information to be disclosed on the annual and semi-annual financial reports and periodic statements, such as the annual accounts, the management report, and a declaration of responsibility signed by the company’s directors; (ii) information on significant shareholdings, reducing the communication threshold to 3%, and extending the disclosure obligations to the acquisition or transfer of financial instruments that grant rights to acquire shares with voting rights; (iii) treasury stock transactions, that reach or exceed 1% of voting rights; and (iv) other obligations, such as communication of remuneration systems for directors and managers, statistical information, etc.
With respect to takeover bids, Law 6/2007 (i) establishes the cases in which a company must launch a takeover bid over the entire share capital of the relevant company; (ii) establishes that takeover bids shall be launched once a
38
specific stake on the share capital of the company has been reached (instead of the previous system which was based on the obligation of launching a takeover bid in order to reach a specific percentage); (iii) regulates new obligations for the board of directors of the target companies of the takeover bid in terms of preventing the takeover bid; (iii) regulates the squeeze-out and sell-out when 90% of the share capital is held after a takeover bid; and (iv) establishes a new relevant control threshold by considering that control exists by the direct or indirect acquisition of a percentage of voting rights in a listed company equal to or in excess of 30%, or by holding any interest carrying less than 30% of voting rights but appointing, within 24 months following the acquisition, a number of directors which, together with those already appointed, if any, represents more than one-half of the members of the board of directors.
The regulations on takeover bids established by Law 6/2007, have been further developed by Royal Decree 1066/2007 on rules applicable to takeover bids for securities, completing the amendments introduced by Law 6/2007, in order to ensure that takeover bids are carried out within a comprehensive legal framework and with absolute legal certainty. The Royal Decree contains provisions regarding: (i) the scope and application to all takeover bids, whether voluntary or mandatory, for a listed company; (ii) the rules applicable to mandatory takeover bids when control of a company is obtained; (iii) other cases of takeover bids, such as bids for de-listing of securities and bids that must be made when a company wishes to reduce capital through the acquisition of its own shares for subsequent redemption thereof; (iv) the consideration and guarantees offered in a bid; (v) stages of the procedure that must be followed in a takeover bid; (vi) the mandatory duty of passivity of the board of directors of the offeree company and the optional regime of neutralization of other preventive measures against bids; (vii) the acceptance period, the calculation of the acceptances received and the settlement of the bid; (viii) the procedures applicable to competing offers and to squeeze-outs and sell-outs; and (ix) certain rules on supervision, inspection and sanctions applicable in respect of the regulations on takeover bids.
| |
| C. | Organizational Structure |
Below is a simplified organizational chart of BBVA’s most significant subsidiaries asAs of December 31, 2008. An additional approximately 3302010, the Group was made up of 302 companies accounted for under the full consolidation method and 7 under the proportionate consolidation method. A further 68 companies are accounted for by the equity method.
The companies are principally domiciled in the following countries: Argentina, Belgium, Bolivia, Brazil, Cayman Islands, Chile, Colombia, Ecuador, France, Germany, Ireland, Italy, Luxembourg, Mexico, Netherlands, Netherlands Antilles, Panama, Peru, Portugal, Puerto Rico, Spain, Switzerland, United Kingdom, United States of America, Uruguay and Venezuela.
The Group has an active presence in Asia.
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| | | | | | | | | | | | | | | | | |
| | | | | | | BBVA
| | | | | | | |
| | | Country of
| | | | Voting
| | | BBVA
| | | Total
| |
Subsidiary | | Incorporation | | Activity | | Power | | | Ownership | | | Assets | |
| | | | | | | (%) | | | (In millions
| |
| | | | | | | | | | of euros) | |
| |
| BBVA Bancomer, S.A. de C.V. | | Mexico | | Bank | | | 100.00 | | | | 99.97 | | | | 59,174 | |
| Compass Bank | | United States | | Bank | | | 100.00 | | | | 100.00 | | | | 46,843 | |
| BBVA Seguros, S.A., de Seguros y Reaseguros | | Spain | | Insurance | | | 99.94 | | | | 99.94 | | | | 11,474 | |
| Banco de Credito Local, S.A. | | Spain | | Bank | | | 100.00 | | | | 100.00 | | | | 11,312 | |
| Banco Provincial S.A. — Banco Universal | | Venezuela | | Bank | | | 55.60 | | | | 55.60 | | | | 9,495 | |
| Banco Bilbao Vizcaya Argentaria Chile, S.A. | | Chile | | Bank | | | 68.18 | | | | 68.16 | | | | 8,587 | |
| Banco Continental, S.A. | | Peru | | Bank | | | 92.08 | | | | 46.04 | | | | 7,699 | |
| Finanzia, Banco de Credito, S.A. | | Spain | | Bank | | | 100.00 | | | | 100.00 | | | | 7,403 | |
| Banco Bilbao Vizcaya Argentaria (Portugal), S.A. | | Portugal | | Bank | | | 100.00 | | | | 100.00 | | | | 6,903 | |
| BBVA Factoring E.F.C., S.A. | | Spain | | Financial services | | | 100.00 | | | | 100.00 | | | | 6,786 | |
| BBVA Colombia, S.A. | | Colombia | | Bank | | | 95.43 | | | | 95.43 | | | | 6,505 | |
| BBVA Banco de Financiacion, S.A. | | Spain | | Bank | | | 100.00 | | | | 100.00 | | | | 5,765 | |
| Compass Capital Markets, Inc. | | United States | | Financial services | | | 100.00 | | | | 100.00 | | | | 5,138 | |
| BBVA Banco Frances, S.A. | | Argentina | | Bank | | | 76.00 | | | | 76.00 | | | | 4,486 | |
| Banco Bilbao Vizcaya Argentaria Puerto Rico | | Puerto Rico | | Bank | | | 100.00 | | | | 100.00 | | | | 4,318 | |
| Compass Southwest, LP | | United States | | Bank | | | 100.00 | | | | 100.00 | | | | 3,631 | |
| BBVA Ireland Public Limited Company | | Ireland | | Financial services | | | 100.00 | | | | 100.00 | | | | 2,302 | |
| BBVA International Investment Corporation | | Puerto Rico | | Financial services | | | 100.00 | | | | 100.00 | | | | 2,144 | |
| Uno-E Bank, S.A. | | Spain | | Bank | | | 100.00 | | | | 100.00 | | | | 1,297 | |
| Banco Depositario BBVA, S.A. | | Spain | | Bank | | | 100.00 | | | | 99.99 | | | | 899 | |
Below is a simplified organizational chart of BBVA’s most significant subsidiaries as of December 31, 2010.
| | | | | | | | | | | | | | | | | |
| | | | | | | BBVA
| | | | |
| | | Country of
| | | | Voting
| | BBVA
| | Total
|
Subsidiary | | Incorporation | | Activity | | Power | | Ownership | | Assets |
| | | (In millions of euros, except percentages) |
| |
| BBVA BANCOMER, S.A. DE C.V. | | MEXICO | | BANK | | | 100.0 | | | | 100.0 | | | | 69,667 | |
| COMPASS BANK | | THE UNITED
STATES | | BANK | | | 100.0 | | | | 100.0 | | | | 51,111 | |
| BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A. | | CHILE | | BANK | | | 68.2 | | | | 68.2 | | | | 11,638 | |
| BANCO CONTINENTAL, S.A. | | PERU | | BANK | | | 92.2 | | | | 46.1 | | | | 10,078 | |
| BBVA SEGUROS, S.A., DE SEGUROS Y REASEGUROS | | SPAIN | | INSURANCE | | | 100.0 | | | | 100.0 | | | | 10,913 | |
| BBVA COLOMBIA, S.A. | | COLOMBIA | | BANK | | | 95.4 | | | | 95.4 | | | | 8,634 | |
| BANCO PROVINCIAL S.A. — BANCO UNIVERSAL | | VENEZUELA | | BANK | | | 55.6 | | | | 55.6 | | | | 8,493 | |
| BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL), S.A. | | PORTUGAL | | BANK | | | 100.0 | | | | 100.0 | | | | 8,094 | |
| BBVA BANCO FRANCES, S.A. | | ARGENTINA | | BANK | | | 76.0 | | | | 76.0 | | | | 5,250 | |
| BANCO BILBAO VIZCAYA ARGENTARIA PUERTO RICO, S.A. | | PUERTO RICO | | BANK | | | 100.0 | | | | 100.0 | | | | 3,615 | |
| FINANZIA, BANCO DE CREDITO, S.A. | | SPAIN | | BANK | | | 100.0 | | | | 100.0 | | | | 7,779 | |
| PENSIONES BANCOMER, S.A. DE C.V. | | MEXICO | | INSURANCE | | | 100.0 | | | | 100.0 | | | | 2,529 | |
| COMPASS SOUTHWEST, LP | | THE UNITED
STATES | | BANK | | | 100.0 | | | | 100.0 | | | | 4,008 | |
| SEGUROS BANCOMER, S.A. DE C.V. | | MEXICO | | INSURANCE | | | 100.0 | | | | 100.0 | | | | 2,432 | |
| BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A. | | PANAMA | | BANK | | | 98.9 | | | | 98.9 | | | | 1,586 | |
| UNO-E BANK, S.A. | | SPAIN | | BANK | | | 100.0 | | | | 100.0 | | | | 1,361 | |
| BBVA PARAGUAY, S.A. | | PARAGUAY | | BANK | | | 100.0 | | | | 100.0 | | | | 1,121 | |
| BBVA SUIZA, S.A. (BBVA SWITZERLAND) | | SWITZERLAND | | BANK | | | 100.0 | | | | 100.0 | | | | 1,407 | |
| |
| D. | Property, Plants and Equipment |
We own and rent a substantial network of properties in Spain and abroad, including 3,3753,024 branch offices in Spain and, principally through our various affiliates, 4,4124,337 branch offices abroad as of December 31, 2008.2010. As of December 31, 2008,2010, approximately 47.3% and 61.0%83% of these properties are rentedour branches in Spain and 57% of our branches abroad respectively,were rented from third parties pursuant to short-term leases that may be renewed by mutual agreement. The remaining properties, including mostnumber of our major branches leased in Spain has increased in 2009 and our headquarters, are owned by us.2010 as a result of the sale and leaseback operation described in Note 16 to the Consolidated Financial Statements.
We purchased through a real estate company of the Group theParque Empresarial Forestalocated in a development area in the north of Madrid from Group Gmp pursuant to an agreement executed on June 19, 2007. The BBVA Group will construct its new corporate headquarters at this location. We have made an aggregate investment of €434 million in this project asAs of December 31, 2008.2010, the accumulated investment for this project amounted to €484 million.
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| E. | Selected Statistical Information |
The following is a presentation of selected statistical information for the periods indicated. Where required under Industry Guide 3, we have provided such selected statistical information separately for our domestic and foreign activities, pursuant to our calculation that our foreign operations are significant according toRule 9-05 ofRegulation S-X.
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47
Average Balances and Rates
The tables below set forth selected statistical information on our average balance sheets, which are based on the beginning and month-end balances in each year. We do not believe that monthly averages present trends materially different from those that would be presented by daily averages. Interest income figures, when used, include interest income on non-accruing loans to the extent that cash payments have been received. Loan fees are included in the computation of interest revenue.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Average Balance Sheet — Assets and Interest from Earning Assets | |
| | | Average Balance Sheet — Assets and Interest from Earning Assets | | | Year Ended
| | Year Ended
| | Year Ended
| |
| | | Year Ended December 31, 2008 | | Year Ended December 31, 2007 | | Year Ended December 31, 2006 | | | December 31, 2010 | | December 31, 2009 | | December 31, 2008 | |
| | | Average
| | | | Average
| | Average
| | | | Average
| | Average
| | | | Average
| | | Average
| | | | Average
| | Average
| | | | Average
| | Average
| | | | Average
| |
| | | Balance | | Interest | | Yield(1) | | Balance | | Interest | | Yield(1) | | Balance | | Interest | | Yield(1) | | | Balance | | Interest | | Yield(1) | | Balance | | Interest | | Yield(1) | | Balance | | Interest | | Yield(1) | |
| | | (In millions of euros, except %) | | | (In millions of euro, except percentages) | |
| |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central banks | | | 14,396 | | | | 479 | | | | 3.33 | % | | | 16,038 | | | | 458 | | | | 2.86 | % | | | 11,903 | | | | 444 | | | | 3.73 | % | | | 21,342 | | | | 239 | | | | 1.12 | % | | | 18,638 | | | | 253 | | | | 1.36 | % | | | 14,396 | | | | 479 | | | | 3.33 | % |
| Debt securities, equity instruments and derivatives | | | 118,356 | | | | 4,659 | | | | 3.94 | % | | | 107,236 | | | | 4,386 | | | | 4.09 | % | | | 103,387 | | | | 4,498 | | | | 4.35 | % | | | 145,990 | | | | 3,939 | | | | 2.70 | % | | | 138,030 | | | | 4,207 | | | | 3.05 | % | | | 118,356 | | | | 4,659 | | | | 3.94 | % |
Loans and receivables | | | 352,727 | | | | 25,087 | | | | 7.11 | % | | | 315,156 | | | | 21,067 | | | | 6.68 | % | | | 256,462 | | | | 14,795 | | | | 5.77 | % | | | 358,587 | | | | 16,797 | | | | 4.68 | % | | | 355,121 | | | | 19,194 | | | | 5.40 | % | | | 352,727 | | | | 25,087 | | | | 7.11 | % |
| Loans and advances to credit institutions | | | 31,229 | | | | 1,367 | | | | 4.38 | % | | | 39,509 | | | | 1,777 | | | | 4.50 | % | | | 23,671 | | | | 992 | | | | 4.19 | % | | | 25,561 | | | | 501 | | | | 1.96 | % | | | 26,152 | | | | 697 | | | | 2.66 | % | | | 31,229 | | | | 1,367 | | | | 4.38 | % |
| In euros(2) | | | 21,724 | | | | 933 | | | | 4.29 | % | | | 29,522 | | | | 1,138 | | | | 3.85 | % | | | 14,090 | | | | 452 | | | | 3.21 | % | |
| In euro(2) | | | | 15,888 | | | | 210 | | | | 1.32 | % | | | 16,190 | | | | 353 | | | | 2.18 | % | | | 21,724 | | | | 933 | | | | 4.29 | % |
| In other currencies(3) | | | 9,505 | | | | 434 | | | | 4.57 | % | | | 9,987 | | | | 639 | | | | 6.40 | % | | | 9,581 | | | | 540 | | | | 5.63 | % | | | 9,673 | | | | 291 | | | | 3.01 | % | | | 9,962 | | | | 344 | | | | 3.45 | % | | | 9,505 | | | | 434 | | | | 4.57 | % |
| Loans and advances to customers | | | 321,498 | | | | 23,720 | | | | 7.38 | % | | | 275,647 | | | | 19,290 | | | | 7.00 | % | | | 232,791 | | | | 13,803 | | | | 5.93 | % | | | 333,026 | | | | 16,296 | | | | 4.89 | % | | | 328,969 | | | | 18,498 | | | | 5.62 | % | | | 321,498 | | | | 23,720 | | | | 7.38 | % |
| In euros(2) | | | 218,634 | | | | 13,072 | | | | 5.98 | % | | | 201,045 | | | | 10,747 | | | | 5.35 | % | | | 177,330 | | | | 7,366 | | | | 4.15 | % | |
| In euro(2) | | | | 219,862 | | | | 7,023 | | | | 3.19 | % | | | 222,254 | | | | 9,262 | | | | 4.17 | % | | | 218,634 | | | | 13,072 | | | | 5.98 | % |
| In other currencies(3) | | | 102,864 | | | | 10,648 | | | | 10.35 | % | | | 74,602 | | | | 8,543 | | | | 11.45 | % | | | 55,461 | | | | 6,437 | | | | 11.61 | % | | | 113,164 | | | | 9,273 | | | | 8.19 | % | | | 106,715 | | | | 9,236 | | | | 8.65 | % | | | 102,864 | | | | 10,648 | | | | 10.35 | % |
| Other financial income | | | — | | | | 179 | | | | — | | | | — | | | | 265 | | | | — | | | | — | | | | 305 | | | | — | | | | — | | | | 159 | | | | — | | | | — | | | | 120 | | | | — | | | | — | | | | 179 | | | | — | |
| Non-earning assets | | | 32,377 | | | | — | | | | — | | | | 22,770 | | | | — | | | | — | | | | 24,198 | | | | — | | | | — | | | | 32,889 | | | | — | | | | — | | | | 31,180 | | | | — | | | | — | | | | 32,377 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total average assets | | | 517,856 | | | | 30,404 | | | | 5.87 | % | | | 461,200 | | | | 26,176 | | | | 5.68 | % | | | 395,950 | | | | 20,042 | | | | 5.06 | % | | | 558,808 | | | | 21,134 | | | | 3.78 | % | | | 542,969 | | | | 23,775 | | | | 4.38 | % | | | 517,856 | | | | 30,404 | | | | 5.87 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Rates have been presented on a non-taxable equivalent basis. |
| |
| (2) | | Amounts reflected in euro correspond to predominantly domestic activities. |
| |
| (3) | | Amounts reflected in other currencies correspond to predominantly foreign activities. |
4148
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Average Balance Sheet — Liabilities and Interest Paid on Interest Bearing Liabilities | |
| | | Average Balance Sheet — Liabilities and Interest Paid on Interest Bearing Liabilities | | | Year Ended
| | Year Ended
| | Year Ended
| |
| | | Year Ended December 31, 2008 | | Year Ended December 31, 2007 | | Year Ended December 31, 2006 | | | December 31, 2010 | | December 31, 2009 | | December 31, 2008 | |
| | | Average
| | | | Average
| | Average
| | | | Average
| | Average
| | | | Average
| | | Average
| | | | Average
| | Average
| | | | Average
| | Average
| | | | Average
| |
| | | Balance | | Interest | | Yield(1) | | Balance | | Interest | | Yield(1) | | Balance | | Interest | | Yield(1) | | | Balance | | Interest | | Yield(1) | | Balance | | Interest | | Yield(1) | | Balance | | Interest | | Yield(1) | |
| | | (In millions of euros, except%) | | | | | | | (In millions of euro, except percentages) | |
| |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks and credit institutions | | | 77,159 | | | | 3,809 | | | | 4.94 | % | | | 65,822 | | | | 3,470 | | | | 5.27 | % | | | 63,730 | | | | 2,612 | | | | 4.10 | % | | | 80,177 | | | | 1,515 | | | | 1.89 | % | | | 74,017 | | | | 2,143 | | | | 2.89 | % | | | 77,159 | | | | 3,809 | | | | 4.94 | % |
| In euros | | | 32,790 | | | | 1,604 | | | | 4.89 | % | | | 27,388 | | | | 1,261 | | | | 4.60 | % | | | 34,550 | | | | 1,175 | | | | 3.40 | % | |
| In euro | | | | 45,217 | | | | 863 | | | | 1.91 | % | | | 35,093 | | | | 967 | | | | 2.75 | % | | | 32,790 | | | | 1,604 | | | | 4.89 | % |
| In other currencies | | | 44,369 | | | | 2,205 | | | | 4.97 | % | | | 38,434 | | | | 2,209 | | | | 5.75 | % | | | 29,180 | | | | 1,437 | | | | 4.92 | % | | | 34,960 | | | | 652 | | | | 1.87 | % | | | 38,924 | | | | 1,176 | | | | 3.02 | % | | | 44,369 | | | | 2,205 | | | | 4.97 | % |
| Customer deposits | | | 237,387 | | | | 8,390 | | | | 3.53 | % | | | 205,740 | | | | 7,013 | | | | 3.41 | % | | | 177,927 | | | | 5,507 | | | | 3.10 | % | | | 259,330 | | | | 3,550 | | | | 1.37 | % | | | 249,106 | | | | 4,056 | | | | 1.63 | % | | | 237,387 | | | | 8,390 | | | | 3.53 | % |
In euros(2) | | | 115,166 | | | | 3,765 | | | | 3.27 | % | | | 109,605 | | | | 3,133 | | | | 2.86 | % | | | 99,148 | | | | 1,850 | | | | 1.87 | % | |
In other currencies(3) | | | 122,221 | | | | 4,625 | | | | 3.78 | % | | | 96,135 | | | | 3,880 | | | | 4.04 | % | | | 78,779 | | | | 3,657 | | | | 4.64 | % | |
| In euro(2) | | | | 121,956 | | | | 1,246 | | | | 1.02 | % | | | 116,422 | | | | 1,326 | | | | 1.14 | % | | | 115,166 | | | | 3,765 | | | | 3.27 | % |
| In other currencies(3) | | | | 137,374 | | | | 2,304 | | | | 1.68 | % | | | 132,684 | | | | 2,730 | | | | 2.06 | % | | | 122,221 | | | | 4,625 | | | | 3.78 | % |
| Debt securities and subordinated liabilities | | | 119,249 | | | | 6,100 | | | | 5.12 | % | | | 116,247 | | | | 5,658 | | | | 4.87 | % | | | 87,520 | | | | 3,354 | | | | 3.83 | % | | | 119,684 | | | | 2,334 | | | | 1.95 | % | | | 120,228 | | | | 3,098 | | | | 2.58 | % | | | 119,249 | | | | 6,100 | | | | 5.12 | % |
In euros(2) | | | 96,764 | | | | 5,055 | | | | 5.22 | % | | | 99,612 | | | | 4,675 | | | | 4.69 | % | | | 77,480 | | | | 2,834 | | | | 3.66 | % | |
In other currencies(3) | | | 22,485 | | | | 1,045 | | | | 4.65 | % | | | 16,635 | | | | 983 | | | | 5.91 | % | | | 10,040 | | | | 520 | | | | 5.18 | % | |
| In euro(2) | | | | 89,020 | | | | 1,569 | | | | 1.76 | % | | | 91,730 | | | | 2,305 | | | | 2.51 | % | | | 96,764 | | | | 5,055 | | | | 5.22 | % |
| In other currencies(3) | | | | 30,664 | | | | 765 | | | | 2.49 | % | | | 28,498 | | | | 793 | | | | 2.78 | % | | | 22,485 | | | | 1,045 | | | | 4.65 | % |
| Other financial costs | | | — | | | | 418 | | | | — | | | | — | | | | 408 | | | | — | | | | — | | | | 431 | | | | — | | | | — | | | | 415 | | | | — | | | | — | | | | 596 | | | | — | | | | — | | | | 418 | | | | — | |
| Non-interest-bearing liabilities | | | 56,867 | | | | — | | | | — | | | | 48,776 | | | | — | | | | — | | | | 47,985 | | | | — | | | | — | | | | 66,541 | | | | — | | | | — | | | | 70,020 | | | | — | | | | — | | | | 56,867 | | | | | | | | — | |
| Stockholders’ equity | | | 27,194 | | | | — | | | | — | | | | 24,615 | | | | — | | | | — | | | | 18,787 | | | | — | | | | — | | |
| Equity | | | | 33,076 | | | | — | | | | — | | | | 29,598 | | | | — | | | | — | | | | 27,194 | | | | | | | | ��� | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total average liabilities | | | 517,856 | | | | 18,717 | | | | 3.61 | % | | | 461,200 | | | | 16,548 | | | | 3.59 | % | | | 395,949 | | | | 11,904 | | | | 3.01 | % | | | 558,808 | | | | 7,814 | | | | 1.40 | % | | | 542,969 | | | | 9,893 | | | | 1.82 | % | | | 517,856 | | | | 18,717 | | | | 3.61 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Rates have been presented on a non-taxable equivalent basis. |
| |
| (2) | | Amounts reflected in euro correspond to predominantly domestic activities. |
| |
| (3) | | Amounts reflected in other currencies correspond to predominantly foreign activities. |
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Changes in Net Interest Income-Volume and Rate Analysis
The following table allocates changes in our net interest income between changes in volume and changes in rate for 20082010 compared to 2007,2009, and 20072009 compared to 2006.2008. Volume and rate variance have been calculated based on movements in average balances over the period and changes in interest rates on average interest-earning assets and average interest-bearing liabilities. The onlyout-of-period items and adjustments excluded from the following table are interest payments on loans which are made in a period other than the period during which they are due. Loan fees were included in the computation of interest income.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008/2007 | | | 2010/2009 | |
| | | Increase (Decrease) Due to Changes in | | | Increase (Decrease) Due to Changes in | |
| | | Volume(1) | | Rate(1)(2) | | Net Change | | | Volume(1) | | Rate(1)(2) | | Net Change | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Interest income | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central bank | | | (46 | ) | | | 66 | | | | 21 | | | | 37 | | | | (51 | ) | | | (14 | ) |
| Debt securities, equity instruments and derivatives | | | 468 | | | | (195 | ) | | | 273 | | | | 243 | | | | (511 | ) | | | (268 | ) |
| Loans and advances to credit institutions | | | (368 | ) | | | (41 | ) | | | (409 | ) | | | (16 | ) | | | (179 | ) | | | (195 | ) |
| In euros | | | 37 | | | | (242 | ) | | | (205 | ) | | | (7 | ) | | | (136 | ) | | | (142 | ) |
| In other currencies | | | (29 | ) | | | (175 | ) | | | (204 | ) | | | (10 | ) | | | (43 | ) | | | (53 | ) |
| Loans and advances to customers | | | 3,270 | | | | 1,159 | | | | 4,430 | | | | 228 | | | | (2,429 | ) | | | (2,201 | ) |
| In euros | | | 698 | | | | 1,627 | | | | 2,325 | | | | (100 | ) | | | (2,139 | ) | | | (2,239 | ) |
| In other currencies | | | 3,269 | | | | (1,164 | ) | | | 2,105 | | | | 558 | | | | (521 | ) | | | 37 | |
| Other financial income | | | — | | | | (86 | ) | | | (86 | ) | | | — | | | | 39 | | | | 39 | |
| | | | | | | | | | | | | | | |
Total income | | | 3,297 | | | | 932 | | | | 4,229 | | | | 693 | | | | (3,333 | ) | | | (2,641 | ) |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks and credit institutions | | | 609 | | | | (269 | ) | | | 340 | | | | 178 | | | | (806 | ) | | | (628 | ) |
| In euros | | | 253 | | | | 91 | | | | 344 | | | | 279 | | | | (382 | ) | | | (104 | ) |
| In other currencies | | | 348 | | | | (351 | ) | | | (3 | ) | | | (120 | ) | | | (404 | ) | | | (524 | ) |
| Customer deposits | | | 1,101 | | | | 277 | | | | 1,377 | | | | 166 | | | | (672 | ) | | | (505 | ) |
| In euros | | | 167 | | | | 493 | | | | 660 | | | | 63 | | | | (143 | ) | | | (80 | ) |
| In other currencies | | | 1,066 | | | | (321 | ) | | | 745 | | | | 96 | | | | (522 | ) | | | (425 | ) |
| Debt certificates and subordinated liabilities | | | 162 | | | | 281 | | | | 443 | | | | (14 | ) | | | (750 | ) | | | (764 | ) |
| In euros | | | (142 | ) | | | 522 | | | | 380 | | | | (68 | ) | | | (668 | ) | | | (736 | ) |
| In other currencies | | | 349 | | | | (287 | ) | | | 62 | | | | 60 | | | | (88 | ) | | | (27 | ) |
| Other financial costs | | | — | | | | 10 | | | | 10 | | | | — | | | | (181 | ) | | | (181 | ) |
| | | | | | | | | | | | | | | |
Total expense | | | 2,084 | | | | 86 | | | | 2,170 | | | | 288 | | | | (2,367 | ) | | | (2,078 | ) |
| | | | | | | | | | | | | | | |
Net interest income | | | 1,213 | | | | 846 | | | | 2,059 | | | | 405 | | | | (966 | ) | | | (562 | ) |
| | | | | | | | | | | | | | | |
| | |
| (1) | | Variances caused by changes in both volume and rate have been allocated proportionally to volume and rate. |
| |
| (2) | | Rates have been presented on a non-taxable equivalent basis. |
4350
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007/2006 | | | 2009/2008 | |
| | | Increase (Decrease) Due to Changes in | | | Increase (Decrease) Due to Changes in | |
| | | Volume(1) | | Rate(1)(2) | | Net Change | | | Volume(1) | | Rate(1)(2) | | Net Change | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Interest income | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central bank | | | 154 | | | | (141 | ) | | | 14 | | | | 141 | | | | (366 | ) | | | (225 | ) |
| Debt securities, equity instruments and derivatives | | | 167 | | | | (279 | ) | | | (112 | ) | | | 774 | | | | (1,226 | ) | | | (452 | ) |
| Loans and advances to credit institutions | | | 663 | | | | 122 | | | | 785 | | | | (222 | ) | | | (449 | ) | | | (670 | ) |
| In euros | | | 495 | | | | 192 | | | | 686 | | | | (238 | ) | | | (342 | ) | | | (580 | ) |
| In other currencies | | | 23 | | | | 76 | | | | 99 | | | | 21 | | | | (112 | ) | | | (91 | ) |
| Loans and advances to customers | | | 2,541 | | | | 2,947 | | | | 5,488 | | | | 551 | | | | (5,774 | ) | | | (5,222 | ) |
| In euros | | | 985 | | | | 2,397 | | | | 3,382 | | | | 216 | | | | (4,027 | ) | | | (3,810 | ) |
| In other currencies | | | 2,221 | | | | (115 | ) | | | 2,106 | | | | 396 | | | | (1,725 | ) | | | (1,412 | ) |
| Other financial income | | | — | | | | (41 | ) | | | (41 | ) | | | — | | | | (59 | ) | | | (59 | ) |
| | | | | | | | | | | | | | | |
Total income | | | 3,303 | | | | 2,832 | | | | 6,134 | | | | 1,474 | | | | (8,104 | ) | | | (6,629 | ) |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks and credit institutions | | | 86 | | | | 772 | | | | 858 | | | | (155 | ) | | | (1,512 | ) | | | (1,667 | ) |
| In euros | | | (244 | ) | | | 329 | | | | 86 | | | | 113 | | | | (750 | ) | | | (637 | ) |
| In other currencies | | | 456 | | | | 316 | | | | 772 | | | | (271 | ) | | | (759 | ) | | | (1,029 | ) |
| Customer deposits | | | 861 | | | | 645 | | | | 1,506 | | | | 414 | | | | (4,348 | ) | | | (4,334 | ) |
| In euros | | | 195 | | | | 1,088 | | | | 1,284 | | | | 41 | | | | (2,094 | ) | | | (2,439 | ) |
| In other currencies | | | 806 | | | | (584 | ) | | | 222 | | | | 396 | | | | (2,291 | ) | | | (1,895 | ) |
| Debt certificates and subordinated liabilities | | | 1,101 | | | | 1,202 | | | | 2,303 | | | | 50 | | | | (3,052 | ) | | | (3,002 | ) |
| In euros | | | 810 | | | | 1,030 | | | | 1,840 | | | | (263 | ) | | | (2,481 | ) | | | (2,744 | ) |
| In other currencies | | | 341 | | | | 122 | | | | 463 | | | | 280 | | | | (537 | ) | | | (258 | ) |
| Other financial costs | | | — | | | | (23 | ) | | | (23 | ) | | | — | | | | 178 | | | | 178 | |
| | | | | | | | | | | | | | | |
Total expense | | | 1,962 | | | | 2,682 | | | | 4,644 | | | | 908 | | | | (9,733 | ) | | | (8,825 | ) |
| | | | | | | | | | | | | | | |
Net interest income | | | 1,341 | | | | 150 | | | | 1,490 | | | | 567 | | | | 1,629 | | | | 2,197 | |
| | | | | | | | | | | | | | | |
| | |
| (1) | | Variances caused by changes in both volume and rate have been allocated proportionally to volume and rate. |
| |
| (2) | | Rates have been presented on a non-taxable equivalent basis. |
Interest Earning Assets — Margin and Spread
The following table analyzes the levels of our average earning assets and illustrates the comparative gross and net yields and spread obtained for each of the years indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | December 31, |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 |
| | | (In millions of euros, except %) | | | (In millions of euro, except percentages) |
| |
| Average interest earning assets | | | 485,479 | | | | 438,430 | | | | 371,752 | | | | 525,914 | | | | 511,789 | | | | 485,479 | |
| Gross yield(1) | | | 6.17 | % | | | 5.89 | % | | | 5.29 | % | | | 4.02 | % | | | 4.65 | % | | | 6.17 | % |
| Net yield(2) | | | 5.78 | % | | | 5.60 | % | | | 4.97 | % | | | 3.78 | % | | | 4.38 | % | | | 5.78 | % |
| Net interest margin(3) | | | 2.41 | % | | | 2.20 | % | | | 2.19 | % | | | 2.53 | % | | | 2.71 | % | | | 2.41 | % |
| Average effective rate paid on all interest-bearing liabilities | | | 3.61 | % | | | 3.59 | % | | | 3.01 | % | | | 1.70 | % | | | 2.23 | % | | | 4.31 | % |
| Spread(4) | | | 2.56 | % | | | 2.30 | % | | | 2.28 | % | | | 2.32 | % | | | 2.41 | % | | | 1.86 | % |
| | |
| (1) | | Gross yield represents total interest income divided by average interest earning assets. |
44
| | |
| (2) | | Net yield represents total interest income divided by total average assets. |
| |
| (3) | | Net interest margin represents net interest income as percentage of average interest earning assets. |
| |
| (4) | | Spread is the difference between gross yield and the average cost of interest-bearing liabilities. |
51
ASSETS
Interest-Bearing Deposits in Other Banks
As of December 31, 2008,2010, interbank deposits represented 4.98%3.88% of our assets. Of such interbank deposits, 17.09%35.04% were held outside of Spain and 82.91%64.96% in Spain. We believe that our deposits are generally placed with highly rated banks and have a lower risk than many loans we could make in Spain. Such deposits, however, are subject to the risk that the deposit banks may fail or the banking system of certain of the countries in which a portion of our deposits are made may face liquidity or other problems.
Securities Portfolio
As of December 31, 2008,2010, our securities were carried on our consolidated balance sheet at a book valuecarrying amount of €85,415€96,020 million, representing 15.74%17.37% of our assets. €14,236€29,902 million, or 16.68%31.14%, of our securities consisted of Spanish Treasury bonds and Treasury bills. The average yield during 20082010 on investment securities that BBVA held was 4.37%4.11%, compared to an average yield of approximately 7.11%4.68% earned on loans and receivables during 2008.2010. The market or appraised value of our total securities portfolio as of December 31, 20082010, was €85,354€95,263 million. See Notes 10, 12 and 14 to the Consolidated Financial Statements. For a discussion of our investments in affiliates, see Note 17 to the Consolidated Financial Statements. For a discussion of the manner in which we value our securities, see Notes 2.2.1.a and 8 to the Consolidated Financial Statements.
4552
The following table analyzes the bookcarrying amount and market value of debt securities as of December 31, 2010, December 31, 2009 and December 31, 2008. Trading portfolio is not included in the tables below because the amortized costs and fair values of these items are the same. See Note 10 to the Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2010 | | | December 31, 2009 | | | December 31, 2008 | |
| | | Amortized
| | | Fair
| | | Amortized
| | | Fair
| | | Amortized
| | | Fair
| |
| | | Cost | | | Value(1) | | | Cost | | | Value(1) | | | Cost | | | Value(1) | |
| | | | | | | | | (Millions of euros) | | | | | | | |
| |
DEBT SECURITIES — | | | | | | | | | | | | | | | | | | | | | | | | |
AVAILABLE FOR SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic — | | | 21,929 | | | | 20,566 | | | | 24,577 | | | | 24,869 | | | | 11,743 | | | | 11,910 | |
| Spanish Government | | | 16,543 | | | | 15,337 | | | | 18,312 | | | | 18,551 | | | | 6,233 | | | | 6,371 | |
| Other debt securities | | | 5,386 | | | | 5,229 | | | | 6,265 | | | | 6,318 | | | | 5,510 | | | | 5,539 | |
| Issued by Central Banks | | | — | | | | — | | | | — | | | | — | | | | 9 | | | | 9 | |
| Issued by credit institutions | | | 4,221 | | | | 4,090 | | | | 5,097 | | | | 5,202 | | | | 4,330 | | | | 4,338 | |
| Issued by other institutions | | | 1,165 | | | | 1,139 | | | | 1,168 | | | | 1,116 | | | | 1,171 | | | | 1,192 | |
International — | | | 30,108 | | | | 30,309 | | | | 31,868 | | | | 32,202 | | | | 28,108 | | | | 27,920 | |
The United States — | | | 6,850 | | | | 6,832 | | | | 6,804 | | | | 6,805 | | | | 10,573 | | | | 10,442 | |
| U.S. Treasury and other U.S. Government agencies | | | 579 | | | | 578 | | | | 414 | | | | 416 | | | | 444 | | | | 444 | |
| States and political subdivisions | | | 187 | | | | 193 | | | | 214 | | | | 221 | | | | 382 | | | | 396 | |
| Other debt securities | | | 6,084 | | | | 6,061 | | | | 6,176 | | | | 6,168 | | | | 9,747 | | | | 9,602 | |
| Issued by Central Banks | | | — | | | | — | | | | — | | | | — | | | | 240 | | | | 242 | |
| Issued by credit institutions | | | 2,982 | | | | 2,873 | | | | 2,597 | | | | 2,610 | | | | 4,341 | | | | 4,327 | |
| Issued by other institutions | | | 3,102 | | | | 3,188 | | | | 3,579 | | | | 3,558 | | | | 5,166 | | | | 5,033 | |
Other countries (*) — | | | 23,258 | | | | 23,477 | | | | 25,064 | | | | 25,397 | | | | 17,535 | | | | 17,478 | |
Securities of other foreign
Governments (**) | | | 15,733 | | | | 15,958 | | | | 17,058 | | | | 17,363 | | | | 9,624 | | | | 9,653 | |
| Other debt securities | | | 7,525 | | | | 7,519 | | | | 8,006 | | | | 8,034 | | | | 7,911 | | | | 7,825 | |
| Issued by Central Banks | | | 945 | | | | 945 | | | | 1,296 | | | | 1,297 | | | | 1,045 | | | | 1,045 | |
| Issued by credit institutions | | | 4,983 | | | | 4,999 | | | | 4,795 | | | | 4,893 | | | | 5,924 | | | | 5,958 | |
| Issued by other institutions | | | 1,597 | | | | 1,575 | | | | 1,915 | | | | 1,844 | | | | 942 | | | | 823 | |
TOTAL AVAILABLE FOR SALE PORTFOLIO | | | 52,037 | | | | 50,875 | | | | 56,445 | | | | 57,071 | | | | 39,851 | | | | 39,830 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
HELD TO MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic — | | | 7,503 | | | | 6,771 | | | | 2,626 | | | | 2,624 | | | | 2,392 | | | | 2,339 | |
| Spanish Government | | | 6,611 | | | | 5,942 | | | | 1,674 | | | | 1,682 | | | | 1,412 | | | | 1,412 | |
| Other debt securities | | | 892 | | | | 829 | | | | 952 | | | | 942 | | | | 980 | | | | 927 | |
| Issued by Central Banks | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Issued by credit institutions | | | 290 | | | | 277 | | | | 342 | | | | 344 | | | | 342 | | | | 344 | |
| Issued by other institutions | | | 602 | | | | 552 | | | | 610 | | | | 598 | | | | 638 | | | | 583 | |
International — | | | 2,443 | | | | 2,418 | | | | 2,811 | | | | 2,869 | | | | 2,890 | | | | 2,882 | |
| Securities of other foreign Governments | | | 2,181 | | | | 2,171 | | | | 2,399 | | | | 2,456 | | | | 2,432 | | | | 2,437 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other debt securities | | | 262 | | | | 247 | | | | 412 | | | | 413 | | | | 458 | | | | 445 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD TO MATURITY PORTFOLIO | | | 9,946 | | | | 9,189 | | | | 5,437 | | | | 5,493 | | | | 5,282 | | | | 5,221 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | 61,983 | | | | 60,064 | | | | 61,882 | | | | 62,564 | | | | 45,133 | | | | 45,051 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
53
| | |
| (1) | | Fair values for listed securities are determined on the basis of their quoted values at the end of the period. Appraised values are used for unlisted securities based on our estimate and valuation techniques see Note 8 to the Consolidated Financial Statements. |
|
| (*) | | Includes Mexico. As of December 31, 2010 the total fair value of Mexican debt securities amounted to €10,547 million of which Mexican Government and other government agency debt securities amounted to € 9,858 million and credit institutions amounted to €579 million. |
|
| (**) | | Consists mainly of securities held by our subsidiaries issued by the Governments of the countries where they operate. As of December 31, 2010 the fair value of Securities of other foreign Governments included €9,858 million of Mexican Government and other government agency debt securities. |
As of December 31, 2010 the carrying amount of the debt securities classified within the available for sale portfolio and the held to maturity portfolio by rating categories, were as follows:
| | | | | | | | | | | | | | | | | |
| | | As of Diciembre 31, 2010 | |
| | | Debt Securities Available for Sale | | | Debt Securities Held to Maturity | |
| | | Carrying Amount | | | % | | | Carrying Amount | | | % | |
| | | (Millions of euros) | | | | | | (Millions of euros) | | | | |
| |
| AAA | | | 11,638 | | | | 22.9 | % | | | 1,908 | | | | 19.2 | % |
| AA+ | | | 12,210 | | | | 24.0 | % | | | 6,703 | | | | 67.4 | % |
| AA | | | 5,022 | | | | 9.9 | % | | | — | | | | — | |
| AA− | | | 2,523 | | | | 5.0 | % | | | 1,222 | | | | 12.3 | % |
| A+ | | | 1,651 | | | | 3.2 | % | | | 76 | | | | 0.8 | % |
| A | | | 8,661 | | | | 17.0 | % | | | — | | | | — | |
| A− | | | 574 | | | | 1.1 | % | | | — | | | | — | |
| With rating BBB+ or below | | | 3,761 | | | | 7.4 | % | | | 37 | | | | 0.3 | % |
| Non-rated | | | 4,835 | | | | 9.5 | % | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
TOTAL | | | 50,875 | | | | 100.0 | % | | | 9,946 | | | | 100.0 | % |
54
The following table analyzes the carrying amount and market value of our ownership of debt securities and equity securities as of December 31, 2010, 2009 and 2008, December 31, 2007respectively. Trading portfolio and December 31, 2006. Investmentsinvestments in affiliated companies consolidated under the equity method are not included in the table below.tables below because the amortized costs and fair values of these items are the same. See Note 10 to the Consolidated Financial Statements.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Amortized
| | | Fair
| | | Amortized
| | | Fair
| | | Amortized
| | | Fair
| |
| | | Cost | | | Value | | | Cost | | | Value | | | Cost | | | Value | |
| | | (In millions of euros) | |
| |
DEBT SECURITIES — | | | | | | | | | | | | | | | | | | | | | | | | |
AVAILABLE FOR SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic — | | | 11,743 | | | | 11,910 | | | | 10,088 | | | | 10,161 | | | | 9,221 | | | | 9,494 | |
| Spanish government | | | 6,233 | | | | 6,371 | | | | 5,226 | | | | 5,274 | | | | 6,596 | | | | 6,859 | |
| Other debt securities | | | 5,510 | | | | 5,539 | | | | 4,862 | | | | 4,887 | | | | 2,625 | | | | 2,635 | |
International — | | | 28,108 | | | | 27,920 | | | | 26,725 | | | | 27,175 | | | | 22,002 | | | | 22,724 | |
United States — | | | 10,573 | | | | 10,442 | | | | 9,051 | | | | 9,056 | | | | 5,514 | | | | 5,506 | |
| U.S. Treasury and other U.S. government agencies | | | 444 | | | | 444 | | | | 60 | | | | 61 | | | | 342 | | | | 343 | |
| States and political subdivisions | | | 382 | | | | 396 | | | | 515 | | | | 518 | | | | 310 | | | | 310 | |
| Other debt securities | | | 9,747 | | | | 9,602 | | | | 8,476 | | | | 8,477 | | | | 4,862 | | | | 4,853 | |
Other countries — | | | 17,535 | | | | 17,478 | | | | 17,674 | | | | 18,119 | | | | 16,488 | | | | 17,218 | |
| Securities of other foreign government | | | 9,624 | | | | 9,653 | | | | 10,844 | | | | 11,278 | | | | 9,858 | | | | 10,386 | |
| Other debt securities | | | 7,911 | | | | 7,825 | | | | 6,830 | | | | 6,841 | | | | 6,630 | | | | 6,832 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE FOR SALE PORTFOLIO | | | 39,851 | | | | 39,830 | | | | 36,813 | | | | 37,336 | | | | 31,223 | | | | 32,218 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
HELD TO MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | |
| Domestic — | | | 2,392 | | | | 2,339 | | | | 2,402 | | | | 2,271 | | | | 2,404 | | | | 2,337 | |
| Spanish government | | | 1,412 | | | | 1,412 | | | | 1,417 | | | | 1,349 | | | | 1,417 | | | | 1,378 | |
| Other debt securities | | | 980 | | | | 927 | | | | 985 | | | | 922 | | | | 987 | | | | 959 | |
International — | | | 2,890 | | | | 2,882 | | | | 3,182 | | | | 3,063 | | | | 3,502 | | | | 3,421 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD TO MATURITY PORTFOLIO | | | 5,282 | | | | 5,221 | | | | 5,584 | | | | 5,334 | | | | 5,906 | | | | 5,758 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | 45,133 | | | | 45,051 | | | | 42,397 | | | | 42,670 | | | | 37,129 | | | | 37,976 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
46
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | | December 31, 2010 | | December 31, 2009 | | December 31, 2008 | |
| | | Amortized
| | Fair
| | Amortized
| | Fair
| | Amortized
| | Fair
| | | Amortized
| | Fair
| | Amortized
| | Fair
| | Amortized
| | Fair
| |
| | | Cost | | Value(1) | | Cost | | Value(1) | | Cost | | Value(1) | | | Cost | | Value(1) | | Cost | | Value(1) | | Cost | | Value(1) | |
| | | (In millions of euros) | | | | | (In millions of euros) | | | | | |
| |
EQUITY SECURITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVAILABLE FOR SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic — | | | 3,582 | | | | 4,675 | | | | 3,783 | | | | 7,164 | | | | 4,564 | | | | 7,381 | | |
Domestic | | | | 3,403 | | | | 4,608 | | | | 3,683 | | | | 5,409 | | | | 3,582 | | | | 4,675 | |
| Equity listed | | | 3,545 | | | | 4,639 | | | | 3,710 | | | | 7,032 | | | | 4,525 | | | | 7,342 | | | | 3,378 | | | | 4,583 | | | | 3,657 | | | | 5,383 | | | | 3,545 | | | | 4,639 | |
| Equity unlisted | | | 37 | | | | 36 | | | | 73 | | | | 132 | | | | 39 | | | | 39 | | | | 25 | | | | 25 | | | | 26 | | | | 26 | | | | 37 | | | | 36 | |
International — | | | 3,408 | | | | 3,275 | | | | 2,841 | | | | 3,932 | | | | 1,860 | | | | 2,656 | | |
United States — | | | 665 | | | | 654 | | | | 490 | | | | 489 | | | | 53 | | | | 54 | | |
International | | | | 927 | | | | 973 | | | | 948 | | | | 1,041 | | | | 3,408 | | | | 3,275 | |
United States | | | | 605 | | | | 662 | | | | 641 | | | | 737 | | | | 665 | | | | 654 | |
| Equity listed | | | 39 | | | | 28 | | | | 420 | | | | 419 | | | | 27 | | | | 28 | | | | 11 | | | | 13 | | | | 16 | | | | 8 | | | | 39 | | | | 28 | |
| Equity unlisted | | | 626 | | | | 626 | | | | 70 | | | | 70 | | | | 26 | | | | 26 | | | | 594 | | | | 649 | | | | 625 | | | | 729 | | | | 626 | | | | 626 | |
Other countries — | | | 2,743 | | | | 2,621 | | | | 2,351 | | | | 3,443 | | | | 1,807 | | | | 2,602 | | |
Other countries | | | | 322 | | | | 311 | | | | 307 | | | | 304 | | | | 2,743 | | | | 2,621 | |
| Equity listed | | | 2,545 | | | | 2,416 | | | | 2,242 | | | | 3,346 | | | | 1,702 | | | | 2,497 | | | | 258 | | | | 240 | | | | 250 | �� | | | 242 | | | | 2,545 | | | | 2,416 | |
| Equity unlisted | | | 198 | | | | 205 | | | | 109 | | | | 97 | | | | 105 | | | | 105 | | | | 64 | | | | 71 | | | | 57 | | | | 62 | | | | 198 | | | | 205 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE FOR SALE PORTFOLIO | | | 6,990 | | | | 7,950 | | | | 6,624 | | | | 11,096 | | | | 6,424 | | | | 10,037 | | | | 4,330 | | | | 5,581 | | | | 4,631 | | | | 6,450 | | | | 6,990 | | | | 7,950 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL EQUITY SECURITIES | | | 6,990 | | | | 7,950 | | | | 6,624 | | | | 11,096 | | | | 6,424 | | | | 10,037 | | | | 4,330 | | | | 5,581 | | | | 4,631 | | | | 6,450 | | | | 6,990 | | | | 7,950 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL INVESTMENT SECURITIES | | | 52,123 | | | | 53,001 | | | | 49,021 | | | | 53,766 | | | | 43,553 | | | | 48,013 | | | | 66,313 | | | | 65,645 | | | | 66,513 | | | | 69,014 | | | | 52,123 | | | | 53,001 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Fair values for listed securities are determined on the basis of their quoted values at the end of the year. Appraised values are used for unlisted securities based on our estimate or on unaudited financial statements, when available. |
47
55
The following table analyzes the maturities of our debt investment and fixed income securities, excluding trading portfolio, by type and geographical area as of December 31, 2008.2010.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Maturing After Five
| | Maturing After Ten
| | | | | Maturity at One
| | Maturity After One
| | Maturity After Five
| | Maturity After Ten
| | | |
| | | Maturing at One Year or Less | | Maturing After One Year to Five Years | | Year to Ten Years | | Years | | | | | Year or Less | | Year to Five Years | | Years to 10 Years | | Years | | Total
| |
| | | Amount | | Yield%(1) | | Amount | | Yield%(1) | | Amount | | Yield%(1) | | Amount | | Yield%(1) | | Total | | | Amount | | Yield % | | Amount | | Yield % | | Amount | | Yield % | | Amount | | Yield % | | Amount | |
| | | (In millions of euros, except %) | | | | | | | | | (Millions of euros, except percentages) | | | | | | | |
| |
AVAILABLE FOR SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
DEBT SECURITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVAILABLE-FOR-SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government and other spanish government securities | | | | 982 | | | | 4.32 | | | | 8,651 | | | | 3.32 | | | | 3,197 | | | | 4.05 | | | | 2,507 | | | | 5.88 | | | | 15,337 | |
| Other debt securities | | | | 1,303 | | | | 3.92 | | | | 2,612 | | | | 3.47 | | | | 438 | | | | 2.51 | | | | 876 | | | | 3.09 | | | | 5,229 | |
| | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | | 2,285 | | | | 4.09 | | | | 11,263 | | | | 3.36 | | | | 3,635 | | | | 3.84 | | | | 3,383 | | | | 4.96 | | | | 20,566 | |
| | | | | | | | | | | | | | | | | | | | | |
International | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
United States | | | | 526 | | | | 4.44 | | | | 2,971 | | | | 3.92 | | | | 2,340 | | | | 3.39 | | | | 995 | | | | 4.39 | | | | 6,832 | |
| U.S. Treasury and other U.S. government agencies | | | | 108 | | | | 1.92 | | | | 195 | | | | 3.55 | | | | 65 | | | | 4.73 | | | | 210 | | | | 4.20 | | | | 578 | |
| States and political subdivisions | | | | 29 | | | | 6.28 | | | | 93 | | | | 6.38 | | | | 59 | | | | 6.54 | | | | 12 | | | | 6.57 | | | | 193 | |
| Other U.S. securities | | | | 389 | | | | 5.03 | | | | 2,683 | | | | 3.86 | | | | 2,216 | | | | 3.25 | | | | 773 | | | | 4.41 | | | | 6,061 | |
Other countries | | | | 3,075 | | | | 3.82 | | | | 11,436 | | | | 5.84 | | | | 3,571 | | | | 5.42 | | | | 5,395 | | | | 5.09 | | | | 23,477 | |
| Securities of other foreign governments | | | | 690 | | | | 5.62 | | | | 9,156 | | | | 6.58 | | | | 2,547 | | | | 6.58 | | | | 3,565 | | | | 5.92 | | | | 15,958 | |
| Other debt securities of other countries | | | | 2,385 | | | | 3.24 | | | | 2,280 | | | | 3.00 | | | | 1,024 | | | | 2.76 | | | | 1,830 | | | | 4.45 | | | | 7,519 | |
Total International | | | | 3,601 | | | | 3.93 | | | | 14,407 | | | | 5.44 | | | | 5,911 | | | | 4.57 | | | | 6,390 | | | | 4.92 | | | | 30,309 | |
| | | | | | | | | | | | | | | | | | | | | |
TOTALAVAILABLE-FOR-SALE | | | | 5,886 | | | | 4.00 | | | | 25,670 | | | | 4.48 | | | | 9,546 | | | | 4.26 | | | | 9,773 | | | | 4.94 | | | | 50,875 | |
| | | | | | | | | | | | | | | | | | | | | |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 342 | | | | 8.60 | | | | 606 | | | | 4.85 | | | | 2,520 | | | | 3.97 | | | | 2,903 | | | | 4.72 | | | | 6,371 | | | | 76 | | | | 5.35 | | | | 98 | | | | 4.70 | | | | 3,107 | | | | 3.90 | | | | 3,330 | | | | 4.95 | | | | 6,611 | |
| Other debt securities | | | 1,037 | | | | 4.69 | | | | 3,112 | | | | 3.95 | | | | 192 | | | | 4.66 | | | | 1,198 | | | | 5.28 | | | | 5,539 | | | | 37 | | | | 3.66 | | | | 645 | | | | 4.05 | | | | 210 | | | | 4.02 | | | | — | | | | — | | | | 892 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 1,379 | | | | 5.58 | | | | 3,718 | | | | 4.10 | | | | 2,712 | | | | 4.02 | | | | 4,101 | | | | 4.89 | | | | 11,910 | | | | 113 | | | | 4.79 | | | | 743 | | | | 4.14 | | | | 3,317 | | | | 3.91 | | | | 3,330 | | | | 4.95 | | | | 7,503 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
International: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
United States: | | | 1,277 | | | | 5.44 | | | | 3,431 | | | | 4.83 | | | | 3,026 | | | | 4.73 | | | | 2,708 | | | | 3.41 | | | | 10,442 | | |
| U.S. Treasury and other U.S. government securities | | | 61 | | | | 18.80 | | | | 156 | | | | 5.04 | | | | 18 | | | | 17.00 | | | | 209 | | | | 3.09 | | | | 444 | | |
| States and political subdivisions | | | 60 | | | | 7.04 | | | | 121 | | | | 6.17 | | | | 141 | | | | 6.09 | | | | 74 | | | | 6.05 | | | | 396 | | |
| Other debt securities | | | 1,156 | | | | 4.69 | | | | 3,154 | | | | 4.78 | | | | 2,867 | | | | 4.66 | | | | 2,425 | | | | 3.29 | | | | 9,602 | | |
Other countries: | | | 3,208 | | | | 5.93 | | | | 5,847 | | | | 5.66 | | | | 4,292 | | | | 6.51 | | | | 4,131 | | | | 5.11 | | | | 17,478 | | |
| Securities of other foreign governments | | | 813 | | | | 6.37 | | | | 3,784 | | | | 6.07 | | | | 3,113 | | | | 7.13 | | | | 1,943 | | | | 5.03 | | | | 9,653 | | |
| Other debt securities | | | 2,395 | | | | 5.79 | | | | 2,063 | | | | 4.88 | | | | 1,179 | | | | 4.94 | | | | 2,188 | | | | 5.18 | | | | 7,825 | | |
| | | | | | | | | | | | | | | | | | | | | |
Total International | | | 4,485 | | | | 5.79 | | | | 9,278 | | | | 5.35 | | | | 7,318 | | | | 5.77 | | | | 6,839 | | | | 4.65 | | | | 27,920 | | | | 616 | | | | 3.37 | | | | 1,392 | | | | 4.23 | | | | 209 | | | | 4.50 | | | | 226 | | | | 3.75 | | | | 2,443 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Available for sale | | | 5,864 | | | | 5.74 | | | | 12,996 | | | | 4.98 | | | | 10,030 | | | | 5.28 | | | | 10,940 | | | | 4.75 | | | | 39,830 | | |
| | | | | | | | | | | | | | | | | | | | | |
HELD TO MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 168 | | | | 4.56 | | | | 120 | | | | 5.21 | | | | 1,068 | | | | 3.22 | | | | 54 | | | | 4.20 | | | | 1,410 | | |
| Other debt securities | | | 26 | | | | 3.63 | | | | 259 | | | | 4.18 | | | | 565 | | | | 3.96 | | | | 130 | | | | 3.81 | | | | 980 | | |
International: | | | 67 | | | | 3.86 | | | | 943 | | | | 4.01 | | | | 1,653 | | | | 4.15 | | | | 227 | | | | 3.75 | | | | 2,890 | | |
| | | | | | | | | | | | | | | | | | | | | |
Total held to maturity | | | 261 | | | | 4.29 | | | | 1,323 | | | | 4.15 | | | | 3,286 | | | | 3.82 | | | | 413 | | | | 3.83 | | | | 5,282 | | |
TOTAL held-to-maturity | | | | 729 | | | | 3.59 | | | | 2,135 | | | | 4.20 | | | | 3,526 | | | | 3.94 | | | | 3,556 | | | | 4.86 | | | | 9,946 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | 6,125 | | | | 5.68 | | | | 14,318 | | | | 4.91 | | | | 13,316 | | | | 4.92 | | | | 11,353 | | | | 4.72 | | | | 45,112 | | | | 6,615 | | | | 3.95 | | | | 27,805 | | | | 4.46 | | | | 13,072 | | | | 4.18 | | | | 13,329 | | | | 4.92 | | | | 60,821 | |
| | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Rates have been presented on a non-taxable equivalent basis. |
|
| (*) | | Securities of other foreign Governments mainly include investments made by our subsidiaries in securities issued by the Governments of the countries where they operate. |
Loans and Advances to Credit Institutions
As of December 31, 2008,2010, our total loans and advances to credit institutions amounted to €33,679€23,604 million, or 6.21%4.27% of total assets. Net of our valuation adjustments, loans and advances to credit institutions amounted to €33,856€23,637 million as of December 31, 2008,2010, or 6.24%4.28% of our total assets.
Loans and Advances to Customers
As of December 31, 2008,2010, our total loans and leases amounted to €341,322€347,210 million, or 62.90%62.82% of total assets. Net of our valuation adjustments, loans and leases amounted to €335,260€338,857 million as of December 31, 2008,2010, or 61.78%
56
61.31% of our total assets. As of December 31, 20082010 our loans in Spain amounted to €208,474€210,102 million. Our foreign loans amounted to €132,848€137,108 million as of December 31, 2008.2010. For a discussion of certain mandatory ratios relating to our loan portfolio, see “— Supervision and Regulation — Liquidity Ratio” and “— Investment Ratio”.
48
Loans by Geographic Area
The following table analyzes, by domicile of the customer, our net loans and leases as of December 31, 2010, 2009 and 2008:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Domestic | | | 208,474 | | | | 205,287 | | | | 184,288 | | | | 210,102 | | | | 203,529 | | | | 208,474 | |
Foreign | | | | | | | | | | | | | | | | | | | | | | | | |
| Western Europe | | | 28,546 | | | | 23,442 | | | | 18,073 | | | | 23,139 | | | | 23,333 | | | | 28,546 | |
| Latin America | | | 61,978 | | | | 57,647 | | | | 49,712 | | | | 70,497 | | | | 61,298 | | | | 61,978 | |
| United States | | | 35,498 | | | | 28,925 | | | | 9,664 | | | | 38,649 | | | | 37,688 | | | | 35,498 | |
| Other | | | 6,826 | | | | 4,370 | | | | 2,405 | | | | 4,823 | | | | 5,239 | | | | 6,826 | |
Total foreign | | | 132,848 | | | | 114,384 | | | | 79,854 | | | | 137,108 | | | | 127,558 | | | | 132,848 | |
| | | | | | | | | | | | | | | |
Total loans and leases | | | 341,322 | | | | 319,671 | | | | 264,142 | | | | 347,210 | | | | 331,087 | | | | 341,322 | |
| | | | | | | | | | | | | | | |
| Valuation adjustments | | | (6,062 | ) | | | (6,493 | ) | | | (5,825 | ) | | | (8,353 | ) | | | (7,645 | ) | | | (6,062 | ) |
| | | | | | | | | | | | | | | |
Total net lending | | | 335,260 | | | | 313,178 | | | | 258,317 | | | | 338,857 | | | | 323,442 | | | | 335,260 | |
| | | | | | | | | | | | | | | |
57
Loans by Type of Customer
The following table analyzes by domicile and type of customer our net loans and leases for each of the years indicated. The analyses by type of customer are based principally on the requirements of the regulatory authorities in each country.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | |
| Government | | | 17,436 | | | | 16,013 | | | | 15,987 | | | | 23,542 | | | | 20,559 | | | | 17,436 | |
| Agriculture | | | 1,898 | | | | 1,987 | | | | 1,818 | | | | 1,619 | | | | 1,722 | | | | 1,898 | |
| Industrial | | | 17,976 | | | | 18,404 | | | | 15,965 | | | | 17,452 | | | | 16,805 | | | | 17,976 | |
| Real estate and construction | | | 38,632 | | | | 36,261 | | | | 33,803 | | | | 29,944 | | | | 36,584 | | | | 38,632 | |
| Commercial and financial | | | 17,165 | | | | 15,220 | | | | 15,231 | | | | 23,409 | | | | 17,404 | | | | 17,165 | |
| Loans to individuals | | | 88,712 | | | | 88,853 | | | | 78,190 | | | | 91,730 | | | | 87,948 | | | | 88,712 | |
| Lease financing | | | 7,702 | | | | 7,698 | | | | 6,717 | | | | 5,893 | | | | 6,547 | | | | 7,702 | |
| Other | | | 18,953 | | | | 20,851 | | | | 16,577 | | | | 16,513 | | | | 15,960 | | | | 18,954 | |
| | | | | | | | | | | | | | | |
Total domestic | | | 208,474 | | | | 205,287 | | | | 184,288 | | | | 210,102 | | | | 203,529 | | | | 208,475 | |
Foreign | | | | | | | | | | | | | | | | | | | | | | | | |
| Government | | | 5,066 | | | | 5,052 | | | | 5,207 | | | | 7,682 | | | | 5,660 | | | | 5,066 | |
| Agriculture | | | 2,211 | | | | 1,750 | | | | 1,315 | | | | 2,358 | | | | 2,202 | | | | 2,211 | |
| Industrial | | | 28,600 | | | | 21,518 | | | | 8,765 | | | | 19,126 | | | | 25,993 | | | | 28,600 | |
| Real estate and construction | | | 15,890 | | | | 18,895 | | | | 7,698 | | | | 25,910 | | | | 19,183 | | | | 15,890 | |
| Commercial and financial | | | 27,720 | | | | 21,151 | | | | 23,679 | | | | 22,280 | | | | 23,310 | | | | 27,720 | |
| Loans to individuals | | | 39,178 | | | | 32,609 | | | | 25,728 | | | | 44,138 | | | | 38,540 | | | | 39,178 | |
| Lease financing | | | 1,683 | | | | 1,450 | | | | 975 | | | | 2,248 | | | | 1,675 | | | | 1,683 | |
| Other | | | 12,500 | | | | 11,959 | | | | 6,487 | | | | 13,366 | | | | 10,995 | | | | 12,499 | |
| | | | | | | | | | | | | | | |
Total foreign | | | 132,848 | | | | 114,384 | | | | 79,854 | | | | 137,108 | | | | 127,558 | | | | 132,847 | |
| | | | | | | | | | | | | | | |
Total loans and leases | | | 341,322 | | | | 319,671 | | | | 264,142 | | | | 347,210 | | | | 331,087 | | | | 341,322 | |
| Valuation adjustments | | | (6,062 | ) | | | (6,493 | ) | | | (5,825 | ) | | | (8,353 | ) | | | (7,645 | ) | | | (6,062 | ) |
| | | | | | | | | | | | | | | |
Total net lending | | | 335,260 | | | | 313,178 | | | | 258,317 | | | | 338,857 | | | | 323,442 | | | | 335,260 | |
| | | | | | | | | | | | | | | |
49
The following table sets forth a breakdown, by currency, of our net loan portfolio for 2008, 20072010, 2009 and 2006.2008.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| In euros | | | 226,855 | | | | 219,226 | | | | 194,405 | | | | 221,269 | | | | 217,537 | | | | 226,855 | |
| In other currencies | | | 108,405 | | | | 93,952 | | | | 63,912 | | | | 117,588 | | | | 105,905 | | | | 108,405 | |
| | | | | | | | | | | | | | | |
Total net lending | | | 335,260 | | | | 313,178 | | | | 258,317 | | | | 338,857 | | | | 323,442 | | | | 335,260 | |
| | | | | | | | | | | | | | | |
As of December 31, 2008,2010, loans by BBVA and its subsidiaries to associates and jointly controlled companies amounted to €507€457 million, compared to €610€613 million as of December 31, 2007.2009. Loans outstanding to the Spanish government and its agencies amounted to €17,770€23,542 million, or 5.21%6.78% of our total loans and leases as of December 31, 2008,2010, compared to €16,163€20,559 million, or 5.06%6.21% of our total loans and leases as of December 31, 2007.2009. None of our loans to companies controlled by the Spanish government are guaranteed by the government and, accordingly, we apply normal credit criteria in extending credit to such entities. Moreover, we carefully monitor such loans because governmental policies necessarily affect such borrowers.
58
Diversification in our loan portfolio is our principal means of reducing the risk of loan losses. We also carefully monitor our loans to borrowers in sectors or countries experiencing liquidity problems. Our exposure to our fivetwo largest borrowers as of December 31, 2008,2010, excluding government-related loans, amounted to €19,076€13,515 million or approximately 5.59%3.89% of our total outstanding loans and leases. As of December 31, 2010 there did not exist any concentration of loans exceeding 10% of our total outstanding loans and leases, other than by category as disclosed in the chart above.
Maturity and Interest Sensitivity
The following table sets forth an analysis by maturity of our total loans and leases by domicile of the office that issued the loan and type of customer as of December 31, 2008.2010. The determination of maturities is based on contract terms.
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Maturity | |
| | | Maturity | | | | | | | Due After
| | | | | |
| | | | | Due After One
| | | | | | | Due in
| | One Year
| | | | | |
| | | Due in One
| | Year Through
| | Due After
| | | | | One Year
| | through
| | Due After
| | | |
| | | Year or Less | | Five Years | | Five Years | | Total | | | or Less | | Five Years | | Five Years | | Total | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Government | | | 6,104 | | | | 5,147 | | | | 6,185 | | | | 17,436 | | | | 9,706 | | | | 6,651 | | | | 7,185 | | | | 23,542 | |
| Agriculture | | | 761 | | | | 679 | | | | 458 | | | | 1,898 | | | | 631 | | | | 594 | | | | 394 | | | | 1,619 | |
| Industrial | | | 13,410 | | | | 3,259 | | | | 1,307 | | | | 17,976 | | | | 13,454 | | | | 2,776 | | | | 1,222 | | | | 17,452 | |
| Real estate and construction | | | 17,707 | | | | 8,298 | | | | 12,627 | | | | 38,632 | | | | 13,184 | | | | 7,323 | | | | 9,437 | | | | 29,944 | |
| Commercial and financial | | | 10,094 | | | | 4,043 | | | | 3,028 | | | | 17,165 | | | | 13,375 | | | | 4,839 | | | | 5,195 | | | | 23,409 | |
| Loans to individuals | | | 10,745 | | | | 16,442 | | | | 61,525 | | | | 88,712 | | | | 10,402 | | | | 17,329 | | | | 63,999 | | | | 91,730 | |
| Lease financing | | | 675 | | | | 3,414 | | | | 3,613 | | | | 7,702 | | | | 701 | | | | 2,278 | | | | 2,914 | | | | 5,893 | |
| Other | | | 10,783 | | | | 3,981 | | | | 4,189 | | | | 18,953 | | | | 11,009 | | | | 2,641 | | | | 2,863 | | | | 16,513 | |
| | | | | | | | | | | | | | | | | | | |
Total domestic | | | 70,279 | | | | 45,263 | | | | 92,932 | | | | 208,474 | | |
Total Domestic | | | | 72,462 | | | | 44,431 | | | | 93,209 | | | | 210,102 | |
| | | | | | | | | | | | | | | | | | | |
Foreign: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Government | | | 940 | | | | 2,575 | | | | 1,551 | | | | 5,066 | | | | 1,736 | | | | 1,696 | | | | 4,250 | | | | 7,682 | |
| Agriculture | | | 1,132 | | | | 947 | | | | 132 | | | | 2,211 | | | | 997 | | | | 1,130 | | | | 231 | | | | 2,358 | |
| Industrial | | | 11,179 | | | | 13,999 | | | | 3,422 | | | | 28,600 | | | | 7,431 | | | | 6,303 | | | | 5,393 | | | | 19,126 | |
| Real estate and construction | | | 7,913 | | | | 5,509 | | | | 2,468 | | | | 15,890 | | | | 9,112 | | | | 8,019 | | | | 8,779 | | | | 25,910 | |
| Commercial and financial | | | 13,601 | | | | 8,981 | | | | 5,138 | | | | 27,720 | | | | 13,393 | | | | 6,267 | | | | 2,620 | | | | 22,280 | |
| Loans to individuals | | | 4,216 | | | | 9,385 | | | | 25,577 | | | | 39,178 | | | | 7,735 | | | | 12,032 | | | | 24,371 | | | | 44,138 | |
| Lease financing | | | 416 | | | | 1,048 | | | | 219 | | | | 1,683 | | | | 808 | | | | 1,147 | | | | 293 | | | | 2,248 | |
| Other | | | 6,974 | | | | 3,837 | | | | 1,689 | | | | 12,500 | | | | 7,018 | | | | 3,812 | | | | 2,535 | | | | 13,366 | |
| | | | | | | | | | | | | | | | | | | |
Total foreign | | | 46,371 | | | | 46,281 | | | | 40,196 | | | | 132,848 | | |
Total loans and leases | | | 116,650 | | | | 91,544 | | | | 133,128 | | | | 341,322 | | |
Total Foreign | | | | 48,230 | | | | 40,406 | | | | 48,472 | | | | 137,108 | |
| | | | | | | | | | | | | | | | | | | |
Total Loans and Leases | | | | 120,692 | | | | 84,837 | | | | 141,681 | | | | 347,210 | |
| | | | | | | | | | | |
5059
The following table sets forth a breakdown of our fixed and variable rate loans which had a maturity of one year or more as of December 31, 2008.2010.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Interest Sensitivity of
| | | Interest Sensitivity of
| |
| | | Outstanding Loans and Leases
| | | Outstanding Loans and Leases
| |
| | | Maturing in More Than One Year | | | Maturing in More Than One Year | |
| | | Domestic | | Foreign | | Total | | | Domestic | | Foreign | | Total | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| Fixed rate | | | 19,732 | | | | 49,654 | | | | 69,386 | | | | 17,022 | | | | 40,992 | | | | 58,013 | |
| Variable rate | | | 118,462 | | | | 36,819 | | | | 155,281 | | | | 120,618 | | | | 47,886 | | | | 168,504 | |
| | | | | | | | | | | | | | | |
Total loans and leases | | | 138,194 | | | | 86,473 | | | | 224,667 | | | | 137,640 | | | | 88,878 | | | | 226,518 | |
| | | | | | | | | | | | | | | |
Loan Loss Reserve
For a discussion of loan loss reserves, see “Item 5. Operating and Financial Review and Prospects — Critical Accounting Policies — Allowance for loan losses” and Note 2.2.1.b) to the Consolidated Financial Statements.
The following table provides information, by domicile of customer, regarding our loan loss reserve and movements of loan charge-offs and recoveries for periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | 2005 | | 2004 | | | 2010 | | 2009 | | 2008 | | 2007 | | 2006 | |
| | | (In millions of euros, except %) | | | (In millions of euros, except percentages) | |
| |
Loan loss reserve at beginning of period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Domestic | | | 3,459 | | | | 3,734 | | | | 3,079 | | | | 2,374 | | | | 1,771 | | | | 4,853 | | | | 3,766 | | | | 3,459 | | | | 3,734 | | | | 3,079 | |
| Foreign | | | 3,685 | | | | 2,690 | | | | 2,511 | | | | 2,248 | | | | 3,274 | | | | 3,952 | | | | 3,740 | | | | 3,685 | | | | 2,690 | | | | 2,511 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total loan loss reserve at beginning of period | | | 7,144 | | | | 6,424 | | | | 5,590 | | | | 4,622 | | | | 5,045 | | | | 8,805 | | | | 7,505 | | | | 7,144 | | | | 6,424 | | | | 5,590 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Loans charged off: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Government and other Agencies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Real estate and loans to individuals | | | (639 | ) | | | (361 | ) | | | (255 | ) | | | (138 | ) | | | (103 | ) | |
| Real estate and loans to individuals and other | | | | (1,719 | ) | | | (936 | ) | | | (639 | ) | | | (361 | ) | | | (255 | ) |
| Commercial and financial | | | (16 | ) | | | (7 | ) | | | (2 | ) | | | (76 | ) | | | (31 | ) | | | (56 | ) | | | (30 | ) | | | (16 | ) | | | (7 | ) | | | (2 | ) |
| Other | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Total Domestic | | | (655 | ) | | | (368 | ) | | | (257 | ) | | | (214 | ) | | | (134 | ) | |
| Foreign | | | (1,296 | ) | | | (928 | ) | | | (289 | ) | | | (452 | ) | | | (579 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total loans charged off | | | (1,951 | ) | | | (1,296 | ) | | | (546 | ) | | | (666 | ) | | | (713 | ) | |
| Total domestic | | | | (1,774 | ) | | | (966 | ) | | | (655 | ) | | | (368 | ) | | | (257 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
Provision for loan losses: | | | | | | | | | | | | | | | | | | | | | |
| Total foreign(*) | | | | (2,628 | ) | | | (2,876 | ) | | | (1,296 | ) | | | (928 | ) | | | (289 | ) |
| | | | | | | | | | | | | |
Total Loans charged off: | | | | (4,402 | ) | | | (3,842 | ) | | | (1,951 | ) | | | (1,296 | ) | | | (546 | ) |
| | | | | | | | | | | | | |
Provision for possible loan losses: | | | | | | | | | | | | | | | | | | | | | |
| Domestic | | | 953 | | | | 807 | | | | 883 | | | | 624 | | | | 737 | | | | 2,038 | | | | 3,079 | | | | 953 | | | | 807 | | | | 883 | |
| Foreign | | | 2,035 | | | | 1,321 | | | | 778 | | | | 196 | | | | 408 | | | | 2,778 | | | | 2,307 | | | | 2,035 | | | | 1,321 | | | | 778 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total provision for loan losses | | | 2,988 | | | | 2,128 | | | | 1,661 | | | | 820 | | | | 1,145 | | |
Total Provision for possible loan losses | | | | 4,816 | | | | 5,386 | | | | 2,988 | | | | 2,128 | | | | 1,661 | |
| Acquisition and disposition of subsidiaries | | | — | | | | 250 | | | | 69 | | | | 144 | | | | — | | | | — | | | | — | | | | — | | | | 250 | | | | 69 | |
| Effect of foreign currency translation | | | (487 | ) | | | (420 | ) | | | (333 | ) | | | 370 | | | | (146 | ) | | | 344 | | | | (29 | ) | | | (487 | ) | | | (420 | ) | | | (333 | ) |
| Other | | | 189 | | | | 58 | | | | (17 | ) | | | 300 | | | | (708 | ) | | | (90 | ) | | | (216 | ) | | | (189 | ) | | | 58 | | | | (17 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
Loan loss reserve at end of period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Domestic | | | 3,766 | | | | 3,459 | | | | 3,734 | | | | 3,079 | | | | 2,374 | | | | 4,935 | | | | 4,853 | | | | 3,766 | | | | 3,459 | | | | 3,734 | |
| Foreign | | | 3,740 | | | | 3,685 | | | | 2,690 | | | | 2,511 | | | | 2,248 | | | | 4,539 | | | | 3,952 | | | | 3,740 | | | | 3,685 | | | | 2,690 | |
Total loan loss reserve at end of period | | | 7,505 | | | | 7,144 | | | | 6,424 | | | | 5,590 | | | | 4,622 | | |
Loan loss reserve as a percentage of total loans and leases at end of period | | | 2.03 | % | | | 2.12 | % | | | 2.30 | % | | | 2.24 | % | | | 2.35 | % | |
Net loan charge-offs as a percentage of total loans and leases at end of period | | | 0.53 | % | | | 0.38 | % | | | 0.20 | % | | | 0.27 | % | | | 0.36 | % | |
| | | | | | | | | | | | | |
Total Loan loss reserve at end of period | | | | 9,473 | | | | 8,805 | | | | 7,505 | | | | 7,144 | | | | 6,424 | |
| | | | | | | | | | | | | |
Loan loss reserve as a percentage of total loans and receivables at end of period | | | | 2.60 | % | | | 2.54 | % | | | 2.03 | % | | | 2.12 | % | | | 2.30 | % |
Net loan charge-offs a a percentage of total loans and receivables at end of period | | | | 1.21 | % | | | 1.11 | % | | | 0.53 | % | | | 0.38 | % | | | 0.20 | % |
| | |
| (*) | | Includes €5 million related to loans to Government and other Agencies, €1,847 million related to real estate and loans to individuals and other, and €776 million related to commercial and financial. |
5160
When the recovery of any recognized amount is considered to be remote, this amount is removed from the consolidated balance sheet, without prejudice to any actions taken by the consolidated entities in order to collect the amount until their rights extinguish in full through expiry, forgiveness or for other reasons.
The loans charged off amounted to €4,402 million as of December 31, 2010 compared to €3,842 million as of December 31, 2009. The increase was primarily due to an increase in loans charged off in Spain, which was primarily related to the financial condition of certain groups of customers within a less favorable macroeconomic environment.
Our loan loss reserves as a percentage of total loans and leases declined from 2.12%increased to 2.60% as of December 31, 2007, to 2.03%2010 from 2.54% as of December 31, 2008,2009, principally due to the 50.4%a higher increase in loans charged off during the period, which was only partially offset by a 40.4% increaseprovisions than in provisions. The increase in loans charged off during 2008 was primarily due to a significant increase in loans charged off in our Mexico business area as well as a significant increase in loans charged off in our Spain and Portugal business area, which was primarily related to the worsening of the financial situation of certain groups of customers due to a less favorable macroeconomic environment. If loan charge offs continue to increase, additional provisions will be necessary to maintain our loan loss reserve as a percentage of total loans and leases.
We do not maintain records allocating the amount of charge-offs and the amount of recoveries by loan category. Also, at the time that a loan is charged off in accordance with Bank of Spain guidelines, it will normally be substantially or fully reserved and, accordingly, such charge-off would have a very limited effect on our net income attributed to parent company or stockholders’ equity. Accordingly, we believe that information relating to domestic reserves and charge-offs by loan category is of less relevance than would be the case for a U.S. bank.
Substandard Loans
We classify loans as substandard loans in accordance towith the requirements underof EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 in respect of “impaired loans”. As we described in Note 2.2.1.b) to the Consolidated Financial Statements, loans are considered to be impaired loans and accrual of the interest thereon is suspended, when there are reasonable doubts that the loans will be recovered in fulland/or the related interest will be collected for the amounts and on the dates initially agreed upon, taking into account the guarantees received by the consolidated entities to assure (in part or in full) the performance of transactions. In addition, all loans that are 90 days past due, even if well-collateralized and in the process of being collected are automatically considered non-accrual if they are classified as substandard loans.
When the recovery of any recognized amount is considered to be remote, this amount is removed from the consolidated balance sheet, without prejudice to any actions taken by the consolidated entities in order to collect the amount until their rights extinguish in full through expiry, forgiveness or for other reasons.
Interest on all of our substandard non-accrual loans is not credited to income until actually collected. The aggregated amount of gross interest income that would have been recorded in respect of our substandard loans as of December 31, 2008, 2007 and 2006 under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 was €1,042 million, €880 million and €1,107 million, respectively.
Amounts collected in relation to impaired loans and receivables are used to recognize the related accrued interest and any excess amount is used to reduce the principal not yet repaid. The approximate amount of interest income on our substandard loans to customers which was included in net income attributed to parent company in 2010, 2009, 2008, 2007 2006, 2005 and 20042006 under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 was €203.5 million, €192.3 million, €149.7 million, €158.3 million and €130.7 million, €148.1 million and €138.3 million, respectivelyrespectively.
52
The following table provides information regarding our substandard loans, by domicile and type of customer, for periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | 2005 | | 2004 | | | 2010 | | 2009 | | 2008 | | 2007 | | 2006 | |
| | | (In millions of euros, except %) | | | (In millions of euros, except %) | |
| |
Substandard loans: | | | | | | | | | | | | | | | | | | | | | |
Substandard loans | | | | | | | | | | | | | | | | | | | | | |
| Domestic | | | 5,700 | | | | 1,590 | | | | 1,105 | | | | 850 | | | | 954 | | | | 10,954 | | | | 10,973 | | | | 5,562 | | | | 1,551 | | | | 1,081 | |
| Public sector | | | 79 | | | | 116 | | | | 127 | | | | 33 | | | | 33 | | | | 111 | | | | 61 | | | | 79 | | | | 116 | | | | 127 | |
| Other resident sectors | | | 5,483 | | | | 1,435 | | | | 954 | | | | 721 | | | | 832 | | |
| Non-resident sector | | | 138 | | | | 38 | | | | 24 | | | | 96 | | | | 89 | | |
| Other resident sector | | | | 10,843 | | | | 10,912 | | | | 5,483 | | | | 1,435 | | | | 954 | |
| Foreign | | | 2,840 | | | | 1,776 | | | | 1,394 | | | | 1,497 | | | | 1,248 | | | | 4,518 | | | | 4,338 | | | | 2,979 | | | | 1,814 | | | | 1,418 | |
| Public sector | | | 22 | | | | 57 | | | | 86 | | | | 89 | | | | 74 | | | | 12 | | | | 25 | | | | 20 | | | | 57 | | | | 86 | |
| Other resident sectors | | | — | | | | — | | | | — | | | | 73 | | | | 48 | | |
| Non-resident sector | | | 2,818 | | | | 1,718 | | | | 1,308 | | | | 1,335 | | | | 1,126 | | | | 4,506 | | | | 4,313 | | | | 2,959 | | | | 1,757 | | | | 1,332 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total substandard loans | | | 8,540 | | | | 3,366 | | | | 2,500 | | | | 2,347 | | | | 2,202 | | |
Total Substandard loans | | | | 15,472 | | | | 15,311 | | | | 8,541 | | | | 3,366 | | | | 2,499 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total loan loss reserve | | | (7,505 | ) | | | (7,144 | ) | | | (6,424 | ) | | | (5,589 | ) | | | (4,622 | ) | | | (9,473 | ) | | | (8,805 | ) | | | (7,505 | ) | | | (7,144 | ) | | | (6,424 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
Substandard loans net of reserves | | | 1,035 | | | | (3,778 | ) | | | (3,925 | ) | | | (3,242 | ) | | | (2,420 | ) | | | 5,999 | | | | 6,506 | | | | 1,036 | | | | (3,778 | ) | | | (3,925 | ) |
Substandard loans as a percentage of total loans and receivables (net) | | | 2.31 | % | | | 1.00 | % | | | 0.89 | % | | | 0.94 | % | | | 1.12 | % | | | 4.24 | % | | | 4.42 | % | | | 2.31 | % | | | 1.00 | % | | | 0.89 | % |
Substandard loans (net of reserves) as a percentage of total loans and receivables (net) | | | 0.28 | % | | | (1.12 | )% | | | (1.40 | )% | | | (1.30 | )% | | | (1.23 | )% | |
Substandard loans (net of reserve) as a percentage of total loans and receivables (net) | | | | 1.64 | % | | | 1.88 | % | | | 0.28 | % | | | (1.12 | %) | | | (1.40 | %) |
Our total substandard loans jumpedamounted to €8,540€15,472 million as of December 31, 2008,2010, a 1.05% increase compared to €3,366€15,311 million as of December 31, 2007, principally due2009.
As mentioned in Note 2.2.1.b) to the Consolidated Financial Statements, our loan loss reserve include loss reserve for impaired assets and loss reserve for not impaired assets but which presents an inherent loss. As of December 31, 2010, the loss reserve for impaired assets amounted to €6,753 million, a 14% increase in substandard loanscompared to customers in Spain generally due to a less favorable macroeconomic environment. As a result of the increase in total substandard loans described above, our substandard loans as a percentage of total loans and receivables (net) increased sharply from 1.00%
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€5,930 million as of December 31, 20072009. As of December 31, 2010, the loss reserve for not impaired assets amounted to 2.31%€2,720 million, a 5% decrease compared to €2,875 million as of December 31, 2008. Our loan loss reserves as a percentage of substandard loans as of December 31, 2008 declined significantly to 87.88% from 212.24% as of December 31, 2007, principally2009 due to the fact that our total substandardduring 2010 the new originated loans rose significantly while loanhad a lower incurred loss reserves rose only modestly due to better credit quality (lower risk) compared to the extent of loans charged off duringloan portfolio in 2009 and 2008.
Substandard loans to other resident sectors in Spain increased in 2008 mainly due to the increase in substandard mortgage loans, which increased sharply to €2,033 million as of December 31, 2008 from €421 million as of December 31, 2007.
We historically have experienced higher substandard loans in our Latin American operations, as a percentage of total loans, than in our Spanish operations and actively monitor the higher risk profile of the loan portfolios of our Latin American operations. However, as of December 31, 2008, substandard loans in Spain as a percentage of total loans in Spain exceeded the comparable percentage in our South America business area.
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The following table provides information, by domicile and type of customer, regarding our substandard loans and the loan loss reserves to customers taken for each substandard loan category, as of December 31, 2008.2010.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Substandard
| | | | | | | Substandard
| |
| | | | | | | Loans as a
| | | | | | | Loans as a
| |
| | | | | Loan
| | Percentage
| | | | | Loan
| | Percentage
| |
| | | Substandard
| | Loss
| | of Loans in
| | | Substandard
| | Loss
| | of Loans in
| |
| | | Loans | | Reserve | | Category | | | Loans | | Reserve | | Category | |
| | | (In millions of euros, except %) | | | (In millions of euros) | |
| |
Domestic: | | | | | | | | | | | | | | | | | | | | | | | | |
| Government | | | 79 | | | | 7 | | | | 0.46 | % | | | 111 | | | | 25 | | | | 0.47 | % |
| Agricultural | | | 50 | | | | 15 | | | | 2.64 | % | |
| Credit Intitutions | | | | — | | | | — | | | | — | |
| Other sectors | | | | 10,841 | | | | 4,529 | | | | 5.81 | % |
| Agriculture | | | | 96 | | | | 45 | | | | 5.93 | % |
| Industrial | | | 312 | | | | 103 | | | | 1.73 | % | | | 700 | | | | 428 | | | | 4.01 | % |
| Real estate and construction | | | 2,176 | | | | 477 | | | | 5.63 | % | |
| Commercial and financial | | | 447 | | | | 122 | | | | 2.61 | % | |
| Real estate and constrution | | | | 5,038 | | | | 2,053 | | | | 16.82 | % |
| Commercial and other financial | | | | 1,218 | | | | 696 | | | | 4.16 | % |
| Loans to individuals | | | 2,354 | | | | 508 | | | | 2.65 | % | | | 2,940 | | | | 907 | | | | 3.20 | % |
| Other | | | 282 | | | | 69 | | | | 1.06 | % | | | 851 | | | | 399 | | | | 5.15 | % |
| | | | | | | | | | | |
Total domestic | | | 5,700 | | | | 1,301 | | | | 2.73 | % | |
Total Domestic | | | | 10,954 | | | | 4,554 | | | | 5.05 | % |
Foreign | | | | | | | | | | | | | |
| Government | | | | 12 | | | | 11 | | | | 0.15 | % |
| Credit Intitutions | | | | 104 | | | | 64 | | | | 0.62 | % |
| Other sectors | | | | 4,402 | | | | 2,124 | | | | 3.40 | % |
| Agriculture | | | | 51 | | | | 69 | | | | 2.18 | % |
| Industrial | | | | 126 | | | | 70 | | | | 0.66 | % |
| Real estate and constrution | | | | 1,112 | | | | 487 | | | | 4.29 | % |
| Commercial and other financial | | | | 1,409 | | | | 592 | | | | 5.75 | % |
| Loans to individuals | | | | 1,596 | | | | 835 | | | | 3.62 | % |
| Other | | | | 108 | | | | 71 | | | | 0.81 | % |
| | | | | | | | | | | |
Total foreign | | | 2,840 | | | | 1,973 | | | | 2.14 | % | |
Total Foreign | | | | 4,518 | | | | 2,199 | | | | 2.94 | % |
General reserve | | | | | | | 4,231 | | | | | | | | — | | | | 2,720 | | | | | |
| | | | | | | | | |
Total | | | 8,540 | | | | 7,505 | | | | 2.50 | % | |
Total substandard loans | | | | 15,472 | | | | 9,473 | | | | 4.17 | % |
| | | | | | | | | | | |
Potential Problem Loans
For a discussion of potential problem loans, as required by the Bank of Spain to be disclosed, see Note 7.6 to the Consolidated Financial Statements.
Foreign Country Outstandings
The following tablestable sets forth, as of the end of the years indicated, the aggregate amounts of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked) where outstandings in the borrower’s country exceeded 1% of our total assets as of December 31, 2008,2010, December 31, 20072009 and December 31, 2006.2008. Cross-border outstandings do not include loans in local currency made by our subsidiary banks to customers in other countries to the extent that such loans are funded in the local
62
currency or hedged. As a result, they do not include the vast majority of the loans made by our subsidiaries in South America, Mexico and United States.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | 2010 | | 2009 | | 2008 | |
| | | 2008 | | 2007 | | 2006 | | | | | % of
| | | | % of
| | | | % of
| |
| | | | | % of Total
| | | | % of Total
| | | | % of Total
| | | | | Total
| | | | Total
| | | | Total
| |
| | | Amount | | Assets | | Amount | | Assets | | Amount | | Assets | | | Amount | | Assets | | Amount | | Assets | | Amount | | Assets | |
| | | | | (In millions of euros, except %) | | | | | (In millions of euros, except percentages) | |
| |
| OECD | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| United Kingdom | | | 7,542 | | | | 1.39 | | | | 6,201 | | | | 1.23 | | | | 5,612 | | | | 1.36 | | | | 5,457 | | | | 0.99 | % | | | 6,619 | | | | 1.24 | % | | | 7,542 | | | | 1.39 | % |
| Mexico | | | 4,644 | | | | 0.86 | | | | 2,812 | | | | 0.56 | | | | 2,337 | | | | 0.57 | | | | 2,175 | | | | 0.39 | % | | | 3,218 | | | | 0.60 | % | | | 4,644 | | | | 0.86 | % |
| Other OECD | | | 6,514 | | | | 1.20 | | | | 6,134 | | | | 1.22 | | | | 5,460 | | | | 1.33 | | | | 5,674 | | | | 1.03 | % | | | 5,761 | | | | 1.08 | % | | | 6,514 | | | | 1.20 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
Total OECD | | | 18,700 | | | | 3.45 | | | | 15,147 | | | | 3.02 | | | | 13,409 | | | | 3.26 | | | | 13,306 | | | | 2.41 | % | | | 15,598 | | | | 2.92 | % | | | 18,700 | | | | 3.45 | % |
| | | | | | | | | |
| Central and South America | | | 4,092 | | | | 0.75 | | | | 3,345 | | | | 0.67 | | | | 2,725 | | | | 0.66 | | | | 3,074 | | | | 0.56 | % | | | 3,296 | | | | 0.62 | % | | | 4,092 | | | | 0.75 | % |
| Others | | | 5,676 | | | | 1.05 | | | | 4,810 | | | | 0.96 | | | | 3,460 | | | | 0.84 | | |
| Other | | | | 5,411 | | | | 0.98 | % | | | 4,657 | | | | 0.87 | % | | | 5,676 | | | | 1.05 | % |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 28,468 | | | | 5.25 | | | | 23,302 | | | | 4.64 | | | | 19,594 | | | | 4.76 | | | | 21,791 | | | | 3.94 | % | | | 23,551 | | | | 4.40 | % | | | 28,468 | | | | 5.25 | % |
| | | | | | | | | | | | | | | | | | | | | |
54
The following tables settable sets forth the amounts of our cross-border outstandings as of December 31 of each year indicated by type of borrower where outstandings in the borrower’s country exceeded 1% of our total assets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Banks and
| | | | | | | | | Banks and
| | | | | |
| | | | | Other
| | Commercial,
| | | | | | | Other
| | Commercial,
| | | |
| | | | | Financial
| | Industrial
| | | | | | | Financial
| | Industrial and
| | | |
| | | Governments | | Institutions | | and Other | | Total | | | Governments | | Institutions | | Other | | Total | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
2008 | | | | | | | | | | | | | | | | | |
As of December 31, 2010 | | | | | | | | | | | | | | | | | |
| Mexico | | | 4 | | | | 228 | | | | 4,412 | | | | 4,644 | | | | 51 | | | | 1 | | | | 2,123 | | | | 2,175 | |
| United Kingdom | | | — | | | | 5,113 | | | | 2,429 | | | | 7,542 | | | | — | | | | 4,078 | | | | 1,379 | | | | 5,457 | |
| | | | | | | | | | | | | | | | | | | |
| Total | | | 4 | | | | 5,341 | | | | 6,841 | | | | 12,186 | | | | 51 | | | | 4,079 | | | | 3,502 | | | | 7,632 | |
| | | | | | | | | | | | | | | | | | | |
2007 | | | | | | | | | | | | | | | | | |
As of December 31, 2009 | | | | | | | | | | | | | | | | | |
| Mexico | | | 26 | | | | 133 | | | | 2,653 | | | | 2,812 | | | | 3 | | | | 3 | | | | 3,212 | | | | 3,218 | |
| United Kingdom | | | — | | | | 3,450 | | | | 2,751 | | | | 6,201 | | | | — | | | | 4,933 | | | | 1,686 | | | | 6,619 | |
| | | | | | | | | | | | | | | | | | | |
| Total | | | 26 | | | | 3,583 | | | | 5,404 | | | | 9,013 | | | | 3 | | | | 4,936 | | | | 4,898 | | | | 9,837 | |
| | | | | | | | | | | | | | | | | | | |
2006 | | | | | | | | | | | | | | | | | |
As of December 31, 2008 | | | | | | | | | | | | | | | | | |
| Mexico | | | 4 | | | | 108 | | | | 2,225 | | | | 2,337 | | | | 4 | | | | 228 | | | | 4,412 | | | | 4,644 | |
| United Kingdom | | | — | | | | 3,386 | | | | 2,226 | | | | 5,612 | | | | — | | | | 5,113 | | | | 2,429 | | | | 7,542 | |
| | | | | | | | | | | | | | | | | | | |
| Total | | | 4 | | | | 3,494 | | | | 4,451 | | | | 7,949 | | | | 4 | | | | 5,341 | | | | 6,841 | | | | 12,186 | |
| | | | | | | | | | | | | | | | | | | |
The Bank of Spain requires that minimum reserves be maintained for cross-border risk arising with respect to loans and other outstandings to countries, or residents of countries, falling into certain categories established by the Bank of Spain on the basis of the level of perceived transfer risk. The category that a country falls into is determined by us, subject to review by the Bank of Spain.
63
The following table shows the minimum required reserves with respect to each category of country for BBVA’s level of coverage as of December 31, 2008.2010.
| | | | | |
| | | Minimum Percentage of
| |
| | | Coverage (Outstandings
| |
Categories(1) | | withinWithin Category) | |
| |
| Countries belonging to the OECD whose currencies are listed in the Spanish foreign exchange market | | | 0.0 | |
| Countries with transitory difficulties(2) | | | 10.1 | |
| Doubtful countries(2) | | | 22.8 | |
| Very doubtful countries(2)(3) | | | 83.5 | |
| Bankrupt countries(4) | | | 100.0 | |
| | |
| (1) | | Any outstanding which is guaranteed may be treated, for the purposes of the foregoing, as if it were an obligation of the guarantor. |
| |
| (2) | | Coverage for the aggregate of these three categories (countries with transitory difficulties, doubtful countries and very doubtful countries) must equal at least 35% of outstanding loans within the three categories. The Bank of Spain has recommended up to 50% aggregate coverage. |
| |
| (3) | | Outstandings to very doubtful countries are treated as substandard under Bank of Spain regulations. |
| |
| (4) | | Outstandings to bankrupt countries must be charged off immediately. As a result, no such outstandings are reflected on our consolidated balance sheet. Notwithstanding the foregoing minimum required reserves, certain interbank outstandings with an original maturity of three months or less have minimum required reserves of 50%. We met or exceeded the minimum percentage of required coverage with respect to each of the foregoing categories. |
55
Our exposure to borrowers in countries with difficulties (the last 4four categories in the foregoing table), excluding our exposure to subsidiaries or companies we manage and trade-related debt, amounted to €10,612€311 million, €1,213€321 million and €951€334 million as of December 31, 2008, 20072010, 2009 and 2006,2008, respectively. These figures do not reflect loan loss reserves of 0.44%11.58%, 10.88%30.53%, and 12.01%,14.07% respectively, against the relevant amounts outstanding at such dates. Deposits with or loans to borrowers in all such countries as of December 31, 20082010 did not in the aggregate exceed 1.96%0.06% of our total assets.
The country-risk exposures described in the preceding paragraph as of December 31, 2008, 20072010, 2009 and 20062008 do not include exposures for which insurance policies have been taken out with third parties that include coverage of the risk of confiscation, expropriation, nationalization, nontransfer, nonconvertibilitynon-transfer, non-convertibility and, if appropriate, war and political violence. The sums insured as of December 31, 2008, 20072010, 2009 and 20062008 amounted to $32$44 million, $54$14 million and $59$32 million, respectively (approximately €23€33 million, €37€10 million and €45€23 million, respectively, based on a euro/dollar exchange rate on December 31, 2010 of $1.00 = €0.75, on December 31, 2009 of $1.00 = €0.69, and on December 31, 2008 of $1.00 = €0.72, on December 31, 2007 of $1.00 = €0.68, and December 31, 2006 of $1.00 = €0.76)€0.72).
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LIABILITIES
Deposits
The principal components of our customer deposits are domestic demand and savings deposits and foreign time deposits. The following tables provide information regarding our deposits by principal geographic area for the dates indicated.indicated, disregarding any valuation adjustments.
| | | | | | | | | | | | | | | | | |
| | | As of December 31, 2010 | |
| | | | | | Bank of Spain and
| | | Other
| | | | |
| | | Customer
| | | Other Central
| | | Credit
| | | | |
| | | Deposits | | | Banks | | | Institutions | | | Total | |
| | | (In millions of euros) | |
| |
Total domestic | | | 133,033 | | | | 2,779 | | | | 8,867 | | | | 144,679 | |
Foreign: | | | | | | | | | | | | | | | | |
| Western Europe | | | 24,120 | | | | 7,205 | | | | 22,626 | | | | 53,951 | |
| Latin America | | | 72,015 | | | | 96 | | | | 14,758 | | | | 86,869 | |
| United States | | | 42,495 | | | | 364 | | | | 6,839 | | | | 49,698 | |
| Other | | | 3,178 | | | | 543 | | | | 3,855 | | | | 7,576 | |
| | | | | | | | | | | | | | | | | |
Total foreign | | | 141,808 | | | | 8,208 | | | | 48,078 | | | | 198,094 | |
| | | | | | | | | | | | | | | | | |
Total | | | 274,841 | | | | 10,987 | | | | 56,945 | | | | 342,773 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | As of December 31, 2009 | |
| | | | | | Bank of Spain and
| | | Other
| | | | |
| | | Customer
| | | Other Central
| | | Credit
| | | | |
| | | Deposits | | | Banks | | | Institutions | | | Total | |
| | | (In millions of euros) | |
| |
Total domestic | | | 97,023 | | | | 15,352 | | | | 7,692 | | | | 120,067 | |
Foreign: | | | | | | | | | | | | | | | | |
| Western Europe | | | 22,199 | | | | 3,945 | | | | 20,472 | | | | 46,616 | |
| Latin America | | | 63,027 | | | | 423 | | | | 11,857 | | | | 75,307 | |
| United States | | | 67,986 | | | | 948 | | | | 6,572 | | | | 75,506 | |
| Other | | | 3,148 | | | | 428 | | | | 2,352 | | | | 5,928 | |
| | | | | | | | | | | | | | | | | |
Total foreign | | | 156,360 | | | | 5,744 | | | | 41,253 | | | | 203,357 | |
| | | | | | | | | | | | | | | | | |
Total | | | 253,383 | | | | 21,096 | | | | 48,945 | | | | 323,424 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | As of December 31, 2008 | |
| | | | | | Bank of Spain and
| | | Other
| | | | |
| | | Customer
| | | Other Central
| | | Credit
| | | | |
| | | Deposits | | | Banks | | | Institutions | | | Total | |
| | | (In millions of euros) | |
| |
Total domestic | | | 105,146 | | | | 6,132 | | | | 6,220 | | | | 117,498 | |
Foreign: | | | | | | | | | | | | | | | | |
| Western Europe | | | 26,341 | | | | 5,524 | | | | 20,293 | | | | 52,158 | |
| Latin America | | | 57,193 | | | | 844 | | | | 10,987 | | | | 69,024 | |
| United States | | | 56,185 | | | | 4,061 | | | | 9,297 | | | | 69,543 | |
| Other | | | 8,860 | | | | 201 | | | | 2,776 | | | | 11,837 | |
| | | | | | | | | | | | | | | | | |
Total foreign | | | 148,579 | | | | 10,630 | | | | 43,353 | | | | 202,562 | |
| | | | | | | | | | | | | | | | | |
Total | | | 253,725 | | | | 16,762 | | | | 49,573 | | | | 320,061 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | As of December 31, 2007 | |
| | | | | | Bank of Spain and
| | | Other
| | | | |
| | | Customer
| | | Other Central
| | | Credit
| | | | |
| | | Deposits | | | Banks | | | Institutions | | | Total | |
| | | (In millions of euros) | |
| |
Total domestic | | | 95,247 | | | | 24,078 | | | | 9,276 | | | | 128,601 | |
Foreign: | | | | | | | | | | | | | | | | |
| Western Europe | | | 15,935 | | | | 1,705 | | | | 17,300 | | | | 34,940 | |
| Latin America | | | 58,368 | | | | 43 | | | | 18,218 | | | | 76,629 | |
| United States | | | 37,985 | | | | 1,284 | | | | 10,811 | | | | 50,080 | |
| Other | | | 8,937 | | | | 146 | | | | 4,790 | | | | 13,873 | |
| | | | | | | | | | | | | | | | | |
Total foreign | | | 121,225 | | | | 3,178 | | | | 51,119 | | | | 175,522 | |
| | | | | | | | | | | | | | | | | |
Total | | | 216,472 | | | | 27,256 | | | | 60,395 | | | | 304,123 | |
| | | | | | | | | | | | | | | | | |
56
| | | | | | | | | | | | | | | | | |
| | | As of December 31, 2006 | |
| | | | | | Bank of Spain and
| | | Other
| | | | |
| | | Customer
| | | Other Central
| | | Credit
| | | | |
| | | Deposits | | | Banks | | | Institutions | | | Total | |
| | | (In millions of euros) | |
| |
Total domestic | | | 95,059 | | | | 12,190 | | | | 7,491 | | | | 11,4740 | |
Foreign: | | | | | | | | | | | | | | | | |
| Western Europe | | | 11,487 | | | | 1,176 | | | | 17,903 | | | | 30,566 | |
| Latin America | | | 60,808 | | | | 679 | | | | 9,321 | | | | 70,808 | |
| United States | | | 14,025 | | | | 993 | | | | 3,560 | | | | 18,578 | |
| Other | | | 4,074 | | | | 153 | | | | 4,011 | | | | 8,238 | |
| | | | | | | | | | | | | | | | | |
Total foreign | | | 90,394 | | | | 3,001 | | | | 34,795 | | | | 128,190 | |
| | | | | | | | | | | | | | | | | |
Total | | | 185,453 | | | | 15,191 | | | | 42,286 | | | | 242,930 | |
| | | | | | | | | | | | | | | | | |
For an analysis of our deposits, including non-interest bearing demand deposits, interest-bearing demand deposits, saving deposits and time deposits, see Note 2223 to the Consolidated Financial Statements.
65
As of December 31, 2008,2010, the maturity of our time deposits (excluding interbank deposits) in denominations of $100,000 (approximately €71,855€75,364 considering the noon buying rate as of December 31, 2008)2010) or greater was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2008 | | | As of December 31, 2010 | |
| | | Domestic | | Foreign | | Total | | | Domestic | | Foreign | | Total | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| 3 months or under | | | 9,961 | | | | 55,840 | | | | 65,801 | | | | 6,047 | | | | 37,303 | | | | 43,350 | |
| Over 3 to 6 months | | | 5,015 | | | | 8,379 | | | | 13,394 | | | | 6,195 | | | | 4,487 | | | | 10,682 | |
| Over 6 to 12 months | | | 4,414 | | | | 3,992 | | | | 8,406 | | | | 11,137 | | | | 4,636 | | | | 15,771 | |
| Over 12 months | | | 7,018 | | | | 3,304 | | | | 10,322 | | | | 9,924 | | | | 3,787 | | | | 13,711 | |
| | | | | | | | | | | | | | | |
Total | | | 26,408 | | | | 71,515 | | | | 97,923 | | | | 33,303 | | | | 50,213 | | | | 83,516 | |
| | | | | | | | | | | | | | | |
Time deposits from Spanish and foreign financial institutions amounted to €35,785€38,265 million as of December 31, 2008,2010, substantially all of which were in excess of $100,000 (approximately €71,855€75,364 considering the noon buying rate as of December 31, 2008)2010).
Large denomination deposits may be a less stable source of funds than demand and savings deposits because they are more sensitive to variations in interest rates. For a breakdown by currency of customer deposits as of December 31, 20082010, 2009 and 2007,2008, see Note 2223 to the Consolidated Financial Statements.
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Short-term Borrowings
Securities sold under agreements to repurchase and promissory notes issued by us constituted the only categories of short-term borrowings that equaled or exceeded 30% of stockholders’ equity as of December 31, 20082010, 2009 and 2007.2008.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | 2010 | | 2009 | | 2008 | |
| | | 2008 | | 2007 | | 2006 | | | | | Average
| | | | Average
| | | | Average
| |
| | | Amount | | Average Rate | | Amount | | Average Rate | | Amount | | Average Rate | | | Amount | | Rate | | Amount | | Rate | | Amount | | Rate | |
| | | (In millions of euro, except %) | | | (In millions of euro, except %) | |
| |
Securities sold under agreements to repurchase (principally Spanish Treasury bills): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31 | | | 28,206 | | | | 4.66 | % | | | 39,902 | | | | 5.20 | % | | | 37,098 | | | | 4.27 | % | | | 39,587 | | | | 2.03 | % | | | 26,171 | | | | 2.43 | % | | | 28,206 | | | | 4.66 | % |
| Average during year | | | 34,729 | | | | 5.62 | % | | | 42,770 | | | | 5.13 | % | | | 38,721 | | | | 3.61 | % | | | 31,056 | | | | 2.17 | % | | | 30,811 | | | | 2.71 | % | | | 34,729 | | | | 5.62 | % |
| Maximum quarter-end balance | | | 34,202 | | | | — | | | | 44,155 | | | | — | | | | 46,449 | | | | — | | | | 39,587 | | | | — | | | | 28,849 | | | | — | | | | 34,202 | | | | — | |
Bank promissory notes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31 | | | 20,061 | | | | 3.70 | % | | | 5,810 | | | | 3.69 | % | | | 7,596 | | | | 3.75 | % | | | 13,215 | | | | 0.91 | % | | | 29,578 | | | | 0.50 | % | | | 20,061 | | | | 3.70 | % |
| Average during year | | | 15,661 | | | | 4.57 | % | | | 6,975 | | | | 3.96 | % | | | 8,212 | | | | 3.16 | % | | | 24,405 | | | | 0.55 | % | | | 27,434 | | | | 1.28 | % | | | 15,661 | | | | 4.57 | % |
| Maximum quarter-end balance | | | 20,061 | | | | — | | | | 7,133 | | | | — | | | | 9,036 | | | | — | | | | 28,937 | | | | — | | | | 30,919 | | | | — | | | | 20,061 | | | | — | |
Bonds and Subordinated debt: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31 | | | 13,565 | | | | 4.66 | % | | | 11,281 | | | | 4.49 | % | | | 7,756 | | | | 4.01 | % | | | 11,041 | | | | 2.57 | % | | | 13,236 | | | | 2.54 | % | | | 13,565 | | | | 4.66 | % |
| Average during year | | | 12,447 | | | | 5.18 | % | | | 12,147 | | | | 5.21 | % | | | 8,076 | | | | 3.74 | % | | | 10,825 | | | | 3.20 | % | | | 14,820 | | | | 3.20 | % | | | 12,447 | | | | 5.18 | % |
| Maximum quarter-end balance | | | 15,822 | | | | — | | | | 15,761 | | | | — | | | | 10,872 | | | | — | | | | 13,184 | | | | — | | | | 15,609 | | | | — | | | | 15,822 | | | | — | |
Total short-term borrowings as of December 31 | | | 61,832 | | | | 4.35 | % | | | 56,993 | | | | 4.91 | % | | | 52,450 | | | | 4.16 | % | | | 63,844 | | | | 1.89 | % | | | 68,985 | | | | 1.62 | % | | | 61,832 | | | | 4.35 | % |
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Return on Equity
The following table sets out our return on equity ratios:
| | | | | | | | | | | | | | |
| | | | As of or for the
| |
| | | | | | | | | | | | | | | Year Ended
| |
| | | As of or for the Year Ended
| | | December 31, | |
| | | December 31, | | | 2010 | | 2009 | | 2008 | |
| | | 2008 | | 2007 | | 2006 | | | (in %) | |
| |
| Return on equity(1) | | | 21.5 | | | | 34.2 | | | | 37.6 | | | | 15.8 | | | | 16.0 | | | | 21.5 | |
| Return on assets(2) | | | 1.04 | | | | 1.39 | | | | 1.26 | | | | 0.89 | | | | 0.85 | | | | 1.04 | |
| Dividend pay-out ratio | | | 46.0 | | | | 44.4 | | | | 46.9 | | |
| Equity to assets ratio(3) | | | 4.90 | | | | 4.95 | | | | 4.42 | | |
| Dividend pay-out ratio(3) | | | | 26.9 | | | | 37.4 | | | | 46.0 | |
| Equity to assets ratio(4) | | | | 6.64 | | | | 5.49 | | | | 4.90 | |
| | |
| (1) | | Represents net income attributed to parent company for the year as a percentage of average stockholders’ equity for the year. |
| |
| (2) | | Represents net income attributed to parent company as a percentage of average total assets for the year. |
| |
| (3) | | Represents dividends paid as a percentage of net income attributed to parent company. |
|
| (4) | | Represents total stockholders’ equity over total assetsassets. |
The decrease produced in return on equity during 2008 is due to the increase in average stockholders’ equity in 2008, combined with the 16.06% decline in net income in 2008 compared with 2007.
The commercial banking sector in Spain has undergone significant consolidation. In the majority of the markets where we provide financial services, the Banco Santander Group is our strongest competitor.competitor, but the restructuring process that it is taking place is expected to increase the size of savings banks, such as Bankia (an integration of seven regional saving banks, led by Caja Madrid and Bancaja) and La Caixa.
We face strong competition in all of our principal areas of operations. The deregulation of interest rates on deposits in the past decade led to increased competition for large demand deposits in Spain and the widespread
58
promotion of interest-bearing demand deposit accounts and mutual funds. The capturing of customer funds in Spain had been characterized for several years by a large shift of deposits into mutual funds. However, since 2006 we have experienced a reverse shift of mutual funds into deposits. As of December 31, 2006, mutual fund assets under management grew by 3.5% compared to December 31, 2005. As of December 31, 2007 such assets decreased by 6.1% compared to December 31, 2006 and as of December 31, 2008 they decreased by 29.8% compared to December 31, 2007. The trend in deposits has been favorable and deposits in the banking sector increased by 16% as of December 31, 2007 compared to December 31, 2006 and 17% as of December 31, 2008 compared to December 31, 2007.
Spanish savings banks, many of which have received financial or other support from the Spanish government, and money market mutual funds provide strong competition for savings deposits, moreover in the context of increasing interest rates of term deposits, which form an important part of our deposit base, and, in the case of savings banks, for other retail banking services. Credit cooperatives, which are active principally in rural areas, where they provide savings bank and loan services and related services such as the financing of agricultural machinery and supplies, are also a source of competition. In Spain, competition distortions in the term deposits market have intensified, and this situation is expected to continue due to the liquidity needs of some financial institutions, which are offering high interest rates
The recent market turmoil triggered by defaults on subprime mortgages in the United States has significantly disrupted first the liquidity of financial institutions and markets and consequentlysubsequently, the real economy. Wholesale and interbank markets are frozenonly open to a great extent,limited number of financial institutions, there is no international demand for securities with public guarantee, and the spread on Spanish Residential Mortgage-Backed Security (RMBSs) and sovereign risk has increased substantially.remains well above the pre-crisis levels. In this adverse and uncertain economic environment, the world economy is facing a lengthy adjustment and de-leveraging process that will be costly in terms of activity and employment.
The entry of on-line banks into the Spanish banking system has increased competition, mainly in customer funds businesses such as deposits. Insurance companies and other financial services firms also compete for customer funds. Like the commercial banks, savings banks, insurance companies and other financial services firms are expanding the services offered to consumers in Spain. We face competition in mortgage loans from saving banks and, to a lesser extent, cooperatives.
The EU Directive on Investment Services took effect on December 31, 1995. The EU Directive permits all brokerage houses authorized to operate in other member states of the EU to carry out investment services in Spain. Although the EU Directive is not specifically addressed to banks, it affects the activities of banks operating in Spain. Besides, several initiatives have been implemented recently in order to facilitate the creation of a Pan-European
67
financial market. For example, SEPA (Single Euro Payments Area) is a major project which aims at replacing all existing payment systems — organized by the Member States with new, Pan-Euro systems and it is currently being implemented and the MiFID project (Markets in Financial Instruments Directive) aims to create a European framework for investment services.
Foreign banks also have a strong presence in Spain. As of December 31, 2008, approximately 127 foreign banks, of which 80 were branches, operated in Spain and several foreign banks have acquired small and medium-sized Spanish banks.
Following the recent financial turmoil, a number of banks have disappeared or have been absorbed by other banks. The trend indicates that this will continue in the future, with a number of mergers and acquisitions between financial entities. The U.S. government has already facilitated the purchase of troubled banks by other competitors, and European governments, including the Spanish government, have expressed their willingness to facilitate these typetypes of operations.
In the wake of the exceptional circumstances unfolding in the international financial markets, notably from the second half of 2008, certain European governments committed to taking appropriate measures to try to resolve the issues confronting bank funding and the ramifications of constrained funding on the real economy with a view to safeguarding the stability of the international financial system. The overriding goals underpinning these measures were to ensure sufficient liquidity to enable financial institutions to function correctly, to facilitate the funding of banks, to provide financial institutions with additional capital resources where needed so as to continue to ensure the proper financing of the economy, to ensure that applicable accounting standards are sufficiently flexible to take into consideration of current exceptional market circumstances and to reinforce and improve cooperation among European nations.
59
Framed by this general philosophy, the following measures were passed into law in Spain during the fourth quarter of 2008:2008, 2009 and 2010:
| | |
| | • | Royal Decree-Law 6/2008, of October 10, creating the Spanish Financial Asset Acquisition Fund (FAAF), and Order EHA/3118/2008, dated October 31, enacting this Royal Decree. The purpose of the fund, which is managed by Spain’s Economy Ministry and has an initial endowment of €30 billion, which can be increased to €50 billion, is to acquire, with public financing and based on market criteria via auctions, financial instruments issued by Spanish banks and savings and loans (cajasbanks (cajas de ahorro)ahorro) and securitization funds containing Spanish assets, secured by loans extended to individuals, companies and non-financial corporates.corporations. |
| |
| | • | Royal Decree-Law 7/2008, of October 13, on Emergency Economic Measures in connection with the Concerted Euro Area Action Plan, and Order EHA/3364/2008, dated November 21, enacting article 1 of the aforementioned Royal Decree, including the following measures: |
| | |
| | • | The extension of state guarantees to secure bills, debentures and bonds issued by credit entities resident in Spain since October 14, 2008. Debt issued which takes advantage of this state guarantee must:must form part of individual operations or issuance programs; not be subordinated or secured by any other class of guarantee; be traded on official Spanish secondary markets; mature within three months and three years (although this maturity can be extended to five years subject to prior notification to the Bank of Spain); be fixed or floating rate (subject to special conditions for floating-rate debt); be repaid in a single installment at maturity; not have any options or other derivatives attached to it;them; and have a nominal value of €10 million or more. The deadline for issuing eligible debt eligible for the state guarantees isguarantee was December 31, 2009 and the total amount of available guarantees that can be extended iswas €100 billion. The government extended the time period to use the remaining resources (€64 billion) until June 2010. |
| |
| | • | Authorization on an exceptional basis, until December 31, 2009, for the Spanish Economy Ministry to acquire securities, on an exceptional basis, including preferred shares and other non-voting equity instruments, issued by credit entities resident in Spain that needwhich needed to reinforce their capital structured and so request.submitted the relevant request to the relevant authorities. |
|
| • | Royal Decree-Law 09/2009, of June 26, creating the Fondo de Reestructuración Ordenada Bancaria (FROB). FROB was created under the management of the Bank of Spain. It has two functions: the management of credit institutions’ restructuring processes and the strengthening of capital in certain merger processes. On 28 January 2010, the European Commission approved the FROB. Since then, aid from the FROB has been requested in connection with eight integration processes totaling €11.17 billion, and additional FROB funds for €392 billion were granted for the restructuring of Cajasur. |
68
We are entitled to avail ourselvesIn the second half of 2010 an important reduction of the aforementioned measures under the umbrellanumber of our risk management policy. However, atsavings banks has taken place in Spain, with a reduction from 45 to 17 as of the date of preparationthis Annual Report. The restructuring process will shape a different financial system in Spain and will result in a more concentrated financial sector, with a lower number of incumbent institutions which will be more competitive, in a context of slow economic recovery.
Additionally at the end of January 2011, the government has issued new solvency requirements, in order to dissipate the doubts about the financial institutions. The new core capital minimum has been set at 8% (or higher for institutions that fulfill certain requirements). Although the general assessment is positive, as the restructuring plan provides a clear roadmap for the continuation of the financial system restructuring and fosters the participation of private capital in the recapitalization process, some uncertainties remain. Some of them are the fact that there is no provision of cleaning the balance-sheets and that the inclusion of such sudden and permanent high capital requirement (stricter and prompter than Basel III) could distort competition with foreign peers and could negatively affect the supply of credit.
As of the date of this Annual Report, we have not requested access to these facilities.
We could be adversely affected if one or more of our direct competitors are beneficiaries of selective governmental interventions or assistance and we do not receive comparable assistance.
In the United States, where we operate through BBVA Compass, the competitive landscape has also been significantly affected by the financial crisis. The U.S. banking industry has experienced significant impairment on its assets in 2009, which will result in continuing losses in select product categories and slow loan growth in 2010. Data published by the FDIC in the fourth quarter of 2009 suggested that banking industry write-offs increased by $52.1 billionquarter-on-quarter from $131 billion in the third quarter of 2009 to $183.8 billion in the fourth quarter of 2009 and the total number of problem list institutions rose to 702. Mortgage delinquency rates, which advanced to 10.3% in the fourth quarter of 2009 have begun to decline to 9.9% in the fourth quarter of 2010, but continue to present challenges to the banking industry nearly two years after the height of the financial crisis. Domestic loan levels at commercial banks generally declined as banks continued to progress in deleveraging. Certain types of loans, such as commercial and industrial and commercial real estate, grew at rapid rates in the pre-crisis years and now must readjust to a new economic environment. In particular, the level of outstanding residential construction loans declined by roughly half between the second quarter of 2008 and the fourth quarter of 2009. The correction is most striking in commercial and industrial loans, which showedyear-on-year growth of 20% at the end of 2007 but declined by 18.3% at the end of 2009 compared to 2008. Commercial real estate loans similarly grew at double digit rates in the years prior to 2008 and now are undergoing a lengthy loan balance decline. Commercial real estate loans similarly grew at double digit rates in the years prior to 2008 and now are undergoing a lengthy loan balance decline.
In Mexico, where we operate through BBVA Bancomer, the banking industry remained solvent throughout the financial crisis, although loan delinquency rates increased during 2009 and the first semester of 2010, especially those related consumer finance and mortgages. The relative strength of the Mexican banking industry can be tied to several factors. In general, banks in Mexico did not invest heavily in assets linked to the U.S. mortgage market; maintained high capitalization levels, coming from maximum levels observed between 2005 and 2007; generally funded themselves through internal sources in local currency; and were subjected to prudent supervision and regulation by the banks’ supervisor (Comisión Nacional Bancaria y de Valores, CNBV) who maintained capital ratio requirements above international standards and increased loan loss provisions for consumer credit and mortgages. However, past-due payment rates increased in 2009 and up to the second quarter of 2010. Delinquency rates reached 4.0% in the second quarter of 2010 for the industry as a whole and higher rates were reached for consumer finance and mortgages. In April of 2010, loan demand started to recover and delinquency rates started ameliorating. At the end of 2010, banking credit to the private sector increased by 3.9% in real terms from December 31, 2009 and the delinquency rate was 2.8%.
In Mexico, changes in banking regulation could have a significant potential impact on profits. Authorities have closely followed international trends and during 2009 they mandated increased loan loss provisions for consumer loans, and stricter loss provisions for housing loans have been enacted during 2010. Rules to limit loans to firms within a certain financial group (préstamos relacionados) were adopted in March 2011. Such limits will impact some small banks of the system with strong connections with retail stores (for example, Inbursa and Banco Azteca). In addition, authorities have strengthened the measures to improve transparency and information about financial
69
services by enacting new legislation that gives more powers to the central bank (Banco de México) to regulate interest rates and bank fees. It also gives more powers to the financial services consumer protection agency (Comisión Nacional para la Defensa de los Usuarios de los Servicios Financieros, Condusef) to set information requirements for bank account statements, product publicity, and contracts, and to improve financial education. The consolidation and restructuring of some non banking financial intermediaries (Sofoles) will imply that some of them will go out of business or be acquired. Along these lines, the mortgage arm of BBVA-Bancomer (Hipotecaria Nacional) acquired the portfolio of certainSofoleslast year.
| |
| ITEM 4A. | UNRESOLVED STAFF COMMENTS |
Not Applicable.
| |
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
Overview
The internationalIn 2010 the world economy started to recover from the major slump in 2009. Global GDP picked up from a fall of 0.6% to a rise of nearly 5% in 2010. This figure is in line with those in the years immediately before the start of the crisis in the summer of 2007. However, the economic crisis was the defining factor for our business in 2008.recovery is not evenly spread across regions. Throughout the year financial markets suffered high volatility with general decreasesit became clear that the emerging economies, particularly in stock market indices aroundemerging Asia and Latin America, showed stronger growth and are contributing to global growth, while in advanced economies, and particularly in some European economies, recovery continues to be sluggish.
In the world. The deteriorationlast quarter of 2010, uncertainty and risks in the international macroeconomic environment wasglobal economy increased due to renewed financial turmoil, particularly pronounced duringin Europe as a result of the thirddoubts regarding the fiscal consolidation process in some countries. This led to the activation of the rescue plans for Ireland.
After a relatively good performance in the subprime and fourth quartersliquidity crises in 2009, the Spanish economy has suffered the consequences of 2008, with major disruptionsthe peripheral sovereign crisis in international financial markets2010. The Greek and Irish rescue programs and the failure or governmentpossibility of a Portuguese rescue program have spread doubts about the Spanish economy. Financial stress in Europe has increased the cost of several largefinancing of governments and financial institutions and insurance entities.which, in some cases, have lost the access to international funding. As a result of this continued contraction, economic conditions and employment in Spain could deteriorate further in 2011. Our Economic Research Department estimates that the Spanish economy will not recover a strong path of growth in terms of gross domestic product in 2011, growing at an estimated pace of 0.9%. Growth forecasts for the Spanish economy could be further revised downwards if the recent surge in oil prices becomes permanent and passes through to non-energy prices. This downward risk could slow the pace of both domestic and external demand.
In Europe, the economy slowed gradually in line with expectations, although some countries such volatilityas Germany maintain their strength. Tension has also returned to the debt markets, particularly in peripheral countries, and uncertainty, liquidity was scarce, includingabove all in the interbank lending market, which contributed to increases in interest rates, particularly short-term interest rates, over the year.Ireland and Portugal. Nevertheless, 2010 closed with growth of nearly 2%.
In the United States wherecyclical concerns continue, derived from the financial crisis originated, economic indicators for 2008 demonstrateweakness shown by private demand since some of the fiscal stimulus programs began to expire. Thus throughout 2010 there has been a notable slowdownloss of strength in economic activity and consumer confidence as well as an increase in unemployment. Thethe real estate market, isweakness in the labor market and a perioddeleveraging process in households. Given this situation, the Federal Reserve has begun a new monetary expansion program. At least initially, this has led to downward pressure on short-term interest rates and a depreciation of adjustment reflected by data showing declining house sales and prices. Other economic activity indicators, such as the Industrial Production andU.S. dollar. Even so, although toward the Manufacturing Index (“ISM”) finished 2008 below 50 points, highlighting the fact thatend of 2010 the U.S. economy has slowed, the year as a whole closed with average growth close to 3%.
The Mexican economy has throughout the second half of 2010 shown resistance to the loss of strength in foreign demand. This is reflected in recession. Due to lower demanda less notable slowdown of its growth rates than expected, with GDP up in 2010 by around 5%. Inflation closed at a historically low level of 4.4% as a result of decreased economic activity, the priceappreciation of oilthe Mexican peso over the year, moderate international prices and the lack of pressure from domestic demand. The monetary pause is expected to remain in 2008 decreased helpingplace, at least throughout 2011.
Finally growth in emerging economies continues to ease inflationary pressures.to more sustainable levels, thus limiting the risk of overheating. In South America, private demand is replacing the economic policy stimuli adopted as the main source
6070
of recovery. Although the trend for inflation is rising, it is still not a problem, and the major capital inflows in the region have led some countries to implement control mechanisms. In Europe,China, the slowdown in economic growth continued in 2008. Euro zonelatest economic indicators point to the existence of a continued slowdownrenewed boost to growth and increased inflation, which is forcing the authorities to take further adjustment measures, including a recent rise in interest rates. Despite this, GDP growth in line2010 was 10.3%. In Turkey, the economy recovered in 2010, with what is happeninga growth of 7.6% and inflation slightly below the Central Bank’s target. At the same time, public debt has fallen steeply. Given this situation, the Central Bank has lowered the official interest rate and controlled credit with increases in Spain. The ISM index for the euro zone was under 50 points, which signifies that industrial and service activities are at historical lows. Mirroring the situation in the United States, consumer confidence levels in the euro zone declined in 2008 while unemployment continued to rise.bank short-term reserve requirements.
In view of the seriousness of the economic situation, during the month of October the governments of the United States and numerous countries in the European Union started to approve specific plans to combat the economic crisis. The measures taken by the Spanish government aim to resolve the lack of liquidity of financial entities to re-establish confidence and to improve the markets for long term financing through the Financial Assets Acquisition Fund, which began auctions in late 2008.
Likewise, central banks have intervened by means of liquidity injections, and in a coordinated action lowered interest rates in December 2008, including the U.S. Federal Reserve (down to 0.25%), the ECB (down to 2.5%) and the Bank of England (down to 2%). In January 2009 the ECB and the Bank of England again lowered the interest rates half a point, down to 2% and 1.5% respectively.
Despite the adverse global economic environment, Latin American economies enjoyed relatively positive results in 2008, primarily due to the continued increase of internal demand. Nevertheless, in 2008 continued worsening of inflation expectations led most central banks in the region to tighten monetary policy. In Mexico, the interbank interest rate was increased in the fourth quarter and stood at 8.69% at the end of 2008.
In relation of exchange rates, most of the currencies that affect the financial situation of the Group have depreciated relative to the euro during the last months of 2008. The U.S. dollar, however, appreciated during the last months of the 2008, resulting in a minor negative impact on theyear-on-year comparison of the BBVA Group’s balance sheet.
Differences in average exchange rates for 2008 and 2007 negatively affected the income statement. In average terms in 2008, the Mexican peso fell 9.3% against the euro, the U.S. dollar fell 7.0% against the euro, the Argentine peso fell 8.7% against the euro, the Venezuelan Bolivar fell 7.0% against the euro, the Chilean peso fell 7.2% against the euro, the Peruvian sol fell 0.1% against the euro and the Colombian peso fell 1.3% against the euro. Overall, the negative impact of the depreciation of these currencies on the Group’s net income attributed to parent company in 2008 is approximately four percentage points.
Critical Accounting Policies
The BBVA Group’s Consolidated Financial Statements as of and for the years ended December 31, 2008, December 31, 20072010, 2009 and December 31, 20062008 were prepared by the Bank’s directors in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular4/ 4/2004 and by applying the basis of consolidation, accounting policies and measurement bases described in Note 2 to the Consolidated Financial Statements, so that they present fairly the Group’s equity and financial position as of and for the years ended December 31, 2008, December 31, 20072010, 2009 and December 31, 2006,2008, and the results of its operations the changes in consolidated equity and the consolidated cash flows in 2008, 20072010, 2009 and 2006. These2008. The Consolidated Financial Statements were prepared on the basis of the accounting records kept by the Bank and by each of the other Group companies and include the adjustments and reclassifications required to unify the accounting policies and measurement bases used by the Group. See(See Note 2.2 to the Consolidated Financial Statements).
The Group’s Consolidated Financial Statements are presented in accordance with the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 applicable at year-end 2008.2004.
In preparing the Consolidated Financial Statements estimates were made by the Group and the consolidated companies in order to quantify certain of the assets, liabilities, income, expenses and commitments reported herein. These estimates relate mainly to the following:
| | |
| | • | The impairment on certain assets. |
| |
| | • | The assumptions used into quantify other provisions and for the actuarial calculation of the post-employment benefit liabilities and commitments. |
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| | |
| | • | The useful life and impairment losses of tangible and intangible assets. |
| |
| | • | The measurement of goodwill arising on consolidation. |
| |
| | • | The fair value of certain unlisted assets.financial assets and liabilities. |
Although these estimates were made on the basis of the best information available as of December 31, 2010, 2009 and 2008, December 31, 2007 and December 31, 2006respectively, on the events analyzed, events that take place in the future might make it necessary to changerevise these estimates (upwards or downwards) in coming years.
The presentation format used under the EU-IFRS required to be applied under the Bank of Spain’s Circular4/ 4/2004 vary in certain respects from the presentation format and accounting rules required to be applied under U.S. GAAP and other rules that are applicable to U.S. banks. The tables included in Note 5860 to our Consolidated Financial Statements give the effect that application of U.S. GAAP would have on net income attributed to parent company and stockholders’shareholders’ equity as reported under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.
Note 2 to the Consolidated Financial Statements contains a summary of our significant accounting policies. We consider certain of these policies to be particularly important due to their effect on the financial reporting of our financial condition and because they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Our reported financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of the Consolidated Financial Statements. The nature of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing our Consolidated Financial Statements and the discussion below. We have identified the following accounting policies as critical to the understanding of our results of
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operations, since the application of these policies requires significant management assumptions and estimates that could result in materially different amounts to be reported if conditions or underlying circumstances were to change.
Fair value of financial instruments
The fair value of an asset or a liability on a given date is taken to be the amount for which it could be exchanged or settled, respectively, between two knowledgeable, willing parties in an arm’s length transaction. The most objective and common reference for the fair value of an asset or a liability is the price that would be paid for it on an organized, transparent and deep market (“(“quoted price” or“market “market price”).
If there is no market price for a given asset or liability, its fair value is estimated on the basis of the price established in recent transactions involving similar instruments and, in the absence thereof, by using mathematical measurement models sufficiently tried and trusted by the international financial community. Such estimates would take into consideration the specific features of the asset or liability to be measured and, in particular, the various types of risk associated with the asset or liability. However, the limitations inherent to the measurement models developed and the possible inaccuracies of the assumptions required by these models may signify that the fair value of an asset or liability thus estimated does not coincide exactly with the price for which the asset or liability could be purchased or sold on the date of its measurement.
See Note 2.22.2.1 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies.
Derivatives and other futuresfuture transactions
These instruments include unmaturedoutstanding foreign currency purchase and sale transactions, unmaturedoutstanding securities purchase and sale transactions, futures transactions relating to securities, exchange rates or interest rates, forward interest rate agreements, options relating to exchange rates, securities or interest rates and various types of financial swaps.
All derivatives are recognized inon the balance sheet at fair value from the date of arrangement. If the fair value of a derivative is positive, it is recorded as an asset and if it is negative, it is recorded as a liability. Unless there is evidence to the contrary, it is understood that on the date of arrangement the fair value of the derivatives is equal to the transaction price. Changes in the fair value of derivatives after the date of arrangement are recognized with a
62
balancing entry under the heading Gains“Gains or Losses on Financial Assets and LiabilitiesLiabilities” in the consolidated income statement.
Specifically, the fair value of the standard financial derivatives included in the held for trading portfolios is equal to their daily quoted price. If, under exceptional circumstances, their quoted price cannot be established on a given date, these derivatives are measured using methods similar to those used to measureover-the-counter (“ (“OTC”) derivatives.
The fair value of OTC derivatives is equal to the sum of the future cash flows arising from the instruments discounted at the measurement date (“(“present value” or“theoretical “theoretical value”). These derivatives are measured using methods recognized by the financial markets, including the net present value (“(“NPV”) method and option price calculation models.
Financial derivatives that have as their underlying equity instruments, whose fair value cannot be determined in a sufficiently objective manner and are settled by delivery of those instruments, are measured at cost.
Financial derivatives designated as hedging items are included in the heading of the balance sheet “Heading“Hedging derivatives”. These financial derivatives are valued at fair value.
See Note 2.2.1 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies with respect to these instruments.
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Goodwill in consolidation
ThePursuant to the new IFRS 3, the positive differencesdifference on the date of a business combination between the costsum of business combinationsthe fair value of the price paid, the amount of all the non-controlling interests and the amounted corresponding tofair value of stock previously held in the acquired percentage ofentity, on one hand,and the net fair value of the assets acquired and liabilities and contingent liabilities ofassumed, on the acquired entity areother hand, is recorded as goodwill on the asset side of the balance sheet. Goodwill represents the future economic benefits from assets that cannot be individually identified and separately recognized. Goodwill is not amortized and is subject periodically to an impairment analysis. Any impaired goodwill is written off.
Goodwill is allocated to one or more cash-generating units, or CGUs, expected to benefit from the synergies arising from business combinations. The cash-generatingCGUs units represent the Group’s smallest identifiable businessand/or geographical segments as managed internally by its directors within the Group.
The cash-generating unitsCGUs to which goodwill has been allocated are tested for impairment based on the carrying amount of the unit including the allocated goodwill. Such testing is performed at least annually and whenever there is an indication of impairment.
For the purpose of determining the impairment of a cash-generating unitCGU to which a part or all of goodwill has been allocated, the carrying amount of that unit, adjusted by the theoretical amount of the goodwill attributable to the minoritynon-controlling interest, shall be compared withto its recoverable amount. The resulting loss shall be apportioned by reducing, firstly, the carrying amount of the goodwill allocated to that unit and, secondly, if there are still impairment losses remaining to be recognized, the carrying amount of the rest of the assets. This shall be done by allocating the remaining loss in proportion to the carrying amount of each of the assets in the unit. It will be taken into account that no impairment of goodwill attributable to the minority interest may be recognized. In any case, impairment losses on goodwill can never be reversed.
See Note 2.2.112.2.8 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies related to goodwill.
As mentioned in Note 20.1 to the Consolidated Financial Statements, the Group has performed the goodwill impairment test as of December 31, 2010, 2009 and 2010.
The results from each of these tests on the dates mentioned were as follows:
As of December 31, 2010, there were no impairment losses on the goodwill recognized in the Group’s cash-generating units (CGUs), except for an insignificant impairment on the goodwill of the Spain and Portugal CGU, related to the impairment on the investments in Rentrucks, Alquiler y Servicios de Transportes, S.A. and in BBVA Finanzia SpA (of €9 million and €4 million, respectively).
The most significant goodwill corresponds to the United States CGU. The recoverable amount of this CGU is equal to its value in use. This is calculated as the discounted value of the cash flow projections estimated by our management based on the latest budgets available for the next five years. As of December 31, 2010, the Group used an estimated sustainable growth rate of 4.2% (4.3% as of December 31, 2009) to extrapolate the cash flows in perpetuity based on the U.S. real GDP growth rate. The discount rate used to discount the cash flows was the cost of capital of the CGU, which stood at 11.4% as of December 31, 2010 (11.2% as of December 31, 2009), consisting of the free risk rate plus a risk premium.
As of December 31, 2009, impairment losses of €1,097 million were estimated in the United States CGU which were recognized under “Impairment losses on other assets (net) — Goodwill and other intangible assets” in the accompanying consolidated income statement for 2009 (see Note 50 to the Consolidated Financial Statements). The impairment loss of this unit was attributed to the significant decline in economic and credit conditions in the states in which the Group operates in the United States. The valuations were verified by an independent expert, not related to the Group’s external auditor.
Both the U.S. CGU’s fair values and the fair values assigned to its assets and liabilities were based on the estimates and assumptions that the Group’s management deemed most likely given the circumstances. However, some changes to the valuation assumptions used could result in differences in the impairment test result. As of December 31, 2009, if the discount rate had increased or decreased by 50 basis points, the difference between the carrying amount and its recoverable amount would have increased or decreased by up to €573 million and
73
€664 million, respectively. If the growth rate had increased or decreased by 50 basis points, the difference between the carrying amount and its recoverable amount would have increased or decreased by €555 million and €480 million, respectively.
As of December 31, 2008, there were no impairment losses on the goodwill recognized in the Group’s CGUs.
Post-employment benefits and other long term commitments to employees
Pension and post-retirement benefit costs and credits are based on actuarial calculations. Inherent in these calculations are assumptions including discount rates, rate of salary increase and expected return on plan assets. Changes in pension and post-retirement costs may occur in the future as a consequence of changes in interest rates, expected return on assets or other assumptions. See Note 2.2.32.2.12 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies about pension and post-retirement benefit costs and credits.
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Allowance for loan losses
As we describeddescribe in Note 2.2.1.b to the Consolidated Financial Statements, a loan is considered to be an impaired loan — and, therefore, its carrying amount is adjusted to reflect the effect of its impairment — when there is objective evidence that events have occurred which, in the case of loans, give rise to a negative impact on the future cash flows that were estimated at the time the transaction was arranged.
The potential impairment of these assets is determined individually or collectively.
The quantification of impairment losses inherent in deterioration is determined on a collective basiscalculated collectively, both in the following two cases:case of assets classified as impaired and for the portfolio of current assets that are not currently impaired but for which an imminent loss is expected.
| | |
| • | Assets classified as impaired for customers in which the amount of their operations is less than € 1 million. |
|
| • | Asset portfolio not currently impaired but which presents an inherent loss. |
Inherent loss, calculated using statistical procedures, is deemed equivalent to the portion of losses incurred on the date that the accompanying consolidated financial statements are prepared that has yet to be allocated to specific transactions.
The Group estimates collective inherent loss of credit risk corresponding to operations realized by Spanish financial entities of the Group (approximately 68.73%68.7% of the Loansloans and Receivablesreceivables of the Group as of December 31, 2008),2010) using the parameters set by Annex IX of the Bank of Spain’s Circular 4/2004 on the basis of its experience and the Spanish banking sector information inregarding the quantification of impairment losses and provisions for insolvencies for credit risk.
Notwithstanding the above, the Group has historic statistical data which it used in its internal ratings models (IRBs)(“IRBs”) that were approved by the Bank of Spain for some portfolios in 2008,2009, albeit only for the purpose of estimating regulatory capital under the new Basel Accord (BIS II). It uses these internal models to calculate the economic capital required in its activities and uses the expected loss concept to quantify the cost of credit risk for incorporation in its calculation of the risk-adjusted return on capital of its operations.
To estimate the collective loss of credit risk corresponding to operations withnon-Spanish residents registered in foreign subsidiaries of the Group, the Group applies similar methods and criteria, using the Bank of Spain’s parameters but adapting the default calendars to the particular circumstances of the country. Additionally, in Mexico for consumer loans, credit cards and mortgages portfolios, as well as for credit investment maintained by the Group in the United States (which in the calculationaggregate represent approximately 13.9% of the impairment losses is based on our historical experience of the Group (approximately 13% of the Loansloans and Receivablesreceivables of the Group as of December 31, 2008).
2010), internal models are used to calculate impairment losses based on the historical experience of the Group. In either case,both of these cases, the aforementioned provisions required under the Bank of Spain’s Circular 4/2004 standards fall within the range of provisions calculated using our historical experience.the Group’s internal ratings models.
For the years ended December 31, 20072010, 2009 and 2006, the provisions required under Bank of Spain’s Circular4/2004 standards represented the outermost range of acceptable estimates which were calculated using our historical experience. Therefore, those provisions did not represent the best estimate of allowance for loan losses under U.S. GAAP which provided a more moderate estimate within the acceptable range. As a consequence,2008, there was an adjustmentare no substantial differences in the reconciliation to U.S. GAAP in order to reflect in net income the reversal of the difference of estimates of the provisions recorded under both GAAPs in each year and in stockholders’ equity the differences of estimates of the accumulated allowance for loan losses under both GAAPs.
For the year ended December 31, 2008, there is no substantial difference in the calculationcalculations made under both GAAPs because the allowance for loan losses calculated under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 isand U.S. GAAP because the allowance for loan losses for such years calculated under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 are similar to the best estimateestimates of allowance for loan losses under U.S. GAAP, which is the central scenario determined by using internal risk models based on our historical experience. Therefore, the allowance for loan losses calculated under both GAAPs are the same and the Bank hasWe included
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an adjustment in the reconciliation of net income for the year 2008 in order to make equivalent the allowance for loan losses under U.S. GAAP comparable to the allowance for loan losses calculated under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.
The estimates of the portfolio’s inherent risks and overall recovery vary with changes in the economy, individual industries, countries and individual borrowers’ or counterparties’ ability and willingness to repay their
64
obligations. The degree to which any particular assumption affects the allowance for credit losses depends on the severity of the change and its relationship to the other assumptions.
Key judgments used in determining the allowance for loan losses include: (i) risk ratings for pools of commercial loans and leases; (ii) market and collateral values and discount rates for individually evaluated loans; (iii) product type classifications for consumer and commercial loans and leases; (iv) loss rates used for consumer and commercial loans and leases; (v) adjustments made to assess current events and conditions; (vi) considerations regarding domestic, global and individual countries economic uncertainty; and (vii) overall credit conditions.
Higher-risk loans
Exposure to subprime credit risk and structured credit instruments
The application of prudent risk policies in the BBVA Group has resulted in a very limited exposure to subprime credit risk in the United States, as well as to structured credit products. As of December 31, 2010, 2009 and 2008 the amount of operations related to such assets was not significant.
Factors Affecting the Comparability of our Results of Operations and Financial Condition
We are exposed to foreign exchange rate risk in that our reporting currency is the euro, whereas certain of our subsidiaries keep their accounts in other currencies, principally Mexican pesos, U.S. dollars, Argentine pesos, Chilean pesos, Colombian pesos, Venezuelan bolivars fuerte and New Peruvian nuevos soles.Soles. For example, if Latin American currencies and the U.S. dollar depreciate against the euro, when the results of operations of our subsidiaries in the countries using these countriescurrencies are included in our Consolidated Financial Statements,consolidated financial statements, the euro value of their results declines, even if, in local currency terms, their results of operations and financial condition have remained the same or improved relative to the prior year.period. Accordingly, declining exchange rates may limit the ability of our results of operations, stated in euro, to fully describe the performance in local currency terms of our subsidiaries. By contrast, the appreciation of Latin American currencies and the U.S. dollar against the euro would have a positive impact on the results of operations of our subsidiaries in the countries using these countries,currencies when their results of operations are included in our Consolidated Financial Statements.consolidated financial statements.
The assets and liabilities of our subsidiaries which maintain their accounts in currencies other than the euro have been converted to the euro at the period-end exchange rates for inclusion in our Consolidated Financial Statements. Income statement items have been converted at the average exchange rates for the period. The following table sets forth the exchange rates of several Latin American currencies and the U.S. dollar against the euro, expressed in local currency per €1.00 for 2010, 2009 and 2008 and as of December 31, 2008, 20072010, 2009 and 2006, respectively,2008 according to the European Central Bank.Bank (“ECB”).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Average Exchange Rates | | Period-end Exchange Rates |
| | | As of December 31, | | Change | | | Year Ended
| | Year Ended
| | Year Ended
| | As of
| | As of
| | As of
|
| | | 2008 | | 2007 | | 2006 | | 2008/2007 | | 2007/2006 | | | December 31,
| | December 31,
| | December 31,
| | December 31,
| | December 31,
| | December 31,
|
| | | | | | | | | (In %) | | | 2010 | | 2009 | | 2008 | | 2010 | | 2009 | | 2008 |
| |
Mexican peso | | | 19.2334 | | | | 16.0521 | | | | 14.3230 | | | | (19.8 | ) | | | (12.1 | ) | | | 16.75 | | | | 18.80 | | | | 16.29 | | | | 16.55 | | | | 18.92 | | | | 19.23 | |
U.S. dollar | | | 1.3917 | | | | 1.4721 | | | | 1.3170 | | | | 5.5 | | | | (11.8 | ) | |
| U.S.dollar | | | | 1.33 | | | | 1.39 | | | | 1.47 | | | | 1.34 | | | | 1.44 | | | | 1.39 | |
| Argentine peso | | | | 5.19 | | | | 5.26 | | | | 4.71 | | | | 5.49 | | | | 5.56 | | | | 4.92 | |
| Chilean peso | | | | 675.92 | | | | 777.60 | | | | 762.78 | | | | 625.39 | | | | 730.46 | | | | 885.74 | |
| Colombian peso | | | | 2,517.50 | | | | 2,976.19 | | | | 2,857.14 | | | | 2,557.54 | | | | 2,941.18 | | | | 3,125.00 | |
| Peruvian new sol | | | | 3.75 | | | | 4.19 | | | | 4.29 | | | | 3.75 | | | | 4.16 | | | | 4.37 | |
Venezuelan bolivar | | | 2.9884 | | | | 3.1646 | | | | 2.8249 | | | | 5.6 | | | | (12.0 | ) | | | 5.63 | | | | 3.00 | | | | 3.16 | | | | 5.74 | | | | 3.09 | | | | 2.99 | |
Colombian peso | | | 3,125.00 | | | | 2,967.36 | | | | 2,941.18 | | | | (5.3 | ) | | | (0.9 | ) | |
Chilean peso | | | 885.74 | | | | 731.53 | | | | 703.73 | | | | (21.1 | ) | | | (4.0 | ) | |
Peruvian nuevo sol | | | 4.3678 | | | | 4.4060 | | | | 4.2098 | | | | 0.9 | | | | (4.7 | ) | |
Argentinean peso | | | 4.9197 | | | | 4.6684 | | | | 4.0679 | | | | (5.4 | ) | | | (14.8 | ) | |
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The main Latin AmericanDuring 2010, there has been a general appreciation of all the currencies have depreciatedthat affect the Group’s financial statements against the euro in recent years,(except the Venezuelan Bolivar fuerte, which had a negative impactwas devalued at the beginning of 2010 and the average exchange rate of the Argentine peso). The effect of the exchange rates on our operating results for 2008 compared to 2007,theyear-on-year comparison of the Group’s income statements and for 2007 compared to 2006, and therefore affects the comparability of our historical results of operations for these periods.balance sheet is positive.
In addition, on September 7, 2007 we acquired CompassJanuary 2010, the Venezuelan authorities announced the devaluation of the Venezuelan Bolivar fuerte against the main foreign currencies among other economic measures. The effects of this devaluation in the United States, which affectsconsolidated income statement for the comparability of our historical results of operations for 2008 compared to 2007year ended December 31, 2010 and for 2007 compared to 2006.
For information on the policies and practices regarding exchange rate risk management, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk — Structural exchange rate risk”.consolidated equity as of December 31, 2010 were not significant.
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BBVA Group Results of Operations For 2008for 2010 Compared to 20072009
The changes in the Group’s consolidated income statements for 20082010 and 20072009 were as follows:
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2008 | | | 2007 | | | 2008/2007 | |
| | | (In millions of euros) | | | (In %) | |
| |
| Interest and similar income | | | 30,404 | | | | 26,176 | | | | 16.15 | |
| Interest expense and similar charges | | | (18,718 | ) | | | (16,548 | ) | | | 13.11 | |
Net interest income | | | 11,686 | | | | 9,628 | | | | 21.38 | |
| | | | | | | | | | | | | |
| Dividend income | | | 447 | | | | 348 | | | | 28.45 | |
| Share of profit or loss of entities accounted for using the equity method | | | 293 | | | | 241 | | | | 21.58 | |
| Fee and commission income | | | 5,539 | | | | 5,603 | | | | (1.14 | ) |
| Fee and commission expenses | | | (1,012 | ) | | | (1,043 | ) | | | (2.97 | ) |
| Net gains (losses) on financial assets and liabilities | | | 1,328 | | | | 1,545 | | | | (14.05 | ) |
| Net exchange differences | | | 231 | | | | 411 | | | | (43.80 | ) |
| Other operating income | | | 3,559 | | | | 3,589 | | | | (0.84 | ) |
| Other operating expenses | | | (3,093 | ) | | | (3,051 | ) | | | 1.38 | |
| | | | | | | | | | | | | |
Gross income | | | 18,978 | | | | 17,271 | | | | 9.88 | |
| Administrative costs | | | (7,756 | ) | | | (7,253 | ) | | | 6.94 | |
| Personnel expenses | | | (4,716 | ) | | | (4,335 | ) | | | 8.79 | |
| General and administrative expenses | | | (3,040 | ) | | | (2,918 | ) | | | 4.18 | |
| Depreciation and amortization | | | (699 | ) | | | (577 | ) | | | 21.14 | |
| Provisions (net) | | | (1,431 | ) | | | (235 | ) | | | n.m.(1 | ) |
| Impairment on financial assets (net) | | | (2,941 | ) | | | (1,903 | ) | | | 54.55 | |
| | | | | | | | | | | | | |
Net operating income | | | 6,151 | | | | 7,303 | | | | (15.77 | ) |
| Impairment on other assets (net) | | | (45 | ) | | | (13 | ) | | | n.m. (1 | ) |
| Gains (losses) in written off assets not classified as non-current | | | | | | | | | | | | |
| assets held for sale | | | 72 | | | | 13 | | | | n.m. (1 | ) |
| Gains (losses) in non-current assets held for sale not classified as | | | | | | | | | | | | |
| discontinued operations | | | 748 | | | | 1,191 | | | | (37.20 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 6,926 | | | | 8,494 | | | | (18.46 | ) |
| Income tax | | | (1,541 | ) | | | (2,079 | ) | | | (25.88 | ) |
| | | | | | | | | | | | | |
Net income | | | 5,385 | | | | 6,415 | | | | (16.06 | ) |
| Profit or loss attributed to minority interest | | | (365 | ) | | | (289 | ) | | | 26.30 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 5,020 | | | | 6,126 | | | | (18.05 | ) |
| | | | | | | | | | | | | |
EU-IFRS(*)
| | | | | | | | | | | | | |
| | | Year Ended
| | | | |
| | | December 31, | | | | |
| | | 2010 | | | 2009 | | | 2010/2009 | |
| | | (In millions of euros) | | | (In %) | |
| |
| Interest and similar income | | | 21,134 | | | | 23,775 | | | | (11.1 | ) |
| Interest expense and similar charges | | | (7,814 | ) | | | (9,893 | ) | | | (21.0 | ) |
| | | | | | | | | | | | | |
Net interest income | | | 13,320 | | | | 13,882 | | | | (4.0 | ) |
| | | | | | | | | | | | | |
| Dividend income | | | 529 | | | | 443 | | | | 19.3 | |
| Share of profit or loss of entities accounted for using the equity method | | | 335 | | | | 120 | | | | 180.1 | |
| Fee and commission income | | | 5,382 | | | | 5,305 | | | | 1.5 | |
| Fee and commission expenses | | | (845 | ) | | | (875 | ) | | | (3.4 | ) |
| Net gains (losses) on financial assets and liabilities | | | 1,441 | | | | 892 | | | | 61.4 | |
| Net exchange differences | | | 453 | | | | 652 | | | | (30.6 | ) |
| Other operating income | | | 3,543 | | | | 3,400 | | | | 4.2 | |
| Other operating expenses | | | (3,248 | ) | | | (3,153 | ) | | | 3.0 | |
| | | | | | | | | | | | | |
Gross income | | | 20,910 | | | | 20,666 | | | | 1.2 | |
| | | | | | | | | | | | | |
| Administration costs | | | (8,207 | ) | | | (7,662 | ) | | | 7.1 | |
| Personnel expenses | | | (4,814 | ) | | | (4,651 | ) | | | 3.5 | |
| General and administrative expenses | | | (3,392 | ) | | | (3,011 | ) | | | 12.7 | |
| Depreciation and amortization | | | (761 | ) | | | (697 | ) | | | 9.2 | |
| Provisions (net) | | | (482 | ) | | | (458 | ) | | | 5.4 | |
| Impairment losses on financial assets (net) | | | (4,718 | ) | | | (5,473 | ) | | | (13.8 | ) |
| | | | | | | | | | | | | |
Net operating income | | | 6,742 | | | | 6,376 | | | | 5.7 | |
| | | | | | | | | | | | | |
| Impairment losses on other assets (net) | | | (489 | ) | | | (1,618 | ) | | | (69.8 | ) |
| Gains (losses) on derecognized assets not classified as non-current assets held for sale | | | 41 | | | | 20 | | | | 106.4 | |
| Negative goodwill | | | 1 | | | | 99 | | | | n.m. | |
| Gains (losses) in non-current assets held for sale not classified as discontinued operations | | | 127 | | | | 859 | | | | (85.2 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 6,422 | | | | 5,736 | | | | 12.0 | |
| | | | | | | | | | | | | |
| Income tax | | | (1,427 | ) | | | (1,141 | ) | | | 25.1 | |
| | | | | | | | | | | | | |
Income from continuing transactions | | | 4,995 | | | | 4,595 | | | | 8.7 | |
| | | | | | | | | | | | | |
| Income from discontinued transactions (net) | | | — | | | | — | | | | n.m. | |
| | | | | | | | | | | | | |
Net income | | | 4,995 | | | | 4,595 | | | | 8.7 | |
| | | | | | | | | | | | | |
| Net income attributed to parent company | | | 4,606 | | | | 4,210 | | | | 9.4 | |
| Net income attributed to non-controlling interests | | | 389 | | | | 385 | | | | 1.1 | |
| | | | | | | | | | | | | |
| | |
| (*) | | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. |
|
| (1) | | Not meaningful |
Year-on-year comparisons of the BBVA Group’s earnings in 2008 compared to 2007 are affected by a series of one-off operations:
| | |
| • | In 2008, we recognized a gross gain of €727 million (€509 million net of tax) from the sale of our stake in Bradesco (which we recorded under the heading “Gains in non-current assets held for sale not classified as discontinued operations”). |
|
| • | In 2008, we recognized a gross charge of €860 million (€602 million net of tax) related to extraordinary early retirements in Spain under the transformation plan we announced in the fourth quarter of 2007, which we recorded under the heading “Provisions (net)”. |
6677
| | |
| • | In 2008, we recognized a charge of €431 million (€302 million net of tax), associated with the loss from the Madoff fraud, which we recorded under the heading “Provisions (net)”. Although we had no direct investment and never sold products managed or deposited at this company to retail or private banking customers, we structured products for financial entities and institutional investors that were linked to third-party mutual funds which invested via Madoff. |
|
| • | In 2007, we recognized a gross gain of €847 million (€696 million net of tax) from the sale of our stake in Iberdrola, S.A., which we recognized under the heading “Gains in non-current assets held for sale not classified as discontinued operations”. |
|
| • | In 2007, we recognized a gross gain of €273 million (€233 million net of tax) from our sale of real estate as part of the project for our new corporate headquarters, which we recognized under the heading “Gains in non-current assets held for sale not classified as discontinued operations”. |
|
| • | In 2007, we recognized a gross charge of €200 million (€135 million net of tax) related to contributions we made to the BBVA Foundation for Microfinance, which we recognized under the heading “General and administrative expenses”. |
|
| • | In 2007, we recognized a gross charge of €100 million (€70 million net of tax) related to extraordinary early retirements in Spain under the transformation plan we announced in the fourth quarter of 2007, which we recorded under the heading “Provisions (net)”. |
The combined effect of these operations, net of corresponding taxes, was the recognition of a reduction of netchanges in our consolidated income attributed to parent company of €395 million in 2008statements for 2010 and an increase of €724 million in 2007.2009 were as follows:
Net interest income
The following table summarizes the principal components of net interest income for 20082010 compared to 2007.2009.
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2008 | | | 2007 | | | 2008/2007 | |
| | | (In millions of euros) | | | (in%) | |
| |
| Interest and similar income | | | 30,404 | | | | 26,176 | | | | 16.15 | |
| Interest expense and similar charges | | | (18,718 | ) | | | (16,548 | ) | | | 13.11 | |
| | | | | | | | | | | | | |
Net interest income | | | 11,686 | | | | 9,628 | | | | 21.38 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Year Ended
| | | | |
| | | December 31, | | | | |
| | | 2010 | | | 2009 | | | 2010/2009 | |
| | | (In millions of euros) | | | (in %) | |
| |
| Interest income | | | 21,134 | | | | 23,775 | | | | (11.1 | ) |
| Interest expense | | | (7,814 | ) | | | (9,893 | ) | | | (21.0 | ) |
| | | | | | | | | | | | | |
Net interest income | | | 13,320 | | | | 13,882 | | | | (4.0 | ) |
| | | | | | | | | | | | | |
In 2008, netNet interest income was €11,686decreased 4.0% to €13,320 million a 21.4% increase overfor the €9,628year ended December 31, 2010 from €13,882 million recorded in 2007. The improvement wasfor the year ended December 31, 2009, due to the decrease in yield on assets and the increase in lending,the cost of liabilities. The decrease in yield on assets was due primarily to the fact that the decrease in market interest rates during 2009 was gradually reflected in the yield of variable rate mortgage loans during 2009, whereas in 2010 this decrease was largely completed at the beginning of the year, and affected most of 2010. Additionally, the Group made continued efforts to gradually increase the relative weight of lower risk and therefore lower yield, loans in its loan portfolio, including primarily private mortgages in all geographical areas in which effectBBVA operates and corporate and business loans, particularly in Mexico and the United States. On the other hand, the decrease in yield on assets was partially offset by the active management of our investments in debt instruments (adjusting the duration of debt portfolios and increasing debt portfolio income in net interest income (€3,297 million)income). The increase in cost of liabilities was higher than the effect on net interest income ofdue primarily to the increase in volume of customer deposits and a higher cost of customers (€2,084 million). Changesliabilities, given the competitive environment in Spain, where fierce competition resulted in higher rates being paid by banks (including BBVA) in order to attract deposits. Finally, an upward curve in interest rates betweenin the two periods alsoeuro area has had a significant effect onfaster impact in the increasecost of liabilities than in net interest income mainly due to increase in interest related to loans and advances to customers in euro, particularly in Spain.the yield of assets.
Dividend income
Dividend income increased 19.3% to €529 million for 2008 was €447the year ended December 31, 2010 from €443 million a 28.4% increase overfor the €348 million recorded in 2007,year ended December 31, 2009, due primarily to dividends from Telefónica, S.A. which increased from €1.0 to €1.3 per share.
Share of Profitprofit or loss of entities accounted for using the equity method
Share of Profitprofit or loss of entities accounted for using the equity method increased to €335 million for 2008 was €293the year ended December 31, 2010 from €120 million euros, a 21.6% increase overfor the €241 million recorded in 2007,year ended December 31, 2009 due primarily to the results contributed by Corporación IBV (€233 millionincrease in 2008 comparedour share of profits of China Citic Bank (“CNCB”) following our exercise in April 2010 of a purchase option to €209 million in 2007).increase our holding of CNCB from 10% to 15%, and to a lesser extent, the increase of profit of CNCB.
6778
Fee and Commissioncommission income
The breakdown of fee and commission income in 2008for 2010 and 20072009 is as follows:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Year Ended
| | | |
| | | Year Ended December 31, | | Change | | | December 31, | | | |
| | | 2008 | | 2007 | | 2008/2007 | | | 2010 | | 2009 | | 2010/2009 | |
| | | (In millions of euros) | | (In %) | | | (In millions of euros) | | (in %) | |
| |
| Commitment fees | | | 62 | | | | 55 | | | | 12.73 | | | | 133 | | | | 97 | | | | 37.1 | |
| Contingent liabilities | | | 243 | | | | 229 | | | | 6.11 | | | | 282 | | | | 260 | | | | 8.5 | |
| Documentary credits | | | 45 | | | | 38 | | | | 18.42 | | | | 45 | | | | 42 | | | | 7.1 | |
| Bank and other guarantees | | | 198 | | | | 191 | | | | 3.66 | | | | 237 | | | | 218 | | | | 8.7 | |
| Arising from exchange of foreign currencies and banknotes | | | 24 | | | | 24 | | | | 0.00 | | | | 19 | | | | 14 | | | | 35.7 | |
| Collection and payment services | | | 2,655 | | | | 2,567 | | | | 3.43 | | | | 2,500 | | | | 2,573 | | | | (2.8 | ) |
| Securities services | | | 1,895 | | | | 2,089 | | | | (9.29 | ) | | | 1,651 | | | | 1,636 | | | | 0.9 | |
| Counseling on and management of one-off transactions | | | 9 | | | | 16 | | | | (43.75 | ) | | | 11 | | | | 7 | | | | 57.1 | |
| Financial and similar counseling services | | | 24 | | | | 23 | | | | 4.35 | | | | 60 | | | | 43 | | | | 39.5 | |
| Factoring transactions | | | 28 | | | | 25 | | | | 12.00 | | | | 29 | | | | 27 | | | | 7.4 | |
| Non-banking financial products sales | | | 96 | | | | 87 | | | | 10.34 | | | | 102 | | | | 83 | | | | 22.9 | |
| Other fees and commissions | | | 503 | | | | 488 | | | | 3.07 | | | | 595 | | | | 565 | | | | 5.3 | |
| | | | | | | | | | | |
Fee and commission income | | | 5,539 | | | | 5,603 | | | | (1.14 | ) | | | 5,382 | | | | 5,305 | | | | 1.5 | |
| | | | | | | | | | | |
Fee and commission income increased 1.5% to €5,382 million for 2008 amounted to €5,539the year ended December 31, 2010 from €5,305 million a 1.1% decrease from €5,603 million in 2007,for the year ended December 31, 2009 due mainlyprincipally to the decrease in feeincrease of fees linked to banking services, specifically account maintenance and commission income from mutualmanagement and pension funds. Fee and commission income from mutual and pension funds, which is recorded under the heading “Securities services”, decreased as a result of a decrease in mutual and pension fund assets under management in 2008 compared to 2007 as a result of the negative performance of equity markets in 2008 compared to 2007 and, in markets such as Spain, the transfer of customer funds out of mutual funds, the value of which decreased by of 19.0%, and into time deposits.contingent liabilities.
Fee and commission expenses
The breakdown of fee and commission expenses in 2008for 2010 and 20072009 is as follows:
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | Year Ended
| | | |
| | | Year Ended December 31, | | Change | | | December 31, | | | |
| | | 2008 | | 2007 | | 2008/2007 | | | 2010 | | 2009 | | 2010/2009 | |
| | | (In millions of euro) | | (In %) | | | (In millions of euros) | | (in %) | |
| |
| Brokerage fees on lending and deposit transactions | | | (9 | ) | | | (7 | ) | | | 28.57 | | | | 5 | | | | 7 | | | | (28.6 | ) |
| Fees and commissions assigned to third parties | | | (728 | ) | | | (612 | ) | | | 18.95 | | | | 578 | | | | 610 | | | | (5.2 | ) |
| Other fees and commissions | | | (275 | ) | | | (424 | ) | | | (35.14 | ) | | | 262 | | | | 258 | | | | 1.6 | |
| | | | | | | | | | | |
Fee and commission expenses | | | (1,012 | ) | | | (1,043 | ) | | | (2.97 | ) | | | 845 | | | | 875 | | | | (3.4 | ) |
| | | | | | | | | | | |
Fee and commission expenses decreased 3.4% to €845 million for 2008 amounted to €1,012the year ended December 31, 2010 from €875 million a 3.0% decrease from €1,046 million in 2007, mainlyfor the year ended December 31, 2009, primarily due to a 35.1%the decrease in other fees and commissions assigned to €275 millionthird parties, which mainly related to our pensions business in 2008 from €424 million in 2007.Chile.
Net fees and commissions
As a result of the foregoing, net fees and commissions for 2008 was €4,527 million, a 0.7% decrease from the amount €4,560 million recorded in 2007.
68
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities increased 61.4% to €1,441 million for the year ended December 31, 2010 from €892 for the year ended December 31, 2009, primarily due to a general recovery in 2008 amountedmarket activity, and the sale of financial instruments to €1,328 million, a 14.05% decreaseadjust portfolio durations. In addition, we have profited from €1,545 millionhigh price volatility in 2007. sovereign debt markets rotating the durations of the portfolios, which generated income without consuming the unrealized capital gains present in certain portfolios as of December 31, 2010.
Net exchange differences amounteddecreased 30.6% to €231€453 million a decrease of 43.8%for the year ended December 31, 2010 from €411€652 million in 2007. Decreases werefor the year ended December 31, 2009 due primarily to the lower results generated by financial assets held fordevaluation of the Venezuelan Bolivar fuerte and losses in foreign currency trading.
79
Other operating income and other operating expenses
Other operating income amounted to €3,559€3,543 million in 2008,for the year ended December 31, 2010 a 0.8% decrease compared with the €3,589 million in 2007. Other operating expenses in 2008 amounted to €3,093 million, a 1.4%4.2% increase compared withto €3,400 million for the €3,051 million recorded in 2007. The net variation was a 13.4% decrease with respect to 2007,year ended December 31, 2009, due primarily to the smaller amountincrease of income generated fromnon-banking product sales, primarily real estate activities.inventories sales and a greater contribution of the insurance business.
Other operating expenses for the year ended December 31, 2010, amounted to €3,248 million, a 3.0% increase compared to the €3,153 million recorded for the year ended December 31, 2009 due to the adjustment for the hyperinflation in Venezuela, the cost of sales, primarily real estate inventories sales, and a higher contribution to deposit guarantee funds in the countries in which we operate.
Gross income
As a result of the foregoing, gross income in 2008for the year ended December 31, 2010 was €18,978€20,910 million, a 9.9%1.2% increase over the €17,271€20,666 million recorded in 2007.for the year ended December 31, 2009.
AdministrativeAdministration costs
AdministrativeAdministration costs for 2008the year ended December 31, 2010 were €7,756€8,207 million, a 6.9%7.1% increase over €7,253from the €7,662 million recorded in 2007,for the year ended December 31, 2009, due primarily to the incorporation of Compass (with its higher relative wages and salaries) and a 30.7%an increase in rentsrent expenses related to the sale and leaseback of certain properties located in connectionSpain during the third quarter of 2009, an increase in costs associated with image and brand identity (including new sponsorship arrangements with the rentalU.S. National Basketball Association) and an increase related to growth plans in 2008 of properties previously owned bypractically all the geographical areas in which the Group in connection with the project for our new corporate headquarters. These factors were partially offset throughoperates. This investment process is accompanied by a 2.6% reduction in the number of employeesgradual increase of the Group asGroup’s workforce in almost all of December 31, 2008its areas, which has resulted in an increase of personnel expenses by 3.5% to 108,972 compared to 111,913 employees as of December 31, 2007.
€4,814 million for 2010 from €4,651 million for 2009. The table below provides a breakdown of personnel expenses for 20082010 and 2007.2009.
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Year Ended
| | | |
| | | Year Ended December 31, | | Change | | | December 31, | | | |
| | | 2008 | | 2007 | | 2008/2007 | | | 2010 | | 2009 | | 2010/2009 | |
| | | (In millions of euro) | | (In %) | | | (In millions of euros) | | (in %) | |
| |
| Wages and salaries | | | 3,593 | | | | 3,297 | | | | 8.98 | | | | 3,740 | | | | 3,607 | | | | 3.7 | |
| Social security costs | | | 566 | | | | 546 | | | | 3.66 | | | | 567 | | | | 531 | | | | 6.8 | |
| Transfers to internal pension provisions | | | 56 | | | | 56 | | | | — | | | | 37 | | | | 44 | | | | (15.9 | ) |
| Contributions to external pension funds | | | 71 | | | | 58 | | | | 22.41 | | | | 84 | | | | 68 | | | | 23.5 | |
| Other personnel expenses | | | 430 | | | | 378 | | | | 13.76 | | | | 386 | | | | 401 | | | | (3.7 | ) |
| | | | | | | | | | | | | |
Total | | | 4,716 | | | | 4,335 | | | | 8.79 | | |
Personnel expenses | | | | 4,814 | | | | 4,651 | | | | 3.5 | |
| | | | | | | | | | | | | |
The table below provides a breakdown of general and administrative expenses for 20082010 and 2007.2009.
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Year Ended
| | | |
| | | Year Ended December 31, | | Change | | | December 31, | | | |
| | | 2008 | | 2007 | | 2008/2007 | | | 2010 | | 2009 | | 2010/2009 | |
| | | (In millions of euro) | | (In %) | | | (In millions of euros) | | (in %) | |
| |
| Technology and systems | | | 598 | | | | 539 | | | | 10.95 | | | | 563 | | | | 577 | | | | (2.4 | ) |
| Communications | | | 260 | | | | 236 | | | | 10.17 | | | | 284 | | | | 254 | | | | 11.8 | |
| Advertising | | | 273 | | | | 248 | | | | 10.08 | | | | 345 | | | | 262 | | | | 31.7 | |
| Property, fixtures and materials | | | 617 | | | | 520 | | | | 18.65 | | | | 750 | | | | 643 | | | | 16.6 | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| Rents expenses | | | 268 | | | | 205 | | | | 30.73 | | | | 397 | | | | 304 | | | | 30.6 | |
| Taxes other than income tax | | | 295 | | | | 258 | | | | 14.34 | | | | 322 | | | | 266 | | | | 21.1 | |
| Other expenses | | | 997 | | | | 1,117 | | | | (10.74 | ) | | | 1,129 | | | | 1,009 | | | | 11.9 | |
| | | | | | | | | | | | | |
Total | | | 3,040 | | | | 2,918 | | | | 4.18 | | |
Other administrative expenses | | | | 3,393 | | | | 3,011 | | | | 12.7 | |
| | | | | | | | | | | | | |
6980
Depreciation and amortization
Depreciation and amortization for 2008the year ended December 31, 2010 amounted to €699€761 million a 21.1%9.2% increase over the €577compared to €697 million recorded in 2007,for the year ended December 31, 2009, due primarily to the full year of amortization of intangiblesoftware and tangible assets for own use.
Provisions (net)
Provisions (net) for the year ended December 31, 2010 amounted to €482 million, a 5.4% increase compared to €458 million recorded for the year ended December 31, 2009, primarily due to a significant increase in the provisions for substandard contingent liabilities primarily related to guarantees given on behalf of our acquired banks in the United States, principally Compass.clients. In addition, provisions (net) for year ended December 31, 2009 were positively impacted by higher provision recoveries.
Impairment on financial assets (net)
Impairment on financial assets (net) was€2,940for the year ended December 31, 2010 amounted to €4,718 million, a 54.5% increase over13.8% decrease compared to the €1,903€5,473 million recorded for the year ended December 31, 2009. Impairment on financial assets (net) was negatively affected in 2007, due primarily to an increase2009 in provisionsSpain and Portugal and in connection with the United States by the significant increase in substandard loans from €3,369 million as of December 31, 2007 to €8,728€8,540 million as of December 31, 2008 due to €15,312 million as of December 31, 2009, mainly as a result of the deterioration of the economic environment andenvironment. Impairment on financial assets (net) in 2010 continues to the Group’s application of prudent criteria with respect to risks.
Provisions (Net)
Provisions (net) for 2008 were €1,431 million, compared with €235 million recorded in 2007, primarily due to our recognition in 2008 of a non-recurring gross charge of €860 million related to extraordinary early retirementsbe impacted in Spain under the transformation plan we announcedand Portugal and in the fourth quarterUnited States by the challenging economic environment. The Group’s non-performing assets ratio was 4.1% as of 2007 and the extraordinary provisionDecember 31, 2010 compared to 4.3% as of €431 million (€302 million net of tax) stemming from the Madoff fraud.December 31, 2009.
Net operating income
As a result of the foregoing, netNet operating income for 2008 was €6,151the year ended December 31, 2010 amounted to €6,742 million, a 15.8% from 2007 (€7,303 million).5.7% increase over the €6,376 million recorded for the year ended December 31, 2009.
Impairment on other assets (net)
Impairment on other assets (net) for 2008the year ended December 31, 2010 amounted to €45€489 million, an increasea 69.8% decrease from the €13€1,618 million recorded for the year ended December 31, 2009. Impairment on other assets (net) for 2009 include impairment changes for goodwill of €1,097 million attributed to the significant decline in 2007, primarily related toeconomic and credit conditions in the states in which the Group operates in the United States, whereas 2010 did not include any significant goodwill impairment changes. On the other hand, loan-loss provisions for foreclosures and real estate impairments.assets were increased to maintain the coverage of these assets at levels above 30% following the deterioration of the real estate business.
Gains (losses) in written offon derecognized assets not classified as non-current assets held for sale
Gains (losses) in written offon derecognized assets not classified as non-current assets held for sale for 2008the year ended December 31, 2010 amounted to €72a gain of €41 million, an increase from the €13€20 million gain recorded in 2007.for the year ended December 31, 2009.
Negative goodwill
Negative goodwill for the year ended December 31, 2010 amounted to a gain of €1 million compared to a gain of €99 million for the year ended December 31, 2009. Negative goodwill for 2009 was due to the acquisition of certain assets and liabilities of Guaranty.
81
Gains (losses) in non-current assets held for sale not classified as discontinued operations
Gains (losses) in non-current assets held for sale not classified as discontinued operations for the year ended December 31, 2010, was €127 million, a decrease of 85.2% million compared to €859 million for the year ended December 31, 2009. In 2010 and 2009 there were capital gains of €273 million and €914 million, respectively, generated by the sale of 164 and 971 fixed assets, respectively (mainly branch offices and various individual properties) to a third-party real estate investor. At the same time, BBVA signed a sale and leaseback long-term contract with such investor, which includes an option to repurchase the properties at fair values, exercisable by the Group on the agreed dates (in most cases, the termination date of each lease agreement).
Income before tax
As a result of the foregoing, income before tax operations for the year ended December 31, 2010 was €6,422 million, a 12.0% increase from the €5,736 million recorded for the year ended December 31, 2009.
Income tax
Income tax for the year ended December 31, 2010 amounted to €1,427 million, a 25.1% increase from the €1,141 million recorded for the year ended December 31, 2009, due to higher income before tax and higher expenses tax.
Net income
As a result of the foregoing, net income for the year ended December 31, 2010 was €4,995 million, an 8.7% increase from the €4,595 million recorded for the year ended December 31, 2009.
Net income attributed to non-controlling interest
Net income attributed to non-controlling interest for the year ended December 31, 2010 was €389 million, a 1.1% increase over the €385 million recorded for the year ended December 31, 2009, principally due to exchange rate impacts.
Net income attributed to parent company
Net income attributed to parent company for the year ended December 31, 2010 was €4,606 million, a 9.4% increase from the €4,210 million recorded for the year ended December 31, 2009.
82
BBVA Group Results of Operations for 2009 Compared to 2008
The changes in the Group’s consolidated income statements for 2009 and 2008 were as follows:
EU-IFRS (*)
| | | | | | | | | | | | | |
| | | For the Year Ended
| | | | |
| | | December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (In millions of euros) | | | % | |
| |
| Interest and similar income | | | 23,775 | | | | 30,404 | | | | (21.8 | ) |
| Interest expense and similar charges | | | (9,893 | ) | | | (18,718 | ) | | | (47.1 | ) |
| | | | | | | | | | | | | |
Net interest income | | | 13,882 | | | | 11,686 | | | | 18.8 | |
| Dividend income | | | 443 | | | | 447 | | | | (0.9 | ) |
| Share of profit or loss of entities accounted for using the equity method | | | 120 | | | | 293 | | | | (59.1 | ) |
| Fee and commission income | | | 5,305 | | | | 5,539 | | | | (4.2 | ) |
| Fee and commission expenses | | | (875 | ) | | | (1,012 | ) | | | (13.6 | ) |
| Net gains (losses) on financial assets and liabilities | | | 892 | | | | 1,328 | | | | (32.8 | ) |
| Net exchange differences | | | 652 | | | | 231 | | | | 182.5 | |
| Other operating income | | | 3,400 | | | | 3,559 | | | | (4.5 | ) |
| Other operating expenses | | | (3,153 | ) | | | (3,093 | ) | | | 1.9 | |
| | | | | | | | | | | | | |
Gross income | | | 20,666 | | | | 18,978 | | | | 8.9 | |
| Administration costs | | | (7,662 | ) | | | (7,756 | ) | | | (1.2 | ) |
| Personnel expenses | | | (4,651 | ) | | | (4,716 | ) | | | (1.4 | ) |
| General and administrative expenses | | | (3,011 | ) | | | (3,040 | ) | | | (1.0 | ) |
| Depreciation and amortization | | | (697 | ) | | | (699 | ) | | | (0.3 | ) |
| Provisions (net) | | | (458 | ) | | | (1,431 | ) | | | (68.0 | ) |
| Impairment on financial assets (net) | | | (5,473 | ) | | | (2,941 | ) | | | 86.1 | |
| | | | | | | | | | | | | |
Net operating income | | | 6,376 | | | | 6,151 | | | | 3.7 | |
| Impairment on other assets (net) | | | (1,618 | ) | | | (45 | ) | | | n.m.(1 | ) |
| Gains (losses) on derecognized assets not classified as non-current assets held for sale | | | 20 | | | | 72 | | | | (72.2 | ) |
| Negative goodwill | | | 99 | | | | — | | | | n.m.(1 | ) |
| | | | | | | | | | | | | |
| Gains (losses) in non-current assets held for sale not classified as discontinued operations | | | 859 | | | | 748 | | | | 14.8 | |
| | | | | | | | | | | | | |
Income before tax | | | 5,736 | | | | 6,926 | | | | (17.2 | ) |
| Income tax | | | (1,141 | ) | | | (1,541 | ) | | | (26.0 | ) |
| | | | | | | | | | | | | |
Net income | | | 4,595 | | | | 5,385 | | | | (14.7 | ) |
Net income attributed to parent company | | | 4,210 | | | | 5,020 | | | | (16.1 | ) |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interest | | | 385 | | | | 365 | | | | 5.2 | |
| | | | | | | | | | | | | |
| | |
| (*) | | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. |
|
| (1) | | Not meaningful |
83
The changes in our consolidated income statements for 2009 and 2008 were as follows:
Net interest income
The following table summarizes the principal components of net interest income for 2009 compared to 2008.
| | | | | | | | | | | | | |
| | | For the Year Ended
| | | | |
| | | December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (Millions of euros) | | | (%) | |
| |
| Interest and similar income | | | 23,775 | | | | 30,404 | | | | (21.8 | ) |
| Interest expense and similar charges | | | (9,893 | ) | | | (18,718 | ) | | | (47.1 | ) |
| | | | | | | | | | | | | |
Net interest income | | | 13,882 | | | | 11,686 | | | | 18.8 | |
| | | | | | | | | | | | | |
Net interest income rose 18.8% to €13,882 million for 2009 from €11,686 million for 2008 due to our customer deposits and debt certificates repricing faster than loans in the context of a slowdown in business. In our business with customers in the euro zone the sharp decline in interest rates initially had a positive effect because assets were repriced more slowly than liabilities. However, for 2009, the reduction in the yield on loans (down 181 basis points from December 31, 2008 to 4.17% as of December 31, 2009) is similar to the decline in the cost of funds (down 180 basis points from December 31, 2008 to 1.14% as of December 31, 2009). Consequently the average customer spread for 2009 at 3.03% was relatively stable compared to the average customer spread for 2008, returning to the level prior to the drastic decline in interest rates. Nevertheless, the risk profile is now lower because assets, such as the consumer finance portfolio, have shrunk and liabilities, in the form of liquid funds, have expanded.
In Mexico, interbank rates sank for the first half of 2008, but it was steady for the second half of the year, with the average Interbank Equilibrium Interest Rate (TIIE) for 2009 standing at 5.9%, as opposed to the figure of 8.3% for 2008. The customer spread remained stable throughout the year, at 11.4% as of December 31, 2009, compared to 12.4% as of December 31, 2007, due to a larger decline in yield on loans than in cost of deposits.
Dividend income
Dividend income decreased to €443 million for 2009, compared to €447 million for 2008.
Share of profit or loss of entities accounted for using the equity method
Share of profit or loss of entities accounted for using the equity method decreased to €120 million for 2009. This is significantly lower than €293 million for 2008, which included €212 million on sales from the industrial holdings portfolio, principally our interest in Gamesa Corporación Tecnológica, S.A.
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Fee and commission income
The breakdown of fee and commission income for 2009 and 2008 is as follows:
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (Millions of euros) | | | (%) | |
| |
| Commitment fees | | | 97 | | | | 62 | | | | 56.8 | |
| Contingent Liabilities | | | 260 | | | | 243 | | | | 7.2 | |
| Documentary credits | | | 42 | | | | 45 | | | | (6.5 | ) |
| Bank and other guarantees | | | 218 | | | | 198 | | | | 10.3 | |
| Arising from exchange of foreign currencies and banknotes | | | 14 | | | | 24 | | | | (41.0 | ) |
| Collection and payment services | | | 2,573 | | | | 2,655 | | | | (3.1 | ) |
| Securities services | | | 1,636 | | | | 1,895 | | | | (13.7 | ) |
| Counseling on and management of one-off transactions | | | 7 | | | | 9 | | | | (22.9 | ) |
| Financial and similar counseling services | | | 43 | | | | 24 | | | | 80.8 | |
| Factoring transactions | | | 27 | | | | 28 | | | | (4.0 | ) |
| Non-banking financial products sales | | | 83 | | | | 96 | | | | (13.2 | ) |
| Other fees and commissions | | | 565 | | | | 503 | | | | 12.4 | |
| | | | | | | | | | | | | |
Fee and commission income | | | 5,305 | | | | 5,539 | | | | (4.2 | ) |
| | | | | | | | | | | | | |
Fee and commission income for 2009 amounted to €5,305 million, a 4.2% decrease from €5,539 million for 2008, due mainly to the decrease of 18.3% in fee and commission income from mutual funds. Fee and commission income from mutual funds, are recorded under the heading “Securities services” and decreased primarily as a result of the transfer of customer funds out of mutual funds into time deposits.
Fee and commission expenses
The breakdown of fee and commission expenses for 2009 and 2008 is as follows:
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change
| |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (Millions of euros) | | | (%) | |
| |
| Brokerage fees on lending and deposit transactions | | | 7 | | | | 8 | | | | (12.6 | ) |
| Fees and commissions assigned to third parties | | | 610 | | | | 728 | | | | (16.2 | ) |
| Other fees and commissions | | | 258 | | | | 276 | | | | (6.6 | ) |
| | | | | | | | | | | | | |
Fee and commission expenses | | | 875 | | | | 1,012 | | | | (13.6 | ) |
| | | | | | | | | | | | | |
Fee and commission expenses for 2009 amounted to €875 million, a 13.6% decrease from €1,012 million for 2008, mainly due to a 16.2% decrease to €610 million for 2009 from €728 million for 2008 in fees and commissions assigned to third parties, which are primarily related to our pension business in Chile.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities for 2009 amounted to €892 million, a 32.8% decrease from €1,328 million for 2008, due primarily to the lower results generated as a result of lower activity given market volatility. In addition, net gains (losses) on financial assets and liabilities for 2008 included non-recurring gains of €232 million related to our sale of shares in the initial public offering of Visa, Inc.
Net exchange differences amounted to €652 million for 2009, an increase of 182.5% from €231 million for 2008 due primarily to gains in currency trading.
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Other operating income and expenses
Other operating income amounted to €3,400 million for 2009 a 4.5% decrease compared to €3,559 million for 2008, primarily due to the lower volume of insurance policies written.
Other operating expenses for 2009, amounted to €3,153 million, a 1.9% increase compared to the €3,093 million recorded for 2008, primarily due to higher contributions to deposit guarantee funds in the countries where we operate. As a result of the fact that other operating income decreased at a faster pace than other operating expenses, the net variation in operating income and expenses was a 46.9% decrease with respect to 2008.
Gross income
As a result of the foregoing, gross income for 2009, was €20,666 million, an 8.9% increase over the €18,978 million recorded for 2008.
Administration costs
Administration costs for 2009 were €7,662 million, a 1.2% decrease from the €7,756 million recorded for 2008, due primarily to cost savings derived from the transformation and restructuring plans initiated in 2006, which resulted in the number of employees of the Group declining to 103,721 as of December 31, 2009 from 108,972 as of December 31, 2008.
The table below provides a breakdown of personnel expenses for 2009 and 2008.
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (Millions of euros) | | | (%) | |
| |
| Wages and salaries | | | 3,607 | | | | 3,593 | | | | 0.4 | |
| Social security costs | | | 531 | | | | 566 | | | | (6.2 | ) |
| Transfers to internal pension provisions | | | 44 | | | | 56 | | | | (21.5 | ) |
| Contributions to external pension funds | | | 68 | | | | 71 | | | | (3.9 | ) |
| Other personnel expenses | | | 401 | | | | 430 | | | | (6.8 | ) |
| | | | | | | | | | | | | |
Personnel expenses | | | 4,651 | | | | 4,716 | | | | (1.4 | ) |
| | | | | | | | | | | | | |
The table below provides a breakdown of general and administrative expenses for 2009 and 2008.
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (Millions of euros) | | | (%) | |
| |
| Technology and systems | | | 577 | | | | 598 | | | | (3.5 | ) |
| Communications | | | 254 | | | | 260 | | | | (2.1 | ) |
| Advertising | | | 262 | | | | 273 | | | | (4.2 | ) |
| Property, fixtures and materials | | | 643 | | | | 617 | | | | 4.2 | |
Of which: | | | | | | | | | | | | |
| Rents expenses | | | 304 | | | | 268 | | | | 13.5 | |
| Taxes other than income tax | | | 266 | | | | 295 | | | | (9.7 | ) |
| Other expenses | | | 1,009 | | | | 997 | | | | 1.2 | |
| | | | | | | | | | | | | |
General and administrative expenses | | | 3,011 | | | | 3,040 | | | | (1.0 | ) |
| | | | | | | | | | | | | |
86
Depreciation and amortization
Depreciation and amortization for 2009 amounted to €697 million compared to the €699 million recorded for 2008, due primarily to the amortization of software and properties.
Provisions (net)
Provisions (net) for 2009 were €458 million, with an important decrease compared to the €1,431 million recorded for 2008, primarily due to the larger provisions for early retirements (€860 million) and the Madoff fraud (€431 million) recorded in 2008.
Impairment on financial assets (net)
Impairment on financial assets (net) was €5,473 million for 2009, an 86.1% increase over the €2,941 million recorded for 2008, due primarily to an increase in provisions in connection with the significant increase in substandard loans from €8,540 million as of December 31, 2008 to €15,311 million as of December 31, 2009, due primarily to the deterioration of the economic environment in Spain and in the United States. The Group’s non-performing assets ratio increased substantially to 4.3% as of December 31, 2009 from 2.3% as of December 31, 2008.
Net operating income
As a result of the foregoing, net operating income for 2009, was €6,376 million, a 3.7% increase over the €6,151 million recorded for 2008.
Impairment on other assets (net)
Impairment on other assets (net) for 2009 amounted to €1,618 million, a significant increase from the €45 million recorded for 2008, due primarily to impairment charges for goodwill of €1,097 million attributed to the significant decline in economic and credit conditions in the states in which the Group operates in the United States. The remainder of the increase was attributed to write-downs on real-estate investments.
Gains (losses) in written off assets not classified as non-current assets held for sale
Gains (losses) in written off assets not classified as non-current assets held for sale for 2009 amounted to a gain of €20 million, a 72.2% decrease from the €72 million gain recorded for 2008.
Negative goodwill
Negative goodwill for 2009 amounted to a gain of €99 million due to the acquisition of certain assets and liabilities of Guaranty.
Gains (losses) in non-current assets held for sale not classified as discontinued operations
Gains (losses) in non-current assets held for sale not classified as discontinued operations for 2009, was €859 million, an increase of 14.8% million compared to €748 million for 2008. The €859 million for 2009 included capital gains of €830 million generated by the sale on September 25, 2009 of 948 fixed assets (mainly branch offices and various individual properties) to a 37.2% decrease fromthird-party real estate investor. At the €1,191 million recorded in 2007. Insame time, BBVA signed a sale and leaseback long-term contract with such investor, which includes an option to repurchase the properties at fair values, exercisable by the Group on the agreed dates (in most cases, the termination date of each lease agreement). For 2008 the gains (losses) in non-current assets held for sale not classified as discontinued operations, was primarily affected by a gross gain of €727 million from the sale of our stake in Bradesco. In 2007, gains (losses) in non-current assets held for sale not classified as discontinued operations, was primarily affected by a gross gain of €847 million from our sale of our stake in Iberdrola, S.A. and a gross gain of €273 million from our sale of real estate as part of the construction of our new corporate headquarters.Bradesco.
Income before tax
As a result of the foregoing, income before tax for 20082009 was €6,926€5,736 million, a 18.5%17.2% decrease from the €8,494€6,926 million recorded in 2007.for 2008.
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Income tax
Income tax for 20082009 amounted to €1,541€1,141 million, a 25.9%26.0% decrease from the €2,079€1,541 million recorded in 2007,for 2008, due to lower profitsincome before tax and higher profitsincome exempt from tax and the reduction of the tax rate in Spain from 32.5% in 2007 to 30% in 2008.tax.
70
Net income
As a result of the foregoing, net income for 20082009 was €5,385€4,595 million, a 16.1%14.7% decrease from the €6,415€5,385 million recorded in 2007.for 2008.
Profit or loss attributableNet income attributed to minoritynon-controlling interest
Profit or loss attributableNet income attributed to minoritynon-controlling interest in 2008for 2009 was €365€385 million, a 26.3%5.2% increase over the €289€365 million recorded in 2007,for 2008, due primarily to greater profits obtained by certain of our Latin American subsidiaries, whose results we account for as profit or loss attributable toprimarily in Venezuela, Peru and Chile, which have minority interest.shareholders.
Net income attributed to parent company
Net income attributed to parent company in 2008for 2009 was €5,020€4,210 million, a 18.1%16.1% decrease from the €6,126€5,020 million recorded in 2007. Excluding the one-off items described above, the net income attributed to parent company in 2008 was €5,414 million, a 0.2% increase over the €5,403 million recorded in 2007.
71
BBVA Group Results of Operations for 2007 compared to 2006
The changes in the Group’s consolidated income statements for 2007 and 2006 were as follows:
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In %) | |
| |
| Interest and similar income | | | 26,176 | | | | 20,042 | | | | 30.61 | |
| Interest expense and similar charges | | | (16,548 | ) | | | (11,904 | ) | | | 39.01 | |
Net interest income | | | 9,628 | | | | 8,138 | | | | 18.31 | |
| | | | | | | | | | | | | |
| Dividend income | | | 348 | | | | 380 | | | | (8.42 | ) |
| Share of profit or loss of entities accounted for using the equity method | | | 241 | | | | 308 | | | | (21.75 | ) |
| Fee and commission income | | | 5,603 | | | | 5,133 | | | | 9.16 | |
| Fee and commission expenses | | | (1,043 | ) | | | (943 | ) | | | 10.60 | |
| Net gains (losses) on financial assets and liabilities | | | 1,545 | | | | 1,261 | | | | 22.52 | |
| Net exchange differences | | | 411 | | | | 376 | | | | 9.31 | |
| Other operating income | | | 3,589 | | | | 3,413 | | | | 5.16 | |
| Other operating expenses | | | (3,051 | ) | | | (2,923 | ) | | | 4.38 | |
| | | | | | | | | | | | | |
Gross income | | | 17,271 | | | | 15,143 | | | | 14.05 | |
| Administrative costs | | | (7,253 | ) | | | (6,330 | ) | | | 14.58 | |
| Personnel expenses | | | (4,335 | ) | | | (3,989 | ) | | | 8.67 | |
| General and administrative expenses | | | (2,918 | ) | | | (2,342 | ) | | | 24.59 | |
| Depreciation and amortization | | | (577 | ) | | | (472 | ) | | | 22.25 | |
| Provisions (net) | | | (235 | ) | | | (1,338 | ) | | | (82.44 | ) |
| Impairment on financial assets (net) | | | (1,903 | ) | | | (1,457 | ) | | | 30.61 | |
| | | | | | | | | | | | | |
Net operating income | | | 7,303 | | | | 5,545 | | | | 31.70 | |
| Impairment on other assets (net) | | | (13 | ) | | | (12 | ) | | | 8.33 | |
| Gains (losses) in written off assets not classified as non-current assets held for sale | | | 13 | | | | 956 | | | | (98.64 | ) |
| Gains (losses) in non-current assets held for sale not classified as discontinued operations | | | 1,191 | | | | 541 | | | | 120.15 | |
| | | | | | | | | | | | | |
Income before tax | | | 8,494 | | | | 7,030 | | | | 20.83 | |
| Income tax | | | (2,079 | ) | | | (2,059 | ) | | | 0.97 | |
| | | | | | | | | | | | | |
Net income | | | 6,415 | | | | 4,971 | | | | 29.05 | |
| Profit or loss attributed to minority interest | | | (289 | ) | | | (235 | ) | | | 22.98 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 6,126 | | | | 4,736 | | | | 29.35 | |
| | | | | | | | | | | | | |
The main Latin American currencies and the U.S. dollar depreciated against the euro, which had a negative impact on our operating results for 2007 compared to 2006, and therefore affects the comparability of our historical results of operations for these periods.
In addition, as discussed above, on September 7, 2007 we acquired Compass in the United States, which affects the comparability of our historical results of operations for 2007 compared to 2006.
72
Year-on-year comparisons of the BBVA Group’s earnings in 2007 compared to 2006 are also affected by a series of one-off operations:
| | |
| • | In 2007, we recognized a gross gain of €847 million (€696 million net of taxes) from our sale of our stake in Iberdrola, S.A., which we recognized under the heading “Gains in non-current assets held for sale not classified as discontinued operations”. |
|
| • | In 2007, we recognized a gross gain of €273 million (€233 million net of taxes) from our sale of real estate as part of the reorganization of our real estate portfolio in connection with our construction of a new corporate headquarters, which we recognized under the heading “Gains in non-current assets held for sale not classified as discontinued operations”. |
|
| • | In 2007, we recognized a gross charge of €200 million (€135 million after tax) related to contributions we made to the BBVA Foundation for Microfinance, which we recognized under the heading “General and administrative expenses”. |
|
| • | In 2007, we recognized a gross charge of €100 million (€70 million net of tax) related to extraordinary early retirements in Spain under the transformation plan we announced in the fourth quarter of 2007, which we recorded under the heading “Provisions (net)”. |
|
| • | In 2006, we acquired 100% ownership of Texas Regional Bancshares, Inc. |
|
| • | In 2006, we acquired 100% ownership of Uno-E. |
|
| • | In 2006, we sold our 5.04% capital share in Repsol, which gave rise to a gain of €523 million. |
|
| • | In 2006, we sold our ownership interest in the share capital of BNL to BNP Paribas, which gave rise to a gain of €568 million. |
In 2006, we sold our ownership interest of 51% in the share capital of Andorra to the rest of the shareholders of the entity.
Net interest income
The following table summarizes the principal components of net interest income for 2007 compared to 2006.
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In %) | |
| |
| Interest and similar income | | | 26,176 | | | | 20,042 | | | | 30.61 | |
| Interest expense and similar charges | | | (16,548 | ) | | | (11,904 | ) | | | 39.01 | |
| | | | | | | | | | | | | |
Net interest income | | | 9,628 | | | | 8,138 | | | | 18.31 | |
| | | | | | | | | | | | | |
Net interest income for 2007 was €9,628 million, a 18.31% increase over the €8,138 million recorded in 2006. The improvement was due to the increase in lending which was higher than the increase in deposits in our main business areas. Changes in interest rates between the two periods had a negligible effect on the increase in net interest income as the general increase in interest rate spreads between loans and advances to customers and customer deposits was offset by increases in interest rates on issuances by the Group.
Dividend income
Dividend income for 2007 was €348 million, a 8.42% decrease over the €380 million recorded in 2006.
Share of profit or loss of entities accounted for using the equity method
Share of Profit or loss of entities accounted for using the equity method for 2007 was €241 million, a 21.8% decrease from the €308 million recorded in 2006. In 2007 the main contributor was Corporación IBV (€209 million). In 2006 the main contributions were from Corporación IBV (€251 million) and BNL (€25 million).
73
Net fees and commissions income
The breakdown of fee and commission income in 2007 and 2006 is as follows:
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In %) | |
| |
| Commitment fees | | | 55 | | | | 56 | | | | (1.79 | ) |
| Contingent liabilities | | | 229 | | | | 204 | | | | 12.25 | |
| Documentary credits | | | 38 | | | | 33 | | | | 15.15 | |
| Bank and other guarantees | | | 191 | | | | 171 | | | | 11.70 | |
| Arising from exchange of foreign currencies and banknotes | | | 24 | | | | 20 | | | | 20.00 | |
| Collection and payment services | | | 2,567 | | | | 2,274 | | | | 12.88 | |
| Securities services | | | 2,089 | | | | 2,017 | | | | 3.57 | |
| Counseling on and management of one-off transactions | | | 16 | | | | 14 | | | | 14.29 | |
| Financial and similar counseling services | | | 23 | | | | 18 | | | | 27.78 | |
| Factoring transactions | | | 25 | | | | 19 | | | | 31.58 | |
| Non-banking financial products sales | | | 87 | | | | 80 | | | | 8.75 | |
| Other fees and commissions | | | 488 | | | | 431 | | | | 13.23 | |
| | | | | | | | | | | | | |
Fee and commission income | | | 5,603 | | | | 5,133 | | | | 9.16 | |
| | | | | | | | | | | | | |
Fee and commission income for 2007 amounted to €5,603 million, a 9.2% increase from €5,133 million recorded in 2006, mainly due to a 12.9% increase in collection and payment services to €2,567 million in 2007 from €2,274 million in 2006, primarily due to an increase in business volume.
Fee and commission expenses
The breakdown of fee and commission expenses in 2007 and 2006 is as follows:
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euro) | | | (In %) | |
| |
| Brokerage fees on lending and deposit transactions | | | (7 | ) | | | (11 | ) | | | (36.36 | ) |
| Fees and commissions assigned to third parties | | | (612 | ) | | | (560 | ) | | | 9.29 | |
| Other fees and commissions | | | (424 | ) | | | (372 | ) | | | 13.98 | |
| | | | | | | | | | | | | |
Fee and commission expenses | | | (1,043 | ) | | | (943 | ) | | | 10.60 | |
| | | | | | | | | | | | | |
Fee and commission expenses for 2007 amounted to €1,043 million, a 10.6% increase from €943 million in 2006, mainly due to increases in fees and commissions assigned to third parties and other fees and commissions as a result of increased business volumes.
Net fees and commissions
As a result of the foregoing, net fees and commissions for 2007 was €4,560 million, an 8.83% increase from the €4,190 million recorded in 2006.
Net gains (losses) on financial assets and liabilities — Net exchange differences
Net gains (losses) on financial assets and liabilities for 2007 amounted to €1,545 million, a 22.5% increase over the €1,545 million recorded in 2006. Net exchange differences for 2007 amounted to €411 million, an increase of 9.3% from the €376 million recorded in 2006. Of these figures, €883 million were capital gains related to one-
74
time gains from the sale of the Group’s interest in Iberdrola in 2007 and €523 million were capital gains from the sale of ownership interest in Repsol in 2006.
Other operating income and other operating expenses
Other operating income for 2007 was €3,589 million, a 5.2% increase over the €3,413 million recorded in 2006. Other operating expenses for 2007 was €3,051 million, a 4.4% increase over the €2,923 million recorded in 2006, primarily as a result of a €200 million charge for the endowment of the Fundación BBVA para las Microfinanzas (a Microcredit Foundation).
Gross income
As a result of the foregoing, gross income for 2007 was €17,271 million, a 14.1% increase over the €15,143 million recorded in 2006.
Administrative costs
Administrative costs for 2007 was €7,253 million, a 14.6% increase over the €6,330 million recorded in 2006, mainly due to a 9.5% increase in wages and salaries to €3,297 million in 2007 from €3,012 million in 2006 as a result of an increase in the average number of employees of the BBVA Group to 104,515 in 2007 from 95,738 in 2006. The increase in the number of employees in 2007 was due mainly to the addition of employees from Compass (8,864 employees) and State National Bank (595 employees), each of which was acquired in 2007.
The breakdown of personnel expenses for 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euro) | | | (In %) | |
| |
| Wages and salaries | | | 3,297 | | | | 3,012 | | | | 9.46 | |
| Social security costs | | | 546 | | | | 504 | | | | 8.33 | |
| Transfers to internal pension provisions | | | 56 | | | | 74 | | | | (24.32 | ) |
| Contributions to external pension funds | | | 58 | | | | 53 | | | | 9.43 | |
| Other personnel expenses | | | 378 | | | | 346 | | | | 9.25 | |
| | | | | | | | | | | | | |
Total | | | 4,335 | | | | 3,989 | | | | 8.67 | |
| | | | | | | | | | | | | |
The breakdown of general and administrative expenses for 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euro) | | | (In %) | |
| |
| Technology and systems | | | 539 | | | | 495 | | | | 8.89 | |
| Communications | | | 236 | | | | 218 | | | | 8.26 | |
| Advertising | | | 248 | | | | 207 | | | | 19.81 | |
| Property, fixtures and materials | | | 520 | | | | 451 | | | | 15.30 | |
Of which: | | | | | | | | | | | | |
| Rents expenses | | | 205 | | | | 173 | | | | 18.50 | |
| Taxes other than income tax | | | 258 | | | | 203 | | | | 27.09 | |
| Other expenses | | | 1,117 | | | | 768 | | | | 45.44 | |
| | | | | | | | | | | | | |
Total | | | 2,918 | | | | 2,342 | | | | 24.59 | |
| | | | | | | | | | | | | |
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Depreciation and amortization
Depreciation and amortization for 2007 was €577 million, a 22.3% increase over the €472 million recorded in 2006.
Impairment on financial assets (net)
Impairment on financial assets (net) for 2007 was €1,903 million, a 30.6% increase over the €1,457 million recorded in 2006. This increase was mainly due to an increase of 28.8% in loan loss provisions (€1,902 million in 2007 compared to €1,477 million in 2006) which was attributable to the growth of lending in all of the Group’s markets, as recently-made loans require higher generic provisions than older loans in our portfolio under Bank of Spain rules.
Provisions (net)
Provisions (net) for 2007 was €235 million, compared with the €1,338 million recorded in 2006. The amount in 2007 includes €100 million related to the transformation plan announced during the fourth quarter of 2007. Provisions (net) for 2006 includes €777 million for early retirement payments associated with the restructuring of the branch networks in Spain and those derived from the new organizational structure introduced in such year.
Net operating income
As a result of the foregoing, net operating income for 2007 was €7,303 million, a 31.7% increase from the €5,545 million recorded in 2006.
Impairment on other assets (net).
Impairment on other assets (net) for 2007 was €13 million, a 8.3% increase from the €12 million recorded in 2006.
Gains (losses) in written off assets not classified as non-current assets held for sale
Gains (losses) in written off assets not classified as non-current assets held for sale for 2007 was €13 million, a 98.6% decrease from the €956 million recorded in 2006, primarily as a result of the non-recurring gains on the sale of our holdings in BNL (€568 million) and in Andorra (€183 million) that we recorded in 2006.
Gains (losses) in non-current assets held for sale not classified as discontinued operations
Gains (losses) in non-current assets held for sale not classified as discontinued operations was €1,191 million for 2007, an increase from the €541 million recorded in 2006. In 2007, we recognized a gross gain of €273 million (€233 million net of taxes) from our sale of real estate as part of the reorganization of our real estate portfolio in connection with our construction of our new corporate headquarters and a gross gain of €847 million (€696 million net of taxes) from our sale of our stake in Iberdrola.
Income before tax
As a result of the foregoing, income before tax for 2007 was €8,494 million, a 20.8% increase from the €7,030 million recorded in 2006.
Income tax
Income tax for 2007 was €2,079 million a 1.0% increase from the €2,059 million recorded in 2006, principally reflecting the change in the composition of our pre-tax income. In addition, the corporate tax rate in Spain was lowered to 32.5% in 2007 and thus provisions for this item are also lower. Finally, 2006 the new tax code generated a one-time charge to adjust deferred tax credits to new rates.
76
Net Income
As a result of the foregoing, net income for 2007 was €6,415 million, a 29.1% increase from the €4,971 million recorded in 2006.
Profit or loss attributable to minority interest
Profit or loss attributable to minority interest in 2007 was €289 million, a 23.0% increase over the €235 million in 2006.
Net income attributed to parent company
Net income attributed to parent company in 2007 was €6,126 million, a 29.4% increase from the €4,736 million recorded in 2006.2008.
Results of Operations by Business Areas for 20082010 Compared to 20072009
Spain and Portugal
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change | | | Year Ended December 31, | | Change | |
| | | 2008 | | 2007 | | 2008/2007 | | | 2010 | | 2009 | | 2010/2009 | |
| | | (In millions of euros) | | (In percentage) | | | (In millions of euros) | | (in %) | |
| |
Net interest income | | | 4,828 | | | | 4,391 | | | | 9.95 | | | | 4,675 | | | | 4,910 | | | | (4.8 | ) |
| | | | | | | |
| Net fees and commissions | | | 1,639 | | | | 1,701 | | | | (3.64 | ) | | | 1,388 | | | | 1,482 | | | | (6.4 | ) |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 254 | | | | 250 | | | | 1.60 | | | | 198 | | | | 187 | | | | 6.0 | |
| Other operating income and expenses | | | 415 | | | | 391 | | | | 6.14 | | |
| | | | | | | |
| Other operating income and expenses (net) | | | | 368 | | | | 436 | | | | (15.7 | ) |
| | | | | | | | | | | | | | | | | | |
Gross income | | | 7,136 | | | | 6,732 | | | | 6.00 | | | | 6,629 | | | | 7,015 | | | | (5.5 | ) |
| | | | | | | |
| Administrative costs | | | (2,480 | ) | | | (2,505 | ) | | | (1.00 | ) | | | (2,481 | ) | | | (2,515 | ) | | | (1.4 | ) |
| Depreciation and amortization | | | (103 | ) | | | (111 | ) | | | (7.21 | ) | | | (103 | ) | | | (105 | ) | | | (1.9 | ) |
| Impairment on financial assets (net) | | | (809 | ) | | | (594 | ) | | | 36.20 | | | | (1,335 | ) | | | (1,931 | ) | | | (30.9 | ) |
| Provisions (net) and other gains (losses) | | | 6 | | | | 6 | | | | 0.00 | | | | 238 | | | | 776 | | | | (69.4 | ) |
| | | | | | | | | | | |
Income before tax | | | 3,751 | | | | 3,529 | | | | 6.29 | | | | 2,948 | | | | 3,240 | | | | (9.0 | ) |
| | | | | | | |
| Income tax | | | (1,125 | ) | | | (1,149 | ) | | | (2.09 | ) | | | (878 | ) | | | (965 | ) | | | (9.0 | ) |
| | | | | | | | | | | |
Net income | | | 2,625 | | | | 2,380 | | | | 10.25 | | | | 2,070 | | | | 2,275 | | | | (9.0 | ) |
| Profit or loss attributed to minority interest | | | — | | | | 1 | | | | n.m. | (1) | |
| | | | | | | |
| Net income attributed to non-controlling interests | | | | — | | | | — | | | | — | |
| | | | | | | | | | | |
Net income attributed to parent company | | | 2,625 | | | | 2,381 | | | | 10.25 | | | | 2,070 | | | | 2,275 | | | | (9.0 | ) |
| | | | | | | | | | | |
Net interest income
Net interest income of this business area for 20082010 was €4,828€4,675 million, a 10.0% increase over4.8% decrease compared to the €4,391€4,910 million recorded for 2009, primarily due to the decrease in 2007. Dueyield on assets, whereas the cost of liabilities increased.
The decrease in yield on assets was due primarily to a successful pricing policy,the fact that the decrease in market interest rate cutsrates during 2009 was gradually reflected in 2008 did not prevent the yield onof variable mortgage loans to domestic customers in Spain from continuing its upward trend ofduring the last two years. This was, however, partially offset by an increase inyear 2009, whereas at the costs of deposits, mainly due to structural changes in customer funds, with time deposits playing an ever-increasing role. The increase in costs of deposits was lower than the increase in yields on loans and as result in 2008, the average customers spreads was 3.18%, an increase of nine basis points compared to 2007. This helped net interest income in the Spain and Portugal area to grow by 10.0% in 2008.beginning
7788
of 2010 this decrease was largely completed and affected most of 2010. Additionally, this business area has made continued efforts to gradually increase the relative weight of loan portfolios with lower risk and, therefore, lower spread (for example, mortgage loans) instead of loan portfolios with higher risk (for example, customer loans). The increase in cost of liabilities was due primarily to the increase in volume of customer deposits and the higher cost of liabilities given the competitive environment in Spain where fierce competition resulted in higher rates being paid by banks (including BBVA) in order to attract deposits. Finally, the upward curve in interest rates in the euro area has had a faster impact in the cost of liabilities than in the yield on assets.
Net Feesfees and commissions
Net fees and commissions of this business area amounted to €1,639€1,388 million in 2008,for 2010, a 3.6%6.4% decrease from the €1,701€1,482 million recorded in 2007, duefor 2009, primarily to the decrease in fees from equity intermediation and fees related to mutual funds, due to the impactloyalty-based reductions applied to a growing number of customers and the negative market effect onfall in the volume of managed assets and clients’ greater preference for time deposits.mutual funds.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) onand financial assets and liabilities and exchangeexchanges differences of this business area for 20082010 was €254€198 million, a 1.6%6.0% increase overfrom the €250€187 million recorded for 2009, primarily due to the general recovery in 2007.markets conditions during 2010.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 20082010 was €415€368 million, a 6.1% increase over15.7% decrease from the €391€436 million recorded in 2007, as a resultfor 2009, primarily due to the lower earnings of growth in income fromour insurance activitiesactivity.
Gross income
As a result of the foregoing, gross income of this business area for 20082010 was €7,136€6,629 million, a 6.0% increase over5.5% decrease from the €6,732€7,015 million recorded in 2007.for 2009.
Administrative costs
Administrative costs of this business area for 20082010 was €2,480€2,481 million, a 1.0%1.4% decrease over the €2,505€2,515 million recorded for 2009, primarily due to the decline in 2007, due primarily togeneral and administrative expenses, principally through continued streamlining of the branch network, and the Group’s transformation plan, which helped to reduce wages and salaries, and, thorough continued streamlining of the branch network, with a reduction of 220 offices over 2008.salaries.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business area for 20082010 was €809€1,335 million, a 36.2% increase over30.9% decrease from the €594€1,931 million recorded for 2009. Impairment on financial assets (net) was negatively affected in 2007, due primarily to2009 by the deterioration of the economic environment and to the application of prudent criteria with respect to risks. Thesharp increase in non-performing loans during 2009. This business area’snon-performing loan assets ratio increaseddecreased to 2.62%5.0% as of December 31, 20082010 from 0.74%5.1% as of December 31, 2007.2009. As the non-performing assets ratio remained relatively stable during 2010, the amount of Impairment on financial assets (net) of this business area declined during 2010.
Income before tax
As a result of the foregoing, income before tax of this business area for 20082010 was €3,751€2,948 million, a 6.3% increase over9.0% decrease from the €3,529€3,240 million recorded in 2007.2009.
Income tax
Income tax of this business area for 20082010 was €1,125€878 million, a 2.1%9.0% decrease from the €1,149€965 million recorded in 2007,2009, primarily as a result of the reductiondecrease in the tax rate in Spain from 32.5% in 2007 to 30% in 2008.income before tax.
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Net income attributed to parent company
As a result of the foregoing, net income attributed to parent company of this business area for 20082010 was €2,625€2,070 million, a 10.2% increase over9.0% decrease from the €2,381€2,275 million recorded in 2007.2009.
Mexico
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2010 | | | 2009 | | | 2010/2009 | |
| | | (In millions of euros) | | | (in %) | |
| |
Net interest income | | | 3,688 | | | | 3,307 | | | | 11.5 | |
| | | | | | | | | | | | | |
| Net fees and commissions | | | 1,233 | | | | 1,077 | | | | 14.5 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 395 | | | | 370 | | | | 6.6 | |
| Other operating income and expenses (net) | | | 179 | | | | 116 | | | | 54.8 | |
| | | | | | | | | | | | | |
Gross income | | | 5,496 | | | | 4,870 | | | | 12.8 | |
| | | | | | | | | | | | | |
| Administrative costs | | | (1,813 | ) | | | (1,489 | ) | | | 21.8 | |
| Depreciation and amortization | | | (86 | ) | | | (65 | ) | | | 32.5 | |
| Impairment on financial assets (net) | | | (1,229 | ) | | | (1,525 | ) | | | (19.4 | ) |
| Provisions (net) and other gains (losses) | | | (87 | ) | | | (21 | ) | | | n.m (1 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 2,281 | | | | 1,770 | | | | 28.8 | |
| | | | | | | | | | | | | |
| Income tax | | | (570 | ) | | | (411 | ) | | | 38.8 | |
| | | | | | | | | | | | | |
Net income | | | 1,711 | | | | 1,360 | | | | 25.8 | |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | (4 | ) | | | (2 | ) | | | 89.5 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 1,707 | | | | 1,357 | | | | 25.7 | |
| | | | | | | | | | | | | |
As discussed above under “— Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2010 the average Mexican peso to euro exchange rate decreased compared to the average exchange rate in 2009 resulting in a positive exchange rate effect on the income statement for 2010.
Net interest income
Net interest income of this business area for 2010 was €3,688 million, a 11.5% increase from the €3,307 million recorded for 2009, due primarily to the exchange-rate effect (assuming constant exchange rates, there would have been a 0.7% decrease due to the decrease in market interest rates).
Net fees and commissions
Net fees and commissions of this business area amounted to €1,233 million for 2010, a 14.5% increase from the €1,077 million recorded 2009 primarily as a result of the exchange-rate effect (assuming constant exchange rates there would have been a 1.9% increase, due primarily to the increased transactional services fees and to greater fees related to securities and our pension fund administration business, Afore BBVA Bancomer).
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains on financial assets and liabilities and exchange differences of this business area for 2010 amounted to €395 million, a 6.6% increase from the €370 million for 2009, primarily as a result of the exchange-rate effect (assuming constant exchange rates, there would have been a 5.1% decrease, principally due to market volatility).
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Global Businesses (WholesaleOther operating income and expenses (net)
Other operating income and expenses (net) of this business area for 2010, was €179 million, a 54.8% increase from the €116 million recorded for 2009, principally due to growth in the insurance business.
Gross income
As a result of the foregoing, gross income of this business area for 2010, was €5,496 million, a 12.8% increase from the €4,870 million recorded for 2009 (assuming constant exchange rates, there would have been a 0.5% increase).
Administrative costs
Administrative costs of this business area for 2010 amounted to €1,813 million, a 21.8% increase from the €1,489 million recorded for 2009 (assuming constant exchange rates, there would have been an 8.4% increase), primarily due to a three-year expansion and transformation plan implemented by BBVA Bancomer to take advantage of the long-term growth opportunities offered by the Mexican market.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business for 2010 was €1,229 million, a 19.4% decrease from the €1,525 million recorded for 2009, primarily due to the recovery in economic conditions in Mexico. The business area’s non-performing assets ratio decreased to 3.2% as of December 31, 2010 from 4.3% as of December 31, 2009.
Income before tax
As a result of the foregoing, income before tax of this business area for 2010 was €2,281 million, a 28.8% increase from the €1,770 million recorded for 2009.
Income tax
Income tax of this business area for 2010 was €570 million, a 38.8% increase from the €411 million recorded for 2009, principally due to an increase in the tax rate in Mexico as of January 1, 2010.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2010 was €1,707 million, a 25.7% increase from the €1,357 million recorded for 2009, primarily due to the exchange-rate effect (assuming constant exchange rates, the increase would have been 11.9%).
91
South America
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2010 | | | 2009 | | | 2010/2009 | |
| | | (In millions of euros) | | | (in %) | |
| |
Net interest income | | | 2,495 | | | | 2,566 | | | | (2.8 | ) |
| | | | | | | | | | | | | |
| Net fees and commissions | | | 957 | | | | 908 | | | | 5.4 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 514 | | | | 405 | | | | 26.7 | |
| Other operating income and expenses (net) | | | (168 | ) | | | (242 | ) | | | (30.7 | ) |
| | | | | | | | | | | | | |
Gross income | | | 3,797 | | | | 3,637 | | | | 4.4 | |
| | | | | | | | | | | | | |
| Administrative costs | | | (1,537 | ) | | | (1,464 | ) | | | 5.0 | |
| Depreciation and amortization | | | (131 | ) | | | (115 | ) | | | 14.1 | |
| Impairment on financial assets (net) | | | (419 | ) | | | (431 | ) | | | (2.8 | ) |
| Provisions (net) and other gains (losses) | | | (40 | ) | | | (52 | ) | | | (22.1 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 1,670 | | | | 1,575 | | | | 6.0 | |
| | | | | | | | | | | | | |
| Income tax | | | (397 | ) | | | (404 | ) | | | (1.7 | ) |
| | | | | | | | | | | | | |
Net income | | | 1,273 | | | | 1,172 | | | | 8.6 | |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | (383 | ) | | | (392 | ) | | | (2.1 | ) |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 889 | | | | 780 | | | | 14.0 | |
| | | | | | | | | | | | | |
As discussed above under “— Factors Affecting the Comparability of our Results of Operations and Financial Condition”, the appreciation in 2010 of all the currencies in the countries in which we operate in South America against the euro (except for the Venezuelan Bolivar fuerte, which was devalued at the beginning of 2010, and the average exchange rate of the Argentine peso) positively affected the results of operations of certain of our Latin American subsidiaries in euro terms. However, the impact of the devaluation of Venezuelan Bolivar fuerte is higher than the positive effect of the appreciation of most of the rest of the currencies and, therefore, movements in exchange rates had a negative overall impact on this business area’s volume of business, balance sheet and, to a lesser extent, earnings in 2010.
Net interest income
Net interest income in 2010 was €2,495 million, a 2.8% decrease from the €2,566 million recorded in 2009. This decrease was primarily due to the exchange-rate effect (assuming constant exchange rates, there would have been an 11.1% increase), which offset an increase of interest income mainly due to the increase in volume of customer loans during the period in all geographical regions of this business area.
Net fees and commissions
Net fees and commissions of this business area amounted to €957 million in 2010, a 5.4% increase from the €908 million recorded in 2009, primarily due to the decrease in fees and commissions paid to third parties mainly related to our pensions business in Chile.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains on financial assets and liabilities and exchange differences of this business area in 2010 were €514 million, a 26.7% increase from the €405 million recorded in 2009, primarily as a result of the valuation of U.S. dollar positions in Venezuela due to the devaluation of the Venezuelan Bolivar fuerte and the appreciation of the U.S. dollar against the euro.
92
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 2010, was a loss of €168 million, a 30.7% decrease from the loss of €242 million recorded for 2009, principally due to the devaluation of the Venezuelan Bolivar peso fuerte and to the impact of Venezuela as a hyperinflationary economy since 2009.
Gross income
As a result of the foregoing, the gross income of this business area in 2010 was €3,797 million, a 4.4% increase from the €3,637 million recorded in 2009.
Administrative costs
Administrative costs of this business area in 2010 were €1,537 million, a 5.0% increase from the €1,464 million recorded in 2009, primarily due to the implementation of growth plans partially offset by the negative effect of the exchange rate.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business in 2010 was €419 million, a 2.8% decrease from the €431 million recorded in 2009. The business area’s non-performing assets ratio decreased to 2.5% as of December 31, 2010 from 2.7% as of December 31, 2009.
Income before tax
As a result of the foregoing, income before tax of this business area in 2010 amounted to €1,670 million, a 6.0% increase compared to the €1,575 million recorded in 2009 (assuming constant exchange rates, there would have been an 11.3% increase).
Income tax
Income tax of this business area in 2010 was €397 million, a 1.7% decrease from the €404 million recorded in 2009 (assuming constant exchange rates, there would have been a 2.0% increase).
Net income attributed to parent company
Net income attributed to parent company of this business area in 2010 was €889 million, a 14.0% increase from the €780 million recorded in 2009 (assuming constant exchange rates, there would have been a 16.5% increase).
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The United States
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2010 | | | 2009 | | | 2010/2009 | |
| | | (In millions of euros) | | | (in %) | |
| |
Net interest income | | | 1,794 | | | | 1,679 | | | | 6.8 | |
| | | | | | | | | | | | | |
| Net fees and commissions | | | 646 | | | | 610 | | | | 5.8 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 156 | | | | 156 | | | | 0.1 | |
| Other operating income and expenses (net) | | | (49 | ) | | | (33 | ) | | | 49.4 | |
| | | | | | | | | | | | | |
Gross income | | | 2,546 | | | | 2,413 | | | | 5.5 | |
| | | | | | | | | | | | | |
| Administrative costs | | | (1,318 | ) | | | (1,159 | ) | | | 13.7 | |
| Depreciation and amortization | | | (199 | ) | | | (205 | ) | | | (3.1 | ) |
| Impairment on financial assets (net) | | | (703 | ) | | | (1,420 | ) | | | (50.5 | ) |
| Provisions (net) and other gains (losses) | | | (22 | ) | | | (1,056 | ) | | | (97.9 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 304 | | | | (1,428 | ) | | | n.m | (1) |
| | | | | | | | | | | | | |
| Income tax | | | (68 | ) | | | 478 | | | | n.m | (1) |
| | | | | | | | | | | | | |
Net income | | | 236 | | | | (950 | ) | | | n.m | (1) |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 236 | | | | (950 | ) | | | n.m | (1) |
As discussed above under “— Factors Affecting the Comparability of our Results of Operations and Financial Condition”, the average U.S. dollar to euro exchange rate in 2010 increased compared to the average exchange rate in 2009, resulting in a positive exchange rate effect on the income statement in 2010.
In addition, as explained in the “Item 4. Information on the Company — History and Development of the Company — Capital Expenditures” on August 21, 2009, BBVA Compass acquired certain assets and liabilities of Guaranty Bank (“Guaranty”) from the FDIC through a public auction for qualified investors. This acquisition affects the comparability of the figures in 2010 since these assets and liabilities were included in our balance sheet, and therefore generated interest income and expenses, for the twelve months ended December 31, 2010 compared to only approximately four months (from the August 21 acquisition date to December 31, 2009) in 2009.
Net interest income
Net interest income in 2010 was €1,794 million, a 6.8% increase from the €1,679 million recorded in 2009, primarily due to the impact of the acquisition of Guaranty referred to above and the exchange rate effect (assuming constant exchange rates, there would have been a 1.3% increase).
Net fees and commissions
Net fees and commissions of this business area in 2010 were €646 million, a 5.8% increase from the €610 million recorded in 2009, due primarily to the integration of Guaranty and the exchange-rate effect (assuming constant exchange rates, there would have been a 0.3% increase).
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area in 2010 were €156 million, a 0.1% increase compared to those recorded in 2009.
94
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area in 2010 were a loss of €49 million, compared to a loss of €33 million recorded in 2009 mainly due to higher contributions to the deposit guarantee fund.
Gross income
As a result of the foregoing, gross income of this business area in 2010 was €2,546 million, a 5.5% increase from the €2,413 million recorded in 2009.
Administrative costs
Administrative costs of this business area in 2010 were €1,318 million, a 13.7% increase from the €1,159 million recorded in 2009, primarily due to the integration of Guaranty and the exchange-rate effect (assuming constant exchange rates, there would have been an 8.0% increase).
Depreciation and amortization
Depreciation and amortization of this business area for 2010 was €199 million, a 3.1% decrease from €205 million in 2009.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business for 2010 was €703 million, a 50.5% decrease from the €1,420 million recorded for 2009, primarily due to the fact that Impairment on financial assets (net) was negatively affected in 2009 by the write-off of impaired assets as a result of the significant deterioration of economic and credit conditions in the states in which the area operates in the United States. The value of the collateral was lower than the commercial real-estate loan portfolio value and, as a consequence, a write-off for the difference and additional provisions were set aside in 2009 to maintain the coverage ratio comparable to the prior year. The non-performing assets ratio of this business area as of December 31, 2010 increased to 4.4% from 4.2% as of December 31, 2009.
Provisions (net) and other gains (losses)
Provisions (net) and other gains (losses) for 2010 reflected losses of €22 million, compared to the €1,056 million losses recorded for 2009. This item was negatively affected in 2009 due primarily to impairment losses for goodwill (€1,097 million) attributed to the significant deterioration in economic and credit conditions in the states in which the area operates in the United States.
Income before tax
As a result of the foregoing, the income before tax of this business area for 2010 was €304 million, compared to a loss of €1,428 million recorded in 2009.
Income tax
Income before tax of this business area for 2010 was a loss of €68 million compared to a gain of €478 million recorded in 2009 due to the loss before tax referred to above.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2010 was €236 million, compared to a loss of €950 recorded in 2009.
95
Wholesale Banking and Asset Management)Management
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change | | | Year Ended December 31, | | Change | |
| | | 2008 | | 2007 | | 2008/2007 | | | 2010 | | 2009 | | 2010/2009 | |
| | | (In millions of euros) | | (In%) | | | (In millions of euros) | | (in %) | |
| |
Net interest income | | | 745 | | | | (7 | ) | | | n.m. | (1) | | | 831 | | | | 982 | | | | (15.4 | ) |
| | | | | | | |
| Net fees and commissions | | | 413 | | | | 446 | | | | (7.40 | ) | | | 492 | | | | 461 | | | | 6.8 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 144 | | | | 791 | | | | (81.80 | ) | | | (66 | ) | | | (59 | ) | | | 13.1 | |
| Other operating income and expenses | | | 434 | | | | 518 | | | | (16.22 | ) | |
| Other operating income and expenses (net) | | | | 500 | | | | 314 | | | | 59.2 | |
| | | | | | | | | | | |
Gross income | | | 1,736 | | | | 1,749 | | | | (0.74 | ) | | | 1,758 | | | | 1,699 | | | | 3.4 | |
| | | | | | | |
| Administrative costs | | | (511 | ) | | | (467 | ) | | | 9.42 | | | | (492 | ) | | | (476 | ) | | | 3.5 | |
| Depreciation and amortization | | | (9 | ) | | | (7 | ) | | | 28.57 | | | | (9 | ) | | | (10 | ) | | | (7.6 | ) |
| Impairment on financial assets (net) | | | (256 | ) | | | (130 | ) | | | 96.92 | | | | (116 | ) | | | (60 | ) | | | 92.9 | |
| Provisions (net) and other gains (losses) | | | (25 | ) | | | 9 | | | | n.m. | (1) | | | 2 | | | | (4 | ) | | | n.m | (1) |
| | | | | | | | | | | |
Income before tax | | | 934 | | | | 1,154 | | | | (19.06 | ) | | | 1,143 | | | | 1,150 | | | | (0.6 | ) |
| | | | | | | |
| Income tax | | | (174 | ) | | | (247 | ) | | | (29.55 | ) | | | (192 | ) | | | (294 | ) | | | (34.8 | ) |
| | | | | | | | | | | |
Net income | | | 760 | | | | 907 | | | | (16.21 | ) | | | 951 | | | | 856 | | | | 11.2 | |
| Profit or loss attributed to minority interest | | | (6 | ) | | | (10 | ) | | | (40.00 | ) | |
| | | | | | | |
| Net income attributed to non-controlling interests | | | | (2 | ) | | | (3 | ) | | | (53.2 | ) |
| | | | | | | | | | | |
Net income attributed to parent company | | | 754 | | | | 896 | | | | (15.85 | ) | | | 950 | | | | 852 | | | | 11.4 | |
| | | | | | | | | | | |
Net interest income and Net gains (losses) on financial assets and liabilities and exchange differences
For internal management purposes, “Net interest income” and “Net gains (losses) on financial assets and liabilities and exchange differences” for this business area are analyzed together. Net interest income includes the cost of funding of the market operations whose revenues are accounted for in the heading “Net gains (losses) on financial assets and liabilities and exchange differences”.
Net interest income for 2010 was €831 million, a 15.4% decrease compared to the €982 million recorded for 2009. Net gains (losses) on financial assets and liabilities and exchange differences amounted to losses of €66 million, compared to losses of €59 million for 2009. The sum of these headings for 2010 was €765 million, a 17.2% decrease compared to the €924 million recorded for 2009. This decrease is mainly due to the high market volatility, which negatively affected trading income as credit spreads widened in the south of Europe, despite the good performance of commercial activity with customers in the Corporate & Investment Banking business unit.
Net fees and commissions
Net fees and commissions of this business area amounted to €492 million for 2010, a 6.8% increase from the €461 million recorded for 2009, primarily due to increased business activity with customers with a high business potential in the Corporate & Investment Banking business unit.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 2010 was €500 million, a 59.2% increase from the €314 million recorded for 2009, primarily due to the increase of the share of profit of entities accounted for using the equity method, which mainly related to our holding in CNCB.
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Gross income
As a result of the foregoing, gross income of this business area for 2010 was €1,758 million, a 3.4% increase over the €1,699 million recorded in 2009.
Administrative costs
Administrative costs of this business area for 2010 were €492 million, a 3.5% increase over the €476 million recorded in 2009, due to investment in systems and the various growth plans implemented in the area.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business for 2010 was €116 million, compared to €60 million in 2009, primarily due to an increase in this business area’s impaired assets. However, the non-performing assets ratio of this business area remained stable (1.2% as of December 31, 2010 and 2009).
Income before tax
As a result of the foregoing, income before tax of this business area for 2010 was €1,143 million, a 0.6% decrease from the €1,150 million for 2009.
Income tax
Income tax of this business area in 2010 was €192 million, a 34.8% decrease from the €294 million recorded in 2009, due to the favorable tax effect from the result of entities accounted for using the equity method.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2010 was €950 million, an 11.4% increase over the €852 million recorded in 2009.
Corporate Activities
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2010 | | | 2009 | | | 2010/2009 | |
| | | (in millions of euros) | | | (in %) | |
| |
Net interest income | | | (163 | ) | | | 437 | | | | n.m | (1) |
| | | | | | | | | | | | | |
| Net fees and commissions | | | (179 | ) | | | (108 | ) | | | 65.4 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 698 | | | | 484 | | | | 44.2 | |
| Other operating income and expenses (net) | | | 329 | | | | 219 | | | | 50.0 | |
| | | | | | | | | | | | | |
Gross income | | | 684 | | | | 1,031 | | | | (33.7 | ) |
| | | | | | | | | | | | | |
| Administrative costs | | | (566 | ) | | | (559 | ) | | | 1.3 | |
| Depreciation and amortization | | | (232 | ) | | | (197 | ) | | | 18.1 | |
| Impairment on financial assets (net) | | | (916 | ) | | | (107 | ) | | | n.m | (1) |
| Provisions (net) and other gains (losses) | | | (893 | ) | | | (741 | ) | | | 20.5 | |
| | | | | | | | | | | | | |
Income before tax | | | (1,924 | ) | | | (572 | ) | | | 236.3 | |
| | | | | | | | | | | | | |
| Income tax | | | 678 | | | | 454 | | | | 49.3 | |
| | | | | | | | | | | | | |
Net income | | | (1,246 | ) | | | (118 | ) | | | n.m | (1) |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | 0 | | | | 13 | | | | (97.8 | ) |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | (1,245 | ) | | | (105 | ) | | | n.m | (1) |
| | | | | | | | | | | | | |
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Net interest income
Net interest income of this business area for 2010 was a loss of €163 million compared to a gain of €437 million recorded in 2009. Net interest income has been negatively affected by the end of the recovery in mortgage lending following the fall in interest rates in 2009, and by the recent upward in the interest-rate curve in the euro zone.
Net fees and commissions
Net fees and commissions of this business area amounted to a loss of €179 million for 2010, a 65.4% increase from the €108 million loss recorded for 2009, primarily due to an increase of fees paid to underwriters in the issues of the Group.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2010 were a gain of €698 million, a 44.2% increase over the €484 million gain recorded in 2009, primarily due to an increase in sales of financial assets from the ALCO portfolio, which has generated significant capital gains by taking advantage of price volatility in the sovereign bond markets during the first half of 2010.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 2010 was a gain of €329 million, a 50.0% increase from the €219 million gain recorded in 2009. Its main component is the dividends from Telefónica, which increased from €1.0 to €1.3 per share.
Gross income
As a result of the foregoing, gross income of this business area for 2010 was a gain of €684 million, a 33.7% decrease from the €1,031 million gain recorded in 2009.
Administrative costs
Administrative costs of this business area for 2010 were €566 million, a 1.3% increase from the €559 million recorded in 2009, primarily due to the increase in costs associated with certain investments that are currently being carried out including upgrading of systems and image and brand identity (including new sponsorship arrangements with the U.S. National Basketball Association).
Depreciation and amortization
Depreciation and amortization of this business area for 2010 was €232 million, an 18.1% increase from the €197 million recorded in 2009.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business for 2010 was €916 million compared to €107 million recorded for 2009, principally due to continuing provisions for loan losses designed to increase the Group coverage ratio from 57% in 2009 to 62% in 2010 in light of economic conditions.
Provisions (net) and other gains (losses)
Provisions (net) and other gains (losses) for 2010 was a loss of €893 million, a 20.5% increase from a loss of €741 million for 2009, primarily due to an increase in provisions for foreclosed assets and real estate assets designed to maintain coverage at an adequate level.
Income before tax
As a result of the foregoing, income before tax of this business area for 2010 was a loss of €1,924 million, compared to a loss of €572 million recorded in 2009.
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Income tax
Income tax of this business area for 2010 was €678 million in income, a 49.3% increase from €454 million in income recorded for 2009.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2010 was a loss of €1,245 million, compared to a loss of €105 million in 2009.
Results of Operations by Business Areas for 2009 Compared to 2008
Spain and Portugal
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (in millions of euros) | | | (in %) | |
| |
Net interest income | | | 4,910 | | | | 4,784 | | | | 2.6 | |
| | | | | | | | | | | | | |
| Net fees and commissions | | | 1,482 | | | | 1,636 | | | | (9.4 | ) |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 187 | | | | 231 | | | | (18.9 | ) |
| Other operating income and expenses (net) | | | 436 | | | | 430 | | | | 1.4 | |
| | | | | | | | | | | | | |
Gross income | | | 7,015 | | | | 7,081 | | | | (0.9 | ) |
| | | | | | | | | | | | | |
| Administrative costs | | | (2,515 | ) | | | (2,622 | ) | | | (4.1 | ) |
| Depreciation and amortization | | | (105 | ) | | | (104 | ) | | | 1.1 | |
| Impairment on financial assets (net) | | | (1,931 | ) | | | (809 | ) | | | 138.7 | |
| Provisions (net) and other gains (losses) | | | 776 | | | | 5 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | 3,240 | | | | 3,553 | | | | (8.8 | ) |
| | | | | | | | | | | | | |
| Income tax | | | (965 | ) | | | (1,080 | ) | | | (10.7 | ) |
| | | | | | | | | | | | | |
Net income | | | 2,275 | | | | 2,473 | | | | (8.0 | ) |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 2,275 | | | | 2,473 | | | | (8.0 | ) |
| | | | | | | | | | | | | |
Net interest income
Net interest income of this business area for 2009, was €4,910 million, a 2.6% increase over the €4,784 million recorded for 2008, due to the pricing policy and a change in the deposit mix (with current and savings accounts playing a bigger role than time deposits).
Net fees and commissions
Net fees and commissions of this business area amounted to €1,482 million for 2009, a 9.4% decrease from the €1,636 million recorded for 2008, due primarily to the decrease in fees income from mutual and pension funds and other market-related products.
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Net gains (losses) on financial assets and liabilities and exchange differences
Net gains on financial assets and liabilities and exchange differences of this business area for 2009 was €187 million, a 18.9% decrease from the net gains of €231 million for 2008, due primarily to the result of lower activity given market volatility.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 2009 was €436 million, a 1.4% increase over the €430 million recorded for 2008.
Gross income
As a result of the foregoing, gross income of this business area for 2009 was €7,015 million, a 0.9% decrease compared to the €7,081 million recorded for 2008.
Administrative costs
Administrative costs of this business area for 2009 was €2,515 million, a 4.1% decrease from the €2,622 million recorded for 2008, due primarily to the Group’s transformation plan, which helped to reduce wages and salaries, and through continued streamlining of the branch network.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business for 2009 was €1,931 million, a 138.7% increase over the €809 million recorded for 2008, due primarily to the significant increase in non-performing assets as a result of the economic downturn. The business area’s non-performing assets ratio increased significantly to 5.1% as of December 31, 2009 from 2.6% as of December 31, 2008.
Income before tax
As a result of the foregoing, income before tax of this business area for 2009 was €3,240 million, an 8.8% decrease from the €3,553 million recorded in 2008.
Income tax
Income tax of this business area for 2009 was €965 million, a 10.7% decrease from the €1,080 million recorded in 2008, primarily as a result of the decrease in income before tax.
Net income attributed to parent company
As a result of the foregoing, net income attributed to parent company of this business area for 2009 was €2,275 million, an 8.0% decrease from the €2,473 million recorded in 2008.
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Mexico
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (In millions of euros) | | | (in %) | |
| |
Net interest income | | | 3,307 | | | | 3,707 | | | | (10.8 | ) |
| | | | | | | | | | | | | |
| Net fees and commissions | | | 1,077 | | | | 1,189 | | | | (9.4 | ) |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 370 | | | | 375 | | | | (1.3 | ) |
| Other operating income and expenses (net) | | | 116 | | | | 155 | | | | (25.5 | ) |
| | | | | | | | | | | | | |
Gross income | | | 4,870 | | | | 5,426 | | | | (10.2 | ) |
| | | | | | | | | | | | | |
| Administrative costs | | | (1,489 | ) | | | (1,730 | ) | | | (14.0 | ) |
| Depreciation and amortization | | | (65 | ) | | | (73 | ) | | | (10.6 | ) |
| Impairment on financial assets (net) | | | (1,525 | ) | | | (1,110 | ) | | | 37.4 | |
| Provisions (net) and other gains (losses) | | | (21 | ) | | | (24 | ) | | | (11.6 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 1,770 | | | | 2,488 | | | | (28.9 | ) |
| | | | | | | | | | | | | |
| Income tax | | | (411 | ) | | | (557 | ) | | | (26.3 | ) |
| | | | | | | | | | | | | |
Net income | | | 1,360 | | | | 1,931 | | | | (29.6 | ) |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | (2 | ) | | | (1 | ) | | | 45.1 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 1,357 | | | | 1,930 | | | | (29.7 | ) |
| | | | | | | | | | | | | |
As discussed above under “— Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2009, the depreciation of the Mexican peso against the euro negatively affected the results of operations of our Mexican subsidiaries in euro terms. The average Mexican peso to euro exchange rate for 2009, decreased by 13.3% compared to the average exchange rate for 2008.
Net interest income
Net interest income of this business area for 2009 was €3,307 million, an 11.0% decrease from the €3,707 million recorded for 2008, due primarily to the depreciation of Mexican peso compared to euro, partially offset by larger business volumes, as well as an active pricing policy.
Net fees and commissions
Net fees and commissions of this business area amounted to €1,077 million for 2009, a 9.4% decrease from the €1,189 million recorded 2008, due to the depreciation of Mexican peso compared to euro, partially offset by a positive performance on banking services and pension fund management.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains on financial assets and liabilities and exchange differences of this business area for 2009 amounted to €370 million, a 1.3% decrease from the net gains of €375 million for 2008. Net gains (losses) on financial assets and liabilities and exchange differences for 2008 included non-recurring gains from the sales of shares in the initial public offering of Visa Inc. and there was no comparable transaction in 2009.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 2009, was €116 million, a 25.5% decrease from the €155 million recorded for 2008, due to the depreciation of Mexican peso compared to euro, partially offset by an increase in income from the pension and insurance businesses.
101
Gross income
As a result of the foregoing, gross income of this business area for 2009, was €4,870 million, a 10.2% decrease from the €5,426 million recorded for 2008.
Administrative costs
Administrative costs of this business area for 2009 amounted to €1,489 million, a 14.0% decrease from the €1,730 million recorded for 2008. In the latter part of 2008 we instituted certain cost-control programs to limit the rate of local currency growth in administrative costs in this business area, the effects of which began to be felt in 2009.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business for 2009 was €1,525 million, a 37.4% increase over the €1,110 million recorded for 2008, due primarily to increases from the consumer loan and credit card segments due to a general deterioration in economic conditions. The business area’s non-performing assets ratio increased to 4.3% as of December 31, 2009 from 3.1% as of December 31, 2008.
Income before tax
As a result of the foregoing, income before tax of this business area for 2009 was €1,770 million, a 28.9% decrease from the €2,488 million recorded for 2008.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2009 was €1,357 million, a 29.7% decrease from the €1,930 million recorded in 2008.
South America
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (In millions of euros) | | | (in %) | |
| |
Net interest income | | | 2,566 | | | | 2,149 | | | | 19.4 | |
| | | | | | | | | | | | | |
| Net fees and commissions | | | 908 | | | | 775 | | | | 17.1 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 405 | | | | 253 | | | | 60.4 | |
| Other operating income and expenses (net) | | | (242 | ) | | | 15 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Gross income | | | 3,637 | | | | 3,192 | | | | 14.0 | |
| | | | | | | | | | | | | |
| Administrative costs | | | (1,464 | ) | | | (1,314 | ) | | | 11.4 | |
| Depreciation and amortization | | | (115 | ) | | | (107 | ) | | | 7.8 | |
| Impairment on financial assets (net) | | | (431 | ) | | | (358 | ) | | | 20.4 | |
| Provisions (net) and other gains (losses) | | | (52 | ) | | | (17 | ) | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | 1,575 | | | | 1,396 | | | | 12.9 | |
| | | | | | | | | | | | | |
| Income tax | | | (404 | ) | | | (318 | ) | | | 27.0 | |
| | | | | | | | | | | | | |
Net income | | | 1,172 | | | | 1,078 | | | | 8.7 | |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | (392 | ) | | | (351 | ) | | | 11.6 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 780 | | | | 727 | | | | 7.3 | |
| | | | | | | | | | | | | |
102
As discussed above under “— Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2009, the depreciation of certain of the currencies in the countries in which we operate in South America against the euro slightly negatively affected the results of operations of our foreign subsidiaries in euro terms.
Net interest income
Net interest income for 2009, was €2,566 million, a 19.4% increase over the €2,149 million recorded for 2008, due to larger business volumes and more favorable customer spreads.
Net fees and commissions
Net fees and commissions of this business area amounted to €908 million for 2009, a 17.1% increase from the €775 million recorded for 2008, mainly due to an increase in banking and mutual fund commissions due primarily to larger business volumes.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains on financial assets and liabilities and exchange differences of this business area for 2009 was €405 million, a 60.4% increase from the net gains of €253 million for 2008, due to recovery in the financial markets, which enabled some entities to realize capital gains on their fixed income portfolios as well as higher returns on proprietary trading positions held by the pension fund managers and insurance providers.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 2009 was a loss of €242 million compared to a gain of €15 million recorded in 2008, due mainly to the impact in the consolidated financial statements of the treatment of Venezuela as a hyperinflationary economy in 2009.
Gross income
As a result of the foregoing, the gross income of this business area for 2009 was €3,637 million, a 14.0% increase over the €3,192 million recorded in 2008.
Administrative costs
Administrative costs of this business area for 2009 were €1,464 million, an 11.4% increase from the €1,315 million recorded for 2008, due primarily to growth in salaries that were lower than average inflation in the region.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business for 2009 was €431 million a 20.4% increase from the €358 million recorded for 2008, due to generic provisions attributable to the rise in lending volume as under Bank of Spain rules recently-made loans require higher generic provisions than older loans in our portfolio. The business area’s non-performing assets ratio increased to 2.7% as of December 31, 2009 from 2.1% as of December 31, 2008.
Income before tax
As a result of the foregoing, income before tax of this business area for 2009 was €1,575 million, a 12.9% increase over the €1,396 million recorded in 2008.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2009 was €780 million, a 7.3% increase over the €727 million in 2008.
103
The United States
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (In millions of euros) | | | (in %) | |
| |
Net interest income | | | 1,679 | | | | 1,471 | | | | 14.2 | |
| | | | | | | | | | | | | |
| Net fees and commissions | | | 610 | | | | 584 | | | | 4.4 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 156 | | | | 149 | | | | 4.6 | |
| Other operating income and expenses (net) | | | (33 | ) | | | 23 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Gross income | | | 2,413 | | | | 2,227 | | | | 8.3 | |
| | | | | | | | | | | | | |
| Administrative costs | | | (1,159 | ) | | | (1,140 | ) | | | 1.7 | |
| Depreciation and amortization | | | (205 | ) | | | (244 | ) | | | (15.9 | ) |
| Impairment on financial assets (net) | | | (1,420 | ) | | | (379 | ) | | | n.m. | (1) |
| Provisions (net) and other gains (losses) | | | (1,056 | ) | | | (17 | ) | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | (1,428 | ) | | | 447 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
| Income tax | | | 478 | | | | (139 | ) | | | n.m. | (1) |
| | | | | | | | | | | | | |
Net income | | | (950 | ) | | | 308 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | (950 | ) | | | 308 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
As discussed above under “— Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2009, the depreciation of the euro against the dollar positively affected the results of operations of our foreign subsidiaries in euro terms. The average dollar to euro exchange rate for 2009 increased by 5.4% compared to the average exchange rate for 2008.
In addition, on August 21, 2009, BBVA Compass acquired certain assets and liabilities of Guaranty from the FDIC through a public auction for qualified investors. BBVA Compass acquired assets, mostly loans, for $11,441 million (approximately €8,016 million) and assumed liabilities, mostly customer deposits, for $12,854 million (approximately €9,006 million). These acquired assets and liabilities represented 1.5% and 1.8% of our total assets and liabilities on the acquisition date. The agreement with the FDIC limits the credit risk associated with the acquisition. The purchase included a loss-sharing agreement with the FDIC under which the latter undertook to assume 80% of the losses on up to the first $2,285 million of the loans purchased by us and up to 95% of the losses, if any, on the loans exceeding this amount. This commitment has a maximum term of either five or ten years, depending on the category of loan portfolio. This investment, which included 164 branches and 300,000 customers in Texas and California, offers us an opportunity to strengthen our United States’ banking franchise in the retail market, while limiting our investment risk.
Net interest income
Net interest income for 2009 was €1,679 million, a 14.2% increase over the €1,471 million recorded for 2008, due mainly to increased volumes of activity primarily as a result of the incorporation of the deposits and liabilities acquired from Guaranty, a lower average dollar to euro exchange rate and our active pricing policy.
Net fees and commissions
Net fees and commissions of this business area for 2009 was €610 million, a 4.4% increase over the €584 million recorded in 2008.
104
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2009 were €156 million, a 4.6% increase over the €149 million recorded in 2008.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 2009 was a loss of €33 million compared to a gain of €23 million recorded for 2008, due primarily to higher contributions to the deposit guarantee fund, as a result of the $28 million contribution made during the second quarter of 2009 to the FDIC.
Gross income
As a result of the foregoing, gross income of this business area for 2009 was €2,413 million, an 8.3% increase over the €2,227 million recorded in 2008.
Administrative costs
Administrative costs of this business area for 2009 were €1,159 million, a 1.7% increase over the €1,140 million recorded for 2008, primarily as a result of the exchange rate effects described above.
Depreciation and amortization
Depreciation and amortization of this business area for 2009 was €205 million, a 15.9% decrease from €244 million in 2008, due primarily to the lower amortization of intangible assets related to the acquisition of the banks comprising this business area.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business for 2009 was €1,420 million compared to €379 million recorded for 2008, due to the write off of impaired assets attributed to the significant decline in economic and credit conditions in the states in which the area operates in the United States. The value of the collateral against which the commercial real-estate loan portfolio was re-assessed, resulting a write-off for the difference, and additional provisions were set aside to maintain the coverage ratio comparable to year end 2008. The business area’s non-performing assets ratio increased to 4.2% as of December 31, 2009 from 2.5% as of December 31, 2008. The non-performing assets ratio as of December 31, 2009 was positively affected by incorporation of performing assets from Guaranty in the third quarter of 2009. The business’ coverage ratio remained at 58% as of December 31, 2009 mainly due to the above-mentioned provisions.
Provisions (net) and other gains (losses)
Provisions (net) and other gains (losses) for 2009 reflected losses of €1,056 million, compared to the €17 million losses recorded for 2008, due primarily to impairment losses for goodwill attributed to the significant decline in economic and credit conditions in the states in which the area operates in the United States.
Income before tax
As a result of the foregoing, the income before tax of this business area for 2009 was a loss amounted to €1,428 million compared to the income amounted to €447 million recorded in 2008.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2009 was a loss amounted to €950 million compared to the income amounted to €308 million recorded in 2008.
105
Wholesale Banking and Asset Management
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2009 | | | 2008 | | | 2009/2008 | |
| | | (In millions of euros) | | | (in %) | |
| |
Net interest income | | | 982 | | | | 618 | | | | 59.1 | |
| | | | | | | | | | | | | |
| Net fees and commissions | | | 461 | | | | 375 | | | | 22.8 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | (59 | ) | | | 114 | | | | n.m. | (1) |
| Other operating income and expenses (net) | | | 314 | | | | 406 | | | | (22.6 | ) |
| | | | | | | | | | | | | |
Gross income | | | 1,699 | | | | 1,513 | | | | 12.3 | |
| | | | | | | | | | | | | |
| Administrative costs | | | (475 | ) | | | (449 | ) | | | 5.9 | |
| Depreciation and amortization | | | (10 | ) | | | (8 | ) | | | 17.0 | |
| Impairment on financial assets (net) | | | (60 | ) | | | (171 | ) | | | (65.0 | ) |
| Provisions (net) and other gains (losses) | | | (4 | ) | | | 4 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | 1,150 | | | | 888 | | | | 29.5 | |
| | | | | | | | | | | | | |
| Income tax | | | (294 | ) | | | (160 | ) | | | 84.0 | |
| | | | | | | | | | | | | |
Net income | | | 856 | | | | 728 | | | | 17.5 | |
| | | | | | | | | | | | | |
| Net income attributed to non-controlling interests | | | (3 | ) | | | (6 | ) | | | (44.9 | ) |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 852 | | | | 722 | | | | 18.0 | |
| | | | | | | | | | | | | |
The preceding table and descriptions below do not take into account the impact of the Madoff fraud in 2008, which, due to its unique nature, is included in the area of Corporate Activities.
Net interest income and Net gains (losses) on financial assets and liabilities and exchange differences
For internal management purposes, “net interest income” and “net gains (losses) on financial assets and liabilities and exchange differences” for this business area are analyzed together. Net interest income includes the cost of funding of the market operations whose revenues are accounted for in the heading “Net gains (losses) on financial assets and liabilities and exchange differences”.
Net interest income amounted tofor 2009 was €982 million, a gain of €74553.1% increase over the €618 million in 2008, compared to a loss of €7 million in 2007.recorded for 2008. Net gains (losses) on financial assets and liabilities and exchange differences amounted to €144losses of €59 million, compared to €791gains of €114 million in 2007.for 2008. The sum of these headingheadings for 20082009 was €889€924 million, a 13.4%26.3% increase over the €784€731 million recorded for 2008, due primarily to active price management and an increase in 2007. This increase was largely attributable to the Corporate Banking unit, through the sharp rise in lending.number of customer transactions.
Net fees and commissions
Net fees and commissions of this business area amounted to €461 million for 2009, a 22.8% increase from the €375 million recorded for 2008, was €413 million, a 7.5% decrease from 2007 (€446 million), primarilydue to increased business volumes as a result in a decrease inof the value of assets under management inarea’s increased strategic focus on customers with the Asset Management unit as well as the decrease inpotential to generate high business volume of origination, structuring, distribution and risk management of market products.volumes.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 20082009 was €434€314 million, a 22.6% decrease of 16.2% from the €518€406 million recorded for 2008, primarily reflecting the non-recurrence in 2007, as a smaller amount2009 of income generated from real estate activities offset an increasegains recognized on the sale of ownership interests in profits of entities accounted for using the equity method and income on equity instruments.Gamesa in 2008.
79106
Gross income
As a result of the foregoing, gross income of this business area for 20082009 was €1,736€1,699 million, a 0.7% decrease from12.3% increase over the €1,749€1,513 million recorded in 2007.2008.
Administrative costs
Administrative costs of this business area for 20082009 were €511€476 million, a 9.5%5.9% increase over the €467€449 million recorded in 2007,2008, due primarily to an increase in employees in connection with growth of the business in Corporate and Investment Banking unit.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business areafor 2009 was €60 million, a 65.0% decrease from the €171 million recorded for 2008, was €256 million, a 96.9% increase over the €130 million recorded in 2007, mainly due to generic provisions associatedthe decline of the loan portfolio and to the focus on customers with the sharp rise in lending and specific loan loss provisions made by the Global Markets unit.better credit (which is also boosting transactional business). The business area’s non-performing loanassets ratio of this business area was 0.12%increased to 1.2% as of December 31, 2008 compared to 0.02%2009 from 0.2% as of December 31, 2007.2008.
Income before tax
As a result of the foregoing, income before tax of this business area for 20082009 was €934€1,150 million, a 19.0% decrease from29.5% increase over the €1,154€888 million recorded in 2007.2008.
Net income attributed to parent company
Net income attributed to parent company of this business area for 20082009 was €754€852 million, a 15.9% decrease froman 18.0% increase over the €896€722 million recorded in 2007.2008.
MexicoCorporate Activities
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | Change | | | Year Ended December 31, | | Change | |
| | | 2008 | | 2007 | | 2008/2007 | | | 2009 | | 2008 | | 2009/2008 | |
| | | (In millions of euros) | | (In %) | | | (In millions of euros) | | (in %) | |
| |
Net interest income | | | 3,716 | | | | 3,505 | | | | 6.02 | | | | 437 | | | | (1,043 | ) | | | n.m. | (1) |
| | | | | | | |
| Net fees and commissions | | | 1,189 | | | | 1,305 | | | | (8.89 | ) | | | (108 | ) | | | (33 | ) | | | n.m. | (1) |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 376 | | | | 311 | | | | 20.90 | | | | 484 | | | | 437 | | | | 10.8 | |
| Other operating income and expenses | | | 154 | | | | 115 | | | | 33.91 | | |
| Other operating income and expenses (net) | | | | 219 | | | | 177 | | | | 24.0 | |
| | | | | | | | | | | |
Gross income | | | 5,435 | | | | 5,236 | | | | 3.80 | | | | 1,031 | | | | (462 | ) | | | n.m. | (1) |
| | | | | | | |
| Administrative costs | | | (1,727 | ) | | | (1,737 | ) | | | (0.58 | ) | | | (559 | ) | | | (500 | ) | | | 11.7 | |
| Depreciation and amortization | | | (73 | ) | | | (102 | ) | | | (28.43 | ) | | | (197 | ) | | | (163 | ) | | | 20.6 | |
| Impairment on financial assets (net) | | | (1,110 | ) | | | (834 | ) | | | 33.09 | | | | (107 | ) | | | (113 | ) | | | n.m. | (1) |
| Provisions (net) and other gains (losses) | | | (25 | ) | | | 19 | | | | n.m. | (1) | | | (741 | ) | | | (608 | ) | | | 21.9 | |
| | | | | | | | | | | |
Income before tax | | | 2,499 | | | | 2,583 | | | | (3.25 | ) | | | (572 | ) | | | (1,847 | ) | | | (69.0 | ) |
| | | | | | | |
| Income tax | | | (560 | ) | | | (701 | ) | | | (20.11 | ) | | | 454 | | | | 713 | | | | (36.3 | ) |
| | | | | | | | | | | |
Net income | | | 1,939 | | | | 1,882 | | | | 3.03 | | | | (118 | ) | | | (1,134 | ) | | | n.m. | (1) |
| Profit or loss attributed to minority interest | | | (1 | ) | | | (2 | ) | | | (50.00 | ) | |
| | | | | | | |
| Net income attributed to non-controlling interests | | | | 13 | | | | (7 | ) | | | n.m. | (1) |
| | | | | | | | | | | |
Net income attributed to parent company | | | 1,938 | | | | 1,880 | | | | 3.09 | | | | (105 | ) | | | (1,140 | ) | | | n.m. | (1) |
| | | | | | | | | | | |
80107
As discussed above under “Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2008, the depreciation of the Mexican peso against the euro negatively affected the results of operations of our Mexican subsidiaries in euro terms.
Net interest income
Net interest income of this business area for 20082009 was €3,716a gain of €437 million a 3.6% increase overcompared to the €3,505loss of €1,043 million recorded in 2007,2008, due primarily to larger business volumesthe favorable impact of lower interest rates and maintenanceour strong balance sheet management of the spread. In Mexico, interbank rates showed a slight upward trend overeuro balance sheet and the 2008, with the average Interbank Equilibrium Interest Rate (TIIE) for 2008 standing at 8.3%, as opposed to the figurepositive contribution of 7.7% for 2007. The customer spread remained stable throughout the year, at 12.4% at December 31, 2008, approximately the same level as of December 31, 2007, due to a slight rise both in yield on loans and cost of deposits.interest rate economic hedges.
Net fees and commissions
Net fees and commissions of this business area for 2008 was €1,189 million, an 8.9% decrease from the €1,305 million recorded in 2007.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2008 was €3762009 were €484 million, a 20.9%10.8% increase over the €311€437 million recorded in 2007.2008.
Other operating income and expenses (net)
Other operating income and expenses (net) of this business area for 20082009 was €154€219 million compared to a 33.8% increase over the €115gain of €177 million recorded in 2007, due primarily to an increase in revenue from insurance activity.2008.
Gross income
As a result of the foregoing, gross income of this business area for 20082009 was €5,435a gain of €1,031 million, compared to a 3.8% increase over the €5,236loss of €462 million recorded in 2007.2008.
Administrative costs
Administrative costs of this business area for 20082009 were €1,727€559 million, a 0.8% decreasean 11.7% increase from the €1,741€500 million recorded in 2007. In the latter part2008.
Depreciation and amortization
Depreciation and amortization of 2008 we instituted certain cost-control programs to limit the rate of local currency growth in administrative costs in this business area.area for 2009 was €197 million, a 20.6% increase over the €163 million recorded in 2008.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business area for 20082009 was €1,110€107 million a 33.1% increase over the €834compared to €113 million recorded in 2007 mainlyfor 2008.
Provisions (net) and other gains (losses)
Provisions (net) and other gains (losses) for 2009 was a loss of €741 million, compared to a loss of €608 million for 2008. This increased loss was primarily due to increased loan loss provisions as a result of higher lending volumesimpairment charges for investments in tangible assets and deteriorating asset quality throughoutinventories from our real estate businesses during the system. At the end of 2008, the non-performing loan ratio stood at 3.21%, increasing from 2.15% as ofyear ended December 31, 2007.2009. The business area’s coverage ratio declined to 161% as ofyear ended December 31, 2008 included the gross gain of €727 million from 255% asthe sale of December 31, 2007, mainly dueour stake in Bradesco, which was offset in part by a charge of €470 million related to write-offs made during 2008.early retirements.
Income before tax
As a result of the foregoing, income before tax of this business area for 20082009 was €2,499a loss of €572 million, a 3.2% decrease compared to the €2,583a loss of €1,847 million recorded in 2007.2008.
Net Incomeincome attributed to parent company
Net income attributed to parent company of this business area for 2008 was €1,938 million, a 3.0% increase over the €1,880 million recorded in 2007.
81
The United States
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2008 | | | 2007 | | | 2008/2007 | |
| | | (In millions of euros) | | | (In %) | |
| |
Net interest income | | | 1,332 | | | | 763 | | | | 74.57 | |
| Net fees and commissions | | | 546 | | | | 314 | | | | 73.89 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 123 | | | | 37 | | | | n.m. | (1) |
| Other operating income and expenses | | | 21 | | | | 11 | | | | 90.91 | |
| | | | | | | | | | | | | |
Gross income | | | 2,022 | | | | 1,125 | | | | 79.73 | |
| Administrative costs | | | (1,088 | ) | | | (621 | ) | | | 75.20 | |
| Depreciation and amortization | | | (244 | ) | | | (123 | ) | | | 98.37 | |
| Impairment on financial assets (net) | | | (365 | ) | | | (85 | ) | | | n.m. | (1). |
| Provisions (net) and other gains (losses) | | | (15 | ) | | | 1 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | 309 | | | | 297 | | | | 4.04 | |
| Income tax | | | (99 | ) | | | (93 | ) | | | 6.45 | |
| | | | | | | | | | | | | |
Net income | | | 211 | | | | 203 | | | | 3.94 | |
| Profit or loss attributed to minority interest | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Net income attributed to the parent company | | | 211 | | | | 203 | | | | 3.94 | |
| | | | | | | | | | | | | |
As discussed above under “Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2008, the depreciation of the dollar against the euro negatively affected the results of operations of our foreign subsidiaries in euro terms. Additionally, because 2007 results of operations only include four months of results of operations for Compass,year-on-year comparisons for the United States business area are less meaningful.
Net interest income
Net interest income of this business area for 2008 was €1,332 million, a 74.6% increase over the €763 million recorded in 2007.
Net Fees and Commissions
Net fees and commissions of this business area for 2008 was €546 million, a 73.6% increase over the €314 million recorded in 2007.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2008 were €123 million, an increase compared to the €37 million recorded in 2007.
Gross income
As a result of the foregoing, gross income of this business area for 2008 was €2,022 million, a 79.7% increase over the €1,125 million recorded in 2007.
Administrative costs
Administrative costs of this business area for 2008 were €1,088 million, a 75.2% increase over the €621 million recorded in 2007, due primarily to the inclusion in 2008 of integration and merger expenses.
82
Depreciation and amortization
Depreciation and amortization of this business area for 2008 was €244 million, a 98.4% increase over the €123 million in 2007, due primarily to the amortization of intangible assets related to the acquisition of the banks comprising this business area.
Impairment on financial assets (net)
Impairment on financial assets (net) for 2008 was €365 million, compared with €85 million recorded in 2007, due to significant write-downs. The non-performing loans ratio was 3.36% as of December 31, 2008, increasing from 1.77% as of December 31, 2007.
Income before tax
As a result of the foregoing, the income before tax of this business area for 2008 was €309 million, a 4.3% increase over the €297 million recorded in 2007.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2008 was €211 million, a 3.9% increase over the €203 million in 2007.
South America
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2008 | | | 2007 | | | 2008/2007 | |
| | | (In millions of euros) | | | (In %) | |
| |
Net interest income | | | 2,199 | | | | 1,746 | | | | 25.95 | |
| Net fees and commissions | | | 775 | | | | 750 | | | | 3.33 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 253 | | | | 222 | | | | 13.96 | |
| Other losses (net) | | | (35 | ) | | | (18 | ) | | | 94.44 | |
| | | | | | | | | | | | | |
Gross income | | | 3,192 | | | | 2,701 | | | | 18.18 | |
| Administrative costs | | | (1,315 | ) | | | (1,181 | ) | | | 11.35 | |
| Depreciation and amortization | | | (107 | ) | | | (93 | ) | | | 15.05 | |
| Impairment on financial assets (net) | | | (358 | ) | | | (262 | ) | | | 36.64 | |
| Provisions (net) and other gains (losses) | | | (17 | ) | | | (63 | ) | | | (73.02 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 1,396 | | | | 1,102 | | | | 26.68 | |
| Income tax | | | (318 | ) | | | (197 | ) | | | 61.42 | |
| | | | | | | | | | | | | |
Net income | | | 1,078 | | | | 905 | | | | 19.12 | |
| Profit or loss attributed to minority interest | | | (351 | ) | | | (282 | ) | | | 24.47 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 727 | | | | 623 | | | | 16.69 | |
| | | | | | | | | | | | | |
As discussed above under “Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2008, the depreciation of certain of the currencies in the countries in which we operate in South America against the euro negatively affected the results of operations of our foreign subsidiaries in euro terms.
Net interest income
Net interest income of this business area for 2008 was €2,199 million, a 25.9% increase over the €1,746 million recorded in 2007, due primarily to the larger business volumes and the maintance of the spreads.
83
Net Fees and Commissions
Net fees and commissions of this business area for 2008 was €775 million, 3.3% increase over the €750 million recorded in 2007, mainly due to an increase in banking commissions.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2008 was €253 million, a 13.9% increase over the €222 million recorded in 2007.
Gross income
As a result of the foregoing, the gross income of this business area for 2008 was €3,192 million, an 18.2% increase over the €2,701 million recorded in 2007.
Administrative costs
Administrative costs of this business area for 2008 was €1,315 million, a 9.5% increase over the €1,181 million recorded in 2007, due primarily to increases in wages as a result of increased inflation and an increase in employees as a result of expansion of certain business units in this area.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business area for 2008 was €358 million, a 36.6% increase over the €262 million recorded in 2007, mainly due to generic provisions attributable to the rise in lending volume as recently-made loans require under Bank of Spain rules higher generic provisions than older loans in our portfolio. The business area’s non-performing loan ratio was 2.12% as of December 31, 2008 compared to 2.14% as of December 31, 2007.
Income before tax
As a result of the foregoing, income before tax of this business area for 2008 was €1,396 million, a 26.7% increase over the €1,102 million recorded in 2007.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2008 was €727 million, a 16.7% increase over the €623 million in 2007.
84
Corporate Activities
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2008 | | | 2007 | | | 2008/2007 | |
| | | (In millions of euros) | | | (In %) | |
| |
Net interest income | | | (1,135 | ) | | | (770 | ) | | | 47.40 | |
| Net fees and commissions | | | (35 | ) | | | 43 | | | | n.m. | (1) |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 409 | | | | 346 | | | | 18.21 | |
| Other operating income and expenses | | | 217 | | | | 111 | | | | 95.50 | |
| | | | | | | | | | | | | |
Gross income | | | (543 | ) | | | (271 | ) | | | 100.37 | |
| Administrative costs | | | (633 | ) | | | (742 | ) | | | (14.69 | ) |
| Depreciation and amortization | | | (164 | ) | | | (142 | ) | | | 15.49 | |
| Impairment on financial assets (net) | | | (43 | ) | | | 1 | | | | n.m. | (1) |
| Provisions (net) and other gains (losses) | | | (581 | ) | | | 984 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | (1,963 | ) | | | (170 | ) | | | n.m. | (1) |
| Income tax | | | 735 | | | | 307 | | | | 139.41 | |
| | | | | | | | | | | | | |
Net income | | | (1,228 | ) | | | 137 | | | | n.m. | (1) |
| Profit or loss attributed to minority interest | | | (7 | ) | | | 5 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | (1,235 | ) | | | 142 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Net interest income
Net interest income of this business area for 20082009 was a loss of €1,135 million, a 47.4% increase over the loss of €770 million recorded in 2007, due primarily to a full year of the expenses associated with the financing of the Compass acquisition and the higher cost of wholesale financing.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2008 were €409 million, an 18.4% increase over the €346 million recorded in 2007.
Other operating income and expenses
Other operating income and expenses of this business area for 2008 was €217 million, a 95.9% increase over the €111 million recorded in 2007, primarily as a result of net operating income.
Gross income
As a result of the foregoing, gross income of this business area for 2008 was a loss of €543€105 million, compared with a loss of €271 million recorded in 2007.
Administrative costs
Administrative costs of this business area for 2008 were €633 million, a 14.7% decrease from the €742 million recorded in 2007, which included a €200 million contribution to the BBVA Foundation for Microfinance.
Depreciation and amortization
Depreciation and amortization of this business area for 2008 was €164 million, a 15.5% increase over the €142 million recorded in 2007.
85
Provisions (net) and other gains (losses)
Provisions (net) and other gains (losses) of this business area for 2008 was a loss of €581 million, compared with a gain of €984 million recorded in 2007, due primarily to the larger provisions for early retirement and lower one-off gains in 2008 compared to 2007. Provisions (net) and other gains (losses) of this business area in 2008 include the following non-recurring items: €727€1,140 million in gains from the sale of our stake in Bradesco, a charge of €860 million in provisions for extraordinary early retirements in Spain and the recognition of €431 million in provisions for the loss that could be caused by the Madoff fraud. Provisions (net) and other gains (losses) of this business area in 2007 include the following non-recurring items: gains on the sale of our stake in Iberdrola, S.A. for €847 million, gains on the sale of real estate as part of the project for our new corporate headquarters for €273 million and a charge of €100 million for provisions for extraordinary early retirements in Spain.
Income before tax
As a result of the foregoing, income before tax of this business area for 2008, was a loss of €1,963 million, compared with a loss of €170 million recorded in 2007.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2008 was a loss of €1,235 million, compared with €142 million in 2007, due primarily to the aforementioned one-off items.
Results of Operations by Business Areas for 2007 compared to 2006
Spain and Portugal
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In %) | |
| |
Net interest income | | | 4,391 | | | | 3,800 | | | | 15.55 | |
| Net fees and commissions | | | 1,701 | | | | 1,650 | | | | 3.09 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 250 | | | | 223 | | | | 12.11 | |
| Other operating income and expenses | | | 391 | | | | 322 | | | | 21.43 | |
| | | | | | | | | | | | | |
Gross income | | | 6,732 | | | | 5,996 | | | | 12.27 | |
| Administrative costs | | | (2,505 | ) | | | (2,445 | ) | | | 2.45 | |
| Depreciation and amortization | | | (111 | ) | | | (105 | ) | | | 5.71 | |
| Impairment on financial assets (net) | | | (594 | ) | | | (546 | ) | | | 8.79 | |
| Provisions (net) and other gains (losses) | | | 6 | | | | 12 | | | | (50.00 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 3,529 | | | | 2,911 | | | | 21.23 | |
| Income tax | | | (1,149 | ) | | | (1,023 | ) | | | 12.32 | |
| | | | | | | | | | | | | |
Net income | | | 2,380 | | | | 1,887 | | | | 26.13 | |
| Profit or loss attributed to minority interest | | | 1 | | | | (3 | ) | | | n.m. | (1) |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 2,381 | | | | 1,884 | | | | 26.38 | |
| | | | | | | | | | | | | |
Net interest income
Net interest income of this business area for 2007 was €4,391 million, a 15.6% increase over the €3,800 million recorded in 2006, driven by increases in lending and lower increases in interest expenses on deposits which contributed to higher customer spreads. In the Spanish market, credit spreads (the spread between the interest we
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paid on interest-bearing liabilities, principally deposits, and the interest we earned on our interest-earning assets, principally loans) widened throughout 2007 and 2006. The increase in costs of deposits was lower than the increase in yields on loans. In 2007, the average customer spread was 3.10%, compared to 2.75% in 2006. The improved margin and the higher volume of business helped the Spain and Portugal business area to increase net interest income 15.6%year-on-year.
Net fees and commissions
Net fees and commissions of this business area for 2007 was €1,701 million, a 3.1% increase from the amount recorded in 2006, due primarily to the increase in business activity.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2007 was €250 million, a 12.1% increase over the €223 million recorded in 2006.
Other operating income and expenses
Other operating income and expenses of this business area for 2007 was €391 million, a 21.4% increase over the €322 million recorded in 2006.
Gross income
As a result of the foregoing, gross income of this business area for 2007 was €6,732 million, a 12.3% increase over the €5,996 million recorded in 2006.
Administrative costs
Administrative costs of this business area for 2007 were €2,505 million, a 2.5% increase over the €2,445 million recorded in 2006.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business area for 2007 was €594 million, a 8.79% increase over the €546 million in 2006, due to an increase of 7.7% in net loan loss provisions to €595 million in 2007 from €553 million in 2006. Net loan loss provisions were still mainly generic in nature because the non-performing loan ratio in the area remained relatively low at 0.73% as of December 31, 2007, although this represents a significant jump from 0.55% as of December 31, 2006 due mainly to increases in non-performing mortgage loans in Spain.
Income before tax
As a result of the foregoing, income before tax of this business area for 2007 was €3,529 million, a 21.2% increase over the €2,911 million recorded in 2006.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2007 was €2,381 million, a 26.4% increase over the €1,884 million in 2006.
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Global Businesses (Wholesale Banking and Asset Management)
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In %) | |
| |
Net interest income | | | (7 | ) | | | 18 | | | | n.m. | (1) |
| Net fees and commissions | | | 446 | | | | 383 | | | | 16.45 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 791 | | | | 501 | | | | 57.88 | |
| Other operating income and expenses | | | 518 | | | | 538 | | | | (3.72 | ) |
| | | | | | | | | | | | | |
Gross income | | | 1,749 | | | | 1,441 | | | | 21.37 | |
| Administrative costs | | | (467 | ) | | | (363 | ) | | | 28.65 | |
| Depreciation and amortization | | | (7 | ) | | | (7 | ) | | | 0.00 | |
| Impairment on financial assets (net) | | | (130 | ) | | | (127 | ) | | | 2.36 | |
| Provisions (net) and other gains (losses) | | | 9 | | | | 151 | | | | (94.04 | ) |
| | | | | | | | | | | | | |
Income before tax | | | 1,154 | | | | 1,094 | | | | 5.48 | |
| Income tax | | | (247 | ) | | | (227 | ) | | | 8.81 | |
| | | | | | | | | | | | | |
Net income | | | 907 | | | | 866 | | | | 4.73 | |
| Profit or loss attributed to minority interest | | | (10 | ) | | | (7 | ) | | | 42.86 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 896 | | | | 859 | | | | 4.31 | |
| | | | | | | | | | | | | |
Net interest income
Net interest income of this business area for 2007 amounted to a loss of €7 million in 2007, a decrease from a gain of €18 million in 2006. The net interest income includes the cost of funding of the market operations whose revenues are accounted for in the “Net gains (losses) on financial assets and liabilities and exchange differences” caption.
Net fees and commissions
Net fees and commissions of this business area for 2007 was €446 million, a 16.5% increase from the €383 million recorded in 2006.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2007 amounted to €791 million, an increase of 57.9% from the €501 million recorded in 2006.
Other operating income and expenses
Other operating income and expenses of this business area for 2007 was €518 million, a 3.7% decrease from the €538 million recorded in 2006, due primarily to a decrease in the share of profit of entities accounted for using the equity as a result of the sale of our interest in certain entities such as Valanza.
Gross income
Based on the foregoing, the gross income of this business area for 2007 was €1,749 million, a 21.4% decrease from the €1,441 million recorded in 2006.
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Administrative costs
Administrative costs of this business area for 2007 were €467 million, a 28.7% increase over the €363 million recorded in 2006, due to our expansion in Asia and related investment strategies and to the growth plans of the global markets and distribution unit.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business area for 2007 was €130 million, a 2.4% increase over the €127 million in 2006, mainly due to higher generic provisions related to increases in lending. The non-performing assets ratio was 0.02% as of December 31, 2007 compared to 0.04% as of December 31, 2006, indicating that loan-loss provisions are stable and almost exclusively of a generic nature.
Income before tax
Based on the foregoing, the income before tax of this business area for 2007 was €1,154 million, a 5.5% increase over the €1,094 million recorded in 2006.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2007 was €896 million, a 4.3% increase from the €859 million recorded in 2006.
Mexico
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In %) | |
| |
Net interest income | | | 3,505 | | | | 3,220 | | | | 8.85 | |
| Net fees and commissions | | | 1,305 | | | | 1,276 | | | | 2.27 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 311 | | | | 260 | | | | 19.62 | |
| Other operating income and expenses | | | 115 | | | | 129 | | | | (10.85 | ) |
| | | | | | | | | | | | | |
Gross income | | | 5,236 | | | | 4,885 | | | | 7.18 | |
| Administrative costs | | | (1,737 | ) | | | (1,694 | ) | | | 2.54 | |
| Depreciation and amortization | | | (102 | ) | | | (98 | ) | | | 4.08 | |
| Impairment on financial assets (net) | | | (834 | ) | | | (621 | ) | | | 34.30 | |
| Provisions (net) and other gains (losses) | | | 19 | | | | (50 | ) | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | 2,583 | | | | 2,422 | | | | 6.65 | |
| Income tax | | | (701 | ) | | | (710 | ) | | | (1.27 | ) |
| | | | | | | | | | | | | |
Net income | | | 1,882 | | | | 1,712 | | | | 9.93 | |
| Profit or loss attributed to minority interest | | | (2 | ) | | | (2 | ) | | | 0.00 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 1,880 | | | | 1,710 | | | | 9.94 | |
| | | | | | | | | | | | | |
As discussed above under “Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2007, the depreciation of the Mexican peso against the euro negatively affected the results of operations of our Mexican subsidiaries in euro terms.
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Net interest income
Net interest income of this business area for 2007 was €3,505 million, an 8.9% increase over the €3,220 million recorded in 2006, due principally to an increase in this business area’s overall business volume and a high interest spread. In Mexico, interest rates rebounded at the end of 2007. The average TIIE (Tasa de Interés Interbancaria de Equilibrio— Interbank Interest Rate) in the 2007 was 7.7% compared to 7.5% in 2006. The cost of funds rose only one basis point to 2.6% and therefore customer spreads decreased to 12.4% in 2007 compared with 12.5% in 2006. The improvement in spreads, together with a strong increase in business, helped Mexico to lift net interest income 8.9%year-on-year.
Net fees and commissions
Net fees and commissions of this business area for 2007 was €1,305 million, a 2.3% increase from the €1,276 million recorded in 2006.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2007 were €311 million, a 19.6% increase over the €260 million recorded in 2006.
Other operating income and expenses
Other operating income and expenses of this business area for 2007 was €115 million, a 10.9% decrease from the €129 million recorded in 2006.
Gross income
As a result of the foregoing, the gross income of this business area for 2007 was €5,236 million, a 7.2% increase over the €4,885 million recorded in 2006, principally attributable to the increases in net interest income discussed above, net fees and commissions, net gains on financial assets and liabilities and insurance activity income.
Administrative costs
Administrative costs of this business area for 2007 were €1,737 million, for a 2.5% increase from the €1,694 million recorded in 2006, mainly due to increase of sales activity and expansion of the branch network.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business area for 2007 was €834 million, a 34.3% increase over the €621 million recorded in 2006, mainly due to higher generic provisions driven by higher provisioning for its consumer and mortgage loan portfolios on the basis of expected losses. The business area’s non-performing loan ratio fell from 2.15% at the end of 2006 to 2.21% as of December 31, 2007. Finally, the business area’s coverage ratio declined to 255% as of December 31, 2007 from 288% as of December 31, 2006 mainly due to write-offs made during 2007.
Income before tax
As a result of the foregoing, the income before tax of this business area for 2007 was €2,583 million, a 6.7% increase over the €2,422 million recorded in 2006.
Net income attributed to parent company
Net income attributed to parent company for 2007 was €1,880 million, a 9.9% increase over the €1,710 million recorded in 2006.
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The United States
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In %) | |
| |
Net interest income | | | 763 | | | | 280 | | | | n.m. | (1) |
| Net fees and commissions | | | 314 | | | | 113 | | | | n.m. | (1) |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 37 | | | | 14 | | | | n.m. | (1) |
| Other operating income and expenses | | | 11 | | | | 3 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Gross income | | | 1,125 | | | | 410 | | | | n.m. | (1) |
| Administrative costs | | | (621 | ) | | | (252 | ) | | | n.m. | (1) |
| Depreciation and amortization | | | (123 | ) | | | (28 | ) | | | n.m. | (1) |
| Impairment on financial assets (net) | | | (85 | ) | | | (39 | ) | | | n.m. | (1) |
| Provisions (net) and other gains (losses) | | | 1 | | | | 2 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | 297 | | | | 93 | | | | n.m. | (1) |
| Income tax | | | (93 | ) | | | (29 | ) | | | n.m. | (1) |
| | | | | | | | | | | | | |
Net income | | | 203 | | | | 64 | | | | n.m. | (1) |
| Profit or loss attributed to minority interest | | | — | | | | — | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 203 | | | | 64 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
As discussed above under “Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2007, the depreciation of the dollar against the euro negatively affected the results of operations of our foreign subsidiaries in euro terms. Additionally, because 2007 results of operations only include four months of results of operations for Compass,year-on-year comparisons for the United States business area are less meaningful.
Net interest income
Net interest income of this business area for 2007 was €763 million, an increase over the €280 million recorded in 2006.
Net fees and commissions
Net fees and commissions of this business area for 2007 was €314 million, an increase over the €113 million recorded in 2006.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2007 were €37 million, an increase over the €14 million recorded in 2006.
Gross income
Based on the foregoing, the gross income of this business area for 2007 was €1,125 million, an increase over the €410 million recorded in 2006.
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Administrative costs
Administrative costs of this business area for 2007 were €621 million, an increase over the €252 million in 2006, mainly due to increase of sales activity, expansion of the branch network and the banks acquired in the United States.
Depreciation and amortization
Depreciation and amortization of this business area for 2007 was €123 million, an increase over the €28 million recorded in 2006.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business area for 2007 was €85 million, an increase over the €39 million recorded in 2006.
Income before tax
As a result of the foregoing, the income before tax of this business area for 2007 was €297 million, an increase over the €64 million recorded in 2006.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2007 was €203 million, an increase over the €64 million recorded in 2006.
South America
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In percentages) | |
| |
Net interest income | | | 1,746 | | | | 1,376 | | | | 26.89 | |
| Net fees and commissions | | | 750 | | | | 664 | | | | 12.95 | |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 222 | | | | 319 | | | | (30.41 | ) |
| Other losses (net) | | | (18 | ) | | | (4 | ) | | | n.m. | (1) |
| | | | | | | | | | | | | |
Gross income | | | 2,701 | | | | 2,355 | | | | 14.69 | |
| Administrative costs | | | (1,181 | ) | | | (1,103 | ) | | | 7.07 | |
| Depreciation and amortization | | | (93 | ) | | | (93 | ) | | | 0.00 | |
| Impairment on financial assets (net) | | | (262 | ) | | | (150 | ) | | | 74.67 | |
| Provisions (net) and other gains (losses) | | | (63 | ) | | | (54 | ) | | | 16.67 | |
| | | | | | | | | | | | | |
Income before tax | | | 1,102 | | | | 955 | | | | 15.39 | |
| Income tax | | | (197 | ) | | | (229 | ) | | | 13.97 | |
| | | | | | | | | | | | | |
Net income | | | 905 | | | | 726 | | | | 24.66 | |
| Profit or loss attributed to minority interest | | | (282 | ) | | | (217 | ) | | | 29.95 | |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 623 | | | | 509 | | | | 22.40 | |
| | | | | | | | | | | | | |
As discussed above under “Factors Affecting the Comparability of our Results of Operations and Financial Condition”, in 2007, the depreciation of the currencies in the countries in which we operate in South America against the euro negatively affected the results of operations of our foreign subsidiaries in euro terms.
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Net interest income
Net Interest income of this business area for 2007 was €1,746 million, a 26.9% increase over the €1,376 million recorded in 2006, principally due to the higher business volumes.
Net fees and commissions
Net Fees and Commissions of this business area for 2007 was €750 million, or 12.95% increase over the €664 million recorded in 2006.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2007 were €222 million, a 30.4% decrease from the €319 million recorded in 2006. Net gains (losses) on financial assets were affected by the unstable market situation in the last quarters of 2007 and declined by 28.7% in 2007 compared to 2006 due to lower equity-portfolio sales.
Gross income
As a result of the foregoing, the gross income of this business area for 2007 was €2,701 million, a 14.7% increase over the €2,355 million recorded in 2006.
Administrative costs
Administrative costs of this business area for 2007 were €1,181 million, a 7.1% increase over the €1,103 million recorded in 2006.
Impairment on financial assets (net)
Impairment on financial assets (net) of this business area for 2007 was €262 million, a 74.7% increase over the €150 million recorded in 2006, mainly due to generic provisions attributable to the sharp rise in lending volume as recently-made loans require under Bank of Spain rules higher generic provisions than older loans in our portfolio. The business area’s non-performing loan ratio was 2.14% as of December 31, 2007 compared to 2.67% as of December 31, 2006. Nonetheless, more lending meant higher generic provisioning, which led to a strongyear-on-year increase in loan-loss provisions and raised the coverage ratio to 145.6% as of December 31, 2007, compared to 132.8% as of December 31, 2006.
Income before tax
Based on the foregoing, income before tax of this business area for 2007 was €1,102 million, a 15.4% increase over the €955 million recorded in 2006.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2007 was €623 million, a 22.4% increase over the €509 million recorded in 2006.
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Corporate Activities
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Change | |
| | | 2007 | | | 2006 | | | 2007/2006 | |
| | | (In millions of euros) | | | (In %) | |
| |
Net interest income | | | (770 | ) | | | (557 | ) | | | 38.24 | |
| Net fees and commissions | | | 43 | | | | 105 | | | | (59.05 | ) |
| Net gains (losses) on financial assets and liabilities and exchange differences | | | 346 | | | | 321 | | | | 7.79 | |
| Other operating income and expenses | | | 111 | | | | 189 | | | | (41.27 | ) |
| | | | | | | | | | | | | |
Gross income | | | (271 | ) | | | 57 | | | | n.m. | (1) |
| Administrative costs | | | (742 | ) | | | (473 | ) | | | 56.87 | |
| Depreciation and amortization | | | (142 | ) | | | (141 | ) | | | 0.71 | |
| Impairment on financial assets (net) | | | 1 | | | | 26 | | | | (96.15 | ) |
| Provisions (net) and other gains (losses) | | | 984 | | | | 87 | | | | n.m. | (1) |
| | | | | | | | | | | | | |
Income before tax | | | (170 | ) | | | (444 | ) | | | (61.71 | ) |
| Income tax | | | 307 | | | | 159 | | | | 93.08 | |
| | | | | | | | | | | | | |
Net income | | | 137 | | | | (285 | ) | | | (148.07 | ) |
| Profit or loss attributed to minority interest | | | 5 | | | | (6 | ) | | | (183.33 | ) |
| | | | | | | | | | | | | |
Net income attributed to parent company | | | 142 | | | | (291 | ) | | | (148.80 | ) |
| | | | | | | | | | | | | |
Net interest income
Net interest income of this business area for 2007 was a loss of €770 million, a 38.2% increase over the loss of €557 million recorded in 2006. Theyear-on-year comparison of this area’s net interest income was negatively impacted by higher wholesale-funding costs and financing costs associated with the Compass acquisition.
Net gains (losses) on financial assets and liabilities and exchange differences
Net gains (losses) on financial assets and liabilities and exchange differences of this business area for 2007 were €346 million, a 7.79% increase over the €321 million recorded in 2006. Gains on financial assets and liabilities in 2007 include capital gains from the disposal of our holding in Iberdrola and in 2006 include capital gains from the disposal of our holding in Repsol.
Other operating income and expenses
Other operating income and expenses of this business area for 2007 was €111 million, a 41.3% decrease from the €189 million recorded in 2006.
Gross income
As a result of the foregoing, gross income of this business area for 2007 was a loss of €271 million, compared with the gain of €57 million recorded in 2006.
Administrative costs
Administrative costs of this business area for 2007 were €742 million, a 56.9% increase from the €473 million recorded in 2006.
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Depreciation and amortization
Depreciation and amortization of this business area for 2007 was €142 million, for a 0.71% increase over the €141 million recorded in 2006.
Provisions (net) and other gains (losses)
Provisions (net) and other gains (losses) of this business area for 2007 was €984 million, compared with the €87 million recorded in 2006. In 2007 provisions (net) include €100 million for a transformation plan announced during the fourth quarter of 2007. In 2006, provisions included a special charge of €777 million in early retirement payments pursuant to a plan to transform the branch network in Spain under the Group’s new organizational structure. Other gains (losses) of this business area in 2007 included earnings from the sale of properties sold off pursuant to the plan to develop a new corporate headquarters and the endowment of the Fundación BBVA para las Microfinanzas. The year 2006 included earnings from the sale of holdings in BNL (€568 million) and Andorra (€183 million).
Income before tax
As a result of the foregoing, the income before tax of this business area for 2007 was a loss of €170 million, compared with a loss of €444 million recorded in 2006.
Net income attributed to parent company
Net income attributed to parent company of this business area for 2007 was €142 million, compared with a loss of €291 million in 2006, due primarily to the aforementioned one-off items.
Material Differences between U.S. GAAP and EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004
As of December 31, 2008, 2007 and 2006, our Consolidated Financial Statements have been prepared in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, which differ in certain respects from U.S. GAAP. The tables included in Note 58 to our Consolidated Financial Statements give the effect that application of U.S. GAAP would have on net income for the years 2008, 2007 and 2006 and stockholders’ equity as of December 31, 2008, 2006 and 2005 as reported under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.
Reconciliation to U.S. GAAP
As of December 31, 2010, 2009 and 2008, 2007 and 2006, stockholders’shareholders’ equity under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 was €35,919 million, €29,300 million and €25,656 million, €27,063 million and €21,550 million, respectively.
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As of December 31, 2010, 2009 and 2008, 2007 and 2006, stockholders’shareholders’ equity under U.S. GAAP was €32,744€42,813 million, €35,384€36,172 million and €30,461€ 32,744 million, respectively.
The increase in stockholders’ equity under U.S. GAAP as of December 31, 2008, December 31, 20072010, 2009 and December 31, 20062008 as compared to stockholders’ equity under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 at each of those dates is principally due to the goodwill that arose from the business combinations with Argentaria (2000) and Bancomer (2004).
For the years ended December 31, 2008, 20072010, 2009 and 2006,2008, net income attributed to parent company under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 was €5,020€4,606 million, €6,126€4,210 million and €4,736€5,020 million, respectively.
For the years ended December 31, 2008, 20072010, 2009 and 2006,2008 net income attributed to parent company under U.S. GAAP was €4,070€4,299 million, €5,409€3,825 million and €4,972€4,070 million, respectively.
The differences in net income in 20082010 and 20072009 under U.S. GAAP as compared withto net income attributed to parent company for the years 20082010 and 2007 under EU-IFRS required to be applied under the Bank of Spain’s
95
Circular 4/2004 are principally due to the reconciliation item “loans adjustments”. The differences in net income in 2006 under U.S. GAAP as compared with net income attributed to parent company for the year in 20062009 under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 are principally due to the following reconciliation items: “loans adjustments” and “accountingitem “valuation of goodwill.”assets”.
See Note 5860 to our Consolidated Financial Statements for a quantitative reconciliation of net income and stockholders’ equity from EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 to U.S. GAAP.
| |
| B. | Liquidity and Capital Resources |
Our principal source of funds is our customer deposit base, which consists primarily of demand, savings and time deposits. In addition to relying on our customer deposits, we also access the interbank market (overnight and time deposits) and domestic and international capital markets for our additional liquidity requirements. To access the capital markets, we have in place a series of domestic and international programs for the issuance of commercial paper and medium- and long-term debt. We also generally maintain a diversified portfolio of liquid assets and securitized assets. Another source of liquidity is our generation of cash flow. Finally, we supplement our funding requirements, to a very limited extent, with borrowings from the Bank of Spain, mostly short-term and at market interest rates, which is a common practice in Spain.
Liquidity risk management and controls are explained in Note 7.3 to the Consolidated Financial Statements. In addition, information on outstanding contractual maturities of assets and liabilities is provided in Note 7.5 to the Consolidated Financial Statements. For information concerning our short-term borrowing, see “Item 4. Information on the Company — Selected Statistical Information — LIABILITIES — Short-term Borrowings”.
The following table shows the balances as of December 31, 2008, 20072010, 2009 and 20062008 of our principal sources of funds (including accrued interest, hedge transactions and issue expenses):
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | As of December 31,
| | As of December 31,
| | As of December 31,
| |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| Customer deposits | | | 255,236 | | | | 219,610 | | | | 186,749 | | | | 275,789 | | | | 254,183 | | | | 255,236 | |
| Due to credit entities | | | 66,805 | | | | 88,098 | | | | 57,805 | | | | 68,180 | | | | 70,312 | | | | 66,805 | |
| Debt securities in issue | | | 121,144 | | | | 117,909 | | | | 100,079 | | | | 102,599 | | | | 117,817 | | | | 121,134 | |
| Other financial liabilities | | | 7,420 | | | | 6,239 | | | | 6,772 | | | | 6,596 | | | | 5,624 | | | | 7,420 | |
| | | | | | | | | | | | | | | |
Total | | | 450,605 | | | | 431,856 | | | | 351,405 | | | | 453,164 | | | | 447,936 | | | | 450,595 | |
| | | | | | | | | | | | | | | |
Interbank Deposits
Amounts due to credit entities amounted to €66,805 million as of December 31, 2008 from €88,098 million as of December 31, 2007 and €57,805 million as of December 31, 2006. The decrease from December 31, 2007 to December 31, 2008 was primarily caused by high volatility in wholesale markets and tight interbank markets, which was exacerbated by the bankruptcy of Lehman Brothers in September 2008.
Customer deposits
Customer deposits amounted to €275,789 million as of December 31, 2010, compared to €254,183 million as of December 31, 2009 and €255,236 million as of December 31, 2008, compared to €219,610 million as of2008. The increase from December 31, 2007 and €186,749 million as of2009 to December 31, 2006. Customer funds increased principally due to2010 was primarily caused by an increase in time deposits in the domestic sector and savings accountslow-cost funds in Spain. the non-domestic sector.
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Our customer deposits, excluding assets sold under repurchase agreements amounted to €239,007€251,780 million as of December 31, 2008,2010 compared to €202,280€242,194 million as of December 31, 20072009 and €168,113€238,589 million as of December 31, 2006. Customer deposits increased principally2008.
Due to credit entities
Amounts due to an increasecredit entities amounted to €68,180 million as of December 31, 2010, compared to €70,312 million as of December 31, 2009 and €66,805 million as of December 31, 2008. The decrease as of December 31, 2010 compared to December 31, 2009, was primarily a result of a reduction in time deposits and savings accountsthe amount borrowed from the European Central Bank in Spain.2010.
Capital Marketsmarkets
We have increasedcontinued making debt issuances in the domestic and international capital markets in order to finance our activities and as of December 31, 2008,2010 we had €104,157€85,179 million of senior debt outstanding, comprising €84,172€71,964 million in bonds and debentures and €19,985€13,215 million in promissory notes and other securities, compared to €102,247€99,939 million, €96,488€70,357 million and €5,759€29,582 million outstanding as of December 31, 2007 and €86,4822009,respectively (€104,157 million, €78,926€84,172 million and €7,556€19,985 million outstanding, respectively, as of December 31, 2008). See Note 23.4 to the Consolidated Financial Statements.
In addition, we had a total of €11,569 million in Subordinated Debt including convertible subordinated obligations in an aggregated principal amount of €2,000 million issued in September 2009 and €5,202 million in Preferred Securities outstanding as of December 31, 2010, and included in the total of debt securities in issue, compared to €12,117 million and €5,188 million outstanding as of December 31, 2006, respectively. See Note 22.4 to the Consolidated Financial Statements. A total of €10,7852009, respectively,(€10,785 million in subordinated debt and €5,464 million in preferred stock issued or guaranteed by Banco Bilbao Vizcaya Argentaria, S.A. was outstanding as of December 31, 2008,
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compared to €10,834 million respectively). The breakdown of the outstanding Subordinated Debt and €4,561 million outstanding asPreferred Securities by entity issuer, maturity, interest rate and currency is disclosed in Appendix VIII of December 31, 2007 and €9,385 million and €4,025 million outstanding as of December 31, 2006, respectively. See Note 22.4 to the Consolidated Financial Statements.
The average maturity of our outstanding debtDebt Certificates and Subordinated Debt as of December 31, 20082010, was the following:
| | | | | |
Senior debtDebt | | | 4.32.9 years | |
Subordinated debtDebt (excluding preference shares)Preference Securities) | | | 8.98.5 years | |
The cost and availability of debt financings are influenced by credit ratings. A reduction in these ratings could increase the cost of, and reduce our access to, debt financing. As of December 31, 2008, our credit ratings were as follows:
| | | | | | | | | | | | | | | | |
| | Short Term | | | Long Term | | | Financial Strength | | | Outlook | |
|
Moody’s | | | P-1 | | | | Aa1 | | | | B | | | | Stable | |
Fitch — IBCA | | | F-1+ | | | | AA- | | | | A/B | | | | Positive | |
Standard & Poor’s | | | A-1+ | | | | AA | | | | — | | | | Stable | |
Generation of Cash Flow
We operate in Spain, Mexico, the United States and over 30 other countries, mainly in Europe and Latin America. Other than in ArgentinaOur banking subsidiaries around the world, including BBVA Compass, are subject to supervision and Venezuela, we are not awareregulation by a variety of any legal or economic restrictions onregulatory bodies relating to, among other things, the satisfaction of minimum capital requirements. The obligation to satisfy such capital requirements may affect the ability of our banking subsidiaries, including BBVA Compass, to transfer funds to us in the form of cash dividends, loans or advances. In addition, under the laws of the various jurisdictions where our parent companysubsidiaries, including BBVA Compass, are incorporated, dividends may only be paid out of funds legally available therefor. For example, BBVA Compass is incorporated in Alabama and under Alabama law it is not able to pay any dividends without the prior approval of the Superintendent of Banking of Alabama if the dividend would exceed the total net earnings for the year combined with the bank’s retained net earnings of the preceding two years.
Even where minimum capital requirements are met and funds are legally available therefore, the relevant regulator could advise against the transfer of funds to us in the form of cash dividends, loans or advances, capital repatriationfor prudence reasons or otherwise.
There is no assurance that in the future suchother similar restrictions will not be adopted or that, if adopted, they will not negatively affect our liquidity. The geographic diversification of our businesses, however, limitscould help to limit the effect ofon the Group any restrictions that could be adopted in any given country.
We believe that our working capital is sufficient for our present requirements and to pursue our planned business strategies.
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See Note 53 of the Consolidated Financial Statements for additional information on our Consolidated Statements of Cash Flows.
Capital
Under the Bank of Spain’s capital adequacy regulations, as of December 31, 2008, 20072010, 2009 and 2006,2008, we were required to have a ratio of consolidated stockholders’ equity to risk-weighted assets and off-balance sheet items (net of certain amounts) of not less than 8%. As of December 31, 2008,2010, this ratio was 11.57%11.9%, updown from 9.59%12.9% as of December 31, 2007,2009, and our stockholders’ equity exceeded the minimum level required by 39.6%48.5%, up from 19.5%37.9% at the prior year end. As of December 31, 2006,2008, this ratio was 11.23%11.2% and our stockholders’ equity exceeded the minimum level required by 40.4%28.6%.
Based on the framework of the Basel II and using such additional assumptions as we consider appropriate, we have estimated that as of December 31, 2008, 20072010, 2009 and 20062008 our consolidated Tier I risk-based capital ratio was 7.9%10.5%, 6.8%9.4% and 7.8%7.9%, respectively, and our consolidated total risk-based capital ratio (consisting of both Tier I capital and Tier II capital) was 12.2%13.7%, 10.7%13.6% and 12.0%12.2%, respectively. The Basel II recommends that these ratios be at least 4% and 8%., respectively.
For qualitative and quantitative information on the principal risks we face, including market, credit, and liquidity risks as well as information on funding and treasury policies and exchange rate risk, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.
Stress Test and Sovereign Debt Exposure
In July 2010, the Committee of European Banking Supervisors (CEBS), published the results of the stress tests performed in conjunction with national financial supervisors. The overall objective of this exercise was to provide policy information for assessing the resilience of the EU banking system to possible adverse economic developments and to assess the ability of banks to absorb possible shocks in credit and market risks, including potential sovereign defaults by European governments.
This stress test exercise was conducted on a sample of 91 European banks that represented 65% of the total assets of the EU banking sector as a whole. The commitment made at the European level was that participating institutions of each country should represent 50% of the banking sector. The Bank of Spain conducted the stress test for all saving banks and for almost all commercial banks, including all listed banks, which together represented 95% of the total assets of the Spanish banking sector.
The stress test focused mainly on credit and market risks, including the exposures to European sovereign debt. The focus of the stress test was on capital adequacy; liquidity risks were not directly stress tested. The exercise was carried out on the basis of the consolidated year-end 2009 figures and the scenarios have been applied over a period of two years — 2010 and 2011. The aggregate Tier I capital ratio was used as a common measure of banks resilience to shocks.
For the purpose of stress testing the credit risk and simulating profit and losses, two sets of macro-economic scenarios, namely benchmark and adverse, including sovereign shock, were used.
The adverse scenario incorporates in the case of Spain a high degree of stress that translates into a decline in GDP in2010-2011 of 2.6%, a decline in housing prices and other assumptions for the evolution of net operational income. The benchmark ratio was established as a ratio of Tier 1 capital to total risk weighted assets (RWA) of 6%. This is not a legal requirement.
In the worst case scenario prescribed under such tests for 2011, BBVA would maintain approximately the same Tier 1 capital ratio (9.3%) that it had at the end of 2009 (9.4%).
New stress tests in the euro area are expected to be published in June 2011.
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We present in the following table a detail of BBVA’s global exposure to European and non-European sovereign debt as of December 31, 2010:
| | | | | | | | | |
| | | (In millions of euros) | | | % | |
| |
Rating | | | | | | | | |
Higher than AA | | | 35,293 | | | | 56.23 | % |
Of which: | | | | | | | | |
Spain | | | 31,212 | | | | 49.72 | % |
AA or below | | | 27,475 | | | | 43.77 | % |
Of which: | | | | | | | | |
Mexico | | | 17,665 | | | | 28.14 | % |
Italy | | | 4,229 | | | | 6.74 | % |
Portugal | | | 58 | | | | 0.09 | % |
Ireland | | | — | | | | — | |
Greece | | | 107 | | | | 0.17 | % |
| | | | | | | | | |
Total | | | 62,768 | | | | 100 | % |
| | | | | | | | | |
| |
| C. | Research and Development, Patents and Licenses, etc. |
In 2008, the BBVA Group2010, we continued to foster the use of new technologies as a key component of itsour global development strategy. ItWe explored new business and growth opportunities, focusing on three major areas: emerging technologies; asset capture/exploitation; and the customer as the focal point of its banking business.
We didThe BBVA Group is not incur any significant researchmaterially dependent on the issuance of patents, licenses and development expensesindustrial, mercantile or financial contracts or on new manufacturing processes in 2008, 2007 and 2006.carrying out its business purpose.
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The European financial services sector is likely to remain competitive. Further consolidation in the sector (through mergers, acquisitions or alliances) is likely as the other major banks look to increase their market share or combine with complementary businesses or via acquisition of distressed entities. It is foreseeable that regulatory changes will take place in the future that will diminish barriers to such consolidation transactions. However, some of the hurdles that should be dealt with are the result of local preferences, such as consumer protection rules. If there are clear local consumer preferences, leading to specific local consumer protection rules, the same products cannot be sold across all the jurisdictions in which the Group operates, which reduces potential synergies. Certain challenges, such as the Value Added Tax regime for banks, do not however, relate to the interest or preferences of consumers.
The following are the most important trends, uncertainties and events that are reasonably likely to have a material adverse effect on us or that would cause the financial information disclosed herein not to be indicative of our future operating results or financial condition:
| | |
| | • | the prolonged downturn in the Spanish economy and sustained unemployment above historical averages; |
|
| • | the restructuring of the Spanish banking sector, specially with concentration in savings banks; |
|
| • | doubts about European peripheral economies will probably continue in 2011, so financial markets will remain closed; |
|
| • | uncertainties relating to the sustainability of any recovery in economic growth expectations and interest rate cycles, especially in the United States, where the high current account deficit of the U.S. economy may translate into an upward adjustment of risk premium and higher global interest rates. Now that there is a contagion of the crisis to Europe, and it is possible that the Spanish economy could enter into recession during 2009 or thereafter;rates; |
| |
| | • | the ongoingfragility of the recovery from the financial crisis triggered by defaults on subprime mortgages and related asset-backed securities in the United States which has significantly disrupted the liquidity of financial institutions and marketsmarkets; |
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| | |
| • | the fragility of the Greek, Portuguese and has been further exacerbated by worsening economic conditions inIrish economies, which could affect the real economy worldwide;funding costs of Spanish financial institutions and of the Government; |
| |
| | • | the downturn ineffects of the withdrawal of significant monetary and fiscal stimulus programs and uncertainty over government responses to growing public deficits; |
|
| • | uncertainty over regulation of the financial industry, including the potential limitation on the size or scope of the activities of certain financial institutions or additional capital requirements, coming both from the Bank of Spain or globally; |
|
| • | uncertainty over the minimum solvency levels to be required to the financial institutions by the Spanish economy could be worse than expected, if it is further exacerbated by the current international financial crisis;government; |
| |
| | • | the continued downward adjustment in the housing sector in Spain, which could be prolonged andfurther negatively affect credit demand and householdshousehold wealth, disposable income and consumer confidence. The existence of a significant over supply in the housing market in Spain and the pessimistic expectations about house price growthincreases are likely to postpone investment decisions, therefore negatively affecting mortgage growth ratesrates; |
| |
| | • | the ongoing slowdown in the U.S. financial sector, which is having negative effects on the U.S. economy and consequently in the global markets; |
|
| • | a further downturncontinued volatility in capital markets or a downturn in investor confidence, linked to factors such as geopolitical risk, particularly given the environment in the Middle East. Continued or new crises in the region could cause an increase in oil prices, generating inflationary pressures that will have a negative effect on interest rates and economic growth; |
| |
| | • | the effect that an economic slowdown may have over Latin American markets and fluctuations in local interest and exchange rates; and |
| |
| | • | although it is foreseeable that entry barriers to domestic markets in Europe will be lowered, our plans for expansion into other European markets could be affected by entry barriers in such countries and by protectionist policies of national governments.governments, which are generally higher in times of crisis. |
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| |
| E. | Off-Balance Sheet Arrangements |
In addition to loans, we had outstanding the following contingent liabilities and commitments at the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Contingent liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Rediscounts, endorsements and acceptances | | | 81 | | | | 58 | | | | 44 | | | | 49 | | | | 45 | | | | 81 | |
| Guarantees and other sureties | | | 27,649 | | | | 27,997 | | | | 24,708 | | | | 28,092 | | | | 26,266 | | | | 27,649 | |
| Other contingent liabilities | | | 8,222 | | | | 8,804 | | | | 5,235 | | | | 8,300 | | | | 6,874 | | | | 8,222 | |
| | | | | | | | | | | | | | | |
| Total contingent liabilities | | | 35,952 | | | | 36,859 | | | | 29,987 | | | | 36,441 | | | | 33,185 | | | | 35,952 | |
| | | | | | | | | | | | | | | |
Commitments: | | | | | | | | | | | | | | | | | | | | | | | | |
| Balances drawable by third parties: | | | | | | | | | | | | | | | | | | | | | | | | |
| Credit entities | | | 2,021 | | | | 2,619 | | | | 4,356 | | | | 2,303 | | | | 2,257 | | | | 2,021 | |
| Public authorities | | | 4,221 | | | | 4,419 | | | | 3,122 | | | | 4,135 | | | | 4,567 | | | | 4,221 | |
| Other domestic customers | | | 37,529 | | | | 42,448 | | | | 43,730 | | | | 27,201 | | | | 29,604 | | | | 37,529 | |
| Foreign customers | | | 48,892 | | | | 51,958 | | | | 47,018 | | | | 53,151 | | | | 48,497 | | | | 48,892 | |
| | | | | | | | | | | | | | | |
| Total balances drawable by third parties | | | 92,663 | | | | 101,444 | | | | 98,226 | | | | 86,790 | | | | 84,925 | | | | 92,663 | |
| Other commitments | | | 6,234 | | | | 5,496 | | | | 4,995 | | | | 3,784 | | | | 7,398 | | | | 6,234 | |
| | | | | | | | | | | | | | | |
| Total commitments | | | 98,897 | | | | 106,940 | | | | 103,221 | | | | 90,574 | | | | 92,323 | | | | 98,897 | |
| | | | | | | | | | | | | | | |
| Total contingent liabilities and commitments | | | 134,849 | | | | 143,799 | | | | 133,208 | | | | 127,015 | | | | 125,508 | | | | 134,849 | |
| | | | | | | | | | | | | | | |
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In addition to the contingent liabilities and commitments described above, the following table provides information regarding off-balance-sheet funds managed by us as of December 31, 2008, 20072010, 2009 and 2006:2008:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| Mutual funds | | | 37,076 | | | | 63,487 | | | | 62,246 | | | | 41,006 | | | | 39,849 | | | | 37,076 | |
| Pension funds | | | 42,701 | | | | 59,143 | | | | 55,505 | | | | 72,598 | | | | 57,264 | | | | 42,701 | |
| Other managed assets | | | 24,582 | | | | 31,936 | | | | 26,465 | | | | 25,435 | | | | 26,501 | | | | 24,582 | |
| | | | | | | | | | | | | | | |
Total | | | 104,359 | | | | 154,566 | | | | 144,216 | | | | 139,039 | | | | 123,614 | | | | 104,359 | |
| | | | | | | | | | | | | | | |
See Note 3738 to the Consolidated Financial Statements for additional information with respect to our off-balance sheet arrangements.
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| |
| F. | Tabular Disclosure of Contractual Obligations |
Our consolidated contractual obligations as of December 31, 20082010 based on when they are due, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Less Than
| | One to Five
| | Over
| | | | | Less Than One
| | One to Three
| | Three to Five
| | Over Five
| | | |
| | | One Year | | Years | | Five Years | | Total | | | Year | | Years | | Years | | Years | | Total | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| Senior debt | | | 35,376 | | | | 45,470 | | | | 20,483 | | | | 101,329 | | | | 23,462 | | | | 8,938 | | | | 33,969 | | | | 15,843 | | | | 82,212 | |
| Subordinated liabilities | | | 1,855 | | | | 3,582 | | | | 10,813 | | | | 16,250 | | |
| Subordinated debt | | | | 788 | | | | 948 | | | | 1,784 | | | | 13,251 | | | | 16,771 | |
| Capital lease obligations | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | — | |
| Operating lease obligations | | | 336 | | | | 87 | | | | 105 | | | | 528 | | | | 144 | | | | 71 | | | | 29 | | | | 89 | | | | 332 | |
| Purchase obligations | | | 33 | | | | 4 | | | | — | | | | 37 | | | | 26 | | | | — | | | | | | | | — | | | | 26 | |
| | | | | | | | | | | | | | | | | | | | | |
Total(*) | | | 37,600 | | | | 49,143 | | | | 31,401 | | | | 118,144 | | | | 24,420 | | | | 9,956 | | | | 35,782 | | | | 29,183 | | | | 99,341 | |
| | | | | | | | | | | | | | | | | | | | | |
| | |
| (*) | | Interest to be paid is not included. The majority of the senior and subordinated debt was issued at variable rates. The financial cost of such issuances for 2008, 20072010, 2009 and 20062008 is detailed in Note 38.239.2 to the Consolidated Financial Statements. Commitments with personnel for 2008, 20072010, 2009 and 20062008 are detailed in Note 2526 to the Consolidated Financial Statements. The breakdown by maturities of customer deposits for 2010, 2009 and 2008 is provided in Note 7 to the Consolidated Financial Statements. |
| |
| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Our boardBoard of directorsDirectors is committed to a good corporate governance system in the design and operation of our corporate bodies in the best interests of the Company and our shareholders.
Our boardBoard of directorsDirectors is subject to boardBoard regulations that reflect and implement the principles and elements of BBVA’s concept of corporate governance. These boardBoard regulations comprise standards for the internal management and operation of the boardBoard and its committees, as well as the rights and obligations of directors in pursuit of their duties, which are contained in the directors’ charter. Shareholders and investors may find these on our website (www.bbva.com).
The Annual General Meeting (“(“AGM”) has its own set of regulations on issues such as how it operates and what rights shareholders enjoy regarding AGMs. These establish the possibility of exercising or delegating votes over remote communication media.
Our Board of directorsDirectors has also approved a report on Corporate Governancecorporate governance for the year ended December 31, 2008,2010, according to the guidelines set forth under Spanish regulation for listed companies. It can be found on our website (www.bbva.com).
Our website was created as an instrument to facilitate information and communication with shareholders. It provides special direct access to all information considered relevant to BBVA’s corporate governance system in a user-friendly manner.
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| |
| A. | Directors and Senior Management |
We are managed by a boardBoard of directorsDirectors that currently has thirteen12 members. Pursuant to article one of the boardBoard regulations, independent directors are those external directors who have been appointed in view of their personal and professional qualifications and can carry out their duties without being compromised by their relationships with us, our significant shareholders or our senior managements. Independent directors may not:
a) Have been employees or executive directors in Group companies, unless three or five years, respectively, have passed since they ceased to be so.
b) Receive any amount or benefit from the Company or its Group companies for any reason other than remuneration of their directorship, unless it is insignificant.
Neither dividends nor supplementary pension payments that the director may receive from earlier professional or employment relationships shall be taken into account for the purposes of this section, provided
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they are not subject to conditions and the company paying them may not at its own discretion suspend, alter or revoke their accrual without breaching its obligations.
c) Be or have been a partner in the external auditors’ firm or in charge of the auditor’s report with respect to the Company or any other Group company during the last three years.
d) Be executive director or senior manager in any other company on which a Company executive director or senior manager is external director.
e) Maintain or have maintained during the past year an important business relationship with the Company or any of its Group companies, either onhis/her own behalf or as relevant shareholder, director or senior manager of a company that maintains or has maintained such relationship.
Business relationships shall mean relationships as provider of goodsand/or services, including financial, advisoryand/or consultancy services.
f) Be significant shareholders, executive directors or senior managers of any organisationorganization that receives or has received significant donations from the Company or its Group during the last three years.
Those who are merely trustees on a foundation receiving donations shall not be ineligible under this letter.
g) Be married to or linked by equivalent emotional relationship, or related by up to second-degree family ties to an executive director or senior manager of the Company.
h) Have not been proposed by the Appointments and Remuneration committeeCommittee for appointment or renewal.
i) Fall within the cases described under letters a), e), f) or g) of this section,above, with respect to any significant shareholder or shareholder represented on the Board. In cases of family relationships described under letter g), the limitation shall not only apply to the shareholder, but also to the directors it nominates for the Company’s Board.
Directors owning shares in the Company may be independent providing they comply with the above conditions and their shareholding is not legally considered as significant.
According to the latest recommendations on corporate governance, the boardBoard has established a limit on how long a director may remain independent. Directors may not remain on the boardBoard as independent directors after having sat on it as such for more than twelve years running.
Regulations of the Board of Directors
The principles and elements comprising the Bank’sour corporate governance are set forth in its boardour Board regulations, which govern the internal procedures and the operation of the boardBoard and its committees and directors’ rights and duties as described in their charter. Originally approved in 2004, these regulations were recentlyhave been amended in December 2008May 2010 to reflect the latest recommendations oncreation of two new committees: one in charge of Appointments and another one in charge of Compensation, which replace the previous Appointments & Compensation Committee in order to keep the Bank’s corporate governance as adjustedsystem at the forefront of governance practices and enhance the role of each committee by achieving
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greater specialization in each separate matter. Furthermore, our Board regulations have also been amended in February 2011 in order to adapt them to the Bank’s particular actual circumstances.amendments to the Spanish Companies Act (currently the Capital Companies Act), and the Spanish Auditing Law entered into force in 2010 as mentioned under Item 4 of this Annual Report.
The following discussion provides a brief description of several significant matters covered in the Regulationsregulations of the boardBoard of directors.Directors.
Appointment and Re-election of Directors
The proposals that the boardBoard submits to the Company’s AGM for the appointment or re-election of directors and the resolutions to appoint directors made by the boardBoard of directorsDirectors shall be approved at the proposal of the Appointments & Compensation committeeCommittee in the case of independent directors and on the basis of a report from said committee in the case of all other directors.
To such end, the committee assesses the skills, knowledge and experience required on the boardBoard and the capacities the candidates must offer to cover any vacant seats. It evaluates how much time and work members may
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need to carry out their duties properly as a function of the needs that the Company’s governing bodies may have at any time.
Term of Directorships and Director Age Limit
Directors shall stay in office for the term defined by the Company’sour bylaws under a resolution passed by the AGM (three years). If they havea director has been appointed to finish the unexpired term of another director, theyhe or she shall work out the term of office remaining toof the director whose vacancy they havehe or she covered through appointment, unless a proposal is put to the AGM to appoint themhim or her for the term of office established under the Company’sour bylaws.
BBVA’s corporate governance system establishes an age limit for sitting on the Bank’s board.Board. Directors must present their resignation at the first boardBoard meeting after the AGM approving the accounts of the year in which they reach the age of seventy.
Performance of Directors’ Duties
Board members must comply with their duties as defined by legislation and by the bylaws in a manner that is faithful to the interests of the Company.
They shall participate in the deliberations, discussions and debates arising on matters put to their consideration and shall have sufficient information to be able to form a sound opinion on the questions corresponding to the Bank’sour governing bodies. They may request additional information and advice if they so require in order to perform their duties. Their participation in the board’sBoard’s meetings and deliberations shall be encouraged.
The directors may also request help from external experts outside the Bank services inwith respect to business submitted to their consideration whose complexity or special importance makes it advisable.
Conflicts of interest
The rules comprising the BBVA directors’ charter detail different situations in which conflicts of interest could arise between directors, their family membersand/or organizations with which they are linked, and the BBVA Group. They establish procedures for such cases, in order to avoid conduct contrary to the Company’sour best interests.
These rules help ensure Directors’directors’ conduct reflects stringent ethical codes, in keeping with applicable standards and according to core values of the BBVA Group.
Incompatibilities
Directors are also subject to a regime of incompatibilities, which places strict constraints on holding posts on governing bodies of Group companies or companies in which the Group has a holding. Non-executive directors may
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not sit on the boards of subsidiarysubsidiaries or related companies because of the Group’s holding in them, whilst executive directors may only do so if they have express authority.
In the performance of their duties, directors will be subject to the rules on incompatibility established under prevailing legislation at any time and in particular under Act 31/1968, 27th July, on senior-management incompatibilities in the private-sector banking industry.
Directors may not, on their own behalf or on behalf of a third party, engage in an activity that is identical, similar or supplementary to that which constitutes the Company’s corporate purpose, unless it is with the express authorization of the Company, by resolution of the AGM, for the purpose of which they must inform the Board of Directors of that fact.
Moreover, directors who cease to be members of the Bank’s boardBoard may not offer their services to any other financial institution competing with the Bank or of its subsidiaries for two years after leaving, unless expressly authorized by the board.Board. Such authorization may be denied on the grounds of corporate interest.
Directors’ Resignation and Dismissal
Furthermore, in the following circumstances, reflected in the boardBoard regulations, directors must tender their resignation to the Board and accept its decision regarding their continuity in office (formalizing said resignation when the boardBoard so resolves):
| | |
| | • | When barred (on grounds of incompatibility or other) under prevailing legal regulations, under the bylaws or under the directors’ charter. |
| |
| | • | When significant changes occur in their professional situation or that may affect the condition by virtue of which they were appointed to the Board. |
102
| | |
| | • | When they are in serious dereliction of their duties as directors. |
| |
| | • | When the director, acting as such, has caused severe damage to the Company’s assets or its reputation or credit,and/or no longer displays the commercial and professional honor required to hold a Bank directorship. |
The Board of Directors
The boardOur Board of directorsDirectors is currently comprised of 13 members. 12 members, as in the meeting held on March 29, 2011 the Board accepted the resignation of Mr. Rafael Bermejo Blanco as member of the Board due to the fact that he had reached the age limit provided in the regulations of the Board.
Our Board of Directors has also agreed the appointment of Mr. José Luis Palao García-Suelto as member and chairman of the Audit and Compliance Committee.
117
The following table sets forth the names of the members of the boardBoard of directorsDirectors as of thethat date of this Annual Report onForm 20-F, their date of appointment and, if applicable, reelection, their current positions and their present principal outside occupation and five-year employment history.
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | Present Principal
|
| | | | | | | | | | | | | Outside Occupation
|
| | | | | | | | | | Date
| | | and Five-YearEmployment
|
Name | | Birth Year | | | Current Position | | Date Nominated | | Date Re-elected | | Employment | History(*) |
| |
| Francisco González Rodríguez(1) | | | 1944 | | | Chairman and
Chief
Executive
Officer | | January 28,
2000 | | February 26,
2005 | March 12, 2010 | | | Chairman &CEOand CEO of BBVA, since January 2000. Director of BBVA Bancomer Servicios, S.A.; Grupo Financiero BBVA Bancomer, S.A. de C.V. and BBVA Bancomer S.A. |
José Ignacio Goirigolzarri Tellaeche(1)Angel Cano Fernández(1) | | | 19541961 | | | President and
Chief
Operating
Officer | | December 18,
2001September 29, 2009 | | | March 14,
200812, 2010 | | | President and Chief Operating Officer, BBVA, since 2001. Director2009. Substitute director of BBVA Bancomer Servicios, S.A.; Director, Grupo Financiero BBVA Bancomer and BBVA Bancomer, S.A. de C.V. Citic Bank board member. BBVA Director of Resources and Means from 2005 to 2009. |
| Tomás Alfaro Drake(2)(3) | | | 1951 | | | Independent
Director | | March 18,
2006 | | | March 11, 2011 | | | Chairman of the Appointments Committee of BBVA since May 25, 2010. Director of Business Management and Administration and Business Sciences programs at Universidad Francisco de Vitoria since 1998. |
Juan Carlos Álvarez Mezquíriz(1)(3)(4) | | | 1959 | | | Independent
Director | | January 28,
2000 | | | March 18,
200611, 2011 | | | Managing Director of Grupo Eulen,El Enebro, S.A. |
Rafael Bermejo Blanco(2)(4) | | | 1940 | | | Independent
Former Manager Director | | March 16,
2007 | | | | Chairman of the Audit & Compliance Committee of BBVA since 28th March 2007. Technical Secretary General of Banco Popular, 1999 — 2004.Grupo Eulen. S.A. until 2010. |
Ramón Bustamante y de la Mora(2)(4)(5) | | | 1948 | | | Independent
Director | | January 28,
2000 | | February 26,
2005 | | Since 1997 he is Chairman of Unitaria. |
103
| | | March 12, 2010 | | | | | | | | | |
| | | | | | | | | | | Present Principal
|
| | | | | | | | | | | Outside Occupation
|
| | | | | | | | | | | Was Director and Five-Year
|
Name
| | Birth Year | | | Current Position | | Date Nominated | | Date Re-elected | | Employment History(*) |
| General Manager and Non-Executive Vice-President of Argentaria and Chairman of Unitaria (1997). |
José Antonio Fernández Rivero(4)Rivero(3)(5) | | | 1949 | | | Independent
Director | | February 28,
2004 | | | March 13, 2009 | | | Chairman of RisksRisk Committee since 30th March 30, 2004; AppointedOn 2001 was appointed Group General Manager, 2000--2003; From 2003 to 2005: Deputy Chairmanuntil January 2003. Has been director representing BBVA on the Boards of Telefónica, and Member of its Audit and Regulation Committees. Member of the Board and Executive Committee of Iberdrola, Directorand of Banco de Crédito Local, and Chairman of Adquira. |
Ignacio Ferrero Jordi(1)(3)(4) | | | 1945 | | | Independent
Director | | January 28,
2000 | | February 26,
2005 | March 12, 2010 | | Chairman and COO | Chief Operating Officer of Nutrexpa, S.A. and La Piara, S.A. |
Román Knörr Borrás(1) | | | 1939 | | | Independent
Director | | May 28,
2002 | | March 14,
2008 | | Chairman, Carbónicas Alavesas, S.A.; Director, Mediasal 2000, S.A. and President of the Alava Chamber of Commerce; Chairman, Confebask (Basque Business Confederation) from 1999 to 2005; Director of Aguas de San Martín de Veri, S.A. until January 2006. Plenary member and Chairman of the Training Committee of the Supreme Council of Chambers of Commerce.Aneto Natural. |
Carlos Loring Martínez de Irujo(2)(3)(4) | | | 1947 | | | Independent
Director | | February 28,
2004 | | | March 18,
200611, 2011 | | | Chairman of the Compensation Committee of BBVA since May 2010 (former Chairman of the Appointments and Compensation Committee since April 2006). Was Partner of J&A Garrigues, from 1977 until 2004; Director of the Department of Mergers and Acquisitions, of Banking and Capital Markets, Member of the Management Committee since 19852004. |
José Maldonado Ramos(4)Ramos (3)(4)(5) | | | 1952 | | | External Director and
General
Secretary | | January 28,
2000 | | February 28,
2004 | March 13, 2009 | | | Was appointed Director and General Secretary of BBVA, sincein January 2000. Took early retirement as Bank executive in December 2009. |
Enrique Medina Fernández(1)(4)(5) | | | 1942 | | | Independent
Director | | January 28,
2000 | | February 28,
2004 | March 13, 2009 | | | State Attorney on Sabbatical. Deputy Chairman of Gines Navarro Construcciones until it merged to become Grupo ACS. |
| José Luis Palao García-Suelto(2) | | | 1944 | | | Independent Director | | February 1, 2011 | | | March 11, 2011 | | | Chairman of the Audit and Compliance Committee of BBVA since March 29, 2011. Senior Partner of the Financial Division in Spain at Arthur Andersen, from 1979 until 2002. Freelance consultant, from 2002 to 2010. |
| Susana Rodríguez Vidarte(2)(3)(4) | | | 1955 | | | Independent
Director | | May 28,
2002 | | | March 18,
200611, 2011 | | | Was Dean of Deusto “La Comercial” University since 1996.1996-2009. Member of the accounts auditing institute. |
104
| | |
| (*) | | Where no date is provided, the position is currently held. |
| | |
| (1) | | Member of the Executive Committee. |
| |
| (2) | | Member of the Audit and Compliance Committee. |
| |
| (3) | | Member of the Appointments and Compensation Committee. |
| |
| (4) | | Member of the RiskCompensation Committee. |
| |
| (5) | | SecretaryMember of the board of directors.Risk Committee. |
118
Executive Officers(Comité or Management Committee (Comité de Dirección)
Our executive officers were each appointed for an indefinite term. Their positions as of the date of this Annual Report onForm 20-F are as follows:
| | | | | |
| | | | | Present Principal Outside Occupation and
|
Name | | Current Position | | Five-Year Employment History(*)
|
| |
| Francisco González Rodríguez | | Chairman and
Chief Executive Officer | | Chairman, BBVA, since January 2000. Director of BBVA Bancomer Servicios, S.A; Grupo Financiero BBVA Bancomer, S.A. de C.V. and BBVA Bancomer, S.A. |
José Ignacio Goirigolzarri TellaecheÁngel Cano Fernández | | President and
Chief Operating Officer | | Director, BBVA Bancomer Servicios, S.A.,Substitute director, Grupo Financiero BBVA Bancomer and BBVA Bancomer, S.A. |
José Maldonado Ramos | | Director and
General Secretary | | Director and General Secretary, Argentaria (BBVA since January 2001), since May 1997. de CV |
| Eduardo Arbizu Lostao | | Head of Legal, Tax,
Audit and Compliance
department | | Head of Legal department of BBVA, since 2002; Chief Executive Officer, Barclays Bank Spain, 1997 —to 2002. |
Ángel Cano Fernández | | Human Resources
and Services | | Chief Financial Officer, BBVA, 2001 — 2002, Controller, BBVA, 2000 — 2001; Controller, Argentaria, 1998 — 2000. |
| Manuel González Cid | | Head of Finance Division | | Deputy General Manager, BBVA — Head of the Merger Office, 1999 — 2001;to 2001. Head of Corporate Development, BBVA, 2001 —to 2002. Director and Vice president of Repsol YPF, S.A. 2003-2005. |
José Sevilla Álvarez | | Head of Risk | | Head of Finance Division, Latin American Banking, BBV, 1998 — December 2001; Head of Business Development, BBVA, December 2001 — January 2003; Head of the Office of the Chairman, with responsibility for accountancy, internal audit and compliance, since January 2003-2006. |
105
| | | | |
| | | | Present Principal Outside Occupation and
|
Name
| | Current Position
| | Five-Year Employment History(*)
|
|
José María García Meyer-Dohner | | Head of United StatesGlobal Retail Business Banking | | BBVA Business Management and Coordination Manager for Mexico, 2000-2001. Commercial Banking Manager for BBVA Bancomer, 2001 — 2004.2001-2004. From 2004 Head of USA, Country Manager and Chairman of BBVA Compass. Global Retail Business Banking Manager for the U.S., August 2004.since 2010. |
| Ignacio Deschamps González | | Head of Mexico | | Commercial Banking Director for BBVA Bancomer to 2006. General Director of BBVA Bancomer since December 2006. |
| Juan Asúa Madariaga | | Head of Corporate and Business -
Spain-Spain and Portugal | | Global Corporate Banking Director, BBVA, 2000. E-Commerce Director, BBVA, 2000 — 2001.2000-2001. Corporate Global Banking Director, BBVA, 2001-2005. |
| Jose Barreiro Hernández | | Head of Global OperationsWholesale Banking and Asset Management | | Spanish Markets Director, BBVA, 2000-2001. Head of Global Markets and Distribution, Trading and Equity, BBVA, 2001 — 2005.2001-2005. |
| Vicente Rodero Rodero | | Head of South America | | BBVA Corporate Banking Director for Mexico, 1995-1999. BBVA Personal Banking Director, 1999-2003. BBVA Regional Director for Madrid, 2003-2004. BBVA Commercial Banking Director for Spain, 2004-2006. |
VilaCarlos Torres CarlosVila | | Head of Strategy &
Development | | BBVA Corporate Strategy & Development Director since January 2009. He entered in BBVA on September 2008. Before he worked five years in Endesa as Strategy Corporate Director. |
| Gregorio Panadero Illera | | Head of Brand and Communication | | From April 1, 2009, Head of BBVA Corporate Brand & Communications Department. Director of Communications and Corporate Responsibility at Grupo Ferrovial from 2006 to 2009. |
| Manuel Castro Aladro | | Head of Risk | | Head of BBVA Risk Department since September 2009. Director of Innovation and Business Development from 2005 to 2009. |
| Ramón Monell Valls | | Head of Innovation & Technology | | Head of BBVA Innovation and Technology since September 2009. From 2002-2005 Chief Operating Officer of BBVA in Chile. BBVA Director of Technology & Operations. (2006-2009). |
| Juan Ignacio Apoita Gordo | | Head of Human Resources & Services | | BBVA Head of Human Resources and Services since September 2009 BBVA Head of Human Resources Director from 2006 to 2009. |
| Manuel Sánchez Rodríguez | | Head of United States | | Working at BBVA since 1990. From 2002-2005 Risks Manager at BBVA Bancomer in Mexico. From 2005-2080 Laredo National Bank. CEO of BBVA Compass from 2008 and Country Manager from 2010. |
| | |
| (*) | | Where no date is provided, positions are currently held. |
119
From April 1, 2009, Gregorio Panadero Illera is the new Head of Corporate Communications Department instead of Javier Ayuso Canals who left his position as Executive Officer at March 31, 2009.
The provisions of BBVA’s bylaws that relate to compensation of directors are in strict accordance with the relevant provisions of Spanish law. The main provisions of the bylaws that relate to these matters are those that, in accordance with applicable Spanish law, allow the members of the boardBoard of directorsDirectors to determine their administration costs or agree on such additional benefits they consider appropriate or necessary, up to an amount equivalent to four percent of ourpaid-up capital per year from the net earnings, which may only be paid after the minimum yearly dividend ofequivalent to four percent of the paid-in capital has been paid to our shareholders. As of the date of the filing of this Annual Report, 10 of the 13 members of the board of directors were independent.
106
Remuneration of non-executive Directors
The following table presents information regarding the compensation (in thousands of euros)remuneration paid to each memberindividual non-executive members of our boardthe Board of directors serving during 2008:Directors in 2010 is indicated below, broken down by type of remuneration in thousand of euros:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Appointments
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Audit and
| | | | and
| | | | | | | |
| | | | | Standing
| | | | | | Appointments and
| | | | | | | Executive
| | Compliance
| | Risk
| | Compensation
| | Appointments
| | Compensation
| | | |
| | | Board | | Committee | | Audit. | | Risks | | Compensation | | Total | | | Board | | Committee | | Committee | | Committee | | Committee(4) | | Committee(5) | | Committee(5) | | Total | |
| |
| Tomás Alfaro Drake | | | 129 | | | | — | | | | 71 | | | | — | | | | — | | | | 200 | | | | 129 | | | | — | | | | 71 | | | | — | | | | — | | | | 59 | | | | — | | | | 259 | |
| Juan Carlos Álvarez Mezquiriz | | | 129 | | | | 167 | | | | — | | | | — | | | | 42 | | | | 338 | | | | 129 | | | | 167 | | | | — | | | | — | | | | 18 | | | | — | | | | 25 | | | | 339 | |
| Rafael Bermejo Blanco | | | 129 | | | | — | | | | 179 | | | | 107 | | | | — | | | | 415 | | |
| Richard C. Breeden | | | 350 | | | | — | | | | — | | | | — | | | | — | | | | 350 | | |
| Rafael Bermejo Blanco(*) | | | | 129 | | | | — | | | | 179 | | | | 107 | | | | — | | | | — | | | | — | | | | 415 | |
| Ramón Bustamante y de La Mora | | | 129 | | | | — | | | | 71 | | | | 107 | | | | — | | | | 307 | | | | 129 | | | | — | | | | 71 | | | | 107 | | | | — | | | | — | | | | — | | | | 307 | |
| José Antonio Fernández Rivero(1) | | | 129 | | | | — | | | | — | | | | 214 | | | | — | | | | 343 | | | | 129 | | | | — | | | | — | | | | 214 | | | | — | | | | 23 | | | | — | | | | 366 | |
| Ignacio Ferrero Jordi | | | 129 | | | | 167 | | | | — | | | | — | | | | 42 | | | | 338 | | | | 129 | | | | 167 | | | | — | | | | — | | | | 18 | | | | — | | | | 25 | | | | 339 | |
| Román Knörr Borrás | | | 129 | | | | 167 | | | | — | | | | — | | | | — | | | | 296 | | |
| Carlos Loring Martínez de Irujo | | | 129 | | | | — | | | | 71 | | | | — | | | | 107 | | | | 307 | | | | 129 | | | | — | | | | 71 | | | | — | | | | 45 | | | | — | | | | 62 | | | | 307 | |
| José Maldonado Ramos | | | | 129 | | | | — | | | | — | | | | 107 | | | | — | | | | 23 | | | | 25 | | | | 284 | |
| Enrique Medina Fernández | | | 129 | | | | 167 | | | | — | | | | 107 | | | | — | | | | 403 | | | | 129 | | | | 167 | | | | — | | | | 107 | | | | — | | | | — | | | | — | | | | 403 | |
| Susana Rodríguez Vidarte | | | 129 | | | | — | | | | 71 | | | | — | | | | 42 | | | | 242 | | | | 129 | | | | — | | | | 71 | | | | — | | | | 18 | | | | 23 | | | | 25 | | | | 266 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1,640 | | | | 668 | | | | 463 | | | | 535 | | | | 233 | | | | 3,539 | | |
Total(3) | | | | 1,290 | | | | 501 | | | | 463 | | | | 642 | | | | 99 | | | | 128 | | | | 162 | | | | 3,284 | |
| | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | In 2008, Mr. José Antonio Fernández Rivero, apart from the amounts listed in additionthe previous table, also received a total of €652 thousand during 2010 in early retirement payments as a former member of the BBVA management. |
|
| (2) | | José Maldonado Ramos, who stood down as a BBVA executive on December 22, 2009, apart from the amounts shown in the previous table, also received a total of €805 thousand during 2010 as variable remuneration accrued during 2009 for his former position as BBVA Secretary. |
|
| (3) | | Roman Knörr Borrás, who stood down as director on March 23, 2010, received a total of €74 thousand in 2010 as remuneration for belonging to the amounts detailedBoard of Directors and the Executive Committee until that date. |
|
| (4) | | Under a Board of Directors resolution of May 25, 2010, two new Board committees were set up, the Appointments Committee and the Compensation Committee, to replace the former Appointments & Compensation Committee. The amount included in the table above also received €652 thousand for early retirement from his previous management responsibilitiesrelates to amounts paid until the creation of the two new committees |
|
| (5) | | The amount included in BBVA.the table above relates to amounts paid since the creation of the new committees. |
|
| (*) | | As previously mentioned, in the meeting held on March 29, 2011, the Board accepted the resignation of Mr. Rafael Bermejo Blanco as member of the Board due to the fact that he had reached the age limit provided in the Regulations of the Board. |
120
Remuneration of executive Directorsdirectors
The remuneration paid to theindividual executive Directors during 2008directors in 2010 is indicated below. The figures are given individually for each executive director and itemized in thousand euros.below, broken down by type of remuneration (in thousands of euros):
| | | | | | | | | | | | | |
| | | Fixed
| | | Variable
| | | | |
| | | Remunerations | | | Remunerations(1) | | | Total(2) | |
| |
Chairman & CEO | | | 1,928 | | | | 3,802 | | | | 5,729 | |
President & COO | | | 1,425 | | | | 3,183 | | | | 4,609 | |
Company Secretary | | | 665 | | | | 886 | | | | 1,552 | |
| | | | | | | | | | | | | |
Total | | | 4,019 | | | | 7,871 | | | | 11,890 | |
| | | | | | | | | | | | | |
| | | Fixed
| | | Variable
| | | | |
| | | Remuneration | | | Remuneration(*) | | | Total (**) | |
| |
Chairman and CEO | | | 1,928 | | | | 3,388 | | | | 5,316 | |
President and COO | | | 1,249 | | | | 1,482 | | | | 2,731 | |
| | | | | | | | | | | | | |
Total | | | 3,177 | | | | 4,870 | | | | 8,046 | |
| | |
(1)(*) | | Figures relating tofor the variable remuneration for 2007 paidpay from 2009 received in 2008.2010. |
| |
(2)(**) | | In addition, the executive directors receivedThe remuneration in kind during 2008 totaling €38 thousand, of which €9 thousand relatespaid to the Chairmancurrent President and COO, who was appointed on September 29, 2009, includes the amount payable as Head of Resources & CEO, €16 thousand relates toSystems for the time he occupied this position (9 months) and the remuneration earned as President &and COO and €13 thousand to the Company Secretary.since his appointment. |
In addition, the executive directors receivedpayment-in-kind during 2010 totaling €32 thousand, of which €10 thousand relates to the Chairman and CEO and €22 thousand relates to the President and COO.
The executive directors also earned aaccrued variable remuneration during 2008, which wasfor 2010, to be paid in 2011, amounting to them during 2009. The amount earned by€3,011 thousand in the case of the Chairman&CEO was €3,416 thousand; and CEO and €1,889 thousand in the President&COO earned €2,861 thousand whilecase of the Company Secretary earned €815 thousand. President and COO.
These amounts are recognized under the headingitem “Other Assetsliabilities — Accrued Expenses and Deferred Income”Accruals” on the liability side in the accompanying consolidated balance sheet as of December 31, 2008.2010.
Remuneration of the members of the Management Committee
The remuneration paid during 2008in 2010 to the members of BBVA’s Management Committee excludingwho held such position as of December 31, 2010, other than the executive directors, comprised €6,768amounted to €7,376 thousand ofin fixed remuneration and €13,320€15,174 thousand ofin variable remuneration accrued in 20082009 and paid in 2009.2010.
107
In addition, the members of the Management Committee excludingwho held such position as of December 31, 2010, other than the executive directors, received remuneration in kind and other items totaling €369€807 thousand in 2008.
This paragraph includes information of the members of the Management committee as of December 31, 2008, excluding the executive directors.2010.
Pension Commitments
The provisions recorded as of December 31, 2008 to cover the commitments assumed in relation to executive director pensions, including the allowances recorded in 2008 amounted to €19,968 thousand, broken down as follows:
| | | | |
Post
| | (In thousands of euros) |
|
Chairman & CEO | | | 72,547 | |
President & COO | | | 52,495 | |
Company Secretary | | | 8,710 | |
| | | | |
TOTAL
| | | 133,752 | |
Insurance premiums amounting to €78 thousand were paid on behalf of the non-executive directors on the board of directors.
The provisions charged as of December 31, 2008 for post-employment commitments for the Management committee members, excluding executive directors, amounted to €51,326 thousand. Of these, €16,678 thousand were charged in the year.
Long-term shareVariable multi-year stock remuneration plan(2006-2008)program for executive directors and members of the Management committeeCommittee
OnSettlement of the multi-year variable share-based remuneration plan for2009-2010
The AGM of the Bank held on March 18, 2006, the general shareholders’ meeting13, 2009 approved a long-term planMulti-Year Variable Share-Based Remuneration Plan for remuneration of executives with shares for the period 2006 to 2008. The plan was2009/2010 (the “2009/2010 Program”) for members of BBVA’s executive team. The number of shares to be allocated to each beneficiary of the management team, including2009/2010 Program is obtained by multiplying the initial number of units assigned to each such beneficiary by a coefficient ranging from 0 to 2. This coefficient reflects the relative performance of BBVA’s total stockholder return (TSR) during the period2009-2010 compared to the TSR of a group of 18 international banks of reference.
In accordance with the resolution of the AGM, the number of units allocated to BBVA executive directors under the 2009/2010 Program was 215,000 for the Chairman and CEO, 131,707 for the President and COO, and 817,464 for members of the Management Committee who held such position as of December 31, 2010, excluding executive directors.
Once the 2009/2010 Program period was completed, on December 31, 2010, the TSR for BBVA and will be paid out in the second half18 reference banks was calculated. Since the resulting coefficient was zero, the 2009/2010 Program was settled without any allocation of 2009.shares to the beneficiaries.
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Multi-year variable share-based remuneration plan for2010-2011
The plan allocated each beneficiary a certain number of theoretical shares as a function of their variable pay and their level of responsibility. At the endAGM of the plan,Bank held on March 12, 2010, approved a new Multi-Year Variable Share-Based Remuneration Plan for2010-2011 (the “2010/2011 Program”) for members of the theoretical shares are used as a basis to allocate BBVA shares toexecutive team, which will end on December 31, 2011 and be settled on April 15, 2012 (although early settlement is also allowed under the beneficiaries, should the initial requirements be met.Program).
The number of shares to be deliveredgiven to each beneficiary isof the 2010/2011 Program will be determined by multiplying the number of theoretical sharesunits allocated to themeach such beneficiary by a coefficient ofranging between 0 and 2. This coefficient reflects the relative performance of BBVA’s total shareholder value (“TSR”)stockholder return (TSR) during the period 20062010-2011 compared to 2008 compared against the TSR of its European peer group.a group of the Bank’s international peers.
Although this groupThese shares will be given to their beneficiaries after the settlement of banks was determined in a resolution approvedthe Program. They will be able to use these shares as follows: (i) 40 percent of the shares received will be freely transferable by shareholders in general meeting on March 18, 2006, the Board,beneficiaries at the proposalmoment they are received; (ii) 30 percent of the Appointments and Remuneration Committee, exercisingshares received will be transferable one year after the powers delegated to its at the shareholders’ meeting, agreed to modify the compositionsettlement date of the peer group inProgram; and (iii) the wakeremaining 30 percent will be transferable starting two years after the settlement date of merger and acquisition activity involving certain banks, by adjusting the plan coefficients to take such activity into account.Program.
The number of theoretical shares allocated tounits assigned for the executive directors in accordance withunder the plan ratified at the shareholders’ meeting, was 320,000AGM resolution is 105,000 for the Chairman&CEO, 270,000 and CEO and 90,000 for the President & CEO and 100,000 for the Board Secretary.
COO. The total number of theoretical shares allocatedunits assigned under this Program to the Management Committee members who held this position on December 31, 2010, excluding executive directors, as of December 31, 2008, was 1,124,166.385,000.
Upon conclusionScheme for remuneration of the plan on December 31, 2008, the TSR was determined for BBVA and its peers in accordanceNon-executive Directors with the terms established at the outset and as subsequently modified as described above, BBVA ranked third among its peers, so that the coefficient to be applied to the numberdeferred distribution of theoretical shares assigned to each beneficiary to determine the number of BBVA shares to be distributed to them is a factor of 1.42.
108
As a result, the number of shares to be delivered under the plan to each of the executive directors and members of the Management Committee as of December 31, 2008, is as follows:
| | | | | | | | | | | | | |
| | | Number Assigned
| | | Multiplier
| | | Number
| |
| | | Theoretical Shares | | | Ratio | | | of Shares | |
| |
| Chairman & CEO | | | 320,000 | | | | 1.42 | | | | 454,400 | |
| President & COO | | | 270,000 | | | | 1.42 | | | | 383,400 | |
| Director & Company Secretary | | | 100,000 | | | | 1.42 | | | | 142,000 | |
| Other members of board of directors | | | 1,124,166 | | | | 1.42 | | | | 1,596,316 | |
The Bank’s Shareholder General Meeting held on March 13, 2009 passed a resolution approving the settlementAGM of the referred long-term plan for remuneration of executives with shares for the period 2006 to 2008. The settlement of the plan has been executed on 30th March 2009.
Remuneration System for Non-Executive Directors with Deferred Delivery of Shares
On March 18, 2006 the general shareholders’ meeting resolved, under agenda item number eight, to establish a remuneration plan usingscheme based on the deferred deliverydistribution of BBVA shares to the Bank’s non-executive directors, to substitutereplace the earlier plan that had coveredpost-employment scheme in place for these directors.
The new plan assigns theoreticalis based on the annual assignment to non-executive directors of a number of “theoretical shares” equivalent to 20% of the total remuneration received by each of them in the previous year. The share price used in the calculation is the average closing price of the BBVA shares in the sixty stock market sessions before the dates of the ordinary AGMs that approve the annual financial statements for each yearyear. The shares will be given to each beneficiary on the date he or she leaves the position of director for any reason except serious breach of duties.
The number of “theoretical shares” allocated to non-executive director beneficiaries under the deferred share distribution scheme approved by the AGM for 2010, equivalent to 20% of the total remuneration paid to each such beneficiary in the previous year, using the average of BBVA stock closing prices from the sixty trading sessions prior to the AGM that approves the financial statements for the years covered by the plan starting from the year 2007. These shares, where applicable, are to be delivered when the beneficiaries cease to be directors on any grounds other than serious dereliction of duties.
The number of theoretical shares allocated to non-executive director beneficiaries under the deferred share delivery scheme approved at the shareholders’ meeting in 2008 corresponding to 20% of the total remuneration paid to each in 2007,2009, is set forthout below:
| | | | | | | | | | |
| | | | | Accumulative
| | |
| | | 2008
| | Number
| | | | | | | | | |
| | | Theoretical
| | of Theoretical
| | | Theoretical
| | Accumulated
| |
Directors | | Shares | | Shares | | | Shares | | Theoretical Shares | |
| |
| Tomás Alfaro Drake | | | 2,655 | | | | 4,062 | | | | 3,521 | | | | 13,228 | |
| Juan Carlos Alvarez Mezquiriz | | | 4,477 | | | | 23,968 | | |
| Rafael Bermejo Blanco | | | 4,306 | | | | 4,306 | | |
| Juan Carlos Álvarez Mezquíriz | | | | 5,952 | | | | 39,463 | |
| Rafael Bermejo Blanco(*) | | | | 7,286 | | | | 23,275 | |
| Ramón Bustamante y de la Mora | | | 4,064 | | | | 23,987 | | | | 5,401 | | | | 38,049 | |
| José Antonio Fernández Rivero | | | 4,533 | | | | 14,452 | | | | 6,026 | | | | 30,141 | |
| Ignacio Ferrero Jordi | | | 4,477 | | | | 24,540 | | | | 5,952 | | | | 40,035 | |
| Román Knörr Borrás | | | 3,912 | | | | 19,503 | | |
| Carlos Loring Martínez de Irujo | | | 4,067 | | | | 11,751 | | | | 5,405 | | | | 25,823 | |
| Enrique Medina Fernández | | | 5,322 | | | | 33,357 | | | | 7,079 | | | | 51,787 | |
| Susana Rodríguez Vidarte | | | 3,085 | | | | 13,596 | | | | 4,274 | | | | 24,724 | |
| | | | | | | | | | | |
TOTAL | | | 40,898 | | | | 173,522 | | |
| Total(**) | | | | 50,896 | | | | 286,525 | |
| | | | | | | |
Severance Payments
The Chairman of the board will be entitled to retire as an executive director at any time after his 65th birthdays and the President&COO and the Company Secretary after their 62nd birthday. They will all be entitled to the maximum percentage established under their contracts for retirement pension, and vesting their right to the pension once they reach said ages will render the indemnity agreed under their contracts null and void.
The contracts of the Bank’s executive directors (Chairman&CEO, President&COO, and Company Secretary) recognize their entitlement to be compensated should they leave their post for grounds other than their own decision, retirement, disablement or serious dereliction of duty. Had this occurred during the year 2009, they would
| | |
| (*) | | As previously mentioned, in the meeting held on March 29, 2011, the Board accepted the resignation of Mr. Rafael Bermejo Blanco as member of the Board due to the fact that he had reached the age limit provided in the Regulations of the Board. |
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have received the following amounts: €80,833 thousand
| | |
| (**) | | Additionally 5,198 shares were assigned to Mr. Roman Knörr Borrás who resigned as a member of the Board in the meeting held on March 23, 2010, as he had reached the age limit provided in the Board regulations. |
Pension commitments
The provisions registered as of December 31, 2010 for the Chairman&CEO; €60,991 thousand forpension commitments relating to the President &and COO and €13,958were €14,551 thousand, forof which €941 thousand were charged against 2010 earnings. As of the Company Secretary.date of this Annual Report, there are no other pension obligations to executive directors.
In orderaddition, insurance premiums amounting to receive such compensation, directors must place their directorships at the disposal€95 thousand were paid on behalf of non-executive members of the board, resign from any posts that they may holdBoard of Directors.
The provisions registered as representativesof December 31, 2010 for pension commitments relating to Management Committee members, excluding executive directors, amounted to €51,986 thousand, of which €6,756 thousand were charged against 2010 earnings.
Severance payments
There were no commitments as of December 31, 2010 for the payment of severance compensation to executive directors.
In the case of the BankPresident and COO, the provisions of his employment contract stipulate that in other companies, and waive prior employment agreements with the Bank, includingevent that he loses this position for any senior management positions and any right to obtain compensationreason other than that already indicated.
Upon resignation,his own will, retirement, disability or serious dereliction of duty, he will take early retirement with a pension payable either as a life annuity or as lump sum payment equal to 75% of his pensionable salary, if this should occur before he reaches 55 years of age, or 85% of such directors will be disqualified from providing services to other financial institutions in competition with the Bank or its subsidiaries for two years, as established in the board regulations.salary after this age.
Committees
BBVA’sOur corporate governance system is based on the distribution of functions between the board,Board, the Executive committeeCommittee and the other board committees,Board Committees, namely: the Audit &and Compliance Committee; the Appointments &Committee; the Compensation Committee; and the RisksRisk Committee.
Our Board of Directors resolved at its meeting of May 25, 2010 to set up two new committees: one in charge of Appointments and another one in charge of Compensation, which replace the previous Appointments & Compensation Committee in order to keep the Bank’s corporate governance system at the forefront of governance practices and enhance the role of each committee by achieving greater specialization in each separate matter.
Executive Committee
BBVA’s boardOur Board of directorsDirectors is assisted in fulfilling its responsibilities by the Executive Committee (Comisión Delegada Permanente) of the boardBoard of directorsDirectors. The boardBoard of directorsDirectors delegates all management functions, except those that it must retain due to legal or statutory requirements, to the Executive Committee.
As of the date of this Annual Report, BBVA’s Executive Committee was comprised of two executive directors and fourthree independent directors, as follows.
| | | |
| Chairman and Chief Executive Officer: | | Mr. Francisco González Rodríguez |
| President and Chief Operating Officer: | | Mr. José Ignacio Goirigolzarri TellaecheÁngel Cano Fernandez |
| Members: | | Mr. Juan Carlos Álvarez Mezquíriz |
| | | Mr. Ignacio Ferrero Jordi |
| | | Mr. Román Knörr Borrás |
| | Mr. Enrique Medina Fernández |
According to our bylaws, the company bylaws, its facultiesExecutive Committee’s responsibilities include the following: to formulate and propose policy guidelines, the criteria to be followed in the preparation of programmesprograms and to fix targets, to examine the proposals put to it in this regard, comparing and evaluating the actions and results of any direct or indirect
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activity carried out by the Group; to determine the volume of investment in each individual activity; to approve or reject operations, determining methods and conditions; to arrange inspections and internal or external audits of all operational areas of the Group; and in general to exercise the faculties delegated to it by the boardBoard of directors.Directors.
Specifically, the Executive Committee is entrusted with evaluation of the Bank’sour system of corporate governance. This shall be analyzed in the context of the Company’sour development and of the results it haswe have obtained, taking into account any regulations that may be passedand/or recommendations made regarding best market practices and adapting these to the Company’sour specific circumstances.
The Executive Committee shall meet on the dates indicated in the annual calendar of meetings and when the chairman or acting chairman so decides. During 2008,2010, the Executive Committee met 1820 times.
Audit and Compliance Committee
This committee shall perform the duties required it under applicable laws, regulations and our bylaws. Essentially, it has authority from the boardBoard to supervise the financial statements and the oversight of the Group.
The boardBoard regulations establish that the Audit &and Compliance Committee shall have a minimum of four members appointed by the boardBoard in light of their know-how and expertise in accounting, auditingand/or risk
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management. They shall all be independent directors, one of whom shall act as chairman, also appointed by the board.Board.
As of the date of this Annual Report, the Audit and Compliance Committee members were:
| | | |
| Chairman: | | Mr. Rafael Bermejo BlancoJosé Luis Palao García-Suelto |
| Members: | | Mr. Tomás Alfaro Drake |
| | | Mr. Ramón Bustamante y de la Mora |
| | | Mr. Carlos Loring Martínez de Irujo |
| | | Mrs. Susana Rodríguez Vidarte |
The scope of its functions is as follows:follows (for purposes of the below, “entity” refers to BBVA):
| | |
| | • | Report to the General Meeting on matters that are raised at its meetings on matters within its competence. |
|
| • | Supervise the efficacy of the Company’s internal control and oversight, internal audit, where applicable, and the risk-management systems, and discuss with the auditors or audit firms any significant issues in the internal control systems’ sufficiency, appropriatenesssystem detected when the audit is conducted. |
|
| • | Supervise the process of drawing up and efficacyreporting regulatory financial information. |
|
| • | Propose the appointment of auditors or audit firms to the Board of Directors for it to submit the proposal to the General Meeting, in accordance with applicable regulations. |
|
| • | Establish correct relations with the auditors or audit firms in order to ensurereceive information on any matters that may jeopardize their independence, for examination by the accuracy, reliability, scopecommittee, and clarityany others that have to do with the process of auditing the accounts; as well as those other communications provided for in laws and standards of audit. It must unfailingly receive written confirmation by the auditors or audit firms each year of their independence with regard to the entity or entities directly or indirectly related to it and information on additional services of any kind provided to these entities by said auditors or audit firms, or by persons or entities linked to them as provided under Law 19/1988, July 12, on the auditing of accounts. |
|
| • | Each year, before the audit report is issued, to put out a report expressing an opinion on the independence of the financial statementsauditors or audit firms. This report must, in all events, state the provision of any additional services referred to in the Company and its consolidated group in their annual and quarterly reports. The Committee also oversees the accounting and financial information that the Bank of Spain or other regulators from Spain and abroad may require.previous subsection. |
| |
| | • | Oversee compliance with applicable nationaldomestic and international regulations on matters related to money laundering, conduct on the securities markets, data protection and the scope of Group activities with respect to anti-trust regulations. The Committee also overseesAlso to ensure that any requests for action or information or for a response from the competent bodiesmade by official authorities in these matters are dealt with in due time and in due form. |
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| | |
| | • | Ensure that the internal codes of ethics and conduct and securities market operations,trading, as they apply to Group personnel, comply with regulationslegislation and are properly suited toappropriate for the Bank. |
| |
| | • | EnforceEspecially to enforce compliance with provisions contained in the BBVA directors charter,Director’s Charter, and ensure that directors satisfy applicable standards regarding their conduct on the securities markets. |
| |
| | • | EnsureAny others that may have been allocated under these regulations or attributed to the accuracy, reliability, scope and claritycommittee by a Board of the financial statements. The committee shall constantly monitor the process by which they are drawn up, holding frequent meetings with the Bank executives and the external auditor responsible for them.Directors resolution. |
The committee shall also monitor the independence of external auditors. This entails the following two duties:
| | |
| | • | Ensuring that the auditors’ warnings, opinions and recommendations are followed. |
| |
| | • | Establishing the incompatibility between the provision of audit and the provision of consultancy services, unless there are no alternatives in the market to the auditors or companies in the auditors’ group of equal value in terms of their content, quality or efficiency. In such event, the committee must grant its approval, which can be done in advance by delegation to its chairman. |
The committee selects the external auditor for the Bank and its Group, and for all the Group companies. It must verify that the audit schedule is being carried out under the service agreement and that it satisfies the requirements of the competent authorities and the Bank’s governing bodies. The committee will also require the auditors, at least once each year, to assess the quality of the Group’s internal oversight procedures.
The Audit &and Compliance Committee meets as often as necessary to comply with its tasks, although an annual meeting schedule is drawn up in accordance with its duties. During 20082010 the Audit &and Compliance Committee met 1513 times.
Executives responsible for control, internal audit and regulatory compliance can be invited to attend its meetings and, at the request of these executives, other staff from these departments who have particular knowledge or responsibility in the matters contained in the agenda, can also be invited when their presence at the meeting is deemed appropriate. However, only the committee members and the secretary shall be present when the results and conclusions of the meeting are evaluated.
The committee may engage external advisory services for relevant issues when it considers that these cannot be properly provided by experts or technical staff within the Group on grounds of specialization or independence.
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Likewise, the committee can call on the personal cooperation and reports of any member of the management team when it considers that this is necessary to carry out its functions with regard to relevant issues.
The committee has its own specific regulations, approved by the boardBoard of directors.Directors. These are available on our website and, amongst other things, regulate its operation.
Appointments and Compensation Committee
The Appointments & Compensation Committee is tasked with assisting the boardBoard on issues related to the appointment and re-election of board members, and determining the directors’ remuneration.Board members.
This committee shall comprise a minimum of three members who shall be external directors appointed by the board,Board, which shall also appoint its chairman. However, the chairman and the majority of its members must be independent directors, in compliance with the boardBoard regulations.
As of the date of this Annual Report, the members of the Appointments and Compensation Committee were:
| | | |
| Chairman: | | Mr. Carlos Loring Martínez de IrujoTomás Alfaro Drake |
| Members: | | Mr. Juan Carlos Álvarez MezquírizJosé Antonio Fernández Rivero |
| | | Mr. Ignacio Ferrero JordiJosé Maldonado Ramos |
| | | Mrs. Susana Rodríguez Vidarte |
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ItsThe duties apart from the aforementioned duty in the appointment of directors, include proposing the remuneration system for the board as a whole, within the framework established in the Company’s bylaws. This entails determination of its items, the amount payable for each item and the settlement of said amount, and, as mentioned above, the scope and amount of the remuneration, rights and economic compensation for the CEO, the COO and the Bank’s executive directors in order to include these aspects in a written contract.
This committee shall also:Appointments Committee are as follows:
| | |
| | • | Draw up and report proposals for appointment and re-election of directors. |
To such end, the committee will evaluate the skills, knowledge and experience that the Board requires, as well as the conditions that candidates should display to fill the vacancies arising.
| | |
| • | Review the status of each director each year, so that this may be reflected in the annual report on corporate governance. |
|
| • | Report on the performance of the Chairman of the Board and, where applicable, the Company’s CEO, such that the Board can make its periodic assessment, under the terms established in the Board regulations. |
|
| • | Should the chairmanship of the boardBoard or the post of chief executive officerCEO fall vacant, the committee will examine or organize, in the manner it deems suitable, the succession of the chairmanChairmanand/or chief executive officerCEO and putmake corresponding proposals to the boardBoard for an orderly, well-planned succession. |
| |
| | • | Submit an annual report on the directors remuneration policy to the boardReport any appointment and separation of directors.senior managers. |
| |
| | • | ReportAny others that may have been allocated under the appointments and severances of senior managers and propose senior-management remuneration policyBoard regulations or attributed to the board, along with the basic terms and conditions for their contracts.committee by a Board of Directors resolution. |
The chairmanIn the performance of its duties, the Appointments Committee will consult with the Chairman of the Appointments & Compensation Committee shall convene it as often as necessaryBoard and, where applicable, the CEO via the committee chair, especially with respect to comply with its mission, although an annual meeting schedule shall be drawn up in accordance with its duties. During 2008 the Appointments & Compensation Committee met five times.matters related to executive directors and senior managers.
In accordance with the boardour Board regulations, the committee may ask members of the BBVA Group to attend its meetings, when their responsibilities relate to its duties. It may also receive any advisory services it requires to inform its criteria on issues falling within the scope of its powers.
The chair of the Appointments Committee will convene it as often as necessary to comply with its functions although an annual meeting schedule will be drawn up in accordance with its duties. During 2010 the Appointments Committee met 2 times (the former Appointments & Compensation Committee met 3 times in 2010).
Compensation Committee
The Compensation Committee’s essential function is to assist the Board on matters regarding the remuneration policy for directors and senior management.
The committee will comprise a minimum of three members who will be external directors appointed by the Board, which will also appoint its chair. The chair and the majority of its members must be independent directors, in compliance with the Board regulations.
As of the date of this Annual Report, the members of the Appointments Committee were:
| | |
| Chairman: | | Mr. Carlos Loring Martínez de Irujo |
| Members: | | Mr. Juan Carlos Álvarez Mezquiriz |
| | Mr. Ignacio Ferrero Jordi |
| | Mr. José Maldonado Ramos |
| | Mrs. Susana Rodríguez Vidarte |
The scope of the functions of the Compensation Committee is as follows:
| | |
| • | Propose the remuneration system for the Board of Directors as a whole, in accordance with the principles established in the Company Bylaws. This committee will propose the items comprising the system, their amounts and method of payment. |
|
| • | Determine the extent and amount of the remuneration, entitlements and other economic rewards for the Chairman and CEO, the President and COO and, where applicable, other executive directors of the Bank, so that these can be reflected in their contracts. The Committee’s proposals on such matters will be submitted to the Board of Directors. |
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| | |
| • | Issue a report on the directors’ remuneration policy each year. This will be submitted to the Board of Directors, which will apprise the Company’s Annual General Meeting each year. |
|
| • | Propose the remuneration policy for senior management to the Board, and the basic terms and conditions to be contained in their contracts. |
|
| • | Propose the remuneration policy to the Board for employees whose professional activities may have a significant impact on BBVA’s risk profile. |
|
| • | Oversee observance of the remuneration policy established by the Company and periodically review the remuneration policy applied to executive directors, senior management and employees whose professional activities may have a significant impact on the BBVA’s risk profile. |
|
| • | Any others that may have been allocated under the Board regulations or attributed to the committee by a Board of Directors resolution. |
In the performance of its duties, the Compensation Committee will consult with the Chairman of the Board and, where applicable, the Company’s CEO via the committee chair, especially with respect to matters related to executive directors and senior managers.
Pursuant to our Board regulations, the committee may ask members of the BBVA Group to attend its meetings, when their responsibilities relate to its duties. It may also receive any advisory services it requires to inform its criteria on matters falling within the scope of its powers.
The chair of the Compensation Committee will convene it as often as necessary to comply with its functions although an annual meeting schedule will be drawn up in accordance with its duties. During 2010 the Appointments Committee met 2 times (the former Appointments & Compensation Committee met 3 times in 2010).
Risk Committee
The board’s RisksBoard’s Risk Committee is tasked with the analysis of issues related to the Group’sour risk management and control policy and strategy. It assesses and approves any risk transactions that may be significant.
The Risk Committee shall have a majority of external directors, with a minimum of three members, appointed by the boardBoard of directors,Directors, which shall also appoint its chairman.
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The Committee is required to be comprised of a majority of non-executive directors. As of the date of this Annual Report, the members of the Risk Committee were:
| | | |
| Chairman: | | Mr. José Antonio Fernández Rivero |
| Members: | | Mr. Ramón Bustamante y de la Mora |
| | | Mr. Rafael Bermejo Blanco |
| | Mr. José Maldonado Ramos |
| | | Mr. Enrique Medina Fernández |
Under the boardBoard regulations, it has the following duties:
| | |
| | • | Analyze and evaluate proposals related to the Group’sour risk management and oversight policies and strategy. In particular, these shall identify: |
a) the risk map;
b) the setting of the level of risk considered acceptable according to the risk profile (expected loss) and capital map (risk capital) broken down by the Group’s businesses and areas of activity;
| | |
| b) | the setting of the level of risk considered acceptable according to the risk profile (expected loss) and capital map (risk capital) broken down by our businesses and areas of activity; |
c) the internal information and oversight systems used to oversee and manage risks; and
d) the measures established to mitigate the impact of risks identified should they materialize.
| | |
| | • | Monitor the match between risks accepted and the profile established. |
| |
| | • | Assess and approve, where applicable, any risks whose size could compromise the Group’sour capital adequacy or recurrent earnings, or that present significant potential operational or reputational risks. |
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| | |
| | • | Check that the Group possesseswe possess the means, systems, structures and resources benchmarked against best practices to allow implementation of its risk management strategy. |
The committee meets as often as necessary to best perform its duties, usually once a week. In 2008,2010, it held 4548 meetings.
As of December 31, 2008,2010, we, through our various affiliates, had 108,972106,976 employees. Approximately 80%83% of our employees in Spain held technical, managerial and executive positions, while the remainder were clerical and support staff. The table below sets forth the number of BBVA employees by geographic area.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Country | | BBVA | | Banks | | Companies | | Total | | | BBVA | | Banks | | Companies | | Total | |
| |
| Spain | | | 26,785 | | | | 597 | | | | 1,688 | | | | 29,070 | | | | 25,939 | | | | 442 | | | | 2,035 | | | | 28,416 | |
| United Kingdom | | | 98 | | | | — | | | | 6 | | | | 104 | | | | 93 | | | | — | | | | — | | | | 93 | |
| France | | | 97 | | | | — | | | | — | | | | 97 | | | | 94 | | | | — | | | | — | | | | 94 | |
| Italy | | | 58 | | | | — | | | | 194 | | | | 252 | | | | 53 | | | | — | | | | 226 | | | | 279 | |
| Germany | | | 26 | | | | — | | | | — | | | | 26 | | | | 40 | | | | — | | | | — | | | | 40 | |
| Switzerland | | | — | | | | 118 | | | | — | | | | 118 | | | | — | | | | 128 | | | | — | | | | 128 | |
| Portugal | | | — | | | | 936 | | | | — | | | | 936 | | | | — | | | | 925 | | | | — | | | | 925 | |
| Belgium | | | 38 | | | | — | | | | — | | | | 38 | | | | 40 | | | | — | | | | — | | | | 40 | |
| Jersey | | | — | | | | 3 | | | | — | | | | 3 | | |
| Russia | | | 4 | | | | — | | | | — | | | | 4 | | | | 4 | | | | — | | | | — | | | | 4 | |
| Ireland | | | — | | | | 4 | | | | — | | | | 4 | | | | — | | | | 5 | | | | — | | | | 5 | |
| | | | | | | | | | | | | | | | | | | |
Total Europe | | | 27,106 | | | | 1,658 | | | | 1,888 | | | | 30,652 | | | | 26,263 | | | | 1,500 | | | | 2,261 | | | | 30,024 | |
| New York | | | 157 | | | | 18 | | | | — | | | | 175 | | |
| Miami | | | 11 | | | | — | | | | — | | | | 11 | | |
| Other U.S. | | | — | | | | 12,461 | | | | — | | | | 12,461 | | |
United States | | | | 165 | | | | 11,975 | | | | — | | | | 12,140 | |
| | | | | | | | | | | | | | | | | | | |
Total North America | | | 168 | | | | 12,479 | | | | — | | | | 12,647 | | |
| Panama | | | — | | | | 312 | | | | — | | | | 312 | | | | — | | | | 345 | | | | — | | | | 345 | |
| Puerto Rico | | | — | | | | 910 | | | | — | | | | 910 | | | | — | | | | 865 | | | | — | | | | 865 | |
| Argentina | | | — | | | | 5,648 | | | | — | | | | 5,648 | | | | — | | | | 5,705 | | | | — | | | | 5,705 | |
| Brazil | | | 4 | | | | — | | | | 14 | | | | 18 | | | | 3 | | | | — | | | | 17 | | | | 20 | |
| Colombia | | | — | | | | 6,093 | | | | — | | | | 6,093 | | | | — | | | | 5,867 | | | | — | | | | 5,867 | |
| Venezuela | | | — | | | | 6,295 | | | | — | | | | 6,295 | | | | — | | | | 5,509 | | | | — | | | | 5,509 | |
| Mexico | | | — | | | | 34,535 | | | | — | | | | 34,535 | | | | — | | | | 34,082 | | | | — | | | | 34,082 | |
| Uruguay | | | 46 | | | | 171 | | | | — | | | | 217 | | | | — | | | | 200 | | | | — | | | | 200 | |
| Paraguay | | | — | | | | 212 | | | | — | | | | 212 | | | | — | | | | 372 | | | | — | | | | 372 | |
| Bolivia | | | — | | | | — | | | | 197 | | | | 197 | | | | — | | | | — | | | | 209 | | | | 209 | |
| Chile | | | — | | | | 5,325 | | | | — | | | | 5,325 | | | | — | | | | 5,413 | | | | — | | | | 5,413 | |
| Cuba | | | 1 | | | | — | | | | — | | | | 1 | | | | 1 | | | | — | | | | — | | | | 1 | |
| Peru | | | — | | | | 5,553 | | | | — | | | | 5,553 | | | | — | | | | 5,715 | | | | — | | | | 5,715 | |
| Ecuador | | | — | | | | — | | | | 216 | | | | 216 | | | | — | | | | — | | | | 273 | | | | 273 | |
| | | | | | | | | | | | | | | | | | | |
Total Latin America | | | 51 | | | | 65,054 | | | | 427 | | | | 65,532 | | | | 4 | | | | 64,073 | | | | 499 | | | | 64,576 | |
| Hong Kong | | | 107 | | | | — | | | | — | | | | 107 | | | | 169 | | | | — | | | | — | | | | 169 | |
| Japan | | | 9 | | | | — | | | | — | | | | 9 | | | | 13 | | | | — | | | | — | | | | 13 | |
| China | | | 7 | | | | — | | | | — | | | | 7 | | | | 13 | | | | — | | | | 11 | | | | 24 | |
| Singapore | | | 18 | | | | — | | | | — | | | | 18 | | | | 17 | | | | — | | | | — | | | | 17 | |
| India | | | | 2 | | | | — | | | | — | | | | 2 | |
| South Korea | | | | 8 | | | | — | | | | — | | | | 8 | |
| | | | | | | | | | | | | | | | | | | |
Total Asia | | | 141 | | | | — | | | | — | | | | 141 | | | | 222 | | | | — | | | | 11 | | | | 233 | |
| | | | | | | | | | | | | | | | | | | |
| Australia | | | | 3 | | | | — | | | | — | | | | 3 | |
Total Oceania | | | | 3 | | | | — | | | | — | | | | 3 | |
| | | | | | | | | | | |
Total | | | 27,466 | | | | 79,191 | | | | 2,315 | | | | 108,972 | | | | 26,657 | | | | 77,548 | | | | 2,771 | | | | 106,976 | |
| | | | | | | | | | | | | | | | | | | |
114
128
As of December 31, 2007,2009, we, through our various affiliates, had 111,913103,721 employees. Approximately 82% of our employees in Spain held technical, managerial and executive positions, while the remainder were clerical and support staff. The table below sets forth the number of BBVA employees by geographic area.
| | | | | | | | | | | | | | | | | |
Country | | BBVA | | | Banks | | | Companies | | | Total | |
| |
| Spain | | | 25,871 | | | | 476 | | | | 1,589 | | | | 27,936 | |
| United Kingdom | | | 89 | | | | — | | | | — | | | | 89 | |
| France | | | 94 | | | | — | | | | — | | | | 94 | |
| Italy | | | 55 | | | | — | | | | 208 | | | | 263 | |
| Germany | | | 35 | | | | — | | | | — | | | | 35 | |
| Switzerland | | | — | | | | 113 | | | | — | | | | 113 | |
| Portugal | | | — | | | | 917 | | | | — | | | | 917 | |
| Belgium | | | 37 | | | | — | | | | — | | | | 37 | |
| Russia | | | 4 | | | | — | | | | — | | | | 4 | |
| Ireland | | | — | | | | 5 | | | | — | | | | 5 | |
| | | | | | | | | | | | | | | | | |
Total Europe | | | 26,185 | | | | 1,511 | | | | 1,797 | | | | 29,493 | |
United States | | | 136 | | | | 12,166 | | | | — | | | | 12,302 | |
| | | | | | | | | | | | | | | | | |
| Panama | | | — | | | | 308 | | | | — | | | | 308 | |
| Puerto Rico | | | — | | | | 777 | | | | — | | | | 777 | |
| Argentina | | | — | | | | 5,300 | | | | — | | | | 5,300 | |
| Brazil | | | 3 | | | | — | | | | 17 | | | | 20 | |
| Colombia | | | — | | | | 5,821 | | | | — | | | | 5,821 | |
| Venezuela | | | — | | | | 5,791 | | | | — | | | | 5,791 | |
| Mexico | | | — | | | | 32,580 | | | | — | | | | 32,580 | |
| Uruguay | | | 20 | | | | 185 | | | | — | | | | 205 | |
| Paraguay | | | — | | | | 250 | | | | — | | | | 250 | |
| Bolivia | | | — | | | | — | | | | 207 | | | | 207 | |
| Chile | | | — | | | | 5,039 | | | | — | | | | 5,039 | |
| Cuba | | | 1 | | | | — | | | | — | | | | 1 | |
| Peru | | | — | | | | 5,208 | | | | — | | | | 5,208 | |
| Ecuador | | | — | | | | — | | | | 262 | | | | 262 | |
| | | | | | | | | | | | | | | | | |
Total Latin America | | | 24 | | | | 61,259 | | | | 486 | | | | 61,769 | |
| Hong Kong | | | 116 | | | | — | | | | — | | | | 116 | |
| Japan | | | 10 | | | | — | | | | — | | | | 10 | |
| China | | | 15 | | | | — | | | | — | | | | 15 | |
| Singapore | | | 9 | | | | — | | | | — | | | | 9 | |
| India | | | 2 | | | | — | | | | — | | | | 2 | |
| South Korea | | | 2 | | | | — | | | | — | | | | 2 | |
| | | | | | | | | | | | | | | | | |
Total Asia | | | 154 | | | | — | | | | — | | | | 154 | |
| | | | | | | | | | | | | | | | | |
| Australia | | | 3 | | | | — | | | | — | | | | 3 | |
Total Oceania | | | 3 | | | | — | | | | — | | | | 3 | |
| | | | | | | | | | | | | | | | | |
Total | | | 26,502 | | | | 74,936 | | | | 2,283 | | | | 103,721 | |
| | | | | | | | | | | | | | | | | |
129
As of December 31, 2008, we, through our various affiliates, had 108,972 employees. The table below sets forth the number of BBVA employees by geographic area:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Country | | BBVA | | Banks | | Companies | | Total | | | BBVA | | Banks | | Companies | | Total | |
| |
| Spain | | | 28,892 | | | | 725 | | | | 1,489 | | | | 31,106 | | | | 26,785 | | | | 597 | | | | 1,688 | | | | 29,070 | |
| United Kingdom | | | 113 | | | | — | | | | 7 | | | | 140 | | | | 98 | | | | — | | | | 6 | | | | 104 | |
| France | | | 109 | | | | — | | | | — | | | | 109 | | | | 97 | | | | — | | | | — | | | | 97 | |
| Italy | | | 61 | | | | — | | | | 171 | | | | 232 | | | | 58 | | | | — | | | | 194 | | | | 252 | |
| Germany | | | 7 | | | | — | | | | — | | | | 7 | | | | 26 | | | | — | | | | — | | | | 26 | |
| Switzerland | | | — | | | | 111 | | | | — | | | | 111 | | | | — | | | | 118 | | | | — | | | | 118 | |
| Portugal | | | — | | | | 925 | | | | — | | | | 925 | | | | — | | | | 936 | | | | — | | | | 936 | |
| Belgium | | | 38 | | | | — | | | | — | | | | 38 | | | | 38 | | | | — | | | | — | | | | 38 | |
| Jersey | | | — | | | | 3 | | | | — | | | | 3 | | | | — | | | | 3 | | | | — | | | | 3 | |
| Russia | | | 3 | | | | — | | | | — | | | | 3 | | | | 4 | | | | — | | | | — | | | | 4 | |
| Ireland | | | — | | | | 5 | | | | — | | | | 5 | | | | — | | | | 4 | | | | — | | | | 4 | |
| | | | | | | | | | | | | | | | | | | |
Total Europe | | | 29,243 | | | | 1,769 | | | | 1,667 | | | | 32,679 | | | | 27,106 | | | | 1,658 | | | | 1,888 | | | | 30,652 | |
| New York | | | 150 | | | | 14 | | | | — | | | | 164 | | |
| Miami | | | 86 | | | | — | | | | — | | | | 86 | | |
| Other U.S. | | | — | | | | 13,082 | | | | — | | | | 13,082 | | |
| Grand Cayman | | | 2 | | | | — | | | | — | | | | 2 | | |
United States | | | | 168 | | | | 12,479 | | | | — | | | | 12,647 | |
| | | | | | | | | | | | | | | | | | | |
Total North America | | | 238 | | | | 13,096 | | | | — | | | | 13,334 | | |
| Panama | | | — | | | | 285 | | | | — | | | | 285 | | | | — | | | | 312 | | | | — | | | | 312 | |
| Puerto Rico | | | — | | | | 999 | | | | — | | | | 999 | | | | — | | | | 910 | | | | — | | | | 910 | |
| Argentina | | | — | | | | 7,483 | | | | — | | | | 7,483 | | | | — | | | | 5,648 | | | | — | | | | 5,648 | |
| Brazil | | | 4 | | | | — | | | | 15 | | | | 19 | | | | 4 | | | | — | | | | 14 | | | | 18 | |
| Colombia | | | — | | | | 5,969 | | | | — | | | | 5,969 | | | | — | | | | 6,093 | | | | — | | | | 6,093 | |
| Venezuela | | | — | | | | 5,822 | | | | — | | | | 5,822 | | | | — | | | | 6,295 | | | | — | | | | 6,295 | |
| Mexico | | | — | | | | 35,200 | | | | — | | | | 35,200 | | | | — | | | | 34,535 | | | | — | | | | 34,535 | |
| Uruguay | | | 36 | | | | 158 | | | | — | | | | 194 | | | | 46 | | | | 171 | | | | — | | | | 217 | |
| Paraguay | | | — | | | | 139 | | | | — | | | | 139 | | | | — | | | | 212 | | | | — | | | | 212 | |
| Bolivia | | | — | | | | — | | | | 196 | | | | 196 | | | | — | | | | — | | | | 197 | | | | 197 | |
| Chile | | | — | | | | 4,431 | | | | — | | | | 4,431 | | | | — | | | | 5,325 | | | | — | | | | 5,325 | |
| Dominican Republic | | | — | | | | — | | | | — | | | | — | | |
| Cuba | | | 1 | | | | — | | | | — | | | | 1 | | | | 1 | | | | — | | | | — | | | | 1 | |
| Peru | | | — | | | | 4,874 | | | | — | | | | 4,874 | | | | — | | | | 5,553 | | | | — | | | | 5,553 | |
| Ecuador | | | — | | | | — | | | | 167 | | | | 167 | | | | — | | | | — | | | | 216 | | | | 216 | |
| | | | | | | | | | | | | | | | | | | |
Total Latin America | | | 41 | | | | 65,360 | | | | 378 | | | | 65,779 | | | | 51 | | | | 65,054 | | | | 427 | | | | 65,532 | |
| Hong Kong | | | 90 | | | | — | | | | — | | | | 90 | | | | 107 | | | | — | | | | — | | | | 107 | |
| Japan | | | 11 | | | | — | | | | — | | | | 11 | | | | 9 | | | | — | | | | — | | | | 9 | |
| China | | | 6 | | | | — | | | | — | | | | 6 | | | | 7 | | | | — | | | | — | | | | 7 | |
| Singapore | | | 14 | | | | — | | | | — | | | | 14 | | | | 18 | | | | — | | | | — | | | | 18 | |
| | | | | | | | | | | | | | | | | | | |
Total Asia | | | 121 | | | | — | | | | — | | | | 121 | | | | 141 | | | | — | | | | — | | | | 141 | |
| | | | | | | | | | | | | | | | | | | |
Total | | | 29,643 | | | | 80,228 | | | | 2,045 | | | | 111,913 | | | | 27,466 | | | | 79,191 | | | | 2,315 | | | | 108,972 | |
| | | | | | | | | | | | | | | | | | | |
115
As of December 31, 2006, we, through our various affiliates, had 98,553 employees. The table below sets forth the number of BBVA employees by geographic area:
| | | | | | | | | | | | | | | | | |
Country | | BBVA | | | Banks | | | Companies | | | Total | |
| |
| Spain | | | 28,601 | | | | 722 | | | | 1,259 | | | | 30,582 | |
| United Kingdom | | | 127 | | | | — | | | | 7 | | | | 134 | |
| France | | | 108 | | | | — | | | | — | | | | 108 | |
| Italy | | | 55 | | | | — | | | | — | | | | 55 | |
| Germany | | | 4 | | | | — | | | | — | | | | 4 | |
| Switzerland | | | 2 | | | | 108 | | | | — | | | | 110 | |
| Portugal | | | — | | | | 953 | | | | — | | | | 953 | |
| Belgium | | | 36 | | | | — | | | | — | | | | 36 | |
| Jersey | | | — | | | | 3 | | | | — | | | | 3 | |
| Russia | | | 3 | | | | — | | | | — | | | | 3 | |
| Andorra | | | — | | | | — | | | | — | | | | — | |
| Ireland | | | — | | | | 4 | | | | — | | | | 4 | |
| Gibraltar | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
Total Europe | | | 28,936 | | | | 1,790 | | | | 1,266 | | | | 31,992 | |
| New York | | | 137 | | | | 20 | | | | — | | | | 157 | |
| Miami | | | 112 | | | | — | | | | — | | | | 112 | |
| Other U.S. | | | — | | | | 3,646 | | | | — | | | | 3,646 | |
| Grand Cayman | | | 3 | | | | — | | | | — | | | | 3 | |
| | | | | | | | | | | | | | | | | |
Total North America | | | 252 | | | | 3,666 | | | | — | | | | 3,918 | |
| Panama | | | — | | | | 266 | | | | — | | | | 266 | |
| Puerto Rico | | | — | | | | 1,044 | | | | — | | | | 1,044 | |
| Argentina | | | — | | | | 7,215 | | | | — | | | | 7,215 | |
| Brazil | | | 4 | | | | — | | | | — | | | | 4 | |
| Colombia | | | — | | | | 6,408 | | | | — | | | | 6,408 | |
| Venezuela | | | — | | | | 5,749 | | | | — | | | | 5,749 | |
| Mexico | | | — | | | | 32,847 | | | | — | | | | 32,847 | |
| Uruguay | | | 39 | | | | 151 | | | | — | | | | 190 | |
| Paraguay | | | — | | | | 108 | | | | — | | | | 108 | |
| Bolivia | | | — | | | | — | | | | 188 | | | | 188 | |
| Chile | | | — | | | | 4,068 | | | | — | | | | 4,068 | |
| Dominican Republic | | | — | | | | — | | | | 97 | | | | 97 | |
| Cuba | | | 1 | | | | — | | | | — | | | | 1 | |
| Peru | | | — | | | | 4,191 | | | | — | | | | 4,191 | |
| Ecuador | | | — | | | | — | | | | 168 | | | | 168 | |
| | | | | | | | | | | | | | | | | |
Total Latin America | | | 44 | | | | 62,047 | | | | 453 | | | | 62,544 | |
| Hong Kong | | | 77 | | | | — | | | | — | | | | 77 | |
| Japan | | | 9 | | | | — | | | | — | | | | 9 | |
| China | | | 8 | | | | — | | | | — | | | | 8 | |
| Singapore | | | 5 | | | | — | | | | — | | | | 5 | |
| | | | | | | | | | | | | | | | | |
Total Asia | | | 99 | | | | — | | | | — | | | | 99 | |
| | | | | | | | | | | | | | | | | |
Total | | | 29,331 | | | | 67,503 | | | | 1,719 | | | | 98,553 | |
| | | | | | | | | | | | | | | | | |
116
The terms and conditions of employment in private sector banks in Spain are negotiated with trade unions representing bank employees. Wage negotiations take place on an industry-wide basis. This process has historically produced collective bargaining agreements binding upon all Spanish banks and their employees. The collective bargaining agreement in application during 20082009 and 2010 came into effect as of January 1, 2007 and will apply untilended on December 31, 2010.
As of December 31, 2008,2010 and 2009, we had 3281,060 and 350 temporary employees in our Spanish offices.offices, respectively.
130
As of March 31, 2009,29, 2011, the members of the boardBoard of directorsDirectors owned an aggregate of 3,099,2633,181,708 BBVA shares as shown in the table below:below :
| | | | | | | | | | | | | | | | | |
| | | Directly
| | | Indirectly
| | | | | | %
| |
| | | Owned
| | | Owned
| | | Total
| | | Capital
| |
Name | | Shares | | | Shares | | | Shares | | | Stock | |
| |
| GONZALEZ RODRÍGUEZ, FRANCISCO | | | 307,011 | | | | 1,508,904 | | | | 1,815,915 | | | | 0.048 | |
| GOIRIGOLZARRI TELLAECHE, JOSE IGNACIO | | | 291,907 | | | | 471,944 | | | | 763,851 | | | | 0.020 | |
| ALFARO DRAKE, TOMÁS | | | 8,959 | | | | — | | | | 8,959 | | | | 0.000 | |
| ALVAREZ MEZQUIRIZ, JUAN CARLOS | | | 140,179 | | | | — | | | | 140,179 | | | | 0.004 | |
| BERMEJO BLANCO, RAFAEL | | | 21,000 | | | | — | | | | 21,000 | | | | 0.001 | |
| BUSTAMANTE Y DE LA MORA, RAMON | | | 10,139 | | | | 2,000 | | | | 12,139 | | | | — | |
| FERNANDEZ RIVERO, JOSÉ ANTONIO | | | 50,000 | | | | 825 | | | | 50,825 | | | | 0.001 | |
| FERRERO JORDI, IGNACIO | | | 2,787 | | | | 51,300 | | | | 54,087 | | | | 0.001 | |
| KNÖRR BORRÁS, ROMÁN | | | 36,637 | | | | 6,987 | | | | 43,624 | | | | 0.001 | |
| LORING MARTÍNEZ DE IRUJO, CARLOS | | | 39,149 | | | | — | | | | 39,149 | | | | 0.001 | |
| MALDONADO RAMOS, JOSÉ | | | 99,235 | | | | — | | | | 99,235 | | | | 0.003 | |
| MEDINA FERNÁNDEZ, ENRIQUE | | | 30,831 | | | | 1,160 | | | | 31,991 | | | | 0.001 | |
| RODRIGUEZ VIDARTE, SUSANA | | | 16,037 | | | | 2,272 | | | | 18,309 | | | | — | |
TOTAL | | | 1,053,871 | | | | 2,045,392 | | | | 3,099,263 | | | | 0.083 | |
| | | | | | | | | | | | | | | | | |
| | | Directly
| | | Indirectly
| | | | | | | |
| | | Owned
| | | Owned
| | | Total
| | | % Capital
| |
Name | | Shares | | | Shares | | | Shares | | | Stock | |
| |
| Gonzalez Rodríguez, Francisco | | | 395,585 | | | | 1,944,213 | | | | 2,339,798 | | | | 0.052 | |
| Cano Fernández, Ángel | | | 332,584 | | | | — | | | | 332,584 | | | | 0.007 | |
| Alfaro Drake, Tomás | | | 12,213 | | | | — | | | | 12,213 | | | | 0.000 | |
| Álvarez Mezquiriz, Juan Carlos | | | 170,927 | | | | — | | | | 170,927 | | | | 0.004 | |
| Bustamante y de la Mora, Ramon | | | 12,362 | | | | 2,439 | | | | 14,801 | | | | 0.000 | |
| Fernandez Rivero, José Antonio | | | 60,967 | | | | — | | | | 60,967 | | | | 0.001 | |
| Ferrero Jordi, Ignacio | | | 3,616 | | | | 57,499 | | | | 61,115 | | | | 0.001 | |
| Loring Martínez de Irujo, Carlos | | | 47,736 | | | | — | | | | 47,736 | | | | 0.001 | |
| Maldonado Ramos, José | | | 73,264 | | | | — | | | | 73,264 | | | | 0.002 | |
| Medina Fernández, Enrique | | | 39,991 | | | | 1,505 | | | | 41,496 | | | | 0.001 | |
| Palao García-Suelto, José Luis | | | 3,048 | | | | — | | | | 3,048 | | | | 0.000 | |
| Rodriguez Vidarte, Susana | | | 20,801 | | | | 2,958 | | | | 23,759 | | | | 0.001 | |
| | | | | | | | | | | | | | | | | |
TOTAL | | | 1,173,094 | | | | 2,008,614 | | | | 3,181,708 | | | | 0.072 | |
| | | | | | | | | | | | | | | | | |
BBVA has not granted options on its shares to any members of its administrative, supervisory or management bodies. Information regarding the variable multi-year share based remuneration program (in which executive directors participate) is provided under “Item 6. Directors, Senior Management and Employees — Compensation — Variable multi-year stock remuneration program for executive directors and members of the Management Committee”.
As of March 31, 2009, the Chairman and Chief Executive Officer held 600,000 put options and 1,200,000 call options over BBVA’s shares.
As of March 31, 200929, 2011 the executive officers (excluding executive directors) and their families owned 1,141,7311,086,902 shares. None of our executive officers holdsheld 1% or more of BBVA’s shares.shares as of such date.
As of March 30, 2009,29, 2011, a total of 51,05925,706 employees (excluding executive officers and directors) owned 97,594,03042,878,445 shares, which represents 2.60%0.95% of our capital stock.
| |
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
As of March 26, 2009 toDecember 31, 2010, Manuel Jove Capellán, beneficially owned 5.07% of our shares. There have not been significant changes in his percentage ownership in the past 3 years. To our knowledge, no other person, corporation or government beneficially owned, beneficially, directly or indirectly, five percent or more of BBVA’s shares. BBVA’s major shareholders do not have voting rights which are different from those held by the rest of its shareholders. To the extent known to us, BBVA is not controlled, directly or indirectly, by any other corporation, government or any other natural or legal person. As of March 26, 2009,December 31, 2010, there were 920,279952,618 registered holders of BBVA’s shares, with 3,474,858,121an aggregate of 4,490,908,285 shares, of which 216226 shareholders with registered addresses in the United States holdheld a total of 716,709,286979,492,736 shares (including shares represented by American Depositary Receipts ((““ADRs”ADRs”)). Since certain of such shares and ADRs are held by nominees, the foregoing figures are not representative of the number of beneficial holders. BBVA’sOur directors and executive officers did not own any ADRs as of March 26, 2009.December 31, 2010. See “Item 6. Directors, Senior Management and Employees — Share Ownership”
117131
| |
| B. | Related Party Transactions |
Loans to Directors, Executive Officers and Other Related Parties
As of December 31, 2010, 2009 and 2008, loans granted to members of boardthe Board of directorsDirectors amounted to an aggregate of €531, €806 and €33 thousand.thousand, respectively.
As of December 31, 2010, 2009 and 2008, loans granted to the members of the Management Committee, excluding the executive directors, amounted to an aggregate of €4,924, €3,912 and €3,891 thousand. thousand, respectively.
As of December 31, 2008,2010 and 2009, there were no guarantees provided on behalf of members of theour Management CommitteeCommittee. As of December 31, 2008 these guarantees amounted to an aggregate of €13 thousand.
As of December 31, 2010, 2009 and 2008, the loans granted to parties related to key personnel (the aforementioned members of the boardBoard of directorsDirectors of BBVA and of the Management Committee) totaledamounted to an aggregate of €28,493, €51,882 and €8,593 thousand.thousand, respectively. As of December 31, 2010, 2009 and 2008, the other exposure (guarantees, financial leases and commercial loans) to parties related to key personnel (guarantees, finance leases and commercial loans) amounted to an aggregate of €4,424, €24,514 and €18,794 thousand.thousand, respectively.
Related Party Transactions in the Ordinary Course of Business
Loans extended to related parties were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectability or present other unfavorable features.
BBVA subsidiaries engage, on a regular and routine basis, in a number of customary transactions with other BBVA subsidiaries, including:
| | |
| | • | overnight call deposits; |
| |
| | • | foreign exchange purchases and sales; |
| |
| | • | derivative transactions, such as forward purchases and sales; |
| |
| | • | money market fund transfers; |
| |
| | • | letters of credit for imports and exports; |
and other similar transactions within the scope of the ordinary course of the banking business, such as loans and other banking services to BBVA’sour shareholders, to employees of all levels, to the associates and family members of all the above and to other BBVA non-banking subsidiaries or affiliates. All these transactions have been made:
| | |
| | • | in the ordinary course of business; |
| |
| | • | on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons; and |
| |
| | • | did not involve more than the normal risk of collectability or present other unfavorable features. |
| |
| C. | Interests of Experts and Counsel |
Not Applicable.
132
| |
| ITEM 8. | FINANCIAL INFORMATION |
| |
| A. | Consolidated Statements and Other Financial Information |
Financial Information
See Item 18.
118
Dividends
The table below sets forth the amount of interim, final and total cash dividends paid by BBVA on its shares for the years 20042006 to 2008, adjusted to reflect all stock splits.2010. The rate used to convert euro amounts to dollars was the noon buying rate at the end of each year.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Per Share | | | Per Share | |
| | | First Interim | | Second Interim | | Third Interim | | Final | | Total | | | First Interim | | Second Interim | | Third Interim | | Final | | Total | |
| | | € | | $ | | € | | $ | | € | | $ | | € | | $ | | € | | $ | | | € | | $ | | € | | $ | | € | | $ | | € | | $ | | € | | $ | |
| |
| 2004 | | € | 0.100 | | | $ | 0.125 | | | € | 0.100 | | | $ | 0.125 | | | € | 0.100 | | | $ | 0.125 | | | € | 0.142 | | | $ | 0.177 | | | € | 0.442 | | | $ | 0.552 | | |
| 2005 | | € | 0.115 | | | $ | 0.143 | | | € | 0.115 | | | $ | 0.143 | | | € | 0.115 | | | $ | 0.143 | | | € | 0.186 | | | $ | 0.231 | | | € | 0.531 | | | $ | 0.660 | | |
| 2006 | | € | 0.132 | | | $ | 0.174 | | | € | 0.132 | | | $ | 0.174 | | | € | 0.132 | | | $ | 0.174 | | | € | 0.241 | | | $ | 0.318 | | | € | 0.637 | | | $ | 0.841 | | | € | 0.132 | | | $ | 0.174 | | | € | 0.132 | | | $ | 0.174 | | | € | 0.132 | | | $ | 0.174 | | | € | 0.241 | | | $ | 0.318 | | | € | 0.637 | | | $ | 0.841 | |
| 2007 | | € | 0.152 | | | $ | 0.222 | | | € | 0.152 | | | $ | 0.222 | | | € | 0.152 | | | $ | 0.222 | | | € | 0.277 | | | $ | 0.405 | | | € | 0.733 | | | $ | 1.070 | | | € | 0.152 | | | $ | 0.222 | | | € | 0.152 | | | $ | 0.222 | | | € | 0.152 | | | $ | 0.222 | | | € | 0.277 | | | $ | 0.405 | | | € | 0.733 | | | $ | 1.070 | |
| 2008 | | € | 0.167 | | | $ | 0.232 | | | € | 0.167 | | | $ | 0.232 | | | € | 0.167 | | | $ | 0.232 | | | | — | | | | — | | | € | 0.501 | | | $ | 0.697 | | | € | 0.167 | | | $ | 0.232 | | | € | 0.167 | | | $ | 0.232 | | | € | 0.167 | | | $ | 0.232 | | | | (* | ) | | | (* | ) | | € | 0.501 | | | $ | 0.697 | |
| 2009 | | | € | 0.090 | | | $ | 0.129 | | | € | 0.090 | | | $ | 0.129 | | | € | 0.090 | | | $ | 0.129 | | | € | 0.150 | | | $ | 0.215 | | | € | 0.420 | | | $ | 0.602 | |
| 2010 | | | € | 0.090 | | | $ | 0.068 | | | € | 0.090 | | | $ | 0.068 | | | € | 0.090 | | | $ | 0.068 | | | | (** | ) | | | (** | ) | | € | 0.270 | | | $ | 0.203 | |
| | |
| (*) | | On March 13, 2009, our shareholders approved the distribution of additional shareholder remuneration to complement the 2008 cash dividend in the form of an in-kind distribution of a portion of the share premium reserve. On April 20, 2009, our shareholders received BBVA shares from treasury stock in the proportion of one share for every 62 shares outstanding. Accordingly, the number of shares distributed was 60,451,115. |
|
| (**) | | In execution of the “Dividendo Opción” described under “Item 4. Information on the Company — Supervision and Regulation — Dividends”, on March 29, 2011, the Board of Directors carried out thefree-of-charge capital increase approved by our shareholders in the General Shareholders Meeting of March 11, 2011. Thisfree-of-charge capital increase gives BBVA shareholders the option to receive one (1) newly-issued share of the Bank for each 59 shares of BBVA held by them or to receive a cash remuneration of €0.149 per share. For more information, please see BBVA’s report onForm 6-K furnished to the United States Securities Exchange Commission on March 29, 2011. |
This payment entailed a charge against the share premium reserve of €317 million, the weighted average market price of BBVA shares in the continuous electronic market on the trading session on March 12, 2009, the day immediately preceding the date of the AGM.
We have paid annual dividends to itsour shareholders since the date it waswe were founded. Historically, we have paid interim dividends each year. The total dividend for a year is proposed by the boardBoard of directorsDirectors following the end of the year to which it relates. The unpaid portion of this dividend (the final dividend) is paid after the approval of our financial statements by the shareholders at the AGM. Interim and final dividends are payable to holders of record on the dividend payment date. Unclaimed dividends revert to BBVA five years after declaration.
While BBVA expectswe expect to declare and pay dividends on itsour shares on a quarterly basis in the future, the payment of dividends will depend upon itsour earnings, financial condition, governmental regulations and policies and other factors.
On March 13, 2009, BBVA’s shareholders adopted the distribution of additional shareholder remuneration to complement the 2008 cash dividend in the form of an in-kind distribution of a portion of the share premium reserve. Banco Bilbao Vizcaya Argentaria, S.A. shareholders will receive Company shares from treasury stock in the proportion of one share for every 62 outstanding. Accordingly, the maximum number of shares to be distributed is 60,451,115 treasury shares of Banco Bilbao Vizcaya Argentaria, S.A.
This payment will entail a charge against the share premium reserve in the amount of the figure resulting from measuring each share to be distributed at the weighted average market price of Banco Bilbao Vizcaya Argentaria, S.A. shares in the continuous electronic market on the trading session on the day immediately preceding the date set for the AGM called to ratify the proposal (“Reference Value”), subject to a ceiling such that in no event can the charge against the share premium reserve exceed the total account balance.
Subject to the terms of the deposit agreement, holders of ADRs are entitled to receive dividends attributable to the shares represented by the ADSs evidenced by their ADRs to the same extent as if they were holders of such shares.
For a description of BBVA’s access to the funds necessary to pay dividends on the shares, see “Item 4. Information on the Company — Supervision and Regulation — Dividends”. In addition, BBVA may not pay dividends except out of its unrestricted reserves available for the payment of dividends, after taking into account the Bank of Spain’s capital adequacy requirements. Capital adequacy requirements are applied by the Bank of Spain on both a consolidated and individual basis. See “Item 4. Information on the Company — Supervision and
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Regulation — Capital Requirements” and “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources — Capital”. Under Spain’s capital adequacy requirements, we estimate that as of December 31, 2008,2009, BBVA had approximately €11€15 billion of reserves in excess of applicable capital and reserve requirements, which were not restricted as to the payment of dividends.
Legal Proceedings
On March 15, 2002,The Group is party to certain legal actions in a number of jurisdictions, including, among others, Spain, Mexico and the Bank of Spain initiated a proceeding against BBVA and 16United States, arising out of its former directors and executives, as a result of the existence of funds (approximately €225 million) belonging to BBVordinary business operations. BBVA considers that were not included in the entity’s financial statements until they were voluntarily regularized by being recorded in the 2000
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consolidated income statement as extraordinary income, for which the related corporation tax was recorded and paid. BBVA notified the Bank of Spain of these matters on January 19, 2001.
On May 22, 2002, the CNMV commenced a proceeding against BBVA for possible contravention of the Securities Market Law (under Article 99 ñ) thereof) owing to the same events as those which gave rise to the Bank of Spain’s proceeding.
The commencement of proceedings to determine an eventual criminal liability of the individuals involved in those events triggered the suspension of the above mentioned proceedings until a definitive criminal resolution was issued. These criminal proceedings finished by definitive court resolutions in 2007 without criminal liability for any person involved in them. The end of these criminal proceedings has allowed the re-opening of the proceedings by the Bank of Spain and the CNMV. On June 13, 2007 the Bank of Spain, and on July 26, 2007 the CNMV, notified us of the end of the proceeding development suspension.
On July 18, 2008, the board of the Bank of Spain sanctioned BBVA with a fine of €1.0 million for a serious breach as typified in article 5.p) of theLey de Disciplina e Intervención de las Entidades de Crédito(law regulating the conduct of financial entities) and also imposed various sanctions on the managers and executives responsible for such conduct none of whom are presently members ofthose actions is material and none is expected to result in a significant adverse effect on BBVA’s financial position at either the board of directorsindividual or hold executive office at BBVA.
On July 23, 2008, the Ministry of Economy and Finance sanctioned BBVA with a fine of €2.0 million, as a result of the proceeding initiated by the CNMV, for a very serious breach as typified in Article 99, ñ) ofthe Ley del Mercado de Valores(law regulating securities markets).
Both sanctionsconsolidated level. Management believes that adequate provisions have been appealed within the Ministry of Economy and Finance, but no decisions have been issued as of the date of this Annual Report.
Internal Control Procedures
As a result of our discovery that BBVA funds had been held in offshore accounts and not been reflected in its financial statements, we have implemented several accounting internal control procedures in order to obtain reasonable assurance that breaches of our internal controls do not occur. For example, BBVA has significantly strengthened its internal audit function. BBVA’s internal audit department is responsible for such matters as verifying accuracy and completeness of BBVA’s financial reporting and ensuring the compliance, appropriateness and effectiveness of BBVA’s internal control systems and procedures. BBVA has also enhanced its internal audit function, including by broadening the scope of its internal audit activities to include all of BBVA’s diverse operations, both in terms of business area and geographical location. In addition, in 2002, BBVA implemented a “Director Plan”made in respect of fiscal years 2003 and 2004 to further strengthenthe litigation arising out of its internal controls. As part of this plan, BBVA’s internal audit function was further expanded to include review of information and documentation used by the management of eachordinary business unit, review of BBVA’s financial statement consolidation process and review and assessment of BBVA’s compliance with capital adequacy requirements. In addition, the Director Plan provided for the standardization of internal audit work procedures, from making initial contact with the business area or unit being audited to documenting the results of the audit. The currentoperations. BBVA Group’s Internal Audit Plan, named “Strategic Plan”, is relatedhas not disclosed to the fiscal yearsmarkets any contingent liability that could arise from 2007 to 2009.
BBVA has also reinforced its internal compliance department. This department, whose functions have been established by the Audit and Compliance Committee of BBVA’s board of directors, is responsible for developing and implementing internal norms and procedures to ensure compliance withsaid legal requirements and ethical guidelines established by BBVA, suchactions as BBVA’s Code of Ethics and Conduct. For example, this department is responsible for establishing internal controls and procedures related to matters such as the prevention of money-laundering and trading in BBVA’s securities.
Besides the accounting internal control procedures implemented by BBVA described above, in order to further obtain reasonable assurance that breaches of BBVA’s internal controls doit does not occur, BBVA has taken a series of steps to strengthen its corporate governance structures in keeping with the most recent trends in this area and new legislation that has taken effect in Spain and the other countries in which BBVA operates. For a description of these corporate governance structures, see “Item 6. — Directors, Senior Management and Employees”.
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Other Proceedings
BBVA Privanza Bank Ltd. (Jersey)
A proceeding was initiated alleging that certain employees of BBVA Privanza Bank Ltd. (Jersey) cooperated in the creation of accounts and financial products in Jersey which were allegedly used by Spanish individuals to avoid Spanish tax obligations. The proceedings also included an allegation of a tax offence due to the purported non-consolidation of a fully-owned subsidiary. This proceeding is ongoing and charges have not been brought against any BBVA employee or director and as of date of this Annual Report no current or former BBVA Privanza Bank (Jersey) employee is party in this proceeding. In light of the surrounding events and circumstances, BBVA’s legal advisers do not expect that the proceedings described above will have a material effect on BBVA.consider them material.
No significant change has occurred since the date of the Consolidated Financial Statements.
| |
| ITEM 9. | THE OFFER AND LISTING |
| |
| A. | Offer and Listing Details |
BBVA’s shares are listed on the Spanish stock exchanges in Madrid, Bilbao, Barcelona and Valencia (the“Spanish “Spanish Stock Exchanges”) and listed on the computerized trading system of the Spanish Stock Exchanges (the“Automated “Automated Quotation System”). BBVA’s shares are also listed on the New York, Frankfurt, Milan, Zurich, Mexican and London stock exchanges as well as quoted on SEAQ International in London. BBVA’s shares are listed on the New York stock exchangeStock Exchange as American Depositary Shares (ADSs).
ADSs are listed on the New York Stock Exchange and are also traded on the Lima (Peru) Stock Exchange, by virtue of an exchange agreement entered into between these two exchanges. Each ADS represents the right to receive one share.
Fluctuations in the exchange rate between the euro and the dollar will affect the dollar equivalent of the euro price of BBVA’s shares on the Spanish Stock Exchanges and the price of BBVA’s ADSs on the New York Stock Exchange. Cash dividends are paid by BBVA in euro, and exchange rate fluctuations between the euro and the dollar will affect the dollar amounts received by holders of ADRs on conversion by The Bank of New York Mellon (acting as depositary) of cash dividends on the shares underlying the ADSs evidenced by such ADRs.
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The table below sets forth, for the periods indicated, the high and low sales closing prices for the shares of BBVA on the Automated Quotation System.
| | | | | | | | | | | | | | | | | |
| | | Euro per Share | | | Euro per Share | |
| | | High | | Low | | | High | | Low | |
| |
Fiscal year ended December 31, 2004 | | | | | | | | | |
| Annual | | | 13.09 | | | | 10.22 | | |
Fiscal year ended December 31, 2005 | | | | | | | | | |
| Annual | | | 15.17 | | | | 11.95 | | |
Fiscal year ended December 31, 2006 | | | | | | | | | | | | | | | | |
| Annual | | | 19.49 | | | | 14.91 | | | | 19.49 | | | | 14.91 | |
Fiscal year ended December 31, 2007 | | | | | | | | | | | | | | | | |
| Annual | | | | 20.08 | | | | 15.60 | |
Fiscal year ended December 31, 2008 | | | | | | | | | |
| Annual | | | | 16.58 | | | | 7.16 | |
Fiscal year ended December 31, 2009 | | | | | | | | | |
| Annual | | | 20.08 | | | | 15.60 | | | | 13.17 | | | | 4.68 | |
| First Quarter | | | 20.08 | | | | 17.38 | | | | 9.28 | | | | 4.68 | |
| Second Quarter | | | 18.87 | | | | 17.65 | | | | 9.03 | | | | 6.32 | |
| Third Quarter | | | 18.43 | | | | 15.60 | | | | 12.71 | | | | 8.63 | |
| Fourth Quarter | | | 17.54 | | | | 16.06 | | | | 13.17 | | | | 11.51 | |
Fiscal year ended December 31, 2008 | | | | | | | | | |
Fiscal year ended December 31, 2010 | | | | | | | | | |
| Annual | | | 16.58 | | | | 7.16 | | | | 13.15 | | | | 7.08 | |
| First Quarter | | | 16.58 | | | | 12.76 | | | | 13.15 | | | | 9.39 | |
| Second Quarter | | | 15.27 | | | | 12.17 | | | | 11.32 | | | | 7.41 | |
| Third Quarter | | | 12.41 | | | | 10.30 | | | | 10.79 | | | | 8.48 | |
| Fourth Quarter | | | 12.30 | | | | 7.16 | | | | 9.99 | | | | 7.08 | |
| Month ended September 30, 2008 | | | 11.86 | | | | 10.30 | | |
| Month ended October 31, 2008 | | | 12.30 | | | | 7.24 | | |
| Month ended November 30, 2008 | | | 10.13 | | | | 7.16 | | |
| Month ended December 31, 2008 | | | 8.72 | | | | 7.62 | | |
Fiscal year ended December 31, 2009 | | | | | | | | | |
| Month ended January 31, 2009 | | | 9.28 | | | | 6.45 | | |
| Month ended February 28, 2009 | | | 7.50 | | | | 5.82 | | |
| Month ended March 31 (through March 27), 2009 | | | 6.57 | | | | 4.68 | | |
| Month ended September 30, 2010 | | | | 10.32 | | | | 9.76 | |
| Month ended October 31, 2010 | | | | 9.99 | | | | 9.34 | |
| Month ended November 30, 2010 | | | | 9.21 | | | | 7.08 | |
| Month ended December 31, 2010 | | | | 8.15 | | | | 7.56 | |
Fiscal year ended December 31, 2011 | | | | | | | | | |
| Month ended January 31, 2011 | | | | 9.08 | | | | 6.92 | |
| Month ended February 28, 2011 | | | | 9.43 | | | | 8.76 | |
| Month ended March 31, 2011 (through March 28) | | | | 9.06 | | | | 8.38 | |
From January 1, 20082010 through December 31, 20082010 the percentage of outstanding shares held by BBVA and its affiliates ranged between 0.639%0.383% and 3.770%2.267%, calculated on a monthly basis. On February 2, 2009,As of January 24, 2011, the percentage of outstanding shares held by BBVA and its affiliates was 2.034%1.004%.
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The table below sets forth the reported high and low sales closing prices for the ADSs of BBVA on the New York Stock Exchange for the periods indicated.
| | | | | | | | | | | | | | | | | |
| | | U.S. Dollars per ADS | | | U.S. Dollars per ADS | |
| | | High | | Low | | | High | | Low | |
| |
Fiscal year ended December 31, 2004 | | | | | | | | | |
| Annual | | | 17.77 | | | | 12.47 | | |
Fiscal year ended December 31, 2005 | | | | | | | | | |
| Annual | | | 17.91 | | | | 15.08 | | |
Fiscal year ended December 31, 2006 | | | | | | | | | | | | | | | | |
| Annual | | | 25.15 | | | | 18.21 | | | | 25.15 | | | | 18.21 | |
Fiscal year ended December 31, 2007 | | | | | | | | | | | | | | | | |
| Annual | | | | 26.23 | | | | 21.56 | |
Fiscal year ended December 31, 2008 | | | | | | | | | |
| Annual | | | | 24.27 | | | | 8.45 | |
Fiscal year ended December 31, 2009 | | | | | | | | | |
| Annual | | | 26.23 | | | | 21.56 | | | | 19.69 | | | | 5.76 | |
| First Quarter | | | 26.23 | | | | 22.79 | | | | 12.66 | | | | 5.76 | |
| Second Quarter | | | 25.37 | | | | 23.56 | | | | 12.73 | | | | 8.44 | |
| Third Quarter | | | 23.57 | | | | 21.56 | | | | 18.16 | | | | 12.09 | |
| Fourth Quarter | | | 25.48 | | | | 23.44 | | | | 19.69 | | | | 16.74 | |
Fiscal year ended December 31, 2008 | | | | | | | | | |
Fiscal year ended December 31, 2010 | | | | | | | | | |
| Annual | | | 24.27 | | | | 8.45 | | | | 18.99 | | | | 8.87 | |
| First Quarter | | | 24.27 | | | | 19.32 | | | | 18.99 | | | | 12.91 | |
| Second Quarter | | | 23.90 | | | | 18.97 | | | | 15.40 | | | | 8.87 | |
| Third Quarter | | | 19.56 | | | | 14.59 | | | | 14.19 | | | | 10.62 | |
| Fourth Quarter | | | 16.63 | | | | 8.45 | | | | 13.99 | | | | 9.21 | |
| Month ended September 30, 2008 | | | 17.46 | | | | 14.59 | | |
| Month ended October 31, 2008 | | | 16.63 | | | | 9.28 | | |
| Month ended November 30, 2008 | | | 12.99 | | | | 8.45 | | |
| Month ended December 31, 2008 | | | 12.49 | | | | 9.27 | | |
Fiscal year ended December 31, 2009 | | | | | | | | | |
| Month ended January 31, 2009 | | | 12.66 | | | | 8.32 | | |
| Month ended February 28, 2009 | | | 9.70 | | | | 7.43 | | |
| Month ended March 31, 2009 (through March 27) | | | 8.90 | | | | 5.76 | | |
| Month ended September 30, 2010 | | | | 13.93 | | | | 12.30 | |
| Month ended October 31, 2010 | | | | 13.99 | | | | 12.98 | |
| Month ended November 30, 2010 | | | | 12.85 | | | | 9.21 | |
| Month ended December 31, 2010 | | | | 10.80 | | | | 9.98 | |
Fiscal year ended December 31, 2011 | | | | | | | | | |
| Month ended January 31, 2011 | | | | 12.45 | | | | 9.03 | |
| Month ended February 28, 2011 | | | | 12.95 | | | | 11.95 | |
| Month ended March 31, 2011 (through March 28) | | | | 12.83 | | | | 11.53 | |
Securities Trading in Spain
The Spanish securities market for equity securities consists of the Automated Quotation System and the four stock exchanges located in Madrid, Bilbao, Barcelona and Valencia. During 2008,2010, the Automated Quotation System accounted for the majority of the total trading volume of equity securities on the Spanish Stock Exchanges.
Automated Quotation System. The Automated Quotation System (Sistema de Interconexión Bursátil) links the four local exchanges, providing those securities listed on it with a uniform continuous market that eliminates certain of the differences among the local exchanges. The principal feature of the system is the computerized matching of buy and sell orders at the time of entry of the order. Each order is executed as soon as a matching order is entered, but can be modified or canceled until executed. The activity of the market can be continuously monitored by investors and brokers. The Automated Quotation System is operated and regulated by Sociedad de Bolsas, S.A. ((““Sociedad de Bolsas”Bolsas”), a corporation owned by the companies that manage the local exchanges. All trades on the Automated Quotation System must be placed through a bank, brokerage firm, an official stock broker or a dealer firm member of a Spanish stock exchangeStock Exchange directly. Since January 1, 2000, Spanish banks have been allowed to place trades on the Automated Quotation System and have been allowed to become members of the Spanish Stock Exchanges. BBVA isWe are currently a member of the four Spanish Stock Exchanges and can trade through the Automated Quotation System.
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In a pre-opening session held from 8:30 a.m. to 9:00 a.m. each trading day, an opening price is established for each security traded on the Automated Quotation System based on orders placed at that time. The regime concerning opening prices was changed by an internal rule issued by theSociedad de Bolsas. TheIn this new regime sets forth that all references to maximum changes in share prices will beare substituted by static and dynamic price ranges for each listed share, calculated on the basis of the most recent historical volatility of each share, and made publicly available and updated on a regular basis by theSociedad de Bolsas. The computerized trading hours are from 9:00 a.m. to 5:30 p.m., during which time the trading price of a security is permitted to vary by up to the stated levels. If, during the open session, the quoted price of a share exceeds these static or dynamic price ranges, Volatility Auctions are triggered, resulting in new static or dynamic price ranges being set for the share object of the same. Between 5:30 p.m. and 5:35 p.m. a closing price is established for each security through an auction system similar to the one held for the pre-opening early in the morning.
Trading hours for block trades (i.e. operations involving a large number of shares) are also from 9:00 a.m. to 5:30 p.m.
Between 5:30 p.m. and 8:00 p.m., special operations, whetherAuthorizedorCommunicated,can take place outside the computerized matching system of theSociedad de Bolsasif they fulfill certain requirements. In such respectCommunicatedspecial operations (those that do not need the prior authorization of theSociedad de Bolsas) can be traded if all of the following requirements are met: (i) the trade price of the share must be within the range of 5% above the higher of the average price and closing price for the day and 5% below the lower of the average price and closing price for the day; (ii) the market member executing the trade must have previously covered certain positions in securities and cash before executing the trade; and (iii) the size of the trade must involve more thanat least €300,000 and more thanrepresent at least a 20% of the average daily trading volume of the shares in theAutomated Quotation Systemduring the preceding three months. If any of the aforementioned requirements is not met, a special operation may still take place, but it will need to take the form ofAuthorizedspecial operation (i.e. those needing the prior authorization of theSociedad de Bolsas). Such authorization will notonly be upheld if any of the following requirements is met:
| | |
| | • | the trade involves more than €1.5 million and more than 40% of the average daily volume of the stock during the preceding three months; |
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| | • | the transaction derives from a merger or spin-off process or from the reorganization of a group of companies; |
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| | • | the transaction is executed for the purposes of settling a litigation or completing a complex group of contracts; or |
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| | • | theSociedad de Bolsasfinds other justifiable cause. |
Please note that the regime set forth in the previous two paragraphs may be subject to change, as article 36 of the Securities Market Act, defining trades in Spanish Exchanges has been,was, as described below, modified as a result Law 47/2007. The Spanish Stock Markets are currently reviewing their trading rules in light of this new regulation.
Information with respect to the computerized trades between 9:00 a.m. and 5:30 p.m. is made public immediately, and information with respect to trades outside the computerized matching system is reported to theSociedad de Bolsasby the end of the trading day and published in theBoletín de Cotizaciónand in the computer system by the beginning of the next trading day.
Sociedad de Bolsasis also the manager of the IBEX 35® Index. This index is made up by the 35 most liquid securities traded on the Spanish Market and, technically, it is a price index that is weighted by capitalization and adjusted according to the free float of each company comprised in the index. AppartApart from its quotation on the four Spanish Exchanges, BBVA is also currently included in thisthe IBEX 35® Index.
Clearing and Settlement System.
On April 1, 2003, by virtue of Law 44/2002 and of Order ECO 689/2003 of March 27, 2003 approved by the Spanish Ministry of Economy, the integration of the two main existing book-entryportfolio-entry settlement systems existing in Spain at the time-thetime−the equity settlement systemServicio de Compensación y Liquidación de Valores(“(“SCLV”) and the Public Debt settlement systemCentral de Anotaciones de Deuda del Estado (“(“CADE”)-− took place. As a
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result of this integration, a single entity, known asSociedad de Gestión de los Sistemas de Registro Compensación y
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Liquidación de Valores(“(“Iberclear”) assumed the functions formerly performed by SCLV and CADE according to the legal regime stated in article 44 bis of the Spanish Securities Market Act.
Notwithstanding the above, rules concerning the book-entryportfolio-entry settlement systems enacted before this date by SCLV and the Bank of Spain, as former manager of CADE, continue in force, but any reference to the SCLV or CADE must be substituted by Iberclear.
In addition, and according to Law 41/1999, Iberclear manages three securities settlement systems for securities in book-entry form: The system for securities listed on the four Spanish Stock Exchanges, the system for Public Debt and the system for debt securities traded in AIAF Mercado de Renta Fija. Cash settlement, from February 18, 2008 for all systems is managed through the TARGET2-Banco de España payment system. The following threefour paragraphs exclusively address issues relating to the securities settlement system managed by Iberclear for securities listed on the Spanish Stock Exchanges (the“SCLV “SCLV system”).
Under Law 41/1999 and Royal Decree 116/1992, transactions carried out on the Spanish Stock Exchanges are cleared and settled through Iberclear and its participants (each an “entidad participante”), through the SCLV system. Only Iberclear participants to this SCLV system are entitled to use it, with participation restricted to authorized members of the Spanish Stock Exchanges (for whom participation was compulsory until March 2007), the Bank of Spain (when an agreement, approved by the Spanish Ministry of Economy and Finance, is reached with Iberclear) and, with the approval of the CNMV, other brokers not members of the Spanish Stock Exchanges, banks, savings banks and foreign clearing and settlement systems. BBVA is currently a participant in Iberclear. Iberclear and its participants are responsible for maintaining records of purchases and sales under the book-entry system. In order to be listed, shares of Spanish companies must be held in book-entry form. Iberclear, maintains a “two-step” book-entry registry reflecting the number of shares held by each of its participants as well as the amount of such shares held on behalf of beneficial owners. Each participant, in turn, maintains a registry of the owners of such shares. Spanish law considers the legal owner of the shares to be:
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| | • | the participant appearing in the records of Iberclear as holding the relevant shares in its own name, or |
| |
| | • | the investor appearing in the records of the participant as holding the shares. |
Iberclear settles Stock Exchange trades in the SCLV system in the so-called“D+ “D+3 Settlement” by which the settlement of Stock Exchange trades takes place three business days after the date on which the transaction was carried out in the Stock Exchange.
Ministerial Order EHA/2054/2010, amended Iberclear’s Regulation permitting Iberclear to clear and settle trades of equity securities listed in the Spanish Stock Exchanges that are entered into outside such stock exchanges (whetherover-the-counter or in multilateral trading facilities).
Obtaining legal title to shares of a company listed on a Spanish stock exchangeStock Exchange requires the participation of a Spanish broker-dealer, bank or other entity authorized under Spanish law to record the transfer of shares in book-entry form in its capacity as Iberclear participant for the SCLV system. To evidence title to shares, at the owner’s request the relevant participant entity must issue a certificate of ownership. In the event the owner is a participant entity, Iberclear is in charge of the issuance of the certificate with respect to the shares held in the participant entity’s own name.
According to article 42 of the Securities Market Act Brokeragebrokerage commissions are not regulated. Brokers’ fees, to the extent charged, will apply upon transfer of title of our shares from the depositary to a holder of ADSs, and upon any later sale of such shares by such holder. Transfers of ADSs do not require the participation of a member of a Spanish Stock Exchange. The deposit agreement provides that holders depositing our shares with the depositary in exchange for ADSs or withdrawing our shares in exchange for ADSs will pay the fees of the official stockbroker or other person or entity authorized under Spanish law applicable both to such holder and to the depositary.
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Securities Market Legislation
The Securities Markets Act was enacted in 1988 with the purpose of reforming the organization and supervision of the Spanish securities markets. This legislation and the regulation implementing it:
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| | • | established an independent regulatory authority, the CNMV, to supervise the securities markets; |
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| | • | established a framework for the regulation of trading practices, tender offers and insider trading; |
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| | • | required stock exchange members to be corporate entities; |
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| | • | required companies listed on a Spanish stock exchangeStock Exchange to file annual audited financial statements and to make public quarterly financial information; |
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| | • | established the legal framework for the Automated Quotation System; |
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| | • | exempted the sale of securities from transfer and value added taxes; |
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| | • | deregulated brokerage commissions; and |
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| | • | provided for transfer of shares by book-entry or by delivery of evidence of title. |
On February 14, 1992, Royal Decree No. 116/92 established the clearance and settlement system and the book-entry system, and required that all companies listed on a Spanish stock exchangeStock Exchange adopt the book-entry system.
On November 16, 1998, the Securities Markets Act was amended in order to adapt it to Directive 93/22/CEE on investment services (later amended by Directive 95/26/CE and Directive 97/9/CE of the European Parliament and Council on investors indemnity systems).
On November 22, 2002, the Securities Markets Act was amended by Law 44/2002 in order to update Spanish financial law to global financial markets. See “Item 4. Information on the Company — Business Overview — Supervision and Regulation — Reform of the Spanish Securities Markets”.
On June 18, 2003, the Securities Markets Act and the Corporate LawCompanies Act (currently, the Capital Companies Act) were amended by Law 26/2003, in order to reinforce the transparency of information available regarding listed Spanish companies. This law added a new chapter, Title X, to the Securities Markets Act, which: (i) requires disclosure of shareholders’ agreements relating to listed companies; (ii) regulates the operation of the general shareholders’ meetings and of boards of directors of listed companies; (iii) requires the publication of an annual report on corporate governance; and (iv) establishes measures designed to increase the availability of information to shareholders.
On April 12, 2007, the Spanish Congress approved Law 6/2007, which amends the Securities Markets Act in order to adapt it to Directive 2004/25/EC on takeover bids, and Directive 2004/109/EC on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (amending Directive 2001/34/EC). Regarding the transparency of listed companies, Law 6/2007 has amended the reporting requirements and the disclosure regime, and has established changes in the supervision system. On the takeover bids side, Law 6/2007 has established the cases in which a company must launch a takeover bid and the ownership thresholds at which a takeover bid must be launched. It also regulates conduct rules for the board of directors of target companies and the squeeze-out and sell-out when a 90% of the share capital is held after a takeover bid. Additionally, Law 6/2007 has been further developed by Royal Decree 1362/2007, on transparency requirements for issuers of listed securities.
With respect to the transparency of listed companies, Law6/2007 (i) amends the reporting requirements of the periodic financial information of listed companies and issuers of listed securities; (ii) amends the disclosure regime for significant stakes; (iii) adds new information and disclosure requirements for issuers of listed securities, including disclosures regarding significant events; (iv) establishes a civil liability system of the issuer and board of directors in connection with the financial information disclosed by issuers of securities; and (v) establishes new developments in the supervision system, conferring new supervisory powers upon the CNMV with respect to the review of accounting information.
Regarding takeover bids, Law 6/2007 (i) establishes the cases in which a company must launch a takeover bid over the whole share capital of the relevant company; (ii) establishes that takeover bids shall be launched once a specific stake on the share capital of the company has been reached (instead of the previous system which was based on the obligation of launching a takeover bid in order to reach a specific percentage); (iii) regulates new obligations for the board of directors of the target companies of the takeover bid in terms of the no blocking of the takeover bid; (iii) regulates the squeeze-out and sell-out when a 90% of the share capital is held after a takeover bid; and (iv) establishes a new relevant control threshold by considering that control exists by the direct or indirect acquisition of a percentage of voting rights in a listed company equal to or in excess of 30%, or by holding any interest carrying less than 30% of voting rights but appointing, within 24 months following the acquisition , a number of directors which, together with those already appointed by it, if any, represents more than one-half of the members of the board of directors. Royal Decree 1066/2007 completes the regulation currently in place for takeover bids in Spain.
On December 19, 2007, the Spanish Congress approved Law 47/2007, which amends the Securities Markets Act in order to adapt it to Directive 2004/37/EC on markets in financial instruments (MiFID), Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions, and Directive 2006/73/EC implementing
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Directive 2004/39/EC with respect to organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive. The amendments introduced by Law 47/2007 represent important reforms of the Securities Markets Act and serve to (i) establish new multilateral trading facilities for listing shares apart from the Stock Markets; (ii) reinforce the measures for the protection of investors; (iii) establish new organizational requirements for investment firms; (iv) reinforce the supervisory powers of CNMV, establishing cooperation mechanisms amongst supervisory authorities. Further MiFID implementation has been introduced by Royal Decree 217/2008.2008 and Ministerial Order EHA/1665/2010, which developed articles 71 and 76 of such Royal Decree 217/2008 regarding fees and types of agreements.
On June 29, 2009, the Spanish Congress approved Law 5/2009, amending, among other laws, the Securities Markets Act and the Discipline and Intervention of Credit Institutions Act (Law 26/1988) to adapt them to Directive
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2007/44/EC. See “Item 10. Additional Information — Exchange Controls — Restrictions on Acquisitions of Shares”.
Trading by the Bank and its Affiliates in the Shares
Trading by subsidiaries in their parent companies shares is restricted by the Spanish Capital Companies Act.
Neither BBVA nor its affiliates may purchase BBVA’s shares unless the making of such purchases is authorized at a meeting of BBVA’s shareholders by means of a resolution establishing, among other matters, the maximum number of shares to be acquired within a maximum period of 18 months.and the authorization term, which cannot exceed five years. Restricted reserves equal to the purchase price of any shares that are purchased by BBVA or its subsidiaries must be made by the purchasing entity. The total number of shares held by BBVA and its subsidiaries may not exceed fiveten percent of BBVA’s total capital.capital, as per the new treasury stock limits set forth in Law 3/2009 of structural modifications of commercial companies. It is the practice of Spanish banking groups, including ours, to establish subsidiaries to trade in their parent company’s shares in order to meet imbalances of supply and demand, to provide liquidity (especially for trades by their customers) and to modulate swings in the market price of their parent company’s shares.
Reporting Requirements
Royal Decree 1362/2007 requires that any entity which acquires or transfers shares and as a consequence the number of voting rights held exceeds, reaches or is below the thresholdthresholds of three percent or any multiple of five percent,3%, 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 60%, 70%, 75%, 80% y 90% of the capital stock of a company listed on a Spanish stock exchangeStock Exchange must, within 4four days after that acquisition or transfer, report it to such company, and to the CNMV. This duty to report the holding of a significant stake will be applicable not only to the acquisitions and transfers in the terms described above, but also to those cases in which in the absence of an acquisition or transfer of shares, the ratio of an individual’s voting rights exceeds, reaches or is below the thresholds that trigger the duty to report, as a consequence of an alteration in the total number of voting rights of an issuer.
In addition, any company listed on a Spanish stock exchangeStock Exchange must report on a non-public basis to the CNMV, within 4 Stock Exchange business days, any acquisition by such company (or an affiliate) of the company’s own shares if such acquisition, together with any previous one from the date of the last communication, exceeds 1% of its capital stock, regardless of the balance retained. Members of the board of directors must report the ratio of voting rights held at the time of their appointment as members of the board, when they are ceased as members, as well as any transfer or acquisition of share capital of a company listed on the Spanish Stock Exchanges, regardless of the size of the transaction. Additionally, since we are a credit entity, any individual or company who intends to acquire a significant participation in BBVA’s share capital must obtain prior approval from the Bank of Spain in order to carry out the transaction. See “Item 10. Additional Information — Exchange Controls — Restrictions on Acquisitions of Shares”.
Royal Decree 1362/2007 also establishes reporting requirements in connection with any entity acting from a tax haven or a country where no securities regulatory commission exists, in which case the threshold of three percent is reduced to one percent.
Each Spanish bank is required to provide to the Bank of Spain a list dated the last day of each quarter of all the bank’s shareholders that are financial institutions and other non-financial institution shareholders owning at least 0.25% of a bank’s total share capital. Furthermore, the banks are required to inform the Bank of Spain, as soon as they become aware, and in any case not later than in 15 days, of each acquisition by a person or a group of at least one percent of such bank’s total share capital.
In addition, BBVA shares were included, among others, in Annex 1 of the Agreement of the Executive Committee of the CNMV on naked short selling dated September 22, 2008. While2008, which was supplemented by a further agreement of this body dated May 27, 2010. According to such agreement continuescommittee’s agreements, from June 11, 2010, the following reporting and disclosing thresholds are in effect, anyplace for short positions in shares listed in Spanish regulated markets (including BBVA shares): (i) Any natural or legal person holding short positions in shares includedlisted in this Annex 1Spanish regulated markets has to disclose to the CNMV and make publicCNMV: any short position exceeding 0.25%0.20% in the share capital of listed issuers included in such Annex, asthe
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well asissuers of such shares, any increase or decrease of any short position from this 0.20% threshold, as well as any change in a short position (whether downwards or upwards) of at least 0.1% of such shares; (ii) the 0.25%CNMV will make public through its website the following information, provided such information has been disclosed to the CNMV: the short positions which exceed 0.5% in shares listed in the Spanish regulated markets, the increase or decrease in short positions in such shares that range further from this threshold before 19:00 hours after each change.(such as 0.5%, 0.6% and 0.7%); and the aggregate of any short positions in such shares falling under the 0.2% and 0.5% thresholds.
Ministerial Order EHA/1421/2009, implements Article 82 of Securities Market (Law 24/1988 of July 28, 1988) on the publication of significant information. The Ministerial Order specifies certain aspects relating to notice of significant information that were pending implementation in Law 24/1988. In this respect, the principles to be followed and conditions to be met by entities when they publish and report significant information are set forth, along with the content requirements, including when significant information is connected with accounting, financial or operational projections, forecasts or estimates. The reporting entity must designate at least one interlocutor whom the CNMV may consult or from whom it may request information relating to dissemination of the significant information. Lastly, some of the circumstances in which it is considered that an entity is failing to comply with the duty to publish and report significant information are described. These include, among others, cases in which significant information is disseminated at meetings with investors or shareholders or at presentations to analysts or to media professionals, but is not communicated, at the same time, to the CNMV.
Circular 4/2009 of the CNMV further develops Ministerial Order EHA1421/2009. In this respect, the Circular sets forth a precise proceeding for the actual report of the significant information and draws up an illustrative list of the events that may be deemed to constitute significant information. This list includes, among others, events connected with strategic agreements and mergers and acquisitions, information relating to the reporting entity’s financial statements or those of its consolidated group, information on notices of call and official matters and information on significant changes in factors connected with the activities of the reporting entity and its group.
Tax Requirements
According to Law 19/2003 and its associated regulations, an issuer’s parent company (credit entity or listed company) is required, on an annual basis, to provide the Spanish tax authorities with the following information: (i) the identity and tax residence of the recipients of income from securities and (ii) the amount of income obtained in each period.
A new Royal Decree, which is currently being debated in the Spanish Congress, would, if enacted, amend the current reporting obligations on the issuers/guarantors of securities (preferred shares and debt instruments) which fall within the scope of Law 19/2003.
Not Applicable.
Not Applicable.
Not Applicable.
Not Applicable.
Not Applicable.
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| ITEM 10. | ADDITIONAL INFORMATION |
Not Applicable.
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| B. | Memorandum and Articles of Association |
Spanish law and BBVA’s bylaws are the main sources of regulation affecting the company.Company. All rights and obligations of BBVA’s shareholders are contained in its bylaws and in Spanish law.
At theThe AGM held on March 14, 2008,11, 2011, resolved to amend articles 1o, 6o, 9o, 13o ter, 15o, 16o, 19o, 20o, 21o, 22o, 24o, 28o, 30o, 31o, 32o, 48o, 51o, 52o, 53o, 54o, 56o of and the Additional Provisions BBVA’s shareholders adopted a resolution amending itsbylaws following the proposal of the Board of Directors. The purpose of this amendment is the adaptation of our bylaws to allow for dividendsthe amendments brought in under the consolidated text of the Capital Companies Act, adopted by Legislative Royal Decree 1/2010 of July 2 and to be paidLaw 12/2010, of June 30, amending Law 19/1988, of June 12, on Accounts Audits, Law 24/1988, of July 28, on Securities Exchanges, and the consolidated text of the former Companies Act adopted under Legislative Royal Decree 1564/1989, of December 22, and to bring in cash or in kind as determined by shareholder resolution.certain technical enhancements. As of the date of this Annual Report this amendment isthese amendments are pending registration atwith the Commercial Registry of Vizcaya.
The regulation in the previous paragraph will also be applicable to the return of contributions in the event of a reduction in share capital.Registry.
Registry and Company’s Objects and Purposes
BBVA is registered with the Commercial Registry of Vizcaya (Spain). Its registration number at the Commercial Registry of Vizcaya is volume 2,083, Company section folio 1, sheet BI-17-1, 1st entry. Its corporate objects and purposes are to: (i) directly or indirectly conduct all types of activities, transactions, acts, agreements and services relating to the banking business which are permitted or not prohibited by law and all banking ancillary activities; (ii) acquire, hold and dispose of securities; and (iii) make public offers for the acquisition and sale of securities and all types of holdings in any kind of company. BBVA’s objects and purposes are contained in Article 3 of the bylaws.
Certain Powers of the Board of Directors
In general, provisions regarding directors are contained in BBVA’sour bylaws. Also, the boardour Board regulations of BBVA, govern the internal procedures and the operation of the boardBoard and its committees and directors’ rights and duties as described in their charter. The referred boardBoard regulations (i) limit a director’s right to vote on a proposal, arrangement or contract in which the director is materially interested; (ii) limit the power or directors to vote on compensation for themselves; (iii) limit borrowing powers exercisable by the directors and how such borrowing powers can be varied;amended; or (iv) require retirement of directors at a certain age. In addition, the boardBoard regulations contain a series of ethical standards. See “Item 6 —6. Directors, Senior Management and Employees”.
Certain Provisions Regarding Preferred Shares
The bylaws authorize BBVAus to issue ordinary, non-voting, redeemable and preferred shares. As of the date of the filing of this Annual Report, BBVA haswe have no non-voting, redeemable or preferred shares outstanding.
The characteristicsterms of any preferred shares must be agreed by the Board of directorsDirectors before they are issued.issued and the issue shall be made in accordance with the provisions of the bylaws and the Capital Companies Act.
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Only shares that have been issued as redeemable may be redeemed by BBVA.us. Redemption of shares may only occur according to the terms set forth when they are issued. Redeemable shares must be fullypaid-up at the time of their subscription. If the right to redeem redeemable shares is exclusively given to BBVA, it may not be exercised until at least three years after the issue. Redemption of shares must be financed against profits, free reserves or the proceeds of new securities issued especially for financing the redemption of an issue. If financed against profits or free reserves, BBVA must create a reserve for the amount of the par value of the redeemed shares. If the redemption is not financed against profits, free reserves or a new issue, it may only be done in compliance with the requirements of a reduction in share capital by the refund of contributions.
Holders of non-voting shares, if issued, are entitled to a minimum annual dividend, fixed or variable, set out at the time of the issue. The right of non-voting shares to accumulate unpaid dividends whenever funds to pay dividends are not available, any preemptive rights associated with non-voting shares, and the ability of holders of non-voting shares to recover voting rights also must be established at the time of the issue. Non-voting shares are entitled to the dividends to which ordinary shares are entitled in addition to their minimum dividend.
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Certain Provisions Regarding Shareholders Rights
As of the date of the filing of this Annual Report, BBVA’sour capital is comprised of one class of ordinary shares, all of which have the same rights.
Once all legal reserves and funds have been provided for out of the net profits of any given fiscal year, shareholders have the right to the distribution of an annual dividend ofequivalent to at least four percent of our paid-in capital. Shareholders will participate in the distribution of dividends in proportion to their paid-in capital. The right to collect a dividend lapses after five years as of the date in which it was first available to the shareholders. Shareholders also have the right to participate in proportion to their paid-in capital in any distribution resulting from our liquidation.
Each shareholder present at a general shareholders’ meeting is entitledshare entitles to one vote per each share.vote. However, unpaid shares with respect to which a shareholder is in default of the resolutions of the boardBoard of directorsDirectors relating to their payment will not be entitled to vote. The bylaws contain no provisions regarding cumulative voting.
The bylaws do not contain any provisions relating to sinking funds or potential liability of shareholders to further capital calls by BBVA.us.
The bylaws do not establish that special quorums are required to change the rights of shareholders. Under Spanish law, the rights of shareholders may only be changed by an amendment to the bylaws that complies with the requirements explained below under “— Shareholders’ Meetings”, plus the affirmative vote of the majority of the shares of the class that will be affected by the amendment.
Shareholders’ Meetings
The annual general shareholders’ meetingAGM has its own set of regulations on issues such as how it operates and what rights shareholders enjoy regarding annual general shareholders’ meeting.AGM. These establish the possibility of exercising or delegating votes over remote communication media.
General shareholders’ meetings may be ordinary or extraordinary. Ordinary general shareholders’ meetings are held within the first six months of each financial year in order to review, among other things, the management of the company, and to approve, if applicable, annual financial statements for the previous fiscal year. Extraordinary general shareholders’ meetings are those meetings that are not ordinary. In any case, the requirements mentioned below for constitution and adoption of resolutions are applicable to both categories of general meetings.
General shareholders’ meetingsMeetings shall be convened at the initiative of the Board of Directors whenever it deems this necessary or advisable for the Company’s interests and in any case on the dates or in the periods determined by law and these Bylaws or if requested by one or several shareholders representing at least five per cent of the share capital.
General Meetings, whether ordinary or extraordinary, must be convened by the Board of directors, whether by their own decision or upon the request of shareholders holding at least five percent of BBVA’s share capital. General meetings must generally be advised at least one month in advance by means of an advertisementannouncements published in the Official Gazette of the Companies Registry Gazette (Boletín Oficial del Registro Mercantil) (“Borme”(“BORME”) and on the Company website, within the notice period required by law (currently one month), unless legal provisions establish other media for disseminating the notice.
Pursuant to the Capital Companies Act, we have set up an Online Shareholder Forum on the Company’s website (www.bbva.com). Individual shareholders and voluntary associations constituted pursuant to prevailing regulations may access the forum with all due guarantees, in a newspaper of general circulation.order to facilitate their communication during therun-up to the General shareholders’ meeting.
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As of the date of the filing of this Annual Report, shareholders have the right to attend general meetings if they:
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| | • | own at least 500 shares; |
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| | • | have registered their shares in the appropriate account registry at least five days prior to the date for which the general meeting has been convened; and |
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| | • | retain the ownership of at least 500 shares until the general shareholders’ meeting takes place. |
Additionally, holders of fewer than 500 shares may aggregate their shares to reach at least such number of shares and appoint a shareholder as proxy to attend the general shareholders meeting.
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General shareholders’ meetings will be validly constituted on first call with the presence of at least 25% of BBVA’sour voting capital, either in person or by proxy. No minimum quorum is required to hold a general shareholders’ meeting on second call. In either case, resolutions will be agreed by the majority of the votes. However, a general shareholders#shareholders meeting will only be validly held with the presence of 50% of BBVA’sour voting capital on first call or of 25% of the voting capital on second call, in the case of resolutions concerning the following matters:
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| | • | issuances of debt; |
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| | • | capital increases or decreases; |
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| | • | the elimination on or limitation of the pre-emptive subscription rights over new shares; |
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| • | transformation, merger of BBVA;BBVA orbreak-up of the company and global assignment of assets and liabilities; |
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| • | the off-shoring of domicile; and |
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| | • | any other amendment to the bylaws. |
In these cases, resolutions may only be approved by the vote of the majority of the shares if at least 50% of the voting capital is present at the meeting. If the voting capital present at the meeting is less than 50%, then resolutions may only be adopted by two-thirds of the shares present.
Additionally, our bylaws state that, in order to adopt resolutions regarding a change in corporate purpose or the total liquidation or dissolution of BBVA, at least two-thirds of the voting capital must be present at the meeting on first call and at least 60 percent60% of voting capital must be present on second call.
Restrictions on the Ownership of Shares
Our bylaws do not provide for any restrictions on the ownership of our ordinary shares. Spanish law, however, provides for certain restrictions which are described below under “— Exchange Controls — Restrictions on Acquisitions of Shares”.
Restrictions on Foreign Investments
The Spanish Stock Exchanges are open to foreign investors. However, the acquisition of 50% or more of the share capital of a Spanish company by a person or entity residing in a tax haven must be notified to the Ministry of Economy and Treasury prior to its execution. All other investments in BBVA’sour shares by foreign entities or individuals only require the notification of the Spanish authorities through the Spanish intermediary that took part in the investment once it is executed.
Current Spanish regulations provide that once all applicable taxes have been paid, see “— Exchange Controls”, foreign investors may freely transfer out of Spain any amounts of invested capital, capital gains and dividends.
Change of Control Provisions
As explained above in Item 4 (Law amending the Securities markets Act on takeover bids and transparency requirements for issuers) and in Item 9, the Spanish legislation on takeovers bids has been amended by theAct 6/2007 of April 12, (Act 6/2007) entered into force on August 13, 2007. This Law has been developed by the Royal Decree 1362/2007. See Item 4 and Item 9.
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Since BBVA is a credit entity, it is necessary to obtain approval from the Bank of Spain in order to acquire a number of shares considered to be a significant participation by Law 26/1988, of July 29, 1998. See “— Exchange Controls — Restrictions on Acquisitions of Shares”. Also, any agreement that contemplates BBVA’s merger with another credit entity will require the authorization of the Ministry of Economy. This could also delay, defer or prevent a change of control of BBVA or any of its subsidiaries that are credit entities in the event of a merger.
The Group isWe are not aware of the execution of any material contracts other than those executed during the Bank’sour ordinary course of business during the two years immediately ending December 31, 2008,2010, and those mentioned in our Consolidated Financial Statements, nor is the Groupare we aware that the Bank or any of the Group’s subsidiaries have entered into contracts that could give rise to material liabilities for the Group.
In 1991, Spain adopted the EU standards for free movement of capital and services. As a result, exchange controls and restrictions on foreign investments have generally been abolished and foreign investors may transfer invested capital, capital gains and dividends out of Spain without limitation as to amount, subject to applicable taxes. See “— Taxation”.
Pursuant to Spanish Law 18/1992 on Foreign Investments and Royal Decree 664/1999, foreign investors may freely invest in shares of Spanish companies, except in the case of certain strategic industries.
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Shares in Spanish companies held by foreign investors must be reported to the Spanish Registry of Foreign Investments by the depositary bank or relevant Iberclear member. When a foreign investor acquires shares that are subject to the reporting requirements of the CNMV, notice must be given by the foreign investor directly to the Registry of Foreign Investments in addition to the notices of majority interests that must be sent to the CNMV and the applicable stock exchanges. This notice must be given through a bank or other financial institution duly registered with the Bank of Spain and the CNMV or through bank accounts opened with any branch of such registered entities.
Investment by foreigners domiciled in enumerated tax haven jurisdictions is subject to special reporting requirements under Royal Decree 1080/1991.
On July 5, 2003, Law 19/2003 came into effect. This law is an update to other Spanish exchange control and money laundering prevention laws.
Restrictions on Acquisitions of Shares
The Discipline and Intervention of Credit Institutions Act (Law 26/1988), amended by Law 26/19885/2009, of June 29, provides that any individual or corporation, that intendsacting alone or in concert with others, intending to acquire, directly or indirectly acquire a significant participation(“participación significativa”)holding in a Spanish bankfinancial institution (as defined in article 56 of the aforementioned Law 26/1998) or to directly or indirectly increase its holding in one in such a way that either the percentage of voting rights or of capital owned were equal to or more than 20%, 30% or 50%, or by virtue of the acquisition, might take control over the financial institution, must obtain the prior approval offirst notify the Bank of Spain. The Bank of Spain includingwill have 60 working days after the amount of such participation,date on which the termsnotification was received, to evaluate the transaction and, conditions ofwhere applicable, challenge the proposed acquisition andon the period in which it is intended to execute the transaction. grounds established by law.
A significant participation is considered 5%10% of the outstanding share capital of a bank or a lower percentage if such holding allows for the exercise of a significant influence.
Any individual or company that intends to increase, directly or indirectly, its significant participation in such a way that its share capital or voting rights after the acquisition reaches or exceeds 10%, 15%, 20%, 25%, 33%, 40%, 50%, 66% or 75% is required to give prior notice to the Bank of Spain of such transaction. Any acquisition without such prior notification, or before three months havethe period established in article 58.2 has elapsed after the date of such notification, or against the objection of the Bank of Spain, will produce the following results:
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| | • | the acquired shares will have no voting rights; and |
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| | • | if considered appropriate, the target bank may be taken over or its directors replaced and a sanction imposed. |
The Bank of Spain has a period of three months60 working days after the date on which the notification was received to object to a proposed transaction. Such objection may be based on the fact that the Bank of Spain does not consider the acquiring person suitable to guarantee the sound and prudent operation of the target bank.
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Any individual or institution that intends to sell its significant participation or reduce the above mentioned percentages, or which, because of such sale, loses control of the entity, must give prior notice to the Bank of Spain, indicating the amount to be sold and the period in which the transaction is to be executed. Non-compliance with this requirement will result in sanctions.
The Ministry of Economy and the Treasury, following a proposal by the Bank of Spain, may, whenever the control by a person with a significant participation may jeopardize the sound and prudent management of a credit institution, adopt any of the following measures as deemed appropriate:
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| • | suspend the voting rights corresponding to such shares for up to three years; |
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| • | take control of the bank or replace the directors; or |
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| • | revoke the bank’s license. |
Regarding the transparency of listed companies, Law 6/2007 amendsamended the Securities Markets Act on takeover bids and transparency requirements for issuers. The transparency requirements have been further developed by Royal Decree 1362/2007 developing the Securities Markets Act on transparency requirement for issuers of listed securities, specifically information on significant stakes, reducing the communication threshold to 3%, and extending the disclosure obligations to the acquisition or transfer of financial instruments that grant rights to acquire shares with voting rights.
Tender Offers
As stated above, the Spanish legal regime concerning takeover bids was amended by Law 6/2007 in order to adapt the Spanish Securities Spanish Market Act to the Directive 2004/25/EC on takeover bids, and Directive 2004/109/EC on the harmonization of transparency requirements in relation to information about issuers.
See Item 4 and Item 9.
Spanish Tax Considerations
The following is a summary of the material Spanish tax consequences to U.S. Residents (as defined below) of the acquisition, ownership and disposition of BBVA’s ADSs or ordinary shares as of the date of the filing of this Annual Report. This summary does not address all tax considerations that may be relevant to all categories of
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potential purchasers, some of whom (such as life insurance companies, tax-exempt entities, dealers in securities or financial institutions) may be subject to special rules. In particular, the summary deals only with the U.S. Holders (as defined below) that will hold ADSs or ordinary shares as capital assets and who do not at any time own individually, norand are not treated as owning, 25% or more of BBVA’s shares, including ADSs.
As used in this particular section, the following terms have the following meanings:
(1) “U.S.“U.S. Holder” means a beneficial owner of BBVA’s ADSs or ordinary shares that is for U.S. federal income tax purposes:
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| | • | a citizen or a resident of the United States, |
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| | • | a corporation or other entity treated as a corporation, created or organisedorganized under the laws of the United States or any political subdivision thereof, or |
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| | • | an estate or trust the income of which is subject to United States federal income tax without regard to its source. |
(2) “Treaty”“Treaty” means the Convention between the United States and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related Protocol.
(3) “U.S.“U.S. Resident” means a U.S. Holder that is a resident of the United States for the purposes of the Treaty and entitled to the benefits of the Treaty, whose holding is not effectively connected with (1) a permanent
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establishment in Spain through which such holder carries on or has carried on business, or (2) a fixed base in Spain from which such holder performs or has performed independent personal services.
Holders of ADSs or ordinary shares should consult their tax advisors, particularly as to the applicability of any tax treaty. The statements regarding Spanish tax laws set out below are based on interpretations of those laws in force as of the date of this Annual Report. Such statements also assume that each obligation in the Deposit Agreement and any related agreement will be performed in full accordance with the terms of those agreements.
Taxation of Dividends
Under Spanish law, dividends paid by BBVA to a holder of ordinary shares or ADSs who is not resident in Spain for tax purposes and does not operate through a permanent establishment in Spain, are subject to Spanish Non-Resident Income Tax, withheld at source, currently at a 18%19% tax rate. For these purposes, upon distribution of the dividend, BBVA or its paying agent will withhold an amount equal to the tax due according to the rules set forth above (i.e., applying the general withholding tax rate of 18%19%), transferring the resulting net amount to the depositary.
However, under the Treaty, if you are a United StatesU.S. Resident, you are entitled to a reduced withholding tax rate of 15%.
To benefit from the Treaty-reduced rate of 15%, if you are a United StatesU.S. Resident, you must provide to BBVA through our paying agent depositary, before the tenth day following the end of the month in which the dividends were payable, a certificate from the U.S. Internal Revenue Service (“(“IRS”) stating that, to the best knowledge of the IRS, you are a resident of the United States within the meaning of the Treaty and entitled to its benefits.
ThoseIf the paying agent depositaries providingdepositary provides timely evidence (i.e., by means of the IRS certificate) of your right to apply the Treaty-reduced rate will immediately receive the surplus amount withheld, which will be credited to you. The IRS certificate is valid for a period of one year from issuance.
To help share holdersshareholders obtain such certificates, BBVA hasset-up set up an online procedure to make this as easy as possible.
If the certificate referred to in the above paragraph is not provided to us through our paying agent depositary within said term, you may afterwards obtain a refund of the amount withheld in excess of the rate provided for in the Treaty.
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Scrip Divided
In the General Annual Meeting that took place on March 11, 2011, the shareholders approved the inclusion of the upcoming dividend against 2010 earnings and one of the interim dividends from 2011 profits in a new “Dividendo Opción” program. This new dividend scheme will let the shareholders choose how they would like to receive their dividends: in cash, or in new shares.
Pursuant to the terms of the “Dividendo Opción” program, the shareholders will receive onefree-of-charge allocation right for each share of BBVA that they hold, these rights will be traded on the Spanish Stock Exchanges, for a minimum period of 15 natural days. At the end of this period, thefree-of-charge allocation rights shall be automatically converted into newly-issued shares of the Company, and under the “Dividendo Opción” program the shareholders of BBVA will be able to freely choose among:
(a) Not transferring their free-of-charge allocation rights. In this case, at the end of the trading period, the shareholders will receive the number of new totallypaid-up shares to which they are entitled. For tax purposes the delivery ofpaid-up shares does not constitute income for purposes of the Spanish Non-Resident Income Tax, whether or not non-residents act through a permanent establishment in Spain.
The acquisition value of both the new shares received and the shares from which they were derived, will result from distributing the total cost among the number of securities (both existing and those issued aspaid-up shares corresponding thereto). Suchpaid-up shares will be deemed to have been held for as long as the shares from which they were derived.
(b) Selling theirfree-of-charge allocation rights on the market. In this event, the amount obtained for the transfer of such rights on the market will be subject to the following tax treatment:
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| • | For purposes of the Spanish Non-Resident Income Tax on non-residents without a permanent establishment, the amount obtained for the transfer of thefree-of-charge allocation rights on the market is subject to the same treatment that tax regulations provide for pre-emptive rights. Accordingly, the amount obtained for the transfer of thefree-of-charge allocation rights decreases the acquisition value for tax purposes of the shares from which such rights derive, pursuant to Section 37.1.a) of Law 35/2006, of November 28, on Personal Income Tax (Ley del Impuesto sobre la Renta de las Personas Físicas). |
Thus, if the amount obtained for the aforementioned transfer is larger than the acquisition value of the securities from which they were derived, the difference will be deemed to be a capital gain earned by the transferor in the tax period in which the transfer is effected (see“— Taxation of Capital Gains” below).
(c) Using the purchase commitment assumed by BBVA forfree-of-charge allocation rights. The tax treatment applicable to the amount received for the transfer to the Company of thefree-of-charge allocation rights held by them in their capacity as shareholders or acquired on the market will be equal to the treatment applicable to dividends directly distributed in cash and, consequently, such amount will be subject to the corresponding withholding.
As this discussion does not address all the possible tax consequences of participation in the scrip dividend program, shareholders are advised to consult with their tax advisors regarding the possible tax consequences of owning scrip dividends.
Spanish Refund Procedure
According to Spanish Regulations on Non-Resident Income Tax, approved by Royal Decree1776/ 1776/2004 dated July 30, 2004, as amended, a refund for the amount withheld in excess of the Treaty-reduced rate can be obtained from the relevant Spanish tax authorities. To pursue the refund claim, if you are a United StatesU.S. Resident, you are required to file:
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| | • | the corresponding Spanish tax form, |
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| | • | the certificate referred to in the preceding section, and |
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| | • | evidence of the Spanish Non-Resident Income Tax that was withheld with respect to you. |
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The refund claim must be filed within four years from the date in which the withheld tax was collected by the Spanish tax authorities.authorities, but not before February 1, of the following year.
United StatesU.S. Residents are urged to consult their own tax advisors regarding refund procedures and any U.S. tax implications thereof.
Additionally, under the Spanish law, the first €1,500 of dividends obtainedreceived by individuals who are not resident in Spain for tax purposes, and do not operate through a permanent establishment in Spain, will be exempt from taxation in certain circumstances.
U.S. Holders should consult their tax advisors in order to make effectiveregarding the availability of this exemption.
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Taxation of Rights
Distribution of preemptive rights to subscribe for new shares made with respect to your shares in BBVA will not be treated as income under Spanish law and, therefore, will not be subject to Spanish Non-Resident Income Tax. The exercise of such preemptive rights is not considered a taxable event under Spanish law and thus is not subject to Spanish tax. Capital gains derived from the disposition of preemptive rights obtainedreceived by U.S. Residents are generally not taxed in Spain provided that certain conditions are met (See “— Taxation of Capital Gains” below).
Taxation of Capital Gains
Under Spanish law, any capital gains derived from securities issued by persons residing in Spain for tax purposes are considered to be Spanish source income and, therefore, are taxable in Spain. For Spanish tax purposes, income obtainedgain recognized by you, if you are a U.S. Resident, from the sale of BBVA’s ADSs or ordinary shares will be treated as capital gains. Spanish Non-Resident Income Tax is currently levied at a 18%19% tax rate on capital gains obtainedrecognized by persons who are not residents of Spain for tax purposes, who are not entitled to the benefit of any applicable treaty for the avoidance of double taxation and who do not operate through a fixed base or a permanent establishment in Spain.
Notwithstanding the discussion above, capital gains derived from the transfer of shares on an official Spanish secondary stock market by any holder who is resident in a country that has entered into a treaty for the avoidance of double taxation with an “exchange of information” clause (the Treaty contains such a clause) will be exempt from taxation in Spain. Additionally, capital gains realized by non-residents of Spain who are entitled to the benefit of an applicable treaty for the avoidance of double taxation will, in the majority of cases, not be taxed in Spain (since most tax treaties provide for taxation only in the taxpayer’s country of residence). If you are a U.S. Resident, under the Treaty, capital gains arising from the disposition of ordinary shares or ADSs will not be taxed in Spain. You will be required to establish that you are entitled to this exemption by providing to the relevant Spanish tax authorities an IRSa certificate of residence in the United States from the IRS (discussed above in “— Taxation of Dividends”), together with the corresponding Spanish tax form.
Spanish Inheritance and Gift Taxes
Transfers of BBVA’s shares or ADSs upon death or by gift to individuals are subject to Spanish inheritance and gift taxes (Spanish Law 29/1987), if the transferee is a resident in Spain for tax purposes, or if BBVA’s shares or ADSs are located in Spain, regardless of the residence of the beneficiary.transferee. In this regard, the Spanish tax authorities may argue that all shares of a Spanish corporation and all ADSs representing such shares are located in Spain for Spanish tax purposes. The applicable tax rate for individuals, after applying all relevant factors, ranges between approximately 7.65% and 81.6% for individuals, approximately..
Alternatively, corporationsCorporations that are non-residentnon-residents of Spain that receive BBVA’s shares or ADSs as a gift are subject to Spanish Non-Resident Income Tax at a 18%19% tax rate on the fair market value of such ordinary shares or ADSs as a capital gain.gain tax. If the donee is a United States resident corporation, the exclusions available under the Treaty described in “— Taxation of Capital Gains” above will be applicable.
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Spanish Transfer Tax
Transfers of BBVA’s ordinary shares or ADSs will be exempt from Transfer Tax (Impuesto sobre Transmisiones Patrimoniales) or Value-Added Tax. Additionally, no stamp duty will be levied on such transfers.
U.S. Tax Considerations
The following summary describes the material U.S. federal income tax consequences of the ownership and disposition of ADSs or ordinary shares, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to hold the securities. The summary applies only to U.S. Holders (as defined under “Spanish Tax Considerations” above) that are eligible for the benefits of the Treaty and that hold ADSs or ordinary shares as capital assets for tax purposes and does not address all of the tax consequences that may be relevant to holders subject to special rules, such as:
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| | • | certain financial institutions; |
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| | • | dealers and traders who use amark-to-market method of accounting; |
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| | • | persons holding ADSs or ordinary shares as part of a hedging transaction, straddle, wash sale, conversion transaction or integrated transaction or persons entering into a constructive sale with respect to the ADSs or ordinary shares; |
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| | • | persons whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar; |
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| | • | persons liable for the alternative minimum tax; |
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| | • | tax-exempt entities; |
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| | • | partnerships or other entities classified as partnerships for U.S. federal income tax purposes; |
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| | • | persons holding ADSs or ordinary shares in connection with a trade or business conducted outside of the United States; |
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| • | persons who acquired our ADSs or ordinary shares pursuant to the exercise of any employee stock option or otherwise as compensation; or |
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| | • | persons who own or are deemed to own 10% or more of our voting shares. |
The summary is based upon the tax laws of the United States including the Internal Revenue Code of 1986, as amended to the date hereof (the“Code” “Code”), the Treaty, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof. These laws are subject to change, possibly with retroactive effect. In addition, the summary is based in part on representations by the depositary and assumes that each obligation provided for in or otherwise contemplated by BBVA’s deposit agreement and any other related document will be performed in accordance with its terms. Prospective purchasers of the ADSs or ordinary shares are urged to consult their tax advisors as to the U.S., Spanish or other tax consequences of the ownership and disposition of ADSs or ordinary shares in their particular circumstances, including the effect of any U.S. state or local tax laws.
In general, for United States federal income tax purposes, a U.S. Holder who owns ADSs will be treated as the owner of the underlying ordinary shares represented by those ADSs. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying ordinary shares represented by those ADSs.
The U.S. Treasury has expressed concerns that parties to whom American depositary shares are pre-released may be taking actions that are inconsistent with the claiming of foreign tax credits forby U.S. holders of American depositary shares. Such actions would also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain noncorporatenon-corporate U.S. Holders, as described below. Accordingly, the analysis of the creditability of Spanish taxes described below, and the availability of the reduced tax rate for dividends received by certain noncorporatenon-corporate U.S. Holders, could be affected by future actions that may be taken by such parties.
This discussion assumes that BBVA is not, and will not become, a passive foreign investment company (“(“PFIC”) for 2008 (as discussed below).
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Taxation of Distributions
Distributions, before reduction for any Spanish income tax withheld by BBVA or its paying agent, made with respect to ADSs or ordinary shares (other than certain pro rata distributions of ordinary shares or rights to subscribe for ordinary shares of its capital stock) will be includible in the income of a U.S. Holder as ordinary dividend income, to the extent paid out of BBVA’s current or accumulated earnings and profits as determined in accordance with U.S. federal income tax principles. Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders as dividends. The amount of such dividends will generally be treated as foreign source dividend income and will not be eligible for the “dividends received deduction” generally allowed to U.S. corporations under the Code. Subject to applicable limitations and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid to certain noncorporatenon-corporate U.S. Holders in taxable years beginning before January 1, 20112013 will be taxable at a maximum tax rate of 15%. U.S. Holders should consult their own tax advisors to determine the availability of this favorable rate in their particular circumstances.
The amount of dividend income will equal the U.S. dollar value of the euro received, calculated by reference to the exchange rate in effect on the date of receipt (which, for U.S. Holders of ADSs, will be the date such distribution
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is received by the depositary), whether or not the depositary or U.S. Holder in fact converts any euro received into U.S. dollars at that time. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of its receipt.
A scrip dividend (as described in “Item 4 — Business Overview — Scrip Dividend”) will be treated in the same manner as a distribution of cash, regardless of whether a U.S. Holder elects to receive the dividend in shares rather than cash. If the U.S. Holder elects to receive the dividend in shares, the U.S. Holder will be treated as having received a distribution equal to the U.S.dollar fair market value of the shares on the date of distribution. The U.S. Holder’s tax basis in such shares received will be equal to the U.S. dollar fair market value of the shares on the date of distribution and the holding period for such shares will begin on the day following the distribution.
Subject to applicable limitations that may vary depending upon a U.S. Holder’s circumstances and subject to the discussion above regarding concerns expressed by the U.S. Treasury, a U.S. Holder will be entitled to a credit against its U.S. federal income tax liability, or a deduction in computing its U.S. federal taxable income, for Spanish income taxes withheld by BBVA or its paying agent at a rate not exceeding the rate the U.S. Holder is entitled to under the Treaty. Spanish taxes withheld in excess of the rate applicable under the Treaty will not be eligible for credit against the U.S. Holder’s U.S. federal income tax liability. See “Spanish Tax Considerations — Taxation of Dividends” for a discussion of how to obtain the treatyTreaty rate. The rules governing foreign tax credits are complex and, therefore, U.S. Holders should consult their tax advisersadvisors regarding the availability of foreign tax credits in their particular circumstances.
Sale and Other Disposition of ADSs or Shares
For U.S. federal income tax purposes, gain or loss realized by a U.S. Holder on the sale or other disposition of ADSs or ordinary shares will be capital gain or loss in an amount equal to the difference between the U.S. Holder’s tax basis in the ADSs or ordinary shares disposed of and the amount realized on the disposition. Such gain or loss will be long-term capital gain or loss if the U.S. Holder held the ordinary shares or ADSs for more than one year at the time of disposition. Gain or loss, if any, will generally be U.S. source for foreign tax credit purposes. The deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company Rules
Based upon certain proposed Treasury regulations which are proposed to be effective for taxable years beginning after December 31, 1994 (“(“Proposed Regulations”), we believe that we were not a PFIC for U.S. federal income tax purposes for our 20082010 taxable year. However, since our PFIC status depends upon the composition of our income and assets and the market value of our assets (including, among others, less than 25% owned equity investments) from time to time and since there is no guarantee that the Proposed Regulations will be adopted in their
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current form and because the manner of the application of the Proposed Regulations is not entirely clear, there can be no assurance that we will not be considered a PFIC for any taxable year.
If we were treated as a PFIC for any taxable year during which a U.S. Holder held ADSs or ordinary shares, gain recognized by such U.S. Holder on a sale or other disposition (including certain pledges) of an ADS or an ordinary share would be allocated ratably over the U.S. Holder’s holding period for the ADS or the ordinary share. The amounts allocated to the taxable year of the sale or other exchange and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the amount allocated to such taxable year. Further,The same treatment would apply to the extent that any distribution received by a U.S. Holder on its ordinary shares or ADSs to the extent that such distribution exceeds 125% of the average of the annual distributions on the ordinary shares or ADSs received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, that distribution would be subject to taxation in the same manner as gain, described immediately above.shorter. In addition, if we were a PFIC or, with respect to a particular U.S. Holder, were treated as a PFIC for the taxable year in which we paid a dividend or the prior taxable year, the 15% dividend rate discussed above with respect to dividends paid to certain non-corporate U.S. Holders would not apply. Certain elections may be available (including amark-to-market election) that may provide an alternative tax treatment.treatments. U.S. Holders should consult their tax advisors regarding whether we are or were a PFIC, the potential application of the PFIC rules and to determine whether any of the aforementionedthese elections for alternative treatment would be available and, if so, what the consequences of the alternative treatments would be in their particular circumstances. IfUnder recently enacted legislation effective as of March 18, 2010, if we were a PFIC for any taxable year during which a U.S. Holder held an ADS or ordinary share, unless otherwise provided by the U.S. Treasury, such U.S. Holder would be required to makefile an annual return on IRS Form 8621 for that year, describingreport containing such information as the distributions received from BBVA and any gain realized on the disposition of ADSs or ordinary shares.U.S. Treasury may require.
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Information Reporting and Backup Withholding
Information returns may be filed with the Internal Revenue ServiceIRS in connection with payments of dividends on, and the proceeds from a sale or other disposition of, ADSs or ordinary shares. A U.S. Holder may be subject to U.S. backup withholding on these payments if the U.S. Holder fails to provide its taxpayer identification number to the paying agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
For taxable years beginning after March 18, 2010, new legislation requires certain U.S. Holders who are individuals to report information relating to stock of anon-U.S. person, subject to certain exceptions (including an exception for stock held in custodial accounts maintained by a U.S. financial institution). U.S. Holders are urged to consult their tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of ordinary shares or ADSs.
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| F. | Dividends and Paying Agents |
At the annual general meeting of shareholders on March 13, 2009, BBVA’s shareholders adopted a resolution amending its bylaws to allow for dividends to be paid in cash or in kind as determined by shareholder resolution. As of the date of this Annual Report, this amendment is pending registration at the Commercial Registry of Vizcaya.Not Applicable.
Not Applicable.
The documents concerning BBVA which are referred to in this Annual Report may be inspected at its offices at Plaza de San Nicolás 4, 48005 Bilbao, Spain. In addition, we are subject to the information requirements of the Exchange Act, except that as a foreign issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file or furnish reports and other information with the SEC. Reports and other information filed or furnished by BBVA with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E.,
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Washington, D.C. 20549. Copies of such material may also be inspected at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, on which BBVA’s ADSs are listed. In addition, the SEC maintains a web site that contains information filed or furnished electronically with the SEC, which can be accessed over the internet athttp://www.sec.gov.
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| I. | Subsidiary Information |
Not Applicable.
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| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Dealing in financial instruments entailscan entail the assumption or transfer of one or more classes of risk by financial institutions. The main risks inherent inrelated to financial instruments are:
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| | • | Market risk: the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. There are three types of market risk: exchange rate risk, interest rate risk and equity/commodity risk. |
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| • | Credit risk: the risk that one party to a financial instrument will cause a financial loss tofor the other party to such instrument by failing to satisfydischarge an obligation under such instrument.obligation. |
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| | • | LiquidityMarket risks: the risks arising from the maintenance of financial instruments whose value may be affected by changes in market conditions. It includes three types of risk: |
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| — | Foreign-exchange risk: the risk that an entity will not be ableresulting from variations in foreign exchange rates. |
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| — | Interest-rate risk: the risk arising from variations in market interest rates. |
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| — | Price risk: the risk resulting from variations in market prices in financial instruments, either due to meet obligations associated with financial liabilitiesfactors specific to the instrument itself, or will be forcedalternatively to secure fundingfactors which affect all the instruments traded on onerous conditions as a result of difficulties encountered in meeting its obligations.the market. |
Market Risk Management
In 2008, we received authorization from the Bank of Spain to extend the perimeter and change the internal model methodology used to determine capital requirements derived from risk positions in our trading portfolio in Spain and Mexico, which jointly account for 90% of the Group’s trading market risk. From December 31, 2007 we
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use the Algorithmics risk assessment platform which employs historic simulation to estimate market risk assumed by BBVA, S.A. and BBVA Bancomer. This new platform should allow for better future integration of market risk for the entire perimeter of the Advanced Internal Model which should aid us in more efficient capital allocation.
During 2008, our risk control policies and tools in market areas were consolidated and internal controls over our trading positions were upgraded.
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| • | Liquidity risk: this relates to the probability that a company cannot meet its payment commitments duly without having to resort to borrowing funds under onerous conditions, or damaging its image and reputation of the entity. |
The basic measurement model we use for measuring risk isValue-at-Risk (“(“VaR”), which provides a forecast of the maximum loss that a portfolio could incur on aone-day time horizon with a 99% probability, stemming from fluctuations recorded in the equity, interest rate, foreign exchange rates and commodity markets.prices. For certain positions, moreover, we also consider other risks, such as the credit spread, basis risk or volatility and correlation risk, where necessary. The VaR is calculated by using a historical period of two years for the observation of the risk factors.
BBVA, S.A. and BBVA Bancomer have been authorized by the Bank of Spain to use their internal model to determine capital requirements deriving from risk positions in their trading book, which jointly accounts for 80 to 90% of the Group’s trading book market risk. BBVA is in the process of incorporating the new regulatory capital charges to comply with the most recent guidelines of the regulators.
Our prevailing market risk limits model includesconsists of a system of VaR and economic risk capital (“ERC”) and VaR limits and VaR and stop loss sublimits, as well as stop-loss limits for each of our business units. The global limits are proposed by the Global Markets Risk unitArea and approved by the Executive Committee on an annual basis, once they have been submitted to the board of directors’Board’s Risk Committee.
This risksrisk limits modelstructure has been developed based on the identification ofby identifying specific risks by typology, activitiestype, trading activity and trading desks.desk. The market risk units maintain consistency between the global and specific limits. This system of limits on the one hand, and between VaR sublimits and delta sensitivity on the other. This is supplemented by analysesmeasurement of the impacts of extreme market movements on risk positions. We are currently performing stress testing on historical and economic crisis scenarios, as well as impact analyses on the income statement when risk factors enter a stress situation,in plausible but unlikely economic crisis scenarios, drawn up by considering the impact of financial crises that have taken place in the past and economic scenarios that could occur in the future.our Economic Research Department.
In order to assess business unit performance over the year, the accrual of negative earnings is linked to athe reduction in theof VaR limits set for such business unit. To anticipate new circumstances and to offset the effect of any adverse situations, the risk limits modelset. The control structure in place is supplemented by limits on loss and alert signals which automatically trigger procedures to manageanticipate the effects of adverse situations that might compromisein terms of riskand/or result. All the tasks associated with stress testing, methodologies, scenarios of market area activities.variables and reports are undertaken in co-ordination with our various Risk Areas.
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TheFinally, the market risk measurement model lastly includes back-testing (ex-post comparison)or ex-post comparison, which helps to refine the accuracy of the risk measurements by comparingday-on-day results with their corresponding VaR measurements.
Market Risk in Trading Portfolio in 20082010
The market risk factors used to measure and control risks in the trading portfolio are the basis of all calculations using the VaR.
VaR measures the maximum loss with a given probability over a given period as a result of changes in the general conditions of financial markets and their effects on market risk factors. BBVAWe mainly conductsconduct daily VaR estimates using the historic simulation methodology.
The types of risk factors we use to measure VaR are:
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| | • | Interest rate risk: the potential loss in value of the portfolio due to movements in interest rate curves. We use all interest rate curves in which we have positions and risks exist. We also use a wide range of vertices reflecting the different maturities within each curve. |
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| | • | Credit spread risk: the potential loss in the value of corporate bonds or any corporate bond derivatives caused by movements in credit spreads for such instruments. Credit spread VaR is estimated by moving the credit spreads used as risk factors through a range of scenarios. The risk factors used in the simulation are credit spread curves by sector and by rating, and specific spread curves for individual issuers. |
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| | • | Exchange rate risk: the potential loss caused by movements in exchange rates. Exchange rate risk VaR is estimated by analyzing present positions with observed actual changes in exchange rates. |
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| | • | Equity or commodity risk: the potential loss caused by movements in equity prices, stock-market indices and commodity prices. Equity or commodity risk VaR is estimated by re-measuring present positions using actual changes in equity prices, stock-market indices and commodity prices. |
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| | • | Vega risk: the potential loss caused by movements in implied volatilities affecting the value of options. Vega (equities, interest rate and exchange rate) risk VaR is estimated by analyzing implied volatility surfaces with observed changes in the implied volatilities of equity, interest rate and exchange rate options. |
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| | • | Correlation risk: the potential loss caused by a disparity between the estimated and actual correlation between two assets, currencies, derivatives, instruments or markets. |
Finally, all these measurements are supplemented with VaR estimation with exponential smoothing, to better reflect the impact of movements.
In 2008, ourOur market risk remainedremains at low levels in proportioncompared to the aggregateaggregates of risks managed by BBVA, particularly in terms of credit risk. This is due to the nature of the business and our policy of minimal proprietary trading. However, in 2010 the market risk we manage. In VaR terms,of our daily average market risk was €20.2 million. The VaR figures were more widely dispersed than intrading portfolio increased significantly from previous years to an average economic capital of €353 million in 2010 from €285 million in 2009 due to the greater market volatility in interest rates and credit spreads, together with higher VaR amountsgreater exposure to interest-rate risk towards the end of the year, which reflect the tense situation in the markets in the last quarterpart of 2010.
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Our main risk factor in 2010 and going forward continues to be interest-rate risk, with a weight of 61% of the year, as volatility spread to all markets. Nevertheless, for the year 2008 our average weighted use of thetotal portfolio risk limits set was moderate at 58%.
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(1) | On 29-Feb-06 the Bank of Spain approved the Algorithmics internal model for the European and Mexican trading portfolios. The methodology applied for the VaR metric in these businesses is the historical simulation. |
If we analyse risk factors affecting our trading portfolio in 2008, the most important factor was interest rate risk (51% of the total as of December 31, 2008)2010 (this figure includes the spread risk). Equity risk accounted for 9%, which includes both interest-rate risk and risk linked to credit spreads. Vega anda fall from the previous year (14%). In contrast, exchange rate risk accounted for 31% and 16%increased slightly in weight to 7% (compared to 4% as of December 31, 2009). Finally, volatility risk remained stable at 24% of the total portfolio risk as of December 31, 2010. The table below shows the components of VaR as of December 31, 2008,2010 and 2009 respectively, both gaining weight inand the second half ofaverage, maximum and minimum VaRs for the year, while equity risk only accounted for 2% of VaR as of December 31, 2008.years then ended.
| | | | |
Risk
| | December 31, 2008 | |
| | (In millions of euros) | |
|
Interest/Spread risk | | | 24.2 | |
Exchange rate risk | | | 7.4 | |
Equity risk | | | 1.1 | |
Vega/Correlation risk | | | 14.8 | |
Diversification effect | | | (24.3 | ) |
| | | | |
Total
| | | 23.3 | |
Average 2008 | | | 20.2 | |
Maximum 2008 | | | 35.3 | |
Minimum 2008 | | | 12.8 | |
| | | | |
| | | | | | | | | |
Risk | | December 31, 2010 | | | December 31, 2009 | |
| | | (In millions of euros) | |
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| Interest/Spread risk | | | 29.5 | | | | 37.6 | |
| Exchange rate risk | | | 3.3 | | | | 2.3 | |
| Equity risk | | | 4.2 | | | | 8.9 | |
| Vega/Correlation risk | | | 11.6 | | | | 15.4 | |
| Diversification effect | | | (21.0 | ) | | | (33.2 | ) |
| | | | | | | | | |
Total | | | 27.6 | | | | 31.0 | |
| | | | | | | | | |
| Average | | | 32.9 | | | | 26.2 | |
| Maximum | | | 40.8 | | | | 33.1 | |
| Minimum | | | 25.2 | | | | 18.2 | |
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By geographical area 69%64.5% of the market risk in 2010 (on an annual average basis) corresponded to banking inGlobal Markets Europe trading desks and the United States and 31%35.5% to the Group’s Latin American entities,banks in the Americas, 23% of which 20% was concentrated in Mexico.
The Group establishes limits on VaR by business unit. Average use of VaR limits in 2008 was higher in mature economies, at 56% during the year and 77% as of December 31, 2008. In Latin America average limits use for the year stood at 40%, reaching 45% as of December 31, 2008.
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The back-testing comparison performed with market risk management results for the parent company (which accounts for a sizeable partmost of the Group’s market risk) follows the principles laidset out in the Basel Accord, whichAccord. It makes aday-on-day comparison between actual VaRrisks and the VaRthose estimated by the model, confirmedand proved that saidthe risk measurement model was workingcontinued to work correctly throughout 2008.2010.
The breakdown of the risk exposure by categories of the instruments within the trading portfolio as of December 31, 2008, December 31, 20072010, 2009 and December 31, 20062008 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Financial assets held for trading | | | 67,502 | | | | 53,156 | | | | 41,842 | | | | | | | | | | | | | |
| Debt securities | | | 26,556 | | | | 38,392 | | | | 30,426 | | | | 24,358 | | | | 34,672 | | | | 26,556 | |
| Public sector | | | 20,778 | | | | 27,960 | | | | 20,939 | | |
| Government | | | | 20,397 | | | | 31,290 | | | | 20,778 | |
| Credit institutions | | | 2,825 | | | | 6,020 | | | | 6,352 | | | | 2,274 | | | | 1,384 | | | | 2,825 | |
| Other sectors | | | 2,953 | | | | 4,412 | | | | 3,135 | | | | 1,687 | | | | 1,998 | | | | 2,953 | |
| Trading derivatives | | | 40,946 | | | | 14,764 | | | | 11,416 | | | | 33,665 | | | | 29,278 | | | | 40,946 | |
Market Risk in Non-TradingNon — Trading Activities in 20082010
Structural Interest Rate Risk
Structural interest-rate risk refers to the potential alteration of a company’s net interest incomeand/or total net-asset value caused by variations in interest rates. A financial institution’s exposure to adverse changes in market rates is a risk inherent in the banking business, while also presenting an opportunity to create value.
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The variations in market interest rates have an effect on our net interest income, from a medium- and short-term perspective, and on our economic value if a long-term view is adopted. The main source of risk resides in the timing mismatch that exists between repricing and the maturity dates of the asset and liability products comprising the banking book. This is illustrated in the chart below, which shows the gap analysis of our structural balance sheet as of December 31, 2010 in euros.
Gap of maturities and repricing dates of BBVA’s structural balance sheet in euros
(Million euros)
The global financial crisis affected the interest rate curves of the main currencies
Rates have remained at low levels in which the Group undertakes its banking activity in 2008. During the early part of the year, interest rates in Europe remained high, especially in the short-term area of the curve,2010, with a risereduction in long-term rates consistent with the positive slope betweenslowdown in business activity. This market scenario has been taken into consideration in advance by the three-month and the one-year rate. In the latter part of the year, however, interest rates fell sharply in Europe and in the United States, as they did in Mexico, after a year inFinancial Management unit, which rates had shown an upward trend with sharp rises in the longer-term rates.
In such an environment, management of structural interest rate risk in our non-trading portfolio is of particular importance. This is the responsibility ofthrough the Assets and Liabilities Management area and, more specifically,Committee (ALCO), is in charge of maximizing the ALCO. ALCO develops management strategies aimed at maximizing BBVA’s economic profitvalue of the banking book and preserving earnings recurrence through net interest income.income to ensure recurrent earnings. To do so, ALCO works to ensureit not only takes the market outlook into consideration, but it also ensures that exposure levels to interest rate risk match the risk profile defined by Groupour management bodies and that a balance is keptmaintained between expected earnings and the risk level borne. The implementation of a transfer pricing system that centralizes our interest rate risk on ALCO’s books also helpshas helped to assure that balance-sheet risk is being suitably managed at a Group level.properly managed.
ControlStructural interest-rate risk control and monitoring of structural interest rate risk in our non-trading portfolio is performed in the risk department,Risk area, which, actsacting as an independent unit, to help guaranteehelps ensure that the risk management and control functions are effectivelyconveniently segregated. This policy is in line with the Basel Committee on Banking Supervision recommendations. The risk department’s functions includeRisk area is responsible for designing models and measurement systems, together with
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the development of monitoring, reporting and control policies. The risk departmentIt also performs monthly measurements of structural interest rate risk and it also performs a risk control and analysis, function. The risk department reports its findingwhich is then reported to the main governing bodies, such as the Executive Committee and the board of directors’Board’s Risk Committee.
Variations in market interest rates affect our net interest income in the short and medium-term and our economic value, when viewed over the long term. The main source of interest rate risk resides in the time mismatch that exists between repricing and maturity dates of the different products comprising the banking book. This is illustrated by the accompanying graph, which shows a gap analysis on BBVA’s structural balance sheet in euro.
Our structural interest rateinterest-rate risk measurement model uses a set of metrics and systems whichtools that enable usour risk profile to identifybe identified and assess our interest rate risk profile. Inassessed. From the caseperspective of characterizing the balance sheet, models of analysis have been developed to establish assumptions dealing fundamentally with prepayment of loans and the performance of deposits with no explicit maturity. Likewise, a model for simulating interest rate curves is applied which enables riskMoreover, in order to be quantified in terms of probabilities. It also allowstake into account additional sources of risk to be assessed in addition to the mismatching of cash flows comingmismatch risk, not only from parallel shiftsmovements are considered but also from changes in the slope and curvature of the interest rate curve, and a model for simulating interest rate curves is also applied to enable risk to be quantified in keeping with each currency’s historical behavior.terms of probabilities. This simulation model, which also considers the diversification between currencies and business units, calculates the earnings at risk (“EaR”)(EaR) and economic risk capital (“EC”),(ECR) defined as the maximum adverse deviations in net interest income and economic profit,value, respectively, for a particular confidence level and time horizon. These negative impacts are controlled in each of the Group’s entities through a risk limits model.
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The interest rate risk measurement modeltime horizon. All this is supplemented by scenario analyses and stress tests, as well asdone in addition to measurements of sensitivity measurements to a standard variationdeviation of 100 basis points for all the relevant market yield curves. The graphchart below shows the structural interest rate riskinterest-rate profile of the Group’sour main entities, according to their sensitivities.
NIS: Net interest income sensitivity (%) of the franchise to +100 bp.
EVS: Economic value sensitivity (%) of the franchise to +100 bp.
Size: Capital allocated to each franchise.
In 2008, we placed special emphasis on stress testing, evaluating both foreseeable scenarios from the Research Department and severe risk scenarios drawn up from an analysis of historical data and the breakdown of certain historical correlations. Further work was done on integration of structural interest rate risk in the Group, taking the source of such risk in its different component entities and markets into account. In addition, in 2008 we integrated Compass into the Group’s interest rate risk monitoring and control policies.
The limits policy on interest rate riskstructure is a fundamental componentone of BBVA’sthe mainstays in control policies, because it applies therepresents our risk appetite of the Group as defined by the Executive Committee to theCommittee. Balance-sheet management of the Group’s operations. Despite the rise in market volatility due to the international financial crisis, which was particularly acute in the second half of the 2008, active balance-sheet managementhas enabled the Group to maintain interest rate risk levels within itsto be maintained in keeping with our risk profile, as shownis demonstrated in the graph below,following chart, which illustratesshows average limits use in the main entities of the BBVA Groupeach entity during 2008.2010.
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The following table below shows the estimated impact on the BBVA Group’s net interest income and economic value for 2010 of a breakdown100 basis point increase and decrease in millions of euros of the average interest rate risk exposure levels, in terms of sensitivity, ofrates for the assets denominated in the currencies of the transactions of the main financial institutions of the BBVA Group in 2008:year.
| | | | | | | | | | | | | | | | | | | | | |
| | | Average Impact on Net Interest Income | |
| | | | | | 100 Basis-Point
| |
| | | 100 Basis-Point Increase | | | Decrease | |
Entities | | Euro | | | Dollar | | | Other | | | Total | | | Total | |
| | | (In millions of euros) | |
| |
| Europe | | | (89.3 | ) | | | (30.1 | ) | | | +0.7 | | | | (115.0 | ) | | | +136.9 | |
| BBVA Bancomer | | | — | | | | +18.2 | | | | +25.2 | | | | +43.4 | | | | (43.4 | ) |
| BBVA Puerto Rico | | | — | | | | +2.0 | | | | — | | | | +2.0 | | | | (3.2 | ) |
| Compass | | | — | | | | (8.3 | ) | | | — | | | | (8.3 | ) | | | +4.6 | |
| BBVA Chile | | | — | | | | +0.2 | | | | (0.5 | ) | | | (0.3 | ) | | | +0.1 | |
| BBVA Colombia | | | — | | | | (0.2 | ) | | | +8.9 | | | | +8.6 | | | | (8.7 | ) |
| BBVA Banco Continental | | | — | | | | (1.2 | ) | | | +2.9 | | | | +1.7 | | | | (1.8 | ) |
| BBVA Banco Provincial | | | — | | | | +1.2 | | | | (1.4 | ) | | | (0.2 | ) | | | +0.2 | |
| BBVA Banco Francés | | | — | | | | (0.2 | ) | | | +0.3 | | | | +0.1 | | | | (0.1 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Average Impact on Economic Value | |
| | | | | | 100 Basis-Point
| |
| | | 100 Basis-Point Increase | | | Decrease | |
Entities | | Euro | | | Dollar | | | Other | | | Total | | | Total | |
| | | (In millions of euros) | |
| |
| Europe | | | +140.6 | | | | +14.1 | | | | (1.1 | ) | | | +152.6 | | | | (196.2 | ) |
| BBVA Bancomer | | | — | | | | +55.1 | | | | (401.8 | ) | | | (346.0 | ) | | | +331.1 | |
| BBVA Puerto Rico | | | — | | | | +6.4 | | | | — | | | | +6.4 | | | | (18.6 | ) |
| Compass | | | — | | | | (127.4 | ) | | | — | | | | (127.4 | ) | | | +44.9 | |
| BBVA Chile | | | — | | | | +3.2 | | | | (54.3 | ) | | | (51.1 | ) | | | +39.7 | |
| BBVA Colombia | | | — | | | | (0.8 | ) | | | (9.5 | ) | | | (10.4 | ) | | | +11.4 | |
| BBVA Banco Continental | | | — | | | | (23.7 | ) | | | (16.3 | ) | | | (40.0 | ) | | | +41.7 | |
| BBVA Banco Provincial | | | — | | | | (12.8 | ) | | | +2.0 | | | | (10.8 | ) | | | +12.0 | |
| BBVA Banco Francés | | | — | | | | +0.1 | | | | (9.4 | ) | | | (9.3 | ) | | | +9.8 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | Impact on Net Interest Income | | Impact on Economic Value (*) |
| | | 100 Basis-Point
| | 100 Basis-Point
| | 100 Basis-Point
| | 100 Basis-Point
|
| | | Increase | | Decrease | | Increase | | Decrease |
| |
| BBVA Group | | (0.43)% | | +0.26% | | (0.44)% | | (0.91)% |
| | |
| (*) | | Percentage relating to equity. |
Structural Exchange Rate Risk
The foreign exchange marketcurrencies with greatest capital impact on the BBVA Group underwent widespread appreciations in 2008 was also affected by2010. BBVA Group’s geographical diversification, given the financial crisis. Exchange rates were more volatile thanuncertain economic climate and the public debt crisis episodes in previous years, with contradictory trends inEurope, has had a positive effect on its capital ratios, equity and earnings, due to amongst other factors, the two halvesfavorable impact of the year. While the first halfappreciation of the year featured a depreciation of the dollar with respect to the euro and a strengthening of the Latin Americanmajor currencies against the dollar, in the second half of the year the US dollar appreciated relative to the euro. The Latin American currencies, on the other hand, depreciated against the US dollar in the second half of the year.
These exchange ratemarket variations affect BBVA’s equity,have an effect on our solvency ratios and itsour estimated earnings whenever there is exposure deriving from the contribution of subsidiary entities operating in “non-euro” markets. The Asset/Liability Management unit, through ALCO, actively manages structural exchange rate risk using hedging policies that aim to minimize the effect of foreign exchange fluctuations on capital ratios, as well as to help ensureassure the equivalent value in euros of the foreign currency earnings contributed by our various subsidiaries while controlling the Group’s various subsidiaries.impact on reserves.
The Risk area acts as an independent unit responsible for designing measurement models, making risk calculations and controlling compliance with limits, reporting on all these issues to the Board’s Risk Committee and to the Executive Committee.
Structural exchange rate risk is measuredevaluated using a measurement model that simulates multiple scenarios of exchange rate simulation models that take account ofrates and evaluates their impacts on our capital ratios, equity and the historical performance of different currencies. Such models consider the historical behavior of the relevant currencies and their possible future variations, in line with market forecasts and macroeconomic analyses which include the possibility of potential exchange rate crises.
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income statement. On the basis of these exchange rate simulations,this exchange-rate simulation, a statistical distribution is produced showing theof their possible impactsimpact on the Group’s equity and income statement, hence giving thethree core items that determine their maximum adverse deviation in both variables for a particular confidence level and time horizon, depending on market liquidity in each currency. Furthermore, these simulation modelsThe risk measurements are also used to generatecompleted with stress testing and backtesting, which give a rangecomplete view of exposure and the impacts on capital ratios, for which the foreigngroup of structural exchange breakdown both of equity and risk-weighted assets is taken into consideration.rate risk.
TheAll these metrics are incorporated into the decision-making process by Asset/Liability Management, unit incorporates these metrics into its decision-making process, in order to match the relevant Group entity’sso that it can adapt our risk profile to the frameworkguidelines derived from the limits structure authorized by the Executive Committee for these metrics. Our activeCommittee. Active management of foreign exchange exposure allowedhas enabled us to maintain ourtake advantage of the favorable evolution of currencies in 2010, while consistently maintaining risk levellevels within the established limits, established for 2008, despite high market volatility. The average hedging level of the bookcarrying value of BBVA investments in currencies stood at around 30%, while hedging of foreign currency earnings in 2010 remained at lower levels. In addition to this corporate-level hedging, dollar positions are held at a local level by some of the Group’s holdingssubsidiary banks. Thanks to a proactive policy in foreign currency was close to 50%. As in previous years, hedgingexchange management, hedges exist at the closing of the year for both the carrying amounts of the BBVA investments and the expected earnings in foreign currency also remained high in 2008. The graph below shows the trend seen in average use of exchange rate limits over the year.
As of December 31, 2008,2010, the coverage of structural currency riskaverage asset exposure stood at 45%. Aggregate exposuresensitivity to a 1% depreciation in exchange rates relative to the euro stood as of December, 31, 2008, at €75€113 million,with the following concentration: 63%45% in the Mexican peso, and 33%28% in other South American currencies.currencies and 18% in the U.S. dollar.
Structural Risk in Equity Price RiskPortfolio
Our exposure to structural equity price risk derives mainlycomes largely from our investmentsholdings in industrial and financial companies with medium- to long-term investment horizons. It ishorizons, reduced by the short net short positions we holdheld in derivative instruments on the same underlyingsunderlying assets, in order to limit theportfolio sensitivity of the portfolio to possible decreases in prices. As of December 31, 2008 thepotential price cuts. The aggregate sensitivity of our consolidated equity positions to a 1% fall in the price of the shares amountedstood, on December 31, 2010, at €47.5 million, while the sensitivity of the consolidated earnings to €78 million, 52%the same change in price on the same date is estimated at €3.3 million. The latter is positive in the case of which is concentratedfalls in highly liquid equities of European Union companies.prices as these are short net positions in derivatives. This figure is
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determined by considering the exposure on shares measured at market price or, in the absence thereof,if not available, at fair value, including the net positions in equity swaps and options on the same underlyingunderlyings in delta equivalent terms. Treasury Area portfolio positions are not included in the calculation.
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The Risk Departmentarea measures and effectively monitors structural risk in the structural equity price risk.portfolio. To this end,do so, it estimates the sensitivity figures and the capital requirednecessary to cover the possible unexpected losses arising from fluctuationsdue to the variations in the value of the companies in the investmentequity portfolio withat a confidence interval equallevel that corresponds to the entity’sinstitution’s target rating, and taking into account of the liquidity of the positions and the statistical behaviorperformance of the assets under consideration. These measurementsfigures are supplemented by periodic stress- andstress comparisons, back-testing and scenario analyses.
Liquidity Risk
The aim of liquidity risk management, assessment and control is to ensure, in the short-term, that payment commitments can be duly met without having to resort to borrowing funds under burdensome terms, or damaging the image and reputation of the institution. In the medium-term, its aim is to ensure that our financing structure is appropriate and that it moves in the right direction in the context of the current economic situation, and considering the markets and regulatory changes.
Liquidity and structural finance management in our Group is based on the principle of the financial autonomy of our subsidiaries. This management approach helps limit liquidity risk and reduce the vulnerability of our Group during high-risk periods.
The management and monitoring of liquidity risk is carried out comprehensively in each of our units with both a short and long-term approach. The short-term liquidity approach has a time horizon of up to 366 days. It is focused on the management of payments and collections from Treasury and Markets and includes the operations specific to each area and the Bank’s possible liquidity requirements. The second medium-term or medium-financing approach is focused on financial management of the balance sheet as a whole, with a time horizon of one year or more.
The comprehensive management of liquidity is carried out by the Assets and Liabilities Committee (ALCO) in each management unit. The Financial Management unit, as part of the Financial Division, analyzes the implications of the Bank’s various projects in terms of finance and liquidity requirements and its compatibility with the target financing structure and the situation of the financial markets. The Financial Management unit executes proposals agreed by the ALCO in accordance with the agreed budgets and manages liquidity risk using a broad scheme of limits,sub-limits and alerts approved by the Executive Committee. The Risk Area uses these limits to carry out its mediation and control work independently and provides the manager with the support tools and metrics needed for decision-making. Each of the local risk areas, which are independent from the local manager, complies with the corporative principles of liquidity risk control that are established by the Global Market Risk (GRM) unit, which is the global structural risks unit for the whole Group.
At the level of each entity, the managing areas request and propose a scheme of quantitative and qualitative limits and alerts that affect liquidity risk in the short and medium term. Once agreed with the GRM, controls and limits are proposed to the Board of Directors for its approval at least once a year. The proposals submitted by the GRM take into consideration the market situation according to our target risk tolerance level.
The implementation of a new Liquidity and Finance Manual, which was approved in the last quarter of 2010, has meant the extension of schemes limiting the internal financing of business units, the financial structure and financing concentration, as well as establishing alerts in qualitative liquidity indicators.
GRM carries out regular measurements of risk incurred and the monitoring of consumption of limits. It develops tools and adapts valuation models, carries out regular stress tests and reports to ALCO and the Group’s Management Committee on a monthly basis about liquidity levels. It also reports to the management areas and to the GRM Management Committee. The frequency of communication and the amount of information under the current Contingency Plan is decided by the Liquidity Committee on the proposal of the Technical Liquidity Group (TLG). The TLG carries out the initial analysis of the Bank’s short or long-term liquidity situation. The TLG is made up of specialized staff from the Short-Term Cash Desk, Financial Management and the Global Market Risk Unit (UCRAM-Structural Risk). If the alert levels suggest a deterioration of the relative situation, the TLG reports the matter to the Liquidity Committee, which is composed of the managers of the related areas. If required, the
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Liquidity Committee is responsible for calling the Financing Committee, which is made up of the President and COO, the Director of the Financial Area, the Director of the Risk Area, the Director of Global Business and the Director of Business of the country in question.
One of the most significant aspects that have had an effect on the monitoring and management of liquidity risk in 2010 has been the management and development of the sovereign risk crisis. In this sense, the role of the central banks has been decisive in calming markets during the Eurozone debt crisis and the ECB has been proactive in guaranteeing the liquidity conditions of the interbank markets. Our Group has not needed to make use of the extraordinary measures established by the Spanish and European authorities to mitigate tension in bank financing.
On the regulatory side, the Basel Committee on Banking Supervision (Bank for International Settlements) has proposed a new liquidity regulatory scheme based on two ratios: the Liquidity Coverage Ratio (LCR), that will enter into force in 2015 and the Net Stable Funding Ratio (NSFR), which will be implemented in 2018. The Group participated in the related impact study (QIS) and has taken into account the new regulatory challenges in its new general framework for action in the field of liquidity and finance.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Up to 1
| | | 1 to 3
| | | 3 to 12
| | | 1 to 5
| | | Over 5
| | | | |
2010 | | Demand | | | Month | | | Months | | | Months | | | Years | | | Years | | | Total | |
| | | (In millions of euros) | |
| |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central banks | | | 17,275 | | | | 1,497 | | | | 693 | | | | 220 | | | | 282 | | | | — | | | | 19,967 | |
| Loans and advances to credit institutions | | | 2,471 | | | | 10,590 | | | | 1,988 | | | | 1,658 | | | | 4,568 | | | | 2,329 | | | | 23,604 | |
| Loans and advances to customers | | | 16,543 | | | | 33,397 | | | | 21,127 | | | | 49,004 | | | | 85,800 | | | | 141,338 | | | | 347,209 | |
| Debt securities | | | 497 | | | | 3,471 | | | | 12,423 | | | | 8,123 | | | | 35,036 | | | | 28,271 | | | | 87,821 | |
| Derivatives (trading and hedging) | | | — | | | | 636 | | | | 1,515 | | | | 3,503 | | | | 13,748 | | | | 17,827 | | | | 37,229 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks | | | 50 | | | | 5,102 | | | | 3,130 | | | | 2,704 | | | | — | | | | 1 | | | | 10,987 | |
| Deposits from credit institutions | | | 4,483 | | | | 30,031 | | | | 4,184 | | | | 3,049 | | | | 9,590 | | | | 5,608 | | | | 56,945 | |
| Deposits from customers | | | 111,090 | | | | 69,625 | | | | 21,040 | | | | 45,110 | | | | 21,158 | | | | 6,818 | | | | 274,841 | |
| Debt certificates (including bonds) | | | 96 | | | | 5,243 | | | | 10,964 | | | | 7,159 | | | | 42,907 | | | | 15,843 | | | | 82,212 | |
| Subordinated liabilities | | | — | | | | 537 | | | | 3 | | | | 248 | | | | 2,732 | | | | 13,251 | | | | 16,771 | |
| Other financial liabilities | | | 4,177 | | | | 1,207 | | | | 175 | | | | 433 | | | | 647 | | | | 1,564 | | | | 8,203 | |
| Short positions | | | — | | | | 651 | | | | — | | | | 10 | | | | — | | | | 3,385 | | | | 4,046 | |
| Derivatives (trading and hedging) | | | — | | | | 826 | | | | 1,473 | | | | 3,682 | | | | 12,813 | | | | 16,037 | | | | 34,831 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Up to 1
| | | 1 to 3
| | | 3 to 12
| | | 1 to 5
| | | Over 5
| | | | |
2009 | | Demand | | | Month | | | Months | | | Months | | | Years | | | Years | | | Total | |
| | | (In millions of euros) | |
| |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central banks | | | 14,650 | | | | 535 | | | | 248 | | | | 735 | | | | 163 | | | | — | | | | 16,331 | |
| Loans and advances to credit institutions | | | 3,119 | | | | 8,484 | | | | 1,549 | | | | 1,914 | | | | 4,508 | | | | 2,626 | | | | 22,200 | |
| Loans and advances to customers | | | 4,313 | | | | 31,155 | | | | 19,939 | | | | 40,816 | | | | 94,686 | | | | 140,178 | | | | 331,087 | |
| Debt securities | | | 1,053 | | | | 4,764 | | | | 15,611 | | | | 10,495 | | | | 37,267 | | | | 29,080 | | | | 98,270 | |
| Other assets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Derivatives (trading and hedging) | | | — | | | | 637 | | | | 2,072 | | | | 3,863 | | | | 13,693 | | | | 12,608 | | | | 32,873 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks | | | 213 | | | | 4,807 | | | | 3,783 | | | | 12,293 | | | | — | | | | — | | | | 21,096 | |
| Deposits from credit institutions | | | 1,836 | | | | 24,249 | | | | 5,119 | | | | 5,145 | | | | 6,143 | | | | 6,453 | | | | 48,945 | |
| Deposits from customers | | | 106,942 | | | | 55,482 | | | | 34,329 | | | | 32,012 | | | | 18,325 | | | | 6,293 | | | | 253,383 | |
| Debt certificates (including bonds) | | | — | | | | 10,226 | | | | 16,453 | | | | 15,458 | | | | 40,435 | | | | 14,614 | | | | 97,186 | |
| Subordinated liabilities | | | — | | | | 500 | | | | 689 | | | | 2 | | | | 1,529 | | | | 14,585 | | | | 17,305 | |
| Other financial liabilities | | | 3,825 | | | | 822 | | | | 141 | | | | 337 | | | | 480 | | | | 20 | | | | 5,625 | |
| Short positions | | | — | | | | 448 | | | | — | | | | 16 | | | | — | | | | 3,366 | | | | 3,830 | |
| Derivatives (trading and hedging) | | | — | | | | 735 | | | | 1,669 | | | | 3,802 | | | | 13,585 | | | | 10,517 | | | | 30,308 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Up to 1
| | | 1 to 3
| | | 3 to 12
| | | 1 to 5
| | | Over 5
| | | | |
2008 | | Demand | | | Month | | | Months | | | Months | | | Years | | | Years | | | Total | |
| | | (In millions of euros) | |
| |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central banks | | | 13,487 | | | | 476 | | | | 296 | | | | 181 | | | | 202 | | | | — | | | | 14,642 | |
| Loans and advances to credit institutions | | | 6,198 | | | | 16,216 | | | | 1,621 | | | | 2,221 | | | | 4,109 | | | | 3,314 | | | | 33,679 | |
| Loans and advances to customers | | | 13,905 | | | | 36,049 | | | | 23,973 | | | | 45,320 | | | | 91,030 | | | | 131,045 | | | | 341,322 | |
| Debt securities | | | 716 | | | | 1,701 | | | | 12,230 | | | | 9,483 | | | | 24,640 | | | | 23,934 | | | | 72,704 | |
| Other assets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Derivatives (trading and hedging) | | | — | | | | 3,739 | | | | 2,206 | | | | 5,442 | | | | 16,965 | | | | 16,427 | | | | 44,779 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks | | | 2,419 | | | | 8,737 | | | | 2,441 | | | | 3,165 | | | | — | | | | — | | | | 16,762 | |
| Deposits from credit institutions | | | 4,906 | | | | 22,412 | | | | 4,090 | | | | 5,975 | | | | 6,581 | | | | 5,609 | | | | 49,573 | |
| Deposits from customers | | | 101,141 | | | | 68,804 | | | | 27,025 | | | | 35,176 | | | | 16,440 | | | | 5,137 | | | | 253,723 | |
| Debt certificates (including bonds) | | | — | | | | 9,788 | | | | 13,516 | | | | 12,072 | | | | 45,469 | | | | 20,483 | | | | 101,328 | |
| Subordinated liabilities | | | 69 | | | | 913 | | | | 1 | | | | 872 | | | | 3,582 | | | | 10,812 | | | | 16,249 | |
| Other financial liabilities | | | 5,000 | | | | 1,152 | | | | 385 | | | | 203 | | | | 1,371 | | | | 342 | | | | 8,453 | |
| Short positions | | | — | | | | 24 | | | | — | | | | 23 | | | | — | | | | 2,653 | | | | 2,700 | |
| Derivatives (trading and hedging) | | | — | | | | 2,693 | | | | 3,108 | | | | 6,310 | | | | 15,538 | | | | 13,886 | | | | 41,535 | |
Credit Risk Management
Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge a contractual obligation due to the insolvency or incapacity of the natural or legal persons involved.
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Maximum exposure to credit risk
For the financial assets recognized on the consolidated balance sheet, credit risk exposure is equivalent to these assets’ carrying amounts. The maximum exposure to credit risk on financial guarantees extended is the maximum that BBVA is liable for if these guarantees are called in.
146
The Group’s maximum credit risk exposure as of December 31, 2008, 20072010, 2009 and 2006,2008, without recognizing the availability of collateral or other credit enhancements to guarantee compliance, is broken down by sectorfinancial instrument and counterparties in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | |
| | | 2008 | | 2007 | | 2006 | | |
Maximum Credit Risk Exposure | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Financial assets held for trading | | | 67,502 | | | | 53,156 | | | | 41,842 | | | | 24,358 | | | | 34,672 | | | | 26,556 | |
| Debt securities | | | 26,556 | | | | 38,392 | | | | 30,426 | | | | 24,358 | | | | 34,672 | | | | 26,556 | |
| Public sector | | | 20,778 | | | | 27,960 | | | | 20,939 | | |
| Government | | | | 20,397 | | | | 31,290 | | | | 20,778 | |
| Credit institutions | | | 2,825 | | | | 6,020 | | | | 6,352 | | | | 2,274 | | | | 1,384 | | | | 2,825 | |
| Other sectors | | | 2,953 | | | | 4,412 | | | | 3,135 | | | | 1,687 | | | | 1,998 | | | | 2,953 | |
| Trading derivatives | | | 40,946 | | | | 14,764 | | | | 11,416 | | |
Other financial assets designated at fair value through profit or loss | | | 516 | | | | 421 | | | | 56 | | | | 691 | | | | 639 | | | | 516 | |
| Debt securities | | | 516 | | | | 421 | | | | 56 | | | | 691 | | | | 639 | | | | 516 | |
| Public sector | | | 38 | | | | 41 | | | | 40 | | |
| Government | | | | 70 | | | | 60 | | | | 38 | |
| Credit institutions | | | 24 | | | | 36 | | | | 10 | | | | 87 | | | | 83 | | | | 24 | |
| Other sectors | | | 454 | | | | 344 | | | | 6 | | | | 534 | | | | 496 | | | | 454 | |
Available-for-sale financial assets | | | 39,961 | | | | 37,252 | | | | 32,068 | | | | 50,602 | | | | 57,067 | | | | 39,961 | |
| Debt securities | | | 39,961 | | | | 37,252 | | | | 32,068 | | | | 50,602 | | | | 57,067 | | | | 39,961 | |
| Public sector | | | 19,576 | | | | 17,573 | | | | 17,964 | | |
| Government | | | | 33,074 | | | | 38,345 | | | | 19,576 | |
| Credit institutions | | | 13,377 | | | | 13,419 | | | | 9,199 | | | | 11,235 | | | | 12,646 | | | | 13,377 | |
| Other sectors | | | 7,008 | | | | 6,260 | | | | 4,905 | | | | 6,293 | | | | 6,076 | | | | 7,008 | |
Loans and receivables | | | 375,386 | | | | 344,124 | | | | 285,421 | | | | 373,037 | | | | 353,741 | | | | 375,387 | |
| Loans and advances to credit institutions | | | 33,679 | | | | 24,392 | | | | 21,204 | | | | 23,604 | | | | 22,200 | | | | 33,679 | |
| Loans and advances to customers | | | 341,321 | | | | 319,671 | | | | 264,139 | | | | 347,210 | | | | 331,087 | | | | 341,322 | |
| Public Sector | | | 22,502 | | | | 21,065 | | | | 21,194 | | |
| Government | | | | 31,224 | | | | 26,219 | | | | 22,503 | |
| Agriculture | | | 4,109 | | | | 3,737 | | | | 3,133 | | | | 3,977 | | | | 3,924 | | | | 4,109 | |
| Industry | | | 46,576 | | | | 39,922 | | | | 24,731 | | | | 36,578 | | | | 42,799 | | | | 46,576 | |
| Real estate and construction | | | 47,682 | | | | 55,156 | | | | 41,502 | | | | 55,854 | | | | 55,766 | | | | 54,522 | |
| Trade and finance | | | 51,725 | | | | 36,371 | | | | 38,910 | | | | 45,689 | | | | 40,714 | | | | 44,885 | |
| Loans to individuals | | | 127,890 | | | | 121,462 | | | | 103,918 | | | | 135,868 | | | | 126,488 | | | | 127,890 | |
| Leases | | | 9,385 | | | | 9,148 | | | | 7,692 | | |
| Finance leases | | | | 8,141 | | | | 8,222 | | | | 9,385 | |
| Other | | | 31,452 | | | | 32,810 | | | | 23,059 | | | | 29,879 | | | | 26,955 | | | | 31,452 | |
| Debt securities | | | 386 | | | | 61 | | | | 78 | | | | 2,223 | | | | 454 | | | | 386 | |
| Public sector | | | 290 | | | | (1 | ) | | | — | | |
| Government | | | | 2,040 | | | | 342 | | | | 290 | |
| Credit institutions | | | 4 | | | | 1 | | | | 1 | | | | 6 | | | | 4 | | | | 4 | |
| Other sectors | | | 92 | | | | 61 | | | | 77 | | | | 177 | | | | 108 | | | | 92 | |
Held-to-maturity investments | | | 5,285 | | | | 5,589 | | | | 5,911 | | | | 9,946 | | | | 5,438 | | | | 5,285 | |
| Public sector | | | 3,844 | | | | 4,125 | | | | 4,440 | | |
| Government | | | | 8,792 | | | | 4,064 | | | | 3,844 | |
| Credit institutions | | | 800 | | | | 818 | | | | 823 | | | | 552 | | | | 754 | | | | 800 | |
| Other sectors | | | 641 | | | | 646 | | | | 648 | | | | 602 | | | | 620 | | | | 641 | |
Hedging derivatives | | | 3,833 | | | | 1,050 | | | | 1,963 | | |
Derivatives (trading and hedging) | | | | 44,762 | | | | 42,836 | | | | 46,887 | |
| | | | | | | | | | | | | | | |
Subtotal | | | 492,482 | | | | 441,592 | | | | 367,261 | | | | 503,396 | | | | 494,393 | | | | 494,591 | |
| | | | | | | | | | | | | | | |
| Valuation adjustments | | | 942 | | | | 655 | | | | 401 | | | | 299 | | | | 436 | | | | 942 | |
| | | | | | | | | | | | | | | |
Total Balance | | | 493,424 | | | | 442,247 | | | | 367,662 | | |
Total balance | | | | 503,695 | | | | 494,829 | | | | 495,533 | |
| | | | | | | | | | | | | | | |
| Financial guarantees | | | 35,952 | | | | 65,845 | | | | 42,281 | | | | 36,441 | | | | 33,185 | | | | 35,952 | |
| Other contingent exposures | | | 6,234 | | | | 5,496 | | | | 4,995 | | |
| Drawable by third parties | | | 92,663 | | | | 101,444 | | | | 98,226 | | | | 86,790 | | | | 84,925 | | | | 92,663 | |
| Public sector | | | 4,221 | | | | 4,419 | | | | 3,122 | | |
| Government | | | | 4,135 | | | | 4,567 | | | | 4,221 | |
| Credit institutions | | | 2,021 | | | | 2,619 | | | | 4,356 | | | | 2,303 | | | | 2,257 | | | | 2,021 | |
| Other sectors | | | 86,421 | | | | 94,406 | | | | 90,748 | | | | 80,352 | | | | 78,101 | | | | 86,421 | |
| Other contingent exposures | | | | 3,784 | | | | 7,398 | | | | 6,234 | |
| | | | | | | | | | | | | | | |
Total off-balances | | | 134,849 | | | | 172,785 | | | | 145,502 | | |
Total off-balance | | | | 127,015 | | | | 125,508 | | | | 134,849 | |
| | | | | | | | | | | | | | | |
Total | | | 628,273 | | | | 615,032 | | | | 513,164 | | |
Total maximum credit exposure | | | | 630,710 | | | | 620,337 | | | | 630,382 | |
| | | | | | | | | | | | | | | |
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For financial assets recognized in the consolidated balance sheets, credit risk exposure is equal to the carrying amount, except for trading and hedging derivatives. The maximum exposure to credit risk on financial guarantees is the maximum that we would be liable for if these guarantees were called in.
For trading and hedging derivatives, this information reflects the maximum credit risk exposure better than the amount shown on the balance sheet because it does not only include the market value on the date of the transactions (the carrying amount only shows this figure); it also estimates the potential risk of these transactions on their due date.
Regarding the renegotiated financial assets as of December 31, 2010, we did not perform any renegotiations that resulted in the need to reclassify doubtful risks as outstanding risks. The amount of financial assets that would be irregular had their conditions not been renegotiated is not significant with respect to the Group’s total loan portfolio as of December 31, 2010.
MitigatingMitigation of credit risk:risk, collateral and other credit enhancements, including risk hedging and mitigation policies
In most instances thecases, maximum exposure to credit exposurerisk is mitigatedreduced by collateral, credit enhancements and other measures devisedactions which mitigate our exposure.
We apply a credit risk hedging and mitigation policy deriving from a banking approach focused on relationship banking. On this basis, the provision of guarantees is a necessary but not sufficient instrument when taking risks; therefore for us to reduceassume risks, we need to verify the payment or resource generation capacity to ensure the amortization of the risk incurred.
The above is carried out through a prudent risk management policy which consists of analyzing the financial risk in a transaction, based on the repayment or resource generation capacity of the credit recipient, the provision of guarantees in any of the generally accepted ways (cash collateral, pledged assets, personal guarantees, covenants or hedges) appropriate to the risk undertaken, and lastly on the recovery risk (the asset’s liquidity).
The procedures for the management and valuation of collaterals are set out in the internal Manual on Credit Risk Management Policies, which we actively use in the arrangement of transactions and in the monitoring of both these and customers.
This Manual lays down the basic principles of credit risk management, which includes the management of the collateral assigned in transactions with customers. Accordingly, the risk management model jointly values the existence of an adequate cash flow generation by the obligor that enables him to service the debt, together with the existence of suitable and sufficient guarantees that ensure the recovery of the credit when the obligor’s circumstances render such obligor unable to meet their obligations.
The procedures used for the valuation of the collateral are consistent with the market’s best practices, which involve the use of appraisal for real estate guarantees, market price for shares, quoted value of shares in a mutual fund, among other things.
All collaterals assigned are to be properly instrumented and recognized in the corresponding register, and must receive the approval of our ultimate credit exposure. Followinglegal department.
The following is a description of the various types ofmain collateral and other credit enhancements for every class ofeach financial instrument:instrument class:
| | |
| | • | Financial assets held for trading: GuaranteesThe guarantees or credit enhancements which are takenobtained directly from the issuer or counterparty may be includedare implicit in the instruments’ contractual clauses to reduce our ultimate credit exposure. Forof the instrument. In trading derivatives, credit risk is generally minimized via masterthrough contractual netting agreements, whereby derivative financial assetswhere positive- and liabilitiesnegative-value derivatives with the same counterparty canare offset for their net balance. There may likewise be settled net. Other typesother kinds of guarantees, may also be put in place, depending on the counterparty’scounterparty solvency and the nature of the transaction. |
| |
| | • | Other financial assets designated at fair value through profit or loss: GuaranteesThe guarantees or credit enhancements which are takenobtained directly from the issuer or counterparty may be includedare inherent in the instruments’ contractual clauses to reduce our ultimate credit exposure.structure of the instrument. |
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| | |
| | • | Available-for-sale financial assets: GuaranteesThe guarantees or credit enhancements which are takenobtained directly from the issuer or counterparty may be implicit toare inherent in the instrument’s structuring to reduce our ultimate credit exposure.structure of the instrument. |
| |
| | • | Loans and receivables: |
| | |
| | • | Loans and advances to credit institutions: Personal guarantees fromThese have the counterparties and, on occasion, an additional guarantee from another credit entity with which a credit derivative has been written to reduce our ultimate credit exposure may be required.counterparty’s personal guarantee. |
| |
| | • | Loans and advancesTotal lending to customers: PersonalMost of these operations are backed by personal guarantees extended by the counterparties may be required.counterparty. The collateral received to secure loans and advances to customers includeother debtors includes mortgages, cash guarantees and other collateral such as pledged securities. Other kinds of credit enhancements may be put in place such as guarantees and credit derivatives to reduce our ultimate credit exposureguarantees. |
| |
| | • | Debt securities: GuaranteesThe guarantees or credit enhancements which are takenobtained directly from the issuer or counterparty may be implicit toare inherent in the instrument’s structuring.structure of the instrument. |
| | |
| | • | Held-to-maturity investments: GuaranteesThe guarantees or credit enhancements which are takenobtained directly from the issuer or counterparty may be implicit toare inherent in the instrument’s structuring.structure of the instrument. |
| |
| | • | Hedging derivatives: Credit risk is minimized via masterthrough contractual netting agreements, whereby derivative financial assetswhere positive- and liabilitiesnegative-value derivatives with the same counterparty canare settled at their net balance. There may likewise be settled net. Other typesother kinds of guarantees, may also be put in place, depending on the counterparty’scounterparty solvency and the nature of the transaction. |
| |
| | • | Financial guarantees, other contingent exposures and drawable by third parties: Personal guarantees fromThese have the counterparties and, on occasion, an additional guarantee from another credit entity with which a credit derivative has been written to reduce our ultimate credit exposure may be required.counterparty’s personal guarantee. |
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Our collateralized credit risk as of December 31, 2008, 20072010, 2009 and 2006,2008, excluding balances deemed impaired, is broken down in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | |
| | | 2008 | | 2007 | | 2006 | | |
Collateralized Credit Risk | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
Mortgage loans | | | 125,540 | | | | 123,998 | | | | 107,837 | | | | 132,628 | | | | 127,957 | | | | 125,540 | |
| Operating assets mortgage loans | | | 3,896 | | | | 4,381 | | | | 4,595 | | | | 3,638 | | | | 4,050 | | | | 3,896 | |
| Home mortgages | | | 82,613 | | | | 79,377 | | | | 67,777 | | | | 108,224 | | | | 99,493 | | | | 96,772 | |
| Rest | | | 39,031 | | | | 40,240 | | | | 35,465 | | |
Secured loans, except mortgage loans | | | 19,982 | | | | 11,559 | | | | 8,900 | | |
| Rest of mortgages | | | | 20,766 | | | | 24,414 | | | | 24,872 | |
Secured loans, except mortgage | | | | 18,154 | | | | 20,917 | | | | 19,982 | |
| Cash guarantees | | | 250 | | | | 578 | | | | 727 | | | | 281 | | | | 231 | | | | 250 | |
| Pledging of securities | | | 458 | | | | 766 | | | | 972 | | |
| Rest | | | 19,274 | | | | 10,215 | | | | 7,201 | | |
| Secured loan (pledged securities) | | | | 563 | | | | 692 | | | | 458 | |
| Rest of secured loans | | | | 17,310 | | | | 19,994 | | | | 19,274 | |
| | | | | | | | | | | | | | | |
Total | | | 145,522 | | | | 135,557 | | | | 116,737 | | | | 150,782 | | | | 148,874 | | | | 145,522 | |
| | | | | | | | | | | | | | | |
In addition, we hold derivatives that carry contractual, legal compensation rights that have effectively reduced credit risk by €27,933 million as of December 31, 2010, by €27,026 million as of December 31, 2009 and by €29,377 million as of December 31, 2008, by €9,480 million as of December 31, 2007 and by €9,142 million as of December 31, 2006.2008.
As of December 31, 2008, the fair value of all collateral pledged was higher than the value of the underlying assets. Specifically2010, specifically in relation to mortgages, the average amount pending loan collection on the corresponding loans represented 55%53.1% of the fair value of the properties pledged.
Policies and procedures for hedging or mitigating risks, including policy governing the taking of collateral.
BBVA’s policy for hedging or mitigating credit risk is built on its banking model, which in turn is focused on relationship banking. Based on this approach, the taking of guarantees is one of many tools to manage credit risk. Among other things, BBVA also manages credit risk by substantiating counterparty’s repayment ability or the ability of counterparties to generate cash flow to service its obligations.
This philosophy is distilled in a conservative approach to risk taking, to the analysis performed on a transaction’s financial risk, based on the creditor’s ability to settle or generate cash flow satisfy its obligations, to taking guarantees in all generally accepted forms (cash collateral pledged assets, personal guarantees, covenants or hedges) commensurate with the risk assumed,(54% as of December 31, 2009 and lastly, to the recovery risk assumed (asset liquidity)55% as of December 31, 2008).
Credit quality of financial assets that are neither past due nor impaired
We have ratings tools that enable us to rank the credit quality of our operations and customers based on a scoring system and to map these ratings to probability of default (“PD”)(PD) scales. To analyze the performance of PD, we have a series of tracking tools and historical databases that house the pertinent information generated internally.
The scoring tools vary by customer segment (companies,(such as companies, corporate clients, SMEs and public authorities, etc)authorities). Scoring is a decision model that contributes to both the arrangement and management of retail type loans: consumer loans, mortgages, credit cards for individuals, among others. Scoring is the tool used to decide to whom a loan should be assigned, what amount should be assigned and what strategies can help establish the price, because it is an algorithm that sorts transactions in accordance with their credit rating. The move towards advanced
164
risk management makes it possible to establish more proactive commercial relations with customers. Proactive scoring establishes limits for customers that are then used when granting transactions.
Rating tools, as opposed to scoring tools, do not assess transactions but focus on customers instead, such as companies, corporate clients, SMEs or public authorities. For wholesale portfolios where the number of defaults is very low (sovereigns, corporates, financial entities) the internal ratings models are fleshed out by benchmarking the statistics maintained by the external rating agencies (Moodys,(Moody’s, Standard and& Poor’s and Fitch). To this end, each year we compare the PDs compiled by the agencies and allocated toat each level of risk rating of risk, mappingand map the measurements compiled by the various agencies to our master ratingsrating scale.
Once the probability of default for the transactions or customers has been determined, the so-called business cycle adjustment starts. This involves generating a risk metric outside the context estimate, seeking to gather information that represents behavior for an entire economic cycle. This probability is linked to our master rating scale.
We maintain a master ratingsrating scale with a view to facilitating the uniform classification of the Group’sour various risky asset risk portfolios. There are two versions of this scale: a 17-notchThe table below shows the abridged scale which groups outstanding risk into 17 categories and an extended 34-notch scale which represents the heterogeneous natureas of our portfolio. The ratings scales also enable us to factor in geographic diversity and the various levels of risk inherent in the various portfolios in our different operating markets.December 31, 2010:
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| | | | | | | | | | | | | |
| | | Probability of Default (Basic Points) | |
| | | | | | Minimum from
| | | Maximum until
| |
Rating | | Average | | | >= | | | < | |
| |
AAA | | | 1 | | | | 0 | | | | 2 | |
AA+ | | | 2 | | | | 2 | | | | 3 | |
AA | | | 3 | | | | 3 | | | | 4 | |
AA- | | | 4 | | | | 4 | | | | 5 | |
A+ | | | 5 | | | | 5 | | | | 6 | |
A | | | 8 | | | | 6 | | | | 9 | |
A- | | | 10 | | | | 9 | | | | 11 | |
BBB+1 | | | 12 | | | | 11 | | | | 14 | |
BBB+2 | | | 15 | | | | 14 | | | | 17 | |
BBB1 | | | 18 | | | | 17 | | | | 20 | |
BBB2 | | | 22 | | | | 20 | | | | 24 | |
BBB-1 | | | 27 | | | | 24 | | | | 30 | |
BBB-2 | | | 34 | | | | 30 | | | | 39 | |
BB+1 | | | 44 | | | | 39 | | | | 50 | |
BB+2 | | | 58 | | | | 50 | | | | 67 | |
BB1 | | | 78 | | | | 67 | | | | 90 | |
BB2 | | | 102 | | | | 90 | | | | 116 | |
BB-1 | | | 132 | | | | 116 | | | | 150 | |
BB-2 | | | 166 | | | | 150 | | | | 194 | |
B+1 | | | 204 | | | | 194 | | | | 226 | |
B+2 | | | 250 | | | | 226 | | | | 276 | |
B+3 | | | 304 | | | | 276 | | | | 335 | |
B1 | | | 370 | | | | 335 | | | | 408 | |
B2 | | | 450 | | | | 408 | | | | 490 | |
B3 | | | 534 | | | | 490 | | | | 581 | |
B-1 | | | 633 | | | | 581 | | | | 689 | |
B-2 | | | 750 | | | | 689 | | | | 842 | |
B-3 | | | 945 | | | | 842 | | | | 1061 | |
CCC+ | | | 1,191 | | | | 1,061 | | | | 1,336 | |
CCC | | | 1,500 | | | | 1,336 | | | | 1,684 | |
CCC- | | | 1,890 | | | | 1,684 | | | | 2,121 | |
CC+ | | | 2,381 | | | | 2,121 | | | | 2,673 | |
CC | | | 3,000 | | | | 2,673 | | | | 3,367 | |
CC- | | | 3,780 | | | | 3,367 | | | | 4,243 | |
| | | | | | | | | | | | | |
| | | Probability of Default (Basic Points) | |
Internal Rating
| | | | | Minimum from
| | | | |
Reduced List (17 groups) | | Average | | | >= | | | Maximum | |
| |
| AAA | | | 1 | | | | — | | | | 2 | |
| AA+ | | | 2 | | | | 2 | | | | 3 | |
| AA | | | 3 | | | | 3 | | | | 4 | |
| AA− | | | 4 | | | | 4 | | | | 5 | |
| A+ | | | 5 | | | | 5 | | | | 6 | |
| A | | | 8 | | | | 6 | | | | 9 | |
| A− | | | 10 | | | | 9 | | | | 11 | |
| BBB+ | | | 14 | | | | 11 | | | | 17 | |
| BBB | | | 20 | | | | 17 | | | | 24 | |
| BBB− | | | 31 | | | | 24 | | | | 39 | |
| BB+ | | | 51 | | | | 39 | | | | 67 | |
| BB | | | 88 | | | | 67 | | | | 116 | |
| BB− | | | 150 | | | | 116 | | | | 194 | |
| B+ | | | 255 | | | | 194 | | | | 335 | |
| B | | | 441 | | | | 335 | | | | 581 | |
| B− | | | 785 | | | | 581 | | | | 1,061 | |
| C | | | 2,122 | | | | 1,061 | | | | 4,243 | |
150
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The table below outlines the distribution of exposure including derivatives by internal ratings, which includes companies,to financial entities and public institutions (excluding sovereign risk), of the Group’s main entities as of December 31, 2010, 2009 and 2008:
| | | | |
Rating
| | % | |
|
AAA/AA | | | 23.77 | % |
A | | | 26.59 | % |
BBB+ | | | 9.23 | % |
BBB | | | 5.76 | % |
BBB- | | | 9.48 | % |
BB+ | | | 8.25 | % |
BB | | | 6.16 | % |
BB- | | | 5.91 | % |
B+ | | | 3.08 | % |
B | | | 1.44 | % |
B- | | | 0.29 | % |
CCC/CC | | | 0.03 | % |
| | | | |
Total | | | 100.00 | % |
| | | | |
| | | | | | | | | | | | | |
Credit Risk Distribution by Internal Rating | | 2010 | | | 2009 | | | 2008 | |
| |
| AAA/AA+/AA/AA− | | | 26.94 | % | | | 19.55 | % | | | 23.78 | % |
| A+/A/A− | | | 27.49 | % | | | 28.78 | % | | | 26.59 | % |
| BBB+ | | | 9.22 | % | | | 8.65 | % | | | 9.23 | % |
| BBB | | | 4.49 | % | | | 7.06 | % | | | 5.76 | % |
| BBB− | | | 5.50 | % | | | 6.91 | % | | | 9.48 | % |
| BB+ | | | 5.10 | % | | | 4.46 | % | | | 8.25 | % |
| BB | | | 4.57 | % | | | 6.05 | % | | | 6.16 | % |
| BB− | | | 4.88 | % | | | 6.45 | % | | | 5.91 | % |
| B+ | | | 4.84 | % | | | 5.38 | % | | | 3.08 | % |
| B | | | 4.81 | % | | | 3.34 | % | | | 1.44 | % |
| B− | | | 1.89 | % | | | 0.88 | % | | | 0.28 | % |
| CCC/CC | | | 0.27 | % | | | 2.49 | % | | | 0.03 | % |
| | | | | | | | | | | | | |
Total | | | 100.00 | % | | | 100.00 | % | | | 100.00 | % |
| | | | | | | | | | | | | |
Policies and procedures for preventing excessive concentrations of risk concentration
In order to prevent the build upbuild-up of excessive concentrations of credit risk at the individual, country and sector levels, we are subject tooversee updated risk concentration limitsindices at the individual and portfolio levels tied to the various observable variables within the field of credit risk management. The limit on our exposure or share of a customer’s financial business therefore depends on the customer’s credit rating, the nature of the facility, and our presence in a given market, based on the following guidelines:
| | |
| | • | Striking aThe need to balance between the customer’s financing needs, broken down by type (trade/(commercial/financial, short/long-term, etc.), and the degree to which its business is or is not attractive to us. We believe this approach drivesprovides a better operational mix that is still compatible with the needs of our clients.the bank’s clientele. |
| |
| | • | Other determining factors relate toare national legislation and the ratio between the size of customer lending and the customer book and bank’sBank’s equity to(to prevent risk from becoming overly concentrated among few customers.customers). Additional factors taken into consideration include constraints related to market, customer, internal regulation and macroeconomic factors.factors, etc. |
| |
| | • | CorrectIn addition, correct portfolio management leads to identification of risk concentrations and enables the taking of appropriate action.action to be taken. |
Operations with customers or groups that entail an expected loss plus economic capital of over €18 million are required to be approved at the highest level, i.e., by the Board’s Risk Committee of the board of directors.Committee. As a reference, point, this is equivalent in terms of exposure to 10% of eligible equity for an AAA and to 1% for a BB rating, implying oversight of the major individual risk concentrations by the highest-level risk governance bodies as a function of credit ratings.
AnThere is an additional guideline in terms of oversight ofa maximum risk concentration level of up to and at the level ofincluding 10% of equity isequity: up to this level there are stringent requirements in terms of in-depth knowledge of the counterparty, including theclient, its operating markets and sectors in which it operates.of operation.
151166
Financial assets past due but not impaired
The table below provides disclosure ondetails of financial assets past due as of December 31, 2010, 2009 and 2008 but not considered to be impaired, including any amount past due on these dates, listed by amount of time past due:their first due date:
| | | | | | | | | | | | | | | | | |
| | | Less Than
| | | | | | | | | | |
| | | 1 Month | | | 1 to 2 Months | | | 2 to 3 Months | | | Total | |
| | | | | | (In millions of euros) | | | | |
| |
| Loans and advances to customers | | | 1,580 | | | | 534 | | | | 447 | | | | 2,561 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | Less
| | | | | | | | | Less
| | | | | | | | | Less
| | | | | | | |
| | | than 1
| | | 1 to 2
| | | 1 to 3
| | | than 1
| | | 1 to 2
| | | 1 to 3
| | | than 1
| | | 1 to 2
| | | 1 to 3
| |
Financial Assets Past Due but Not
| | Months
| | | Months
| | | Months
| | | Months
| | | Months
| | | Months
| | | Months
| | | Months
| | | Months
| |
Impaired | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | |
| | | (In millions of euros) | |
| |
| Loans and advances to credit institutions | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Loans and advances to customers | | | 1,082 | | | | 311 | | | | 277 | | | | 2,653 | | | | 336 | | | | 311 | | | | 1,580 | | | | 534 | | | | 447 | |
| Government | | | 122 | | | | 27 | | | | 27 | | | | 45 | | | | 32 | | | | 19 | | | | 30 | | | | 10 | | | | 12 | |
| Other sectors | | | 960 | | | | 284 | | | | 250 | | | | 2,608 | | | | 304 | | | | 292 | | | | 1,550 | | | | 524 | | | | 435 | |
| Debt securities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1,082 | | | | 311 | | | | 277 | | | | 2,653 | | | | 336 | | | | 311 | | | | 1,580 | | | | 534 | | | | 447 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired assets and impairment losses
The table below breaks downshows the composition of the balance of impaired financial assets broken down by heading in the balance sheet and the impaired contingent liabilities as of December 31, 2008, 20072010, 2009 and 2006 by heading:2008:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | |
| | | 2008 | | 2007 | | 2006 | | |
Impaired Risks.
| | | | | | | | |
Breakdown by Type of Asset and by Sector | | | 2010 | | 2009 | | 2008 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
IMPAIRED RISKS ON BALANCE | | | | | | | | | | | | | | | | | | | | | | | | |
| Available-for-sale | | | 188 | | | | 3 | | | | 3 | | |
Available-for-sale financial assets | | | | 140 | | | | 212 | | | | 188 | |
| Debt securities | | | 188 | | | | 3 | | | | 3 | | | | 140 | | | | 212 | | | | 188 | |
| Loans and advances | | | 8,540 | | | | 3,366 | | | | 2,500 | | |
| Loans and receivables | | | | 15,472 | | | | 15,311 | | | | 8,540 | |
| Loans and advances to credit institutions | | | 95 | | | | 8 | | | | 8 | | | | 101 | | | | 100 | | | | 95 | |
| Loans and advances to customers | | | 8,437 | | | | 3,358 | | | | 2,492 | | | | 15,361 | | | | 15,197 | | | | 8,437 | |
| Debt securities | | | 8 | | | | — | | | | — | | | | 10 | | | | 14 | | | | 8 | |
| | | | | | | | | | | | | | | |
Total Impaired Risks on Balance(1) | | | | 15,612 | | | | 15,523 | | | | 8,728 | |
| | | | 8,728 | | | | 3,369 | | | | 2,503 | | | | | | | | |
Impaired Risks Off Balance(2) | | | | | | | | | | | | | |
| Impaired contingent liabilities | | | | 324 | | | | 405 | | | | 131 | |
| | | | | | | | | | | | | | | |
IMPAIRED RISKS OFF BALANCE | | | | | | | | | | | | | |
TOTAL IMPAIRED RISKS(1)+(2) | | | | 15,936 | | | | 15,928 | | | | 8,859 | |
| | | | | | | | | |
Of which: | | | | | | | | | | | | | |
| Government | | | | 123 | | | | 87 | | | | 102 | |
| Credit institutions | | | | 129 | | | | 172 | | | | 165 | |
| Other sectors | | | | 15,360 | | | | 15,264 | | | | 8,461 | |
| Mortgage | | | | 8,627 | | | | 7,932 | | | | 3,047 | |
| With partial secured loans | | | | 159 | | | | 37 | | | | 4 | |
| Rest | | | | 6,574 | | | | 7,295 | | | | 5,410 | |
| Impaired contingent liabilities | | | 131 | | | | 49 | | | | 40 | | | | 324 | | | | 405 | | | | 131 | |
| | | | | | | | | | | | | | | |
TOTAL IMPAIRED RISKS | | | 8,859 | | | | 3,418 | | | | 2,543 | | | | 15,936 | | | | 15,928 | | | | 8,859 | |
| | | | | | | | | | | | | | | |
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The changes as of December 31,in 2010, 2009 and 2008 2007 and 2006 in the impaired financial assets and contingent liabilities were as follows:
| | | | | | | | | | | | | | |
Changes in Impaired Financial
| | | | | | | | |
Assets and Contingent Liabilities | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | (In millions of euros) | |
| | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | |
| | | (In millions of euros) | | |
| | |
Balance at the beginning of the year | | | 3,418 | | | | 2,543 | | | | 2,389 | | |
Balance at the beginning | | | | 15,928 | | | | 8,859 | | | | 3,418 | |
Additions | | | 11,488 | | | | 4,606 | | | | 2,746 | | | | 13,207 | | | | 17,298 | | | | 11,488 | |
Recoveries | | | (3,668 | ) | | | (2,418 | ) | | | (1,830 | ) | | | (9,138 | ) | | | (6,524 | ) | | | (3,668 | ) |
| Net additions(1)+(2) | | | | 4,069 | | | | 10,774 | | | | 7,820 | |
| Transfers to write-off | | | (2,198 | ) | | | (1,497 | ) | | | (707 | ) | | | (4,307 | ) | | | (3,737 | ) | | | (2,198 | ) |
| Exchange differences and others | | | (182 | ) | | | 184 | | | | (55 | ) | |
| Exchange differences and other | | | | 247 | | | | 32 | | | | (181 | ) |
| | | | | | | | | | | | | | | |
Balance at the end of the year | | | 8,858 | | | | 3,418 | | | | 2,543 | | |
Balance at the end | | | | 15,936 | | | | 15,928 | | | | 8,859 | |
| | | | | | | | | | | | | | | |
| Recoveries on entries(%) | | | | 69 | | | | 38 | | | | 32 | |
| | | | | | | | | |
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The table belowBelow are details of the impaired financial assets considered as of December 31, 2010, 2009 and 2008, without considering impaired liabilities or valuation adjustments, classified by geographical location of risk and by age of the time since their oldest past-due amount:amount or the period since they were deemed impaired:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Impaired Assets of Loans and Advances to Customers | | | Less than 6
| | 6 to 9
| | 9 to 12
| | More than
| | | |
| | | Amounts Less Than Six
| | 6 to 12
| | 12 to 18
| | 18 to 24
| | More Than
| | | | | Months
| | Months
| | Months
| | 12 Months
| | | |
| | | Months Past-Due | | Months | | Months | | Months | | 24 Months | | Total | | |
2010 | | | Past-Due | | Past-Due | | Past-Due | | Past-Due | | Total | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| Spain | | | 2,405 | | | | 1,904 | | | | 595 | | | | 87 | | | | 975 | | | | 5,966 | | | | 5,279 | | | | 1,064 | | | | 798 | | | | 4,544 | | | | 11,685 | |
| Rest of Europe | | | 55 | | | | 10 | | | | 6 | | | | 5 | | | | 16 | | | | 92 | | | | 106 | | | | 24 | | | | 24 | | | | 55 | | | | 209 | |
| Latin America | | | 1,112 | | | | 88 | | | | 22 | | | | 7 | | | | 320 | | | | 1,549 | | | | 1,473 | | | | 112 | | | | 100 | | | | 397 | | | | 2,082 | |
| United States | | | 221 | | | | 869 | | | | — | | | | — | | | | 30 | | | | 1,120 | | |
| Rest | | | — | | | | — | | | | — | | | | — | | | | 1 | | | | 1 | | |
| The United States | | | | 1,110 | | | | 84 | | | | 111 | | | | 331 | | | | 1,636 | |
| Rest of the world | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 3,793 | | | | 2,871 | | | | 623 | | | | 99 | | | | 1,342 | | | | 8,728 | | | | 7,968 | | | | 1,284 | | | | 1,034 | | | | 5,327 | | | | 15,612 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
The table below breaks down impaired financial assets by segment, indicating, where appropriate, the type of security taken to ensure collection, as of December 31, 2008, 2007 and 2006:
IMPAIRED RISKS ON BALANCE
| | | | | | | | | | | | | |
| | | As of December 31, | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | (In millions of euros) | |
| |
| Public sector | | | 102 | | | | 177 | | | | 216 | |
| Credit institutions | | | 165 | | | | 8 | | | | 8 | |
| Collateralized financial assets with other sectors | | | 3,428 | | | | 809 | | | | 545 | |
| Mortgage | | | 2,487 | | | | 696 | | | | 459 | |
| Other collateralized financial assets | | | 941 | | | | 113 | | | | 86 | |
| Non-collateralized financial assets with other sectors | | | 5,033 | | | | 2,375 | | | | 1,734 | |
| | | | | | | | | | | | | |
Total | | | 8,728 | | | | 3,369 | | | | 2,503 | |
| | | | | | | | | | | | | |
As of December 31, 2008, the provisions for collateralized non-performing loans, at €606 million, reflect the difference between the carrying amountBelow are details of the non-performing loans and the fair value of the collateral taken.
The table below presents the finance income accrued on impaired financial assets as of December 31, 2008, 20072010, classified by type of loan in accordance with its associated guarantee, and 2006:by the time since their oldest past-due amount or the period since they were deemed impaired:
| | | | | | | | | | | | | |
| | | As of December 31, | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | (In millions of euros) | |
| |
| Financial income from impaired assets | | | 1,042 | | | | 880 | | | | 1,107 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Less than
| | | 6 to 9
| | | 9 to 12
| | | More than
| | | | |
| | | 6 Months
| | | Months
| | | Months
| | | 12 Months
| | | | |
2010 | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Total | |
| | | (In millions of euros) | |
| |
| Unsecured loans | | | 4,309 | | | | 338 | | | | 271 | | | | 1,710 | | | | 6,628 | |
| Mortgage | | | 3,301 | | | | 946 | | | | 763 | | | | 3,617 | | | | 8,627 | |
| Residential mortgage | | | 629 | | | | 304 | | | | 271 | | | | 1,472 | | | | 2,676 | |
| Commercial mortgage (rural properties in operation and offices, and industrial buildings) | | | 561 | | | | 128 | | | | 100 | | | | 602 | | | | 1,391 | |
| Rest of residential mortgage | | | 701 | | | | 132 | | | | 99 | | | | 593 | | | | 1,525 | |
| Plots and other real state assets | | | 1,410 | | | | 382 | | | | 293 | | | | 950 | | | | 3,035 | |
| Other partially secured loans | | | 159 | | | | — | | | | — | | | | — | | | | 159 | |
| Others | | | 199 | | | | — | | | | — | | | | — | | | | 198 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 7,968 | | | | 1,284 | | | | 1,034 | | | | 5,327 | | | | 15,612 | |
| | | | | | | | | | | | | | | | | | | | | |
Financial income accrued from impaired financial assets amounted to €1,717 million, €1,485 million and 1,042 million as of December 31, 2010, 2009 and 2008, respectively. This income is not recognized in the accompanying consolidated income statement due to the existence of doubts as to the collectabilitycollection of these assets.
The Note 2.2.1.b to the Consolidated Financial Statements gives a description of the individual analysis of impaired
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financial assets, that are individually determined to be impaired as at the relevant reporting date, including the factors the entity consideredtakes into account in determining that they are impaired and a descriptionthe extension of collateral held by the entity as securityguarantees and other credit enhancements, is providedenhancements.
The following shows the changes in note 2.2.1.b. to the Consolidated Financial Statements.
153
The changes during 2008, 2007 and 2006 of the transfers to write-offs (financial impairmentimpaired financial assets removedwritten off from the balance sheet for the years ended December 31, 2010, 2009 and 2008 because the possibility of their recovery was considered remote) were as follows:deemed remote:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | 2010 | | 2009 | | 2008 | |
| | | 2008 | | 2007 | | 2006 | | | (In millions of euros) | |
| | | (In millions of euros) | |
| | |
Balance at beginning of year | | | 5,622 | | | | 6,120 | | | | 6,187 | | |
Changes in Written-Off | | | | | | | | | | | | | |
Balance at the beginning of year | | | | 9,834 | | | | 6,872 | | | | 5,622 | |
Increase: | | | | | | | | | | | | | | | 4,788 | | | | 3,880 | | | | 1,976 | |
| Assets of remote collectability | | | 1,700 | | | | 1,895 | | | | 472 | | |
| Products overdue not collected | | | 276 | | | | 217 | | | | 167 | | |
Decrease: | | | | | | | | | | | | | | | (1,448 | ) | | | (1,172 | ) | | | (567 | ) |
| Re-financing or restructuring | | | | (1 | ) | | | — | | | | — | |
| Cash recovery | | | (199 | ) | | | (237 | ) | | | (463 | ) | | | (253 | ) | | | (188 | ) | | | (199 | ) |
| Foreclosed assets | | | (13 | ) | | | (5 | ) | | | (5 | ) | | | (5 | ) | | | (48 | ) | | | (13 | ) |
| Sales of written-off | | | | (342 | ) | | | (590 | ) | | | (261 | ) |
| Other causes | | | (355 | ) | | | (2,455 | ) | | | (129 | ) | | | (847 | ) | | | (346 | ) | | | (94 | ) |
Net exchange differences | | | (159 | ) | | | 87 | | | | (109 | ) | | | 193 | | | | 253 | | | | (159 | ) |
| | | | | | | | | | | | | | | |
Balance at the end of year | | | 6,872 | | | | 5,622 | | | | 6,120 | | |
Balance at the end | | | | 13,367 | | | | 9,833 | | | | 6,872 | |
| | | | | | | | | | | | | | | |
Decreases by other causes shown inOur non-performing assets (“NPA”) ratios for the table above include salesheadings “Loans and advances to non Group third parties of the portfolio of write-offs during the current year, which are described in the following table:
SALES TO THIRD PARTIES
| | | | | | | | | |
| | | As of December 31, | |
| | | 2008 | | | 2007 | |
| | | (In millions of euros) | |
| |
| Bancomer | | | 249 | | | | 1,338 | |
| BBVA, S.A. | | | 12 | | | | 968 | |
| | | | | | | | | |
Total | | | 261 | | | | 2,306 | |
| | | | | | | | | |
| Gains for sales to third parties | | | 3 | | | | 26 | |
| | | | | | | | | |
The Group’s non-performing loan (“NPL”) ratioscustomers” and “Contingent liabilities” as of December 31, 2010, 2009 and 2008 2007were 4.1%, 4.3% and 2006 were:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| |
| NPL ratio | | | 2.12 | | | | 0.89 | | | | 0.83 | |
| | | | | | | | | | | | | |
2.3%, respectively.
TheA breakdown of impairment losses by type of financial instrument registered in profitthe income statement and loss andthe recoveries of written-offimpaired financial assets realizedin 2010, 2009 and 2008 is provided Note 49 to the Consolidated Financial Statements. The accumulated balance of impairment losses broken down by portfolio as of December 31, 2010, 2009 and 2008 2007 and 2006 is provided in Note 47as follows:
| | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | (In millions of euros) | |
| |
Impairment Losses | | | | | | | | | | | | |
Available-for-sale portfolio | | | 619 | | | | 449 | | | | 202 | |
Loans and receivables | | | 9,473 | | | | 8,805 | | | | 7,505 | |
| Loans and advances to customers | | | 9,396 | | | | 8,720 | | | | 7,412 | |
| Loans and advances to credit institutions | | | 67 | | | | 68 | | | | 74 | |
| Debt securities | | | 10 | | | | 17 | | | | 19 | |
Held to maturity investment | | | 1 | | | | 1 | | | | 4 | |
| | | | | | | | | | | | | |
Total | | | 10,093 | | | | 9,255 | | | | 7,711 | |
Of which: | | | | | | | | | | | | |
| For impaired portfolio | | | 7,362 | | | | 6,380 | | | | 3,480 | |
| For currently non-impaired portfolio | | | 2,731 | | | | 2,875 | | | | 4,231 | |
In addition to the amounts indicated above, provisions for contingent exposures and commitments rose to €264, €243 and €421 million as of December 31, 2010, 2009 and 2008 respectively (see Note 25 to the Consolidated Financial Statements).
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Financial Statements “Impairment on financial assets (net)”. The changes in the accumulated impairment losses for the years 2008, 20072010, 2009 and 2006 on the financial assets2008 were as follow:follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, | | | 2010 | | 2009 | | 2008 | |
| | | 2008 | | 2007 | | 2006 | | | (In millions of euros) | |
| | | (In millions of euros) | |
| | |
Balance at beginning of year | | | 7,194 | | | | 6,504 | | | | 5,729 | | |
Changes in the Impairment Losses | | | | | | | | | | | | | |
Balance at the beginning | | | | 9,255 | | | | 7,711 | | | | 7,194 | |
| Increase in impairment losses charged to income | | | 4,590 | | | | 2,462 | | | | 2,113 | | | | 7,207 | | | | 8,282 | | | | 4,590 | |
| Decrease in impairment losses credited to income | | | (1,457 | ) | | | (333 | ) | | | (470 | ) | | | (2,236 | ) | | | (2,622 | ) | | | (1,457 | ) |
| Acquisition of subsidiaries in the year | | | 1 | | | | 276 | | | | 91 | | |
| Disposal of subsidiaries in the year | | | (4 | ) | | | (26 | ) | | | (22 | ) | |
| Acquisition of subsidiaries | | | | — | | | | — | | | | 1 | |
| Disposal of subsidiaries | | | | — | | | | — | | | | (4 | ) |
| Transfers to written-off loans | | | (1,951 | ) | | | (1,297 | ) | | | (563 | ) | | | (4,488 | ) | | | (3,878 | ) | | | (1,951 | ) |
| Exchange differences and other | | | (662 | ) | | | (392 | ) | | | (374 | ) | | | 355 | | | | (238 | ) | | | (662 | ) |
| | | | | | | | | | | | | | | |
Balance at end of year | | | 7,711 | | | | 7,194 | | | | 6,504 | | |
| | | | | | | | | |
Balance at the end | | | | 10,093 | | | | 9,255 | | | | 7,711 | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| For impaired portfolio | | | 3,480 | | | | 1,999 | | | | 2,083 | | | | 7,362 | | | | 6,380 | | | | 3,480 | |
| For current portfolio non impaired | | | 4,231 | | | | 5,195 | | | | 4,421 | | |
| | | | | | | | | |
| For currently non-impaired portfolio | | | | 2,731 | | | | 2,875 | | | | 4,231 | |
RenegotiatedMost of the impairment on financial assets are included under the heading “Loans and receivables — Loans and advances to customers”. The changes in impairment for 2010, 2009 and 2008 are shown in this heading:
| | | | | | | | | | | | | |
Changes in the Impairment Losses | | 2010 | | | 2009 | | | 2008 | |
| | | (In millions of euros) | |
| |
Loans and advances to customers | | | | | | | | | | | | |
Balance at the beginning | | | 8,720 | | | | 7,412 | | | | 7,117 | |
| Increase in impairment losses charged to income | | | 7,014 | | | | 7,983 | | | | 4,434 | |
| Decrease in impairment losses credited to income | | | (2,200 | ) | | | (2,603 | ) | | | (1,636 | ) |
| Acquisition of subsidiaries | | | — | | | | — | | | | — | |
| Disposal of subsidiaries | | | — | | | | — | | | | — | |
| Transfers to written-off loans | | | (4,423 | ) | | | (3,828 | ) | | | (1,950 | ) |
| Exchange differences and other | | | 285 | | | | (244 | ) | | | (553 | ) |
| | | | | | | | | | | | | |
Balance at the end | | | 9,396 | | | | 8,720 | | | | 7,412 | |
Of which: | | | | | | | | | | | | |
| For impaired portfolio | | | 6,683 | | | | 5,864 | | | | 3,239 | |
| For currently non-impaired portfolio | | | 2,713 | | | | 2,856 | | | | 4,173 | |
As of December 31, 2008 the carrying amount of unimpaired financial assets which could have been impaired had the conditions thereof not been renegotiated amounted to €6,565 million (1.78% of credit investment).
Exposure to subprime credit risk
Given the lack of an agreed definition of “subprime” in use across the market, we consider “subprime credit risk” to be the risk incidental to all those financial instruments of which the direct or indirect end borrower merits a credit FICO® score (a credit score based on a statistical analysis of each person’s credit profile, which is used to represent the creditworthiness of that person) of less than 640 points.
The application across the BBVA group of prudent risk policies has resulted in very limited exposure to subprime credit risks with respect to mortgage loans, mortgage backed securities and other securitized financial instruments originated the United States.
We do not market products specifically to the subprime segment. However, the financial crisis that began in the United States in 2007, and the consequent decline in economic conditions and in the ability to pay of certain borrowers, has implied a downgrade in the respective credit FICO® score of these borrowers. It is important to note, however, that the classification of a financial instrument as a subprime credit risk does not necessarily signify that such financial instrument is either past due or impaired or that we have not assigned such financial instrument a “high” or “very high” estimate of recoverability.
As of December 31, 2008, mortgage loans originated in the United States to customers whose creditworthiness had dropped below the “subprime” level as defined above totaled €498 million (0.15% of our total customer credit risk). Of this amount, only €42 million was past due or impaired.
In addition, as of December 31, 2008, indirect exposure through credit instruments tied to an underlying subprime risk totaled €21 million (Note 8 to the Consolidated Financial Statements), of which 75% carried high ratings from the rating agencies widely recognized in the marketplace.
Liquidity risk
The aim of liquidity risk management and control is to ensure that the payment commitments can be met as due without having to resort to borrowing funds under onerous conditions, or damaging the image and reputation of the institution.
155
The Group’s liquidity risk is monitored using a dual approach: (i) the short-term approach(90-day time horizon), which focuses basically on the management of payments and collections of the Treasury and Markets department and ascertains the Bank’s possible liquidity requirements; and (ii) the structural, medium- and long-term approach, which focuses on the financial management of the balance sheet as a whole, with a minimum monitoring time frame of one year.
The assessment of asset liquidity risk is based on whether or not such assets are eligible for rediscounting before the corresponding central bank. For normal situations, both in the short and medium term, those assets that are on the eligible list published by the ECB or the corresponding monetary authority are considered to be liquid. Non-eligible assets, quoted or non-quoted, are considered to represent a second line of liquidity for the entity when analyzing crisis situations.
The Risk Department performs a control function and is totally independent of the management areas of each of the approaches and of the Group’s various units. Each of the risk departments, which are independent from each other, complies with the corporative principles of liquidity risk control that are established by the Market Risk Central Unit (“UCRAM”) — Structural Risks.
For each entity, the management areas request an outline of the quantitative and qualitative limits and alerts for short-medium- and long-term liquidity risk, which is authorized by the Standing Committee. Also, the risk department performs periodic (daily and monthly) risk exposure measurements, develops the related valuation tools and models, conducts periodic stress tests, measures the degree of concentration on interbank counterparties, prepares the policies and procedures manual, and monitors the authorised limits and alerts, which are reviewed at least one time every year.
The liquidity risk data are sent periodically to the Group’s ALCO and to the management areas involved. As established in the Contingency Plan, the Technical Liquidity Group (“TLG”), in the event of an alert of a possible crisis, conducts an initial analysis of the Bank’s short- and long-term liquidity situation. The TLG comprises personnel from the Short-Term Cash Desk, Financial Management and the Market Area Risk Unit (UCRAM-Structural Risk). If the alert is serious, the TLG reports the matter to the Liquidity Committee, which is composed of the managers of the related areas. The Liquidity Committee is responsible, in situations requiring urgent attention, for calling a meeting of the Crisis Committee chaired by the CEO.
In the wake of the exceptional circumstances unfolding in the international financial markets, notably from the second half of 2008, the European governments committed to taking the opportune measures to try to resolve the issues confronting bank funding and the ramifications of constrained funding on the real economy with a view to safeguarding the stability of the international financial system. The overriding goals underpinning these measures were to ensure sufficient liquidity to enable financial institutions to function correctly, to facilitate the funding of banks, to provide financial institutions with additional capital resources where needed so as to continue to ensure the proper financing of the economy, to ensure that applicable accounting standards are sufficiently flexible to take into consideration current exceptional market circumstances and to reinforce and improve cooperation among European nations.
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Risk Concentrations
The table below depictsshows the Group’s financial instruments by classes and geographic markets, disregardinggeographical area, not taking into account valuation adjustments, as of December 31, 2010, 2009 and 2008:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Europe
| | | | Latin
| | | | | | | | | Europe,
| | | | | | | | | |
Risks on Balance | | Spain | | Except Spain | | USA | | America | | Rest | | Total | | |
2010
| | | | | Excluding
| | | | Latin
| | | | | |
Risks On-Balance | | | Spain | | Spain | | USA | | America | | Rest | | Total | |
| | | (in millions of euros) | | | (In millions of euros) | |
| |
Financial assets held for trading | | | 20,489 | | | | 30,251 | | | | 4,566 | | | | 16,120 | | | | 1,873 | | | | 73,299 | | | | 18,903 | | | | 22,899 | | | | 3,951 | | | | 15,126 | | | | 2,404 | | | | 63,283 | |
| Debt securities | | | 7,799 | | | | 5,926 | | | | 652 | | | | 11,563 | | | | 616 | | | | 26,556 | | | | 9,522 | | | | 2,839 | | | | 654 | | | | 10,938 | | | | 405 | | | | 24,358 | |
| Equity instruments | | | 2,332 | | | | 1,376 | | | | 80 | | | | 1,071 | | | | 938 | | | | 5,797 | | | | 3,041 | | | | 888 | | | | 148 | | | | 861 | | | | 322 | | | | 5,260 | |
| Derivatives | | | 10,358 | | | | 22,949 | | | | 3,834 | | | | 3,486 | | | | 319 | | | | 40,946 | | | | 6,340 | | | | 19,172 | | | | 3,149 | | | | 3,327 | | | | 1,677 | | | | 33,665 | |
Other financial assets designated at fair value through profit or loss | | | 245 | | | | 24 | | | | 442 | | | | 1,042 | | | | 1 | | | | 1,754 | | | | 284 | | | | 98 | | | | 481 | | | | 1,913 | | | | 1 | | | | 2,777 | |
| Debt securities | | | 63 | | | | — | | | | 441 | | | | 12 | | | | — | | | | 516 | | | | 138 | | | | 66 | | | | 480 | | | | 7 | | | | — | | | | 691 | |
| Equity instruments | | | 182 | | | | 24 | | | | 1 | | | | 1,030 | | | | 1 | | | | 1,238 | | | | 146 | | | | 32 | | | | 1 | | | | 1,906 | | | | 1 | | | | 2,086 | |
Available-for-sale portfolio | | | 15,233 | | | | 10,460 | | | | 9,633 | | | | 8,449 | | | | 2,999 | | | | 46,774 | | | | 25,230 | | | | 7,689 | | | | 7,581 | | | | 14,449 | | | | 1,234 | | | | 56,183 | |
| Debt securities | | | 11,811 | | | | 9,970 | | | | 8,889 | | | | 8,368 | | | | 924 | | | | 39,962 | | | | 20,725 | | | | 7,470 | | | | 6,903 | | | | 14,317 | | | | 1,187 | | | | 50,602 | |
| Equity instruments | | | 3,422 | | | | 490 | | | | 744 | | | | 81 | | | | 2,075 | | | | 6,812 | | | | 4,505 | | | | 219 | | | | 678 | | | | 132 | | | | 47 | | | | 5,581 | |
Loans and receivables | | | 215,030 | | | | 44,394 | | | | 38,268 | | | | 69,534 | | | | 8,162 | | | | 375,388 | | | | 218,399 | | | | 30,985 | | | | 39,944 | | | | 77,861 | | | | 5,847 | | | | 373,036 | |
| Loans and advances to credit institutions | | | 6,556 | | | | 15,848 | | | | 2,479 | | | | 7,466 | | | | 1,330 | | | | 33,679 | | | | 6,786 | | | | 7,846 | | | | 864 | | | | 7,090 | | | | 1,018 | | | | 23,604 | |
| Loans and advances to customers | | | 208,474 | | | | 28,546 | | | | 35,498 | | | | 61,978 | | | | 6,826 | | | | 341,322 | | | | 210,102 | | | | 23,139 | | | | 38,649 | | | | 70,497 | | | | 4,822 | | | | 347,209 | |
| Debt securities | | | — | | | | — | | | | 291 | | | | 90 | | | | 6 | | | | 387 | | | | 1,511 | | | | — | | | | 431 | | | | 274 | | | | 7 | | | | 2,223 | |
Held-to-maturity investments | | | 2,396 | | | | 2,889 | | | | — | | | | — | | | | — | | | | 5,285 | | | | 7,504 | | | | 2,443 | | | | — | | | | — | | | | — | | | | 9,947 | |
Hedging derivatives | | | 439 | | | | 2,789 | | | | 270 | | | | 309 | | | | 26 | | | | 3,833 | | | | 234 | | | | 2,922 | | | | 131 | | | | 281 | | | | 35 | | | | 3,603 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 253,832 | | | | 90,807 | | | | 53,179 | | | | 95,454 | | | | 13,061 | | | | 506,333 | | | | 270,554 | | | | 67,036 | | | | 52,088 | | | | 109,630 | | | | 9,521 | | | | 508,829 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Europe,
| | | | | | | | | |
| | | | | Europe
| | | | Latin
| | | | | | | | | Excluding
| | | | Latin
| | | | | |
Risks Off-Balance | | Spain | | Except Spain | | USA | | America | | Rest | | Total | | | Spain | | Spain | | USA | | America | | Rest | | Total | |
| |
Financial guarantees | | | 16,843 | | | | 8,969 | | | | 3,456 | | | | 4,721 | | | | 1,963 | | | | 35,952 | | | | 20,175 | | | | 6,773 | | | | 3,069 | | | | 4,959 | | | | 1,465 | | | | 36,441 | |
Other contingent exposures | | | 45,039 | | | | 22,366 | | | | 16,194 | | | | 13,559 | | | | 1,739 | | | | 98,897 | | |
| Contingent exposures | | | | 35,784 | | | | 19,144 | | | | 17,604 | | | | 17,132 | | | | 910 | | | | 90,574 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 61,882 | | | | 31,335 | | | | 19,650 | | | | 18,280 | | | | 3,702 | | | | 134,849 | | | | 55,959 | | | | 25,917 | | | | 20,673 | | | | 22,091 | | | | 2,375 | | | | 127,015 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Europe,
| | | | | | | | | | | | | |
2009
| | | | | Excluding
| | | | | | Latin
| | | | | | | |
Risks On-Balance | | Spain | | | Spain | | | USA | | | America | | | Rest | | | Total | |
| | | (In millions of euros) | |
| |
| Financial assets held for trading | | | 22,893 | | | | 25,583 | | | | 3,076 | | | | 15,941 | | | | 2,240 | | | | 69,733 | |
| Debt securities | | | 14,487 | | | | 7,434 | | | | 652 | | | | 11,803 | | | | 296 | | | | 34,672 | |
| Equity instruments | | | 3,268 | | | | 624 | | | | 35 | | | | 1,662 | | | | 194 | | | | 5,783 | |
| Derivatives | | | 5,138 | | | | 17,525 | | | | 2,389 | | | | 2,476 | | | | 1,750 | | | | 29,278 | |
| Other financial assets designated at fair value through profit or loss | | | 330 | | | | 73 | | | | 436 | | | | 1,498 | | | | — | | | | 2,337 | |
| Debt securities | | | 157 | | | | 42 | | | | 435 | | | | 5 | | | | — | | | | 639 | |
| Equity instruments | | | 173 | | | | 31 | | | | 1 | | | | 1,493 | | | | — | | | | 1,698 | |
Available-for-sale portfolio | | | 30,177 | | | | 11,660 | | | | 7,828 | | | | 12,585 | | | | 1,266 | | | | 63,516 | |
| Debt securities | | | 24,838 | | | | 11,429 | | | | 7,082 | | | | 12,494 | | | | 1,223 | | | | 57,066 | |
| Equity instruments | | | 5,339 | | | | 231 | | | | 746 | | | | 91 | | | | 43 | | | | 6,450 | |
| Loans and receivables | | | 206,097 | | | | 34,613 | | | | 40,469 | | | | 66,395 | | | | 6,167 | | | | 353,741 | |
| Loans and advances to credit institutions | | | 2,568 | | | | 11,280 | | | | 2,441 | | | | 4,993 | | | | 918 | | | | 22,200 | |
| Loans and advances to customers | | | 203,529 | | | | 23,333 | | | | 37,688 | | | | 61,298 | | | | 5,239 | | | | 331,087 | |
| Debt securities | | | — | | | | — | | | | 340 | | | | 104 | | | | 10 | | | | 454 | |
Held-to-maturity investments | | | 2,625 | | | | 2,812 | | | | — | | | | — | | | | — | | | | 5,437 | |
| Hedging derivatives | | | 218 | | | | 2,965 | | | | 117 | | | | 270 | | | | 25 | | | | 3,595 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 262,340 | | | | 77,706 | | | | 51,926 | | | | 96,689 | | | | 9,698 | | | | 498,359 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Europe,
| | | | | | | | | | | | | |
| | | | | | Excluding
| | | | | | Latin
| | | | | | | |
Risks Off-Balance | | Spain | | | Spain | | | USA | | | America | | | Rest | | | Total | |
| |
| Financial guarantees | | | 15,739 | | | | 7,826 | | | | 3,330 | | | | 4,601 | | | | 1,689 | | | | 33,185 | |
| Contingent exposures | | | 37,804 | | | | 24,119 | | | | 15,990 | | | | 13,164 | | | | 1,246 | | | | 92,323 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 53,543 | | | | 31,945 | | | | 19,320 | | | | 17,765 | | | | 2,935 | | | | 125,508 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
172
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Europe,
| | | | | | | | | | | | | |
2008
| | | | | Excluding
| | | | | | Latin
| | | | | | | |
Risks On-Balance | | Spain | | | Spain | | | USA | | | America | | | Rest | | | Total | |
| | | (In millions of euros) | |
| |
| Financial assets held for trading | | | 20,489 | | | | 30,251 | | | | 4,566 | | | | 16,120 | | | | 1,873 | | | | 73,299 | |
| Debt securities | | | 7,799 | | | | 5,926 | | | | 652 | | | | 11,563 | | | | 616 | | | | 26,556 | |
| Equity instruments | | | 2,332 | | | | 1,376 | | | | 80 | | | | 1,071 | | | | 938 | | | | 5,797 | |
| Derivatives | | | 10,358 | | | | 22,949 | | | | 3,834 | | | | 3,486 | | | | 319 | | | | 40,946 | |
| Other financial assets designated at fair value through profit or loss | | | 245 | | | | 24 | | | | 442 | | | | 1,042 | | | | 1 | | | | 1,754 | |
| Debt securities | | | 63 | | | | — | | | | 441 | | | | 12 | | | | — | | | | 516 | |
| Equity instruments | | | 182 | | | | 24 | | | | 1 | | | | 1,030 | | | | 1 | | | | 1,238 | |
Available-for-sale portfolio | | | 15,233 | | | | 10,460 | | | | 9,633 | | | | 8,449 | | | | 2,999 | | | | 46,774 | |
| Debt securities | | | 11,811 | | | | 9,970 | | | | 8,889 | | | | 8,368 | | | | 924 | | | | 39,962 | |
| Equity instruments | | | 3,422 | | | | 490 | | | | 744 | | | | 81 | | | | 2,075 | | | | 6,812 | |
| Loans and receivables | | | 215,030 | | | | 44,394 | | | | 38,268 | | | | 69,534 | | | | 8,162 | | | | 375,388 | |
| Loans and advances to credit institutions | | | 6,556 | | | | 15,848 | | | | 2,479 | | | | 7,466 | | | | 1,330 | | | | 33,679 | |
| Loans and advances to customers | | | 208,474 | | | | 28,546 | | | | 35,498 | | | | 61,978 | | | | 6,826 | | | | 341,322 | |
| Debt securities | | | — | | | | — | | | | 291 | | | | 90 | | | | 6 | | | | 387 | |
Held-to-maturity investments | | | 2,396 | | | | 2,889 | | | | — | | | | — | | | | — | | | | 5,285 | |
| Hedging derivatives | | | 439 | | | | 2,789 | | | | 270 | | | | 309 | | | | 26 | | | | 3,833 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 253,832 | | | | 90,807 | | | | 53,179 | | | | 95,454 | | | | 13,060 | | | | 506,333 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Europe,
| | | | | | | | | | | | | |
| | | | | | Excluding
| | | | | | Latin
| | | | | | | |
Risks Off-Balance | | Spain | | | Spain | | | USA | | | America | | | Rest | | | Total | |
| |
| Financial guarantees | | | 16,843 | | | | 8,969 | | | | 3,456 | | | | 4,721 | | | | 1,963 | | | | 35,952 | |
| Contingent exposures | | | 45,039 | | | | 22,366 | | | | 16,194 | | | | 13,559 | | | | 1,739 | | | | 98,897 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 61,882 | | | | 31,335 | | | | 19,650 | | | | 18,280 | | | | 3,702 | | | | 134,849 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Not Applicable.
Not Applicable.
Not Applicable.
173
| |
| D. | American Depositary Shares |
Our ADSs are listed on the New York Stock Exchange under the symbol “BBVA”. The Bank of New York Mellon is the depositary (the “Depositary”) issuing ADSs pursuant to an amended and restated deposit agreement dated June 29, 2007 among BBVA, the Depositary and the holders from time to time of ADSs (the “Deposit Agreement”). Each ADS represents the right to receive one share. The table below sets forth the fees payable, either directly or indirectly, by a holder of ADSs as of the date of this Annual Report.
| | | | |
Category | | Depositary Actions | | Associated Fee/By Whom Paid |
|
| (a) Depositing or substituting the underlying shares | | Issuance of ADSs | | Up to $5.00 for each 100 ADSs (or portion thereof) evidenced by the new ADSs delivered (charged to person depositing the shares or receiving the ADSs) |
| (b) Receiving or distributing dividends | | Distribution of cash dividends or other cash distributions; distribution of share dividends or other free share distributions; distribution of securities other than ADSs or rights to purchase additional ADSs | | Not applicable |
| | | | |
| (c) Selling or exercising rights | | Distribution or sale of securities | | Not applicable |
| | | | |
| (d) Withdrawing an underlying security | | Acceptance of ADSs surrendered for withdrawal of deposited securities | | Up to $5.00 for each 100 ADSs (or portion thereof) evidenced by the ADSs surrendered (charged to person surrendering or to person to whom withdrawn securities are being delivered) |
| | | | |
| (e) Transferring, splitting or grouping receipts | | Transfers, combining or grouping of depositary receipts | | Not applicable |
| | | | |
| (f) General depositary services, particularly those charged on an annual basis | | Other services performed by the Depositary in administering the ADSs | | Not applicable |
| | | | |
| (g) Expenses of the Depositary | | Expenses incurred on behalf of holders in connection with
1) stock transfer or other taxes (including Spanish income taxes) and other governmental charges;
2) cable, telex and facsimile transmission and delivery charges incurred at request of holder of ADS or person depositing shares for the issuance of ADSs;
3) transfer, brokerage or registration fees for the registration of shares or other deposited securities on the share register and applicable to transfers of shares or other deposited securities to or from the name of the custodian;
4) reasonable and customary expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars | | Expenses payable by holders of ADSs or persons depositing shares for the issuance of ADSs; expenses payable in connection with the conversion of foreign currency into U.S. dollars are payable out of such foreign currency |
174
The Depositary may remit to us all or a portion of the Depositary fees charged for the reimbursement of certain of the expenses we incur in respect of the ADS program established pursuant to the Deposit Agreement upon such terms and conditions as we may agree from time to time. In the year ended December 31, 2010, the Depositary reimbursed us $527 thousand with respect to certain fees and expenses. The table below sets forth the types of expenses that the Depositary has agreed to reimburse and the amounts reimbursed in 2010.
| | | | |
| | Amount
|
| | Reimbursed in
|
| | the Year
|
| | Ended
|
Category of Expenses | | December 31, 2010 |
| | Thousands of dollars |
|
| NYSE Listing Fees | | | 119 | |
| Investor Relations Marketing | | | 210 | |
| Professional Services | | | 129 | |
| AGM Expenses | | | 69 | |
PART II
| |
| ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Not Applicable.
| |
| ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
Not Applicable.
| |
| ITEM 15. | CONTROLS AND PROCEDURES |
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of December 31, 2008,2010, BBVA, under the supervision and with the participation of BBVA’s management, including our Chairman and Chief Executive Officer, President and Chief Operating Officer and Chief Accounting Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined inRule 13a-15(f)13a-15(e) under the Exchange Act). There are, as described below, inherent limitations to the effectiveness of any control system, including disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives.
Based upon that evaluation, BBVA’s Chairman and Chief Executive Officer, President and Chief Operating Officer and Chief Accounting Officer concluded that BBVA’s disclosure controls and procedures are effective to ensure that information relating to BBVA, including its consolidated subsidiaries, required to be disclosed in reports that it files under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to the management, including principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
The management of BBVA is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a-1513a-15(f) (f) under the Exchange Act. BBVA’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| | |
| | • | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of BBVA; |
175
| | |
| | • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of BBVA’s management and directors; and |
| |
| | • | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In 2008 Compass has been integrated in the Internal Control Model of the Group.
158
Under the supervision and with the participation of BBVA’s management, including our Chairman and Chief Executive Officer, President and Chief Operating Officer and Chief Accounting Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission ((““COSO”COSO”). Based on this assessment, our management concluded that, as of December 31, 2008,2010, our internal control over financial reporting was effective based on those criteria.
Our internal control over financial reporting as of December 31, 20082010 has been audited by Deloitte S.L., an independent registered public accounting firm, as stated in their report which follows below.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Banco Bilbao Vizcaya Argentaria, S.A.:
We have audited the internal control over financial reporting of BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (the “Company”) and subsidiaries composing the BANCO BILBAO VIZCAYA ARGENTARIA Group (the “Group” — Note 3) as of December 31, 2008,2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008,2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 20082010 of the Group and our report dated April 2, 20091, 2011 expressed an unqualified opinion on those consolidated financial statements and
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included twoan explanatory paragraphsparagraph stating 1) that the International Financial Reporting Standards adopted by the European Union (“EU-IFRS”) required to be applied under the Bank of Spain’s Circular 4/2004 vary in certain significant respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”) and that the information relating to the nature and effect of such differences is presented in Note 58 to the consolidated financial statements of the Group and 2) during 2008 the Bank of Spain issued Circular 6/2008 which modified the presentation format of financial statements models and this reason, the consolidated financial statements for 2007 and 2006 have been restated to conform to the new presentation formats required by the Bank of Spain, the changes do not impact the consolidated stockholders’ equity or consolidated income for such years and that the information relating to the modification of the financial statements formats is included in Note 1.360 to the consolidated financial statements of the Group.
Madrid — Spain
April 2, 20091, 2011
Changes in Internal Control Over Financial Reporting
There has been no change in BBVA’s internal control over financial reporting (as defined inRule 13a-15(f) under the Exchange Act) that occurred during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
| |
| ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
We have not determined whether any particular member of our Audit and Compliance Committee is a “financial expert” and, therefore, have not named any particular member of such Committee as our “Audit Committee Financial Expert” in accordance with SEC rules and regulations. The charter for our Audit and Compliance Committee which was approved by our board of directors, however, provides that the Chairman of the Audit and Compliance Committee is required to have experience in financial matters as well as knowledge of the accounting standards and principles required by BBVA’s regulators. the banking regulators, and we have determined that Mr. José Luis Palao García Suelto, the Chairman of the Audit and Compliance Committee, has such experience and knowledge and is an “audit committee financial expert” as such term is defined by the regulations of the Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. Mr. Palao is independent within the meaning of the New York Stock Exchange listing standards.
In addition, we believe that the remaining members of the Audit and Compliance Committee have an understanding of applicable generally accepted accounting principles, experience analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our Consolidated Financial Statements, an understanding of internal controls over financial reporting, and an understanding of audit committee functions. Our Audit and Compliance Committee has experience overseeing and assessing the performance of BBVA and its consolidated subsidiaries and our external auditors with respect to the preparation, auditing and evaluation of our Consolidated Financial Statements.
BBVA’s Code of Ethics and Conduct applies, among others, to its chief executive officer, chief financial officer and chief accounting officer. This code establishes the principles that guide these officers’ respective actions: ethical conduct, professional standards and confidentiality. It also establishes the limitations and defines the conflicts of interest arising from their status as senior executives. We have not waived compliance with, nor made any
177
amendment to, the Code of Ethics and Conduct in 2008.2010. BBVA’s Code of Ethics and Conduct can be found on its website at www.bbva.com.
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| |
| ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The following table provides information on the aggregate fees billed by our principal accountants, Deloitte, S.L., by type of service rendered for the periods indicated.
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Year Ended December 31, | |
Services Rendered | | 2008 | | 2007 | | | 2010 | | 2009 | |
| | | (In millions of euros) | | | (In millions of euros) | |
| |
| Audit Fees(1) | | | 4.3 | | | | 4.3 | | | | 7.3 | | | | 6.9 | |
| Audit-Related Fees(2) | | | 3.0 | | | | 3.6 | | | | 1.3 | | | | 0.7 | |
| Tax Fees(3) | | | 0.1 | | | | 0.2 | | | | 0.3 | | | | 0.2 | |
| All Other Fees(4) | | | 0.3 | | | | 0.3 | | | | 0.6 | | | | 0.7 | |
| | | | | | | | | | | |
| Total | | | 7.7 | | | | 8.4 | | | | 9.5 | | | | 8.5 | |
| | | | | | | |
| | |
| (1) | | Aggregate fees billed for each of the last two fiscal years for professional services rendered by Deloitte, S.L. for the audit of BBVA’s annual financial statements or services that are normally provided by Deloitte, S.L. in connection with statutory and regulatory filings or engagements for those fiscal years. Total audit fees billed by Deloitte, S.L. and its worldwide affiliates, were €12.2€16.4 million and €10.6€13.1 million in 20082010 and 2007,2009, respectively. |
| |
| (2) | | Aggregate fees billed in each of the last two fiscal years for assurance and related services by Deloitte, S.L. that are reasonably related to the performance of the audit or review of BBVA’s financial statements and are not reported under (1) above. |
| |
| (3) | | Aggregate fees billed in each of the last two fiscal years for professional services rendered by Deloitte, S.L. for tax compliance, tax advice, and tax planning. |
| |
| (4) | | Aggregate fees billed in each of the last two fiscal years for products and services provided by Deloitte, S.L. other than the services reported in (1), (2) and (3) above. Services in this category consisted primarily of employee education courses and verification of the security of information systems. |
The Audit and Compliance Committee’s Pre-Approval Policies and Procedures
In order to assist in ensuring the independence of our external auditor, the regulations of our Audit and Compliance Committee provides that our external auditor is generally prohibited from providing us with non-audit services, other than under the specific circumstance described below. For this reason, our Audit and Compliance Committee has developed a pre-approval policy regarding the contracting of BBVA’s external auditor, or any affiliate of the external auditor, for professional services. The professional services covered by such policy include audit and non-audit services provided to BBVA or any of its subsidiaries reflected in agreements dated on or after May 6, 2003.
The pre-approval policy is as follows:
1. The hiring of BBVA’s external auditor or any of its affiliates is prohibited, unless there is no other firm available to provide the needed services at a comparable cost and that could deliver a similar level of quality.
2. In the event that there is no other firm available to provide needed services at a comparable cost and delivering a similar level of quality, the external auditor (or any of its affiliates) may be hired to perform such services, but only with the pre-approval of the Audit and Compliance Committee.
3. The Chairman of the Audit and Compliance Committee has been delegated the authority to approve the hiring of BBVA’s external auditor (or any of its affiliates). In such an event, however, the Chairman would be required to inform the Audit and Compliance Committee of such decision at the Committee’s next meeting.
4. The hiring of the external auditor for any of BBVA’s subsidiaries must also be pre-approved by the Audit and Compliance Committee.
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5. Agreements entered into prior to May 6, 2003 between BBVA or any of its subsidiaries and any of their respective external auditors, required the approval of the Audit and Compliance Committee in the event that services provided under such agreements continued after May 6, 2004.
| |
| ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Not Applicable.
| |
| ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Maximum Number (or
| | | | | | Total Number of
| | Maximum Number
| |
| | | Total
| | | | Total Number of
| | Approximate Dollar
| | | | | | Shares (or Units)
| | (or Approximate Dollar
| |
| | | Number of
| | | | Shares (or Units)
| | Value) of Shares
| | | | | | Purchased as Part
| | Value) of Shares (or
| |
| | | Ordinary
| | Average Price
| | Purchased as Part of
| | (or Units) that May Yet
| | Total Number of
| | Average Price
| | of Publicly
| | Units) that may yet Be
| |
| | | Shares
| | Paid per Share
| | Publicly Announced
| | Be Purchased Under
| | Ordinary Shares
| | Paid per Share (or
| | Announced Plans or
| | Purchased Under the
| |
Period of Fiscal Year | | Purchased | | (or Unit) | | Plans or Programs | | the Plans or Programs | |
2010 | | | Purchased | | Unit) | | Programs | | Plans or Programs | |
| |
| January 1 to January 31 | | | 173,910,763 | | | € | 14.72 | | | | — | | | | — | | | | 50,319,956 | | | € | 11.93 | | | | — | | | | — | |
| February 1 to February 28 | | | 60,805,115 | | | € | 13.87 | | | | — | | | | — | | | | 56,619,454 | | | € | 10.01 | | | | — | | | | — | |
| March 1 to March 31 | | | 43,534,121 | | | € | 13.42 | | | | — | | | | — | | | | 42,829,540 | | | € | 10.41 | | | | — | | | | — | |
| April 1 to April 30 | | | 157,316,121 | | | € | 14.12 | | | | — | | | | — | | | | 77,852,734 | | | € | 10.45 | | | | — | | | | — | |
| May 1 to May 31 | | | 34,411,789 | | | € | 14.82 | | | | — | | | | — | | | | 113,715,210 | | | € | 8.79 | | | | — | | | | — | |
| June 1 to June 30 | | | 65,915,639 | | | € | 13.24 | | | | — | | | | — | | | | 75,038,225 | | | € | 9.21 | | | | — | | | | — | |
| July 1 to July 31 | | | 172,958,729 | | | € | 11.82 | | | | — | | | | — | | | | 98,431,518 | | | € | 9.13 | | | | — | | | | — | |
| August 1 to August 31 | | | 33,221,470 | | | € | 11.46 | | | | — | | | | — | | | | 36,309,050 | | | € | 9.95 | | | | — | | | | — | |
| September 1 to September 30 | | | 59,864,237 | | | € | 11.33 | | | | — | | | | — | | | | 60,745,856 | | | € | 10.02 | | | | — | | | | — | |
| October 1 to October 31 | | | 211,522,561 | | | € | 10.13 | | | | — | | | | — | | | | 80,592,413 | | | € | 9.63 | | | | — | | | | — | |
| November 1 to November 30 | | | 64,213,475 | | | € | 8.44 | | | | — | | | | — | | | | 69,811,829 | | | € | 8.25 | | | | — | | | | — | |
| December 1 to December 31 | | | 41,268,835 | | | € | 8.58 | | | | — | | | | — | | | | 59,563,014 | | | € | 8.24 | | | | — | | | | — | |
| | | | | |
Total | | | 1,118,942,855 | | | | | | | — | | | | — | | | | 821,828,799 | | | € | 9.53 | | | | — | | | | — | |
| | | | | |
During 2008,2010, we sold a total of 1,073,239,664780,423,886 shares for an average price of €12.52€9.48 per share.
| |
| ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
During the years ended December 31, 2010, 2009 and 2008 and through the date of this Annual Report, the principal independent accountant engaged to audit our financial statements, Deloitte S.L., has not resigned, indicated that it has declined to stand for re-election after the completion of its current audit or been dismissed. For each of the years ended December 31, 2010, 2009 and 2008, Deloitte S.L. has not expressed reliance on another accountant or accounting firm in its report on our audited annual accounts for such periods.
| |
| ITEM 16G. | CORPORATE GOVERNANCE |
Compliance with NYSE Listing Standards on Corporate Governance
On November 4, 2003, the SEC approved new rules proposed by the New York Stock Exchange (the ““NYSE”NYSE”) intended to strengthen corporate governance standards for listed companies. In compliance therewith, the following is a summary of the significant differences between our corporate governance practices and those applicable to domestic issuers under the NYSE listing standards. The Group’s website address is www.bbva.com. We include on such website a narrative description in English of corporate governance differences between NYSE rules and home country practice in Spain.
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Independence of the Directors on the boardBoard of directorsDirectors and Committees
Under the NYSE corporate governance rules, (i) a majority of a U.S. company’s board of directors must be composed of independent directors, (ii) all members of the audit committee must be independent and (iii) all U.S. companies listed on the NYSE must have a compensation committee and a nominations committee and all members of such committees must be independent. In each case, the independence of directors must be established pursuant to highly detailed rules promulgated by the NYSE and, in the case of the audit committee, the NYSE and the SEC.
With the exception of the rules on the composition of the Audit and Compliance Committee contained in the Securities Market Act, where at least one of the members must be an independent director, Spanish law does not contain any other requirement that members of the board of directors or the committees thereof be independent, nor does Spanish law provide for the time being any definition of what constitutes independence for the purpose of board or committee membership or otherwise. In addition, Spanish law does not require that a company have a
162
compensation committee or a nominationsan appointments committee. However, there are non-binding recommendations for listed companies in Spain to have these committees and for them to be composed of a majority of non-executive directors as well as a definition of what constitutes independence for directors.
As described above, under “Conditionspursuant to article 1 of Directorship”,our Board regulations BBVA considers that independent directors to be independent when:are those who fulfill the requirements described below:
Independent directors are external directors appointed for their personal and professional background who can pursue their duties without being constrained by their relations with the Company, its significant shareholders or its executives.
Independent directors may not:
a) Have been employees or executive directors in Group companies, unless three or five years, respectively, have passed since they ceased to be so.
b) Receive any amount or benefit from the Company or its Group companies for any reason other than remuneration of their directorship, unless it is insignificant.
Neither dividends nor supplementary pension payments that the director may receive from earlier professional or employment relationships shall be taken into account for the purposes of this section, provided they are not subject to conditions and the company paying them may not at its own discretion suspend, alter or revoke their accrual without breaching its obligations.
c) Be or have been a partner in the external auditors’ firm or in charge of the auditor’s report with respect to the Company or any other Group company during the last three years.
d) Be executive director or senior manager in any other company on which a Company executive director or senior manager is external director.
e) Maintain or have maintained during the past year an important business relationship with the Company or any of its Group companies, either onhis/her own behalf or as relevant shareholder, director or senior manager of a company that maintains or has maintained such relationship.
“Business relationships” shall mean relationships as provider of goodsand/or services, including financial, advisoryand/or consultancy services.
f) Be significant shareholders, executive directors or senior managers of any organization that receives or has received significant donations from the Company or its Group during the last three years.
Those who are merely trustees on a foundation receiving donations shall not be ineligible under this section.
g) Be married to or linked by equivalent emotional relationship, or related by up to second-degree family ties to an executive director or senior manager of the Company.
h) Have not been proposed by the Appointments and Compensation committeeCommittee for appointment or renewal.
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i) Fall within the cases described under letters a), e), f) or g) of this section, with respect to any significant shareholder or shareholder represented on the Board. In cases of family relationships described under letter g), the limitation shall not only apply to the shareholder, but also to the directors it nominates for the Company’s Board.
Directors owning shares in the Company may be independent providing they comply with the above conditions and their shareholding is not legally considered as significant.
According to the latest recommendations on corporate governance, the boardBoard has established a limit on how long a director may remain independent. Directors may not remain on the boardBoard as independent directors after having sat on it as such for more than 12 consecutive years.
Our boardBoard of directorsDirectors has a large number of non-executive directors and tennine out of the 1312 members of our boardBoard are independent under the definition of independence described above. In addition, our Audit and Compliance Committee is composed exclusively of independent directors and the committee chairman is required to have experience in financial management and an understanding of the standards and accounting procedures required by the governmental authorities that regulate the banking sector. In accordance with the non-binding recommendation, our boardBoard of directorsDirectors has created an Appointments Committee and a Compensation Committee which isare composed exclusivelymainly of independent directors.
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Separate Meetings for Independent Directors
In accordance with the NYSE corporate governance rules, independent directors must meet periodically outside of the presence of the executive directors. Under Spanish law, this practice is not contemplated as such. We note, however, that our independent directors meet periodically outside the presence of our executive directors anytime the Audit and Compliance Committee or the Appointments Committee and Compensation Committee meet, since these Committees are comprised solely of independentnon-executive directors. In addition, our independent directors meet outside the presence of our executive directors as often as they deem fit, and usually prior to meetings of the boardBoard of directorsDirectors or its Committees.
Code of Ethics
The NYSE listing standards require U.S. companies to adopt a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. For information with respect to BBVA’s code of business conduct and ethics see “Item 16B. Code of Ethics”.
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PART III
| |
| ITEM 17. | FINANCIAL STATEMENTS |
We have responded to Item 18 in lieu of responding to this Item.
| |
| ITEM 18. | FINANCIAL STATEMENTS |
Reference is made to Item 19 for a list of all financial statements filed as a part of this Annual Report.
| | | | | | | | | |
Exhibit
| Exhibit
| | | Exhibit
| | |
Number | Number | | Description | Number | | Description |
| |
| | 1 | .1 | | Amended and Restated Bylaws (Estatutos) of the Registrant*. | 1 | .1 | | Amended and Restated Bylaws (Estatutos) of the Registrant. |
| | 4 | .1 | | Plan of Merger between Banco Bilbao Vizcaya, S.A. and Argentaria, Caja Postal y Banco Hipotecario, S.A.** | 8 | .1 | | Consolidated Companies Composing Registrant (see Appendix I to XI to our Consolidated Financial Statements included herein). |
| | 4 | .2 | | Master Agreement of Strategic Alliance between Telefónica and BBVA, together with an English translation.*** | 12 | .1 | | Section 302 Chairman and Chief Executive Officer Certification. |
| | 4 | .3 | | Transaction Agreement by and between Banco Bilbao Vizcaya Argentaria, S.A. and Compass Bancshares, Inc. dated as of February 16, 2007.**** | 12 | .2 | | Section 302 President and Chief Operating Officer Certification. |
| | 8 | .1 | | Consolidated Companies Composing Registrant (see Appendix I to XI to our Consolidated Financial Statements included herein). | 12 | .3 | | Section 302 Chief Accounting Officer Certification. |
| | 12 | .1 | | Section 302 Chairman and Chief Executive Officer Certification. | 13 | .1 | | Section 906 Certification. |
| | 12 | .2 | | Section 302 President and Chief Operating Officer Certification. | 15 | .1 | | Consent of Independent Registered Public Accounting Firm |
| | 12 | .3 | | Section 302 Chief Accounting Officer Certification. | |
| | 13 | .1 | | Section 906 Certification. | |
| | 15 | .1 | | Consent of Independent Registered Public Accounting Firm | |
| | |
* | | Incorporated by reference to BBVA’s Registration Statement onForm F-3 (FileNo. 333-144784) filed with the Securities and Exchange Commission July 18, 2008. |
|
** | | Incorporated by reference to BBVA’s Registration Statement onForm F-4 (FileNo. 333-11090) filed with the Securities and Exchange Commission on November 4, 1999. |
|
*** | | Incorporated by reference to BBVA’s 1999 Annual Report onForm 20-F. |
|
**** | | Incorporated by reference to BBVA’s 2006 Annual Report onForm 20-F. |
We will furnish to the Commission, upon request, copies of any unfiled instruments that define the rights of holders of our long-term debt.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing onForm 20-F and had duly caused this Annual Report to be signed on its behalf by the undersigned, thereto duly authorized.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
| | |
| | By: | /s/ JAVIER MALAGON NAVAS |
Name: JAVIER MALAGON NAVAS
| | |
| Name: JAVIER MALAGON NAVAS
Title: | Chief Accounting Officer |
Date: April 2, 20091, 2011
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APPENDIXAPPENDICES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Banco Bilbao Vizcaya Argentaria, S.A.:
We have audited the accompanying consolidated balance sheets of BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (the “Company”) and subsidiaries composing the BANCO BILBAO VIZCAYA ARGENTARIA Group (the “Group” — Note 3) as of December 31, 2008, 20072010, 2009 and 2006,2008, and the related consolidated income statements, statements of income, recognized income and expense, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2008.2010. These consolidated financial statements are the responsibility of the controlling Company’s Directors. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BANCO BILBAO VIZCAYA ARGENTARIA, S.A. and subsidiaries composing the BANCO BILBAO VIZCAYA ARGENTARIA Group as of December 31, 2008, 20072010, 2009 and 2006,2008, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 2008,2010, in conformity with the International Financial Reporting Standards adopted by the European Union (“EU-IFRS”) required to be applied under the Bank of Spain’s Circular4/2004 (see Note 1.2).
EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 vary in certain significant respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). Information relating to the nature and effect of such differences is presented in Note 5860 to the consolidated financial statements.
As discussed in Note 1.3 to the consolidated financial statements, during 2008 the Bank of Spain issued Circular 6/2008 which modified the presentation format of financial statements models. For this reason, the consolidated financial statements for 2007 and 2006 have been restated to conform to the new presentation formats required by the Bank of Spain and such changes do not impact the consolidated stockholders’ equity or consolidated income for such years.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group’s internal control over financial reporting as of December 31, 2008,2010, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 2, 20091, 2011 expressed an unqualified opinion on the Group’s internal control over financial reporting.reporting
Madrid –— Spain
April 2, 20091, 2011
F-1
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007(*) | | 2006(*) | | | Notes | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | | | Millions of euros | |
| |
ASSETS | ASSETS | | | | | | | | | | | | | | | | |
CASH AND BALANCES WITH CENTRAL BANKS (Note 9) | | | 14,659 | | | | 22,581 | | | | 12,515 | | |
FINANCIAL ASSETS HELD FOR TRADING (Note 10) | | | 73,299 | | | | 62,336 | | | | 51,791 | | |
CASH AND BALANCES WITH CENTRAL BANKS | | | | 9 | | | | 19,981 | | | | 16,344 | | | | 14,659 | |
FINANCIAL ASSETS HELD FOR TRADING | | | | 10 | | | | 63,283 | | | | 69,733 | | | | 73,299 | |
| Loans and advances to credit institutions | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Loans and advances to customers | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Debt securities | | | 26,556 | | | | 38,392 | | | | 30,426 | | | | | | | | 24,358 | | | | 34,672 | | | | 26,556 | |
| Other equity instruments | | | 5,797 | | | | 9,180 | | | | 9,949 | | |
| Equity instruments | | | | | | | | 5,260 | | | | 5,783 | | | | 5,797 | |
| Trading derivatives | | | 40,946 | | | | 14,764 | | | | 11,416 | | | | | | | | 33,665 | | | | 29,278 | | | | 40,946 | |
OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (Note 11) | | | 1,754 | | | | 1,167 | | | | 977 | | |
OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | | | | 11 | | | | 2,774 | | | | 2,337 | | | | 1,754 | |
| Loans and advances to credit institutions | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Loans and advances to customers | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Debt securities | | | 516 | | | | 421 | | | | 56 | | | | | | | | 688 | | | | 639 | | | | 516 | |
| Other equity instruments | | | 1,238 | | | | 746 | | | | 921 | | |
AVAILABLE-FOR-SALE FINANCIAL ASSETS (Note 12) | | | 47,780 | | | | 48,432 | | | | 42,256 | | |
| Equity instruments | | | | | | | | 2,086 | | | | 1,698 | | | | 1,238 | |
AVAILABLE-FOR-SALE FINANCIAL ASSETS | | | | 12 | | | | 56,456 | | | | 63,521 | | | | 47,780 | |
| Debt securities | | | 39,831 | | | | 37,336 | | | | 32,219 | | | | | | | | 50,875 | | | | 57,071 | | | | 39,831 | |
| Other equity instruments | | | 7,949 | | | | 11,096 | | | | 10,037 | | |
LOANS AND RECEIVABLES (Note 13) | | | 369,494 | | | | 337,765 | | | | 279,658 | | |
| Equity instruments | | | | | | | | 5,581 | | | | 6,450 | | | | 7,949 | |
LOANS AND RECEIVABLES | | | | 13 | | | | 364,707 | | | | 346,117 | | | | 369,494 | |
| Loans and advances to credit institutions | | | 33,856 | | | | 24,527 | | | | 21,264 | | | | | | | | 23,637 | | | | 22,239 | | | | 33,856 | |
| Loans and advances to customers | | | 335,260 | | | | 313,178 | | | | 258,317 | | | | | | | | 338,857 | | | | 323,442 | | | | 335,260 | |
| Debt securities | | | 378 | | | | 60 | | | | 77 | | | | | | | | 2,213 | | | | 436 | | | | 378 | |
HELD-TO-MATURITY INVESTMENTS (Note 14) | | | 5,282 | | | | 5,584 | | | | 5,906 | | |
HELD-TO-MATURITY INVESTMENTS | | | | 14 | | | | 9,946 | | | | 5,437 | | | | 5,282 | |
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | | | — | | | | — | | | | — | | | | 15 | | | | 40 | | | | — | | | | — | |
HEDGING DERIVATIVES (Note 15) | | | 3,833 | | | | 1,050 | | | | 1,963 | | |
NON-CURRENT ASSETS HELD FOR SALE (Note 16) | | | 444 | | | | 240 | | | | 186 | | |
INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD (Note 17) | | | 1,467 | | | | 1,542 | | | | 889 | | |
HEDGING DERIVATIVES | | | | 15 | | | | 3,563 | | | | 3,595 | | | | 3,833 | |
NON-CURRENT ASSETS HELD FOR SALE | | | | 16 | | | | 1,529 | | | | 1,050 | | | | 444 | |
INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD | | | | 17 | | | | 4,547 | | | | 2,922 | | | | 1,467 | |
| Associates | | | 894 | | | | 846 | | | | 206 | | | | | | | | 4,247 | | | | 2,614 | | | | 894 | |
| Jointly controlled entities | | | 573 | | | | 696 | | | | 683 | | | | | | | | 300 | | | | 308 | | | | 573 | |
INSURANCE CONTRACTS LINKED TO PENSIONS | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
REINSURANCE ASSETS (Note 18) | | | 29 | | | | 43 | | | | 32 | | |
TANGIBLE ASSETS (Note 19) | | | 6,908 | | | | 5,238 | | | | 4,527 | | |
REINSURANCE ASSETS | | | | 18 | | | | 28 | | | | 29 | | | | 29 | |
TANGIBLE ASSETS | | | | 19 | | | | 6,701 | | | | 6,507 | | | | 6,908 | |
| Property, plants and equipment | | | 5,174 | | | | 5,156 | | | | 4,466 | | | | | | | | 5,132 | | | | 4,873 | | | | 5,174 | |
| Own use | | | 4,442 | | | | 4,437 | | | | 3,816 | | |
| For own use | | | | | | | | 4,408 | | | | 4,182 | | | | 4,442 | |
| Other assets leased out under an operating lease | | | 732 | | | | 719 | | | | 650 | | | | | | | | 724 | | | | 691 | | | | 732 | |
| Investment properties | | | 1,734 | | | | 82 | | | | 61 | | | | | | | | 1,569 | | | | 1,634 | | | | 1,734 | |
INTANGIBLE ASSETS (Note 20) | | | 8,439 | | | | 8,244 | | | | 3,269 | | |
INTANGIBLE ASSETS | | | | 20 | | | | 8,007 | | | | 7,248 | | | | 8,439 | |
| Goodwill | | | 7,659 | | | | 7,436 | | | | 2,973 | | | | | | | | 6,949 | | | | 6,396 | | | | 7,659 | |
| Other intangible assets | | | 780 | | | | 808 | | | | 296 | | | | | | | | 1,058 | | | | 852 | | | | 780 | |
TAX ASSETS (Note 32) | | | 6,484 | | | | 5,207 | | | | 5,340 | | |
TAX ASSETS | | | | 21 | | | | 6,649 | | | | 6,273 | | | | 6,484 | |
| Current | | | 1,266 | | | | 682 | | | | 449 | | | | | | | | 1,113 | | | | 1,187 | | | | 1,266 | |
| Deferred | | | 5,218 | | | | 4,525 | | | | 4,891 | | | | | | | | 5,536 | | | | 5,086 | | | | 5,218 | |
OTHER ASSETS (Note 21) | | | 2,778 | | | | 2,297 | | | | 2,354 | | |
OTHER ASSETS | | | | 22 | | | | 4,527 | | | | 3,952 | | | | 2,778 | |
| Inventories | | | 1,066 | | | | 457 | | | | 470 | | | | | | | | 2,788 | | | | 1,933 | | | | 1,066 | |
| Other | | | 1,712 | | | | 1,840 | | | | 1,884 | | |
| Rest | | | | | | | | 1,739 | | | | 2,019 | | | | 1,712 | |
| | | | | | | | | |
TOTAL ASSETS | | | 542,650 | | | | 501,726 | | | | 411,663 | | | | | | | | 552,738 | | | | 535,065 | | | | 542,650 | |
| | | | | | | | | |
| | |
(*) | | Balance sheet and balance sheet derived information as of December 31, 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. |
The accompanying Notes 1 to 5860 and Appendices I to XI are an integral part of the consolidated balance sheet as of December 31, 2008.2010.
F-2
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010, 2009 and 2008 2007 AND 2006 (Notes
(Notes 1 to 5)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007(*) | | 2006(*) | | | Notes | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | | | Millions of euros | |
| |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | |
FINANCIAL LIABILITIES HELD FOR TRADING (Note 10) | | | 43,009 | | | | 19,273 | | | | 14,923 | | |
FINANCIAL LIABILITIES HELD FOR TRADING | | | | 10 | | | | 37,212 | | | | 32,830 | | | | 43,009 | |
| Deposits from central banks | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Deposits from credit institutions | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Deposits from customers | | | — | | | | — | | | | — | | |
| Customer deposits | | | | | | | | — | | | | — | | | | — | |
| Debt certificates | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Trading derivatives | | | 40,309 | | | | 17,540 | | | | 13,218 | | | | | | | | 33,166 | | | | 29,000 | | | | 40,309 | |
| Short positions | | | 2,700 | | | | 1,733 | | | | 1,705 | | | | | | | | 4,046 | | | | 3,830 | | | | 2,700 | |
| Other financial liabilities | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (Note 11) | | | 1,033 | | | | 449 | | | | 582 | | |
OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | | | | 11 | | | | 1,607 | | | | 1,367 | | | | 1,033 | |
| Deposits from central banks | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Deposits from credit institutions | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Deposits from customers | | | — | | | | — | | | | — | | |
| Customer deposits | | | | | | | | — | | | | — | | | | — | |
| Debt certificates | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Subordinated liabilities | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | |
| Other financial liabilities | | | 1,033 | | | | 449 | | | | 582 | | | | | | | | 1,607 | | | | 1,367 | | | | 1,033 | |
FINANCIAL LIABILITIES AT AMORTISED COST (Note 22) | | | 450,605 | | | | 431,856 | | | | 351,405 | | |
FINANCIAL LIABILITIES AT AMORTIZED COST | | | | 23 | | | | 453,164 | | | | 447,936 | | | | 450,605 | |
| Deposits from central banks | | | 16,844 | | | | 27,326 | | | | 15,238 | | | | | | | | 11,010 | | | | 21,166 | | | | 16,844 | |
| Deposits from credit institutions | | | 49,961 | | | | 60,772 | | | | 42,567 | | | | | | | | 57,170 | | | | 49,146 | | | | 49,961 | |
| Deposits from customers | | | 255,236 | | | | 219,610 | | | | 186,749 | | |
| Customer deposits | | | | | | | | 275,789 | | | | 254,183 | | | | 255,236 | |
| Debt certificates | | | 104,157 | | | | 102,247 | | | | 86,482 | | | | | | | | 85,179 | | | | 99,939 | | | | 104,157 | |
| Subordinated liabilities | | | 16,987 | | | | 15,662 | | | | 13,597 | | | | | | | | 17,420 | | | | 17,878 | | | | 16,987 | |
| Other financial liabilities | | | 7,420 | | | | 6,239 | | | | 6,772 | | | | | | | | 6,596 | | | | 5,624 | | | | 7,420 | |
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | | | — | | | | — | | | | — | | | | | | | | (2 | ) | | | — | | | | — | |
HEDGING DERIVATIVES (Note 15) | | | 1,226 | | | | 1,807 | | | | 2,280 | | |
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE (Note 16) | | | — | | | | — | | | | — | | |
HEDGING DERIVATIVES | | | | 15 | | | | 1,664 | | | | 1,308 | | | | 1,226 | |
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE | | | | 16 | | | | — | | | | — | | | | — | |
| | | |
| LIABILITIES UNDER INSURANCE CONTRACTS (Note 23) | | | 6,571 | | | | 6,867 | | | | 6,908 | | |
PROVISIONS (Note 24) | | | 8,678 | | | | 8,342 | | | | 8,649 | | |
| LIABILITIES UNDER INSURANCE CONTRACTS | | | | 24 | | | | 8,034 | | | | 7,186 | | | | 6,571 | |
PROVISIONS | | | | 25 | | | | 8,322 | | | | 8,559 | | | | 8,678 | |
| Provisions for pensions and similar obligations | | | 6,359 | | | | 5,967 | | | | 6,358 | | | | | | | | 5,980 | | | | 6,246 | | | | 6,359 | |
| Provisions for taxes | | | 263 | | | | 225 | | | | 232 | | |
| Provisions for taxes and other legal contingencies | | | | | | | | 304 | | | | 299 | | | | 263 | |
| Provisions for contingent exposures and commitments | | | 421 | | | | 546 | | | | 502 | | | | | | | | 264 | | | | 243 | | | | 421 | |
| Other provisions | | | 1,635 | | | | 1,604 | | | | 1,557 | | | | | | | | 1,774 | | | | 1,771 | | | | 1,635 | |
TAX LIABILITIES (Note 32) | | | 2,266 | | | | 2,817 | | | | 2,369 | | |
TAX LIABILITIES | | | | 21 | | | | 2,195 | | | | 2,208 | | | | 2,266 | |
| Current | | | 984 | | | | 582 | | | | 622 | | | | | | | | 604 | | | | 539 | | | | 984 | |
| Deferred | | | 1,282 | | | | 2,235 | | | | 1,747 | | | | | | | | 1,591 | | | | 1,669 | | | | 1,282 | |
OTHER LIABILITIES (Note 21) | | | 2,557 | | | | 2,372 | | | | 2,229 | | |
OTHER LIABILITIES | | | | 22 | | | | 3,067 | | | | 2,908 | | | | 2,557 | |
| | | | | | | | | |
TOTAL LIABILITIES | | | 515,945 | | | | 473,783 | | | | 389,345 | | | | | | | | 515,263 | | | | 504,302 | | | | 515,945 | |
| | | | | | | | | |
| | (*) Balance sheet and balance sheet derived information as of December 31, 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. | |
F-3
| | | | | | | | | | | | | |
| | | 2008 | | | 2007(*) | | | 2006(*) | |
| | | Millions of euros | |
| |
STOCKHOLDERS’ FUNDS | | | 26,586 | | | | 24,811 | | | | 18,209 | |
Capital (Note 27) | | | 1,837 | | | | 1,837 | | | | 1,740 | |
| Issued | | | 1,837 | | | | 1,837 | | | | 1,740 | |
| Unpaid and uncalled(-) | | | — | | | | — | | | | — | |
Share premium (Note 28) | | | 12,770 | | | | 12,770 | | | | 9,579 | |
Reserves (Note 29) | | | 9,410 | | | | 6,060 | | | | 3,629 | |
| Accumulated reserves (losses) | | | 8,801 | | | | 5,609 | | | | 3,268 | |
| Reserves (losses) of entities accounted for using the equity method | | | 609 | | | | 451 | | | | 361 | |
Other equity instruments | | | 89 | | | | 68 | | | | 35 | |
| Equity component of compound financial instruments | | | — | | | | — | | | | — | |
| Other | | | 89 | | | | 68 | | | | 35 | |
Less: Treasury shares (Note 30) | | | (720 | ) | | | (389 | ) | | | (147 | ) |
Income attributed to the Group | | | 5,020 | | | | 6,126 | | | | 4,736 | |
Less: Dividends and remuneration | | | (1,820 | ) | | | (1,661 | ) | | | (1,363 | ) |
VALUATION ADJUSTMENTS | | | (930 | ) | | | 2,252 | | | | 3,341 | |
| Available-for-sale financial assets (Note 12) | | | 931 | | | | 3,546 | | | | 3,323 | |
| Cash flow heges | | | 207 | | | | (50 | ) | | | 17 | |
| Hedges of net investment in a foreign operations | | | 247 | | | | 297 | | | | (5 | ) |
| Exchange differences | | | (2,231 | ) | | | (1,588 | ) | | | (27 | ) |
| Non-current assets helf for sale | | | — | | | | — | | | | — | |
| Entities accounted for using the equity method | | | (84 | ) | | | 47 | | | | 33 | |
| Other valuation adjustments | | | — | | | | — | | | | — | |
MINORITY INTERESTS (Note 26) | | | 1,049 | | | | 880 | | | | 768 | |
| Valuation adjustments | | | (175 | ) | | | (118 | ) | | | 8 | |
| Other | | | 1,224 | | | | 998 | | | | 760 | |
TOTAL STOCKHOLDERS’ EQUITY | | | 26,705 | | | | 27,943 | | | | 22,318 | |
TOTAL LIABILITIES AND EQUITY | | | 542,650 | | | | 501,726 | | | | 411,663 | |
| | | | | | | | | | | | | | | | | |
| | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Millions of euros | |
| |
LIABILITIES AND EQUITY(Continued) | | | | | | | | | | | | | | | | |
STOCKHOLDERS’ FUNDS | | | | | | | 36,689 | | | | 29,362 | | | | 26,586 | |
Common Stock | | | 27 | | | | 2,201 | | | | 1,837 | | | | 1,837 | |
| Issued | | | | | | | 2,201 | | | | 1,837 | | | | 1,837 | |
| Unpaid and uncalled(-) | | | | | | | — | | | | — | | | | — | |
Share premium | | | 28 | | | | 17,104 | | | | 12,453 | | | | 12,770 | |
Reserves | | | 29 | | | | 14,360 | | | | 12,074 | | | | 9,410 | |
| Accumulated reserves (losses) | | | | | | | 14,305 | | | | 11,765 | | | | 8,801 | |
| Reserves (losses) of entities accounted for using the equity method | | | | | | | 55 | | | | 309 | | | | 609 | |
Other equity instruments | | | | | | | 37 | | | | 12 | | | | 89 | |
| Equity component of compound financial instruments | | | | | | | — | | | | — | | | | — | |
| Other equity instruments | | | | | | | 37 | | | | 12 | | | | 89 | |
Less: Treasury stock | | | 30 | | | | (552 | ) | | | (224 | ) | | | (720 | ) |
Income attributed to the parent company | | | | | | | 4,606 | | | | 4,210 | | | | 5,020 | |
Less: Dividends and remuneration | | | | | | | (1,067 | ) | | | (1,000 | ) | | | (1,820 | ) |
VALUATION ADJUSTMENTS | | | 31 | | | | (770 | ) | | | (62 | ) | | | (930 | ) |
Available-for-sale financial assets | | | | | | | 333 | | | | 1,951 | | | | 931 | |
| Cash flow hedging | | | | | | | 49 | | | | 188 | | | | 207 | |
| Hedging of net investment in foreign transactions | | | | | | | (158 | ) | | | 219 | | | | 247 | |
| Exchange differences | | | | | | | (978 | ) | | | (2,236 | ) | | | (2,231 | ) |
Non-current assetsheld-for-sale | | | | | | | — | | | | — | | | | — | |
| Entities accounted for using the equity method | | | | | | | (16 | ) | | | (184 | ) | | | (84 | ) |
| Other valuation adjustments | | | | | | | — | | | | — | | | | — | |
NON-CONTROLLING INTEREST | | | 32 | | | | 1,556 | | | | 1,463 | | | | 1,049 | |
| Valuation adjustments | | | | | | | (86 | ) | | | 18 | | | | (175 | ) |
| Rest | | | | | | | 1,642 | | | | 1,445 | | | | 1,224 | |
| | | | | | | | | | | | | | | | | |
TOTAL EQUITY | | | | | | | 37,475 | | | | 30,763 | | | | 26,705 | |
| | | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | | | | | | 552,738 | | | | 535,065 | | | | 542,650 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Millions of euros | |
| | | 2008 | | | 2007(*) | | | 2006(*) | |
| |
CONTINGENT EXPOSURES (Note 33) | | | 35,952 | | | | 36,859 | | | | 29,986 | |
CONTINGENT COMMITMENTS (Note 33) | | | 98,897 | | | | 106,940 | | | | 103,221 | |
| | | | | | | | | | | | | | | | | |
Memorandum Item | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Millions of euros | |
| |
CONTINGENT EXPOSURES | | | 34 | | | | 36,441 | | | | 33,185 | | | | 35,952 | |
| | | | | | | | | | | | | | | | | |
CONTINGENT COMMITMENTS | | | 34 | | | | 90,574 | | | | 92,323 | | | | 98,897 | |
| | | | | | | | | | | | | | | | | |
| | |
(*) | | Balance sheet and balance sheet derived information as of December 31, 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. |
The accompanying Notes 1 to 5860 and Appendices I to XI are an integral part of the consolidated balance sheet as of December 31, 2008.2010.
F-4
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE BANCO BILBAO
VIZCAYA ARGENTARIA GROUP
FOR THE YEARS ENDED DECEMBER 31, 2008, 20072010, 2009 AND 20062008 (Notes 1 to 5)
| | | | | | | | | | | | | |
| | | 2008 | | | 2007(*) | | | 2006(*) | |
| | | Millions of euros | |
| |
| INTEREST AND SIMILAR INCOME (Note 38) | | | 30,404 | | | | 26,176 | | | | 20,042 | |
| INTEREST EXPENSE AND SIMILAR CHARGES (Note 38) | | | (18,718 | ) | | | (16,548 | ) | | | (11,904 | ) |
NET INTEREST INCOME | | | 11,686 | | | | 9,628 | | | | 8,138 | |
| DIVIDEND INCOME (Note 39) | | | 447 | | | | 348 | | | | 380 | |
| SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD (Note 40) | | | 293 | | | | 241 | | | | 308 | |
| FEE AND COMMISSION INCOME (Note 41) | | | 5,539 | | | | 5,603 | | | | 5,133 | |
| FEE AND COMMISSION EXPENSES (Note 42) | | | (1,012 | ) | | | (1,043 | ) | | | (943 | ) |
| NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES (Note 43) | | | 1,328 | | | | 1,545 | | | | 1,261 | |
| Held for trading | | | 265 | | | | 709 | | | | 829 | |
| Other financial instruments at fair value through profit or loss | | | (17 | ) | | | 43 | | | | 62 | |
| Other financial instruments not at fair value through profit or loss | | | 1,080 | | | | 793 | | | | 370 | |
| Other | | | — | | | | — | | | | — | |
| NET EXCHANGE DIFFERENCES | | | 231 | | | | 411 | | | | 376 | |
| OTHER OPERATING INCOME (Note 44) | | | 3,559 | | | | 3,589 | | | | 3,413 | |
| Income on insurance and reinsurance contracts | | | 2,512 | | | | 2,605 | | | | 2,736 | |
| Financial income from non-financial services | | | 485 | | | | 655 | | | | 460 | |
| Rest of other operating income | | | 562 | | | | 329 | | | | 217 | |
| OTHER OPERATING EXPENSES (Note 44) | | | (3,093 | ) | | | (3,051 | ) | | | (2,923 | ) |
| Expenses on insurance and reinsurance contracts | | | (1,896 | ) | | | (2,052 | ) | | | (2,209 | ) |
| Changes in inventories | | | (403 | ) | | | (467 | ) | | | (329 | ) |
| Rest of other operating expenses | | | (794 | ) | | | (532 | ) | | | (385 | ) |
GROSS INCOME | | | 18,978 | | | | 17,271 | | | | 15,143 | |
| ADMINISTRATION COSTS (Note 45) | | | (7,756 | ) | | | (7,253 | ) | | | (6,330 | ) |
| Personnel expenses | | | (4,716 | ) | | | (4,335 | ) | | | (3,989 | ) |
| General and administrative expenses | | | (3,040 | ) | | | (2,918 | ) | | | (2,342 | ) |
| DEPRECIATION AND AMORTIZATION | | | (699 | ) | | | (577 | ) | | | (472 | ) |
| PROVISIONS (NET) (Note 46) | | | (1,431 | ) | | | (235 | ) | | | (1,338 | ) |
| IMPAIRMENT ON FINANCIAL ASSETS (NET) (Note 47) | | | (2,941 | ) | | | (1,903 | ) | | | (1,457 | ) |
| Loans and receivables (Note 13) | | | (2,797 | ) | | | (1,902 | ) | | | (1,477 | ) |
| Other financial instruments not at fair value through profit or loss | | | (144 | ) | | | (1 | ) | | | 20 | |
NET OPERATING INCOME | | | 6,151 | | | | 7,303 | | | | 5,545 | |
| IMPAIRMENT ON OTHER ASSETS (NET) (Note 48) | | | (45 | ) | | | (13 | ) | | | (12 | ) |
| Goodwill and other intangible assets (Note 20) | | | (1 | ) | | | (1 | ) | | | (13 | ) |
| Other assets | | | (44 | ) | | | (12 | ) | | | 1 | |
| GAINS (LOSSES) IN WRITTEN OFF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE (Note 49) | | | 72 | | | | 13 | | | | 956 | |
| NEGATIVE GOODWILL | | | — | | | | — | | | | — | |
| |
|
| (*) Income statement and income statement derived information for the years 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. |
F-5
| | | | | | | | | | | | | |
| | | 2008 | | | 2007(*) | | | 2006(*) | |
| | | Millions of euros | |
| |
| GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS (Note 50) | | | 748 | | | | 1,191 | | | | 541 | |
INCOME BEFORE TAX | | | 6,926 | | | | 8,494 | | | | 7,030 | |
| INCOME TAX (Note 32) | | | (1,541 | ) | | | (2,079 | ) | | | (2,059 | ) |
INCOME FROM ORDINARY ACTIVITIES | | | 5,385 | | | | 6,415 | | | | 4,971 | |
| INCOME FROM DISCONTINUED OPERATIONS (NET) | | | — | | | | — | | | | — | |
NET INCOME | | | 5,385 | | | | 6,415 | | | | 4,971 | |
| Net Income attributed to parent company | | | 5,020 | | | | 6,126 | | | | 4,736 | |
| Profit or loss attributable to minority interest (Note 26) | | | 365 | | | | 289 | | | | 235 | |
| | | | | | | | | | | | | | | | | |
| | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Millions of Euros | |
| |
| INTEREST AND SIMILAR INCOME | | | 39 | | | | 21,134 | | | | 23,775 | | | | 30,404 | |
| INTEREST AND SIMILAR EXPENSES | | | 39 | | | | (7,814 | ) | | | (9,893 | ) | | | (18,718 | ) |
| | | | | | | | | | | | | | | | | |
NET INTEREST INCOME | | | | | | | 13,320 | | | | 13,882 | | | | 11,686 | |
| | | | | | | | | | | | | | | | | |
| DIVIDEND INCOME | | | 40 | | | | 529 | | | | 443 | | | | 447 | |
| SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD | | | 41 | | | | 335 | | | | 120 | | | | 293 | |
| FEE AND COMMISSION INCOME | | | 42 | | | | 5,382 | | | | 5,305 | | | | 5,539 | |
| FEE AND COMMISSION EXPENSES | | | 43 | | | | (845 | ) | | | (875 | ) | | | (1,012 | ) |
| NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES | | | 44 | | | | 1,441 | | | | 892 | | | | 1,328 | |
| Financial instruments held for trading | | | | | | | 643 | | | | 321 | | | | 265 | |
| Other financial instruments at fair value through profit or loss | | | | | | | 83 | | | | 79 | | | | (17 | ) |
| Other financial instruments not at fair value through profit or loss | | | | | | | 715 | | | | 492 | | | | 1,080 | |
| Rest | | | | | | | — | | | | — | | | | — | |
| EXCHANGE DIFFERENCES (NET) | | | | | | | 453 | | | | 652 | | | | 231 | |
| OTHER OPERATING INCOME | | | 45 | | | | 3,543 | | | | 3,400 | | | | 3,559 | |
| Income on insurance and reinsurance contracts | | | | | | | 2,597 | | | | 2,567 | | | | 2,512 | |
| Financial income from non-financial services | | | | | | | 647 | | | | 493 | | | | 485 | |
| Rest of other operating income | | | | | | | 299 | | | | 340 | | | | 562 | |
| OTHER OPERATING EXPENSES | | | 45 | | | | (3,248 | ) | | | (3,153 | ) | | | (3,093 | ) |
| Expenses on insurance and reinsurance contracts | | | | | | | (1,815 | ) | | | (1,847 | ) | | | (1,896 | ) |
| Changes in inventories | | | | | | | (554 | ) | | | (417 | ) | | | (403 | ) |
| Rest of other operating expenses | | | | | | | (879 | ) | | | (889 | ) | | | (794 | ) |
| | | | | | | | | | | | | | | | | |
GROSS INCOME | | | | | | | 20,910 | | | | 20,666 | | | | 18,978 | |
| | | | | | | | | | | | | | | | | |
| ADMINISTRATION COSTS | | | 46 | | | | (8,207 | ) | | | (7,662 | ) | | | (7,756 | ) |
| Personnel expenses | | | | | | | (4,814 | ) | | | (4,651 | ) | | | (4,716 | ) |
| General and administrative expenses | | | | | | | (3,393 | ) | | | (3,011 | ) | | | (3,040 | ) |
| DEPRECIATION AND AMORTIZATION | | | 47 | | | | (761 | ) | | | (697 | ) | | | (699 | ) |
| PROVISIONS (NET) | | | 48 | | | | (482 | ) | | | (458 | ) | | | (1,431 | ) |
| IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET) | | | 49 | | | | (4,718 | ) | | | (5,473 | ) | | | (2,941 | ) |
| Loans and receivables | | | | | | | (4,563 | ) | | | (5,199 | ) | | | (2,797 | ) |
| Other financial instruments not at fair value through profit or loss | | | | | | | (155 | ) | | | (274 | ) | | | (144 | ) |
| | | | | | | | | | | | | | | | | |
NET OPERATING INCOME | | | | | | | 6,742 | | | | 6,376 | | | | 6,151 | |
| | | | | | | | | | | | | | | | | |
NET OPERATING INCOME | | | | | | | 6,742 | | | | 6,376 | | | | 6,151 | |
| IMPAIRMENT LOSSES ON OTHER ASSETS (NET) | | | 50 | | | | (489 | ) | | | (1,618 | ) | | | (45 | ) |
| Goodwill and other intangible assets | | | | | | | (13 | ) | | | (1,100 | ) | | | (1 | ) |
| Other assets | | | | | | | (476 | ) | | | (518 | ) | | | (44 | ) |
| GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE | | | 51 | | | | 41 | | | | 20 | | | | 72 | |
| NEGATIVE GOODWILL | | | 20 | | | | 1 | | | | 99 | | | | — | |
| GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS | | | 52 | | | | 127 | | | | 859 | | | | 748 | |
| | | | | | | | | | | | | | | | | |
INCOME BEFORE TAX | | | | | | | 6,422 | | | | 5,736 | | | | 6,926 | |
| | | | | | | | | | | | | | | | | |
| INCOME TAX | | | 21 | | | | (1,427 | ) | | | (1,141 | ) | | | (1,541 | ) |
| | | | | | | | | | | | | | | | | |
INCOME FROM CONTINUING TRANSACTIONS | | | | | | | 4,995 | | | | 4,595 | | | | 5,385 | |
| | | | | | | | | | | | | | | | | |
| INCOME FROM DISCONTINUED TRANSACTIONS (NET) | | | | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
NET INCOME | | | | | | | 4,995 | | | | 4,595 | | | | 5,385 | |
| | | | | | | | | | | | | | | | | |
| Net Income attributed to parent company | | | | | | | 4,606 | | | | 4,210 | | | | 5,020 | |
| Net income attributed to non-controlling interests | | | 32 | | | | 389 | | | | 385 | | | | 365 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | Note | | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Euros | |
| |
EARNINGS PER SHARE | | | 5 | | | | | | | | | | | | | |
| Basic earnings per share | | | | | | | 1.17 | | | | 1.08 | | | | 1.31 | |
| Diluted earnings per share | | | | | | | 1.17 | | | | 1.08 | | | | 1.31 | |
| | | | | | | | | | | | | |
| | | 2008 | | | 2007(*) | | | 2006(*) | |
| | | Units of euros | |
| |
EARNINGS PER SHARE FOR CONTINUING OPERATIONS (Note 5) | | | | | | | | | | | | |
| Basic earnings per share | | | 1.35 | | | | 1.70 | | | | 1.39 | |
| Diluted earnings per share | | | 1.35 | | | | 1.70 | | | | 1.39 | |
| | | | | | | | | | | | | |
| | |
(*) | | Income statement and income statement derived information for the years 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. |
The accompanying Notes 1 to 5860 and Appendices I to XI are an integral part of the consolidated income statement for the year endedending December 31, 2008.2010.
F-6F-5
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
(Notes 1 to 5)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007(*) | | 2006(*) | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
NET INCOME RECOGNISED DIRECTLY IN EQUITY | | | 5,385 | | | | 6,415 | | | | 4,971 | | |
NET INCOME RECOGNIZED IN INCOME STATEMENT | | | | 4,995 | | | | 4,595 | | | | 5,385 | |
| | | | | | | | | |
OTHER RECOGNIZED INCOME (EXPENSES) | | | (3,237 | ) | | | (1,092 | ) | | | 46 | | | | (813 | ) | | | 1,061 | | | | (3,237 | ) |
| | | | | | | | | |
| Available-for-sale financial assets | | | (3,787 | ) | | | 320 | | | | 143 | | | | (2,166 | ) | | | 1,502 | | | | (3,787 | ) |
| Revaluation gains/losses | | | (2,065 | ) | | | 1,857 | | | | 1,264 | | |
| Valuation gains/(losses) | | | | (1,963 | ) | | | 1,520 | | | | (2,065 | ) |
| Amounts removed to income statement | | | (1,722 | ) | | | (1,537 | ) | | | (1,121 | ) | | | (206 | ) | | | (18 | ) | | | (1,722 | ) |
| Reclassifications | | | — | | | | — | | | | — | | | | 3 | | | | — | | | | — | |
| Cash flow hedges | | | 361 | | | | (94 | ) | | | 183 | | |
| Revaluation gains/losses | | | 373 | | | | (81 | ) | | | 183 | | |
Cash flow hedging | | | | (190 | ) | | | (32 | ) | | | 361 | |
| Valuation gains/(losses) | | | | (156 | ) | | | (21 | ) | | | 373 | |
| Amounts removed to income statement | | | (12 | ) | | | (13 | ) | | | — | | | | (34 | ) | | | (11 | ) | | | (12 | ) |
| Amounts removed to the initial carrying amount of the hedged items | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassifications | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Hedges of net investment in foreign operations | | | (50 | ) | | | 507 | | | | 676 | | |
| Revaluation gains/losses | | | (50 | ) | | | 507 | | | | 676 | | |
Hedging of net investment in foreign transactions | | | | (377 | ) | | | (27 | ) | | | (50 | ) |
| Valuation gains/(losses) | | | | (377 | ) | | | (27 | ) | | | (50 | ) |
| Amounts removed to income statement | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassifications | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Exchange differences | | | (660 | ) | | | (2,311 | ) | | | (1,328 | ) | | | 1,384 | | | | 68 | | | | (661 | ) |
| Translation gains/losses | | | (678 | ) | | | (2,311 | ) | | | (1,328 | ) | |
| Valuation gains/(losses) | | | | 1,380 | | | | 141 | | | | (678 | ) |
| Amounts removed to income statement | | | 17 | | | | — | | | | — | | | | 4 | | | | (73 | ) | | | 17 | |
| Reclassifications | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Non-current assets held for sale | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Revaluation gains | | | — | | | | — | | | | — | | |
| Valuation gains/(losses) | | | | — | | | | — | | | | — | |
| Amounts removed to income statement | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassifications | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Actuarial gains and losses in post-employment plans | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Entities accounted for using the equity method | | | (144 | ) | | | 18 | | | | 29 | | | | 228 | | | | (88 | ) | | | (144 | ) |
| Valuation gains/losses | | | (144 | ) | | | 18 | | | | 29 | | |
| Valuation gains/(losses) | | | | 228 | | | | (88 | ) | | | (144 | ) |
| Amounts removed to income statement | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassifications | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Rest of recognized income and expenses | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Income tax | | | 1,044 | | | | 468 | | | | 343 | | | | 308 | | | | (362 | ) | | | 1,044 | |
| | | | | | | | | |
TOTAL RECOGNIZED INCOME/EXPENSES | | | 2,148 | | | | 5,323 | | | | 5,017 | | | | 4,182 | | | | 5,656 | | | | 2,148 | |
| | | | | | | | | |
| Attributed to the parent company | | | 1,838 | | | | 5,038 | | | | 4,782 | | | | 3,898 | | | | 5,078 | | | | 1,838 | |
| Attributed to minority interest | | | 310 | | | | 285 | | | | 235 | | |
| Attributed to minority interests | | | | 284 | | | | 578 | | | | 310 | |
| | |
(*) | | Changes in equity and stockholders’ equity derived information for the years 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. |
The accompanying Notes 1 to 5860 and Appendices I to XI are an integral part of the consolidated statement of recognized income and expense for the year ended December 31, 2008.2010.
F-7F-6
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSE/
CONSOLIDATED CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008,
2007 AND 2006 (Notes 1 to 5)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total equity attributed to the parent company | | | | | | | |
| | | Stockholders’ funds | | | | | | | | | | | | | |
| | | | | | | | | Reserves | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Reserves
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | (Losses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | From
| | | | | | | | | Profit For
| | | Less:
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Entities
| | | | | | Less:
| | | The Year
| | | Dividends
| | | | | | | | | | | | | | | | |
| | | Share
| | | | | | Reserves
| | | Accounted For
| | | Other
| | | Treasury
| | | Attributed
| | | And
| | | Total
| | | | | | | | | Minority
| | | Total
| |
| | | Capital
| | | Share
| | | (Accumulated
| | | Equity
| | | Equity
| | | Shares
| | | to Parent
| | | Remune-
| | | Stockholders
| | | Valuation
| | | | | | Interest
| | | Stockholders’
| |
| | | (Note 27) | | | Premium | | | Losses) | | | Method) | | | Instruments | | | (Note 30) | | | Company | | | Rations | | | Funds | | | Adjustments | | | Total | | | (Note 26) | | | Equity(*) | |
| | | Millions of euros | |
| |
Balances at January 1, 2008 | | | 1,837 | | | | 12,770 | | | | 5,609 | | | | 451 | | | | 68 | | | | 389 | | | | 6,126 | | | | 1,661 | | | | 24,811 | | | | 2,252 | | | | 27,063 | | | | 880 | | | | 27,943 | |
| Effects of changes in accounting policies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of correction of errors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Adjusted initial balance | | | 1,837 | | | | 12,770 | | | | 5,609 | | | | 451 | | | | 68 | | | | 389 | | | | 6,126 | | | | 1,661 | | | | 24,811 | | | | 2,252 | | | | 27,063 | | | | 880 | | | | 27,943 | |
Total income/expense recognized | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,020 | | | | — | | | | 5,020 | | | | (3,182 | ) | | | 1,838 | | | | 310 | | | | 2,148 | |
Other changes in equity | | | — | | | | — | | | | 3,192 | | | | 158 | | | | 21 | | | | 331 | | | | (6,126 | ) | | | 159 | | | | (3,244 | ) | | | — | | | | (3,244 | ) | | | (142 | ) | | | (3,388 | ) |
| Increased of capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Capital reduction | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Conversion of financial liabilities into capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase of other equity instruments | | | — | | | | — | | | | — | | | | — | | | | 21 | | | | — | | | | — | | | | — | | | | 21 | | | | — | | | | — | | | | — | | | | 21 | |
| Reclassification of financial liabilities to other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassification of other equity instruments to financial liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Dividend distribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,002 | | | | (1,820 | ) | | | 2,822 | | | | — | | | | 2,822 | | | | 142 | | | | 2,964 | |
| Transactions including treasury shares and other equity instruments (net) | | | — | | | | — | | | | (172 | ) | | | — | | | | — | | | | 331 | | | | — | | | | — | | | | (503 | ) | | | — | | | | (503 | ) | | | — | | | | (503 | ) |
| Transfers between total equity entries | | | — | | | | — | | | | 3,431 | | | | 33 | | | | — | | | | — | | | | (5,125 | ) | | | (1,661 | ) | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase/Reduction in business combinations | | | — | | | | — | | | | 9 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9 | | | | — | | | | 9 | | | | — | | | | 9 | |
| Payments with equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Rest of increase/reductions in total equity | | | — | | | | — | | | | (75 | ) | | | 125 | | | | — | | | | — | | | | — | | | | — | | | | 49 | | | | — | | | | 49 | | | | — | | | | 49 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances as of December 31, 2008 | | | 1,837 | | | | 12,770 | | | | 8,801 | | | | 609 | | | | 89 | | | | 720 | | | | 5,020 | | | | 1,820 | | | | 26,586 | | | | (930 | ) | | | 25,656 | | | | 1,049 | | | | 26,705 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances at January 1, 2007 | | | 1,740 | | | | 9,579 | | | | 3,268 | | | | 361 | | | | 35 | | | | 147 | | | | 4,736 | | | | 1,363 | | | | 18,209 | | | | 3,341 | | | | 21,550 | | | | 768 | | | | 22,318 | |
| Effects of changes in accounting policies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of correction of errors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Adjusted initial balance | | | 1,740 | | | | 9,579 | | | | 3,268 | | | | 361 | | | | 35 | | | | 147 | | | | 4,736 | | | | 1,363 | | | | 18,209 | | | | 3,341 | | | | 21,550 | | | | 768 | | | | 22,318 | |
Total income/expense recognized | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,126 | | | | — | | | | 6,126 | | | | (1,088 | ) | | | 5,038 | | | | 285 | | | | 5,323 | |
Other changes in equity | | | 97 | | | | 3,191 | | | | 2,341 | | | | 90 | | | | 33 | | | | 242 | | | | (4,736 | ) | | | 298 | | | | 476 | | | | (1 | ) | | | 475 | | | | (173 | ) | | | 302 | |
| Increased of capital | | | 97 | | | | 3,191 | | | | (24 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,264 | | | | — | | | | 3,264 | | | | — | | | | 3,264 | |
| Capital reduction | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Conversion of financial liabilities into capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase of other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassification of financial liabilities to other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassification of other equity instruments to financial liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Dividend distribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 848 | | | | (1,661 | ) | | | 2,509 | | | | — | | | | 2,509 | | | | 108 | | | | 2,617 | |
| Transactions including treasury shares and other equity instruments (net) | | | — | | | | — | | | | (26 | ) | | | — | | | | — | | | | 242 | | | | — | | | | — | | | | (268 | ) | | | — | | | | (268 | ) | | | — | | | | (268 | ) |
| Transfers between total equity entries | | | — | | | | — | | | | 2,435 | | | | 90 | | | | — | | | | — | | | | (3,888 | ) | | | (1,363 | ) | | | — | | | | — | | | | — | | | | — | | | | — | |
| | |
(*) | | Changes in equity and stockholders’ equity derived information for the years 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. |
F-8
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
(Notes 1 to 5)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total equity attributed to the parent company | | | | | | | Total Equity Attributed to the Parent Company | | | | | |
| | | Stockholders’ funds | | | | | | | | | | | Stockholders’ Funds | | | | | | | | | |
| | | | | | | Reserves | | | | | | | | | | | | | | | | | | | | | | | | | Reserves (Note 29) | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Reserves
| | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | (Losses
| | | | | | | | | | | | | | | | | | | | | | | | | | | (Losses) From
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | From
| | | | | | Profit For
| | Less:
| | | | | | | | | | | | | | | | | | | Entities
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Entities
| | | | Less:
| | The Year
| | Dividends
| | | | | | | | | | | | | | | | | | | Accounted
| | | | Less:
| | | | Less:
| | | | | | | | Non-
| | | |
| | | Share
| | | | Reserves
| | Accounted For
| | Other
| | Treasury
| | Attributed
| | And
| | Total
| | | | | | Minority
| | Total
| | | Common
| | Share
| | Accumulated
| | for Using
| | Other
| | Treasury
| | Income Attributed
| | Dividends and
| | Total
| | Valuation
| | | | Controlling
| | | |
| | | Capital
| | Share
| | (Accumulated
| | Equity
| | Equity
| | Shares
| | to Parent
| | Remune-
| | Stockholders
| | Valuation
| | | | Interest
| | Stockholders’
| | | Stock
| | Premium
| | Reserves
| | the Equity
| | Equity
| | Stock
| | to the Parent
| | Remunerations
| | Stockholders’
| | Adjustments
| | | | Interests
| | Total
| |
2010 | | | (Note 27) | | (Note 28) | | (Losses) | | Method | | Instruments | | (Note 30) | | Company | | (Note 4) | | Funds | | (Note 31) | | Total | | (Note 32) | | Equity | |
| | | (Note 27) | | Premium | | Losses) | | Method) | | Instruments | | (Note 30) | | Company | | Rations | | Funds | | Adjustments | | Total | | (Note 26) | | Equity(*) | | | Millions of euros | |
| | | Millions of euros | |
| | |
| Increase/Reduction in business combinations | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Payments with equity instruments | | | — | | | | — | | | | — | | | | — | | | | 33 | | | | — | | | | — | | | | — | | | | 33 | | | | — | | | | 33 | | | | — | | | | 33 | | |
| Rest of increase/reductions in total equity | | | — | | | | — | | | | (44 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (44 | ) | | | (1 | ) | | | (45 | ) | | | (65 | ) | | | (110 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances as of December 31, 2007 | | | 1,837 | | | | 12,770 | | | | 5,609 | | | | 451 | | | | 68 | | | | 389 | | | | 6,126 | | | | 1,661 | | | | 24,811 | | | | 2,252 | | | | 27,063 | | | | 880 | | | | 27,943 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances at January 1, 2006 | | | 1,662 | | | | 6,658 | | | | 2,343 | | | | (171 | ) | | | — | | | | 96 | | | | 3,806 | | | | 1,166 | | | | 13,036 | | | | 3,295 | | | | 16,331 | | | | 971 | | | | 17,302 | | |
| Effects of changes in accounting policies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Balances as of January 1, 2010 | | | | 1,837 | | | | 12,453 | | | | 11,765 | | | | 309 | | | | 12 | | | | (224 | ) | | | 4,210 | | | | (1,000 | ) | | | 29,362 | | | | (62 | ) | | | 29,300 | | | | 1,463 | | | | 30,763 | |
| Effect of changes in accounting policies | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of correction of errors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Adjusted initial balance | | | 1,662 | | | | 6,658 | | | | 2,343 | | | | (171 | ) | | | — | | | | 96 | | | | 3,806 | | | | 1,166 | | | | 13,036 | | | | 3,295 | | | | 16,331 | | | | 971 | | | | 17,302 | | | | 1,837 | | | | 12,453 | | | | 11,765 | | | | 309 | | | | 12 | | | | (224 | ) | | | 4,210 | | | | (1,000 | ) | | | 29,362 | | | | (62 | ) | | | 29,300 | | | | 1,463 | | | | 30,763 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total income/expense recognized | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,736 | | | | — | | | | 4,736 | | | | 46 | | | | 4,782 | | | | 235 | | | | 5,017 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,606 | | | | — | | | | 4,606 | | | | (708 | ) | | | 3,898 | | | | 284 | | | | 4,182 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in equity | | | 78 | | | | 2,921 | | | | 925 | | | | 532 | | | | 35 | | | | 51 | | | | (3,806 | ) | | | 197 | | | | 437 | | | | — | | | | 437 | | | | (438 | ) | | | (1 | ) | | | 364 | | | | 4,651 | | | | 2,540 | | | | (254 | ) | | | 25 | | | | (328 | ) | | | (4,210 | ) | | | (67 | ) | | | 2,721 | | | | — | | | | 2,721 | | | | (191 | ) | | | 2,530 | |
| Increased of capital | | | 78 | | | | 2,921 | | | | (40 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,959 | | | | — | | | | 2,959 | | | | — | | | | 2,959 | | |
| Capital reduction | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock increase | | | | 364 | | | | 4,651 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,015 | | | | — | | | | 5,015 | | | | — | | | | 5,015 | |
| Common stock reduction | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Conversion of financial liabilities into capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase of other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 25 | | | | — | | | | — | | | | — | | | | 25 | | | | — | | | | 25 | | | | — | | | | 25 | |
| Reclassification of financial liabilities to other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassification of other equity instruments to financial liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Dividend distribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 629 | | | | (1,363 | ) | | | 1,992 | | | | — | | | | 1,992 | | | | 104 | | | | 2,096 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (558 | ) | | | (1,067 | ) | | | (1,625 | ) | | | — | | | | (1,625 | ) | | | (197 | ) | | | (1,822 | ) |
| Transactions including treasury shares and other equity instruments (net) | | | — | | | | — | | | | 17 | | | | — | | | | — | | | | 51 | | | | — | | | | — | | | | (34 | ) | | | — | | | | (34 | ) | | | — | | | | (34 | ) | |
| Transactions including treasury stock and other equity instruments (net) | | | | — | | | | — | | | | (105 | ) | | | — | | | | — | | | | (328 | ) | | | — | | | | — | | | | (433 | ) | | | — | | | | (433 | ) | | | — | | | | (433 | ) |
| Transfers between total equity entries | | | — | | | | — | | | | 1,479 | | | | 532 | | | | — | | | | — | | | | (3,177 | ) | | | (1,166 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,865 | | | | (213 | ) | | | — | | | | — | | | | (3,652 | ) | | | 1,000 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase/Reduction in business combinations | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Increase/Reduction due to business combinations | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Payments with equity instruments | | | — | | | | — | | | | — | | | | ��� | | | | 35 | | | | — | | | | — | | | | — | | | | 35 | | | | — | | | | 35 | | | | — | | | | 35 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Rest of increase/reductions in total equity | | | — | | | | — | | | | (531 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (531 | ) | | | — | | | | (531 | ) | | | (334 | ) | | | (865 | ) | |
| Rest of increases/reductions in total equity | | | | — | | | | — | | | | (220 | ) | | | (41 | ) | | | — | | | | — | | | | — | | | | — | | | | (261 | ) | | | — | | | | (261 | ) | | | 6 | | | | (255 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances as of December 31, 2006 | | | 1,740 | | | | 9,579 | | | | 3,268 | | | | 361 | | | | 35 | | | | 147 | | | | 4,736 | | | | 1,363 | | | | 18,209 | | | | 3,341 | | | | 21,550 | | | | 768 | | | | 22,318 | | |
Balances as of December 31, 2010 | | | | 2,201 | | | | 17,104 | | | | 14,305 | | | | 55 | | | | 37 | | | | (552 | ) | | | 4,606 | | | | (1,067 | ) | | | 36,689 | | | | (770 | ) | | | 35,919 | | | | 1,556 | | | | 37,475 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-7
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Notes 1 to 5)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Equity Attributed to the Parent Company | | | | | | | |
| | | Stockholders’ Funds | | | | | | | | | | | | | |
| | | | | | | | | Reserves (Note 29) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Reserves
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | (Losses)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | from
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Entities
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Accounted
| | | | | | Less:
| | | Income
| | | Less:
| | | | | | | | | | | | Non-
| | | | |
| | | Common
| | | Share
| | | Accumulated
| | | for Using
| | | | | | Treasury
| | | Attributed
| | | Dividends and
| | | Total
| | | Valuation
| | | | | | Controlling
| | | | |
| | | Stock
| | | Premium
| | | Reserves
| | | the Equity
| | | Other Equity
| | | Stock
| | | to the Parent
| | | Remunerations
| | | Stockholders’
| | | Adjustments
| | | | | | Interests
| | | Total
| |
2009 | | (Note 27) | | | (Note 28) | | | (Losses) | | | Method | | | Instruments | | | (Note 30) | | | Company | | | (Note 4) | | | Funds | | | (Note 31) | | | Total | | | (Note 32) | | | Equity | |
| | | Millions of euros | |
| |
Balances as of January 1, 2009 | | | 1,837 | | | | 12,770 | | | | 8,801 | | | | 609 | | | | 89 | | | | (720 | ) | | | 5,020 | | | | (1,820 | ) | | | 26,586 | | | | (930 | ) | | | 25,656 | | | | 1,049 | | | | 26,705 | |
| Effect of changes in accounting policies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of correction of errors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Adjusted initial balance | | | 1,837 | | | | 12,770 | | | | 8,801 | | | | 609 | | | | 89 | | | | (720 | ) | | | 5,020 | | | | (1,820 | ) | | | 26,586 | | | | (930 | ) | | | 25,656 | | | | 1,049 | | | | 26,705 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total income/expense recognized | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,210 | | | | — | | | | 4,210 | | | | 868 | | | | 5,078 | | | | 578 | | | | 5,656 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in equity | | | — | | | | (317 | ) | | | 2,964 | | | | (300 | ) | | | (77 | ) | | | 496 | | | | (5,020 | ) | | | 820 | | | | (1,434 | ) | | | — | | | | (1,434 | ) | | | (164 | ) | | | (1,598 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock increase | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Common stock reduction | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Conversion of financial liabilities into capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase of other equity instruments | | | — | | | | — | | | | — | | | | — | | | | 10 | | | | — | | | | — | | | | — | | | | 10 | | | | — | | | | 10 | | | | — | | | | 10 | |
| Reclassification of financial liabilities to other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassification of other equity instruments to financial liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Dividend distribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,000 | ) | | | (1,000 | ) | | | — | | | | (1,000 | ) | | | (144 | ) | | | (1,144 | ) |
| Transactions including treasury stock and other equity instruments (net) | | | — | | | | — | | | | (238 | ) | | | — | | | | — | | | | 496 | | | | — | | | | — | | | | 258 | | | | — | | | | 258 | | | | — | | | | 258 | |
| Transfers between total equity entries | | | — | | | | — | | | | 3,378 | | | | (178 | ) | | | — | | | | — | | | | (5,020 | ) | | | 1,820 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase/Reduction due to business combinations | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Payments with equity instruments | | | — | | | | (317 | ) | | | — | | | | — | | | | (87 | ) | | | — | | | | — | | | | — | | | | (404 | ) | | | — | | | | (404 | ) | | | — | | | | (404 | ) |
| Rest of increases/reductions in total equity | | | — | | | | — | | | | (176 | ) | | | (122 | ) | | | — | | | | — | | | | — | | | | — | | | | (298 | ) | | | — | | | | (298 | ) | | | (20 | ) | | | (318 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances as of December 31, 2009 | | | 1,837 | | | | 12,453 | | | | 11,765 | | | | 309 | | | | 12 | | | | (224 | ) | | | 4,210 | | | | (1,000 | ) | | | 29,362 | | | | (62 | ) | | | 29,300 | | | | 1,463 | | | | 30,763 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-8
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Notes 1 to 5)
| | |
(*) | | Changes in equity and stockholders’ equity derived information for the years 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Equity Attributed to the Parent Company | | | | | | | |
| | | Stockholders’ Funds | | | | | | | | | | | | | |
| | | | | | | | | Reserves (Note 29) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Reserves
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | (Losses)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | from
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Entities
| | | | | | | | | Income
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Accounted
| | | | | | Less:
| | | Attributed
| | | Less:
| | | | | | | | | | | | Non-
| | | | |
| | | Common
| | | Share
| | | Accumulated
| | | for Using
| | | Other
| | | Treasury
| | | to the
| | | Dividends and
| | | Total
| | | Valuation
| | | | | | controlling
| | | | |
| | | Stock
| | | Premium
| | | Reserves
| | | the Equity
| | | Equity
| | | Stock
| | | Parent
| | | Remunerations
| | | Stockholders’
| | | Adjustments
| | | | | | Interests
| | | Total
| |
2008 | | (Note 27) | | | (Note 28) | | | (Losses) | | | Method | | | Instruments | | | (Note 30) | | | Company | | | (Note 4) | | | Funds | | | (Note 31) | | | Total | | | (Note 32) | | | Equity | |
| | | Millions of euros | |
| |
Balances as of January 1, 2008 | | | 1,837 | | | | 12,770 | | | | 5,609 | | | | 451 | | | | 68 | | | | (389 | ) | | | 6,126 | | | | (1,661 | ) | | | 24,811 | | | | 2,252 | | | | 27,063 | | | | 880 | | | | 27,943 | |
| Effect of changes in accounting policies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of correction of errors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Adjusted initial balance | | | 1,837 | | | | 12,770 | | | | 5,609 | | | | 451 | | | | 68 | | | | (389 | ) | | | 6,126 | | | | (1,661 | ) | | | 24,811 | | | | 2,252 | | | | 27,063 | | | | 880 | | | | 27,943 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total income/expense recognized | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,020 | | | | — | | | | 5,020 | | | | (3,182 | ) | | | 1,838 | | | | 310 | | | | 2,148 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in equity | | | — | | | | — | | | | 3,192 | | | | 158 | | | | 21 | | | | (331 | ) | | | (6,126 | ) | | | (159 | ) | | | (3,245 | ) | | | — | | | | (3,245 | ) | | | (142 | ) | | | (3,387 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock increase | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Common stock reduction | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Conversion of financial liabilities into capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase of other equity instruments | | | — | | | | — | | | | — | | | | — | | | | 21 | | | | — | | | | — | | | | — | | | | 21 | | | | — | | | | 21 | | | | — | | | | 21 | |
| Reclassification of financial liabilities to other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassification of other equity instruments to financial liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Dividend distribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,002 | ) | | | (1,820 | ) | | | (2,822 | ) | | | — | | | | (2,822 | ) | | | (142 | ) | | | (2,964 | ) |
| Transactions including treasury stock and other equity instruments (net) | | | — | | | | — | | | | (172 | ) | | | — | | | | — | | | | (331 | ) | | | — | | | | — | | | | (503 | ) | | | — | | | | (503 | ) | | | — | | | | (503 | ) |
| Transfers between total equity entries | | | — | | | | — | | | | 3,431 | | | | 33 | | | | — | | | | — | | | | (5,125 | ) | | | 1,661 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase/Reduction due to business combinations | | | — | | | | — | | | | 9 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9 | | | | — | | | | 9 | | | | — | | | | 9 | |
| Payments with equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Rest of increases/reductions in total equity | | | — | | | | — | | | | (75 | ) | | | 125 | | | | — | | | | — | | | | — | | | | — | | | | 49 | | | | — | | | | 49 | | | | — | | | | 49 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances as of December 31, 2008 | | | 1,837 | | | | 12,770 | | | | 8,801 | | | | 609 | | | | 89 | | | | (720 | ) | | | 5,020 | | | | (1,820 | ) | | | 26,586 | | | | (930 | ) | | | 25,656 | | | | 1,049 | | | | 26,705 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying Notes 1 to 5860 and Appendices I to XI are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2008.2010.
F-9
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
FOR THE YEARS ENDED DECEMBER 31, 2008, 20072010, 2009 AND 20062008 (Notes 1 to 5)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007(*) | | 2006(*) | | | Notes | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | | | Millions of euros | |
| |
CASH FLOW FROM OPERATING ACTIVITIES(1) | | | (1,992 | ) | | | 17,290 | | | | 2,222 | | | | 53 | | | | 8,503 | | | | 2,567 | | | | (1,992 | ) |
Consolidated profit for the year | | | 5,385 | | | | 6,415 | | | | 4,971 | | |
Net income for the year | | | | | | | | 4,995 | | | | 4,595 | | | | 5,385 | |
Adjustments to obtain the cash flow from operating activities: | | | (1,112 | ) | | | 828 | | | | 1,522 | | | | | | | | (534 | ) | | | (591 | ) | | | (1,112 | ) |
| Depreciation and amortization | | | 699 | | | | 577 | | | | 472 | | | | | | | | 761 | | | | 697 | | | | 699 | |
| Other adjustments | | | (1,811 | ) | | | 251 | | | | 1,050 | | | | | | | | (1,295 | ) | | | (1,288 | ) | | | (1,811 | ) |
Net increase/decrease in operating assets | | | 45,714 | | | | 74,226 | | | | 19,468 | | | | | | | | 6,452 | | | | (9,781 | ) | | | 45,714 | |
| Financial assets held for trading | | | 10,964 | | | | 10,545 | | | | 7,779 | | | | | | | | (6,450 | ) | | | (3,566 | ) | | | 10,964 | |
| Other financial assets designated at fair value through profit or loss | | | 588 | | | | 190 | | | | (444 | ) | | | | | | | 437 | | | | 582 | | | | 588 | |
| Available-for-sale financial assets | | | (800 | ) | | | 5,827 | | | | (18,357 | ) | | | | | | | (7,064 | ) | | | 15,741 | | | | (800 | ) |
| Loans and receivables | | | 30,866 | | | | 58,352 | | | | 33,334 | | | | | | | | 18,590 | | | | (23,377 | ) | | | 30,866 | |
| Other operating assets | | | 4,096 | | | | (688 | ) | | | (2,844 | ) | | | | | | | 939 | | | | 839 | | | | 4,096 | |
Net increase/decrease in operating liabilities | | | 37,908 | | | | 82,192 | | | | 13,138 | | | | | | | | 9,067 | | | | (12,359 | ) | | | 37,908 | |
| Financial liabilities held for trading | | | 23,736 | | | | 4,350 | | | | (1,347 | ) | | | | | | | 4,383 | | | | (10,179 | ) | | | 23,736 | |
| Other financial liabilities designated at fair value through profit or loss | | | — | | | | (134 | ) | | | (158 | ) | | | | | | | 240 | | | | 334 | | | | — | |
| Financial liabilities measured at amortised cost | | | 20,058 | | | | 78,385 | | | | 17,672 | | |
| Financial liabilities at amortized cost | | | | | | | | 5,687 | | | | (3,564 | ) | | | 20,058 | |
| Other operating liabilities | | | (5,886 | ) | | | (408 | ) | | | (3,029 | ) | | | | | | | (1,243 | ) | | | 1,050 | | | | (5,886 | ) |
Collection/Payments for income tax | | | 1,541 | | | | 2,080 | | | | 2,059 | | | | | | | | 1,427 | | | | 1,141 | | | | 1,541 | |
CASH FLOWS FROM INVESTING ACTIVITIES(2) | | | (2,865 | ) | | | (7,987 | ) | | | (2,128 | ) | | | 53 | | | | (7,078 | ) | | | (643 | ) | | | (2,865 | ) |
Investment | | | 4,617 | | | | 10,948 | | | | 5,401 | | | | | | | | 8,762 | | | | 2,396 | | | | 4,617 | |
| Tangible assets | | | 1,199 | | | | 1,836 | | | | 1,214 | | | | | | | | 1,040 | | | | 931 | | | | 1,199 | |
| Intangible assets | | | 402 | | | | 134 | | | | 253 | | | | | | | | 464 | | | | 380 | | | | 402 | |
| Investments | | | 672 | | | | 690 | | | | 80 | | | | | | | | 1,209 | | | | 2 | | | | 672 | |
| Subsidiaries and other business units | | | 1,559 | | | | 7,082 | | | | 1,629 | | | | | | | | 77 | | | | 7 | | | | 1,559 | |
| Non-current assets held for sale and associated liabilities | | | 515 | | | | 487 | | | | 279 | | | | | | | | 1,464 | | | | 920 | | | | 515 | |
| Held-to-maturity investments | | | — | | | | — | | | | 1,946 | | | | | | | | 4,508 | | | | 156 | | | | — | |
| Other payments related to investing activities | | | 270 | | | | 719 | | | | — | | |
| Other settlements related to investing activities | | | | | | | | — | | | | — | | | | 270 | |
Divestments | | | 1,752 | | | | 2,961 | | | | 3,273 | | | | | | | | 1,684 | | | | 1,753 | | | | 1,752 | |
| Tangible assets | | | 168 | | | | 328 | | | | 501 | | | | | | | | 261 | | | | 793 | | | | 168 | |
| Intangible assets | | | 31 | | | | 146 | | | | 120 | | | | | | | | 6 | | | | 147 | | | | 31 | |
| Investments | | | 9 | | | | 227 | | | | 825 | | | | | | | | 1 | | | | 1 | | | | 9 | |
| Subsidiaries and other business units | | | 13 | | | | 11 | | | | 934 | | | | | | | | 69 | | | | 32 | | | | 13 | |
| Non-current assets held for sale and associated liabilities | | | 374 | | | | 744 | | | | 370 | | | | | | | | 1,347 | | | | 780 | | | | 374 | |
| Held-to-maturity investments | | | 283 | | | | 321 | | | | — | | | | | | | | — | | | | — | | | | 283 | |
| Other collections related to investing activities | | | 874 | | | | 1,184 | | | | 523 | | | | | | | | — | | | | — | | | | 874 | |
CASH FLOWS FROM FINANCING ACTIVITIES(3) | | | (2,271 | ) | | | 1,996 | | | | 871 | | | | 53 | | | | 1,148 | | | | (74 | ) | | | (2,271 | ) |
Investment | | | 17,807 | | | | 20,470 | | | | 9,554 | | | | | | | | 12,410 | | | | 10,012 | | | | 17,807 | |
| Dividends | | | 2,813 | | | | 2,424 | | | | 1,914 | | | | | | | | 1,218 | | | | 1,567 | | | | 2,813 | |
| Subordinated liabilities | | | 735 | | | | 1,723 | | | | 1,760 | | | | | | | | 2,846 | | | | 1,667 | | | | 735 | |
| Amortization of own equity instruments | | | — | | | | — | | | | — | | |
| Acquisition of own equity instruments | | | 14,095 | | | | 16,182 | | | | 5,677 | | |
| Common stock amortization | | | | | | | | — | | | | — | | | | — | |
| Treasury stock acquisition | | | | | | | | 7,828 | | | | 6,431 | | | | 14,095 | |
| Other items relating to financing activities | | | 164 | | | | 141 | | | | 203 | | | | | | | | 518 | | | | 347 | | | | 164 | |
Divestments | | | 15,536 | | | | 22,466 | | | | 10,425 | | | | | | | | 13,558 | | | | 9,938 | | | | 15,536 | |
| Subordinated liabilities | | | 1,535 | | | | 3,096 | | | | 1,846 | | | | | | | | 1,205 | | | | 3,103 | | | | 1,535 | |
| Issuance of own equity instruments | | | — | | | | 3,263 | | | | 2,939 | | |
| Disposal of own equity instruments | | | 13,745 | | | | 16,041 | | | | 5,640 | | |
| Common stock increase | | | | | | | | 4,914 | | | | — | | | | — | |
| Treasury stock disposal | | | | | | | | 7,439 | | | | 6,835 | | | | 13,745 | |
| Other items relating to financing activities | | | 256 | | | | 66 | | | | — | | | | | | | | — | | | | — | | | | 256 | |
EFFECT OF EXCHANGE RATE CHANGES(4) | | | (791 | ) | | | (1,233 | ) | | | (785 | ) | | | | | | | 1,063 | | | | (161 | ) | | | (791 | ) |
NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (1+2+3+4) | | | (7,919 | ) | | | 10,066 | | | | 180 | | | | | | | | 3,636 | | | | 1,689 | | | | (7,919 | ) |
CASH OR CASH EQUIVALENTS AT BEGINNING OF YEAR | | | 22,561 | | | | 12,496 | | | | 12,317 | | |
CASH OR CASH EQUIVALENTS AT END OF YEAR | | | 14,642 | | | | 22,561 | | | | 12,496 | | |
| Cash | | | 3,915 | | | | 2,938 | | | | 2,756 | | |
| Balance of cash equivalent in central banks | | | 10,727 | | | | 19,623 | | | | 9,713 | | |
| Other financial assets | | | — | | | | — | | | | — | | |
| Less:bank overdraft refundable on demand | | | — | | | | — | | | | — | | |
| TOTAL CASH OR CASH EQUIVALENTS AT END OF YEAR | | | 14,642 | | | | 22,561 | | | | 12,496 | | |
| Of which: | | | | | | | | | | | | | |
| held by consolidated entities but no available for the Group | | | — | | | | — | | | | — | | |
CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR | | | | | | | | 16,331 | | | | 14,642 | | | | 22,561 | |
CASH OR CASH EQUIVALENTS AT END OF THE YEAR | | | | | | | | 19,967 | | | | 16,331 | | | | 14,642 | |
F-10
| | | | | | | | | | | | | | | | | |
Components of Cash and Equivalent at end of the Year | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Millions of euros | |
| |
| Cash | | | | | | | 4,284 | | | | 4,218 | | | | 3,915 | |
| Balance of cash equivalent in central banks | | | | | | | 15,683 | | | | 12,113 | | | | 10,727 | |
| Other financial assets | | | | | | | — | | | | — | | | | — | |
| Less: Bank overdraft refundable on demand | | | | | | | — | | | | — | | | | — | |
TOTAL CASH OR CASH EQUIVALENTS AT END OF THE YEAR | | | 9 | | | | 19,967 | | | | 16,331 | | | | 14,642 | |
Of which: | | | | | | | | | | | | | | | | |
| Held by consolidated subsidiaries but not available for the Group | | | | | | | — | | | | — | | | | — | |
| | |
(*) | | Cash flows and cash flows derived information for the years 2007 and 2006 have been restated as mentioned in Note 1.3 to consolidated financial statements. |
The accompanying Notes 1 to 5860 and Appendices I to XI are an integral part of the consolidated statement of cash flows for the year ended December 31, 2008.2010.
F-10F-11
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
AND COMPANIES COMPOSING
THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
REPORT FOR THE YEAR ENDED DECEMBER 31, 20082010
| |
| 1. | INTRODUCTION, BASIS OF PRESENTATION OF THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS AND OTHER INFORMATION |
1.1.1.1 INTRODUCTION
Banco Bilbao Vizcaya Argentaria, S.A. (“(hereinafter, the Bank”“Bank” or “BBVA”) is a private-law entity, governed bysubject to the rules and regulations applicable to banksgoverning banking institutions operating in Spain. The Bank leadsconducts its business through branches and offices located throughout Spain and abroad.
The bylaws of associationBylaws and other public information onabout the Bank can be consulted bothare available for consultation at its registered officeaddress (Plaza San Nicolás, 4 Bilbao) and on its official website, www.bbva.com..
In addition to the operations carried ontransactions it carries out directly, by it, the Bank is the head ofheads a group of subsidiaries, jointly controlledjointly-controlled and associated entities and associates that engage in various businesswhich perform a wide range of activities and which compose, together with the Bank constitute the Banco Bilbao Vizcaya Argentaria Group (“the(hereinafter, “the Group” or “BBVA Group”). Therefore, the Bank is obliged to prepare, inIn addition to its own individual financial statements, the Group’s.Bank is therefore obliged to prepare the Group’s annual consolidated financial statements.
As of December 31, 20082010, the Group was composed by 357 entities that were fully consolidated, 5 were consolidated bymade up of 302 companies accounted for under the full consolidation method and 7 under the proportionate method and 72 entitiesconsolidation method. A further 68 companies are accounted for using the equity method (Notes(see Notes 3 and 17 and appendixAppendices II to VIVII of the presentthese financial consolidated financial statements).
The Group’s consolidated financial statements as offor the years ending December 31, 20072009 and 2008 were approved by the shareholders at the Bank’s Annual General Meeting (“AGM”) held on March 14, 2008.12, 2010 and March 13, 2009, respectively.
The 20082010 consolidated financial statements of the Group and the 20082010 financial statements of the Bank and of substantially all the Group companies have not yet been approved by theirthe shareholders at the respective Annual General Meetings. However, the Bank’s Board of Directors considers that the aforementioned financial statements will be approved without any changes.Meeting (“AGM”) held on March 11, 2011.
1.2. BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
| |
| 1.2. | BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS |
The Group’s accompanying consolidated financial statements for 2010 are presented in accordance with the International Financial Reporting Standards endorsed by the European Union (“IFRS-EU”EU-IFRS”) applicable at year-end 2008,2010, and additionally considering the Bank of Spain Circular 4/2004, of December 22, 2004 (and as amended thereafter). These Circular of theThis Bank of Spain areCircular is the legislationregulation that enactsimplements and adapts the IFRS-EUEU-IFRS for Spanish banks.
The BBVA Group’s consolidated financial statements for 2008the year ended December 31, 2010 were prepared by the Bank’s directors (at the Board Meeting on February 5, 2009) in accordance with the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, and by applying the basisprinciples of consolidation, accounting policies and measurement basesvaluation criteria described in Note 2, so that they present fairly the Group’s consolidated equity and financial position in 2008, andas of December 31, 2010, together with the consolidated results of its operations the changes in the consolidated equity and consolidated cash flows arising in the Groupgenerated during 2008.2010. These consolidated financial statements were prepared on the basis of the accounting records kept by the Bank and by each of the other entities in the Group, companies and include the adjustments and reclassifications required to unifyharmonize the accounting policies and measurement basesvaluation criteria used by the Group (Note(see Note 2.2).
All accounting policies and measurement basesvaluation criteria with a significant effect onin the consolidated financial statements were applied in their preparation.
Due to the fact that the numerical information containedThe amounts reflected in the annualaccompanying consolidated financial statements is expressedare presented in millionmillions of euros, except in certain cases where it is necessaryas stated otherwise due to lower unit, certain captions that dothe need for a smaller unit. Therefore, there may be occasions when a balance does not present any balanceappear in the financial statements may present balancebecause it is in units of euros. In addition, information regarding period-to-periodthe percentage changes is based on numbersare calculated using thousands of euros. The accounting balances have been rounded to present the amounts in millions of euros. As a result, the amounts appearing in some tables may not rounded.
F-11
1.3. COMPARATIVE INFORMATION
Aforementioned,be the annual consolidated financial statements for the year ended December 31, 2008 were prepared under the financial statements models established in Circular 4/2004arithmetical sum of the Bank of Spain, and its subsequents modifications. Bank of Spain issued Circular 6/2008 of the Bank of Spain, of November 26, 2008, which represents modifications in the presentation format of the consolidated financial statements.
For this reason, the consolidated financial statements for 2007 and 2006 have been modified with respect to those originally prepared by the Group in order to adapt them to the presentation requirements. These changes exclusively affect the presentation format and have no impact whatsoever on the Group’s consolidated equity or profit.
Appendix VIII reconciles the originally issued consolidated financial statements for 2008, 2007 and 2006.
1.4. RESPONSIBILITY FOR THE INFORMATION AND FOR THE ESTIMATES MADE
The information in these BBVA Group consolidated financial statements is the responsibility of the Group’s directors.
In preparing these consolidated financial statements estimates were occasionally made by the Bank and the consolidated companies in order to quantify certain of the assets, liabilities, income, expenses and commitments reported herein. These estimates relate mainly to the following:
1. The impairment losses on certain financial assets (Notes 7, 8, 11, 12, 13 and 16).
2. The assumptions used in the actuarial calculation of the post-employment benefit liabilities and commitments (Note 25).
3. The useful life of tangible and intangible assets (Notes 19 and 20).
4. The measurement of goodwill arising on consolidation (Notes 17 and 20).
5. The fair value of certain unlisted assets (Note 7, 8, 10, 11, 12 and 15).
Although these estimates were made on the basis of the best information available as of December 31, 2008 on the events analysed, events that take place in the future might make it necessary to change these estimates (upwards or downwards) in coming years.
1.5. ENVIRONMENTAL IMPACT
Given the activities in which the Group companies engage, the Group has no environmental liabilities, expenses, assets, provisions or contingencies that could have a significant effect on its consolidated equity, financial situation and profits. Consequently, there is no heading on the face of the Group’s 2008 consolidated financial statements that requires disclosure in the environmental report stipulated under the Ministry of Economics Order of October 8, 2001. Further the notes to the accompanying financial statements do not include specific disclosure on environmental matters.
1.6. DETAIL OF AGENTS OF CREDIT INSTITUTIONS
The detail of BBVA agents required pursuant to Article 22 of Royal Decree 1245/1995 of July 14 of the Ministry of Economy and Finance is disclosed in the BBVA financial statements for the year ended December 31, 2008.
| |
1.7. | REPORT ON THE ACTIVITY OF THE CUSTOMER CARE DEPARTMENT AND THE CUSTOMER OMBUDSMAN |
The report on the activity of the Customer Care Department and the Customer Ombudsman required pursuant to Article 17 of Ministry of Economy and Finance Order ECO/734/2004 of March 11 is included in the management report accompanying these consolidated financial statements.preceding figures.
F-12
1.8. CAPITAL MANAGEMENT AND MINIMUM EQUITY REQUIRED
Capital requirements
Bank of Spain Circular 3/2008, of May 22, on the calculation and control of minimum capital requirements, regulates the minimum capital requirements for Spanish credit institutions — both as individual entities and as consolidated groups — and how to calculate them, as well as the various internal capital adequacy assessment processes they should have in place and the information they should disclose to the market.
This Circular is the final implementation, for credit institutions, of the legislation on capital and consolidated supervision of financial institutions, which was contained in Law 36/2007, of November 16, amending Law 13/1985, of May 25, on the investment ratios, capital and reporting requirements of financial intermediaries, and other financial regulations, which also includes Royal Decree 216/2008, of February 15, on the capital of financial institutions. Bank of Spain Circular 3/2008 also culminates the process of adaptation of Spanish legislation to Directive 2006/48/EC of the European Parliament and of the Council, of June 14, 2006, and Directive 2006/49/EC of the European Parliament and of the Council, of June 14, 2006. The minimum capital requirements for credit institutions and their consolidable groups were thoroughly revised in both Directives, based on the new Capital Accord adopted by the Basel Committee on Banking Supervision (“Basel II”).
The minimum capital requirements established by Bank of Spain Circular3/2008 are calculated on the basis of the Group’s exposure to credit risk and dilution risk (on the basis of the assets, obligations and other memorandum items that present these risks, depending on their amounts, characteristics, counterparties, guarantees, etc.), to counterparty risk and position and settlement risk in the trading book, to foreign exchange risk (on the basis of the overall net foreign currency position) and to operational risk. Additionally, the Group is subject to compliance with the risk concentration limits established in the aforementioned Circular and with the requirements concerning internal corporate governance, internal capital adequacy assessment, measurement of interest rate risk and information to be disclosed to the market also set forth therein. With a view to guaranteeing compliance with the aforementioned objectives, the Group performs integrated management of these risks, in accordance with its internal policies (see Note 7).
As of December 31, 2007 and 2006, regulatory capital management analized capital base and capital ratios under requirements of Circular 5/1993, of March 26, of Bank of Spain.
As of December 31, 2008, 2007 and 2006, the eligible capital of the Group exceeded the minimum required under the regulations then in force (Note 31).
The calculation of the minimum regulatory capital requirements under the new standards, the so-called Pillar 1, is supplemented with an internal capital adequacy assessment and supervisory review process, also called Pillar 2. The Group’s internal capital adequacy assessment process is based on the internal model for the quantification of the economic capital required on the basis of the Group’s overall risk profile. Finally, Basel II standards establish, through Pillar 3, strict transparency requirements regarding the information on risks to be disclosed to the market.
Capital management
New Basel Capital Accord — Basel II — Economic Capital
The Group’s capital management is performed at both regulatory and economic level.
Regulatory capital management is based on the analysis of the capital base and the capital ratios (core capital, Tier 1, etc.) using Basel (“BIS”) and Bank of Spain criteria (Note 31)
The aim is to achieve a capital structure that is as efficient as possible in terms of both cost and compliance with the requirements of regulators, ratings agencies and investors. Active capital management includes securitisations, sales of assets, and preferred and subordinated issues of equity and hybrid instruments.
The Bank has obtained the approval of its internal model of capital estimation (IRB) in 2008 for certain portfolios.
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From an economic standpoint, capital management seeks to optimise value creation at the Group and at its different business units.
The Group allocates economic capital commensurate with the risks incurred by each business (CER). This is based on the concept of unexpected loss at a certain level of statistical confidence, depending on the Group’s targets in terms of capital adequacy. These targets are applied at two levels: the first is core equity, which determines the allocated capital. The Bank uses this amount as a basis for calculating the return generated on the equity in each business (ROE). The second level is total capital, which determines the additional allocation in terms of subordinate debt and preference shares. The CER calculation combines lending risk, market risk (including structural risk associated with the balance sheet and equity positions), operational risk and fixed asset and technical risks in the case of insurance companies.
Stockholders’ funds, as calculated under BIS rules, is an extremely important reference to the entire Group. However, for the purpose of allocating capital to business areas the Bank prefers CeR. It is risk-sensitive and thus linked to the management policies for the individual businesses and the business portfolio. This procedure anticipates the approach likely to be adopted by the future Basel II rules on capital. These provide an equitable basis for assigning capital to businesses according to the risks incurred and make it easier to compare returns.
To internal effects of management and pursuit of the business areas, the Group realizes a capital allocation to each business area (Note 6).
1.9. SEASONAL NATURE OF INCOME AND EXPENSES
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| 1.3. | SEASONAL NATURE OF INCOME AND EXPENSES |
The nature of the most significant activities and transactions carried out by the Group is mainly related to traditional activities carried out by financial institutions thatinstitutions. Therefore, they are not significantly affected by seasonal or cyclical factors.
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| 1.4. | RESPONSIBILITY FOR THE INFORMATION AND FOR THE ESTIMATES MADE |
The information contained in these BBVA Group consolidated financial statements is the responsibility of the Group’s Directors.
Estimates were occasionally made by the Bank and the consolidated companies in preparing these consolidated financial statements in order to quantify some of the assets, liabilities, income, expenses and commitments reported. These estimates relate mainly to the following:
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| • | Impairment on certain financial assets (see Notes 7, 8, 12, 13, 14 and 17). |
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| • | The assumptions used to quantify other provisions (see Note 25) and for the actuarial calculation of post-employment benefit liabilities and commitments (see Note 26). |
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| • | The useful life and impairment losses of tangible and intangible assets (see Notes 16, 19, 20 and 22). |
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| • | The valuation of consolidation goodwill (see Notes 17 and 20). |
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| • | The fair value of certain unlisted financial assets and liabilities (see Notes 7, 8, 10, 11, 12 and 15). |
Although these estimates were made on the basis of the best information available as of December 31, 2010 on the events analyzed, events that take place in the future might make it necessary to change them (upwards or downwards) in the coming years.
With regard to the impairment losses on financial assets and assets acquired in debt payments, of particular importance is the entry into force on September 30, 2010, of Bank of Spain Circular 3/2010 of June 29. This Circular has modified Circular 4/2004 with respect to provision of these impairment losses to be carried out by Spanish credit institutions. The Bank of Spain has modified and updated certain parameters established in Annex IX of said Circular to adjust them to the experience and information of the Spanish banking sector as a whole following the financial crisis of the past few years.
The new requirements included in the Circular have changed the estimates for impairment losses on some financial assets and assets acquired in payment of debts carried out by the Bank and its consolidated entities. Given that they have been considered as changes in estimates, in accordance with applicable standards, the impact of these changes has been recognized in the consolidated income statement for 2010 for a total of €198 million.
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| 1.5. | BBVA GROUP INTERNAL CONTROL OVER FINANCIAL REPORTING MODEL |
The BBVA Group Internal Control over Financial Reporting Model (“ICFR Model”) includes a set of processes and procedures that the Group’s Management has designed to reasonably guarantee fulfillment of the Group’s set control targets. These control targets have been set to ensure the reliability and integrity of the consolidated financial information, as well as the efficiency and effectiveness of transactions and fulfillment of applicable standards.
The ICFR Model is based on the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) international standards. The five components that COSO establishes to determine whether an internal control system is effective and efficient are:
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| • | Evaluate all of the risks that could arise during the preparation of the financial information. |
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| • | Design the necessary control activities to mitigate the most critical risks. |
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| • | Monitor the control activities to ensure they are fulfilled and they are effective over time. |
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| • | Establish the right reporting circuits to detect and report system weaknesses or flaws. |
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| • | Set up a suitable control area to track all of these activities. |
The BBVA Group ICFR Model is summarized in the following chart:
ICFR Model is implemented in the Group’s main entities using a common and uniform methodology.
Among the main characteristics of the Group ICFR Model are as follows:
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| • | The BBVA Group has opted for a direct model of individually assigned responsibilities through a more ambitious model of certification aimed to ensure that the internal control extends to a greater range of hierarchical levels and contributes to the culture of control within the Group. |
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| • | The internal control system is dynamic and evolves continuously over time in a way that reflects the reality of the business of the Group at all times, together with the risks affecting it and the controls mitigating these risks. |
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| • | A complete documentation of the processes, risks and control activities is prepared within its scope, including detailed descriptions of the transactions, criteria for evaluation and revisions applied. |
To determine the scope of the ICFR Model annual evaluation, the main companies, accounts and most significant processes are identified based on quantitative criteria (probability of occurrence, economic impact and materiality) and qualitative criteria (related to typology, complexity, nature of risks and the business structure), ensuring coverage of critical risks for the BBVA Group consolidated financial statements.
As well as the evaluation that the Internal Control Units performs, ICFR Model is subject to regular evaluations by the Internal Audit Department and is supervised by the Group’s Audit and Compliance Committee.
As a foreign private issuer in the United States, the BBVA Group submits Annual Reports on Form 20F to the Securities and Exchange Commission (SEC) and thus complies with the requirements pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.
In the evaluation by the Internal Audit Department and the Internal Control Units, no weaknesses were detected that could have a material or significant impact on the BBVA Group consolidated financial statements for the year 2010.
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| 1.6. | MORTGAGE MARKET POLICIES AND PROCEDURES |
The additional disclosures required by Bank of Spain Circular 7/2010, applying Royal Decree 716/2009 of April 24, 2009 (which developed certain aspects of Act 2/1981, of 25 March 1981, on the regulation of the mortgage market and other mortgage and financial market regulations) is detailed in the Bank’s individual financial statements for the year ended December 31, 2010.
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| 2. | BASISPRINCIPLES OF CONSOLIDATION, ACCOUNTING POLICIES AND MEASUREMENT BASES APPLIED AND IFRS RECENT PRONOUNCEMENTS |
The Glossary (Appendix(see Appendix XI) includes the definition of financial and economic terms useused in this Note 2 “Basis of consolidation, accounting policies and measurement bases applied and IFRS pronouncements” and subsequent explanatory notes.
2.1 BASIS OF CONSOLIDATION
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| 2.1. | PRINCIPLES OF CONSOLIDATION |
The accounting policiesprinciples and measurement basesvaluation criteria used in preparingto prepare the Group’s consolidated financial statements as of December 31, 2008 may differ from those used by certain Group companies.companies in the Group. For this reason, the required adjustments and reclassifications were made on consolidation to unifyharmonize the policiesprinciples and basescriteria used and to make them compliant with EU-IFRSsEU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.
The results of subsidiaries acquired during the periodyear are included intaking into account only the consolidated income statementperiod from the date of acquisition to period-end; similarly, theyear-end. The results of subsidiariescompanies disposed of during theany year are included inonly taking into account the consolidated income statementperiod from the beginningstart of the year to the date of disposal.
In theThe Group thereconsolidated companies are classified into three types of consolidated entities:types: subsidiaries, jointly controlled entities and associates.associates entities.
Subsidiaries
Subsidiaries (see the Glossary) are those companies which the Group has the capacity to control. Control is presumed to exist when the parent owns, either directly or indirectly through other subsidiaries, more than one half of an entity’s voting power, unless, in exceptional cases, it can be clearly demonstrated such ownership of it does not constitute control of it.
The financial statements of the subsidiaries are fully consolidated with those of the Bank.Bank using the global integration method.
The share of minority shareholders of theinterests from subsidiaries in the Group’s net consolidated equity is presented under the heading “Minority Interests”“Non-controlling interest” in the accompanying consolidated balance sheetsheets and their share in the profit or loss for the year is presented under the heading “Profit or loss“Net income attributed to minoritynon-controlling interests” in the accompanying consolidated income statement (Note 26)statements (see Note 32).
Note 3 containinclude information onrelated to the most significant investments and divestmentsmain companies in subsidiaries that took placethe Group as of December 31, 2008.2010. Appendix II includes the most significant information on these companies.
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Jointly controlled entities
These are entities that, while not being subsidiaries, fulfill the definition of “joint business” (see the Glossary).
Since the implementation of IFRS-EU in 2005,EU-IFRS, the Group has pursuedapplied the following policy in relation to investments in jointly controlled entities:
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| | • | Jointly controlledJointly-controlled financial entities.entity: Since their corporate purposeit is that of a financial entity, management considers that the best way of reflecting theirits activities within the Group’s consolidated financial statements is usingconsidered to be the proportionate method of consolidation. |
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TheAs of December 31, 2010, 2009 and 2008, the contribution of jointly controlled financial entities to the main figures in the Group’s 2008 consolidated financial statements under the proportionate consolidation method, and calculated on the basis of the interest held by the GroupGroup’s holding in them, is depictedshown in the table below:
| | | | |
| | Millions of Euros | |
|
Group Asset | | | 331 | |
Group Liabilities | | | 217 | |
Group Equity | | | 27 | |
Group Consolidated Income | | | 11 | |
| | | | | | | | | | | | | |
Contribution to the Group by Entities
| | | | | | | | | |
Accounted for Under the Proportionate Method | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
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| Assets | | | 1,040 | | | | 869 | | | | 331 | |
| Liabilities | | | 891 | | | | 732 | | | | 217 | |
| Equity | | | 28 | | | | 38 | | | | 27 | |
| Net income | | | 19 | | | | 17 | | | | 11 | |
Additional disclosure is not provided as these investments are not material.significant.
Appendix IV itemisesIII shows the main figures for jointly controlled entities consolidated by the Group under the proportionate method, listing salient information for these companies.method.
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| | • | Jointly controlledJointly-controlled non-financial entities. Management believesentity: It is considered that the effect of breaking outdistributing the balance sheet and income statement headings ofamounts belonging to jointly controlled non-financial entities would distort the information provided to investors. For this reason, the equity method is considered the most appropriate way of recognisingreflecting these investments. |
Appendix V to the accompanying 2008 financial statements listsIV shows the main financial magnitudesfigures for jointly controlled entities consolidated using the equity method. Note 17 — Investments meanwhile disclosesdetails the impact, if any, that application of an alternativethe proportionate consolidation method of consolidation, i.e. proportionate consolidation,on these entities would have had on the consolidated balance sheet and income statement.
AssociatesAssociate entities
Associates are companies in which the Group is able to exercise significant influence, without having total or joint control. Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly.
However, certain entities in which the Group owns 20% or more of the voting rights are not included as Group associates, since it is considered that the Group does not have the capacity to exercise significant influence over these entities. The investmentsInvestments in these entities, which do not represent materialsignificant amounts for the Group, are classified asavailable-for-sale investments. financial assets.
In addition, certainMoreover, some investments in entities in which the Group holds less than 20% of the voting rights are accounted for as Group associates, based on the judgment thatas the Group hasis considered to have the power to exercise significant influence over these entities.
Investments in associates are accounted for using the equity method (Note(see Note 17). Appendix IV includesshows the most significant information on these companiesrelated to the associates consolidated using the equity method.
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2.2. ACCOUNTING POLICIES AND MEASUREMENT BASES APPLIED
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| 2.2. | ACCOUNTING POLICIES AND VALUATION CRITERIA APPLIED |
The accountingAccounting policies and measurement basesvaluation criteria used in preparing these consolidated financial statements were as follows:
2.2.1. FINANCIAL INSTRUMENTS
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| 2.2.1. | FINANCIAL INSTRUMENTS |
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| a) | Measurement of financial instruments and recognition of changes arising from the measurementin fair value |
All financial instruments are initially recognizedaccounted for at fair value which, in the absence ofunless there is evidence to the contrary, shall be the transaction price. These instruments will subsequently be measured on the basis of their classification. The recognition of changes arising subsequent to the initial recognition is described below.
The change producedAll the changes during the year, except in trading derivatives, arising from the accrual of interests and similar items are recordedrecognized under the headings “Interest and Similar Income”similar income” or “Interest Expense and Similar Charges”similar expenses”, as appropriate, in the accompanying consolidated income statement offor this period.year (see Note 39). The dividenddividends accrued
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in the periodyear are recordedrecognized under the heading “Dividend income” in the accompanying consolidated income statement.statement for the year (see Note 40).
The changes in the measurementsfair value after the initial recognition, for reasons other than those of theincluded in preceding paragraph, are described below according to the categories of financial assets and liabilities:
—– “Financial assets held for trading” and “Financial“Other financial assets and liabilities designated at fair value through profit or loss”
Assets and liabilities recognized inunder these headings in the accompanying consolidated balance sheets are valued at fair value.
Changes arising from the valuation tomeasurement at fair value (gains or losses) are recognized as their net value under the heading “Net gains (losses) on financial assets and liabilities” in the accompanying consolidated income statements. On the other hand, Valuation adjustments by changesstatements (see Note 44). Changes resulting from variations in foreign exchange rates are recognized under the heading “Net exchange differences” in the accompanying consolidated income statements.
The fair value of the standard financial derivatives included in the held for trading portfolios is equal tocalculated by their daily quoted price inif there is an active market. If, under exceptional circumstances, their quoted price cannot be established on a given date, these derivatives are measured using methods similar to those used to measure inover-the-counter (“OTC”) derivatives.markets.
The fair value of OTC derivatives (“present value” or “theoretical close”price”) is equal to the sum of the future cash flows arising from the instrument, discounted at the measurement date; these derivatives are measuredvalued using methods recognized by the financial markets: the net present value (NPV) method, option price calculation models, etc. (Note(see Note 8)
Financial derivatives that have as their underlying equity instruments, whose fair value cannot be determined in a sufficiently objective manner and are settled by delivery of those instruments, are measured at cost..
— “Available-for-Sale Financial Assets”–“Available-for-sale financial assets”
Assets and liabilities recognized inunder these headings in the accompanying consolidated balance sheets are valuedmeasured at fair value.
Changes arising from the valuation tomeasurement at fair value (gains or losses) are recognized temporarily, for their amount net amount,of tax effect, under the heading “Valuation Adjustmentsadjustments - Available-for-Sale Financial Assets”Available-for-sale financial assets” in the accompanying consolidated balance sheets.
Valuation adjustments arising from non-monetary items by changes in foreign exchange rates are recognized temporarily under the heading “Valuation Adjustmentsadjustments — Exchange Differences”differences” in the accompanying consolidated balance sheet.sheets. Valuation adjustments arising from monetary items by changes in foreign exchange rates are recognized under the heading “Net Exchange Differences”exchange differences” in the accompanying consolidated income statements.
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The amounts recognized inunder the headings “Valuation Adjustments - Available-for-Sale Financial Assets”adjustments —Available-for-sale financial assets” and “Valuation Adjustmentsadjustments — Exchange Differences” remain indifferences” continue to form part of the Group’s consolidated equity until the asset is derecognized from the consolidated balance sheet at which time thoseor until an impairment loss is recognized in it. If these assets are sold, these amounts are recognized under the headings “Net gains (losses) on financial assets and liabilities” or “Net Exchange Differences”exchange differences”, as appropriate, in the consolidated income statement.statement for the year in which they are derecognized.
The gains from sales of other equity instruments considered strategic investments accounted for as “Available-for-sale”,registered under“Available-for-sale financial assets” are registered inrecognized under the heading “Gains (losses) in non-current assetsheld-for-sale not classified as discontinued operations” (Note 50) in the consolidated income statement, although they had not previously accounted forbeen classified in the heading “Non-current assets held-for-sale” in the consolidateda previous balance sheet as is indicated in rule 56 of the Circular 4/2004 modified by the Circular 6/2008.non-current assets held for sale (see note 52).
On the other hand, theThe net impairment (net)losses in the available-for-sale“Available-for-sale financial assetsassets” during the periodyear are recognized under the heading “Impairment oflosses on financial assets (net) — Other financial instruments not at fair value through profit or loss” in the consolidated income statements.statements for that year.
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—– “Loans and receivables”, “Held-to-maturity“Held-to-maturity investments” and “Financial liabilities at amortisedamortized cost”
Assets and liabilities recognized inunder these headings in the accompanying consolidated balance sheets are measured at “amortized cost” using the “effective interest rate” method, due toas the fact that consolidated entities has the intention to hold themsuch financial instruments to maturity.
Impairment (net)Net impairment losses of assets under these headings arising in the perioda particular year are recognized under the heading “Impairment losses on financial assets (net) — Loans and receivables” or “Impairment oflosses on financial assets (net) — Other financial instruments not valued at fair value through profit or loss” in the consolidated income statements.statement for that year.
—– “Hedging derivatives” and “Fair value changes of the hedged items in portfolio hedges of interest rate risk”
Assets and liabilities recognized inunder these headings in the accompanying consolidated balance sheets are valuedmeasured at fair value.
Changes produced subsequent to the designation of the hedging relationship in the valuationmeasurement of financial instruments designated as hedged items as well as financial instruments designated as hedging itemsunder hedge accounting are recognized based onaccording to the following criteria:
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| | • | In the fair value hedges, the changes in the fair value of the derivative and the hedged item attributable to the hedged risk are recognized inunder the heading “Net gains (losses) on financial assets and liabilities” in the consolidated income statement, with a balancing item under the headings where hedging items (“Hedging derivatives”) and the hedged items are recognized, as applicable. |
In fair value hedges of interest rate risk of a portfolio of financial instruments (portfolio-hedges), the gains or losses that arise in the measurement of the hedging instrument are recognized in the consolidated income statement, and the gains or losses that arise from the change in the fair value of the hedged item (attributable to the hedged risk) are recognized in the consolidated income statement, using, as a balancing item, the headings “Fair value changes of the hedged items in portfolio hedges of interest rate risk” in the consolidated balance sheets, as applicable.
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| • | In cash flow hedges, the gain or loss on the hedging instruments relating to the effective portion are recognized temporarily under the heading “Valuation adjustments — Cash flow hedging”. These valuation changes are recognized in the accompanying consolidated income statement at the time when the gain or loss in the hedged instrument affects profit or loss, when the forecast transaction takes place or at the maturity date of the hedged item. Almost all of the hedges used by the Group are for interest rate risks. Therefore, the valuation changes are recognized under the headings “Interest and similar income” or “Interest and similar expenses” as appropriate, in the accompanying consolidated income statement (see Note 39). Differences in the measurement of the hedging items corresponding to the ineffective portions of cash flow hedges are recognized directly in the heading “Net gains (losses) on financial assets and liabilities” in the accompanying consolidated income statement. |
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| | • | In the cash flow hedges andof net investments in a foreign operation hedges,operations, the differences produced in the effective portions of hedging items are recognized temporarily under the heading “Valuation adjustments — Cash flow hedges” and “Valuation adjustments — HedgesHedging of net investments in foreign operations” respectively.transactions” in the consolidated balance sheets. These differences in valuation changes are recognized inunder the heading “Net gains (losses) on financial assets and liabilities”exchange differences” in the consolidated income statement when the investment in the same perioda foreign operation is disposed of or periods during which the hedged instrument affects profit or loss, when forecast transaction occurs or at the maturity date of the item hedged.derecognized. |
Differences in valuation of the hedging item for ineffective portions of cash flow hedges and net investments in a foreign operation hedges are recognized directly in the heading “Net gains (losses) on– Other financial assets and liabilities” in the consolidated income statement.
— “Other financial instruments”instruments
In relationThe following exceptions have to be highlighted with respect to the aforementionedabove general criteria, we must highlight the following exceptions:criteria:
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| | • | Equity instruments whose fair value cannot be determined in a sufficiently objective manner and financial derivatives that have those instruments as their underlying asset and are settled by delivery of those instruments are measured at acquisition cost adjusted, where appropriate, byfor any related impairment loss. |
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| | • | Valuation adjustments arising onfrom financial instruments classified at Balancebalance sheet date as non-current assets held for sale are recognized with a balancing entry under the heading “Valuation Adjustmentsadjustments — Non-Current Assets HeldNon-current assets held for Sale” ofsale” in the accompanying consolidated balance sheet.sheets. |
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| b) | Impairment on financial assets |
Definition of impaired financial assets
A financial asset is considered to be impaired — and therefore its carrying amount is adjusted to reflect the effect of its impairment — when there is objective evidence that events have occurred which:
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| | • | In the case of debt instruments (loans and debt securities), give rise to a negative impact on the future cash flows that were estimated at the time the transaction was arranged. |
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| | • | In the case of equity instruments, mean that the carrying amount of these instruments cannot be recovered. |
As a general rule, the carrying amount of impaired financial instruments is adjusted with a charge to the consolidated income statement for the period in which the impairment becomes known, and theknown. The recoveries of previously recognized impairment losses are recognizedregistered, if appropriate, in the consolidated income statement for the periodyear in which the impairment is reversed or reduced, with the exception thatan exception: any recovery of previously recognized impairment losses for an investment in an equity instrument classified as financial assets available for sale which areis not recognized through consolidated profit or lossfinancial statements, but recognized under the heading “Valuation Adjustments — Available for sale Financial Assets”Available-for-sale financial assets” in the consolidated balance sheet.
BalancesThe amounts in balance sheet are considered to be impaired, and accrual of the interest thereon is suspended, when there are reasonable doubts that the balances will be recovered in fulland/or the related interest will be collected for the amounts and on the dates initially agreed upon, taking into account the guarantees received by the consolidated entities to assure (in part or in full) the performance of transactions. Amounts collected in relation to impaired loans and receivables are used to recognize the related accrued interest and any excess amount is used to reduce the principal not yet paid.
When the recovery of any recognized amount is considered to be remote, this amount is removed from the consolidated balance sheet, without prejudice to any actions taken by the consolidated entities in order to collect the amount until their rights extinguish in full through expiry, forgiveness or for other reasons.
Calculation of impairment on financial assets
The impairment on financial assets is determined by type of instrument and the category in which they are recognized. The BBVA Group recognizes impairment charges directly against the impaired asset when the likelihood of recovery is deemed remote, and uses an offsetting or allowance account when it records non-performing loan provisions.
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| • | Debt securities at amortized cost |
The amount of impairment losses of debt securities at amortisedamortized cost is measured as a function ofdepending on whether the impairment losses are determined individually or collectively.
– Impairment losses determined individually
The quantification of impairment losses on assets classified as impaired is done on an individual basis in connection with customers whose operations are equal to or exceed €1 million.
The amount of the impairment losses incurred on these instruments relates to the positive difference between their respective carrying amounts and the present values of their expected future cash flows.
The following is to be taken into consideration when estimating the future cash flows of debt instruments:
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| | • | All the amounts that are expected to be obtained over the residual life of the instrument; including, where appropriate, those which may result from the collaterals and other credit enhancements provided for the instrument (after deducting the costs required for foreclosure and subsequent sale). Impairment losses include an estimate for the possibility of collecting accrued, past due and uncollected interest. |
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| | • | The various types of risk to which each instrument is subject. |
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| | • | The circumstances in which collections will foreseeably be made. |
These cash flows are discounted using the original effective interest rate. If a financial instrument has a variable interest rate, the discount rate for measuring any impairment loss is the current effective rate determined under the contract.
As an exception to the rule described above, the market value of quoted debt instruments is deemed to be a fair estimate of the present value of their future cash flows.
Impairment losses determined collectively
The quantification ofIn respect to impairment losses resulting from the materialization of insolvency risk of the obligors (credit risk), a debt instrument is determined on a collective basis in the following two cases:impaired:
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| | • | Assets classified as impairedWhen there is evidence of customersa reduction in which the amount of their operations is less than €1 million.obligor’s capacity to pay, whether manifestly by default or for other reasons; and/or |
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| | • | Asset portfolio not impaired currently but which presents an inherent loss.When country-risk is risk materializes, understood as the risk among debtors who are resident in a particular country as a result of factors other than normal commercial risk. |
The group has policies, methods and procedures for hedging its credit risk, for both insolvency attributable to counterparties and country-risk.
These policies, methods and procedures are applied to the arrangement, study and documentation of debt instruments, risks and contingent commitments, as well as the detection of their deterioration and in the calculation of the amounts needed to cover their credit risk.
– Impairment losses determined collectively
The quantification of losses inherent in deterioration is calculated collectively, both in the case of assets classified as impaired and for the portfolio of current assets that are not currently impaired, but for which an imminent loss is expected.
Inherent loss, calculated using statistical procedures, is deemed equivalent to the portion of losses incurred at the date of preparing the accompanying consolidated financial statements that has yet to be allocated to specific transactions.
The Group realizes the estimateestimates collectively the inherent loss of credit risk corresponding to operations realized by Spanish financial entities of the Group (approximately 68.73%68.7% on Loans“Loans and receivablesreceivables” of the Group as of December 31, 2008)2010), using the parameters set by Annex IX of the Circular 4/4/2004 from Bank of Spain on the base of its experience and the Spanish banking sector information in the quantification of impairment losses and provisions for insolvencies for credit risk.
Notwithstanding the above, the Group can avail of the proprietary historic records used in its internal ratings models (IRBs), which were approved by the Bank of Spain, for some portfolios in 2008, albeit only for the purposes of estimating regulatory capital under the new Basel Accord (BIS II). It uses these internal ratings models to calculate the economic capital required in its activities and uses the expected loss concept to quantify the cost of credit risk for incorporation into its calculation of the risk-adjusted return on capital of its operations.
The provisions required under Circular 4/2004 from Bank of Spain standards fall within the range of provisions calculated using the Group’s internal ratings models.
To estimate the collective loss of credit risk corresponding to operations with nonresident in Spain registered in foreign subsidiaries, are applied methods and similar criteria, taking like reference the Bank of Spain parameters but adapting the default’s calendars to the particular circumstances of the country. However, in Mexico for consumer loans, credit cards and mortgages portfolios, as well as for credit investment maintained by the Group in the United States are using internal models for calculating the impairment losses based on historical experience of the Group (approximately 13%13.9% of the Loans“Loans and Receivablesreceivables” of the Group as of December 31, 2008)2010).
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Following is a description of the methodology used to estimate the collective loss of credit risk corresponding to operations with resident in Spain:
1. Portfolio doubtfulImpaired financial assets
TheAs a general rule, impaired debt instruments, whoever the obligor and whatever the guarantee or collateral,provided that they do not have past-due amounts with more than three months, taking into account the ageany of the past-due amounts,guarantees mentioned below, will be provisioned by applying the guarantees or collateral provided andpercentages indicated below over the economic situationamount of the customer andoutstanding risk pending, according to the guarantors.
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Inoldest past-due amount, or the case of unsecured transactions and taking into accountdate on which the age of the past-due amounts, the allowance percentages areassets were classified as follow:
| | |
Age of the Past-Due Amount
| | Allowance Percentage
|
|
Up to 6 months | | between 4,5% and 5,3% |
Over 6 months and up to 12 months | | between 27,4% and 27,8% |
Over 12 months and up to 18 months | | between 60,5% and 65,1% |
Over 18 months and up to 24 months | | between 93,3% and 95,8% |
Over 24 months | | 100% |
impaired, if earlier:
In the case of transactions secured by completed houses when the total exposure is equal or inferior 80% of the value of the guarantee or collateral and taking into account the age of the past-due amounts, the allowance percentages are as follow:Allowance Percentages for Impairment Loans
| | | | | |
Age of the Past-Due Amount | | Allowance Percentage | |
| |
Less than 3 years | | | 2 | % |
Over 3 years and upUp to 4 years6 months | | | 25 | % |
Over 4 years6 months and up to 5 years9 months | | | 50 | % |
Over 5 years9 months and up to 6 years12 months | | | 75 | % |
Over 6 years12 months | | | 100 | % |
InThe impairment on debt instruments that have one or more of the restguarantees stipulated below will be calculated by applying the above percentages to the amount of transactionsthe outstanding risk pending that exceeds the value of guarantees, in accordance with the following methodology:
Transactions secured by real propertyestate
For the purposes of calculating impairment on financial assets classified as impaired, the value of the real rights received as security will be calculated according to the type of asset secured by the real right, using the following criteria, provided they are first call and duly constituted and registered in favor of the bank.
| |
| a. | Completed home that is the primary residence of the borrower. |
Includes homes with a current certificate of habitability or occupation, issued by the corresponding administrative authority, in which the entityborrower habitually lives and has began the process to take possessionstrongest personal ties. The calculation of the pledge and taking into account the agevalue of the past-due amounts,rights received as collateral shall be 80% of the allowance percentages are as follow:cost of the completed home and the appraisal value of its current state, whichever is lower. For these purposes, the cost will be the purchase price declared by the borrower in the public deed. If the deed is manifestly old, the cost may be obtained by adjusting the original cost by an indicator that accurately reflects the average change in price of existing homes between the date of the deed and that of the calculation.
| | |
Age of the Past-Due Amount
b. | Rural buildings in use, and completed offices, premises and multi-purpose buildings. |
Includes land not declared as urbanized, and on which construction is not authorized for uses other than agricultural, forest or livestock, as appropriate; as well as multi-purpose buildings, whether or not they are linked to an economic use, that do not include construction or legal characteristics or elements that limit or make difficult their multi-purpose use and thus their easy conversion into cash. The calculation of the value of the rights received as collateral shall be 70% of the cost of the completed property or multi-purpose buildings and the appraisal value of its current state, whichever is lower. For these purposes, the cost shall be deemed to be the purchase price declared in the public deed. If the property was constructed by the borrower himself, the cost shall be calculated by the price of acquisition of the land declared in the public deed plus the value of work certificates, and including any other necessary expenses and accrued taxes
| Allowance Percentage
|
|
Up to 6 monthsc. | | between 3,8% and 4,5% |
Over 6 months and up to 12 months | | between 23,3% and 23,6% |
Over 12 months and up to 18 months | | between 47,2% and 55,3% |
Over 18 months and up to 24 months | | between 79,3% and 81,4% |
Over 24 months | | 100%Finished homes (rest). |
Includes finished homes that, at the date referred to by the consolidated annual accounts, have the corresponding current certificate of habitability or occupancy issued by the corresponding administrative authority, but that do not qualify for consideration under section a. above. The value of the rights received as collateral shall be 60% of the cost of the completed home and the appraisal value of its current state, whichever is lower.
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The cost will be the purchase price declared by the borrower in the public deed.
Debt instrumentsIn the case of finance for real estate construction, the cost will include the amount declared on the purchase deed for the land, together with any necessary expenses actually paid for its development, excluding commercial and financial expenses, plus the sum of the costs of construction as accredited by partial certificates for the work issued by experts with appropriate professional qualifications, including that corresponding to the end of the work. In the case of groups of homes that form part of developments partially sold to third parties, the cost shall be that which can be rationally imputed to the homes making up the collateral.
| |
| d. | Land, lots and other real estate assets. |
The value of the rights received as collateral shall be 50% of the cost of the lot or real-estate asset affected and the appraisal value of its current state, whichever is lower. For these purposes, the cost is made up of the purchase price declared by in the public deed, plus the necessary expenses that have actually been incurred by the borrower for the consideration of the land or lot in question as consolidated urban land, as well as those stipulated in section c. above.
Transactions secured by other collateral (not real estate)
Transactions that have as collateral any of the pledges indicated below shall be hedged by applying the following criteria:
| |
| a. | Partial cash guarantees |
Transactions that have partial cash guarantees shall be hedged by applying the coverage percentages stipulated as general criteria to the difference between the amount for which without qualifyingthey are registered in the asset and the current value of the deposits.
Transactions that have partial pledges on shares in monetary financial institutions or securities representing debt issued by government or credit institutions rated in the “negligible risk” class, or other financial instruments traded on asset markets, shall be hedged by applying the hedging percentages stipulated as doubtfula general rule to the difference between the amount for which they are registered in termsthe asset and 90% of criteria for classification as past-due, there is reasonable doubt that they will be recovered on the initially agreed terms, are analyzed individually.fair value of these financial instruments.
2. Portfolio into forceNot individually impaired assets
The debt instruments, whoever the obligor and whatever the guarantee or collateral, that do not have individually objective of impairment are collectively assesses, including the assets in a group with similar credit risk characteristics, including sector of activity of the debtor or the type of guarantee.
The allowance percentages of hedge are as follows:
| | | | | | | | | |
Risk | | Allowance Percentage | |
| |
| Negligible risk | | | 0 | % | | | 0 | % |
| Low risk | | | 0.06 | % | | | 0.75 | % |
| Medium-low risk | | | 0.15 | % | | | 1.88 | % |
| Medium risk | | | 0.18 | % | | | 2.25 | % |
| Medium-high risk | | | 0.20 | % | | | 2.50 | % |
| High risk | | | 0.25 | % | | | 3.13 | % |
Allowance Percentages for Non-Impaired transaction collectively assesses
| | |
Type of Risk | | Allowance Percentage Range |
|
| Negligible risk | | 0% |
| Low risk | | 0.06% - 0.75% |
| Medium-low risk | | 0.15% - 1.88% |
| Medium risk | | 0.18% - 2.25% |
| Medium-high risk | | 0.20% - 2.50% |
| High risk | | 0.25% - 3.13% |
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3. Country Risk Allowance or Provision
Country risk is understood as the risk associated with customers resident in a specific country due to circumstances other than normal commercial risk. Country risk comprises sovereign risk, transfer risk and other risks arising from international financial activity. On the basis of the economic performance, political situation,
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regulatory and institutional framework, and payment capacity and record, the Group classifies the transactions in different groups, assigning to each group the provisions for insolvencies percentages, which are derived from those analyses.
However, due to the dimension Group, and to risk-country management, the provision levels are not significant in relation to the balance of the provisions by constituted insolvencies (As(as of December 31, 2008,2010, this provision represents a 0.55%0.37% in the provision for insolvencies of the Group).
– Impairment onof other debt instruments
The impairment losses on debt securities included in the “Available-for-sale“Available-for-sale financial asset” portfolio are equal to the positive difference between their acquisition cost (net of any principal repayment) and their fair value, after deducting any impairment loss previously recognized in the consolidated income statement.statement and their fair value.
When there is objective evidence that the negative differences arising on measurement of these assets are due to impairment, they are no longer considered as “Valuation Adjustmentsadjustments — Available-for-Sale Financial Assets”Available-for-sale financial assets” and are recognized in the consolidated income statement. If all, or part of the impairment losses are subsequently recovered, the amount is recognized in the consolidated income statement for the year in which the recovery occurred.
Similarly, in the case– Impairment of debt instruments classified as “non-current assets held for sale”, losses previously recorded in equity are considered to be realised — and are recognized in the consolidated income statement — on the date the instruments are so classified.
Impairment on equity instruments
The amount of the impairment in the equity instruments is determined by the category where is recognized:
| | |
| | • | Equity instruments measured at fair value: The criteria for quantifying and recognisingrecognizing impairment losses on equity instruments are similar to those for other debt instruments, with the exception that any recovery of previously recognized impairment losses for an investment in an equity instrument classified as available for sale which are not recognized through profit or loss but recognized under the heading “Valuation Adjustmentsadjustments — Available for sale Financial Assets”Available-for-sale financial assets” in the accompanying consolidated balance sheet.sheet (Note 31). |
| |
| | • | Equity instruments measured at cost: The impairment losses on equity instruments measured at acquisition cost are equal to the difference between their carrying amount and the present value of expected future cash flows discounted at the market rate of return for similar securities. These impairment losses are determined taking into account the equity of the investee (except for valuation adjustments due to cash flow hedges) for the last approved (consolidated) balance sheet, adjusted for the unrealisedunrealized gains at the measurement date. |
Impairment losses are recognized in the consolidated income statement for the periodyear in which they arise as a direct reduction of the cost of the instrument. These losses may only be reversed subsequently in the event of the sale of these assets.
2.2.2. RECOGNITION OF INCOME AND EXPENSES
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| 2.2.2. | TRANSFERS AND DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES |
The most significant criteria used byaccounting treatment of transfers of financial assets depends on the Groupextent to recognize its incomewhich the risks and expensesrewards associated with the transferred assets are summarised as follows:transferred to third parties.
Interest income and expenses and similar items:
As a general rule, interest income and expenses and similar itemsFinancial assets are recognized on the basis of their period of accrual using the effective interest rate method. Specifically, the financial fees and commissions that arise on the arrangement of loans, basically origination and analysis fees must be deferred and recognized in the income statement over the expected life of the loan. The direct costs incurred in arranging these transactions can be deductedonly derecognized from the amount thus recognized. Also dividends received from other companies are recognized as incomeconsolidated balance sheet when the rights to the cash flows they generate expire or when their implicit risks and benefits have been substantially transferred out to third parties. Similarly, financial liabilities are derecognized from the consolidated companies’ rightbalance sheet only if their obligations are extinguished or acquired (with a view to receive them arises.subsequent cancellation or renewed placement).
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However, when a debt instrumentWhen the risks and benefits of transferred assets are substantially transferred to third parties, the financial asset transferred is deemed to be impaired individually or is included in the category of instruments that are impaired because of amounts more than three months past-due, the recognition of accrued interest inderecognized from the consolidated income statementbalance sheet, and any right or obligation retained or created as a result of the transfer is interrupted. This interest is recognized for accounting purposes when it is received.simultaneously recognized.
Commissions, feesThe Group is considered to have transferred substantially all the risks and similar items:benefits if such risks and benefits account for the majority of the risks and benefits involved in ownership of the transferred assets.
IncomeIf substantially all the risks and expenses relating to commissions and similar feesbenefits associated with the transferred financial asset are recognized in the consolidated income statement using criteria that vary according to their nature. The most significant income and expense items in this connection are:retained:
| | |
| | • | Those relatingThe transferred financial asset is not derecognized and continues to financial assets and liabilitiesbe measured at fair value through profit or loss. They are recognized when they are collected.in the consolidated balance sheet using the same criteria as those used before the transfer. |
| |
| | • | Those arising from transactions or servicesA financial liability is recognized at the amount of compensation received, which is subsequently measured at amortized cost and included under the heading “Financial liabilities at amortized cost — Debt certificates” in the accompanying consolidated balance sheet (see Note 23). As these liabilities do not constitute a current obligation, when measuring such a financial liability the Group deducts those financial instruments owned by it which constitute financing for the entity to which the financial assets have been transferred, to the extent that these instruments are provided over a period of time. They are recognized overdeemed to specifically finance the life of these transactions or services.assets transferred. |
| |
| | • | Those relating to a single act. TheyBoth the income generated on the transferred (but not derecognized) financial asset and the expenses of the new financial liability are recognized whenin the single act is carried out.accompanying consolidated income statements. |
Non-financial incomePurchase and expenses:sale commitments
TheseFinancial instruments sold with a repurchase agreement are recordednot derecognized from the consolidated balance sheets and the amount received from the sale is considered financing from third parties.
Financial instruments acquired with an agreement to subsequently resell them are not recognized in the accompanying consolidated balance sheets and the amount paid for accounting purposes on an accrual basis.the purchase is considered credit given to third parties.
Deferred collections and payments:Securitization
TheseIn the specific instance of the securitization funds to which the Group’s entities transfer their loan portfolios, the following indications of the existence of control are recordedconsidered for accounting purposes at the amount resulting from discountingpurpose of analyzing the expectedpossibility of consolidation:
| | |
| • | The securitization funds’ activities are undertaken in the name of the entity in accordance with its specific business requirements, with a view to generating benefits or gains from the securitization funds’ operations. |
|
| • | The entity retains decision-making power with a view to securing most of the gains derived from the securitization funds’ activities or has delegated this power in some kind of “auto-pilot” mechanism (the securitization funds are structured so that all the decisions and activities to be performed are pre-defined at the time of their creation). |
|
| • | The entity is entitled to receive the bulk of the profits from the securitization funds and is accordingly exposed to the risks inherent in their business activities. The entity retains the bulk of the securitization funds’ residual profit. |
|
| • | The entity retains the bulk of the securitization funds’ asset risks. |
If there is control based on the preceding guidelines, the securitization funds are integrated into the consolidated Group.
The consolidated Group is deemed to transfer substantially all risks and rewards if its exposure to the potential variation in the future net cash flows at market rates.of the securitized assets following the transfer is not significant. In this instance, the consolidated Group may derecognize the securitized assets.
The BBVA Group has applied the most stringent prevailing criteria in determining whether or not it retains the risks and rewards on such assets for all securitizations performed since 1 January 2004. As a result of this analysis,
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the Group has concluded that none of the securitizations undertaken since that date meet the prerequisites for derecognizing the underlying assets from the consolidated balance sheets (see Note 13.3 and Appendix VII) as it retains substantially all the risks embodied by expected loan losses or associated with the possible variation in net cash flows, as it retains the subordinated loans and lines of credit extended by the BBVA Group to these securitization funds.
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| 2.2.3. | POST-EMPLOYMENT BENEFITS AND OTHER LONG TERM COMMITMENTS TO EMPLOYEESFINANCIAL GUARANTEES |
FollowingFinancial guarantees are considered those contracts that require their issuer to make specific payments to reimburse the holder for a loss incurred when a specific borrower breaches its payment obligations on the terms — whether original or subsequently modified — of a debt instrument, irrespective of the legal form it may take. These guarantees may take the form of a deposit, financial guarantee, insurance contract or credit derivative, among others.
Financial guarantees, irrespective of the guarantor, instrumentation or other circumstances, are reviewed periodically so as to determine the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required for them. The credit risk is determined by application of criteria similar to those established for quantifying impairment losses on debt instruments measured at amortized cost (see Note 2.2.1).
The provisions made for financial guarantees classified as substandard are recognized under the heading “Provisions — Provisions for contingent exposures and commitments” in the liability side in the accompanying consolidated balance sheets (see Note 25). These provisions are recognized and reversed with a charge or credit, respectively, to “Provisions” in the accompanying consolidated income statements (see Note 48).
Income from guarantee instruments is registered under the heading “Fee and commission income” in the consolidated income statement and is calculated by applying the rate established in the related contract to the nominal amount of the guarantee (see Note 42).
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| 2.2.4. | NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITHNON-CURRENT ASSETS HELD FOR SALE |
The heading “Non-current assetsheld-for-sale” in the accompanying consolidated balance sheets recognized the carrying amount of financial or non-financial assets that are not part of operating activities of the Group. The recovery of this carrying amount is expected to take place through the price obtained on its disposal (see Note 16). The assets included under this heading are assets where an active sale plan has been initiated and approved at the appropriate level of management and it is highly probable they will be sold in their current condition within one year from the date on which they are classified as such.
This heading includes individual items and groups of items (“disposal groups”) and disposal groups that form part of a major business unit and are being held for sale as part of a disposal plan (“discontinued operations”). The individual items include the assets received by the subsidiaries from their debtors in full or partial settlement of the debtors’ payment obligations (assets foreclosed or donated in repayment of debt and recovery of lease finance transactions), unless the Group has decided to make continued use of these assets. The Group has units that specialize in real estate management and the sale of this type of asset.
Symmetrically, the heading “Liabilities associated with non-current assets held for sale” in the accompanying consolidated balance sheets reflects the balances payable arising from disposal groups and discontinued operations.
Non-current assets held for sale are generally measured at fair value less sale costs or their carrying amount upon classification within this category, whichever is the lower. Non-current assets held for sale are not depreciated while included under this heading.
The fair value of non-current assets held for sale from foreclosures or recoveries is determined taking in consideration the valuations performed by companies of authorized values in each of the geographical areas in which the assets are located. The BBVA Group requires that these valuations be no more than one year old, or less if there are other signs of impairment losses. In the case of Spain, appraisal companies entrusted with the appraisal of
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these assets are the main independent valuation and appraisal companies authorized by the Bank of Spain, that are not related parties with the BBVA Group.
As a general rule, gains and losses generated on the disposal of assets and liabilities classified as non-current held for sale, and related impairment losses and subsequent recoveries, where pertinent, are recognized in“Gains/(losses) on non-current assets held for sale not classified as discontinued operations” in the accompanying consolidated income statements (see Note 52). The remaining income and expense items associated with these assets and liabilities are classified within the relevant consolidated income statement headings.
Tangible assets — Property, plants and equipment for own use
The heading “Tangible assets — Property, plants and equipment — For own use” relates to the assets under ownership or acquired under lease finance, intended for future or current use by the Group and that it expects hold for more than one year. It also includes tangible assets received by the consolidated entities in full or part settlement of financial assets representing receivables from third parties and those assets expected to be held for continuing use.
Property, plants and equipment for own use are presented in the consolidated balance sheets at acquisition cost, less any accumulated depreciation and, where appropriate, any estimated impairment losses resulting from comparing this net value of each item with its corresponding recoverable value.
Depreciation is calculated, using the straight-line method, on the basis of the acquisition cost of the assets less their residual value; the land on which the buildings and other structures stand is considered to have an indefinite life and is therefore not depreciated.
The tangible asset depreciation charges are recognized in the accompanying consolidated income statements under the heading “Depreciation and amortization” (see Note 47) and are based on the application of the following depreciation rates (determined on the basis of the average years of estimated useful life of the various assets):
Amortization Rates for Tangible Assets
| | |
Type of Assets | | Annual Percentage |
|
| Buildings for own use | | 1.33% - 4.00% |
| Furniture | | 8% - 10% |
| Fixtures | | 6% - 12% |
| Office supplies and hardware | | 8% - 25% |
The BBVA Group’s criteria for determining the recoverable amount of these assets is based onup-to-date independent appraisals that are no more than 3-5 years old at most, unless there are other indications of impairment.
At each accounting close, the Group entities analyze whether there are internal or external indicators that a tangible asset may be impaired. When there is evidence of impairment, the entity then analyzes whether this impairment actually exists by comparing the asset’s carrying amount with its recoverable amount. When the carrying amount exceeds the recoverable amount, the carrying amount is written down to the recoverable amount and depreciation charges going forward are adjusted to reflect the asset’s remaining useful life.
Similarly, if there is any indication that the value of a tangible asset has been recovered, the consolidated entities will estimate the recoverable amounts of the asset and recognize it in the consolidated income statement, recording the reversal of the impairment loss registered in previous years and thus adjusting future depreciation charges. In no circumstances may the reversal of an impairment loss on an asset raise its carrying amount above that which it would have if no impairment losses had been recognized in prior years.
Upkeep and maintenance expenses relating to tangible assets held for own use are recognized as an expense in the year they are incurred and recognized in the accompanying consolidated income statements under the heading “Administration costs — General and administrative expenses - Property, fixtures and equipment” (see Note 46.2).
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Other assets leased out under an operating lease
The criteria used to recognize the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives and to record the impairment losses on them, are the same as those described in relation to tangible assets for own use.
Investment properties
The heading “Tangible assets — Investment properties” in the accompanying consolidated balance sheets reflects the net values of the land (purchase cost minus the corresponding accumulated repayment, and if appropriate, estimated impairment losses), buildings and other structures held either to earn rentals or for capital appreciation through sale and are neither expected to be sold off in the ordinary course of business nor are destined for own use (see Note 19).
The criteria used to recognize the acquisition cost of investment properties, calculate their depreciation and their respective estimated useful lives and record the impairment losses on them, are the same as those described in relation to tangible assets for continued use.
The criteria used by the BBVA Group to determine their recoverable value is based on independent appraisals no more than 1 year old, unless there are other indications of impairment.
The balance of the heading “Other assets — Inventories” in the accompanying consolidated balance sheets mainly reflects the land and other properties that Group’s real estate companies hold for sale as part of their property development activities (see Note 22).
The BBVA Group recognized inventories at their cost or net realizable value, whichever is lower:
| | |
| • | The cost value of inventories includes the costs incurred for their acquisition and transformation, as well as other direct and indirect costs incurred in giving them their current condition and location. |
The cost value of real estate assets accounted for as inventories is comprised of: the acquisition cost of the land, the cost of urban planning and construction, non-recoverable taxes and costs corresponding to construction supervision, coordination and management. The financial expenses incurred during the year increase by the cost value provided that the inventories require more than a year to be in a condition to be sold.
| | |
| • | The net realizable value is the estimated selling price of inventories in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. |
In the case of real estate assets accounted for as inventories, the BBVA Group’s criteria for obtaining their net realizable value is mainly based on independent appraisals of no more than one year old, or less if there are other indications of impairment In the case of Spain, appraisal companies entrusted with the appraisal of these assets are the main independent valuation and appraisal companies included in the Bank of Spain’s official register.
The amount of any inventory valuation adjustment for reasons such as damage, obsolescence, reduction in sale price to its net realizable value, as well as losses for other reasons and, if appropriate, subsequent recoveries of value up to the limit of the initial cost value, are registered under the heading “Impairment losses on other assets (net) — Other assets” in the accompanying consolidated income statements (see Note 50) for the year in which they are incurred.
In the sale transactions, the carrying amount of inventories is derecognized from the balance sheet and recognized as an expense under the heading “Other operating expenses — Changes in inventories” in the year which the income from its sale is recognized. This income is recognized under the heading “Other operating income — Financial income from non-financial services” in the consolidated income statements (see Note 45).
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| 2.2.7. | BUSINESS COMBINATIONS |
The result of a business combination is that the Group obtains control of one or more entities. It is accounted for appliyng the acquisition method.
The acquisition method records business combinations from the point of view of the acquirer, who has to recognize the assets acquired and the liabilities and contingent liabilities assumed, including those that the acquired entity had not recognized. The adquisition method can be summed up as a measurement of the cost of the business combination and its allocation to the assets, liabilities and contingent liabilities measured according to their fair value, at the purchase date.
In addition, and pursuant to the new IFRS 3, the purchasing entity shall recognize an asset in the balance sheet under the heading “Intangible Asset — Goodwill” when there is a positive difference on the date of purchase between the sum of the fair value of the price paid, the amount of all the non-controlling interests and the fair value of stock previously held in the acquired entity; and the fair value of the assets acquired and liabilities assumed. If this difference is negative, it shall be recognized directly in the income statement under the heading “Negative Goodwill in business combinations”. The non-controlling interests mentioned may be valued in two ways: at their fair value, or at the proportional percentage of net assets identified in the acquired entity. The form of valuating the non-controlling holdings may be chosen in each business combination.
The purchase of non-controlling interests subsequent to the takeover of the entity is recognized as capital transactions. In other words, the difference between the price paid and the carrying amount of the percentage of non-controlling interests acquired is charged directly to equity.
Goodwill
Goodwill represents payment in advance by the acquiring entity for the future economic benefits from assets that cannot be individually identified and separately recognized. It is only recognized as goodwill when the business combinations are acquired at a price. Goodwill is never amortized. It is subject periodically to an impairment analysis, and impaired goodwill is written off if appropriate.
For the purposes of the impairment analysis, goodwill is allocated to one or more cash-generating units expected to benefit from the synergies arising from business combinations. The cash-generating units represent the Group’s smallest identifiable asset groups that generate cash flows for the Group and that are largely independent of the flows generated from other assets or groups of assets. Each unit or units to which goodwill is allocated:
| | |
| • | Is the lowest level at which the entity manages goodwill internally. |
|
| • | Is not larger than an operating segment. |
The cash-generating units to which goodwill has been allocated are tested for impairment by including the allocated goodwill in their carrying amount. This analysis is performed at least annually and always if there is any indication of impairment.
For the purpose of determining the impairment of a cash-generating unit to which a part of goodwill has been allocated, the carrying amount of that unit, adjusted by the theoretical amount of the goodwill attributable to the non-controlling interests, in the event they are not valued at fair value, is compared with its recoverable amount.
The recoverable amount of a cash-generating unit is equal to the higher value between the fair value less costs to sell and its value in use. Value in use is calculated as the discounted value of the cash flow projections that the Division estimates and is based on the latest budgets approved for the next three years. The principal hypotheses are a sustainable growth rate to extrapolate the cash flows indefinitely, and the discount rate used to discount the cash flows is equal to the cost of the capital assigned to each cash-generating unit, which is made up of the risk-free rate plus a risk premium.
If the carrying amount of the cash-generating unit exceeds the related recoverable amount, the Group recognizes an impairment loss; the resulting loss is apportioned by reducing, first, the carrying amount of the
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goodwill allocated to that unit and, second, if there are still impairment losses remaining to be recognized, the carrying amount of the rest of the assets. This is done by allocating the remaining loss in proportion to the carrying amount of each of the assets in the unit. In the event the non-controlling interests are not valued at fair value, the deterioration of goodwill attributable to minority interests will be recognized. No impairment of goodwill attributable to the minority interests may be recognized.
In any case, impairment losses on goodwill can never be reversed. Impairment losses on goodwill are recognized under the heading “Impairment losses on other assets (net) — Goodwill and other intangible assets” in the accompanying consolidated income statements (see Note 50).
Other intangible assets
These assets may have an indefinite useful life if, based on an analysis of all relevant factors, it is concluded that there is no foreseeable limit to the year over which the asset is expected to generate net cash flows for the consolidated entities. In all other cases they have a finite useful life.
The Group has not recognized any intangible assets with an indefinite useful life.
Intangible assets with a finite useful life are amortized according to this useful life, using methods similar to those used to depreciate tangible assets. The depreciation charge of these assets is recognized in the accompanying consolidated income statements under the heading “Depreciation and amortization” (see Note 47).
The consolidated entities recognize any impairment loss on the carrying amount of these assets with charge to the heading “Impairment losses on other assets (net) — Goodwill and other intangible assets” in the accompanying consolidated income statements (see Note 50). The criteria used to recognize the impairment losses on these assets and, where applicable, the recovery of impairment losses recognized in prior years are similar to those used for tangible assets.
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| 2.2.9. | INSURANCE AND REINSURANCE CONTRACTS |
The assets of the Group’s insurance companies are recognized according to their nature under the corresponding headings of the accompanying consolidated balance sheets and their registration and valuation is carried out according to the criteria in this Note 2.
The heading “Reinsurance assets” in the accompanying consolidated balance sheets includes the amounts that the consolidated entities are entitled to receive under the reinsurance contracts entered into by them with third parties and, more specifically, the share of the reinsurer in the technical provisions recognized by the consolidated insurance entities (see Note 18).
The heading “Liabilities under insurance contracts” in the accompanying consolidated balance sheets includes the technical provisions for direct insurance and inward reinsurance recognized by the consolidated entities to cover claims arising from insurance contracts in force at period-end (see Note 24).
The income or expense reported by the Group’s insurance companies on their insurance activities is recognized, attending to it nature in the corresponding items of the accompanying consolidated income statements.
In the insurance activity carried out by the Group’s insurance companies, the amount of the premiums from insurance contracts written are credited to income and the cost of any claims that may be met when they are finally settled are charged to the income statement. Both the amounts charged and not paid and the costs incurred and not paid at the date in question are accrued at the end of each year.
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The most significant items that are subject to previsions by consolidated insurance entities in relation to direct insurance contracts that they arranged (see Note 24) are as follows:
| | |
| • | Life insurance provisions: Represents the value of the net obligations undertaken with the life insurance policyholder. These provisions include: |
| | |
| - | Provisions for unearned premiums. These are intended for the accrual, at the date of calculation, of the premiums written. Their balance reflects the portion of the premiums accrued until the closing date has to be allocated to the year from the closing date to the end of the policy period. |
|
| - | Mathematical reserves: Represents the value of the life insurance obligations of the insurance companies at the year-end, net of the policyholder’s obligations. |
| | |
| • | Non-life insurance provisions: |
| | |
| - | Provisions for unearned premiums. These provisions are intended for the accrual, at the date of calculation, of the premiums written. Their balance reflects the portion of the premiums accrued until year-end that has to be allocated to the period between the year-end and the end of the policy period. |
|
| - | Provisions for unexpired risks: the provision for unexpired risks supplements the provision for unearned premiums by the amount by which that provision is not sufficient to reflect the assessed risks and expenses to be covered by the insurance companies in the policy period not elapsed at the year-end. |
| | |
| • | Provision for claims: This reflects the total amount of the outstanding obligations arising from claims incurred prior to the year-end. Insurance companies calculate this provision as the difference between the total estimated or certain cost of the claims not yet reported, settled or paid, and the total amounts already paid in relation to these claims. |
|
| • | Provision for bonuses and rebates: this provision includes the amount of the bonuses accruing to policyholders, insurees or beneficiaries and the premiums to be returned to policyholders or insurees, as the case may be, based on the behavior of the risk insured, to the extent that such amounts have not been individually assigned to each of them. |
|
| • | Technical provisions for reinsurance ceded: calculated by applying the criteria indicated above for direct insurance, taking account of the assignment conditions established in the reinsurance contracts in force. |
|
| • | Other technical provisions: insurance companies have recognized provisions to cover the probable mismatches in the market reinvestment interest rates with respect to those used in the valuation of the technical provisions. |
The Group controls and monitors the exposure of the insurance companies to financial risk and, to this end, uses internal methods and tools that enable it to measure credit risk and market risk and to establish the limits for these risks.
| |
| 2.2.10. | TAX ASSETS AND LIABILITIES |
Corporation tax expense in Spain and the expense for similar taxes applicable to the consolidated entities abroad are recognized in the consolidated income statement, except when they result from transactions on which the profits or losses are recognized directly in equity, in which case the related tax effect is also recognized in equity.
The current income tax expense is calculated by aggregating the current tax arising from the application of the related tax rate to the taxable profit (or tax loss) for the year (after deducting the tax credits allowable for tax purposes) and the change in deferred tax assets and liabilities recognized in the consolidated income statement.
Deferred tax assets and liabilities include temporary differences, measured at the amount expected to be payable or recoverable on future fiscal years for the differences between the carrying amount of assets and liabilities and their tax bases, and tax loss and tax credit carry forwards. These amounts are measured applying to each temporary difference the tax rates that are expected to apply when the asset is realized or the liability settled (Note 21).
F-30
The “Tax Assets” chapter of the accompanying consolidated balance sheets includes the amount of all the assets of a tax nature, and distinguishes between: “Current” (amounts recoverable by tax in the next twelve months) and “Deferred” (including taxes recoverable in future years, including loss carryforwards or tax credits for deductions and tax rebates pending application).
The “Tax Liabilities” chapter of the accompanying consolidated balance sheets includes the amount of all the liabilities of a tax nature, except for provisions for taxes, broken down into: “Current” (income tax payable on taxable profit for the year and other taxes payable in the next twelve months) and “Deferred” (income taxes payable in subsequent years).
Deferred tax liabilities in relation to taxable temporary differences associated with investments in subsidiaries, associates or jointly controlled entities are recognized as such, except where the Group can control the timing of the reversal of the temporary difference and it is unlikely that it will reverse in the foreseeable future.
Deferred tax assets are recognized to the extent that it is considered probably that the consolidated entities will have sufficient taxable profits in the future against which the deferred tax assets can be utilized and are not from the initial recognition (except in the case of a combination of business) of other assets or liabilities in a transaction that does not affect the fiscal outcome or the accounting result.
The deferred tax assets and liabilities recognized are reassessed by the consolidated entities at each balance sheet date in order to ascertain whether they are still current, and the appropriate adjustments are made on the basis of the findings of the analyses performed.
The income and expenses directly recognized in equity that do not increase or decrease taxable income are accounted as temporary differences.
| |
| 2.2.11. | PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES |
The heading “Provisions” in the accompanying consolidated balance sheets includes amounts recognized to cover the Group’s current obligations arising as a result of past events. These are certain in terms of nature but uncertain in terms of amountand/or cancellation date. The settlement of these obligations is deemed likely to entail an outflow of resources embodying economic benefits (see Note 25). The obligations may arise in connection with legal or contractual provisions, valid expectations formed by Group companies relative to third parties in relation to the assumption of certain responsibilities or through virtually certain developments of particular aspects of applicable regulation, specifically draft legislation to which the Group will certainly be subject.
Provisions are recognized in the balance sheet when each and every one of the following requirements is met: The Group has an existing obligation resulting from a past event and, at the consolidated balance sheet date, it is more likely than not that the obligation will have to be settled; it is probable that to settle the obligation the entity will have to give up resources embodying economic benefits; and a reliable estimate can be made of the amount of the obligation. Among other items they include provisions for commitments to employees mentioned in section 2.2.12, as well as provisions for tax and legal litigation.
Contingent assets are possible assets that arise from past events and whose existence is conditional on, and will be confirmed only by the occurrence or non-occurrence of, events beyond the control of the Group. Contingent assets are not recognized in the consolidated balance sheet or in the consolidated income statement; however, they are disclosed in the notes to financial statements, provided that it is probable that these assets will give rise to an increase in resources embodying economic benefits (see Note 36).
Contingent liabilities are possible obligations of the Group that arise from past events and whose existence is conditional on the occurrence or non-occurrence of one or more future events beyond the control of the entity. They also include the existing obligations of the entity when it is not probable that an outflow of resources embodying economic benefits will be required to settle them or when, in extremely rare cases, their amount cannot be measured with sufficient reliability.
F-31
| |
| 2.2.12. | POST-EMPLOYMENT BENEFITS AND OTHER LONG-TERM COMMITMENTS TO EMPLOYEES |
Below is a description of the most significant accounting criteria relating to the commitments to employees, related to post-employment benefits and other long term commitments, of certain Group companies in Spain and abroad (Note 25)(see Note 26).
Commitments valuation: assumptions and actuarial gains/losses recognition
The present values of the commitments are quantified on acase-by-case basis. The valuation method used for current employees isCosts are calculated using the projected unit credit method, which views each yearsees cach period of service as giving rise to an additional unit of benefit entitlementbenefit/commitment and measures each unit separately.separately to build up the final obligation.
In adopting the actuarial assumptions, it isthe following are taken into account that:account:
| | |
| | • | They are unbiased, in that they are neither imprudentnot unduly aggressive nor excessively conservative. |
| |
| | • | They are mutually compatible, reflecting the economic relationships between factors such as inflation, rates of salary increase, discount rates and expected return of assets. The expected return of plan assets in the post-employment benefits is estimated taking into account the market expectations and the distribution of such assets in the different portfolios. |
| |
| | • | The future levels of salaries and benefits are based on market expectations at the balance sheet date for the period over which the obligations are to be settled. |
| |
| | • | The discount rate used is determined by reference to market yields at the balance sheet date on high quality corporate bonds.bonds or debentures. |
The Group recognizes all actuarial differences under “Provisions”the heading “Provisions (net)” (see Note 48) in the accompanying consolidated income statement forstatements in the yearperiod in which they arise in connection with commitments assumed by the Group in connection with personnel availing offor its staff’s early retirement schemes, benefits awarded for seniority pre-retirement widowhood and disability benefits awarded as a function of years of employee service in the Group, and other similar concepts.
F-22
The Group recognizes the actuarial gains or losses arising on all other defined benefit post-employment commitments directly inunder the heading “Reserves” within the Group’s consolidated equity, in accordance with standard 35 of Bank of Spain Circular 4/2004 (as amended by Circular 6/2008). Specifically, the balance of actuarial differences is recognized in “Actuarial gains and losses in post-employment plans” within “Net income recognized directly in equity — Other recognized income (expenses)”(see Note 29) in the accompanying consolidated statement of changes in total equity.balance sheets.
The Group does not apply the option of deferring actuarial gains and losses in equityto any of its employee commitments using the so-called corridor approach in any commitment to employees.approach.
Post-employment benefits
—• Pensions
Post-employment benefits include defined contributiondefined-contribution and defined obligationdefined-benefit commitments.
Defined contribution– Defined-contribution commitments:
The amounts of these commitments are determined as a percentage of certain remuneration itemsand/or as a pre-established annual amount. The current contributions made each period by the Group’s companies for defined contribution retirementdefined-contribution commitments, which are recognized with a charge to the heading “Personnel Expenses —expenses- Contributions to external pension funds” in the accompanying consolidated income statements (Notes 25 and 45)(see Note 46).
Defined benefit– Defined-benefit commitments
CertainSome of the Group’s companies have defined benefitdefined-benefit commitments for permanent disability and death offor certain current employees and early retirees; and defined-benefit retirement commitments applicable only to certain groups of serving employees, or early retired employees and of retired employees. Defined benefitDefined-benefit commitments are funded by insurance contracts and internal Group provisions.
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The amounts recognized in the heading “Provisions — FundsProvisions for Pensionspensions and Similar Obligations” (Note 24)similar obligations” (see Note 25) are the differences between the present values of the vested obligations for defined obligation retirementdefined-benefit commitments at balance sheet date, adjusted by the priorpast service cost and the fair value of plan assets, if it the case,applicable, which are to be used directly to settle employee benefit obligations.
The provisions for defined obligation retirementThese commitments wereare charged to the heading “Provisions (net) — Provisions to pension commitmentsPension funds and similar obligations” in the accompanying consolidated income statements (Note 46)(see Note 48).
The current contributions made by the Group’s companies for defined obligation retirementdefined-benefit commitments covering current employees are charged to the heading “Personnel Expenses”“Administration cost — Personnel expenses” in the accompanying consolidated income statements.statements (see Note 46).
—• Early retirements
In 2008, theThe Group offered certainsome employees in Spain the possibility of taking early retirement before the age stipulated in the collective labor agreement then in force. The corresponding provisions by the Group were recognized with a charge to the heading “Provision Expense (Net)“Provisions (net) — Transfers to FundsProvisions for Pensionspensions and Similar Obligations — Early Retirements”similar obligations” in the accompanying consolidated income statements.statements (see note 48). The present values for early retirement are quantified on acase-by-case basis and they are recognized in the heading “ProvisionsProvisions — Provisions for Pensionspensions and Similar Obligations”similar obligations” in the accompanying consolidated balance sheets (Note 24)(see Note 25).
The commitments to early retirees include the compensation and indemnities and contributions to external pension funds payable during the year of early retirement. The commitments relating to this group of employees after they have reached thenormal retirement age of effective retirement are included in the employee welfare system.previous section “Pensions”.
F-23
— Post-employment• Other post-employment welfare benefits
Certain GroupSome of the Group’s companies have welfare benefit commitments thewhose effects of which extend beyond the retirement of the employees entitled to the benefits. These commitments relate to certain current employees and retirees, depending upon the employee group to which they belong.
The present values of the vested obligations for post-employment welfare benefits are quantified on acase-by-case basis. They are recognized in the heading “Provisions — FundsProvisions for Pensionspensions and Similar Obligations”similar obligations” in the accompanying consolidated balance sheets (Note 24)(see Note 25) and they are charged to the heading “Personnel expenses — Other personnel expenses” in the accompanying consolidated income statements (Note 45)(see Note 46).
• Other long termlong-term commitments to employees
Certain GroupSome of the Group’s companies are obliged to deliver partially or fully subsidised goods and services. The most significant, employee welfare benefits granted, in terms of the type of compensation and the event giving rise to the commitments are:are as follows: loans to employees, life insurance, study aidassistance and long-service bonuses.awards.
TheSome of these commitments are measured according to actuarial studies, so that the present values of the vested obligations for commitments with personnel are quantified on acase-by-case basis. They are recognized in the heading “Provisions — Funds for Pensions and Similar Obligations”Other provisions” in the accompanying consolidated balance sheets (Note 24)(see Note 25).
The post-employment welfare benefits delivered by the Spanish companies to active employees are recognized in the heading “Personnel expenses — Other personnel expenses” in the accompanying income statements (Note 45)(see Note 46).
Other commitments for current employees accrue and are settled on a yearly basis, so it is not necessary to record a provision in this connection.
| |
| 2.2.13. | EQUITY-SETTLED SHARE-BASED PAYMENT TRANSACTIONS |
2.2.4. FOREIGN CURRENCY TRANSACTIONS AND EXCHANGE DIFFERENCES
Equity-settled share-based payment transactions, when the instruments granted do not vest until the counterparty completes a specified period of service, shall be accounted for those services as they are rendered by the counterparty during the vesting period, with a corresponding increase in equity. The entity measures the goods or
F-33
services received and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the entity measures their value and the corresponding increase in equity indirectly, by reference to the fair value of the equity instruments granted, at grant date.
When the initial compensation agreement includes what may be considered market conditions among its terms, any changes in these conditions will not be reflected on the profit and loss account, as these have already been accounted for in calculating their initial fair value. Non-market vesting conditions are not taken into account when estimating the initial fair value of instruments, but they are taken into account when determining the number of instruments to be granted. This will be recognized on the income statement with the corresponding increase in equity.
| |
| 2.2.14. | TERMINATION BENEFITS |
Termination benefits must be recognized when the Group is committed to severing its contractual relationship with its employees and, to this end, has a formal detailed redundancy plan. At the date these consolidated financial statements were prepared, there was no plan to reduce staff in the Group’s companies that would make it necessary to set aside provisions for this item.
The amount of the equity instruments that the Group’s entities own is recognized under “Stockholders’ funds — Treasury stock” in the accompanying consolidated balance sheets. The balance of this heading relates mainly to the Bank’s shares and share derivatives held by some of its consolidated companies (see Note 30).
These financial assets are recognized at acquisition cost, and the gains or losses arising on their disposal are credited or debited, as appropriate, to the heading “Stockholders’ funds -Reserves” in the accompanying consolidated balance sheets (see Note 29).
| |
| 2.2.16. | FOREIGN CURRENCY TRANSACTIONS AND EXCHANGE DIFFERENCES |
The Group’s functional currency is the euro. Therefore, all balances and transactions denominated in currencies other than the euro are deemed to be denominated in “foreign currency”. The balances in the financial statements of consolidated entities whose functional currency is not the euro are translatedconverted to euros as follows:
| | |
| | • | Assets and liabilities: at the average spot exchange rates as of December 31, 2008, 2007 and 2006.the date of each of the accompanying consolidated balance sheets. |
| |
| | • | Income and expenses and cash flows: at the average exchange rates of the year.for each year presented. |
| |
| | • | Equity items: at the historical exchange rates. |
The exchange differences arising onfrom the translationconversion of foreign currency balances to the functional currency of the consolidated entities (or entities accounted for equity method) and their branches are generally recordedrecognized in the “Exchange differences (net)” in the consolidated income statement. Exceptionally, the exchange differences arising on non-monetary items whose fair value is adjusted with a balancing item in equity are recordedrecognized under the heading “Valuation Adjustmentsadjustments — Exchange Differences” ofdifferences” in the consolidated balance sheet.
The exchange differences arising onfrom the translationconversion to euros of balances in the functional currencies of the consolidated entities (or entities accounted for equity method) whose functional currency is not the euro are recordedrecognized under the heading “Valuation Adjustmentsadjustments — Exchange Differences”differences” in the consolidated balance sheetsheet. Meanwhile, the differences arising from the conversion to euros of the financial statements of entities accounted for by the equity method are recognized under the heading “Valuation adjustments — Entities accounted for using the equity method” until the item to which they relate is derecognized, at which time they are recordedrecognized in the income statement.
F-24
The breakdown of the main balances in foreign currencycurrencies of the accompanying consolidated balance sheetsheets as of December 31, 2010, 2009 and 2008, 2007 and 2006, based on the nature of the related items, was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Assets — | | | 181,108 | | | | 168,983 | | | | 126,190 | |
| Cash and balances with Central Banks | | | 11,579 | | | | 10,097 | | | | 8,858 | |
| Financial held for trading | | | 20,324 | | | | 28,561 | | | | 22,398 | |
| Available-for-sale financial assets | | | 20,780 | | | | 21,159 | | | | 14,801 | |
| Loans and receivables | | | 120,168 | | | | 102,987 | | | | 71,728 | |
| Investments in entities accounted for using the equity method | | | 589 | | | | 523 | | | | 66 | |
| Tangible assets | | | 2,016 | | | | 2,026 | | | | 1,661 | |
| Other | | | 5,652 | | | | 3,630 | | | | 6,678 | |
Liabilities — | | | 214,929 | | | | 189,683 | | | | 135,829 | |
| Financial held for trading | | | 6,168 | | | | 1,893 | | | | 1,879 | |
| Financial liabilities at amortised cost | | | 201,295 | | | | 181,611 | | | | 128,154 | |
| Other | | | 7,466 | | | | 6,179 | | | | 5,796 | |
The breakdown of the balances in foreign currencies of the consolidated balance sheet as of December 31, 2008 and 2007, based onwith reference to the most significant foreign currencies, are set forth in the following table:
| | | | | | | | | | | | | | | | | |
2008 | | USD | | | Mexican Pesos | | | Other Foreign | | | Total | |
| | | Millions of euros | |
| |
Assets — | | | 86,074 | | | | 52,819 | | | | 42,215 | | | | 181,108 | |
| Cash and balances with Central Banks | | | 2,788 | | | | 5,179 | | | | 3,612 | | | | 11,579 | |
| Financial assets held for trading | | | 4,137 | | | | 13,184 | | | | 3,003 | | | | 20,324 | |
| Available-for-sale financial assets | | | 10,321 | | | | 5,613 | | | | 4,846 | | | | 20,780 | |
| Loans and receivables | | | 65,928 | | | | 26,168 | | | | 28,072 | | | | 120,168 | |
| Investments in entities accounted for using the equity method | | | 5 | | | | 103 | | | | 481 | | | | 589 | |
| Tangible assets | | | 802 | | | | 729 | | | | 485 | | | | 2,016 | |
| Other | | | 2,093 | | | | 1,843 | | | | 1,716 | | | | 5,652 | |
Liabilities — | | | 119,107 | | | | 50,103 | | | | 45,719 | | | | 214,929 | |
| Financial liabilities held for trading | | | 1,192 | | | | 3,919 | | | | 1,057 | | | | 6,168 | |
| Financial liabilities at amortised cost | | | 116,910 | | | | 42,288 | | | | 42,097 | | | | 201,295 | |
| Other | | | 1,005 | | | | 3,896 | | | | 2,565 | | | | 7,466 | |
Appendix IX.
F-25F-34
| | | | | | | | | | | | | | | | | |
2007 | | USD | | | Mexican Pesos | | | Other foreign | | | Total | |
| | | Millions of euros | |
| |
Assets — | | | 73,296 | | | | 58,449 | | | | 37,238 | | | | 168,983 | |
| Cash and balances with Central Banks | | | 1,785 | | | | 5,459 | | | | 2,853 | | | | 10,097 | |
| Financial assets held for trading | | | 5,963 | | | | 20,203 | | | | 2,395 | | | | 28,561 | |
| Available-for-sale financial assets | | | 10,477 | | | | 5,227 | | | | 5,455 | | | | 21,159 | |
| Loans and receivables | | | 52,311 | | | | 26,436 | | | | 24,240 | | | | 102,987 | |
| Investments in entities accounted for using the equity method | | | 5 | | | | 72 | | | | 446 | | | | 523 | |
| Tangible assets | | | 737 | | | | 823 | | | | 466 | | | | 2,026 | |
| Other | | | 2,018 | | | | 229 | | | | 1,383 | | | | 3,630 | |
Liabilities — | | | 95,939 | | | | 53,021 | | | | 40,723 | | | | 189,683 | |
| Financial liabilities held for trading | | | 1,441 | | | | 18 | | | | 434 | | | | 1,893 | |
| Financial liabilities at amortised cost | | | 93,835 | | | | 49,647 | | | | 38,129 | | | | 181,611 | |
| Other | | | 663 | | | | 3,356 | | | | 2,160 | | | | 6,179 | |
| |
| 2.2.17. | RECOGNITION OF INCOME AND EXPENSES |
The most significant criteria used by the Group to recognize its income and expenses are as follows:
Interest income and expenses and similar items
As a general rule, interest income and expenses and similar items are recognized on the basis of December 31, 2006their period of accrual using the balances heldeffective interest rate method. Specifically, the financial fees and commissions that arise on the arrangement of loans, basically origination and analysis fees, must be deferred and recognized in foreign currency, approximately 64%the income statement over the expected life of assetsthe loan. The direct costs incurred in arranging these transactions can be deducted from the amount thus recognized. Also dividends received from other companies are recognized as income when the consolidated companies’ right to receive them arises.
However, when a debt instrument is deemed to be impaired individually or is included in the category of instruments that are impaired because of amounts more than three months past-due, the recognition of accrued interest in the consolidated income statement is interrupted. This interest is recognized for accounting purposes as income, as soon it is received, from the recovery of the impairment loss.
Commissions, fees and 64%similar items
Income and expenses relating to commissions and similar fees are recognized in the consolidated income statement using criteria that vary according to the nature of liabilities were related to transactionssuch items. The most significant income and expense items in Mexican pesosthis connection are:
| | |
| • | Those relating to financial assets and liabilities measured at fair value through profit or loss, which are recognized when collected. |
|
| • | Those arising from transactions or services that are provided over a period of time, which are recognized over the life of these transactions or services. |
|
| • | Those relating to single acts, which are recognized when this single act is carried out. |
Non-financial income and US dollars.expenses
These are recognized for accounting purposes on an accrual basis.
Deferred collections and payments
These are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market rates.
| |
2.2.5. | ENTITIES AND BRANCHES LOCATED IN COUNTRIES WITH HYPERINFLATIONARY ECONOMIES |
None of the functional currencies of the consolidated subsidiaries and associates and their branches located abroad relate to hyperinflationary economies as defined by EU-IFRSs required to be applied under the Bank of Spain’s Circular 4/2004. Accordingly, as of December 31, 2008, 2007 and 2006 it was not necessary to adjust the financial statements of any of the consolidated subsidiaries or associates to correct for the effect of inflation.
| |
2.2.6. | NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
The heading “Non-current Assets Held for Sale” in the accompanying consolidated balance sheets reflects the carrying amount of the assets that are not included in operating activities — composing a “disposal group” or forming part of a business unit that the Group intends to sell (“discontinued operations”) — i.e., assets where an active program to locate a buyer and complete the plan has been initiated and approved at the appropriate level of management and it is highly probable they will be sold in their current condition within one year from the date on which are classified as such. Therefore, the carrying amount of these assets — which can be financial or non-financial but are not included in Group’s operating activities — will foreseeably be recovered through the price obtained on their sale.
Within this heading, a distinction is made between individual assets and groups of assets that are to be disposed of along with related liabilities (“disposal groups”) and disposal groups that form part of a major business unit and are being held for sale as part of a disposal plan (“discontinued operations”).
The individual headings include, the assets received by the consolidated entities from their debtors in full or partial settlement of the debtors’ payment obligations (assets foreclosed or donated in repayment of debt) are treated as non-current assets held for sale, unless the consolidated entities have decided to make continuing use of these assets.
Symmetrically, the heading “Liabilities Associated with Non-current Assets Held for Sale” in the accompanying consolidated balance sheets reflects the balances payable arising on disposal groups and discontinued operations.
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Non-current assets held for sale are generally measured at the lower of fair value less costs to sell and their carrying amount upon classification within this category. Non-current assets held for sale are not depreciated while included under this heading.
As a general rule, gains and losses generated on the disposal of assets and liabilities classified as non-current held for sale, and related impairment losses and subsequent recoveries, where pertinent, are recognized in “Gains/(losses) on non-current assets held for sale not classified as discontinued operations” of the accompanying consolidated income statements. The remaining income and expense items associated with these assets and liabilities are classified within the corresponding income statement headings.
| |
2.2.7.2.2.18. | SALES AND INCOME FROM THE PROVISION OF NON-FINANCIAL SERVICES |
The heading “Other operating income — Sales andFinancial income from non financialnon-financial services” ofin the accompanying consolidated income statementstatements includes the carrying amount of the sales of assets and income from the services provided by the consolidated Group companies that are not financial institutions. In the case of the Group, these companies are mainly real estate and services companies.
2.2.8. INSURANCE AND REINSURANCE CONTRACTS
In accordance with standard accounting practice in the insurance industry, the consolidated insurance entities credit to the income statement the amounts of the premiums written and charge to income the cost of the claims incurred on final settlement thereof. Insurance entities are therefore required to accrue at period-end the unearned revenues credited to their income statements and the accrued costs not charged to income.
The most significant accruals recorded by the consolidated entities in relation to direct insurance contracts arranged by them relate to the following (Note 23):
| | |
| • | Mathematical provisions, which include: |
| | |
| • | Life insurance provisions: these represent the value of the life insurance obligations of the insurance companies at period-end, net of the obligations of the policyholder. |
|
| • | Non-life insurance provisions: provisions for unearned premiums. These provisions are intended for the accrual, at the date of calculation, of the premiums written. Their balance reflects the portion of the premiums accrued in the year that has to be allocated to the period from the reporting date to the end of the policy period. |
|
| • | Provision for claims: this reflects the total amount of the obligations outstanding arising from claims incurred prior to the reporting date. The insurance companies calculate this provision as the difference between the total estimated or certain cost of the claims not yet reported, settled or paid, and the total amounts already paid in relation to these claims. |
| | |
| • | Provisions for unexpired risks and other provisions, which include: |
| | |
| • | Non-life insurance provisions — unexpired risks: the provision for unexpired risks supplements the provision for unearned premiums by the amount by which that provision is not sufficient to reflect the assessed risks and expenses to be covered by the insurance companies in the policy period not elapsed at period-end. |
|
| • | Technical provisions for reinsurance ceded: calculated by applying the criteria indicated above for direct insurance, taking account of the cession conditions established in the reinsurance contracts in force. |
|
| • | Other technical provisions: the insurance companies have recognized provisions to cover the probable mismatches in the market reinvestment interest rates with respect to those used in the measurement of the technical provisions. |
| | |
| • | Provision for bonuses and rebates: this provision includes the amount of the bonuses accruing to policyholders, insurees or beneficiaries and the premiums to be returned to policyholders or insurees, as |
F-27
| | |
| | the case may be, based on the behaviour of the risk insured, to the extent that such amounts have not been individually assigned to each of them. |
The Group controls and monitors the exposure of the insurance companies to financial risk and, to this end, uses internal methods and tools that enable it to measure credit risk and market risk and to establish the limits for these risks.
Reinsurance assets and Liabilities under insurance contracts —
The heading “Reinsurance Assets” in the accompanying consolidated balance sheets includes the amounts that the consolidated entities are entitled to receive under the reinsurance contracts entered into by them with third parties and, more specifically, the share of the reinsurer in the technical provisions recorded by the consolidated insurance entities (Note 18)(see Note 45).
The heading “Liabilities under Insurance Contracts” in the accompanying consolidated balance sheets includes the technical reserves of direct insurance and inward reinsurance recorded by the consolidated entities to cover claims arising from insurance contracts in force at period-end (Note 23).
The income or loss reported by the Group’s insurance companies on their insurance activities is recorded, attending to it nature in the corresponding items of the consolidated income statement.
2.2.9. TANGIBLE ASSETS
Non-current tangible assets for own use:
The heading Non-Current Tangible Assets for own use relates to the assets, under ownership or acquired under finance leases, intended to the future or current use by the Group and that it is expected to be held for more than one year. It also includes tangible assets received by the consolidated entities in full or part settlement of financial assets representing receivables from third parties and those assets expected to be held for continuing use.
Non-Current tangible assets for own use are presented in the consolidated balance sheets at acquisition cost less any accumulated depreciation and, where appropriate, any estimated impairment losses (net carrying amount higher than fair value).
Depreciation is calculated, using the straight-line method, on the basis of the acquisition cost of the assets less their residual value; the land on which the buildings and other structures stand has an indefinite life and, therefore, is not depreciated.
The period tangible asset depreciation charge is recognized with a balancing entry in the consolidated income statement and is based on the application of the following depreciation rates (determined on the basis of the average years of estimated useful life of the various assets):
| | | | |
| | Annual Percentage | |
|
Buildings for own use | | | 1.33% a 4% | |
Furniture | | | 8% to 10% | |
Fixtures | | | 6% to 12% | |
Office supplies and computerisation | | | 8% to 25% | |
At each close, the entities analyze whether there are internal or external indicators that a tangible asset may be impaired. When there is evidence of impairment, the entity then analyzes whether the indicated impairment actually exists by comparing the asset’s carrying amount with its recoverable amount. When the carrying amount exceeds the recoverable amount, the carrying amount is written down to the recoverable amount and depreciation charges going forward are adjusted to reflect the asset’s remaining useful life.
The BBVA Group’s criteria for determining the recoverable amount of these assets is based on up-to-date independent appraisals, performed within the last 3-5 years at most, absent other indications of impairment.
Similarly, if there is any indication that the value of a tangible asset has been recovered, the consolidated entities will estimate the recoverable amounts of the asset and recognised it in the consolidated income statement,
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recording the reversal of the impairment loss recorded in previous periods and, consequently, adjust the future depreciation charges. In no circumstances may the reversal of an impairment loss on an asset raise its carrying amount above that which it would have if no impairment losses had been recognized in prior periods.
Upkeep and maintenance expenses relating to tangible assets held for continued use are charged to the income statement for the period in which they are incurred.
Other assets leased out under an operating lease
The criteria used to recognize the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives and to record the impairment losses thereon are the same as those described in relation to tangible assets for continued use.
Investment property:
The heading “Tangible assets — Investment Property” in the consolidated balance sheet reflects the net values of the land, buildings and other structures held either to earn rentals or for capital appreciation at the disposal date and are neither expected to be sold off in the ordinary course of the business nor are destined for own use.
The criteria used by the BBVA Group to determine their recoverable value is based on updated independent appraisals performed in the last 3-5 years at most, absent other indications of impairment.
2.2.10. BUSINESS COMBINATIONS
A business combination is the bringing together of two or more separate entities or businesses into one single entity or group of entities. As a result of a business combination, which is accounted for using the purchase method, the Group obtains control over one or several entities.
The purchase method accounts for business combinations from the perspective of the acquirer. The acquirer must recognize the assets acquired and the liabilities and contingent liabilities assumed, including those not previously recognized by the acquired entity. This method measures the cost of the business combination and the assignation of it, at the date of acquisition, to the identifiable assets, liabilities and contingent liabilities measured at fair value.
In addition, any purchases of minority interests after the date on which the Group obtains control of the acquired are recorded as equity transactions, i.e. the difference between the price paid and the carrying amount of the percentage of minority interests acquired is charged directly to equity.
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2.2.112.2.19. | INTANGIBLE ASSETSLEASES |
Goodwill
The positive differences between the cost of business combinations and the amount corresponding to the acquired percentage of the net fair value of the assets, liabilities and contingent liabilities of the acquired entity are recorded as goodwill on the asset side of the consolidated balance sheet. Goodwill represents the future economic benefits from assets that cannot be individually identified and separately recognized. Goodwill is not amortized and is subject periodically to an impairment analysis. Any impaired goodwill is written off.
Goodwill is allocated to one or more cash-generating units expected to benefit from the synergies arising from business combinations. The cash-generating units represent the Group’s smallest identifiable businessand/or geographical segments as managed internally by its directors within the Group.
The cash-generating units to which goodwill has been allocated are tested for impairment based on the carrying amount of the unit including the allocated goodwill. Such testing is performed at least annually and, always, if there is an indication of impairment.
For the purpose of determining the impairment on a cash-generating unit to which a part of goodwill has been allocated, the carrying amount of that unit, adjusted by the theoretical amount of the goodwill attributable to the minority interest, shall be compared with its recoverable amount. If the carrying amount of the cash generating unit
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exceed the related recoverable amounts the entity will recognised an impairment loss; the resulting loss shall be apportioned by reducing, firstly, the carrying amount of the goodwill allocated to that unit and, secondly, if there are still impairment losses remaining to be recognized, the carrying amount of the rest of the assets. This shall be done by allocating the remaining loss in proportion to the carrying amount of each of the assets in the unit. It will be taken into account that no impairment on goodwill attributable to the minority interest may be recognized. In any case, impairment losses on goodwill can never be reversed.
Other intangible assets
These assets can have an “indefinite useful life” — when, based on an analysis of all relevant factors, it is concluded that there is no foreseeable limit to the period over which the asset is expected to generate net cash flows for the consolidated entities — or a “finite useful life”, in all other cases.
The Group has not recognized any intangible assets with indefinite useful life.
Intangible assets with finite useful life are amortized over those useful lives using methods similar to those used to depreciate tangible assets.
In both cases the consolidated entities recognize any impairment loss on the carrying amount of these assets with charge to the heading “Impairment on other assets (net) — Goodwill on other intangible assets” in the consolidated income statement. The criteria used to recognize the impairment losses on these assets and, where applicable, the recovery of impairment losses recognized in prior periods are similar to those used for tangible assets.
2.2.12. INVENTORIES
The heading “Other assets — Inventories” in the consolidated balance sheet reflects the land and other properties that Group real estate agencies hold for sale as part of their property development activities (Note 21).
Inventories are measured at the lower of cost and net realisable value, which is the estimated selling price of inventories in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
The amount of any write-down of inventories, such as that reflecting damage, obsolescence, and reduction of the sale price, to net realisable value and any other losses is recognized as an expense in the period in which the write-down or loss occurs. Subsequent reversal of any write-down is recognized in the consolidated income statement for the period in which it occurs.
When inventories are sold, the carrying amount of those inventories is derecognised and recorded as an expense in the period in which the related revenue is recognized. The expense is included in the heading “Other operating expenses — Changes in Inventories” of the accompanying consolidated income statement (Note 44).
2.2.13. TAX ASSETS AND LIABILITIES
The Spanish corporation tax expense and the expense for similar taxes applicable to the consolidated entities abroad are recognized in the consolidated income statement, except when they result from transactions the profits or losses on which are recognized directly in equity, in which case the related tax effect is also recognized in equity.
The current income tax expense is calculated by aggregating the current tax arising from the application of the related tax rate to the taxable profit (or tax loss) for the period (after deducting the tax credits allowable for tax purposes) and the change in deferred tax assets and liabilities recognized in the income statement.
Deferred tax assets and liabilities include temporary differences, measured at the amount expected to be payable or recoverable on future fiscal years for the differences between the carrying amounts of assets and liabilities and their tax bases, and tax loss and tax credit carry forwards. These amounts are measured applying to each temporary difference the tax rates that are expected to apply in the period when the asset is realised or the liability settled (Note 32).
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Deferred tax assets are recognized to the extent that it is considered probable that the consolidated entities will have sufficient taxable profits in the future against which the deferred tax assets can be utilized.
The deferred tax assets and liabilities recognized are reassessed by the consolidated entities at each balance sheet date in order to ascertain whether they still exist, and the appropriate adjustments are made on the basis of the findings of the analyses performed.
The income and expenses directly recognized in equity that do not increase or decrease taxable income are accounted as temporary differences.
Deferred tax liabilities in relation to taxable temporary differences associated with investments in subsidiaries, associates or jointly controlled entities are recognized as such, except where the Group can control the timing of the reversal of the temporary difference and it is further unlikely that it will reverse in the foreseeable future.
2.2.14. FINANCIAL GUARANTEES
Financial guarantees are considered thoseLease contracts that oblige their issuer to make specific payments to reimburse the lender for a loss incurred when a specific borrower breaches its payment obligations on the terms — original or as modified — of a debt instrument, irrespective of its instrumentation. These guarantees may take the form of a deposit, financial guarantee, insurance contract or credit derivative, among others.
Financial guarantees, irrespective of the guarantor, instrumentation or other circumstances, are reviewed periodically so as to determine the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required. The credit risk is determined by application of criteria similar to those established for quantifying impairment losses on debt instruments measured at amortized cost (see Note 2.2.1).
The provisions made for financial guarantees classified as substandard are recognized under “Provisions — Provisions for Contingent Exposures and Commitments” on the liability side in the accompanying consolidated balance sheet (Note 24). These provisions are recognized and reversed with a charge or credit, respectively, to “Provisions Expense” in the consolidated income statement.
2.2.15. LEASES
Leases are classified as finance from the start of the transaction, whenif they transfer substantially all the risks and rewards incidental to ownership of the asset forming the subject mattersubject-matter of the contract. Leases other than finance leases are classified as operating leases.
When the consolidated entities act as the lessor of an asset in finance leases, the aggregate present values of the lease payments receivable from the lessee plus the guaranteed residual value (normally the exercise price of the lessee’s purchase option on expiration of the lease agreement) are recordedrecognized as financing provided to third parties and, therefore, are included under the heading “Loans and Receivables”receivables” in the accompanying consolidated balance sheets.
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When the consolidated entities act as the lessorlessors of an asset in operating leases, the acquisition cost of the leased assets is recognized inunder “Tangible assets”assets — Property, plants and equipment — Other assets leased out under an operating lease” in the accompanying consolidated balance sheets.sheets (see Note 19). These assets are depreciated in line with the criteria adopted for items of tangible assets for own use, while the income arising from the lease arrangements is recognized in the accompanying consolidated income statementstatements on a straight line basis within “Other operating income — Rest of other operating income” (see Note 45).
If a fair value sale and leaseback results in an operating lease, the profit or loss generated is recognized in the income statement at the time of sale. If such a transaction gives rise to a finance lease, the corresponding gains or losses are amortized over the lease period.
Assets providedThe assets leased out under operating leaseslease contracts to other entities in the Group entities are treated in the consolidated financial statements as assets held for continued use.
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2.2.16. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES
The heading “Provisions” of the accompanying consolidated balance sheets include amounts recognized to cover the Group’s current obligations arising as a result of past events, certain in terms of nature but uncertain in terms of amountand/or cancellation date, settlement of whichown use, and thus rental expense and income is deemed likely to entail an outflow of resources embodying economic benefits. The obligations may arise in connection with legal or contractual provisions, valid expectations formed by Group companies relative to third parties in relation to the assumption of certain responsibilities or virtually certain developments of particular aspects of applicable regulation, specifically draft legislation to which the Group will certainly be subject.
Provisions are recognized in the balance sheet when each and every one of the following requirements is met: the Group has an existing obligation resulting from a past event and, at the consolidated balance sheet date, it is more likely than not that the obligation will have to be settled; it is probable that to settle the obligation the entity will have to give up resources embodying economic benefits; and a reliable estimate can be made of the amount of the obligation. This heading includes provisions for restructuring charges and litigation, including tax litigation.
Contingent assets are possible assets that arise from past events and whose existence is conditional on, and will be confirmed only by the occurrence or non-occurrence of, events beyond the control of the Group. Contingent assets are not recognized in the balance sheet or in the income statement; however, they are disclosed in the notes to financial statements, provided that it is probable that these assets will give rise to an increase in resources embodying economic benefits.
Contingent liabilities are possible obligations of the Group that arise from past events and whose existence is conditional on the occurrence or non-occurrence of one or more future events beyond the control of the entity. They include the existing obligations of the entity when it is not probable that an outflow of resources embodying economic benefits will be required to settle them or when, in extremely rare cases, their amount cannot be measured with sufficient reliability. A contingent liability is recognized as a substandard contingent liability when the Group considers that it will have to fulfill the obligation entered into due to the probability of failure by a customer being more likely than not,eliminated and the valuation methodology used to determine the extent of impairmentcorresponding depreciation is the same used for the valuation of financial assets, as explained in note 2.2.1.b.registered.
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2.2.17.2.2.20. | TRANSFERSCONSOLIDATED STATEMENTS OF FINANCIAL ASSETSRECOGNIZED INCOME AND DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIESEXPENSES |
The accounting treatmentconsolidated statements of transfers of financial assets depends onrecognized income and expenses reflect the extent to whichincome and expenses generated each year. It distinguishes between those recognized as results in the risks and rewards associated withconsolidated income statements from “Other recognized income (expenses)” recognized directly in the transferred assets are transferred to third parties.total equity.
“Other recognized income (expenses)” include the changes that have taken place in the year in the “Valuation adjustments” broken down by item.
The financial assets are derecognised from the consolidated balance sheet only if their cash flows are extinguished or the risks and rewards associated with the financial assets are substantially transferred. If the risks and rewards are substantially transferred to third parties, the financial asset is derecognized from the balance sheet, and any right or obligation retained or created as a resultsum of the transfer is simultaneously recognized. Similarly,changes to the financial liabilities are derecognisedheading “Valuation adjustments” of the consolidated balance sheet only if their obligations are extinguished or acquired (with a view to subsequent cancellation or renewed placement)
If substantially alltotal equity and the risks and rewards associated with the transferred financial asset are transferred to third parties, the transferred financial asset is derecognised and, at the same time, any right or obligation retained or created as a resultnet income of the transfer is recognized.
The BBVA Group is considered to have transferred substantially allyear forms the risks and rewards if such risks and rewards account for the majority“Total recognized income/expenses of the risks and rewards incidental to ownership of the securitized assets.
If substantially all the risksand/or rewards associated with the transferred financial asset are retained:year”.
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| 2.2.21. | • | The transferred financial asset is not derecognized and continues to be measured using the same criteria as those used before the transfer in the consolidated balance sheet. |
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| • | A financial liability is recognized in the amount of compensation received, which is subsequently measured at amortized cost and included under the heading “Financial liabilities at amortized cost — Debt |
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| | certificates” of the accompanying consolidated balance sheet. As these liabilities do not constitute a current obligation, when measuring such a financial liability the Group deducts those financial instruments owned by it which constitute financing for the entity to which the financial assets have been transferred, in so far as these instruments are deemed to specifically finance the assets transferred. |
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| • | Both the income generated on the transferred (but not derecognized) financial asset and the expenses of the new financial liability are recognized in the consolidated income statementCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
SecuritizationsThe consolidated statements of changes in equity reflect all the movements generated in each year in each of the headings of the consolidated equity, including those from transactions undertaken with shareholders when they act as such, and those due to changes in accounting criteria or corrections of errors, if any.
InThe applicable regulations establish that certain categories of assets and liabilities are recognized at their fair value with a charge to equity. These charges, known as “Valuation adjustments” (see Note 31), are included in the specific instanceGroup’s total consolidated equity net of the securitization funds totax effect, which the Group entities transfer their loan portfolios, the following indications of the existence of control are considered for the purpose of analyzing the need for consolidation:has been recognized as deferred tax assets or liabilities, as appropriate.
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| 2.2.22. | • | The securitization fund’s activities are undertaken in the name of the entity in accordance with that bank’s specific business requirements with a view to generating benefits or gains from the securitization funds’ operations. |
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| • | The bank retains decision-making power with a view to securing most of the gains derived from the securitization funds’ activities or has delegated this power in some kind of “auto-pilot” mechanism (the securitization funds are structured so that all the decisions and activities to be performed are pre-defined at their incorporation). |
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| • | The bank is entitled to receive the bulk of the securitization funds’ profits and is accordingly exposed to the risks inherent in their business activities. The entity retains the bulk of the securitization funds’ residual profit. |
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| • | The entity retains the bulk of the risk embodied by the assets in the securitization funds and the corresponding asset derecognition rules are applied.CONSOLIDATED STATEMENTS OF CASH FLOWS |
If control is deemed to exist based on the aforementioned indicators, the securitization funds are consolidated within the consolidating entity. The consolidated Group is deemed to transfer substantially all risks and rewards if its exposure to the potential variation in the future net cash flows of the securitized assets following the transfer is not material. In this instance, the consolidated Group may derecognize the securitized assets.
The BBVA Groupindirect method has applied the most stringent prevailing criteria in determining whether or not it retains substantially all the risk and rewards incidental to ownershipbeen used for all securitizations performed since January 1, 2004. As a result of this analysis, the Group has concluded that none of the securitizations undertaken since that date meet the prerequisites for derecognizing the underlying assets from the consolidated balance sheets (Note 13.3) as it retains substantially all the risks embodied by expected loan losses or associated with the possible variation in net cash flows, as it retains the subordinated loans extended by the BBVA Group to the same securitization funds.
2.2.18. OWN EQUITY INSTRUMENTS
The balance of the heading “Stockholders’ funds — Treasury Shares” in the accompanying consolidated balance sheets relates mainly to Bank shares held by certain consolidated companies as of December 31, 2008, 2007 and 2006. These shares are carried at acquisition cost, and the gains or losses arising on their disposal are credited or debited, respectively, as appropriate, to the heading “Stockholders’ funds-Reserves” in the accompanying consolidated balance sheets (Note 30).
2.2.19. EQUITY-SETTLED SHARE-BASED PAYMENT TRANSACTIONS
Equity-settled share-based payment transactions, when the instruments granted do not vest until the counterparty completes a specified period of service, shall be accounted for those services as they are rendered by the counterparty during the vesting period, with a corresponding increase in equity. The entity shall measure the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the
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goods or services received, the entity shall measure their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted, at grant date.
Market conditions shall be taken into account when estimating the fair value of the equity instruments granted, thus, their evolution will not be reflected on the profit and loss account. Vesting conditions, other than market conditions, shall not be taken into account when estimating the fair value of the shares at the measurement date. Instead, vesting conditions shall be taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognized for goods or services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. As a consequence the effect of vesting conditions other than market conditions, will be recognized on the profit and loss account with the corresponding increase in equity.
2.2.20. TERMINATION BENEFITS
Termination benefits must be recognized when the Group is committed to severing its contractual relationship with its employees and, to this end, has a formal detailed redundancy plan. There were no redundancy plans in the Group entities, so it is not necessary to recognize a provision for this issue.
2.2.21. CONSOLIDATED STATEMENTS OF CASH FLOWS
For the preparation of the consolidated statement of cash flows has been used the indirect method.flows. This method starts from the entity’s consolidated profit or lossnet income and adjusts its amount for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investingcash flows classified as investment or financing cash flows.finance.
For these purposes, in addition to cash on hand, cash equivalents include very short term, highly liquid investments subject to very low risk of impairment.
The composition of component of cash and equivalents with respect to the headings of the consolidated balance sheets is shown in the accompanying consolidated cash flow statements.
ForTo prepare the development of consolidated statement of cash flows isflow statements, the following items are taken into consideration the following concepts:consideration:
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| | • | Cash flows: Inflows and outflows of cash and cash equivalents, the latter being short-term, highly liquid investments subject to a low risk of changes in value, such asCash and Deposit balances withfrom central banks, short-term Treasury bills and notes, and demand balances with other credit institutions.banks. |
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| | • | Operating activities: The typical activities of credit institutions and other activities that cannot be classified as investing or financing activities. |
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| | • | Investing activities: The acquisition, sale or other disposal of long-term assets and other investments not included in cash and cash equivalents. |
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| | • | Financing activities: Activities that result in changes in the size and composition of equity and of liabilities that do not form part of operating activitiesactivities. |
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| 2.2.23. | ENTITIES AND BRANCHES LOCATED IN COUNTRIES WITH HYPERINFLATIONARY ECONOMIES |
2.2.22. STATEMENT OF CHANGES IN CONSOLIDATED TOTAL EQUITYIn accordance with the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 criteria, to determine whether an economy has a high inflation rate the country’s economic situation is examined, analyzing whether certain circumstances are fulfilled, such as whether the population prefers to keep its wealth or save in non-monetary assets or in a relatively stable foreign currency, whether prices can be set in that currency, whether interest rates, wages and prices are pegged to a price index or whether the accumulated inflation rate over three years reaches or exceeds 100%. The fact that any of these circumstances is fulfilled will not be a decisive factor in considering an economy hyperinflationary, but it does provide some reasons to consider it as such.
AccordingSince the end of 2009, the Venezuelan economy has been considered to be hyperinflationary as defined by the aforementioned criteria. Accordingly, the financial statements as of December 31, 2010 and 2009, of the Group’s subsidiaries based in Venezuela (Note 3) are adjusted to correct for the effects of inflation. Pursuant to the new modelsrequirements of IAS 29, the monetary headings (mainly loans and credits) have not been re-expressed, while the non-monetary headings (mainly tangible fixed assets) have been re-expressed in accordance with the change in the country’s Consumer Price Index.
The historical differences as of January 1, 2009 between the re-expressed costs and the previous costs in the non-monetary headings were credited to “Reserves” on the accompanying consolidated balance sheet as of December 31, 2009, while the differences for 2010 and 2009, and the re-expression of the statementsincome statement for 2010 and 2009 were recognized in the consolidated income statement for 2010 and 2009.
The effects of inflation accounting in Venezuela in the consolidated income statement corresponding to the year ended December 31, 2010 were not significant.
In January 2010, the Venezuelan authorities announced the devaluation of the Circular 6/2008,Venezuelan bolivar with regard to the Statementmain foreign currencies and that other economic measures will be adopted. The effects of changes in totalthis devaluation on the consolidated income statement for 2010 and consolidated equity consistsas of two parts: Statement of recognized income and expense and Statement of changes in total equity.December 31, 2010, were not significant.
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| 2.3 | • | Statement of recognized income and expense that reflects the income and expenses generated in every year, distinguishing the recognized ones as “results” in the consolidated income statement of the “other gains (losses) and recognized expenses” straight in equity. |
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| • | Statement of changes in total equity that reflects all the movements produced in every year in each of the headings of the consolidated equity included the proceeding ones from transactions realized with theRECENT IFRS PRONOUNCEMENTS |
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| | shareholders when they act as such, and the due ones to changes in countable criteria and corrections of errors. |
The applicable regulations establish that certain categories of assets and liabilities are recognized by its fair value with charge to total equity. These charges, known as “valuation adjustments”, are included in the total equity of the Group net of tax effect, which has been recognized depending on the case, as deferred tax assets or liabilities.
This statement presents the changes occurred in the “valuation adjustments” for the period detailed by concepts, as well as earnings of the period plus/minus, if applicable, of the adjustments done by the change in accounting principles or by errors of previous periods . The sum of the changes occurred in the heading “valuation adjustments” of the consolidated total equity and the consolidated income of the period forms the “Incomes and expenses of the year” that is shown in the consolidated Statement of recognized income and expense.
2.3 IFRS RECENT PRONOUNCEMENTS
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| a) | STANDARDS AND INTERPRETATIONS EFFECTIVE IN EFFECT IN 20082010 |
The following amendmentsmodifications to the IFRS or their interpretations of existing standards (“IFRIC”) came into effect for the first timeforce in 2008.2010. Their application byintegration in the Group didhas not have anhad a significant impact on the accompanyingthese consolidated financial statements:
IAS 39 “Financial Instruments”Second IFRS annual improvements project
This standard was modifiedThe IASB published its second annual improvements project, which includes small amendments in 2008 to enable certain reclassifications of assets included in heldthe IFRS. These are mostly applicable for trading portfolios to the available-for-sale and held-to-maturity portfolios, subject to compliance with certain criteria. The Group did not perform any such reclassifications.annual period starting after January 1, 2010.
IFRIC 11The amendments are focused mainly on eliminating inconsistencies between some IFRS and on clarifying terminology.
IFRIC 11 provides guidanceIFRS 2 Amended — “Share-based payment”
The IASB published an amendment to IFRS 2 — “Share-based payment” on interpreting IFRS 2: Group and Treasury Share Transactions, specifically clarification on whether certain transactions needhow a subsidiary should to be accounted for as equity-settled or cash-settled. In addition, this interpretation addresses how to account, in its individual financial statements, for share-based payment arrangements that involve two or more entities within the same group.
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b) | STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE IN 2008 |
At the date of elaboration of the consolidated financial statements new IFRS’s (International Financialgroup (for both creditors and Reporting Standards) and interpretations (“IFRIC’s”) have been issued, which are not required to be applied as of December 31, 2008, althoughemployees) in some cases earlier applicationthe event the payment is encouraged. Themade with another Group has not yet applied any ofsubsidiary or the following Standards to its consolidated financial statements.parent company.
The amendments clarify that the entity receiving the goods and services in a share-based payment transaction must, in its financial statements, account for goods and services in accordance with IFRS 8 “Operating Segments”
It will be effective for annual periods beginning on or after January 1, 2009.
This new standard replaces IAS 14 “Segment Reporting”. The main novelty is the adoption2, regardless of an approach to management reporting business segments. The information reported will be that which management uses internally for evaluating the performance of operating segments and allocating resources to those segments. In the information to present, the segments identified and the criteria used to identify the segments, will be coincide with those used internally by the organization and the direction, but do not meet the criteria IFRS of the financial statements.
This standard will not have an impact on balanceand/or income statement, but will affect the Report breakdown of the information by segments.
IAS 23 Revised “Borrowing Costs”
It will be effective for annual periods beginning on or after January 1, 2009, early application is permitted.
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The revision to IAS 23 removesentity within the option of immediately recognising as an expense borrowing costs that are directly attributable togroup makes the acquisition, constructionpayment or production of a qualifying asset. A qualifying asset is one that takes a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalise such borrowing costs as part of the cost ofpayment being made is in shares or in cash. Under IFRS 2, the asset.Group includes the parent company and its subsidiaries, in line with that stipulated in IAS 27 — Consolidate and separate financial statements.
The Group does not anticipate that adoptionFurthermore, the contents of IAS 23 will have any effects on its consolidated financial position, resultsIFRIC 8 — “Scope of operations or cash flows.IFRS 2” and IFRIC 11- “Group and Treasury Share Transactions” are incorporated into IFRS 2, thus nullifying them.
IFRIC 13 “Customer Loyalty Programmes”
It will be effective for annual periods beginning on or after July 1, 2008, early application is permitted.
This IFRIC establishes the accounting procedure for the customer loyalty programmes used by entities to provide customers with incentives to buy their goods or services. If a customer buys goods or services, the entity grants the customer award credits (often described as “points”). The customer can redeem the award credits for awards such as free or discounted goods or services. The entity may operate the customer loyalty programme itself or participate in a programme operated by a third party.
The interpretation requires entities allocate part of incomes of initial sale to exchangeable bond, recognizing them as income only when they have fulfilled their obligations by providing such awards or paying third parties to do so.
The Group does not anticipate that adoption of IFRIC 13 will have any effects on its consolidated financial position, results of operations or consolidated cash flows.
IAS 1 Revised — Presentation of Financial Statements
The revised standard will come into effect for the annual periods beginning on or after January 1, 2009, but early adoption is permitted.
The main changes from the previous version are to require that an entity must:
The “statement of changes in equity” will present the amounts of transactions with owners in their capacity as owners, such as equity contributions, reacquisition of the entity’s own equity instruments and dividends.
Present all non-owner changes in equity (that is, ‘comprehensive income’) either in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income).
Also, introduce new disclosures requirements when the entity applies an accounting policy retrospectively, makes a restatement or reclassifies headings vis-à-vis the previous Financial Statement. The names of some Financial Statements are change to reflect more clearly its function. (i.e. the Balance Sheet is rename as Statement of Financial Position).
No material effects are expected with the application of this Standard in the Group.
IFRS 3 Revised — Business Combinations —combinations, and modification ofAmendment to IAS 27 -— Consolidated and Separate Financial Statementsseparate financial statements
These standards will be effective for annual periods beginning on or after January 1, 2009. An entity shall apply them prospectively from the period beginning after June 30, 2007.
The amendments to IFRS 3 (Revised) and the modifications of IAS 27 represent some significant changes into various aspects related to the accounting for Business Combinations that, in general, makingbusiness combinations. They generally place more emphasis on using the fair value. Some of the main changes are: the acquisition costs which will be registeredrecognized as expense compared toinstead of the current treatmentpractice of increasingconsidering them as a part of the cost of the business combination; acquisitions achieved in stages, in which at the timedate of acquisition the acquirer should remeasure its previously held equity interest in the control, re-measuredacquiree at fair value the ownership interest; or the existenceoption of measuring the option to measure at fair value the minoritynon-controlling interests in the acquired compared tocompany at fair value, instead of the current treatmentpractice of only measuring itsthe proportional share atof the fair value of the acquired net assets acquired.
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IFRS 2 Revised — Share-based Paymentassets.
The amendment will apply for annual periods beginning on or after January 1, 2009, with earlier application permitted.
The amendment clarifies that vesting conditions are service conditions and performance conditions only, and that all cancellations, whether byIn the entity or by other parties, should receive the same accounting treatment
No material effects are expected withyear ended December 31, 2010, no significant business combination has required the application of this standardthe modifications established in the Group.IFRS 3 and IAS 27 standards.
Amendments to IAS 3239 Amended — “Financial Instruments: Presentation”instruments: Recognition and IAS 1 “Presentation of financial statements”valuation. Eligible hedged items”
The amendments performed to IAS 1 and IAS 32 have the objective of improving the accounting process for financial instruments who’s features are similar to the features of ordinary shares but that are at the present time classified as financial liabilities. These amendments will be applied from January 1, 2009, being earlier application permitted.
The amendment to IAS 32 requires that entities start to classify some instruments as equity, as long as they fulfill a series of particular requirements. Specifically, the following instruments will be classified as equity:
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| • | “Puttable instruments”: Financial instrument that gives the holder the right to put the instrument back to the issuer for cash or another financial asset or is automatically put back to the issuer on the occurrence of an uncertain future event or retirement of the instrument holder. Puttable instruments that are subordinate and that entitle the holder to a pro rata share of the entity’s net assets in the event of the entity’s liquidation will be classified as equity. |
|
| • | Instruments, or components of instruments, that are subordinate to all other classes of instruments and that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation. |
No significant impact in the consolidated financial situation of the Group is expected from the implementation of this standard.
Amendment to IAS 27- Consolidated and separated financial statements; Cost of investments in subsidiaries, jointly controlled entities and associates
This amended standard shall be applied from January 1, 2009, being earlier application permitted. The main changes in IAS 27 are the following:
The elimination of the “cost method” from IAS 27.4, which implied that any return of the investment that corresponded to earnings not generated after the date of acquisition should be reduced in the separated financial statements, was due to problems that arose from this concept definition in some jurisdictions. In order to reduce the risk of overvaluation of the investments in subsidiaries, jointly controlled entities and associates, any dividend received by the investor from these entities will be recognised as an income and the related investment would be examined towards any impairment in accordance with IAS 36, as long as there is evidence of impairment39 introduces new requirements on the investment (defining as such those cases in which: the book value of the investment in the separated financial statements is higher than the book value of the consolidated financial statements of the net assets of the investment, including goodwill; or when the dividend exceeds the valuation adjustments recognized in equity related with the investment in the period to which the distribution of dividends are charged.
When a new parent company is formed, it will value the cost of the investments in its separate financial statements the book value presented in the financial statements of the previous parent company as of the date in which the new parent company is created. This would be the case in which a new parent company is created when an existing entity decides to reorganize it operational structure and consequently becomes a subsidiary of the new parent company.
No significant impact in the consolidated financial situation of the Group is expected from the implementation of this standard.
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First annual Project of improvements of IFRS
This project is required to be applied from January 1, 2009, being earlier application permitted. This is the first annual project of improvements carried out by the IASB in which small changes that affect the presentation, recognition or assessment of the IFRS as well as changes in terminology and editing, that don’t have any significant effect on the accounting process.
The most significant changes affect the following standards:
IFRS 5 —Non-current Assets Held for Sale and Discontinued Operations
IAS 1 —Presentation of Financial Statements
IAS 16— Property, Plant and Equipment
IAS 19 —Employee benefits
IAS 20 —Accounting for Government Grants and Disclosure of Government Assistance
IAS 27 —Consolidated and Separate Financial Statements
IAS 28 —Investments in Associates
IAS 38— Intangible Assets
IAS 39 — Financial Instruments: Recognition and Measurement
IAS 40 —Investment property
The changes that affect the aforementioned standards do not represent a significant impact in the consolidated financial situation of the Group.
Amendment to IAS 39 — Financial Instruments: Recognition and Measurement. Eligible Hedged Items
This amendment applies retrospectively for annual periods beginning on or after July 1, 2009. Earlier application is permitted.eligible hedged items.
The amendment stipulates that:
| | |
| | • | Inflation may not be designated as a hedged item unless it is identifiable and the inflation portion is a contractually specified portion of cash flows of an inflation-linked financial instrument, and otherthe rest of the cash flows of the financial instrument are not affected by the inflationinflation-linked portion. |
| |
| | • | When changes in the cash flows or the fair value of aan item are hedged item above or below a specified price or other variable (a one-sidedone-side risk) are hedged via a purchased option, the intrinsic value and time value components of the option must be separated and only the intrinsic value may be designated as a hedging instrument. |
Group management considers that the effectiveness of this amendment will not have a material impact on its consolidated financial statements.
IFRIC 15 — Agreements for the Construction of Real Estate
IFRIC 15 is effective for annual periods beginning on or after 1 January 2009 and earlier application is permitted.
This Interpretation says that agreements for the construction of real estate shall only fall under the scope of IAS 11 “Construction Contracts” when the buyer is able to specify the major structural elements of the design of the real estate before construction beginsand/or specify major structural changes once construction is in progress (even when the buyer does not exercise this power). To the contrary IAS 18 applies.
Group management considers that the effectiveness of this amendment will not have a material impact on its consolidated financial statements.
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IFRIC 16 — Hedges of a Net Investment in a Foreign Operation
IFRIC 16 is applicable for annual periods beginning on or after October 1, 2008.
This Interpretation addresses the following aspects of hedging net investments in foreign operations:
| | |
| • | The risk hedged is the foreign currency exposure to the functional currencies of the foreign operation and the parent entity. Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation, i.e. the presentation currency does not create an exposure to which an entity may apply hedge accounting. |
|
| • | The hedging instrument(s) may be held by any entity or entities within the group, irrespective of their functional currencies (except the foreign operation the investment in which is hedged), so long as IAS 39 requirements are met. |
Group management considers that the effectiveness of this amendment will not have a material impact on its consolidated financial statements.
IFRIC 17 — Distribution“Distributions of Non-cash Assetsnon-cash assets to Ownersowners”
The Interpretation is effective for annual periods beginning on or after July 1, 2009. Earlier application is permitted.
IFRIC 17This new interpretation stipulates that all distributions of non-cash distributionsassets to owners must be valued at fair value, clarifying that:
| | |
| | • | AThe dividend payable should be recognized when the dividend is appropriately authorized and is no longer at the discretion of the entity. |
| |
| | • | An entity should recognize the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss. |
IFRIC 18 — “Transfer of assets from customers”
This clarifies the requirements for agreements in which an entity receives an item of property, plant, and equipment from a customer which the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services, or both.
The basic principle of IFRIC 18 is that when the item of property, plant and equipment meets the definition of an asset from the perspective of the recipient, the recipient must recognize the asset at its fair value on the date of the transfer with a balancing entry in ordinary income in accordance with IAS 18.
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| |
| b) | STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE AS OF DECEMBER 31, 2010 |
New International Financial Reporting Standards together with their interpretations (IFRIC) had been published at the date of close of these consolidated financial statements. These were not obligatory as of December 31, 2010. Although in some cases the IASB permits early adoption before they enter into force, the Group management considershas not done so as of this date.
The future impacts that the effectivenessadoption of these standards could have not been analyzed to date.
IAS 24 Revised — “Related party disclosures”
This amendment to IAS 24 refers to the disclosures of related parties in the financial statements. There are two main new features. One of them introduces a partial exemption for some disclosures when the relationship is with companies that depend on or are related to the State (or an equivalent governmental institution) and the definition of related party is revised, establishing some relations that were not previously explicit in the standard.
This amendment will apply for years beginning after January 1, 2011. Early adoption is permitted.
IAS 32 Amended — “Financial instruments: Presentation — Classification of preferred subscription rights”
The amendment to IAS 32 clarifies the classification of preferred subscription rights (instruments that entitle the holder to acquire instruments from the entity at a fixed price) when they are in a currency other than the issuer’s functional currency. The proposed amendment establishes that the rights to acquire a fixed number of own equity instruments for a fixed amount will be classified as equity regardless of the currency of the exercise price and whether the entity gives the tag-along rights to all of the existing shareholders (in accordance with current standards they must be posted as liability derivatives).
This amendment will apply for years beginning after February 1, 2010. Early adoption is permitted.
IFRIC 14 Amended — “Prepayment of Minimum Funding Contributions”
The IASB issued an amendment to IFRIC 14 to correct the fact that, under the current IFRIC 14, in certain circumstances it is not permitted to recognize some prepayments of minimum funding contributions as assets.
This amendment will apply for years beginning after January 1, 2011. Early adoption is permitted.
IFRIC 19 — “Settlement of financial liabilities through equity instruments”
In the current market situation, some entities are renegotiating conditions regarding financial liabilities with their creditors. There are cases in which creditors agree to receive equity instruments that the debtor has issued to cancel part or all of the financial liabilities. IFRIC 19 clarifies the posting of these transactions from the perspective of the issuer of the instrument, and states that these securities must be valued at fair value. If this value cannot be calculated, they will be valued at the fair value of the cancelled liability. The difference between the cancelled liability and the issued instruments will be recognized in the income statement.
This amendment will apply for years beginning after July 1, 2010. Early adoption is permitted.
IFRS 9 — “Financial Instruments”
On November 12, 2009, the IASB published IFRS 9 — Financial Instruments as the first stage of its plan to replace IAS 39 — Financial Instruments: Recognition and Valuation. IFRS 9, which introduces new requirements for the classification and valuation of financial assets, is mandatoty from January 1, 2013 onwards, although early adoption is permitted from December 31, 2009 onwards. The European Commission has decided not to adopt IFRS 9 for the time being. The possibility of early adoption of this first part of the standard ended for European entities.
F-39
Third annual improvements project for the IFRS
The IASB has published its third annual improvements project, which includes small amendments in the IFRS. These will mostly be applicable for annual periods starting after January 1, 2011.
The amendments are focused mainly on eliminating inconsistencies between some IFRS and on clarifying terminology.
IFRS 7 Amended — Disclosures — Transfers of Financial Assets
The amendments to IFRS 7 modify the disclosures that have to be presented on transfers and derecognition in the balance sheets of financial assets.
IFRS 7 as amended establishes that entities that transfer financial assets must disclose information that enables people to a) understand the relationship between the transferred financial assets that are derecognized in their entirety and the associated liabilities; and b) evaluate the nature of, and the risks associated with, the entity’s continuing involvement in transferred and derecognized financial assets.
Additional disclosures are required for asset transfer transactions when the transfers have not been uniform throughout the reporting period.
This amendment will apply annually beginning after July 1, 2011. Early adoption is permitted.
IAS 12 Amended — Income Taxes — Deferred Taxation: Recovery of Underlying Assets
The IAS 12 establishes that the deferred tax assets and liabilities will be calculated by using the tax base and the tax rate corresponding according to the form in which the entity expects to recover or cancel the corresponding asset or liability: by the use of the asset or by its sale.
The IASB has published a modification to IAS 12 — Deferred Taxes. This includes the assumption when calculating the assets and liabilities for deferred taxes that the recovery of the underlying asset will be carried out through its sale in investment property valued at fair value under NIC 40 Investment Property. However, an exception is admitted if the investment is depreciable and is managed according to a business model whose objective is to use the profits from the investment over time, and not have a material impactfrom its sale.
At the same time, IAS 12 includes the content of sic 21 Deferred Taxes — Recovery of revalued non-depreciable assets, which is withdrawn.
This amendment should be appled retrospectively for annual periods beginning on its consolidated financial statements.January 1, 2012. Early adoption is permitted.
| |
| 3. | BANCO BILBAO VIZCAYA ARGENTARIA GROUP |
The BBVA Group is an international diversified financial group with a significant presence in the retail banking, business, wholesale banking, assetsasset management and private banking. Additionally, theThe Group maintainsalso engages in business activity in theother sectors, such as insurance, and real estate sector as well as other business activities such asand operational leasing.
The following table sets forthAppendix II shows relevant information relating to total assets and income attributed to the Group of the entities of the Group, based on the activity of the entity, for the year 2008:
| | | | | | | | | | | | | | | | | |
| | | Total Assets
| | | % of the Total
| | | Total Income of the
| | | % of the Total
| |
| | | Contributed to the
| | | Asset of the
| | | Period Contributed
| | | Income of the
| |
| | | Group | | | Group | | | to the Group | | | Group | |
| | | Millions of euros | |
| |
| Banks | | | 498,030 | | | | 91.78 | % | | | 3,535 | | | | 70.41 | % |
| Financial services | | | 15,608 | | | | 2.88 | % | | | 393 | | | | 7.84 | % |
| Portfolio and funds managing company and dealers | | | 11,423 | | | | 2.10 | % | | | 466 | | | | 9.28 | % |
| Insurance and pension fund managing company | | | 14,997 | | | | 2.76 | % | | | 646 | | | | 12.86 | % |
| Real Estate, services and other entities | | | 2,592 | | | | 0.48 | % | | | (20 | ) | | | (0.40 | )% |
| | | | | | | | | | | | | | | | | |
| Total | | | 542,650 | | | | 100 | % | | | 5,020 | | | | 100 | % |
| | | | | | | | | | | | | | | | | |
The activity of the Group is mainly located in Spain, Mexico, United States, and other Latin American maintaining as well as an active presence in Asia (Note 17).
F-39
The total assets of the Group’s most significant subsidiaries grouped by countries where Group has activity, as of December 31, 2008, 2007 and 2006 are as follows:
| | | | | | | | | | | | | |
Country | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Spain | | | 380,532 | | | | 347,767 | | | | 302,412 | |
| Mexico | | | 61,023 | | | | 65,556 | | | | 55,992 | |
| USA & Puerto Rico | | | 49,698 | | | | 44,358 | | | | 14,682 | |
| Chile | | | 9,389 | | | | 8,835 | | | | 7,273 | |
| Venezuela | | | 9,652 | | | | 7,156 | | | | 6,824 | |
| Colombia | | | 6,552 | | | | 5,922 | | | | 4,797 | |
| Peru | | | 7,683 | | | | 5,650 | | | | 4,464 | |
| Argentina | | | 5,137 | | | | 4,798 | | | | 4,595 | |
| Other | | | 12,984 | | | | 11,684 | | | | 10,624 | |
| | | | | | | | | | | | | |
Total | | | 542,650 | | | | 501,724 | | | | 411,663 | |
| | | | | | | | | | | | | |
The finance income of the Group’s most significant subsidiaries, grouped by countries where Group has activity, as of December 31, 2008, 2007 and 2006, are as follows:
| | | | | | | | | | | | | |
Country | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Spain | | | 16,892 | | | | 15,007 | | | | 10,792 | |
| Mexico | | | 6,721 | | | | 6,185 | | | | 5,991 | |
| USA & Puerto Rico | | | 2,174 | | | | 1,476 | | | | 566 | |
| Chile | | | 986 | | | | 793 | | | | 513 | |
| Venezuela | | | 1,116 | | | | 772 | | | | 574 | |
| Colombia | | | 811 | | | | 589 | | | | 437 | |
| Peru | | | 520 | | | | 395 | | | | 326 | |
| Argentina | | | 541 | | | | 466 | | | | 439 | |
| Other | | | 643 | | | | 493 | | | | 404 | |
| | | | | | | | | | | | | |
| Total | | | 30,403 | | | | 26,176 | | | | 20,044 | |
| | | | | | | | | | | | | |
2010. Appendix II providesIII shows relevant information as of December 31, 2008 on the consolidated entities in the Group accounted for using the equity method.
Appendix IV provides relevant information as of December 31, 2008 on the consolidated jointly controlled entities accounted for using the proportionate consolidation method.
method, as of December 31, 2010. Appendix IV provides additional information on investments and jointly controlled companies consolidated using the equity method in the BBVA Group. Appendix V shows the main changes in investments over 2010. Appendix VI includes the changes in ownership interests held by the Group in the year 2008.
Appendix VII includes a detailgives details of the fully consolidated subsidiaries under the full consolidation method and which, based on the information available, were more than 5%10% owned by non-Group shareholders as of December 31, 2008.2010.
F-40
The following table sets forth information related to the Group’s total assets as of 31 December 2010, 2009 and 2008 and the Group’s income attributed to parent company for 2010, 2009 and 2008, broken down by the companies in the group according to their activity:
| | | | | | | | | | | | | | | | | |
| | | | | | | | | Net Income
| | | | |
| | | Total Assets
| | | % of the
| | | Attributed to
| | | % of the Net
| |
Contribution to Consolidated Group.
| | Contributed to
| | | Total Assets of
| | | Parent
| | | Income Attributed
| |
Entities by Main Activities 2010 | | the Group | | | the Group | | | Company | | | to Parent Company | |
| | | Millions of euros/percentages | |
| |
| Banks | | | 521,701 | | | | 94.38 | % | | | 3,749 | | | | 81.39 | % |
| Financial services | | | 8,070 | | | | 1.46 | % | | | 247 | | | | 5.36 | % |
| Portfolio, securities dealers and mutual funds management companies | | | 3,372 | | | | 0.61 | % | | | (239 | ) | | | (5.19 | )% |
| Insurance and pension fund managing companies | | | 17,034 | | | | 3.08 | % | | | 826 | | | | 17.93 | % |
| Real Estate, services and other entities | | | 2,561 | | | | 0.46 | % | | | 23 | | | | 0.50 | % |
| | | | | | | | | | | | | | | | | |
Total | | | 552,738 | | | | 100.00 | % | | | 4,606 | | | | 100.00 | % |
| | | | | | | | | | | | | | | | | |
— Spain
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | % of the Net
| |
| | | Total Assets
| | | % of the
| | | Net Income
| | | Income
| |
Contribution to Consolidated Group.
| | Contributed to
| | | Total Assest of
| | | Attributed to Parent
| | | Attributed to
| |
Entities by Main Activities 2009 | | the Group | | | the Group | | | Company | | | Parent Company | |
| | | Millions of euros/percentage | |
| |
| Banks | | | 505,398 | | | | 94.46 | % | | | 3,435 | | | | 81.58 | % |
| Financial services | | | 7,980 | | | | 1.49 | % | | | 343 | | | | 8.16 | % |
| Portfolio, securities dealers and mutual funds management companies | | | 3,053 | | | | 0.57 | % | | | (243 | ) | | | (5.77 | )% |
| Insurance and pension fund managing companies | | | 16,168 | | | | 3.02 | % | | | 755 | | | | 17.94 | % |
| Real Estate, services and other entities | | | 2,466 | | | | 0.46 | % | | | (80 | ) | | | (1.91 | )% |
| | | | | | | | | | | | | | | | | |
Total | | | 535,065 | | | | 100.00 | % | | | 4,210 | | | | 100.00 | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | % of the Net
| |
| | | Total Assets
| | | % of the
| | | Net Income
| | | Income
| |
Contribution to Consolidated Group.
| | Contributed to
| | | Total Assest of
| | | Attributed to Parent
| | | Attributed to
| |
Entities by Main Activities 2008 | | the Group | | | the Group | | | Company | | | Parent Company | |
| | | Millions of euros/percentage | |
| |
| Banks | | | 498,030 | | | | 91.78 | % | | | 3,535 | | | | 70.41 | % |
| Financial services | | | 15,608 | | | | 2.88 | % | | | 393 | | | | 7.84 | % |
| Portfolio, securities dealers and mutual funds management companies | | | 11,423 | | | | 2.10 | % | | | 466 | | | | 9.28 | % |
| Insurance and pension fund managing companies | | | 14,997 | | | | 2.76 | % | | | 646 | | | | 12.86 | % |
| Real Estate, services and other entities | | | 2,592 | | | | 0.48 | % | | | (20 | ) | | | (0.40 | )% |
| | | | | | | | | | | | | | | | | |
Total | | | 542,650 | | | | 100.00 | % | | | 5,020 | | | | 100.00 | % |
| | | | | | | | | | | | | | | | | |
The Group’s activity is mainly located in Spain, Mexico, the United States and Latin America, with an active presence in Europe and Asia (see Note 17).
F-41
As of December 31, 2010, 2009 and 2008, the total assets broken down by countries in which the Group operates, were as follows:
| | | | | | | | | | | | | |
Total Assets by Countries | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Spain | | | 365,019 | | | | 370,622 | | | | 380,486 | |
| Mexico | | | 73,837 | | | | 61,655 | | | | 61,023 | |
| The United States | | | 52,166 | | | | 49,576 | | | | 49,698 | |
| Chile | | | 13,309 | | | | 10,253 | | | | 9,389 | |
| Venezuela | | | 8,613 | | | | 11,410 | | | | 9,652 | |
| Colombia | | | 8,702 | | | | 6,532 | | | | 6,552 | |
| Peru | | | 10,135 | | | | 7,311 | | | | 7,683 | |
| Argentina | | | 6,075 | | | | 5,030 | | | | 5,137 | |
| Rest | | | 14,882 | | | | 12,676 | | | | 13,030 | |
| | | | | | | | | | | | | |
Total | | | 552,738 | | | | 535,065 | | | | 542,650 | |
| | | | | | | | | | | | | |
For the year ended December 31, 2010, 2009 and 2008, the “Interest and similar income” of the Group’s most significant subsidiaries, broken down by countries where Group operates, were as follows:
| | | | | | | | | | | | | |
Interest and Similar Income by Countries | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Spain | | | 9,426 | | | | 12,046 | | | | 16,892 | |
| Mexico | | | 5,543 | | | | 5,354 | | | | 6,721 | |
| The United States | | | 2,050 | | | | 1,991 | | | | 2,174 | |
| Chile | | | 850 | | | | 522 | | | | 986 | |
| Venezuela | | | 975 | | | | 1,553 | | | | 1,116 | |
| Colombia | | | 694 | | | | 750 | | | | 811 | |
| Peru | | | 597 | | | | 563 | | | | 520 | |
| Argentina | | | 563 | | | | 549 | | | | 541 | |
| Rest | | | 436 | | | | 447 | | | | 643 | |
| | | | | | | | | | | | | |
Total | | | 21,134 | | | | 23,775 | | | | 30,404 | |
| | | | | | | | | | | | | |
– Spain
The Group’s activity in Spain is carried out fundamentallyprincipally through BBVA, which is the Group’s parent company.company of the BBVA Group. Appendix I includes the BBVAshows BBVA’s individual financial statements as of December 31, 2008, 20072010, 2009 and 2006.2008.
The following table sets forth information relating toBBVA’s total assets and income before tax as a proportion of the Group over the total assets and consolidateconsolidated income before tax of the Group, as of December 31, 2010, 2009 and 2008, 2007 and 2006:after the corresponding consolidation process adjustments:
| | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Contribution of BBVA, S.A. to Total Assets and
| | | | | | | | | |
Income before Taxes of BBVA Group | | | | | 2010 | | 2009 | | 2008 |
| |
| % BBVA Assets over Group Assets | | | 63 | % | | | 62 | % | | | 65 | % | | | | | | 64 | % | | | 67 | % | | | 63 | % |
| % BBVA Income before tax over Consolidated income before tax | | | 28 | % | | | 46 | % | | | 33 | % | |
| % BBVA Income before tax over consolidated income before tax | | | | | | | 32 | % | | | 49 | % | | | 28 | % |
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Additionally, there areThe Group also has other entities of the Groupcompanies in Spain’s banking sector, insurance sector, real estate sector and entities of servicesservice and operating leases.lease companies.
— Mexico– Rest of Europe
The BBVA Group is present in the United Kingdom, France, Belgium, Germany, Italy, Portugal, Ireland and Switzerland.
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– Mexico
The Group’s presence in Mexico dates back tosince 1995. The activity isIt operates mainly developed through Grupo Financiero BBVA Bancomer, both in the banking sector through BBVA Bancomer, S.A. de C.V. asand in the insurance and pensions business through Seguros Bancomer S.A. de C.V., Pensiones Bancomer S.A. de C.V., and Administradora de Fondos para el Retiro Bancomer, S.A. de C.V.
—– The United States and Puerto Rico
In recent years, the Group has expanded its presence in the United States through the acquisition of several financial groups operating in severalvarious southern states. In 2007 the Group acquired Compass Bancshares Inc. and State National Bancshares Inc., taking control of these entities and the companies ofin their groups. The merger between the three banks based in Texas owned by the Bank (Laredo National Bank, Inc., Texas National Bank, and State National Bank) and Compass Bank, Inc. took place alongin 2008.
In 2009, through its subsidiary BBVA Compass, the Group acquired certain assets and liabilities of Guaranty Bank, Inc. (hereinafter, “Guaranty Bank”) from the Federal Deposit Insurance Corporation (hereinafter, “FDIC”).
The BBVA group also has as well a significant presence in Puerto Rico through its subsidiary bank BBVA Puerto Rico, S.A.
— Other– Latin American Countries.America
The Group’s activity in the rest of the Latin American countriesAmerica is mainly focused on the banking, insuranceand/or and pensions sectors, in the following countries: Chile, Venezuela, Colombia, Peru, Argentina, Panama, Paraguay and Uruguay. InIt is also active in Bolivia and Ecuador the business activity is concentrated in the pensions sector.
The Group owns more than 50% of mostsome of the companies in these countries, with the exception of certain companies based in Peru and Venezuela. Following is the detail of companies forming partcountries. Appendix II shows a list of the BBVA Banco Continental (Peru) Group and BBVA Banco Provincial (Venezuela)companies which, although less than 50% owned by the BBVA Group, as of December 31, 2008,2010, are fully consolidated becauseat this date as a result of agreements between the agreements entered into withGroup and the other shareholders givegiving the Group effective control (Noteof these entities (see Note 2.1):
| | | | | | | | | |
Company | | % Voting Rights | | | % Ownership | |
| |
| Banco Continental, S.A. | | | 92.08 | | | | 46.04 | |
| Continental Bolsa, Sociedad Agente de Bolsa, S.A. | | | 100 | | | | 46.04 | |
| Continental Sociedad Titulizadora, S.A. | | | 100 | | | | 46.04 | |
| Continental S.A. Sociedad Administradora de Fondos | | | 100 | | | | 46.04 | |
| Inmuebles y Recuperaciones Continental, S.A. | | | 100 | | | | 46.04 | |
| Banco Provincial Overseas N.V. | | | 100 | | | | 48.01 | |
.
Changes in the Group in the last three years– Asia
The mostGroup’s activity in Asia is carried out through operational branches (in Tokyo, Hong Kong and Singapore) and representative offices (in Beijing, Shanghai, Seoul, Mumbai and Taipei). The BBVA Group also has several agreements with the CITIC Group (CITIC) for a strategic alliance in the Chinese market (see Note 17). The investment in the CITIC Group includes the investment in Citic International Financial Holdings Limited (“CIFH”) and China National Citic Bank (“CNCB”).
Changes in the Group
The principal noteworthy acquisitions and sales of subsidiaries and associate entities in 2008, 20072010, 2009 and 20062008 were as follows:
ChangesIn 2010
• Purchase of an additional 4.93% of the share capital of CNCB
On April 1, 2010, after obtaining the corresponding authorizations, the purchase of an additional 4.93% of CNCB’s capital was finalized for €1,197 million.
As of December 31, 2010, BBVA had a 29.68% holding in CIFH and 15% in CNCB.
• Purchase of Credit Uruguay Banco
In May 2010, the Group announced that it has reached an agreement to acquire, through its subsidiary BBVA Uruguay, the Credit Uruguay Banco, from a French financial group. On January 18, 2011, after obtaining the corresponding authorizations, the purchase of Credit Uruguay Banco was completed for approximately €78 million.
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• Agreement for the acquisition of a holding in the bank Garanti
In November 2010, BBVA signed an agreement with the primary shareholders of the Turkish bank, Turkiye Garanti Bankasi, AS (hereinafter, “Garanti Bank”): the Turkish group Dogus and the General Electric group for the acquisition of a 24.89% holding of the common stock of Garanti Bank, for a total price of $5,838 million, which is equivalent to a payment of approximately €4,195 million (*).
The agreement with the Dogus group includes an agreement for the joint management of the bank and the appointment of some of the members of its board of directors. In addition, BBVA has the option of purchasing an additional 1% of Garanti Bank five years after the initial purchase. At the date these annual consolidated financial statements were prepared, this transaction was subject to the pertinent authorizations of the competent bodies.
In 2009
• Purchase of assets and liabilities of Guaranty Bank
On August 21, 2009, through its subsidiary BBVA Compass, the Group acquired certain Guaranty Bank assets and liabilities from FDIC through a public auction for qualified investors.
BBVA Compass acquired assets, mostly loans, for approximately $11,441 million (approximately €8,016 million) and assumed liabilities, mostly customer deposits, for $12,854 million (approximately €9,006 million). These acquired assets and liabilities represented 1.5% and 1.8% of the Group’s total assets and liabilities, respectively, on the acquisition date.
In addition, the purchase included a loss-sharing agreement with the U.S. supervisory body FDIC under which the latter undertook to assume 80% of the losses of the loans purchased by the BBVA Group up to the first $2,285 million, and up to 95% of the losses if they exceeded this amount. This commitment has a maximum term of 5 or 10 years, based on the portfolios.
• Takeovers of Banco de Crédito Local de España, S.A. and BBVA Factoring E.F.C., S.A.
The Directors of the subsidiaries Banco de Crédito Local de España, S.A. (Unipersonal), and BBVA Factoring E.F.C., S.A. (Unipersonal), in meetings of their respective boards of directors held on January 26, 2009, and of Banco Bilbao Vizcaya Argentaria, S.A. in its board of directors meeting held on January 27, 2009, approved respective projects for the takeover of both companies by BBVA and the subsequent transfer of all their equity interest to BBVA, which acquired all the rights and obligations of the companies it had purchased through universal succession.
The merger agreement was submitted for approval at the general meetings of the shareholders and sole shareholder of the companies involved.
Both takeovers were entered into the Companies Register on June 5, 2009, and thus on this date the companies acquired were dissolved, although for accounting purposes the takeover was carried out on January 1, 2009.
In 2008
During 2008, thereThere were no significant changes in the Group in 2008, except the previouslyabove mentioned fusionmerger of three banks in Texas (Laredo National Bank, Inc., Texas National Bank, Inc., and State National Bank, Inc.) with Compass Bank, Inc., and the increase of our ownership interest in the CITIC Group (Note(see Note 17).
Changes in the Group in 2007
| | |
| • | On January 3, 2007 the Group closed the transaction to purchase State National Bancshares Inc. with an investment of 488 million dollars (€378 million), generating a goodwill of €270 million. |
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| | |
| • | On September 7, 2007 the Group acquired 100% of the share capital of Compass Bancshares Inc., (“Compass”) a U.S. banking Group, which conducts its main business activity in the states of Alabama, Texas, Florida, Arizona, Colorado and New Mexico. |
The consideration paid to former Compass stockholders for the acquisition was $9,115 million, (€6,672 million). The Group paid $4,612 million (€3,385 million) in cash and delivered 196 million of shares issued, which represent 5.5% of the current share capital of BBVA. This capital increase took place on September 10, 2007 at an issuance rate of €16.77 per share, the closing market price of the BBVA’s shares at September 6, 2007, in accordance with the resolutions adopted by the BBVA’s general shareholders’ meeting.
BBVA financed the cash consideration in this transaction with internal resources, among which are the funds raised through the sale of its 5,01% stake in Iberdrola, S.A. in February 2007, which represented a net capital gain of €696 million.
Changes in the Group in 2006
The most noteworthy acquisitions and sales of subsidiaries in 2006 were as follows:
| | |
| • | On July 28, 2006, Telefónica España, S.A., proceeded to start selling to BBVA its 33% ownership interest in Uno-E Bank, S.A. for an aggregated amount of €148.5 million, reaching BBVA a 100% ownership ofUno-E Bank, S.A. |
|
| • | In May 2006 BBVA acquired a 51% ownership interest in Forum, a Chilean company specialising in car purchase financing, through the Chilean entities Forum Distribuidora, S.A. and Forum Servicios Financieros, S.A. (which in turn own all the shares of ECASA, S.A.), giving rise to the incorporation of BBVA Financiamiento Automotriz. |
|
| • | On April 5, 2006 the Group sold its 51% ownership interest in Banc Internacional d’Andorra, S.A. for €395 million, which gave rise to a gain of €184 million. |
|
| • | On November 10, 2006 the Group acquired Texas Regional Bancshares Inc. through the investment of $2,141 million (€1,674 million). |
|
| • | On November 30, 2006 the Group acquired all the shares of the Italian vehicle rental company Maggiore Fleet S.p.A., for €70.2 million. |
| |
| 4. | ALLOCATIONAPPLICATION OF PROFIT OR LOSSEARNINGS |
In 20082010, the Board of Directors of Banco Bilbao Vizcaya Argentaria, S.A. resolved to paydistribute the shareholders three interimfirst, second and third amounts against the 2010 dividends out of 2008 profit,the income, amounting to a total of €0.501€0.270 gross per share. The aggregate amount of the interim dividends declared as of December 31, 2008,2010, net of the amount collected and to be collected by the consolidable Group companies, was €1,820€1,067 million and was recorded under “Equity-Dividends and Remuneration” in the related consolidated balance sheet. The last of the aforementioned interim dividends, which amounted to €0.167 gross per share and was paid to the shareholders on January 12, 2009, was recordedrecognized under the heading “Financial Liabilities“Stockholders’ funds —
(*) Calculated at Amortised Cost — Other Financial Liabilities”, in the consolidated balance sheetexchange rate as of December 31, 2008 (Note 22).October 29, 2010 at $/€ = 1.3916.
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Dividends and remuneration” in the accompanying consolidated balance sheet. The provisional accountingfinancial statements prepared in 2008,2010 by Banco Bilbao Vizcaya Argentaria, S.A. in accordance with legal requirements evidencing the existence of sufficient liquidity for the distribution of the amounts to the interim dividendsdividend were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 25-06-2008
| | 31-08-2008
| | 30-11-2008
| | | 31-05-2010
| | 31-08-2010
| | 30-11-2010
| |
Available Amount for Interim Dividend Payments | | | First | | Second | | Third | |
| | | Dividend 1 | | Dividend 2 | | Dividend 3 | | | Millions of euros | |
| | | Millions of euros | |
| Profit at each of the dates indicated, after the provision for income tax | | | | 1,432 | | | | 3,072 | | | | 3,088 | |
Less — | | | | | | | | | | | | | |
| | | | | | | | |
Interim dividend — | | | | | | | | | | | | | |
| Profit at each of the dates indicated, after the provision for income tax | | | 1,748 | | | | 2,785 | | | | 2,967 | | |
Less - | | | | | | | | | | | | | |
| Estimated provision for Legal Reserve | | | — | | | | — | | | | — | | | | — | | | | — | | | | 73 | |
| Interim dividends paid | | | — | | | | 626 | | | | 1,252 | | | | — | | | | 337 | | | | 675 | |
| | | | | | | | | | | | | | | |
Maximum amount distributable | | | 1,748 | | | | 2,159 | | | | 1,715 | | | | 1,432 | | | | 2,735 | | | | 2,340 | |
| | | | | | | | | | | | | | | |
Amount of proposed interim dividend | | | 626 | | | | 626 | | | | 626 | | | | 337 | | | | 337 | | | | 404 | |
| | | | | | | | | |
The application of earnings during 2010 was as follows:
| | | | | | | | |
| | | Millions of euros
|
Application of Earnings 2010 | | | | euros |
| |
Net profitincome for 2008(*year of 2010(*) | | | 2,8352,904 | |
| | | | | |
Distribution: | | | | | | | | |
| Dividends | | | — | | | | | |
— Interim | | | 1,878 | | | | | |
— Final | | | — | | | | 1,079 | |
| Legal reserve | | | — | | | | 73 | |
| Voluntary reserves | | | 957 | | | | | |
| | | | | | | 1,752 | |
| | |
| (*) | | ProfitNet income of BBVA, S.A. (Appendix(Apendix I) |
The distribution of profitdividends per share during 2008, 2007 and 2006 wasin 2010 were as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | First Interim | | | Second Interim | | | Third Interim | | | Final | | | Total | |
| |
2008 | | | 0.167 | | | | 0.167 | | | | 0.167 | | | | — | | | | 0.501 | |
2007 | | | 0.152 | | | | 0.152 | | | | 0.152 | | | | 0.277 | | | | 0.733 | |
2006 | | | 0.132 | | | | 0.132 | | | | 0.132 | | | | 0.241 | | | | 0.637 | |
| | | | | | | | | | | | | | | | | |
| | | First
| | Second
| | Third
| | |
Dividends per Share | | Interim | | Interim | | Interim | | Total |
| | | Euros per share |
| |
2010 | | | 0.090 | | | | 0.090 | | | | 0.090 | | | | 0.270 | |
The dividends paid during 2008per share in 2010 and 20072009 were as follow:follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | | 2007 | | | | | 2010 | | 2009 | |
| | | % over
| | Euros
| | | | % Over
| | Euros
| | | | | | | Euros
| | Amount
| | | | Euros
| | Amount
| |
| | | Nominal | | per Share | | Amount | | Nominal | | per Share | | Amount | | | % Over
| | per
| | (Millions of
| | % Over
| | Per
| | (Millions of
| |
| | | | | | | (Millions of Euros) | | | | | | (Millions of Euros) | | |
Dividends Paid (*) | | | Nominal | | Share | | Euros) | | Nominal | | Share | | Euros) | |
| |
| Ordinary shares | | | 102 | % | | | 0.501 | | | | 1,878 | | | | 150 | % | | | 0.733 | | | | 2,717 | | | | 67 | % | | | 0.330 | | | | 1,237 | | | | 86 | % | | | 0.420 | | | | 1,574 | |
| Rest of shares | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Total dividends paid | | | 102 | % | | | 0.501 | | | | 1,878 | | | | 150 | % | | | 0.733 | | | | 2,717 | | | | 67 | % | | | 0.330 | | | | 1,237 | | | | 86 | % | | | 0.420 | | | | 1,574 | |
| Dividends with charge to income | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 67 | % | | | 0.330 | | | | 1,237 | | | | 86 | % | | | 0.420 | | | | 1,574 | |
| Dividends with charge to reserve or share premium | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Dividends in kind | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
The Bank’s Board of Directors plans to propose to its shareholders in general meeting the distribution of additional shareholder remuneration to complement the 2008 cash dividend in the form of an in-kind distribution of a portion of the share premium reserve: specifically, the proposal is to give Banco Bilbao Vizcaya Argentaria, S.A.
| | |
| (*) | | The total dividens paid under the cash-flows criteria, are the total amount paid in cash each year to shareholders, regardless of the year there were accued. |
F-43F-45
shareholders Company shares from treasury stock in the proportion of one (1) share
New scheme for every sixty-two (62) outstanding.payment to shareholders
Accordingly,At the maximum numberOrdinary General Meeting of Shareholders, the Board of Directors will propose two capital increases under the heading of voluntary reserves within the framework of the new scheme of payment to shareholders (“Dividend Option”).
The “Dividend Option” scheme enables shareholders to choose between different alternatives for their remuneration: either receiving shares to be distributed is sixty million, four hundred and fifty-one thousand, one hundred and fifteen (60,451,115) treasury shares of Banco Bilbao Vizcaya Argentaria, S.A. (Note 30).issued through an increase in released capital or in cash by selling the rights assigned in said increase.
This new scheme presents the opportunity for the shareholder to choose to perceive the entirety of his payment will entail a charge againstin cash or in new issued shares, while the share premium reserveGroup continues to respects the terms of payment to shareholders. In this regard, the first of these payments under Dividend Option is expected to occur in April 2011, to substitute the traditional final dividend, for which an increase in released capital is planned for an approximate amount of the figure resulting from measuring each share to be distributed at the weighted average market price of Banco Bilbao Vizcaya Argentaria, S.A. shares in the continuous electronic market on the trading session on the day immediately preceding the date set for the General Shareholders’ Meeting called to ratify the proposal (“Reference Value”), subject to a ceiling such that in no event can the charge against the share premium reserve exceed the total account balance.€690 million.
Basic and diluted earnings per share are determined by dividing net profit or losses attributablecalculated according to the Group in a given periodcriteria established by the weighted average number of shares outstanding during the period.IAS 33:
| | |
| • | Basic earnings per shareare determined by dividing the “Net income attributed to parent company” by the weighted average number of shares outstanding, excluding the average number of treasury stocks maintained throughout the year. |
|
| • | Diluted earnings per shareis calculated by using a method similar to that used to calculate basic earnings per share; the weighted average number of shares outstanding, and the net income attributed to the parent company if appropriate, is adjusted to take into account the potential dilutive effect of certain financial instruments that could generate the issue of new Bank shares (share option commitments with employees, warrants on parent company shares, convertible debt instruments) or for discontinued operations. |
Diluted
Two transactions were carried out in 2010 and 2009 that affect the calculation of basic and diluted earnings per share:
| | |
| • | In 2010 the Bank has carried out a capital increase with the pre-emptive subscription right for former shareholders (see Note 27). According to IAS 33, the calculation of the basic and diluted earnings per share should be adjusted retrospectively for all years before the issue by using a corrective factor that will be applied to the denominator (a weighted average number of shares outstanding). Said corrective factor is the result of dividing the fair value per share immediately before the exercise of rights by the theoretical ex-rights fair value per share. For these purposes the basic and diluted earnings per share have been recalculated for 2009 and 2008 from the following table. |
|
| • | In 2009, the Bank issued subordinated convertible bonds amounting to €2,000 million (see Note 23.4). Since the conversion is mandatory on the date of their final maturity, in accordance with the IAS 33 criteria, the following adjustments must be applied to both the calculation of the diluted earnings per share as well as the basic earnings per share. |
| | |
| • | In the numerator, the net income attributed to the parent company is increased by the amount of the annual coupon of the subordinated convertible bond. |
|
| • | In the denominator, the weighted average number of shares outstanding is increased by the estimated number of shares after the conversion if done that day. |
F-46
As a result, as can be seen in the following table, for 2010, 2009 and 2008 the amount of the basic earnings per share are determined using a method similarand diluted earnings per share coincide, as since the diluting effect of the conversion is mandatory, it should also be applied to that used to calculatethe calculation of the basic earnings per share; however, the weighted average number of shares outstanding is adjusted to take into account the potential dilutive effect of share options, warrants and convertible debt instruments outstanding at period-end.share.
The “diluted number” of shares linked to warrants outstanding at period-end is determined in two stages: firstly, the hypothetical liquid amount that would be received on the exercise of these warrants is divided by the annual average price of the share and, secondly, the difference between the amount thus quantified and the present number of potential shares is calculated; this represents the theoretical number of shares issued disregarding the dilutive effect. Profit or loss for the period is not adjusted.
Therefore, the calculation of earnings per share wasin 2010, 2009 and 2008 is as follow:follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| |
EARNINGS PER SHARE FOR CONTINUING OPERATIONS | | | | | | | | | | | | |
| Numerator for basic earnings per share: | | | | | | | | | | | | |
| Income available to common stockholders (thousands of euros) | | | 5,020 | | | | 6,126 | | | | 4,736 | |
| Numerator for diluted earnings per share: | | | | | | | | | | | | |
| Income available to common stockholders (thousands of euros) | | | 5,020 | | | | 6,126 | | | | 4,736 | |
| Denominator for basic earnings per share (millions of shares) | | | 3,706 | | | | 3,594 | | | | 3,406 | |
| Denominator for diluted earnings per share (millions of shares) | | | 3,706 | | | | 3,594 | | | | 3,406 | |
| | | | | | | | | | | | | |
Basic earnings per share for continuing operations (euros) | | | 1.35 | | | | 1.70 | | | | 1.39 | |
| | | | | | | | | | | | | |
Diluted earnings per share for continuing operations (euros) | | | 1.35 | | | | 1.70 | | | | 1.39 | |
| | | | | | | | | | | | | |
Basic and Diluted Earnings per Share | | 2010 | | | 2009 | | | 2008 | |
| |
Numerator for basic and diluted earnigs per share (million of euros) | | | | | | | | | | | | |
| Net income attributed to parent company | | | 4,606 | | | | 4,210 | | | | 5,020 | |
| +ADJUSTMENT: Mandatory convertible bonds interest expenses | | | 70 | | | | 18 | | | | — | |
| | | | | | | | | | | | | |
| Net income adjusted (millions of euros)(A) | | | 4,676 | | | | 4,228 | | | | 5,020 | |
| | | | | | | | | | | | | |
Denominator for basic earnings per share (number of shares outstanding) | | | | | | | | | | | | |
| Weighted average number of shares outstanding(1) | | | 3,762 | | | | 3,719 | | | | 3,706 | |
| Weighted average number of shares outstanding x corrective factor(2) | | | — | | | | 3,860 | | | | 3,846 | |
| +ADJUSTMENT: Average number of estimated shares to be converted | | | 221 | | | | 39 | | | | — | |
| | | | | | | | | | | | | |
| Adjusted number of shares(B) | | | 3,983 | | | | 3,899 | | | | 3,846 | |
| | | | | | | | | | | | | |
Basic earnings per share (Euros per share)A/B | | | 1.17 | | | | 1.08 | | | | 1.31 | |
| | | | | | | | | | | | | |
Diluted earnings per share (Euros per share)A/B | | | 1.17 | | | | 1.08 | | | | 1.31 | |
| | | | | | | | | | | | | |
| | |
| (1) | | Weighted average number of shares outstanding (millions of euros), excluded weighted average of treasury shares during the period |
|
| (2) | | Corrective factor, due to the capital increase with pre-emptive subscription right, applied for the previous years. |
As of December 31, 2010, 2009 and 2008, 2007 and 2006,except for the aforementioned convertible bonds, there were neitherno other financial instruments, nor share based payment tooption commitments with employees or discontinued transactions that could potentially dilute basicaffect the calculation of the diluted earnings per share nor discontinued operations that affectedfor the earnings per share calculation for periodsyears presented.
| |
| 6. | BASIS AND METHODOLOGY INFORMATION FOR SEGMENT REPORTING |
Segment reporting represents a basic tool in the oversight and management of the Group’s various businesses. The Group compiles reporting information on as disaggregated a level as possible, and all data relating to the businesses these units manage is recordedrecognized in full. These disaggregated units are then amalgamated in accordance with the organizational structure preordained by the Group into higher level units and, ultimately, the business segments themselves. Similarly, each ofall the legal entitiescompanies making up the Group are also assigned to the various businessdifferent segments based onaccording to their core activities; where their businesses are sufficiently diverse to so warrant, they are in turn segmented and their assets and liabilities and income statement accounts are allocated to more than one segment.activity.
F-44
Once the composition of each business segment has been defined, certain management criteria are applied, noteworthy among which are the following:
Economic capital: capital | | |
| • | Economic capital: Capital is allocated to each business based on capital at risk (CaR) criteria, in turn predicated on unexpected loss at a specific confidence level, determined as a function of the Group’s target capital ratio. This target level is applied at two levels: the first is adjusted core capital, which determines the allocated capital. The Bank uses this amount as a basis for calculating the return generated on the equity in each business (ROE). The second level is total capital, which determines the additional allocation in terms of subordinate debt and preferred securities. The calculation of the CaR combines credit risk, market risk, structural risk associated with the balance sheet equity positions, operational risk, fixed assets risks and technical risks in the case of insurance companies. These calculations are carried out using internal models that have been defined following the guidelines and requirements established under the Basel II Capital Accord, with economic criteria prevailing over regulatory ones. |
F-47
Due to each business based on capital at risk (CaR) criteria, in turn predicated on unexpected loss at a specific confidence level, determined as a function of the Group’s target solvency ratio. This target is in turn set at two levels: Tier 1 capital, which determines capital allocation and serves as the benchmark for determining each business’return-on-equity (ROE); total capital, which determines additional allocations in relation to preferred shares and subordinated debt.
The CaR calculation encompasses credit risk, market risk, structural balance sheet risk, shareholding risks, operational risk, risks to tangible assets and technical risks at insurance companies.
The calculation of eligible capital under prevailing legislation is a very important exercise for the Group at the global level; however, CaR criteria are used to allocate capital by business, which, due toits sensitivity to risk, factors, dovetails with theCaR is an element linked to management policies governingof the businesses themselves and the overall business portfolio. This procedure, a frontrunner for the trend later endorsed in the Basel II capital accord,themselves. It standardizes capital allocation across businessesbetween them in accordance with the risks incurred and facilitates comparisonmakes it easier to compare profitability. In other words, it is calculated in a way that is standard and integrated for all kinds of returns acrossrisks and for each operation, balance or risk position, allowing its risk-adjusted return to be assessed and an aggregate to be calculated for the businesses.return by client, product, segment, unit or business area.
| | |
| • | Internal transfer prices: The calculation of the net interest income of each business is performed using rates adjusted for the maturities and rate reset clauses in effect on the various assets and liabilities making up each unit’s balance sheet. The allocation of profits across business units is performed at market prices. |
|
| • | Allocation of operating expenses: Both direct and indirect expenses are allocated to the segments, except for those items for which there is no clearly defined or close link with the businesses, as they represent corporate/institutional expenses incurred on behalf of the overall Group. In this regard, we should note that the primary change in criteria during 2010 related to the assignment of expenses refers to the allocation of rent expenses in Spain and Portugal. This was formerly carried out based on a percentage over the book value of the real estate property and based on the area occupied. As of 2010, this allocation will be carried out at market value. |
|
| • | Cross selling: On certain occasions, consolidation adjustments are made to eliminate overlap accounted for in the results of one or more units as result of cross-selling focus. |
Internal transfer prices: the calculationDescription of the spreads at eachGroup’s business is performed using rates adjusted for the maturities and rate reset clauses in effect on the various assets and liabilities making up each unit’s balance sheet. The allocation of profits across business generation and distribution units (e.g., in asset management products) is performed at market prices.
Allocation of operating expenses:segments both direct and indirect expenses are allocated to the segments, except for those items for which there is no clearly defined or close link with the businesses, as they represent corporate/institutional expenses incurred on behalf of the overall Group.
Recognition of revenue from cross-selling: on certain occasions, as a result of the correct allocation of revenues and expenses, consolidation adjustments are made to eliminate overlap in the units’ results on account of cross-selling incentives.
The primary segment reporting format used is that of business segments. The BBVA Group manages its business along two fundamental axes: wholesale and retail businesses, via five business units and one corporate division.
These units constitute the main cut-off for formingareas described below are considered the Group’s business segments. They are managed individually and each has discrete characteristics in relation to customers, products, distribution networks, ratesand/or returns produced.
The breakdowncomposition of primarythe Group’s business segments isareas as of 31 December 2010 was as follows:
| | |
| | • | The wholesale businesses (aSpain and Portugal: This area handles the financial and non-financial needs of private individual customers (Retail Network), including the higher net-worth market segment denominated Global Businesses)(BBVA Banca Privada, private banking), which includes wholesale type transactions undertaken in any part ofas well as the world,business segment (professionals, the self-employed, retailers, the farming community and is made up of: Global Clients & Investment Banking, which encompasses the wholesale businesses performed by the European, Asian and New York based offices, Global Markets, charged with treasury management and distributionSMEs) in the same markets, Asset Management, which includes the traditional asset management businesses (mutual fundsSpanish market. It also manages business with SMEs, corporations and pension funds in Spain), alternative asset managementpublic and private equity,institutions and developers in Spain through the Proprietary Project Management arm, includingCorporate and Business Banking unit (“CBB”). Other specialized units handle online banking, consumer finance (the Consumer Finance Unit), the Group’s non-financial shareholdingsbancassurance business (BBVA Seguros) and proprietary real estate activities, and Asia, which holds the Group’s investment in the CITIC Group.BBVA Portugal. |
| |
| | • | The retailMexico: Includes the banking, pensions and insurance businesses which constitutein the country. |
|
| • | United States: encompasses the Group’s corebusiness in the United States and in the Commonwealth of Puerto Rico. |
|
| • | South America: Includes the banking, pensions and insurance businesses in South America. |
|
| • | Wholesale Banking and Asset Management (WB&AM): handles the Group’s wholesale businesses and asset management in all the geographical areas where it operates. For the purposes of this financial report, the business and earnings of the units in the Americas are registered in turn split into four segments, given each unit’s unique characteristics. The names of these segments have been preserved from howtheir respective areas (Mexico, South America and the Group has traditionally reported itsUnited States). WB&AM is organized around three main business performance tounits: Corporate and Investment Banking (“C&IB”), Global Markets (“GM”) and Asset Management (“AM”). It also includes the market. They are:Industrial and Real Estate Holdings unit and the Group’s holdings in the CITIC financial group. |
C&IB coordinates the origination, distribution and management of a complete catalogue of corporate and investment banking products (corporate finance, structured finance, structured trade finance, equity capital markets and debt capital markets), and global transactional services. Large corporate customers are offered a specialized coverage by sector (industry bankers).
This unit handles the origination, structuring, distribution and risk management of market products, which are traded through several markets.
Asset Management is BBVA’s provider of asset management solutions. It designs and manages mutual funds, pension funds and the third-party fund platform Quality Funds. The unit has solutions tailored for each customer segment, based on constant product innovation as the key to success.
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Industrial and Real Estate Holdings diversifies the area by developing long-maturing projects that create value in the medium and long-term through the active management of industrial equity holdings and real estate projects (Duch).
As well as the areas indicated, all the areas also have allocations of other businesses that include eliminations and other items not assigned to the units.
Finally, the Corporate Activities unit includes all the business not included in the business areas. Basically, this segment records the costs from head offices with a strictly corporate function and makes allocations to corporate and miscellaneous provisions, such as early retirement. It also includes the Financial Management unit, which performs management functions for the Group as a whole, essentially management of asset and liability positions in euro-denominated interest rates and in exchange rates, as well as liquidity and capital management functions. The management of asset and liability interest-rate risks in currencies other than the euro is recognized in the corresponding business areas. It also includes the Industrial and Financial Holdings unit and the Group’s non-international real estate businesses.
In 2010, certain changes were made in the criteria applied in 2009 in terms of the composition of some of the different business areas, such as:
| | |
| | • | The retail bankingUnited States and WB&AM: In order to give a global view of the Group’s business in the eurozone (a segment denominated Spain and Portugal), which includes:United States, we decided to include the retail banking networkNew York branch, formerly in Spain, including the retail segment, wealth management and the company and business banking unit in this market; commercial banking, which encompasses banking with SMEs, corporates, institutions and developersWB&AM, in the same geography, and all other related businesses, noteworthy among which are the consumer financing, European insurance and Portuguese bankingUnited States area. This change is consistent with BBVA’s current method of reporting its business units. |
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| | |
| • | The retail businesses in Mexico (a segment denominated Mexico), which includes the banking, insurance and pension businesses in this nation. |
| |
| | • | South America:The retail businessesadjustment for the hyperinflation is included in 2010 in the US (a segment denominated USA), which includes the banking and insurance businesses in the US and Puerto Rico. |
|
| • | The retail businesses in the rest of the Americas (a segment denominated South America), which includes the banking, insurance and pension businesses inaccounting statements for Banco Provincial (Venezuela); this region. |
| | |
| • | Activities of a corporate nature (Corporate Activities), a unit which performs management functionswill also be carried out for the Group as a whole, essentially management2009 statements to make them comparable. At the close of structural euro-2009, when the Venezuelan economy was for the first time considered hyperinflationary for accounting purposes, this impact was registered in Corporate Activities, with the aim of making comparison with 2008 easier and currency-denominated balance sheet interest rate positions, as well as liquidity and capital management functions;in order not to distort the management of structural risks in non-euro interest rate positions is undertaken at the corresponding business units. This segment also includes the Industrial and Financial Shareholdings unit and the allocation of strictly head-office costs and certain allowances, such as early retirement provisions and others that are also corporate in nature.quarterly series for 2009 itself. |
This segment breakdown is different to that presentedLikewise, a modification has been made in 2007, and reflects the Group’s new organizational structure in force since January 2008. The main changesallocation of certain costs from the corporate headquarters to the new structure are:business areas that affect rent expenses and sales of IT services, though to a lesser extent. This has meant that the segregation ofdata for 2009 and 2008 has been reworked to ensure that the US operation as an independent business unit (having been previous combined into a Mexico & USA unit) and the swapping of certain portfolios and units among the Spain and Portugal and Global Businesses segments.
Accordingly the figures presented for 2007 and 2006 have been restated using the same criteria and segment breakdown as disclosed in 2008, to enable like-for-likeyear-on-year comparisons.different years are comparable
The detailtotal breakdown of the totalGroup’s assets for each operating segmentby business areas as of December 31, 2010, 2009 and 2008 2007 and 2006, iswas as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Assets | | |
| | | 2008 | | 2007 | | 2006 | | |
Total Assets by Bussiness Areas | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Spain and Portugal | | | 223,498 | | | | 223,628 | | | | 200,814 | | | | 217,191 | | | | 215,823 | | | | 220,464 | |
| Global Businesses | | | 140,372 | | | | 103,999 | | | | 84,792 | | |
| Mexico | | | 60,805 | | | | 65,678 | | | | 56,879 | | | | 75,152 | | | | 62,855 | | | | 60,774 | |
| USA | | | 43,345 | | | | 38,381 | | | | 14,951 | | |
| South America | | | 41,600 | | | | 34,690 | | | | 30,498 | | | | 51,663 | | | | 44,378 | | | | 41,600 | |
| The United States | | | | 57,613 | | | | 77,896 | | | | 74,124 | |
| WB&AM | | | | 121,522 | | | | 106,563 | | | | 124,058 | |
| Corporate Activities | | | 33,029 | | | | 35,350 | | | | 23,730 | | | | 29,597 | | | | 27,550 | | | | 21,630 | |
| | | | | | | | | | | | | | | |
Total | | | 542,650 | | | | 501,726 | | | | 411,663 | | | | 552,738 | | | | 535,065 | | | | 542,650 | |
| | | | | | | | | | | | | | | |
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The detail of the consolidated net income for the yearyears 2010, 2009 and 2008 2007 and 2006 for each operating segment isbusiness area was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Consolidated Income | | |
| | | 2008 | | 2007 | | 2006 | | |
Net Income attributed by Bussiness Areas | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Spain and Portugal | | | 2,625 | | | | 2,381 | | | | 1,884 | | | | 2,070 | | | | 2,275 | | | | 2,473 | |
| Global Businesses | | | 754 | | | | 896 | | | | 859 | | |
| Mexico | | | 1,938 | | | | 1,880 | | | | 1,711 | | | | 1,707 | | | | 1,357 | | | | 1,930 | |
| USA | | | 211 | | | | 203 | | | | 64 | | |
| South America | | | 727 | | | | 623 | | | | 509 | | | | 889 | | | | 780 | | | | 727 | |
| The United States | | | | 236 | | | | (950 | ) | | | 308 | |
| WB&AM | | | | 950 | | | | 853 | | | | 722 | |
| Corporate Activities | | | (1,235 | ) | | | 142 | | | | (291 | ) | | | (1,246 | ) | | | (105 | ) | | | (1,140 | ) |
| | | | | | | | | | | | | | | |
Subtotal | | | 5,020 | | | | 6,126 | | | | 4,736 | | | | 4,606 | | | | 4,210 | | | | 5,020 | |
| | | | | | | | | | | | | | | |
| Not assigned income | | | — | | | | — | | | | — | | |
| Non-assigned income | | | | — | | | | — | | | | — | |
| Elimination of interim income (between segments) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Other gains (losses) | | | 366 | | | | 289 | | | | 235 | | | | 389 | | | | 385 | | | | 365 | |
| Income tax and/or income from discontinued operations | | | 1,541 | | | | 2,079 | | | | 2,059 | | | | 1,427 | | | | 1,141 | | | | 1,541 | |
| | | | | | | | | | | | | | | |
INCOME BEFORE TAX | | | 6,926 | | | | 8,494 | | | | 7,030 | | | | 6,422 | | | | 5,736 | | | | 6,926 | |
| | | | | | | | | | | | | | | |
For the years 2008, 20072010, 2009 and 20062008 the detail of the ordinary income for each operating segment, which is conformed bymade up of the interest income, equity instruments income, fee“Interest and similar income”, “Dividend income”, “Fee and commission income, netincome”, “Net gains (losses) on financial assets and liabilitiesliabilities” and other“Other operating income,income”, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Ordinary Income | | |
| | | 2008 | | 2007 | | 2006 | | |
Total Ordinary Income by Bussiness Areas | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Spain and Portugal | | | 12,613 | | | | 11,442 | | | | 9,832 | | | | 10,151 | | | | 10,974 | | | | 12,787 | |
| Global Businesses | | | 5,920 | | | | 5,559 | | | | 4,035 | | |
| Mexico | | | 9,162 | | | | 8,721 | | | | 8,431 | | | | 8,271 | | | | 7,669 | | | | 9,166 | |
| USA | | | 2,862 | | | | 1,831 | | | | 701 | | |
| South America | | | 5,834 | | | | 4,643 | | | | 3,954 | | | | 5,684 | | | | 5,755 | | | | 5,970 | |
| The United States | | | | 3,067 | | | | 3,191 | | | | 3,932 | |
| WB&AM | | | | 1,987 | | | | 2,887 | | | | 4,739 | |
| Corporate Activities | | | 4,886 | | | | 5,064 | | | | 3,275 | | | | 2,869 | | | | 3,339 | | | | 4,683 | |
| Adjustments and eliminations of ordinary income between segments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | |
TOTAL | | | 41,277 | | | | 37,260 | | | | 30,229 | | | | 32,029 | | | | 33,815 | | | | 41,277 | |
| | | | | | | | | | | | | | | |
The secondary level of segments is geographic (note 3).
Dealing in financial instruments can entail the assumption or transfer of one or more classes of risk by financial institutions. The main risks inherent inrelated to financial instruments are:
| | |
| | • | Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. There are three types of market risk: |
|
| • | CurrencyCredit risk: the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. |
|
| • | Interest rate risk: the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. |
|
| • | Price risk: the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. |
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| | |
| • | Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. |
| |
| | • | Liquidity risk isMarket risks: These are defined as the risk that an entity will notrisks arising from the maintenance of financial instruments whose value may be able to meet obligations associated with financial liabilities, or will be forced to secure funding on onerous conditions as a resultaffected by changes in market conditions. It includes three types of difficulties encountered in meeting its obligations.risk: |
| | |
| • | Foreign-exchange risk: this is the risk resulting from variations in foreign exchange rates. |
|
| • | Interest rate risk: this arises from variations in market interest rates. |
|
| • | Price risk: This is the risk resulting from variations in market prices, either due to factors specific to the instrument itself, or alternatively to factors which affect all the instruments traded on the market. |
|
| • | Liquidity risk: This is the possibility that a company cannot meet its payment commitments duly, or, to do so, must resort to borrowing funds under onerous conditions, or risking its image and the reputation of the entity. |
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RISK GUIDELINES AND POLICIESPrinciples and policies
The general guiding principles followed by the BBVA Group to define and monitor its risk profile are set out below:
| | |
| | • | The risks assumed must be aligned with the Group’s regulatory capital in accordance with its target solvency level. |
|
| • | There are limits in place to curtail the concentration of exposures to specific risk factors that could jeopardize the Group’s objectives in terms of solvency, liquiditymanagement function is unique, independent and earnings recurrence.global. |
| |
| | • | The Group’s endeavours to generate profits must imply a high degree of repeat earnings. |
|
| • | Business growthassumed risks must be financedcompatible with the target capital adequacy and must be identified, measured and assessed. Monitoring and management procedures and sound control and mitigation systems must likewise be in accordance with prudent liquidity management.place. |
| |
| | • | All risks must be identified, measuredmanaged integrally during their life cycle, being treated differently depending on their type and evaluated and procedures must be in place to monitor and manage these risks.with active portfolio management based on a common measurement (economic capital). |
| |
| | • | Maintenance of robust tools for controllingIt is each business area’s responsibility to propose and mitigating operational and reputational risks. |
|
| • | The business divisions are held responsible for proposing and maintaining an adequatemaintain its own risk profile, within their scope of activity and under the umbrella ofindependence in the corporate action framework (defined as the set of risk management framework.policies and procedures), using a proper risk infrastructure. |
| |
| | • | The risk management infrastructure must be sufficient to lend dynamic support to the principles listed abovesuitable in relation toterms of people, tools, databases, ITinformation systems and procedures so that there is a clear definition of roles and personnel.responsibilities, ensuring efficient assignment of resources among the corporate area and the risk units in business areas. |
Building on these principles, the Group has developed an integrated risk management system that is structured around three main components: (i) a corporate risk governance regime, with adequate segregation of duties and responsibilities (i.e., separation of risk-taking and risk control functions), (ii) a set of tools, circuits and procedures that constitute the various discretedifferent risk management regimes, and (iii) an internal risk control system.
Corporate governance system
The Group has a corporate governance system which is in keeping with international recommendations and trends, adapted to requirements set by regulators in each country and to the most advanced practices in the markets in which it pursues its business.
In the field of risks the Board of Directors is responsible for establishing the general principles that define the Institution’s risk objectives, approving the risk control and management policy and the regular monitoring of the internal systems of information and control.
To perform this function correctly the board is supported by the Executive Committee and a Risk Committee, the main mission of the latter being to assist the board in undertaking its functions associated with risk control and management.
Under Article 36 of the Board Regulations, the Risk Committee is assigned the following functions for these purposes:
| | |
| • | To analyze and evaluate proposals related to the Group’s risk management and oversight policies and strategies. |
| | |
| • | To monitor the match between risks accepted and the profile established. |
|
| • | To assess and approve, where applicable, any risks whose size could compromise the Group’s capital adequacy or recurrent earnings, or that present significant potential operational or reputational risks. |
|
| • | To check that the Group possesses the means, systems, structures and resources in accordance with best practices to allow the implementation of its risk management strategy. |
The risk management function is distributed into the Risk Units of the business areas and the Corporate Area, which defines the policy, strategies, methodologies and global infrastructure. The risk units in the business areas propose and maintain the risk profile of each client independently, but within the corporate framework for action.
The Corporate Risk Area combines the view by risk type with a global view. It is made up of the Corporate Risk Management unit, which covers the different types of risk, the Technical Secretary responsible for technical comparison, which works alongside the transversal units: such as Structural Management & Asset Allocation, Risk
F-51
Assessment Methodologies and Technology, and Validation and Control, which include internal control and operational risks.
Using this structure, the risk management system insures the following: first, the integration, control and management of all the Group’s risks; second, the application of standardized risk principles, policies and metrics throughout the entire Group; and third, the necessary insight into each geographical region and each business.
This organizational scheme is complemented by different committees, which include the following:
| | |
| • | The Global Asset Allocation Committee is made up of the Group’s President and COO, the financial director, the corporate strategy and development director and the Global Risk Management director. This committee plans the process of risk acceptance by proposing an objective risk objective, which is submitted to the Board’s Risk Committee. |
|
| • | The task of theGlobal Internal Control and Operational Risk Committeeis to undertake a review at the level of the Group and of each of its units, of the control environment and the running of the Internal Control and Operational Risk Models, and likewise to monitor and locate the main operational risks the Group is subject to, including those that are transversal in nature. This Committee is therefore the highest operational risk management body in the Group. |
|
| • | ThisRisk Management Committeeis made up of the risk managers from the Risk Units from the business areas and those of the Corporate Risk Area. This body meets monthly and is responsible for establishing the Group’s risk strategy (especially as regards policies and structure of the operation of the Group), presenting the risk strategy to the Group’s governing bodies for their approval, monitoring the management and control of risks in the Group and, if necessary, adopting the necessary actions. |
|
| • | The Global Risk Management Committee is made up of the corporate directors of the Group’s risk unit and those responsible for risks in the different countries. The Committee meets every week to review the Group’s risk strategy, and review and agree on the main risk projects and initiatives in the business areas. |
|
| • | The Risk Management Committee is made up of the following permanent members: the Global Risk Management director, the Corporate Risk Management director and the Technical Secretary. The rest of the committee members deal with the operations that have to be analyzed in each of its sessions. The members analyze and decide on those financial programs and operations that are within its remit and discuss those that are not, and if necessary transfer them for approval to the Risk Committee. |
|
| • | The Assets and Liabilities Committee (“ALCO”) is responsible for actively managing structural interest rate and foreign exchange risk positions, global liquidity and the Group’s capital resources. |
|
| • | The Technology and Methodologies Committee is a forum that decides on the hedging needs of models and infrastructures in the Business Areas within the framework of the operational model of Global Risk Management. |
|
| • | The functions of theNew Products Committeeare to assess, and if appropriate to approve, the introduction of new products before the start of activity; to undertake subsequent control and monitoring for newly authorized products; and to foster business in an orderly way to enable it to develop in a controlled environment. |
Tools, circuits and procedures
The Group has implemented an integral risk management system designed to cater for the needs arising in relation to limitingthe various types of risk. This has prompted it to equip the management processes for each risk concentrations, specificallywith measurement tools for risk acceptance, assessment and monitoring and to define the appropriate circuits and procedures, which are reflected in manuals that also include management criteria.
Specifically, the Group’s risk management main activities are as follows: calculation of the risk exposures of the various portfolios, considering any related mitigating factors (netting, collateral, etc.); calculation of the probability of default ( “PD”), loss severity and expected loss of each portfolio, and assignment of the PD to the new transactions (ratings and scorings);values-at-risk measurement of the portfolios based on various scenarios using
F-52
historical simulations; establishment of limits to the potential losses based on the various risks incurred; determination of the possible impacts of the structural risks on the income statement; setting of limits and alerts to safeguard the Group’s liquidity; identification and quantification of operational risks by business line to enable the mitigation of these risks through corrective measures; and definition of efficient circuits and procedures which contribute to the efficient achievement of the targets set.
Internal control model
The Group’s Internal Control Model is based on the best practices described in the following documents: “Enterprise Risk Management— Integrated Framework” by the COSO (Committee of Sponsoring Organizations of the Treadway Commission) and “Framework for Internal Control Systems in Banking Organizations” by the Bank for International Settlements (BIS).
The Internal Control Model therefore comes within the Integral Risk Management Framework. Said framework is understood as the process within an organization involving its board of directors, its management and all its staff, which is designed to identify potential risks facing the institution and which enables them to be managed within the limits defined, in such a way as to reasonably assure that the organization meets its business targets.
This Integral Risk Management Framework is made up of Specialized Units (Risks, Compliance, Accounting and Consolidation, Legal Services), the Internal Control Function and Operational Risk and Internal Audit.
The Internal Control Model is underpinned by, amongst others, the following principles:
| | |
| • | The “process” is the articulating axis of the Internal Control Model. |
|
| • | Risk identification, assessment and mitigation activities must be unique for each process. |
|
| • | It is the Group’s units that are responsible for internal control. |
|
| • | The systems, tools and information flows that support internal control and operational risk activities must be unique or, in any event, they must be wholly administered by a single unit. |
|
| • | The specialized units promote policies and draw up internal regulations, the second-level development and application of which is the responsibility of the Corporate Internal Control and Operational Risk Unit. |
One of the essential elements in the model is the Institution-level Controls, a top-level control layer, the aim of which is to reduce the overall risk inherent in its business activities.
Each unit’s Internal Control and Operational Risk Management is responsible for implementing the control model within its scope of responsibility and managing the existing risk by proposing improvements to processes.
Given that some units have a global scope of responsibility, there are transversal control functions which supplement the previously mentioned control mechanisms.
Lastly, the Internal Control and Operational Risk Committee in each unit is responsible for approving suitable mitigation plans for each existing risk or shortfall. This committee structure culminates at the Group’s Global Internal Control and Operational Risk Committee.
Risk concentration
In the trading area, limits are approved each year by the Board’s Risk Committee on exposures to trading, structural interest rate, structural currency, equity and liquidity risk at the banking entities and in the asset management, pension and insurance businesses. These limits factor in many variables, including economic capital and earnings volatility criteria, and are reinforced with alert triggers and a stop-loss scheme.
In relation to credit risk, maximum exposure limits are set by customer and country; generic limits are also set for maximum exposure to specific deals and products. Upper limits are allocated based on iso-risk curves, determined as the sum of expected losses and economic capital, and its ratings-based equivalence in terms of gross nominal exposure.
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AnThere is also an additional guideline in terms of oversight of maximum risk concentration up to and at the level of 10% of equity: stringent requirements in terms of in-depth knowledge of the counterparty, its operating markets and sectors.
For retail portfolios, potential concentrations of risk are analyzed by geographygeographical area or by certain specific risk profiles in relation to overall risk and earnings volatility; where appropriate, the opportune measures are taken, imposing cut-offs using scoring tools, via recovery management and mitigating exposure using pricing strategy, among other approaches.
CORPORATE MANAGEMENT STRUCTURE
The Board of Directors is the body responsible for setting the risk policies via the Bank’s Standing committee and the Lending committee. The Board hence establishes the general principles defining the target risk profile for
F-48
the Group. Likewise, it approves the infrastructure required for risk management, the delegation framework and the ceilings system that enable the business to develop in keeping within this risk profile in day-to-day decision-making.
The Lending Committee undertakes periodic analysis and monitoring of risk management within the various levels of delegation of the Bank’s administrative bodies. The scope of its functions comprises:
| | |
| • | Analysing and assessing proposals for Group risk strategy and policies in order to submit them to the Bank’s Standing Committee for approval. |
|
| • | Monitoring the degree to which the risks assumed are in line with the specified profile, as a reflection of the Bank’s risk tolerance and expected earnings in view of the risk exposure. |
|
| • | Approval of risk operations within the established delegation system. |
|
| • | Verification that the Group is provided with the means, systems, structures and resources in line with best practices, to enable it to implement its risk management strategy. |
|
| • | Submission of the proposals it considers necessary or appropriate to the Bank’s Standing Committee so that risk management adapts to best practices arising from recommendations on corporate governance or from risk supervisory bodies. |
The Group’s risk management system is managed by an independent risk area, which combines a view by risk type with a global view. The risk area assures that the risks tools, metrics, historical databases and information systems are in line and uniform. It likewise sets the procedures, circuits and general management criteria.
The Global Risk Committee — which is composed of those in charge of the group’s risk management- has as its main tasks the development and implementation of the Group’s risk management model as well as the correct integration of the risk’s costs in the different decision-making processes. The Global Risk Committee assesses the global risk profile of the Group and the coherence between the risk policies and objective risk profile; identifies global risk concentrations and mitigation techniques; monitors the macroeconomic environment and the performance of entities in the sector quantifying global sensitivity and the expected impact of different scenarios of risk positioning.
The Global Risk Internal Control and Operational risk Committee assesses the main operational risks of the Group and assures that the units establish the corresponding mitigation plans. As well, they review the internal control annual review that is afterwards approved by the Audit and Compliance Committee.
The Technical Transactions Committee analyzes and approves, where appropriate, the financial transactions and programs that are within its level of authorization, and refers any transactions exceeding the scope of its delegated powers to the Lending Committee.
The New Products Committee is responsible for studying and, if necessary, approving the introduction of new products before the activities begin. The Committee is also responsible for controlling and monitoring the new products, and for promoting business in an orderly way, and allow them to develop in a controlled environment.
The Asset-Liability Committee (ALCO) is the body responsible for actively managing the Group’s structural liquidity, interest rate and currency risks, and its core capital.
TOOLS, CIRCUITS AND PROCEDURES
The Group has implemented an integrated risk management system designed to cater for the needs arising in relation to the various types of risk; this prompted it to equip the management processes for each risk with measurement tools for risk acceptance, assessment and monitoring and to define the appropriate circuits and procedures, which are reflected in manuals that also include management criteria.
Specifically, the main risk management activities performed are as follows: calculation of the risk exposures of the various portfolios, considering any related mitigating factors (netting, collateral, etc.); calculation of the probability of default (PD), loss severity and expected loss of each portfolio, and assignment of the PD to the new transactions (ratings and scorings); measurement of thevalues-at-risk of the portfolios based on various scenarios
F-49
using historical simulations; establishment of limits to the potential losses based on the various risks incurred; determination of the possible impacts of the structural risks on the income statement; setting of limits and alerts to safeguard the Group’s liquidity; identification and quantification of operational risks by business line to enable the mitigation of these risks through corrective measures; and definition of efficient circuits and procedures which contribute to the achievement of the targets set.
7.1 Credit RiskCREDIT RISK
Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
Maximum exposurea contractual obligation due to credit risk
For the financial assets recognized on the faceinsolvency or incapacity of the consolidated balance sheet, credit risk exposure is equivalent to these assets’ carrying amounts. The maximum exposure to credit risk on financial guarantees extended is the maximum that BBVA is liable for if these guarantees are called in.natural or legal persons involved.
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Maximum credit risk exposure
The Group’s maximum credit risk exposure as of December 31, 2008, 20072010, 2009 and 2006,2008, without recognizing the availability of collateral or other credit enhancements to guarantee compliance, is broken down by sectorfinancial instrument and counterparties in the table below:
| | | | | | | | | | | | | | | | | | |
Maximum Credit Risk Exposure | | | Notes | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millions of euros | | |
| | |
Financial asstest held for trading (Note 10) | | | 67,502 | | | | 53,156 | | | | 41,842 | | |
Financial assets held for trading | | | | 10 | | | | 24,358 | | | | 34,672 | | | | 26,556 | |
| Debt securities | | | 26,556 | | | | 38,392 | | | | 30,426 | | | | | | | | 24,358 | | | | 34,672 | | | | 26,556 | |
| Public sector | | | 20,778 | | | | 27,960 | | | | 20,939 | | |
| Government | | | | | | | | 20,397 | | | | 31,290 | | | | 20,778 | |
| Credit institutions | | | 2,825 | | | | 6,020 | | | | 6,352 | | | | | | | | 2,274 | | | | 1,384 | | | | 2,825 | |
| Other sectors | | | 2,953 | | | | 4,412 | | | | 3,135 | | | | | | | | 1,687 | | | | 1,998 | | | | 2,953 | |
| Trading derivatives | | | 40,946 | | | | 14,764 | | | | 11,416 | | |
Other financial assets designated at fair value through profit or loss (Note 11) | | | 516 | | | | 421 | | | | 56 | | |
Other financial assets designated at fair value through profit or loss | | | | 11 | | | | 691 | | | | 639 | | | | 516 | |
| Debt securities | | | 516 | | | | 421 | | | | 56 | | | | | | | | 691 | | | | 639 | | | | 516 | |
| Public sector | | | 38 | | | | 41 | | | | 40 | | |
| Government | | | | | | | | 70 | | | | 60 | | | | 38 | |
| Credit institutions | | | 24 | | | | 36 | | | | 10 | | | | | | | | 87 | | | | 83 | | | | 24 | |
| Other sectors | | | 454 | | | | 344 | | | | 6 | | | | | | | | 534 | | | | 496 | | | | 454 | |
Availvable-for-sale financial assets (Note 12) | | | 39,961 | | | | 37,252 | | | | 32,068 | | |
Available-for-sale financial assets | | | | 12 | | | | 50,602 | | | | 57,067 | | | | 39,961 | |
| Debt securities | | | 39,961 | | | | 37,252 | | | | 32,068 | | | | | | | | 50,602 | | | | 57,067 | | | | 39,961 | |
| Public sector | | | 19,576 | | | | 17,573 | | | | 17,964 | | |
| Government | | | | | | | | 33,074 | | | | 38,345 | | | | 19,576 | |
| Credit institutions | | | 13,377 | | | | 13,419 | | | | 9,199 | | | | | | | | 11,235 | | | | 12,646 | | | | 13,377 | |
| Other sectors | | | 7,008 | | | | 6,260 | | | | 4,905 | | | | | | | | 6,293 | | | | 6,076 | | | | 7,008 | |
Loans and receivables (Note 13) | | | 375,386 | | | | 344,124 | | | | 285,421 | | |
Loans and receivables | | | | 13 | | | | 373,037 | | | | 353,741 | | | | 375,387 | |
| Loans and advances to credit institutions | | | 33,679 | | | | 24,392 | | | | 21,204 | | | | | | | | 23,604 | | | | 22,200 | | | | 33,679 | |
| Loans and advances to customers | | | 341,321 | | | | 319,671 | | | | 264,139 | | | | | | | | 347,210 | | | | 331,087 | | | | 341,322 | |
| Public Sector | | | 22,502 | | | | 21,065 | | | | 21,194 | | |
| Government | | | | | | | | 31,224 | | | | 26,219 | | | | 22,503 | |
| Agriculture | | | 4,109 | | | | 3,737 | | | | 3,133 | | | | | | | | 3,977 | | | | 3,924 | | | | 4,109 | |
| Industry | | | 46,576 | | | | 39,922 | | | | 24,731 | | | | | | | | 36,578 | | | | 42,799 | | | | 46,576 | |
| Real estate and construction | | | 47,682 | | | | 55,156 | | | | 41,502 | | | | | | | | 55,854 | | | | 55,766 | | | | 54,522 | |
| Trade and finance | | | 51,725 | | | | 36,371 | | | | 38,910 | | | | | | | | 45,689 | | | | 40,714 | | | | 44,885 | |
| Loans to individuals | | | 127,890 | | | | 121,462 | | | | 103,918 | | | | | | | | 135,868 | | | | 126,488 | | | | 127,890 | |
| Leases | | | 9,385 | | | | 9,148 | | | | 7,692 | | |
| Finance leases | | | | | | | | 8,141 | | | | 8,222 | | | | 9,385 | |
| Other | | | 31,452 | | | | 32,810 | | | | 23,059 | | | | | | | | 29,879 | | | | 26,955 | | | | 31,452 | |
| Debt securities | | | 386 | | | | 61 | | | | 78 | | | | | | | | 2,223 | | | | 454 | | | | 386 | |
| Public sector | | | 290 | | | | (1 | ) | | | — | | |
| Government | | | | | | | | 2,040 | | | | 342 | | | | 290 | |
| Credit institutions | | | 4 | | | | 1 | | | | 1 | | | | | | | | 6 | | | | 4 | | | | 4 | |
| Other sectors | | | 92 | | | | 61 | | | | 77 | | | | | | | | 177 | | | | 108 | | | | 92 | |
Held-to-maturity investments (Note 14) | | | 5,285 | | | | 5,589 | | | | 5,911 | | |
| Public sector | | | 3,844 | | | | 4,125 | | | | 4,440 | | |
Held-to-maturity investments | | | | 14 | | | | 9,946 | | | | 5,438 | | | | 5,285 | |
| Government | | | | | | | | 8,792 | | | | 4,064 | | | | 3,844 | |
| Credit institutions | | | 800 | | | | 818 | | | | 823 | | | | | | | | 552 | | | | 754 | | | | 800 | |
| Other sectors | | | 641 | | | | 646 | | | | 648 | | | | | | | | 602 | | | | 620 | | | | 641 | |
Hedging derivatives (Note 15) | | | 3,833 | | | | 1,050 | | | | 1,963 | | |
Derivatives (trading and hedging) | | | | 10-15 | | | | 44,762 | | | | 42,836 | | | | 46,887 | |
| | | | | | | | | | | | | | | |
Subtotal | | | 492,482 | | | | 441,592 | | | | 367,261 | | | | | | | | 503,396 | | | | 494,393 | | | | 494,591 | |
| | | | | | | | | | | | | | | |
| Valuation adjustments | | | 942 | | | | 655 | | | | 401 | | | | | | | | 299 | | | | 436 | | | | 942 | |
| | | | | | | | | | | | | | | |
Total Balance | | | 493,424 | | | | 442,247 | | | | 367,662 | | |
Total balance | | | | | | | | 503,695 | | | | 494,829 | | | | 495,533 | |
| | | | | | | | | | | | | | | |
| Financial guarantees (Note 33) | | | 35,952 | | | | 65,845 | | | | 42,281 | | |
| Other contingent exposures | | | 6,234 | | | | 5,496 | | | | 4,995 | | |
| Drawable by third parties (Note 33) | | | 92,663 | | | | 101,444 | | | | 98,226 | | |
| Public sector | | | 4,221 | | | | 4,419 | | | | 3,122 | | |
| Financial guarantees | | | | | | | | 36,441 | | | | 33,185 | | | | 35,952 | |
| Drawable by third parties | | | | | | | | 86,790 | | | | 84,925 | | | | 92,663 | |
| Government | | | | | | | | 4,135 | | | | 4,567 | | | | 4,221 | |
| Credit institutions | | | 2,021 | | | | 2,619 | | | | 4,356 | | | | | | | | 2,303 | | | | 2,257 | | | | 2,021 | |
| Other sectors | | | 86,421 | | | | 94,406 | | | | 90,748 | | | | | | | | 80,352 | | | | 78,101 | | | | 86,421 | |
| Other contingent exposures | | | | | | | | 3,784 | | | | 7,398 | | | | 6,234 | |
| | | | | | | | | | | | | | | |
Total off-balances | | | 134,849 | | | | 172,785 | | | | 145,502 | | |
Total off-balance | | | | 34 | | | | 127,015 | | | | 125,508 | | | | 134,849 | |
| | | | | | | | | | | | | | | |
Total | | | 628,273 | | | | 615,032 | | | | 513,164 | | |
Total maximum credit exposure | | | | | | | | 630,710 | | | | 620,337 | | | | 630,382 | |
| | | | | | | | | | | | | | | |
For financial assets recognized in the accompanying consolidated balance sheets, credit risk exposure is equal to the carrying amount, except for trading and hedging derivatives. The maximum exposure to credit risk on financial guarantees is the maximum that BBVA would be liable for if these guarantees were called in.
For trading and hedging derivatives, this information reflects the maximum credit risk exposure better than the amount shown on the balance sheet because it does not only include the market value on the date of the transactions
F-51F-55
(the carrying amount only shows this figure); it also estimates the potential risk of these transactions on their due date.
Regarding the renegotiated financial assets as of December 31, 2010, the BBVA Group did not perform any renegotiations that resulted in the need to reclassify doubtful risks as outstanding risks. The amount of financial assets that would be irregular had their conditions not been renegotiated is not significant with respect to the Group’s total loan portfolio as of December 31, 2010.
MitigatingMitigation of credit risk:risk, collateral and other credit enhancements, including risk hedging and mitigation policies
In most instances thecases, maximum exposure to credit exposurerisk is mitigatedreduced by collateral, credit enhancements and other measures devisedactions which mitigate the Group’s exposure.
The Group applies a credit risk hedging and mitigation policy deriving from a banking approach focused on relationship banking. On this basis, the provision of guarantees is a necessary but not sufficient instrument when taking risks; therefore for the Group to reduce BBVA’s ultimate exposure. Followingassume risks, it needs to verify the payment or resource generation capacity to ensure the amortization of the risk incurred.
The above is carried out through a prudent risk management policy which consists of analyzing the financial risk in a transaction, based on the repayment or resource generation capacity of the credit recipient, the provision of guarantees in any of the generally accepted ways (cash collateral, pledged assets, personal guarantees, covenants or hedges) appropriate to the risk undertaken, and lastly on the recovery risk (the asset’s liquidity).
The procedures for the management and valuation of collaterals are set out in the internal Manual on Credit Risk Management Policies, which the Group actively uses in the arrangement of transactions and in the monitoring of both these and customers.
This Manual lays down the basic principles of credit risk management, which includes the management of the collateral assigned in transactions with customers. Accordingly, the risk management model jointly values the existence of an adequate cash flow generation by the obligor that enables him to service the debt, together with the existence of suitable and sufficient guarantees that ensure the recovery of the credit when the obligor’s circumstances render him unable to meet their obligations.
The procedures used for the valuation of the collateral are consistent with the market’s best practices, which involve the use of appraisal for real estate guarantees, market price for shares, quoted value of shares in a mutual fund, etc.
All collaterals assigned are to be properly instrumented and recognized in the corresponding register, as well as receive the approval of the Group’s Legal Units.
The following is a description of the main collateral for every class ofeach financial instruments:instrument class:
Financial assets held for trading: Guarantees or credit enhancements, which are taken directly from the issuer or counterparty, are implied in the instruments’ contractual clauses. For trading derivatives credit risk is minimized via master netting agreements, whereby derivative financial assets and liabilities with the same counterparty can been settled net. Other types of guarantees may also be put in place, depending on the counterparty’s solvency and the nature of the transaction.
Other financial assets designated at fair value through profit or loss: Guarantees or credit enhancements, which are taken directly from the issuer or counterparty, are implied in the instruments’ contractual clauses.
Available-for-sale financial assets: Guarantees or credit enhancements, which are taken directly from the issuer or counterparty, are implicit to the instrument’s structuring.
Loans and receivables:
| | |
| • | Financial assets held for trading: The guarantees or credit enhancements obtained directly from the issuer or counterparty are implicit in the clauses of the instrument. In trading derivatives, credit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the same counterparty are offset for their net balance. There may likewise be other kinds of guarantees, depending on counterparty solvency and the nature of the transaction. |
|
| • | Other financial assets designated at fair value through profit or loss:The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. |
|
| • | Available for sale financial assets: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. |
|
| • | Loans and receivables: |
| | |
| | • | Loans and advances to credit institutions: TheyThese have the counterparty’s personal guarantees from the counterparties and, on occasion, an additional guarantee from another credit entity with which a credit derivative has been written.guarantee. |
| |
| | • | Loans and advancesTotal lending to customers: Most of these operations are backed by personal guarantees extended by the counterparties.counterparty. The collateral received to secure loans and advances to customers includeother debtors includes mortgages, |
F-56
| | |
| | cash guarantees and other collateral such as pledged securities. Other kinds of credit enhancements may be put in place such as guarantees. |
| | |
| • | Debt securities: The guarantees or credit derivatives, etc.enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. |
| | |
| • | Held-to-maturity investments: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. |
| |
| | • | Debt securities:Hedging derivatives: Guarantees or credit enhancements, which are taken directly fromCredit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the issuer orsame counterparty are implicit tosettled at their net balance. There may likewise be other kinds of guarantees, depending on counterparty solvency and the instrument’s structuring.nature of the transaction. |
|
| • | Financial guarantees, other contingent exposures and drawable by third parties:These have the counterparty’s personal guarantee. |
Held-to-maturity investments: Guarantees or credit enhancements, which are taken directly from the issuer or counterparty, are implicit to the instrument’s structuring.
Hedging derivatives: Credit risk is minimized via master netting agreements, whereby derivative financial assets and liabilities with the same counterparty can be settled net. Other types of guarantees may also be put in place, depending on the counterparty’s solvency and the nature of the transaction.
Financial guarantees, other contingent exposures and drawable by third parties: They have personal guarantees from the counterparties and, on occasion, an additional guarantee from another credit entity with which a credit derivative has been written.
The Group’s collateralized credit risk as of December 31, 2008, 20072010, 2009 and 2006,2008, excluding balances deemed impaired, is broken down in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Collateralized Credit Risk | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
Mortgage loans | | | 125,540 | | | | 123,998 | | | | 107,837 | | | | 132,628 | | | | 127,957 | | | | 125,540 | |
| Operating assets mortgage loans | | | 3,896 | | | | 4,381 | | | | 4,595 | | | | 3,638 | | | | 4,050 | | | | 3,896 | |
| Home mortgages | | | 82,613 | | | | 79,377 | | | | 67,777 | | | | 108,224 | | | | 99,493 | | | | 96,772 | |
| Rest | | | 39,031 | | | | 40,240 | | | | 35,465 | | |
| Rest of mortgages | | | | 20,766 | | | | 24,414 | | | | 24,872 | |
Secured loans, except mortgage | | | 19,982 | | | | 11,559 | | | | 8,900 | | | | 18,154 | | | | 20,917 | | | | 19,982 | |
| Cash guarantees | | | 250 | | | | 578 | | | | 727 | | | | 281 | | | | 231 | | | | 250 | |
| Pledging of securities | | | 458 | | | | 766 | | | | 972 | | |
| Rest | | | 19,274 | | | | 10,215 | | | | 7,201 | | |
| Secured loan (pledged securities) | | | | 563 | | | | 692 | | | | 458 | |
| Rest of secured loans | | | | 17,310 | | | | 19,994 | | | | 19,274 | |
| | | | | | | | | | | | | | | |
Total | | | 145,522 | | | | 135,557 | | | | 116,737 | | | | 150,782 | | | | 148,874 | | | | 145,522 | |
| | | | | | | | | | | | | | | |
F-52
In addition, the derivatives carry contractual, legal compensation rights that have effectively reduced credit risk by €27,933 million as of December 31, 2010, by €27,026 million as of December 31, 2009 and by €29,377 million in 2008, by €9,480 million in 2007 and by €9,142 million in 2006.as of December 31, 2008.
As of December 31, 2008, the fair value of all collateral received was higher than the value of the underlying assets. Specifically2010, specifically in relation to mortgages, the average amount pending loan collection on the corresponding loans represented 55%53,1% of the fair value of the properties pledged.
Policies and procedures for hedging or mitigating risks, including policy governing the taking of collateral.
BBVA’s policy for hedging or mitigating credit risk is built on its banking model, which in turn is focused on relationship banking. Based on this approach, the taking of guarantees is a necessary tool but alone is not sufficient to underpin risk taking; accordingly, risk-taking by BBVA entails substantiation of the counterparty’s repayment ability or its ability to generate cash flow to service its obligations.
This philosophy is distilled in a conservative approach to risk taking policy, to the analysis performed on a transaction’s financial risk, based on the creditor’s ability to settle or generate cash flow to extinguish its obligations, to taking guarantees in all generally accepted forms (cash collateral pledged assets, personal guarantees, covenants or hedges) commensurate with the risk assumed,(54% as of December 31, 2009 and lastly, to the recovery risk assumed (asset liquidity)55% as of December 31, 2008).
Credit quality of financial assets that are neither past due nor impaired
BBVA has ratings tools that enable it to rank the credit quality of its operations and customers based on a scoring system and to map these ratings to probability of default (PD)(“PD”) scales. To analyze the performance of PD, the BankGroup has a series of tracking tools and historical databases that house the pertinent information generated internally.
The scoring tools vary by customer segment (companies, corporate clients, SMEs, public authorities, etc)etc.). Scoring is a decision model that contributes to both the arrangement and management of retail type loans: Consumer loans, mortgages, credit cards for individuals, etc. Scoring is the tool used to decide to whom a loan should be assigned, what amount should be assigned and what strategies can help establish the price, because it is an algorithm that sorts transactions in accordance with their credit rating. The move towards advanced risk management makes it possible to establish more proactive commercial relations with customers. Proactive scoring establishes limits for customers that are then used when granting transactions.
Rating tools, as opposed to scoring tools, do not assess transactions but focus on customers instead: Companies, corporate clients, SMEs, public authorities, etc. For wholesale portfolios where the number of defaults is very low (sovereigns, corporates, financial entities) the internal ratings models are fleshed out by benchmarking the statistics maintained by the external rating agencies (Moody’s, Standard and& Poor’s and Fitch). To this end, each year the Bank compares the PDs compiled by the agencies and allocated toat each level of risk rating of risk, mappingand maps the measurements compiled by the various agencies to the BBVA master ratingsrating scale.
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Once the probability of default for the transactions or customers has been determined, the so-called business cycle adjustment starts. This involves generating a risk metric outside the context estimate, seeking to gather information that represents behavior for an entire economic cycle. This probability is linked to the Group’s master rating scale.
BBVA maintains a master ratingsrating scale with a view to facilitating the uniform classification of the Group’s various risky asset risk portfolios. There are two versions of this scale: a 17-notchThe table below shows the abridged scale which groups outstanding risk into 17 categories and an extended 34-notch scale that best represents the heterogeneous natureas of BBVA’s portfolio. The enables the Group to factor in geographic diversity and the various levels of risk inherent in the various portfolios in the Group’s different operating markets.December 31, 2010:
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| | | | | | | | | | | | | |
| | | Probability of Default (Basic Points) | |
| | | | | | Minimum from
| | | Maximum
| |
Rating | | Average | | | >= | | | Until < | |
| |
AAA | | | 1 | | | | 0 | | | | 2 | |
AA+ | | | 2 | | | | 2 | | | | 3 | |
AA | | | 3 | | | | 3 | | | | 4 | |
AA- | | | 4 | | | | 4 | | | | 5 | |
A+ | | | 5 | | | | 5 | | | | 6 | |
A | | | 8 | | | | 6 | | | | 9 | |
A- | | | 10 | | | | 9 | | | | 11 | |
BBB+1 | | | 12 | | | | 11 | | | | 14 | |
BBB+2 | | | 15 | | | | 14 | | | | 17 | |
BBB1 | | | 18 | | | | 17 | | | | 20 | |
BBB2 | | | 22 | | | | 20 | | | | 24 | |
BBB-1 | | | 27 | | | | 24 | | | | 30 | |
BBB-2 | | | 34 | | | | 30 | | | | 39 | |
BB+1 | | | 44 | | | | 39 | | | | 50 | |
BB+2 | | | 58 | | | | 50 | | | | 67 | |
BB1 | | | 78 | | | | 67 | | | | 90 | |
BB2 | | | 102 | | | | 90 | | | | 116 | |
BB-1 | | | 132 | | | | 116 | | | | 150 | |
BB-2 | | | 166 | | | | 150 | | | | 194 | |
B+1 | | | 204 | | | | 194 | | | | 226 | |
B+2 | | | 250 | | | | 226 | | | | 276 | |
B+3 | | | 304 | | | | 276 | | | | 335 | |
B1 | | | 370 | | | | 335 | | | | 408 | |
B2 | | | 450 | | | | 408 | | | | 490 | |
B3 | | | 534 | | | | 490 | | | | 581 | |
B-1 | | | 633 | | | | 581 | | | | 689 | |
B-2 | | | 750 | | | | 689 | | | | 842 | |
B-3 | | | 945 | | | | 842 | | | | 1061 | |
CCC+ | | | 1,191 | | | | 1,061 | | | | 1,336 | |
CCC | | | 1,500 | | | | 1,336 | | | | 1,684 | |
CCC- | | | 1,890 | | | | 1,684 | | | | 2,121 | |
CC+ | | | 2,381 | | | | 2,121 | | | | 2,673 | |
CC | | | 3,000 | | | | 2,673 | | | | 3,367 | |
CC- | | | 3,780 | | | | 3,367 | | | | 4,243 | |
| | | | | | | | | | | | | |
| | | Probability of Default (Basic Points) | |
Internal Rating
| | | | | Minimum from
| | | | |
Reduced List (17 Groups) | | Average | | | >= | | | Maximum | |
| |
| AAA | | | 1 | | | | — | | | | 2 | |
| AA+ | | | 2 | | | | 2 | | | | 3 | |
| AA | | | 3 | | | | 3 | | | | 4 | |
| AA− | | | 4 | | | | 4 | | | | 5 | |
| A+ | | | 5 | | | | 5 | | | | 6 | |
| A | | | 8 | | | | 6 | | | | 9 | |
| A− | | | 10 | | | | 9 | | | | 11 | |
| BBB+ | | | 14 | | | | 11 | | | | 17 | |
| BBB | | | 20 | | | | 17 | | | | 24 | |
| BBB- | | | 31 | | | | 24 | | | | 39 | |
| BB+ | | | 51 | | | | 39 | | | | 67 | |
| BB | | | 88 | | | | 67 | | | | 116 | |
| BB- | | | 150 | | | | 116 | | | | 194 | |
| B+ | | | 255 | | | | 194 | | | | 335 | |
| B | | | 441 | | | | 335 | | | | 581 | |
| B− | | | 785 | | | | 581 | | | | 1,061 | |
| C | | | 2,122 | | | | 1,061 | | | | 4,243 | |
F-54
The table below outlines the distribution of exposure including derivatives by internal ratings, which comprenhends companies,to financial entities and public institutions (excluding sovereign risk), of the Group’s main institutions as of December 31, 2010, 2009 and 2008:
| | | | |
Rating
| | % | |
|
AAA/AA | | | 23.77 | % |
A | | | 26.59 | % |
BBB+ | | | 9.23 | % |
BBB | | | 5.76 | % |
BBB- | | | 9.48 | % |
BB+ | | | 8.25 | % |
BB | | | 6.16 | % |
BB- | | | 5.91 | % |
B+ | | | 3.08 | % |
B | | | 1.44 | % |
B- | | | 0.29 | % |
CCC/CC | | | 0.03 | % |
| | | | |
Total | | | 100.00 | % |
| | | | |
| | | | | | | | | | | | | |
Credit Risk Distribution by Internal Rating | | 2010 | | | 2009 | | | 2008 | |
| |
| AAA/AA+/AA/AA− | | | 26.94 | % | | | 19.55 | % | | | 23.78 | % |
| A+/A/A− | | | 27.49 | % | | | 28.78 | % | | | 26.59 | % |
| BBB+ | | | 9.22 | % | | | 8.65 | % | | | 9.23 | % |
| BBB | | | 4.49 | % | | | 7.06 | % | | | 5.76 | % |
| BBB- | | | 5.50 | % | | | 6.91 | % | | | 9.48 | % |
| BB+ | | | 5.10 | % | | | 4.46 | % | | | 8.25 | % |
| BB | | | 4.57 | % | | | 6.05 | % | | | 6.16 | % |
| BB- | | | 4.88 | % | | | 6.45 | % | | | 5.91 | % |
| B+ | | | 4.84 | % | | | 5.38 | % | | | 3.08 | % |
| B | | | 4.81 | % | | | 3.34 | % | | | 1.44 | % |
| B− | | | 1.89 | % | | | 0.88 | % | | | 0.28 | % |
| CCC/CC | | | 0.27 | % | | | 2.49 | % | | | 0.03 | % |
| | | | | | | | | | | | | |
Total | | | 100.00 | % | | | 100.00 | % | | | 100.00 | % |
| | | | | | | | | | | | | |
F-58
Policies and procedures for preventing excessive concentrations of risk concentration
In order to prevent the build upbuild-up of excessive concentrations of credit risk at the individual, country and sector levels, the Group oversees updatedmaintains the risk concentration indices updated at the individual and portfolio levels tied to the various observable variables within the field of credit risk management. The limit on the Group’s exposure or share of a customer’s financial business therefore depends on the customer’s credit rating, the nature of the facility, and the Group’s presence in a given market, based on the following guidelines:
| | |
| | • | Striking aThe need to balance between the customer’s financing needs, broken down by type (trade/(commercial/financial, short/long-term, etc.), and the degree to which its business is or is not attractive to BBVA.. This approach drivesprovides a better operational mix that is still compatible with the needs of the bank’s clientele. |
| |
| | • | Other determining factors relate toare national legislation and the ratio between the size of customer lending and the customer book and bank’sBank’s equity to(to prevent risk from becoming overly concentrated among few customers.customers). Additional factors taken into consideration include constraints related to market, customer, internal regulation and macroeconomic factors, etc. |
| |
| | • | Meanwhile, correct portfolio management leads to identification of risk concentrations and enables the taking of appropriate action.action to be taken. |
Operations with customers or groups that entail an expected loss plus economic capital of over €18 million are approved at the highest level, i.e., by the Board Risk Committee. As a reference, point, this is equivalent in terms of exposure to 10% of eligible equity for a AAA and to 1% for a BB rating, implying oversight of the major individual risk concentrations by the highest-level risk governance bodies as a function of credit ratings.
AnThere is additional guideline in terms of oversight ofa maximum risk concentration level of up to and at the level ofincluding 10% of equity: up to this level there are stringent requirements in terms of in-depth knowledge of the counterparty,client, its operating markets and sectors.sectors of operation.
Sovereign risk exposure
As of December 31, 2010, the sovereign risk exposure amounted to €62,769 million. This exposure is included in the following lines of the accompanying consolidated balance sheet: “Financial Liabilities Held for trading” (31.4%),“Available-for-Sale Financial Assets” (57.4%), “Loans and Receivables” (3.2%) and“Held-to-Maturity Investments” (14.0%).
As of December 31, 2010, the breakdown of our sovereign risk exposure in accordance with the classification of each country by its ratings was as follows:
| | | | | | | | | |
Exposure to Sovereign Counterparties by Ratings(*) | | Millions of euros | | | % | |
| |
Higher than AA | | | 35,293 | | | | 56.23 | % |
Of which: | | | | | | | | |
| Spain | | | 31,212 | | | | 49.72 | % |
AA or below | | | 27,475 | | | | 43.77 | % |
Of which: | | | | | | | | |
| Mexico | | | 17,665 | | | | 28.14 | % |
| Italy | | | 4,229 | | | | 6.74 | % |
| Portugal | | | 58 | | | | 0.09 | % |
| Grece | | | 107 | | | | 0.17 | % |
| Ireland | | | — | | | | — | |
Total | | | 62,768 | | | | 100.00 | % |
| | |
| (*) | | Global Ratings established by external rating agencies as of December 31, 2010. |
F-59
Financial assets past due but not impaired
The table below provides disclosure ondetails of financial assets past due as of December 31, 2010, 2009 and 2008, but not considered to be impaired, specifically an age analysislisted by class of financial instrument:their first due date:
| | | | | | | | | | | | | | | | | |
| | | Less Than 1
| | | 1 to 2
| | | 2 to 3
| | | | |
| | | Month | | | Months | | | Months | | | Total | |
| | | Millions of euros | |
| |
| Loans and advances to customers | | | 1,580 | | | | 534 | | | | 447 | | | | 2,561 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | Less than 1
| | | | | | | | | Less than 1
| | | | | | | | | Less than 1
| | | | | | | |
Financial Assets Past
| | Months
| | | 1 to 2 Months
| | | 1 to 3 Months
| | | Months
| | | 1 to 2 Months
| | | 1 to 3 Months
| | | Months
| | | 1 to 2 Months
| | | 1 to 3 Months
| |
Due but Not Impaired | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | |
| | | Millions of euros | |
| |
| Loans and advances to credit institutions | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Loans and advances to customers | | | 1,082 | | | | 311 | | | | 277 | | | | 2,653 | | | | 336 | | | | 311 | | | | 1,580 | | | | 534 | | | | 447 | |
| Government | | | 122 | | | | 27 | | | | 27 | | | | 45 | | | | 32 | | | | 19 | | | | 30 | | | | 10 | | | | 12 | |
| Other sectors | | | 960 | | | | 284 | | | | 250 | | | | 2,608 | | | | 304 | | | | 292 | | | | 1,550 | | | | 524 | | | | 435 | |
| Debt securities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1,082 | | | | 311 | | | | 277 | | | | 2,653 | | | | 336 | | | | 311 | | | | 1,580 | | | | 534 | | | | 447 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-55
Impaired assets and impaitmentimpairment losses
The table below breaks downshows the composition of the balance of impaired financial assets, broken down by heading in the consolidated balance sheetssheet, and the impaired contingent liabilities as of December 31, 2008, 20072010, 2009 and 2006 by heading:2008:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Impaired Risks. Breakdown by Type of Asset and by Sector | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
IMPAIRED RISKS ON BALANCE | | | | | | | | | | | | | | | | | | | | | | | | |
| Available-for-sale | | | 188 | | | | 3 | | | | 3 | | |
Available-for-sale financial assets | | | | 140 | | | | 212 | | | | 188 | |
| Debt securities | | | 188 | | | | 3 | | | | 3 | | | | 140 | | | | 212 | | | | 188 | |
| Loans and advances | | | 8,540 | | | | 3,366 | | | | 2,500 | | |
| Loans and receivables | | | | 15,472 | | | | 15,311 | | | | 8,540 | |
| Loans and advances to credit institutions | | | 95 | | | | 8 | | | | 8 | | | | 101 | | | | 100 | | | | 95 | |
| Loans and advances to customers | | | 8,437 | | | | 3,358 | | | | 2,492 | | | | 15,361 | | | | 15,197 | | | | 8,437 | |
| Debt securities | | | 8 | | | | — | | | | — | | | | 10 | | | | 14 | | | | 8 | |
| | | | | | | | | | | | | | | |
| | | | 8,728 | | | | 3,369 | | | | 2,503 | | |
TOTAL IMPAIRED RISKS ON BALANCE(1) | | | | 15,612 | | | | 15,523 | | | | 8,728 | |
| | | | | | | | | | | | | | | |
IMPAIRED RISKS OFF BALANCE | | | | | | | | | | | | | | | | | | | | | | | | |
| Impaired contingent liabilities | | | 131 | | | | 49 | | | | 40 | | | | 324 | | | | 405 | | | | 131 | |
| | | | | | | | | | | | | | | |
TOTAL IMPAIRED RISKS(1)+(2) | | | | 15,936 | | | | 15,928 | | | | 8,859 | |
| | | | | | | | | |
Of which: | | | | | | | | | | | | | |
| Goverment | | | | 123 | | | | 87 | | | | 102 | |
| Credit institutions | | | | 129 | | | | 172 | | | | 165 | |
| Other sectors | | | | 15,360 | | | | 15,264 | | | | 8,461 | |
| Mortgage | | | | 8,627 | | | | 7,932 | | | | 3,047 | |
| With partial secured loans | | | | 159 | | | | 37 | | | | 4 | |
| Rest | | | | 6,574 | | | | 7,295 | | | | 5,410 | |
| Impaired contingent liabilities | | | | 324 | | | | 405 | | | | 131 | |
| | | | | | | | | |
TOTAL IMPAIRED RISKS | | | 8,859 | | | | 3,418 | | | | 2,543 | | | | 15,936 | | | | 15,928 | | | | 8,859 | |
| | | | | | | | | | | | | | | |
F-60
The changes for December 31,in 2010, 2009 and 2008 2007 and 2006 in the impaired financial assets and contingent liabilities were as follow:follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at the beginning of the year | | | 3,418 | | | | 2,543 | | | | 2,389 | |
| Additions | | | 11,488 | | | | 4,606 | | | | 2,746 | |
| Recoveries | | | (3,668 | ) | | | (2,418 | ) | | | (1,830 | ) |
| Transfers to write-off | | | (2,198 | ) | | | (1,497 | ) | | | (707 | ) |
| Exchange differences and others | | | (182 | ) | | | 184 | | | | (55 | ) |
| | | | | | | | | | | | | |
Balance at the end of the year | | | 8,858 | | | | 3,418 | | | | 2,543 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Changes in Impaired Financial Assets and Contingent Liabilities | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the beginning | | | 15,928 | | | | 8,859 | | | | 3,418 | |
| | | | | | | | | | | | | |
| Additions(1) | | | 13,207 | | | | 17,298 | | | | 11,488 | |
| Recoveries(2) | | | (9,138 | ) | | | (6,524 | ) | | | (3,668 | ) |
| Net additions(1)+(2) | | | 4,069 | | | | 10,774 | | | | 7,820 | |
| Transfers to writeoff | | | (4,307 | ) | | | (3,737 | ) | | | (2,198 | ) |
| Exchange differences and other | | | 247 | | | | 32 | | | | (181 | ) |
| | | | | | | | | | | | | |
Balance at the end | | | 15,936 | | | | 15,928 | | | | 8,859 | |
| | | | | | | | | | | | | |
| Recoveries on entries (%) | | | 69 | | | | 38 | | | | 32 | |
| | | | | | | | | | | | | |
Following is a detailBelow are details of the impaired financial assets considered as ofon December 31, 2008,2010, classified by geographical location of risk and by agethe time since their oldest past-due amount or the period since they were deemed impaired:
| | | | | | | | | | | | | | | | | | | | | |
| | | Less than 6
| | | 6 to 9
| | | 9 to 12
| | | More than
| | | | |
| | | Months
| | | Months
| | | Months
| | | 12 Months
| | | | |
2010 | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Total | |
| | | Millions of euros | | | | |
| |
| Spain | | | 5,279 | | | | 1,064 | | | | 798 | | | | 4,544 | | | | 11,685 | |
| Rest of Europe | | | 106 | | | | 24 | | | | 24 | | | | 55 | | | | 209 | |
| Latin America | | | 1,473 | | | | 112 | | | | 100 | | | | 397 | | | | 2,082 | |
| The United States | | | 1,110 | | | | 84 | | | | 111 | | | | 331 | | | | 1,636 | |
| Rest of the world | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 7,968 | | | | 1,284 | | | | 1,034 | | | | 5,327 | | | | 15,612 | |
| | | | | | | | | | | | | | | | | | | | | |
Below are details of the oldest past-due amount:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Impaired Assets of Loans and Advances to Customers | |
| | | Amounts less
| | | | | | | | | | | | | | | | |
| | | than six
| | | | | | | | | | | | | | | | |
| | | months past-
| | | 6 to 12
| | | 12 to 18
| | | 18 to 24
| | | More than 24
| | | | |
| | | due | | | months | | | months | | | months | | | months | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 2,405 | | | | 1,904 | | | | 595 | | | | 87 | | | | 975 | | | | 5,966 | |
| Rest of Europe | | | 55 | | | | 10 | | | | 6 | | | | 5 | | | | 16 | | | | 92 | |
| Latin America | | | 1,112 | | | | 88 | | | | 22 | | | | 7 | | | | 320 | | | | 1,549 | |
| United States | | | 221 | | | | 869 | | | | — | | | | — | | | | 30 | | | | 1,120 | |
| Rest | | | — | | | | — | | | | — | | | | — | | | | 1 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 3,793 | | | | 2,871 | | | | 623 | | | | 99 | | | | 1,342 | | | | 8,728 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
F-56
The table below breaks down impaired financial assets as on December 31, 2010, classified by segment, indicating, where appropriate, the type of security taken to ensure collection, as of December 31, 2008, 2007loan in accordance with its associated guarantee, and 2006:by the time since their oldest past-due amount or the period since they were deemed impaired:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
IMPAIRED RISKS ON BALANCE | | | | | | | | | | | | |
| Public sector | | | 102 | | | | 177 | | | | 216 | |
| Credit institutions | | | 165 | | | | 8 | | | | 8 | |
| Collateralized financial assets with other sectors | | | 3,428 | | | | 809 | | | | 545 | |
| Mortgage | | | 2,487 | | | | 696 | | | | 459 | |
| Other collateralized financial assets | | | 941 | | | | 113 | | | | 86 | |
| Non-collateralized financial assets with other sectors | | | 5,033 | | | | 2,375 | | | | 1,734 | |
| | | | | | | | | | | | | |
Total | | | 8,728 | | | | 3,369 | | | | 2,503 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Less than 6
| | | 6 to 9
| | | 9 to 12
| | | More than
| | | | |
| | | Months
| | | Months
| | | Months
| | | 12 Months
| | | | |
2010 | | Past-Due | | | Past-Due | | | Past-Due | | | Past-Due | | | Total | |
| | | Millions of euros | |
| |
| Unsecured loans | | | 4,309 | | | | 338 | | | | 271 | | | | 1,710 | | | | 6,628 | |
| Mortgage | | | 3,301 | | | | 946 | | | | 763 | | | | 3,617 | | | | 8,627 | |
| Residential mortgage | | | 629 | | | | 304 | | | | 271 | | | | 1,472 | | | | 2,676 | |
| Commercial mortgage (rural properties in operation and offices, and industrial buildings) | | | 561 | | | | 128 | | | | 100 | | | | 602 | | | | 1,391 | |
| Rest of residential mortgage | | | 701 | | | | 132 | | | | 99 | | | | 593 | | | | 1,525 | |
| Plots and other real state assets | | | 1,410 | | | | 382 | | | | 293 | | | | 950 | | | | 3,035 | |
| Other partially secured loans | | | 159 | | | | — | | | | — | | | | — | | | | 159 | |
| Others | | | 199 | | | | — | | | | — | | | | — | | | | 198 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 7,968 | | | | 1,284 | | | | 1,034 | | | | 5,327 | | | | 15,612 | |
| | | | | | | | | | | | | | | | | | | | | |
The table below depictsshows the finance income accrued on impaired financial assets as of December 31, 2008, 20072010, 2009 and 2006:2008:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Financial income from impaired assets | | | 1,042 | | | | 880 | | | | 1,107 | |
| | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Financial Income from Impaired Assets | | | 1,717 | | | | 1,485 | | | | 1,042 | |
F-61
This income is not recognized in the accompanying consolidated income statementstatements due to the existence of doubts as to the collectibilitycollection of these assets.
TheNote 2.2.1.b gives a description of the individual analysis of impaired financial assets, that are individually determined to be impaired as at the reporting date, including the factors the entity consideredtakes into account in determining that they are impaired and a descriptionthe extension of collateral held by the entity as securityguarantees and other credit enhancements, is provided in Note 2.2.1.b.enhancements.
The following shows the changes duringin impaired financial assets written off from the balance sheet for the years ended December 31, 2010, 2009 and 2008 2007 and 2006 of the transfers to write-offs (financial impairment assets removed from balance because the possibility of their recovery was considered remote) were as follow:deemed remote:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at beginning of year | | | 5,622 | | | | 6,120 | | | | 6,187 | |
Increase: | | | | | | | | | | | | |
| Assets of remote collectability | | | 1,700 | | | | 1,895 | | | | 472 | |
| Products overdue not collected | | | 276 | | | | 217 | | | | 167 | |
Decrease: | | | | | | | | | | | | |
| Cash recovery | | | (199 | ) | | | (237 | ) | | | (463 | ) |
| Foreclosed assets | | | (13 | ) | | | (5 | ) | | | (5 | ) |
| Other causes | | | (355 | ) | | | (2,455 | ) | | | (129 | ) |
Net exchange differences | | | (159 | ) | | | 87 | | | | (109 | ) |
| | | | | | | | | | | | | |
Balance at the end of year | | | 6,872 | | | | 5,622 | | | | 6,120 | |
| | | | | | | | | | | | | |
F-57
Decreases by other causes shown in the table above include sales to non Group third parties of the portfolio of write-offs during the current year, which are describe in the following table:
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
SALES TO THIRD PARTIES | | | | | | | | |
| Bancomer | | | 249 | | | | 1,338 | |
| BBVA, S.A. | | | 12 | | | | 968 | |
| | | | | | | | | |
Total | | | 261 | | | | 2,306 | |
| | | | | | | | | |
| Gains for sales to third parties | | | 3 | | | | 26 | |
| | | | | | | | | |
| | | | | | | | | | | | | |
Changes in Impaired Financial Assets Written-Off from the Balance Sheet | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the beginning | | | 9,834 | | | | 6,872 | | | | 5,622 | |
| Increase: | | | 4,788 | | | | 3,880 | | | | 1,976 | |
| Decrease: | | | (1,448 | ) | | | (1,172 | ) | | | (567 | ) |
| Re-financing or restructuring | | | (1 | ) | | | — | | | | — | |
| Cash recovery | | | (253 | ) | | | (188 | ) | | | (199 | ) |
| Foreclosed assets | | | (5 | ) | | | (48 | ) | | | (13 | ) |
| Sales of written-off | | | (342 | ) | | | (590 | ) | | | (261 | ) |
| Other causes | | | (847 | ) | | | (346 | ) | | | (94 | ) |
| Net exchange differences | | | 193 | | | | 253 | | | | (159 | ) |
| | | | | | | | | | | | | |
Balance at the end | | | 13,367 | | | | 9,833 | | | | 6,872 | |
| | | | | | | | | | | | | |
The Group’s NPLNon-Performing Assets (“NPA”) ratios for the headings “Loans and advances to customers” and “Contingent liabilities” as of December 31, 2010, 2009 and 2008 2007 and 2006 were:were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| |
| NPL ratio | | | 2.12 | | | | 0.89 | | | | 0.83 | |
| | | | | | | | | | | | | |
| | | Percentage (%) | |
NPA Ratio | | 2010 | | | 2009 | | | 2008 | |
| |
BBVA Group | | | 4.1 | | | | 4.3 | | | | 2.3 | |
TheA breakdown of impairment losses by type of financial instrument registered in profitthe accompanying consolidated income statement and loss andthe recoveries of written-offimpaired financial assets realized in the yearis provided Note 49.
The accumulated balance of impairment losses broken down by portfolio as of December 31, 2010, 2009 and 2008 2007is as follows:
| | | | | | | | | | | | | | | | | |
Impairment Losses | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Available-for-sale portfolio | | | 12 | | | | 619 | | | | 449 | | | | 202 | |
Loans and receivables | | | 13 | | | | 9,473 | | | | 8,805 | | | | 7,505 | |
| Loans and advances to customers | | | | | | | 9,396 | | | | 8,720 | | | | 7,412 | |
| Loans and advances to credit institutions | | | | | | | 67 | | | | 68 | | | | 74 | |
| Debt securities | | | | | | | 10 | | | | 17 | | | | 19 | |
Held to maturity investment | | | 14 | | | | 1 | | | | 1 | | | | 4 | |
| | | | | | | | | | | | | | | | | |
Total | | | | | | | 10,093 | | | | 9,255 | | | | 7,711 | |
| | | | | | | | | | | | | | | | | |
Of which: | | | | | | | | | | | | | | | | |
For impaired portfolio | | | | | | | 7,362 | | | | 6,380 | | | | 3,480 | |
| For currently non-impaired portfolio | | | | | | | 2,731 | | | | 2,875 | | | | 4,231 | |
In addition to total amount of funds indicated above, as of December 31, 2010, 2009 and 2006 is provided2008, the amount of the provisions for contingent exposures and commitments rose to €264, €243 and €421 million, respectively (see Note 25).
F-62
The changes in note 47 “Impairmentthe accumulated impairment losses for the years 2010, 2009 and 2008 were as follows:
| | | | | | | | | | | | | |
Changes in the Impairment Losses | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the beginning | | | 9,255 | | | | 7,711 | | | | 7,194 | |
| | | | | | | | | | | | | |
| Increase in impairment losses charged to income | | | 7,207 | | | | 8,282 | | | | 4,590 | |
| Decrease in impairment losses credited to income | | | (2,236 | ) | | | (2,622 | ) | | | (1,457 | ) |
| Transfers to written-off loans | | | (4,488 | ) | | | (3,878 | ) | | | (1,951 | ) |
| Exchange differences and other | | | 355 | | | | (238 | ) | | | (662 | ) |
| | | | | | | | | | | | | |
Balance at the end | | | 10,093 | | | | 9,255 | | | | 7,711 | |
| | | | | | | | | | | | | |
Of which: | | | | | | | | | | | | |
| For impaired portfolio | | | 7,362 | | | | 6,380 | | | | 3,480 | |
| For currently non-impaired portfolio | | | 2,731 | | | | 2,875 | | | | 4,231 | |
| | | | | | | | | | | | | |
The majority of the impairment on financial assets (net)”corresponds to the heading “Loans and receivables — Loans and advances to customers”. The changes in the accumulated impairment losses for the years 2010, 2009 and 2008 2007 and 2006 on the financial assetsunder this heading were as follow:follows:
| | | | | | | | | | | | | | |
Changes in the Impairment Losses of the Heading Loans and Receivables - Loans and Advances to Customers | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
Balance at the beginning | | | | 8,720 | | | | 7,412 | | | | 7,117 | |
| | | Millions of euros | | | | | | | | |
| | |
Balance at beginning of year | | | 7,194 | | | | 6,504 | | | | 5,729 | | |
| Increase in impairment losses charged to income | | | 4,590 | | | | 2,462 | | | | 2,113 | | | | 7,014 | | | | 7,983 | | | | 4,434 | |
| Decrease in impairment losses credited to income | | | (1,457 | ) | | | (333 | ) | | | (470 | ) | | | (2,200 | ) | | | (2,603 | ) | | | (1,636 | ) |
| Aquisition of subsidiaries in the year | | | 1 | | | | 276 | | | | 91 | | |
| Disposal of subsidiaries in the year | | | (4 | ) | | | (26 | ) | | | (22 | ) | |
| Transfers to written-off loans | | | (1,951 | ) | | | (1,297 | ) | | | (563 | ) | | | (4,423 | ) | | | (3,828 | ) | | | (1,950 | ) |
| Exchange differences and other | | | (662 | ) | | | (392 | ) | | | (374 | ) | | | 285 | | | | (244 | ) | | | (553 | ) |
| | | | | | | | | | | | | | | |
Balance at end of year | | | 7,711 | | | | 7,194 | | | | 6,504 | | |
Balance at the end | | | | 9,396 | | | | 8,720 | | | | 7,412 | |
| | | | | | | | | | | | | | | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| For impaired portfolio | | | 3,480 | | | | 1,999 | | | | 2,083 | | | | 6,683 | | | | 5,864 | | | | 3,239 | |
| For current portfolio non impaired | | | 4,231 | | | | 5,195 | | | | 4,421 | | |
| For currently non-impaired portfolio | | | | 2,713 | | | | 2,856 | | | | 4,173 | |
| | | | | | | | | |
Renegotiated financial assets
As of December 31, 2008 the carrying amount of unimpaired financial assets which could have been impaired had the conditions thereof not been renegotiated amounted to €6,565 million (1.78% of credit investment).
Exposure to subprime credit risk
Given the lack of an agreed definition of “subprime” in use across the market, we consider “subprime credit risk” to be the risk incidental to all those financial instruments of which the direct or indirect end borrower merits a credit FICO® score (a credit score based on a statistical analysis of each person’s credit profile, which is used to represent the creditworthiness of that person) of less than 640 points.
The application across the BBVA group of prudent risk policies has resulted in very limited exposure to subprime credit risks with respect to mortgage loans, mortgage backed securities and other securitized financial instruments originated the United States.
We do not market products specifically to the subprime segment. However, the financial crisis that began in the United States in 2007, and the consequent decline in economic conditions and in the ability to pay of certain borrowers, has implied a downgrade in the respective credit FICO® score of these borrowers. It is important to note,
F-58
however, that the classification of a financial instrument as a subprime credit risk does not necessarily signify that such financial instrument is either past due or impaired or that we have not assigned such financial instrument a “high” or “very high” estimate of recoverability.
As of December 31, 2008, mortgage loans originated in the United States to customers whose creditworthiness had dropped below the “subprime” level as defined above totalled €498 million (0.15% of our total customer credit risk). Of this amount, only €42 million was past due or impaired.
In addition, as of December 31, 2008, indirect exposure through credit instruments tied to an underlying subprime risk totalled €21 million (Note 8), of which 75% carried high ratings from the rating agencies widely recognized in the marketplace.
7.2 Market RiskMARKET RISK
Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:
| | |
| • | Currency risk: the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changesprices, resulting in foreign exchange rates. |
|
| • | Interest rate risk: the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. |
|
| • | Price risk: defined as the risk that the value of financial instruments will fluctuate as a result of changes in market prices whether those changes are caused by factors specific to the individual instrument or factors affecting all instruments traded in the market. |
With regard to market risk (including interest rate risk, currency risk and equity price risk), limit structure determines a scheme of VaR (Value at Risk) limits and an Economic Capital for market risk for each business unit and specific sublimits by type of risk, activity and desk. In general, the VaR/CaR readings are complemented by sensitivity analysis to determine, and where necessary limit, exposure to changes in the various marketdifferent assets and financial risk variables. This indicators and alerts automatically activate procedures aimed at addressing any situations that might have a negative effect onfactors. The risk can be mitigated or even eliminated through hedges using other products (assets/liabilities or derivatives), or by undoing the activities of the business area.transaction/open position.
In addition, the Group performs back testingThere are three main risk factories that affect market prices: Interest rates, foreign exchange rates and stress testing.
The BBVA Group’s market risk was higher in 2008 than in prior years due to protracted and intense financial market volatility. The market risk profile as of December 31, 2008 for the VaR calculations without smoothing with a 99% confidence interval and a1-day horizon were as follows:
TREND IN MARKET RISK
(MILLIONS of EUROS)
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The market risks for risk factors are:
| | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | | | | |
| | | Millions of euros | |
| |
| Interest/Spread risk | | | 24.2 | | | | 12.2 | | | | 12.9 | | | | | |
| Currency risk | | | 7.4 | | | | 2.4 | | | | 0.7 | | | | | |
| Stock-market risk | | | 1.1 | | | | 6.3 | | | | 5.8 | | | | | |
| Vega/Correlation risk | | | 14.8 | | | | 8.8 | | | | 7.9 | | | | | |
Since February 29, 2008 and with effect from December 31, 2007, the internal model of calculate of minimum capital was approved by the Bank of Spain for the trading portfolios of BBVA, S.A. and BBVA Bancomer.
The market risk factors used to measure and control these risks are the basis of all calculations using theValue-at-Risk (VaR) methodology
VaR measures the maximum loss with a given probability over a given period as a result of changes in the general conditions of financial markets and their effects on market risk factors. BBVA mainly conducts daily VaR estimates using the historic simulation methodology.
The types of risk factors used to measure VaR are:equity.
| | |
| | • | Interest rate risk: Defined as changes in the potential loss in valueterm structure of the portfolio due to movements inmarket interest rate curves. We use all interest rate curves in which positions and risks exist. We also use a wide range of vertices reflecting therates for different maturities within each curve.currencies. |
| |
| | • | Credit spreadForeign-exchange risk: Defined asThis is the potential loss caused by movements in credit spread levels determining the value of corporate bonds or any corporate bond derivative. Credit spread VaR is estimated by moving the credit spreads used as risk factors through a range of scenarios. The risk factors usedresulting from changes in the simulation are credit spread curves by sector and by rating, and specific spread curvesforeign exchange rate for individual issuers.different currencies. |
| |
| | • | Exchange ratePrice risk: Defined asThis is the potential loss caused by movementsrisk resulting from variations in exchange rates. Exchange rate risk VaR is estimated by impacting present positions with observed actual changes in exchange rates. |
|
| • | Equitymarket prices, either due to factors specific to the instrument itself, or commodity risk: Defined asalternatively to factors which affect all the potential loss caused by movements in equity prices, stock-market indices and commodity prices. Equity or commodity risk VaR is estimated by re-measuring present positions in line with observed actual changes in equity prices, stock-market indices and commodity prices. |
|
| • | Vega risk: Defined asinstruments traded on the potential loss caused by movements in implied volatilities affecting the value of options. Vega (equities, interest rate and exchange rate) risk VaR is estimated by impacting implied volatility surfaces with observed changes in the implied volatilities of equity, interest rate and exchange rate options. |
|
| • | Correlation risk: Defined as the potential loss caused by a disparity between the estimated and actual correlation between two assets, currencies, derivatives, instruments or markets.market. |
Finally, all theseIn addition, for certain positions, other risks also need to be considered: Credit spread risk, basis risk, volatility or correlation risk.
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Value at Risk (VaR) is the basic variable for measuring and controlling the Group’s market risk. This risk metric estimates the maximum loss that may occur in a portfolio’s market positions for a particular time horizon and given confidence level. VaR is calculated in the Group at a 99% confidence level and a1-day time horizon.
The BBVA and BBVA Bancomer have received approval from the Bank of Spain to use the internal model to calculate bank capital for market risk.
In BBVA and BBVA Bancomer VaR is estimated using Historic Simulation methodology. This methodology consists of observing how the profits and losses of the current portfolio would perform if the market conditions from a particular historic period were in force, and from that information to infer the maximum loss at a certain confidence level. It offers the advantage of accurately reflecting the historical distribution of the market variables and of not requiring any specific distribution assumption. The historic period comprises two years.
With regard to market risk, limit structure determines a system of VaR and economic capital at risk limits for each business unit, with specificsub-limits by type of risk, activity and desk.
Validity tests are performed on the risk measurement models used to estimate the maximum loss that could be incurred in the positions assessed with a certain level of probability (backtesting), as well as measurements are supplemented with VaR estimation with exponential smoothing, to better reflectof the impact of movements.extreme market events on risk positions (stress testing). The Group is currently performing stress testing on historical and economic crisis scenarios drawn up by its Economic Research Department.
Changes in market risk in 2010
The BBVA Group’s market risk is higher in 2010 compared to previous years. The average risk for 2010 stood at €33 million (VaR calculation without smoothing). The changes in the Group’s market risk can be basically explained by the contribution of Global Market Europe, which has seen its risk increase as a result mainly of greater market volatility in interest rates and credit spreads, together with greater exposure to interest-rate risk towards the end of the year. Global Market Bancomer has contributed to a lesser extent to the Group’s increased risk due to the growth in equity risk throughout the year, particularly in the first quarter through a one-off operation.
In 2010, the changes in market risk (VaR calculations without smoothing with a 99% confidence level and a1-day horizon) were as follows:
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The breakdown of VaR by risk factor as of December 31, 2010, 2009 and 2008 was as follows:
| | | | | | | | | | | | | |
VaR by Risk Factor | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Interest/Spread risk | | | 29 | | | | 38 | | | | 24 | |
| Currency risk | | | 3 | | | | 2 | | | | 7 | |
| Stock-market risk | | | 4 | | | | 9 | | | | 1 | |
| Vega/Correlation risk | | | 12 | | | | 15 | | | | 15 | |
| Diversification effect | | | (21 | ) | | | (33 | ) | | | (24 | ) |
| | | | | | | | | | | | | |
Total | | | 28 | | | | 31 | | | | 23 | |
| | | | | | | | | | | | | |
VaR medium in the period | | | 33 | | | | 26 | | | | 20 | |
VaR max in the period | | | 41 | | | | 33 | | | | 35 | |
VaR min in the period | | | 25 | | | | 18 | | | | 13 | |
| |
| b) | Structural interest rate risk |
The aim of on-balance-sheet interest rate risk management is to maintain the BBVA Group’s exposure to market interest rate fluctuations at levels in keeping with its risk strategy and profile. ToIn pursuance of this, end, the ALCO actively manages theAsset-Liability Committee (“ALCO”) undertakes active balance sheet management through transactionsoperations intended to optimize the levellevels of risk assumed in relationborne according to the expected results, thus enablingearnings and enables the Groupmaximum levels of accepted risk with which to comply with the tolerable risk limits.be complied.
The ALCO bases its activities onuses the interest rate risk measurements performed by the Risk Area. Acting as an independent unit, the Risk Area periodically quantifies the impact of interest rate fluctuations on the BBVA Group’s net interest income and economic value.
In addition to measuring the sensitivity to 100-basis-point changes in market interest rates, the Group performs probability calculations that determine the economic capital (maximum loss of economic value) and risk margin (maximum loss of operating income) for structural interest rate risk in
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the BBVA’s Group banking activity, (excludingexcluding the Treasury Area)area, based on interest rate curve simulation models. The Group regularly performs stress tests and sensitivity analysis to complement its assessment of its interest rate risk profile.
All these risk measurements are subsequently analyzed and monitored, and levels of risk assumed and the degree of compliance with the limits authorized by the StandingExecutive Committee are reported to the various managing bodies of the BBVA Group.
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Following is a detail in millions of euros ofBelow are the average interest rate risk exposure levels in terms of sensitivity of the main financial institutions of the BBVA Group in 2008:2010, in millions of euros:
| | | | | | | | | | | | | | | | | | | | | |
| | | Average Impact on Net Interest Income | |
| | | | | | 100 Basis-Point
| |
| | | 100 Basis-Point Increase | | | Decrease | |
Entities | | Euro | | | Dollar | | | Other | | | Total | | | Total | |
| | | (Millions of euros) | |
| |
| BBVA | | | (89.3 | ) | | | (30.1 | ) | | | +0.7 | | | | (115.0 | ) | | | +136.9 | |
| BBVA Bancomer | | | — | | | | +18.2 | | | | +25.2 | | | | +43.4 | | | | (43.4 | ) |
| BBVA Puerto Rico | | | — | | | | +2.0 | | | | — | | | | +2.0 | | | | (3.2 | ) |
| Compass Bancshares, Inc | | | — | | | | (8.3 | ) | | | — | | | | (8.3 | ) | | | +4.6 | |
| BBVA Chile | | | — | | | | +0.2 | | | | (0.5 | ) | | | (0.3 | ) | | | +0.1 | |
| BBVA Colombia | | | — | | | | (0.2 | ) | | | +8.9 | | | | +8.6 | | | | (8.7 | ) |
| BBVA Banco Continental | | | — | | | | (1.2 | ) | | | +2.9 | | | | +1.7 | | | | (1.8 | ) |
| BBVA Banco Provincial | | | — | | | | +1.2 | | | | (1.4 | ) | | | (0.2 | ) | | | +0.2 | |
| BBVA Banco Francés | | | — | | | | (0.2 | ) | | | +0.3 | | | | +0.1 | | | | (0.1 | ) |
| | | | | | | | | | | | | | | | |
| | Impact on Net Interest
| | | Impact on Economic
| |
| | Income(*) | | | Value(**) | |
| | 100 Basis-
| | | 100 Basis-
| | | 100 Basis-
| | | 100 Basis-
| |
| | Point
| | | Point
| | | Point
| | | Point
| |
2010 | | Increase | | | Decrease | | | Increase | | | Decrease | |
|
| Europe | | | −3.06 | % | | | +4.83 | % | | | +1.10 | % | | | −1.21 | % |
| BBVA Bancomer | | | +1.71 | % | | | −1.71 | % | | | −1.49 | % | | | +0.98 | % |
| BBVA Compass | | | +3.63 | % | | | −2.66 | % | | | +1.60 | % | | | −3.39 | % |
| BBVA Puerto Rico | | | +4.50 | % | | | −4.27 | % | | | +2.88 | % | | | −2.48 | % |
| BBVA Chile | | | −1.36 | % | | | +1.29 | % | | | −5.13 | % | | | +3.72 | % |
| BBVA Colombia | | | +1.32 | % | | | −1.33 | % | | | −2.51 | % | | | +2.50 | % |
| BBVA Banco Continental | | | +2.28 | % | | | −2.25 | % | | | −4.93 | % | | | +5.26 | % |
| BBVA Banco Provincial | | | +1.66 | % | | | −1.55 | % | | | −0.64 | % | | | +0.66 | % |
| BBVA Banco Francés | | | +0.47 | % | | | −0.48 | % | | | −2.02 | % | | | +2.12 | % |
| BBVA Group | | | +0.43 | % | | | +0.26 | % | | | +0.44 | % | | | −0.91 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | Average impact on Economic Value | |
| | | | | | 100 Basis-Point
| |
| | | 100 Basis-Point Increase | | | Decrease | |
Entities | | Euro | | | Dollar | | | Other | | | Total | | | Total | |
| | | (Millions of euros) | |
| |
| Europa | | | +140.6 | | | | +14.1 | | | | (1.1 | ) | | | +152.6 | | | | (196.2 | ) |
| BBVA Bancomer | | | — | | | | +55.1 | | | | (401.8 | ) | | | (346.0 | ) | | | +331.1 | |
| BBVA Puerto Rico | | | — | | | | +6.4 | | | | — | | | | +6.4 | | | | (18.6 | ) |
| Compass Bancshares, Inc | | | — | | | | (127.4 | ) | | | — | | | | (127.4 | ) | | | +44.9 | |
| BBVA Chile | | | — | | | | +3.2 | | | | (54.3 | ) | | | (51.1 | ) | | | +39.7 | |
| BBVA Colombia | | | — | | | | (0.8 | ) | | | (9.5 | ) | | | (10.4 | ) | | | +11.4 | |
| BBVA Banco Continental | | | — | | | | (23.7 | ) | | | (16.3 | ) | | | (40.0 | ) | | | +41.7 | |
| BBVA Banco Provincial | | | — | | | | (12.8 | ) | | | +2.0 | | | | (10.8 | ) | | | +12.0 | |
| BBVA Banco Francés | | | — | | | | +0.1 | | | | (9.4 | ) | | | (9.3 | ) | | | +9.8 | |
| | |
| (*) | | Percentage relating to “1 year” net Interest margin forecast in each entity. |
|
| (**) | | Percentage relating to each entity’s Capital Base. |
As part of the measurement process, the Group established the assumptions regarding the evolutionmovement and behaviourbehavior of certain items, such as those relating to products with no explicit or contractual maturity. These assumptions are based on studies that estimate the relationship between the interest rates on these products and market rates and enable specific balances to be classified into trend-based balances maturing at long term and seasonal or volatile balances with short-term residual maturity.
| |
| c) | Structural currency risk |
Structural currencyforeign exchange risk derives mainly fromis basically caused by exposure to variations in foreign exchange rate fluctuations arisingrates that arise in relation to the Group’s foreign subsidiaries and from the endowmentprovision of funds to foreign branches financed in a different currency to that of the branches abroad financed in currencies other than the investment currency.investment.
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The ALCO is responsible for arranging hedging transactions to limit the net worthcapital impact of fluctuations in exchange rates, based on their projected trend, and to guarantee the equivalent euro value of the foreign currency earnings expected to be obtained from these investments.
Structural currency risk management is based on the measurements performed by the Risk Area. These measurements use ana foreign exchange rate scenario simulation model which quantifies possible changes in value for a given confidence interval and a pre-established time horizon. The StandingExecutive Committee authorisesauthorizes the schemesystem of limits and alerts over thisfor these risk measurements, which include a limit on the economic capital or unexpected loss arising from the currencyforeign exchange risk of the foreign-currency investments.
As of December 31, 2008,In 2010, the coverage of structural currency risk exposure stood at 45%. The aggregate figure ofaverage asset exposure sensitivity to 1% depreciation in exchange rates stood as of December, 31 2008, at €75€113 million, with the following concentration: 63%45% in the Mexican peso, and 33%28% in other South American currencies.currencies and 18% in the US dollar.
| |
| d) | Structural equity price risk |
The BBVA Group’s exposure to structural equity price risk derives mainlycomes largely from investmentsits holdings in industrial and financial companies with medium- to long-term investment horizons. It ishorizons, reduced by the short net short positions held in derivative instruments on the same underlyingsunderlying assets, in order to limit theportfolio sensitivity of the portfolio to possible falls in prices. As of December 31, 2008 thepotential price cuts. The aggregate sensitivity of the Group’s consolidated equity positions to a 1% fall in the price of shares stood, on December 31, 2010, at €47.5 million, while the shares amountedsensitivity of the consolidated earnings to €78 million, 52%the same change in price on the same date is estimated at €3.3 million. The latter is positive in the case of which is concentratedfalls in highly liquid European Union equities.prices as these are short net positions in
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derivatives. This figure is determined by considering the exposure on shares measured at market price or, in the absence thereof,if not available, at fair value, including the net positions in equity swaps and options on the same underlyingunderlyings in delta equivalent terms. Treasury Area portfolio positions are not included in the calculation.
The Risk Area measures and effectively monitors structural risk in the structural equity price risk.portfolio. To this end,do so, it estimates the sensitivity figures and the capital requirednecessary to cover the possible unexpected losses arising from fluctuationsdue to the variations in the value of the companies in the investmentequity portfolio withat a confidence interval equallevel that corresponds to the entity’sinstitution’s target rating, and taking into account of the liquidity of the positions and the statistical behaviourperformance of the assets under consideration. These measurementsfigures are supplemented by periodic stress- andstress comparisons, back-testing and scenario analyses.
7.3 Liquidity risk
The aim of liquidity risk management, tracking and control is to ensure, in the short-term, that the payment commitments can be duly met on duly without having to resort to borrowing funds under onerous conditions,burdensome terms, or damaging the image and reputation of the institution. In the medium term the aim is to ensure that the financing structure is ideal and that it moves in the right direction, in the context of the economic situation, the markets and regulatory changes.
The Group’sLiquidity management and structural finance in the BBVA Group are based on the principle of the financial autonomy of its subsidiaries. This management approach helps prevent or limit liquidity risk by reducing the vulnerability of the BBVA Group during high-risk periods.
Once the decentralization is considered by geographical areas/subsidiaries, the management and monitoring of liquidity risk is monitored usingcarried out comprehensively in each of the Group’s units with both a dual approach: theshort and long-term Approach. The short-term liquidity approach(90-day has a time horizon), which focuses basicallyhorizon of up to 366 days. It is focused on the management of payments and collections offrom Treasury and Markets ascertainsand includes the operations specific to the areas and the Bank’s possible liquidity requirements; and the structural, medium- and long-termrequirements. The second medium-term or medium-financing approach which focusesis focused on the financial management of all the balance sheet, as a whole, with a minimum monitoring time framehorizon of one year.year or more.
The assessmentcomprehensive management of assetliquidity is carried out by the Assets and Liabilities Committee (ALCO) in each management unit. The Financial Management unit, as part of the Financial Division, analyzes the implications of the Bank’s various projects in terms of finance and liquidity and its compatibility with the target financing structure and the situation of the financial markets. The Financial Management unit executes proposals agreed by the ALCO in accordance with the agreed budgets and manages liquidity risk is based on whether or not they are eligible for rediscounting before the corresponding central bank. For normal situations, both in the shortusing a broad scheme of limits,sub-limits and medium term, those assets that are on the eligible list publishedalerts approved by the European Central Bank (ECB) or the corresponding monetary authority are considered to be liquid. Non-eligible assets, quoted or non-quoted, are considered to represent a second line of liquidity for the entity when analysing crisis situations.
Permanent Delegate Committee. The Risk Area performs auses these limits to carry out its mediation and control functionwork independently and is totally independentprovides the manager with the support tools and metrics needed for decision-making. Each of the management areas of each of the approaches and of the Group’s various units. Each of thelocal risk areas, which are independent from each other,the local manager, complies with the corporative principles of liquidity risk control that are established by the Global Market Risk Central Unit (UCRAM) — Structural Risks.(GRM) unit, which is the global structural risks unit for the whole Group.
ForAt the level of each entity, the managementmanaging areas request an outlineand propose a scheme of the quantitative and qualitative limits and alerts for short-medium- and long-termthat affect liquidity risk which is authorizedin the short and medium term. Once agreed with GRM, controls and limits are proposed to the Board of Directors through its delegate bodies, for approval at least once a year. The proposals submitted by GRM are adapted to the situation of the market according to the risk tolerance level aimed for by the Standing Committee. Also, the Risk Area performs periodic (daily and monthly) risk exposure measurements, develops the related valuation tools and models, conducts periodic stress tests, measures the degree of concentration on interbank counterparties, prepares
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the policies and procedures manual, and monitors the authorised limits and alerts, which are reviewed al least one time every year.Group.
The implementation of a new Liquidity and Finance Manual, which was approved in the last quarter of the year, has meant the extension of schemes limiting the internal financing of business units, the financial structure and financing concentration, as well as establishing alerts in qualitative liquidity indicators.
GRM carries out regular measurements of risk data are sent periodicallyincurred and the monitoring of consumption of limits. It develops tools and adapts valuation models, carries out regular stress tests and reports to ALCO and the Group’s ALCO andManagement Committee on a monthly basis about liquidity levels. It also reports more often to the management areas involved. As established inthemselves and to the GRM Management Committee. The frequency of communication and the amount of information under the current Contingency Plan is decided by the Liquidity Committee on the proposal of the Technical Liquidity Group (TLG), in. The TLG carries out the event of an alert of a possible crisis, conducts an initial analysis of the Bank’s short- andshort or long-term liquidity situation. The TLG comprises personnelis made up of specialized staff from the Short-Term Cash Desk, Financial Management and the
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Global Market Area Risk Unit (UCRAM-Structural Risk). If the alert is serious,levels suggest a deterioration of the relative situation, the TLG reports the matter to the Liquidity Committee, which is composed of the managers of the related areas. TheIf required, the Liquidity Committee is responsible in situations requiring urgent attention, for calling a meetingthe Financing Committee, which is made up of the Crisis Committee chaired byPresident and COO, the CEO.Director of the Financial Area, the Director of the Risk Area, the Director of Global Business and the Director of Business of the country in question.
One of the most significant aspects that have had an effect on the monitoring and management of liquidity risk in 2010 has been the management and development of the sovereign risk crisis. In this sense, the role of the central banks has been decisive in calming markets during the Eurozone debt crisis and the ECB has been proactive in guaranteeing the liquidity conditions of the interbank markets. The remaining contractual maturitiesBBVA Group has not needed to use the extraordinary measures established by the Spanish and European authorities to mitigate tension in bank financing.
On the regulatory side, the Basel Committee on Banking Supervision (Bank for International Settlements) has proposed a new liquidity regulatory scheme based on two ratios: the Liquidity Coverage Ratio (LCR), to enter into force in 2015; and the Net Stable Funding Ratio (NSFR), which will be implemented in 2018. The Group participated in the corresponding impact study (QIS) and has included the new regulatory challenges in its new general framework for action in the field of transactionsLiquidity and Finance.
7.4. RISK CONCENTRATIONS
Below is presented a breakdown by geographical area, of the balances of certain headings of financial instruments in the accompanying consolidated balance sheets, as of December 31, 2008, 2007 and 2006, disregarding any valuation adjustments, was as follow:adjustments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Up to 1
| | | 1 to 3
| | | 3 to 12
| | | 1 to 5
| | | Over 5
| |
2008 | | Total | | | Demand | | | month | | | months | | | months | | | years | | | years | |
| | | Millions of euros | |
| |
ASSETS — |
| Cash and balances with central banks | | | 14,640 | | | | 13,485 | | | | 476 | | | | 296 | | | | 181 | | | | 202 | | | | — | |
| Loans and advances to credit insititutions | | | 33,678 | | | | 6,198 | | | | 16,215 | | | | 1,621 | | | | 2,221 | | | | 4,109 | | | | 3,314 | |
| Loans and advances to customers | | | 341,322 | | | | 13,905 | | | | 36,049 | | | | 23,973 | | | | 45,320 | | | | 91,030 | | | | 131,045 | |
| Debt securities | | | 72,704 | | | | 716 | | | | 1,701 | | | | 12,230 | | | | 9,483 | | | | 24,640 | | | | 23,934 | |
| Derivatives (trading and hedging) | | | 44,779 | | | | — | | | | 3,739 | | | | 2,206 | | | | 5,442 | | | | 16,965 | | | | 16,427 | |
| |
| LIABILITIES — |
| Deposits from central banks | | | 16,762 | | | | 2,419 | | | | 8,737 | | | | 2,441 | | | | 3,165 | | | | — | | | | — | |
| Deposits from credit institutions | | | 49,573 | | | | 4,906 | | | | 22,412 | | | | 4,090 | | | | 5,975 | | | | 6,581 | | | | 5,609 | |
| Deposits from customers | | | 253,722 | | | | 101,140 | | | | 68,804 | | | | 27,025 | | | | 35,176 | | | | 16,440 | | | | 5,137 | |
| Debt certificates (including bonds) | | | 101,329 | | | | — | | | | 9,788 | | | | 13,516 | | | | 12,072 | | | | 45,470 | | | | 20,483 | |
| Subordinated liabilities | | | 16,250 | | | | 69 | | | | 913 | | | | 1 | | | | 872 | | | | 3,582 | | | | 10,813 | |
| Other financial liabilities | | | 8,453 | | | | 5,000 | | | | 1,152 | | | | 385 | | | | 203 | | | | 1,371 | | | | 342 | |
| Short positions | | | 2,700 | | | | — | | | | 24 | | | | — | | | | 23 | | | | — | | | | 2,653 | |
| Derivatives (trading and hedging) | | | 41,534 | | | | — | | | | 2,693 | | | | 3,108 | | | | 6,310 | | | | 15,537 | | | | 13,886 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Europe,
| | | | | | | | | | | | | |
| | | | | | Excluding
| | | | | | Latin
| | | | | | | |
2010 | | Spain | | | Spain | | | USA | | | America | | | Rest | | | Total | |
| | | Millions of euros | |
| |
RISKS ON-BALANCE | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial assets held for trading | | | 18,903 | | | | 22,899 | | | | 3,951 | | | | 15,126 | | | | 2,404 | | | | 63,283 | |
| Debt securities | | | 9,522 | | | | 2,839 | | | | 654 | | | | 10,938 | | | | 405 | | | | 24,358 | |
| Equity instruments | | | 3,041 | | | | 888 | | | | 148 | | | | 861 | | | | 322 | | | | 5,260 | |
| Derivatives | | | 6,340 | | | | 19,172 | | | | 3,149 | | | | 3,327 | | | | 1,677 | | | | 33,665 | |
| Other financial assets designated at fair value through profit or loss | | | 284 | | | | 98 | | | | 481 | | | | 1,913 | | | | 1 | | | | 2,777 | |
| Debt securities | | | 138 | | | | 66 | | | | 480 | | | | 7 | | | | — | | | | 691 | |
| Equity instruments | | | 146 | | | | 32 | | | | 1 | | | | 1,906 | | | | 1 | | | | 2,086 | |
Available-for-sale portfolio | | | 25,230 | | | | 7,689 | | | | 7,581 | | | | 14,449 | | | | 1,234 | | | | 56,183 | |
| Debt securities | | | 20,725 | | | | 7,470 | | | | 6,903 | | | | 14,317 | | | | 1,187 | | | | 50,602 | |
| Equity instruments | | | 4,505 | | | | 219 | | | | 678 | | | | 132 | | | | 47 | | | | 5,581 | |
| Loans and receivables | | | 218,399 | | | | 30,985 | | | | 39,944 | | | | 77,861 | | | | 5,847 | | | | 373,036 | |
| Loans and advances to credit institutions | | | 6,786 | | | | 7,846 | | | | 864 | | | | 7,090 | | | | 1,018 | | | | 23,604 | |
| Loans and advances to customers | | | 210,102 | | | | 23,139 | | | | 38,649 | | | | 70,497 | | | | 4,822 | | | | 347,209 | |
| Debt securities | | | 1,511 | | | | — | | | | 431 | | | | 274 | | | | 7 | | | | 2,223 | |
Held-to-maturity investments | | | 7,504 | | | | 2,443 | | | | — | | | | — | | | | — | | | | 9,947 | |
| Hedging derivatives | | | 234 | | | | 2,922 | | | | 131 | | | | 281 | | | | 35 | | | | 3,603 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 270,554 | | | | 67,036 | | | | 52,088 | | | | 109,630 | | | | 9,521 | | | | 508,829 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
RISKS OFF-BALANCE | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial guarantees | | | 20,175 | | | | 6,773 | | | | 3,069 | | | | 4,959 | | | | 1,465 | | | | 36,441 | |
| Contingent exposures | | | 35,784 | | | | 19,144 | | | | 17,604 | | | | 17,132 | | | | 910 | | | | 90,574 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 55,959 | | | | 25,917 | | | | 20,673 | | | | 22,091 | | | | 2,375 | | | | 127,015 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
F-63F-68
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Up to 1
| | | 1 to 3
| | | 3 to 12
| | | 1 to 5
| | | Over 5
| |
2007 | | Total | | | Demand | | | Month | | | Months | | | Months | | | Years | | | Years | |
| | | Millions of euros | |
| |
ASSETS — |
| Cash and balances with central banks | | | 22,561 | | | | 22,532 | | | | 29 | | | | — | | | | — | | | | — | | | | — | |
| Loans and advances to credit insititutions | | | 24,392 | | | | 3,764 | | | | 12,246 | | | | 2,519 | | | | 2,301 | | | | 2,703 | | | | 859 | |
| Loans and advances to customers | | | 319,671 | | | | 7,220 | | | | 30,338 | | | | 23,778 | | | | 46,226 | | | | 87,414 | | | | 124,695 | |
| Debt securities | | | 81,715 | | | | 516 | | | | 1,719 | | | | 24,726 | | | | 8,964 | | | | 20,884 | | | | 24,906 | |
| Other assets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| OTC derivatives | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| |
| LIABILITIES — |
| Deposits from central banks | | | 27,256 | | | | 117 | | | | 25,013 | | | | 1,435 | | | | 691 | | | | — | | | | — | |
| Deposits from credit institutions | | | 60,395 | | | | 6,696 | | | | 36,665 | | | | 4,063 | | | | 5,258 | | | | 5,657 | | | | 2,055 | |
| Money market operations through counterparties | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Deposits from customers | | | 218,541 | | | | 74,605 | | | | 51,671 | | | | 15,815 | | | | 36,390 | | | | 34,404 | | | | 5,656 | |
| Debt certificates (including bonds) | | | 101,875 | | | | 5,987 | | | | 7,391 | | | | 4,191 | | | | 14,878 | | | | 44,178 | | | | 25,249 | |
| Subordinated liabilities | | | 15,397 | | | | 1,200 | | | | 495 | | | | 15 | | | | 583 | | | | 2,722 | | | | 10,382 | |
| Other financial liabilities | | | 6,239 | | | | 3,810 | | | | 1,372 | | | | 182 | | | | 450 | | | | 372 | | | | 53 | |
| OTC derivatives | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Europe,
| | | | | | | | | | | | | |
| | | | | | Excluding
| | | | | | Latin
| | | | | | | |
2009 | | Spain | | | Spain | | | USA | | | America | | | Rest | | | Total | |
| | | Millions of euros | |
| |
RISKS ON-BALANCE | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial assets held for trading | | | 22,893 | | | | 25,583 | | | | 3,076 | | | | 15,941 | | | | 2,240 | | | | 69,733 | |
| Debt securities | | | 14,487 | | | | 7,434 | | | | 652 | | | | 11,803 | | | | 296 | | | | 34,672 | |
| Equity instruments | | | 3,268 | | | | 624 | | | | 35 | | | | 1,662 | | | | 194 | | | | 5,783 | |
| Derivatives | | | 5,138 | | | | 17,525 | | | | 2,389 | | | | 2,476 | | | | 1,750 | | | | 29,278 | |
| Other financial assets designated at fair value through profit or loss | | | 330 | | | | 73 | | | | 436 | | | | 1,498 | | | | — | | | | 2,337 | |
| Debt securities | | | 157 | | | | 42 | | | | 435 | | | | 5 | | | | — | | | | 639 | |
| Equity instruments | | | 173 | | | | 31 | | | | 1 | | | | 1,493 | | | | — | | | | 1,698 | |
Available-for-sale portfolio | | | 30,177 | | | | 11,660 | | | | 7,828 | | | | 12,585 | | | | 1,266 | | | | 63,516 | |
| Debt securities | | | 24,838 | | | | 11,429 | | | | 7,082 | | | | 12,494 | | | | 1,223 | | | | 57,066 | |
| Equity instruments | | | 5,339 | | | | 231 | | | | 746 | | | | 91 | | | | 43 | | | | 6,450 | |
| Loans and receivables | | | 206,097 | | | | 34,613 | | | | 40,469 | | | | 66,395 | | | | 6,167 | | | | 353,741 | |
| Loans and advances to credit institutions | | | 2,568 | | | | 11,280 | | | | 2,441 | | | | 4,993 | | | | 918 | | | | 22,200 | |
| Loans and advances to customers | | | 203,529 | | | | 23,333 | | | | 37,688 | | | | 61,298 | | | | 5,239 | | | | 331,087 | |
| Debt securities | | | — | | | | — | | | | 340 | | | | 104 | | | | 10 | | | | 454 | |
Held-to-maturity investments | | | 2,625 | | | | 2,812 | | | | — | | | | — | | | | — | | | | 5,437 | |
| Hedging derivatives | | | 218 | | | | 2,965 | | | | 117 | | | | 270 | | | | 25 | | | | 3,595 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 262,340 | | | | 77,706 | | | | 51,926 | | | | 96,689 | | | | 9,698 | | | | 498,359 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
RISKS OFF-BALANCE | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial guarantees | | | 15,739 | | | | 7,826 | | | | 3,330 | | | | 4,601 | | | | 1,689 | | | | 33,185 | |
| Contingent exposures | | | 37,804 | | | | 24,119 | | | | 15,990 | | | | 13,164 | | | | 1,246 | | | | 92,323 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 53,543 | | | | 31,945 | | | | 19,320 | | | | 17,765 | | | | 2,935 | | | | 125,508 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Up to 1
| | | 1 to 3
| | | 3 to 12
| | | 1 to 5
| | | Over 5
| |
2006 | | Total | | | Demand | | | Month | | | Months | | | Months | | | Years | | | Years | |
| | | Millions of euros | |
| |
ASSETS — |
| Cash and balances with central banks | | | 12,496 | | | | 12,446 | | | | 50 | | | | — | | | | — | | | | — | | | | — | |
| Loans and advances to credit insititutions | | | 21,205 | | | | 4,705 | | | | 9,306 | | | | 1,271 | | | | 2,166 | | | | 3,131 | | | | 626 | |
| Loans and advances to customers | | | 264,139 | | | | 2,919 | | | | 23,196 | | | | 21,555 | | | | 37,308 | | | | 71,728 | | | | 107,433 | |
| Money market operations through counterparties | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Debt securities | | | 68,537 | | | | 379 | | | | 1,272 | | | | 16,223 | | | | 7,068 | | | | 16,461 | | | | 27,134 | |
| Other assets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| OTC derivatives | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| |
| LIABILITIES — |
| Deposits from central banks | | | 15,191 | | | | 1,802 | | | | 11,041 | | | | 1,850 | | | | 498 | | | | — | | | | — | |
| Deposits from credit institutions | | | 42,285 | | | | 2,529 | | | | 22,017 | | | | 5,268 | | | | 5,968 | | | | 4,460 | | | | 2,043 | |
| Money market operations through counterparties | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Deposits from customers | | | 186,035 | | | | 77,654 | | | | 46,488 | | | | 12,352 | | | | 16,412 | | | | 27,295 | | | | 5,834 | |
| Debt certificates (including bonds) | | | 85,670 | | | | 3,453 | | | | 5,629 | | | | 2,989 | | | | 9,952 | | | | 41,985 | | | | 21,662 | |
| Subordinated liabilities | | | 13,411 | | | | — | | | | — | | | | 560 | | | | 631 | | | | 3,435 | | | | 8,785 | |
| Other financial liabilities | | | 6,771 | | | | 4,552 | | | | 1,596 | | | | 262 | | | | 210 | | | | 147 | | | | 4 | |
| OTC derivatives | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
In the wake of the exceptional circumstances unfolding in the international financial markets, notably from the second half of 2008, the European governments committed to taking the opportune measures to try to resolve the issues confronting bank funding and the ramifications of constrained funding on the real economy with a view to safeguarding the stability of the international financial system. The overriding goals underpinning these measures
F-64F-69
were to ensure sufficient liquidity to enable financial institutions to function correctly, to facilitate the funding of banks, to provide financial institutions with additional capital resources where needed so as to continue to ensure the proper financing of the economy, to ensure that applicable accounting standards are sufficiently flexible to take into consideration current exceptional market circumstances and to reinforce and improve cooperation among European nations.
Framed by this general philosophy, the following measures were passed into law in Spain during the fourth quarter of 2008:
| | |
| • | Royal Decree-Law 6/2008, of October 10, creating the Spanish Financial Asset Acquisition Fund, and Order EHA/3118/2008, dated October 31, enacting this Royal Decree. The purpose of the fund, which is managed by Spain’s economy ministry and has an initial endowment of €30 billion, extendable to €50 billion, is to acquire, with public financing and based on market criteria, via auctions, financial instruments issued by the banks andcajasand securitization funds containing Spanish assets, secured by loans extended to individuals, companies and non-financial corporates. |
|
| • | Royal Decree-Law 7/2008, of October 13, on Emergency Economic Measures in connection with the Concerted Euro Area Action Plan, and Order EHA/3364/2008, dated November 21, enacting article 1 of the aforementioned Royal Decree, including the following measures: |
The extension of state guarantees to secure bills, debentures and bonds issued by credit entities resident in Spain since October 14, 2008. Debt issued availing this state guarantee must: form part of individual operations or issuance programs; not be subordinated or secured by any other class of guarantee; be traded on official Spanish secondary markets; mature within 3 months and 3 years, although this maturity can be extended to 5 years subject to prior notification to the Bank of Spain; be fixed or floating rate, subject to special conditions for floating-rate debt; be repaid in a single installment at maturity; not have any options or other derivatives attached; and, have a nominal value of €10 million or more. The deadline for granting state guarantees is December 31, 2009 and the total amount of guarantees that can be extended in 2008 is €100 billion.
Authorization, on an exceptional basis, until December 31, 2009, for the Spanish economy ministry to acquire securities, including preferential shares and other non-voting equity instruments, issued by credit entities resident in Spain that need to reinforce their capital and so request.
The Bank is entitled to avail of the aforementioned measures under the umbrella of its risk management policy. However, at the date of preparation of the accompanying financial statements, the Group has not had to resort to using these facilities thanks to its exceptional liquidity management.
F-65
7.4 Risk concentrations
The table below depicts the Group’s financial instruments by classes and geographic markets, disregarding valuation adjustments, as of December 31, 2008:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Europe
| | | | | | | | | | | | | Europe,
| | | | | | | | | |
| | | | | Except
| | | | Latin
| | | | | | | | | Excluding
| | | | | | | | | |
Risks on Balance | | Spain | | Spain | | USA | | America | | Rest | | Total | | |
2008 | | | Spain | | Spain | | USA | | Latin America | | Rest | | Total | |
| | | Millions of euros | | | Millions of euros | |
| |
RISK ON-BALANCE | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial assets held for trading | | | 20,489 | | | | 30,251 | | | | 4,566 | | | | 16,120 | | | | 1,873 | | | | 73,299 | | | | 20,489 | | | | 30,251 | | | | 4,566 | | | | 16,120 | | | | 1,873 | | | | 73,299 | |
| Debt securities | | | 7,799 | | | | 5,926 | | | | 652 | | | | 11,563 | | | | 616 | | | | 26,556 | | | | 7,799 | | | | 5,926 | | | | 652 | | | | 11,563 | | | | 616 | | | | 26,556 | |
| Equity instruments | | | 2,332 | | | | 1,376 | | | | 80 | | | | 1,071 | | | | 938 | | | | 5,797 | | | | 2,332 | | | | 1,376 | | | | 80 | | | | 1,071 | | | | 938 | | | | 5,797 | |
| Derivatives | | | 10,358 | | | | 22,949 | | | | 3,834 | | | | 3,486 | | | | 319 | | | | 40,946 | | | | 10,358 | | | | 22,949 | | | | 3,834 | | | | 3,486 | | | | 319 | | | | 40,946 | |
Other financial assets designated at fair value through profit or loss | | | 245 | | | | 24 | | | | 442 | | | | 1,042 | | | | 1 | | | | 1,754 | | | | 245 | | | | 24 | | | | 442 | | | | 1,042 | | | | 1 | | | | 1,754 | |
| Debt securities | | | 63 | | | | — | | | | 441 | | | | 12 | | | | — | | | | 516 | | | | 63 | | | | — | | | | 441 | | | | 12 | | | | — | | | | 516 | |
| Equity instruments | | | 182 | | | | 24 | | | | 1 | | | | 1,030 | | | | 1 | | | | 1,238 | | | | 182 | | | | 24 | | | | 1 | | | | 1,030 | | | | 1 | | | | 1,238 | |
Available-for-sale portfolio | | | 15,233 | | | | 10,460 | | | | 9,633 | | | | 8,449 | | | | 2,999 | | | | 46,774 | | | | 15,233 | | | | 10,460 | | | | 9,633 | | | | 8,449 | | | | 2,999 | | | | 46,774 | |
| Debt securities | | | 11,811 | | | | 9,970 | | | | 8,889 | | | | 8,368 | | | | 924 | | | | 39,962 | | | | 11,811 | | | | 9,970 | | | | 8,889 | | | | 8,368 | | | | 924 | | | | 39,962 | |
| Equity instruments | | | 3,422 | | | | 490 | | | | 744 | | | | 81 | | | | 2,075 | | | | 6,812 | | | | 3,422 | | | | 490 | | | | 744 | | | | 81 | | | | 2,075 | | | | 6,812 | |
Loans and receivables | | | 215,030 | | | | 44,394 | | | | 38,268 | | | | 69,534 | | | | 8,162 | | | | 375,388 | | | | 215,030 | | | | 44,394 | | | | 38,268 | | | | 69,534 | | | | 8,162 | | | | 375,388 | |
| Loans and advances to credit institutions | | | 6,556 | | | | 15,848 | | | | 2,479 | | | | 7,466 | | | | 1,330 | | | | 33,679 | | | | 6,556 | | | | 15,848 | | | | 2,479 | | | | 7,466 | | | | 1,330 | | | | 33,679 | |
| Loans and advances to customers | | | 208,474 | | | | 28,546 | | | | 35,498 | | | | 61,978 | | | | 6,826 | | | | 341,322 | | | | 208,474 | | | | 28,546 | | | | 35,498 | | | | 61,978 | | | | 6,826 | | | | 341,322 | |
| Debt securities | | | — | | | | — | | | | 291 | | | | 90 | | | | 6 | | | | 387 | | | | — | | | | — | | | | 291 | | | | 90 | | | | 6 | | | | 387 | |
Held-to-maturity investments | | | 2,396 | | | | 2,889 | | | | — | | | | — | | | | — | | | | 5,285 | | | | 2,396 | | | | 2,889 | | | | — | | | | — | | | | — | | | | 5,285 | |
Hedging derivatives | | | 439 | | | | 2,789 | | | | 270 | | | | 309 | | | | 26 | | | | 3,833 | | | | 439 | | | | 2,789 | | | | 270 | | | | 309 | | | | 26 | | | | 3,833 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 253,832 | | | | 90,807 | | | | 53,179 | | | | 95,454 | | | | 13,061 | | | | 506,333 | | | | 253,832 | | | | 90,807 | | | | 53,179 | | | | 95,454 | | | | 13,060 | | | | 506,333 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Europe
| | | | | | | | | | | | | Europe,
| | | | | | | | | |
| | | | | Except
| | | | Latin
| | | | | | | | | Excluding
| | | | | | | | | |
Risks Off-Balance | | Spain | | Spain | | USA | | America | | Rest | | Total | | |
| | | Spain | | Spain | | USA | | Latin America | | Rest | | Total | |
| | | | Millions of euros | |
| | |
RISK OFF-BALANCE | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial guarantees | | | 16,843 | | | | 8,969 | | | | 3,456 | | | | 4,721 | | | | 1,963 | | | | 35,952 | | | | 16,843 | | | | 8,969 | | | | 3,456 | | | | 4,721 | | | | 1,963 | | | | 35,952 | |
Other contingent exposures | | | 45,039 | | | | 22,366 | | | | 16,194 | | | | 13,559 | | | | 1,739 | | | | 98,897 | | |
Contingent exposures | | | | 45,039 | | | | 22,366 | | | | 16,194 | | | | 13,559 | | | | 1,739 | | | | 98,897 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 61,882 | | | | 31,335 | | | | 19,650 | | | | 18,280 | | | | 3,702 | | | | 134,849 | | | | 61,882 | | | | 31,335 | | | | 19,650 | | | | 18,280 | | | | 3,702 | | | | 134,849 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
The breakdown of the main balances in foreign currencies of the accompanying consolidated balance sheets, with reference to the most significant foreign currencies, is set forth in Appendix IX.
F-70
Below is a breakdown by contractual maturity, of the balances of certain headings in the accompanying consolidated balance sheets, disregarding any valuation adjustments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Up to
| | | 1 to
| | | 3 to
| | | 1 to
| | | Over
| | | | |
2010 | | Demand | | | 1 Month | | | 3 Months | | | 12 Months | | | 5 Years | | | 5 Years | | | Total | |
| | | Millions of euros | |
| |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central banks | | | 17,275 | | | | 1,497 | | | | 693 | | | | 220 | | | | 282 | | | | — | | | | 19,967 | |
| Loans and advances to credit institutions | | | 2,471 | | | | 10,590 | | | | 1,988 | | | | 1,658 | | | | 4,568 | | | | 2,329 | | | | 23,604 | |
| Loans and advances to customers | | | 16,543 | | | | 33,397 | | | | 21,127 | | | | 49,004 | | | | 85,800 | | | | 141,338 | | | | 347,209 | |
| Debt securities | | | 497 | | | | 3,471 | | | | 12,423 | | | | 8,123 | | | | 35,036 | | | | 28,271 | | | | 87,821 | |
| Derivatives (trading and hedging) | | | — | | | | 636 | | | | 1,515 | | | | 3,503 | | | | 13,748 | | | | 17,827 | | | | 37,229 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks | | | 50 | | | | 5,102 | | | | 3,130 | | | | 2,704 | | | | — | | | | 1 | | | | 10,987 | |
| Deposits from credit institutions | | | 4,483 | | | | 30,031 | | | | 4,184 | | | | 3,049 | | | | 9,590 | | | | 5,608 | | | | 56,945 | |
| Deposits from customers | | | 111,090 | | | | 69,625 | | | | 21,040 | | | | 45,110 | | | | 21,158 | | | | 6,818 | | | | 274,841 | |
| Debt certificates (including bonds) | | | 96 | | | | 5,243 | | | | 10,964 | | | | 7,159 | | | | 42,907 | | | | 15,843 | | | | 82,212 | |
| Subordinated liabilities | | | — | | | | 537 | | | | 3 | | | | 248 | | | | 2,732 | | | | 13,251 | | | | 16,771 | |
| Other financial liabilities | | | 4,177 | | | | 1,207 | | | | 175 | | | | 433 | | | | 647 | | | | 1,564 | | | | 8,203 | |
| Short positions | | | — | | | | 651 | | | | — | | | | 10 | | | | — | | | | 3,385 | | | | 4,046 | |
| Derivatives (trading and hedging) | | | — | | | | 826 | | | | 1,473 | | | | 3,682 | | | | 12,813 | | | | 16,037 | | | | 34,831 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Up to 1
| | | 1 to 3
| | | 3 to 12
| | | 1 to 5
| | | Over 5
| | | | |
2009 | | Demand | | | Month | | | Months | | | Months | | | Years | | | Years | | | Total | |
| | | Millions of euros | |
| |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central banks | | | 14,650 | | | | 535 | | | | 248 | | | | 735 | | | | 163 | | | | — | | | | 16,331 | |
| Loans and advances to credit institutions | | | 3,119 | | | | 8,484 | | | | 1,549 | | | | 1,914 | | | | 4,508 | | | | 2,626 | | | | 22,200 | |
| Loans and advances to customers | | | 4,313 | | | | 31,155 | | | | 19,939 | | | | 40,816 | | | | 94,686 | | | | 140,178 | | | | 331,087 | |
| Debt securities | | | 1,053 | | | | 4,764 | | | | 15,611 | | | | 10,495 | | | | 37,267 | | | | 29,080 | | | | 98,270 | |
| Derivatives (trading and hedging) | | | — | | | | 637 | | | | 2,072 | | | | 3,863 | | | | 13,693 | | | | 12,608 | | | | 32,873 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks | | | 213 | | | | 4,807 | | | | 3,783 | | | | 12,293 | | | | — | | | | — | | | | 21,096 | |
| Deposits from credit institutions | | | 1,836 | | | | 24,249 | | | | 5,119 | | | | 5,145 | | | | 6,143 | | | | 6,453 | | | | 48,945 | |
| Deposits from customers | | | 106,942 | | | | 55,482 | | | | 34,329 | | | | 32,012 | | | | 18,325 | | | | 6,293 | | | | 253,383 | |
| Debt certificates (including bonds) | | | — | | | | 10,226 | | | | 16,453 | | | | 15,458 | | | | 40,435 | | | | 14,614 | | | | 97,186 | |
| Subordinated liabilities | | | — | | | | 500 | | | | 689 | | | | 2 | | | | 1,529 | | | | 14,585 | | | | 17,305 | |
| Other financial liabilities | | | 3,825 | | | | 822 | | | | 141 | | | | 337 | | | | 480 | | | | 20 | | | | 5,625 | |
| Short positions | | | — | | | | 448 | | | | — | | | | 16 | | | | — | | | | 3,366 | | | | 3,830 | |
| Derivatives (trading and hedging) | | | — | | | | 735 | | | | 1,669 | | | | 3,802 | | | | 13,585 | | | | 10,517 | | | | 30,308 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Up to 1
| | | 1 to 3
| | | 3 to 12
| | | 1 to 5
| | | Over 5
| | | | |
2008 | | Demand | | | Month | | | Months | | | Months | | | Years | | | Years | | | Total | |
| | | Millions of euros | |
| |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central banks | | | 13,487 | | | | 476 | | | | 296 | | | | 181 | | | | 202 | | | | — | | | | 14,642 | |
| Loans and advances to credit institutions | | | 6,198 | | | | 16,216 | | | | 1,621 | | | | 2,221 | | | | 4,109 | | | | 3,314 | | | | 33,679 | |
| Loans and advances to customers | | | 13,905 | | | | 36,049 | | | | 23,973 | | | | 45,320 | | | | 91,030 | | | | 131,045 | | | | 341,322 | |
| Debt securities | | | 716 | | | | 1,701 | | | | 12,230 | | | | 9,483 | | | | 24,640 | | | | 23,934 | | | | 72,704 | |
| Other assets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Derivatives (trading and hedging) | | | — | | | | 3,739 | | | | 2,206 | | | | 5,442 | | | | 16,965 | | | | 16,427 | | | | 44,779 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks | | | 2,419 | | | | 8,737 | | | | 2,441 | | | | 3,165 | | | | — | | | | — | | | | 16,762 | |
| Deposits from credit institutions | | | 4,906 | | | | 22,412 | | | | 4,090 | | | | 5,975 | | | | 6,581 | | | | 5,609 | | | | 49,573 | |
| Deposits from customers | | | 101,141 | | | | 68,804 | | | | 27,025 | | | | 35,176 | | | | 16,440 | | | | 5,137 | | | | 253,723 | |
| Debt certificates (including bonds) | | | — | | | | 9,788 | | | | 13,516 | | | | 12,072 | | | | 45,469 | | | | 20,483 | | | | 101,328 | |
| Subordinated liabilities | | | 69 | | | | 913 | | | | 1 | | | | 872 | | | | 3,582 | | | | 10,812 | | | | 16,249 | |
| Other financial liabilities | | | 5,000 | | | | 1,152 | | | | 385 | | | | 203 | | | | 1,371 | | | | 342 | | | | 8,453 | |
| Short positions | | | — | | | | 24 | | | | — | | | | 23 | | | | — | | | | 2,653 | | | | 2,700 | |
| Derivatives (trading and hedging) | | | — | | | | 2,693 | | | | 3,108 | | | | 6,310 | | | | 15,538 | | | | 13,886 | | | | 41,535 | |
| |
| 7.6. | RISK IN THE REAL ESTATE AND CONSTRUCTION SECTOR IN SPAIN |
As of December 31, 2010, exposure to the construction sector and real estate activities in Spain stood at €31,708 million. Of that amount, risk from loans to the construction sector and real estate activities accounted for €16,608 million, representing 9% of loans and advances to customers of the balance of business in Spain (excluding Government and other government agencies) and 3% of the total assets of the Consolidated Group.
Lending for Real Estate Development according to the purpose of the loans as of December 31, 20082010, is shown below:
| | | | | | | | | | | | | |
Financing Allocated to
| | | | | Drawn Over
| | | | |
Construction and Real Estate
| | | | | the Guarantee
| | | Provision
| |
Development and its Coverage | | Gross Amount | | | Value | | | Coverage | |
| | | Millions of euros | |
| |
| Loans recorded by the Group’s credit institutions (Business in Spain) | | | 16,608 | | | | 4,869 | | | | 1,224 | |
Of which: Impaired assets | | | 3,543 | | | | 1,355 | | | | 893 | |
Of which: Potencial problem assets | | | 2,381 | | | | 1,185 | | | | 331 | |
| Memorandum item: | | | | | | | | | | | | |
| Total provision for currently non-impaired portfolio (Total business) | | | n/a | | | | n/a | | | | 2,698 | |
| Write-offs | | | 23 | | | | n/a | | | | n/a | |
n/a: not applicable
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| | | | |
Memorandum Item:
| | |
Consolidated Group Data (Carrying Amount) | | 2010 |
| | Millions of euros |
|
| Total loans and advances to customers, excluding the Public Sector (Business in Spain) | | | 185,361 | |
| Total consolidated assets (total business) | | | 552,738 | |
Impaired assets and 2007 heldpotencial problem assets rose to €3,543 million and €2,381 million, respectively, with a loan loss provision amounting to €1,224 million.
The drawn over the guarantee value shown in foreign currencythe tables above corresponds to the excess from the gross amount of each loan over the value of the real rights that, if applicable, were received as security, calculated according to Appendix IX of Circular 4.2004 of the Bank of Spain. This means that additional regulatory corrective factors ranging from 30% to 50%, based on the type of asset, have been applied to the updated appraisal values. For the total portfolio, this amount rose to €4,869 mill and to €1,355 million and €1,185 million for the non-performing and substandard loan portfolio, respectively. The updated appraisal values, without the application of said corrective factors, rose to €25,327 million, which broadly covers the amount of the debt.
Of the €3,543 million in impaired assets, €1,138 million (32%) correspond to loans whose payments are broken down intoup-to-date and whose placing in arrears has been anticipated in the main currenciesframework of denominationthe policy of prudence.
The following is a description of the real estate credit risk based on the types of associated guarantees:
| | | | |
Credit: Gross amount (Business in Spain) | | 2010 | |
| | Millions of euros | |
|
| Without secured loan | | | 1,259 | |
| With secured loan | | | 15,249 | |
| Terminated buildings | | | 7,403 | |
| Homes | | | 7,018 | |
| Other | | | 385 | |
| Buildings under construction | | | 3,531 | |
| Homes | | | 3,320 | |
| Other | | | 211 | |
| Land | | | 4,315 | |
| Urbanized land | | | 2,922 | |
| Rest of land | | | 1,393 | |
| Rest | | | 100 | |
| | | | |
Total | | | 16,608 | |
| | | | |
A total of 66% of loans to developers are guaranteed with buildings (62% are homes, 89% of which are first homes or public housing), and only 26% in Note 2.2.4.land, of which 68% is urbanized).
The information on the retail mortgage portfolio risk as of December 31, 2010 is as follows:
| | | | |
Housing-Acquisition Loans to Households
| | | |
(Business in Spain) | | 2010 | |
| | Millions of euros | |
|
| Without secured loan (gross amount) | | | — | |
of which: Impaired | | | — | |
| With secured loan (gross amount) | | | 80,027 | |
of which: Impaired | | | 2,324 | |
| | | | |
Total | | | 80,027 | |
| | | | |
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Information on the loan to value (LTV: ratio resulting from dividing the risk as of that date over the amount of the last available appraisal) of the retail mortgage portfolio risk shown above is as follows:
| | | | | | | | | | | | | | | | | |
LTV Breakdown
| | | | Over 50%
| | Over 80%
| | |
of Secured Loans to
| | | | but Less
| | but Less
| | |
Households for the
| | Less Than
| | than or
| | than or
| | |
Purchase of a Home
| | or Equal to
| | Equal to
| | Equal to
| | |
(Business in Spain) | | 50% | | 80% | | 100% | | Over 100% |
| | | Millions of euros |
| |
| Gross amount | | | 20,109 | | | | 44,362 | | | | 14,399 | | | | 1,157 | |
of which: Impaired | | | 413 | | | | 806 | | | | 903 | | | | 202 | |
Secured loans to households for the purchase of a home as of December 31, 2010 have an average LTV of 51%.
The breakdown of foreclosed, acquired, purchased or exchanged assets from debt from loans relating to business in Spain, as well as the holdings and financing to non-consolidated companies holding such assets is as follows:
| | | | | | | | | | | | | |
Foreclosed Assets to the Consolidated
| | Carrying
| | | Of which:
| | | | |
Group Entities (Business in Spain) | | Amount | | | Coverage | | | | |
| | | Millions of euros | |
| |
Real estate assets from loans to the construction and real estate development sectors in Spain | | | 2,214 | | | | 1,045 | | | | | |
| Terminated buildings | | | 598 | | | | 202 | | | | | |
| Homes | | | 341 | | | | 110 | | | | | |
| Other | | | 257 | | | | 92 | | | | | |
| Buildings under construction | | | 124 | | | | 74 | | | | | |
| Homes | | | 115 | | | | 71 | | | | | |
| Other | | | 9 | | | | 3 | | | | | |
| Land | | | 1,492 | | | | 769 | | | | | |
| Urbanized land | | | 724 | | | | 392 | | | | | |
| Rest of land | | | 768 | | | | 377 | | | | | |
Rest of real estate assets from mortgage financing for households for the purchase of a home | | | 682 | | | | 193 | | | | | |
Rest of foreclosed real estate assets | | | 127 | | | | 77 | | | | | |
Equity instruments, investments and financing to non-consolidated companies holding said assets | | | 168 | | | | 287 | | | | | |
The net carrying amount of said assets rose to €3,191 million with specific recognized provisions amounting to €1,602 million, for a total coverage of 33%. Likewise, the net carrying amount of the real estate assets rose to €3,023 million with a provision amounting to €1,315 million, which implies a coverage of 30.3%.
| |
| 8. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
The fair value of ana financial asset or a liability on a given date is the amount for which it could be exchanged or settled, respectively, between two knowledgeable, willing parties in an arm’s length transaction.transaction in market conditions. The most objective and common reference for the fair value of ana financial asset or a liability is the price that would be paid for it on an organised,organized, transparent and deep market (“quoted price” or “market price”).
If there is no market price for a given financial asset or liability, its fair value is estimated on the basis of the price established in recent transactions involving similar instruments and, in the absence thereof, by using mathematical measurement models sufficiently tried and trusted by the international financial community. The models we most frequently use are the present value method, Monte Carlo, and Black-Scholes. The estimates used in such models take into consideration the specific features of the asset or liability to be measured and, in particular, the various types of risk associated with the asset or liability. However, the limitations inherent toin the measurement models developed and the possible inaccuracies of the assumptions required by these models may signifymean that the fair value
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of an asset or liability that is estimated does not coincide exactly with the price for which the asset or liability could be exchanged or settled on the date of its measurement.
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Determining the fair value of financial instruments
FollowingBelow is a comparison of the carrying amountsamount of the Group’s financial assets and liabilities in the accompanying consolidated balance sheets as of December 31, 2010, 2009 and 2008, and their respective fair values as of December 31, 2008, 2007 and 2006:values:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | | | | 2010 | | 2009 | | 2008 | |
| | | Book
| | Fair
| | Book
| | Fair
| | Book
| | Fair
| | | | | Carrying
| | Fair
| | Carrying
| | Fair
| | Carrying
| | Fair
| |
Fair Value and Carrying Amount | | | Notes | | Amount | | Value | | Amount | | Value | | Amount | | Value | |
| | | Value | | Value | | Value | | Value | | Value | | Value | | | | | | | | | Millions of euros | | | | | |
| | | Millions of euros | |
| | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and balances with central banks | | | 14,659 | | | | 14,659 | | | | 22,581 | | | | 22,581 | | | | 12,515 | | | | 12,515 | | | | 9 | | | | 19,981 | | | | 19,981 | | | | 16,344 | | | | 16,344 | | | | 14,659 | | | | 14,659 | |
| Financial assets held for trading | | | 73,299 | | | | 73,299 | | | | 62,336 | | | | 62,336 | | | | 51,791 | | | | 51,791 | | | | 10 | | | | 63,283 | | | | 63,283 | | | | 69,733 | | | | 69,733 | | | | 73,299 | | | | 73,299 | |
| Other financial assets designated at fair value through profit or loss | | | 1,755 | | | | 1,755 | | | | 1,167 | | | | 1,167 | | | | 977 | | | | 977 | | | | 11 | | | | 2,774 | | | | 2,774 | | | | 2,337 | | | | 2,337 | | | | 1,754 | | | | 1,754 | |
| Available-for-sale financial assets | | | 47,780 | | | | 47,780 | | | | 48,432 | | | | 48,432 | | | | 42,256 | | | | 42,267 | | | | 12 | | | | 56,456 | | | | 56,456 | | | | 63,521 | | | | 63,521 | | | | 47,780 | | | | 47,780 | |
| Loans and receivables | | | 369,494 | | | | 381,845 | | | | 337,765 | | | | 345,505 | | | | 279,658 | | | | 287,590 | | | | 13 | | | | 364,707 | | | | 371,359 | | | | 346,117 | | | | 354,933 | | | | 369,494 | | | | 381,845 | |
| Held-to-maturity investments | | | 5,282 | | | | 5,221 | | | | 5,584 | | | | 5,334 | | | | 5,906 | | | | 5,757 | | | | 14 | | | | 9,946 | | | | 9,189 | | | | 5,437 | | | | 5,493 | | | | 5,282 | | | | 5,221 | |
| Fair value changes of the hedges items in portfolio hedges of interes rate risk | | | | 15 | | | | 40 | | | | 40 | | | | — | | | | — | | | | — | | | | — | |
| Hedging derivatives | | | 3,833 | | | | 3,833 | | | | 1,050 | | | | 1,050 | | | | 1,963 | | | | 1,963 | | | | 15 | | | | 3,563 | | | | 3,563 | | | | 3,595 | | | | 3,595 | | | | 3,833 | | | | 3,833 | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| LIABILITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial assets held for trading | | | 43,009 | | | | 43,009 | | | | 19,273 | | | | 19,273 | | | | 14,923 | | | | 14,923 | | | | 10 | | | | 37,212 | | | | 37,212 | | | | 32,830 | | | | 32,830 | | | | 43,009 | | | | 43,009 | |
| Other financial liabilities designated at fair value through profit or loss | | | 1,033 | | | | 1,033 | | | | 449 | | | | 449 | | | | 582 | | | | 582 | | | | 11 | | | | 1,607 | | | | 1,607 | | | | 1,367 | | | | 1,367 | | | | 1,033 | | | | 1,033 | |
| Financial liabilities at amortised cost | | | 450,605 | | | | 447,722 | | | | 431,856 | | | | 425,265 | | | | 351,405 | | | | 347,557 | | |
| Hedging derivatives | | | 1,226 | | | | 1,226 | | | | 1,807 | | | | 1,807 | | | | 2,280 | | | | 2,280 | | |
| Financial liabilities at amortized cost | | | | 23 | | | | 453,164 | | | | 453,504 | | | | 447,936 | | | | 448,537 | | | | 450,605 | | | | 447,722 | |
| Fair value changes of the hedged items in portfolio hedges of interest rate risk | | | | 15 | | | | (2 | ) | | | (2 | ) | | | — | | | | — | | | | — | | | | — | |
For financial instruments that are not carried atwhose carrying amount is different from its fair value, fair value was calculated in the following manner:
| | |
| | • | The fair value of “Cash and balances with central banks”, which are short term by their very nature, is equivalent to their carrying amount. |
| |
| | • | The fair value of “Held-to-maturity“Held-to-maturity investments” correspondsis equivalent to their quoted price in active markets. |
| |
| | • | The fair values of “Loans and receivables” and “Financial liabilities at amortized cost” waswere estimated by discounting estimated cash flows to present value using the market interest rates prevailing at each year-end. The “Fair value changes of the hedged items in portfolio hedges of interest rate risk” item registers the difference between the carrying amount of the hedged deposits lent, registered under “Loans and Receivables,” and the fair value calculated using internal models and observable variables of market data (see Note 15). |
For financial instruments which are carried atwhose carrying amount corresponds to their fair value, the measurement processes used are set forth below:
| | |
| | • | Level 1:Measurement using market observable quoted prices for the financial instrument in question, secured from independent sources and linked to active markets (Level 1).markets. This level includes listed debt securities, other listed equity instruments, some derivatives in organized markets and mutual funds. |
| |
| | • | Level 2:Measurement using valuation techniques the inputs for which are drawn from market observable data (Level 2). They are measured using discounted cash flow methodology using market observable interest rate and spread curves. This level includes unlisted debt securities, other unlisted equity instruments and OTC derivatives (swaps, forward contracts, credit default swaps (CDS), etc).data. |
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| | |
| | • | Level 3:Measurement using valuation techniques, where some of the inputs are not taken from market observable data (Level 3).data. Model selection and validation is undertaken at the independent business units. As of December 31, 2010, Level 3 financial instruments accounted for 0.28% of financial assets and 0.01% of financial liabilities. |
Model selection and validation is undertaken by control areas outside the business units.
The following table shows the main financial instruments carried at fair value in the accompanying consolidated balance sheets, broken down by the valuation technique level used to determine fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 2010 | | | 2009 | | | 2008 | |
Fair Value by Levels | | Notes | | | Level 1 | | | Level 2 | | | Level 3 | | | Level 1 | | | Level 2 | | | Level 3 | | | Level 1 | | | Level 2 | | | Level 3 | |
| | | Millions of euros | |
| |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial assets held for trading | | | 10 | | | | 28,914 | | | | 33,568 | | | | 802 | | | | 39,608 | | | | 29,236 | | | | 889 | | | | 29,096 | | | | 43,257 | | | | 946 | |
| Debt securities | | | | | | | 22,930 | | | | 921 | | | | 508 | | | | 33,043 | | | | 1,157 | | | | 471 | | | | 22,227 | | | | 4,015 | | | | 314 | |
| Equity instruments | | | | | | | 5,034 | | | | 92 | | | | 134 | | | | 5,504 | | | | 94 | | | | 185 | | | | 5,348 | | | | 89 | | | | 360 | |
| Trading derivatives | | | | | | | 950 | | | | 32,555 | | | | 160 | | | | 1,060 | | | | 27,985 | | | | 233 | | | | 1,521 | | | | 39,153 | | | | 272 | |
Other financial assets designated at fair value through profit or loss | | | 11 | | | | 2,326 | | | | 448 | | | | — | | | | 1,960 | | | | 377 | | | | — | | | | 923 | | | | 831 | | | | — | |
| Debt securities | | | | | | | 624 | | | | 64 | | | | — | | | | 584 | | | | 54 | | | | — | | | | 515 | | | | 1 | | | | — | |
| Equity instruments | | | | | | | 1,702 | | | | 384 | | | | — | | | | 1,376 | | | | 323 | | | | — | | | | 408 | | | | 830 | | | | — | |
Available-for-sale financial assets | | | 12 | | | | 41,500 | | | | 13,789 | | | | 668 | | | | 49,747 | | | | 12,367 | | | | 818 | | | | 24,640 | | | | 19,679 | | | | 2,905 | |
| Debt securities | | | | | | | 37,024 | | | | 13,352 | | | | 499 | | | | 44,387 | | | | 12,146 | | | | 538 | | | | 19,274 | | | | 19,384 | | | | 1,173 | |
| Equity instruments | | | | | | | 4,476 | | | | 437 | | | | 169 | | | | 5,360 | | | | 221 | | | | 280 | | | | 5,366 | | | | 295 | | | | 1,732 | |
Hedging derivatives | | | 15 | | | | 265 | | | | 3,298 | | | | — | | | | 302 | | | | 3,293 | | | | — | | | | 444 | | | | 3,386 | | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial liabilities held for trading | | | 10 | | | | 4,961 | | | | 32,225 | | | | 25 | | | | 4,936 | | | | 27,797 | | | | 96 | | | | 4,517 | | | | 38,408 | | | | 84 | |
| Trading derivatives | | | | | | | 916 | | | | 32,225 | | | | 25 | | | | 1,107 | | | | 27,797 | | | | 96 | | | | 1,817 | | | | 38,408 | | | | 84 | |
| Short positions | | | | | | | 4,046 | | | | — | | | | — | | | | 3,830 | | | | — | | | | — | | | | 2,700 | | | | — | | | | — | |
Other financial liabilities designated at fair value through profit or loss | | | 11 | | | | — | | | | 1,607 | | | | — | | | | — | | | | 1,367 | | | | — | | | | — | | | | 1,033 | | | | — | |
Hedging derivatives | | | 15 | | | | 96 | | | | 1,568 | | | | — | | | | 319 | | | | 989 | | | | — | | | | 564 | | | | 662 | | | | — | |
The heading“Available-for-sale-financial assets” in the accompanying consolidated balance sheet as of December 31, 2010, 2009 and 2008, additionally includes €499 million, €589 million and €556 million, respectively, accounted for at cost as indicated in the Section “Financial instruments at cost”.
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The following table sets forth the main valuation techniques, hypotheses and inputs used in the estimation of fair value in level 3, based of the financial instruments at fair valueassets classified under in level 2 and 3 as of December 31, 2008:
| | | | |
| | | | Assumptions not
|
Financial Instruments
| | Valuation Techniques
| | Obsevable in Market
|
|
Debt securities
| | Time to default model. ABSs were measured by discounted cash flow. Future prepayments are calculated on the basis of conditional prepayment rates supplied by issuers. CDOs are valued by the time-to-default model. The model is based on a statistical Gaussian Copula as a measure of probability of default. The BBVA Group uses a correlation input extrapolated from the correlation of the various tranches of the indices (ITRAXX and CDX) with the underlying portfolio of our CDOs, using the expected loss as the basis of realisation. | | Credit Spread
Correlation of
defaults |
Other equity instruments
| | Present value method | | Credit Spread |
Trading derivatives
| | Present value method and “Libor Market” model for valuation of forward and future rate agreements (FRA). Options are measured using widely accepted valuation models, factoring in implied volatility observations. The models used most often are the Montecarlo, numerical integration and Black-Scholes models for equity and currency options while the models used most extensively to value interest rate options are the Black 76, Hull & White and Black-Derman-Toy models. | | Correlation decay
Vol-of-Vol; Rever
Factor; Volatility-
Spot Correlation |
Short positions
| | Present value method | | |
Hedging derivatives
(assets and liabilities)
| | Present value method. Black 76 for caps, collars and floors. | | |
2010, based on the type of financial instrument as of December 31, 2010:
The following are the principal assumptions used in the valuation of the financial instruments listed in the table above that are measured by means of internal models in which non-observable market data is utilized:
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| | |
| (1) | • | Credit Spread:spread: The spread between the yieldinterest rate of a free riskrisk-free asset (e.g.Treasury(e.g. Treasury securities) and the yieldinterest rate of any other security that areis identical in all respectsevery respect except for quality rating. Spreads are considered as levelLevel 3 inputs to fair value when referredreferring to illiquid issues. Based on spreadspreads of similar entities. |
| |
| (2) | • | Correlation decay: It is the factor The constant rate of decay that allows us to calculate how the correlation evolves between the different pairs of forward rates. |
| |
| (3) | • | Vol-of-Vol: Volatility of implicit volatility of the spot. Itvolatility. This is a statistical measure of the changes of the spot volatility. |
| |
| (4) | • | Reversion Factor: it is the The speed with the spotwhich volatility reverts to its averagenatural value. |
| |
| (5) | • | Volatility —Volatility- Spot Correlation: is a A statistical measure of the linear relationship (correlation) between the spot price of a security and its volatility. |
F-68F-78
The changes in 2010 and 2009 in the balance of Level 3 financial assets and liabilities were as follows:
| | | | | | | | | | | | | | | | | |
| | | 2010 | | | 2009 | |
Financial Assets Level 3 Changes in the Period | | Assets | | | Liabilities | | | Assets | | | Liabilities | |
| | | Millions of euros | |
| |
Balance at the beginning | | | 1,707 | | | | 96 | | | | 3,853 | | | | 84 | |
| Valuation adjustments recognized in the income statement(*) | | | (123 | ) | | | 12 | | | | (146 | ) | | | 6 | |
| Valuation adjustments not recognized in the income statement | | | (18 | ) | | | — | | | | 33 | | | | — | |
| Acquisitions, disposals and liquidations | | | (334 | ) | | �� | (100 | ) | | | (634 | ) | | | (1 | ) |
| Net transfers to Level 3 | | | 236 | | | | — | | | | (1,375 | ) | | | 7 | |
| Exchange differences | | | 1 | | | | 17 | | | | (24 | ) | | | — | |
| | | | | | | | | | | | | | | | | |
Balance at the end | | | 1,469 | | | | 25 | | | | 1,707 | | | | 96 | |
| | | | | | | | | | | | | | | | | |
| | |
| (*) | | Profit or loss that are attributable to gains or losses relating to those assets and liabilities held at the end of the reporting period |
In 2010 the balance Level 3 financial assets did not register any significant changes. Net transfers to Level 3 correspond to debt instruments of credit institutions whose inputs used in the valuation are no longer observable. This increase is compensated by sales, settlements and valuations of equity instruments.
The financial assets transferred between the different levels of valuation during 2010 were at the following table depictsamounts in the main financial instruments carried at fair valueconsolidated balance sheets as of December 31, 2008 and 2007, broken down by the valuation technique level used to determine fair value:2010:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Level 1 | | | Level 2 | | | Level 3 | |
| | | Millions of euros | |
| |
ASSETS |
Financial assets held for trading (Note 10) | | | 29,096 | | | | 43,257 | | | | 946 | | | | 44,880 | | | | 17,247 | | | | 210 | |
| Debt securities (Note 10.2) | | | 22,227 | | | | 4,015 | | | | 314 | | | | 34,265 | | | | 4,031 | | | | 96 | |
| Other equity instruments (Note 10.3) | | | 5,348 | | | | 89 | | | | 360 | | | | 9,149 | | | | 30 | | | | 1 | |
| Trading derivatives (Note 10.4) | | | 1,521 | | | | 39,153 | | | | 272 | | | | 1,466 | | | | 13,185 | | | | 113 | |
Other financial assets designated at fair value through profit or loss (Note 11) | | | 923 | | | | 831 | | | | — | | | | 1,116 | | | | 51 | | | | — | |
| Debt securities | | | 515 | | | | 1 | | | | — | | | | 370 | | | | 51 | | | | — | |
| Other equity instruments | | | 408 | | | | 830 | | | | — | | | | 746 | | | | — | | | | — | |
Available-for-sale financial assets (Note 12) | | | 24,640 | | | | 19,679 | | | | 2,905 | | | | 37,590 | | | | 10,445 | | | | 397 | |
| Debt securities | | | 19,274 | | | | 19,384 | | | | 1,173 | | | | 35,587 | | | | 1,452 | | | | 297 | |
| Other equity instruments | | | 5,366 | | | | 295 | | | | 1,732 | | | | 2,003 | | | | 8,993 | | | | 100 | |
Hedging derivatives (Nota 15) | | | 444 | | | | 3,386 | | | | 2 | | | | 389 | | | | 661 | | | | — | |
| |
LIABILITIES |
| Financial liabilities held for trading (Note 10) | | | 4,517 | | | | 38,408 | | | | 84 | | | | 1,506 | | | | 17,691 | | | | 76 | |
| Trading derivatives (Note 10.4) | | | 1,817 | | | | 38,408 | | | | 84 | | | | — | | | | 17,464 | | | | 76 | |
| Short positions (Note 10.1) | | | 2,700 | | | | — | | | | — | | | | 1,506 | | | | 227 | | | | — | |
Other financial liabilities designated at fair value through profit or loss (Note 11) | | | — | | | | 1,033 | | | | — | | | | 449 | | | | — | | | | — | |
Hedging derivatives (Note 15) | | | 564 | | | | 662 | | | | — | | | | 502 | | | | 1,305 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | From:
| | | Level I | | | Level 2 | | | Level 3 | |
Transfer Between Levels | | To: | | | Level 2 | | | Level 3 | | | Level 1 | | | Level 3 | | | Level 1 | | | Level2 | |
| | | Millions of euros | |
| |
ASSETS — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial assets held for trading | | | | | | | 107 | | | | — | | | | 4 | | | | 118 | | | | — | | | | 55 | |
Available-for-sale financial assets | | | | | | | 263 | | | | 4 | | | | 3 | | | | 209 | | | | — | | | | 53 | |
| Hedging derivatives | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES — | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Certain structured instruments of credit for which previously an active market existed have included in the Level 3 since, as a result of the changes in the economic conditions, they have turned in iliquid, being necessary to change method to determine its fair value. The amount of reclassified assets to Level 3 in 2008 was €2,566 millions.
As of December 31, 2008,2010, the amount of gains no realized recognizedpotential effect in the accompanying consolidated income statement isand consolidated equity on the valuation of Level 3 financial instruments of a creditchange in the main assumptions if other reasonable models, more or less favorable, were used, taking the highest or lowest value of €33 million.the range deemed probable, would have the following effect:
| | | | | | | | | | | | | | | | | |
| | | Potential Impact on Consolidated
| | | | |
| | | Income Statement | | | Potential Impact on Total Equity | |
| | | Most Favorable
| | | Least Favorable
| | | Most Favorable
| | | Least Favorable
| |
Financial Assets Level 3 Sensitivity Analysis | | Hypotheses | | | Hypotheses | | | Hypotheses | | | Hypotheses | |
| | | Millions of euros | |
| |
ASSETS — | | | | | | | | | | | | | | | | |
| Financial assets held for trading | | | 43 | | | | (90 | ) | | | — | | | | — | |
Available-for-sale financial assets | | | — | | | | — | | | | 13 | | | | (4 | ) |
LIABILITIES — | | | | | | | | | | | | | | | | |
| Financial liabilities held for trading | | | 3 | | | | (3 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
Total | | | 46 | | | | (93 | ) | | | 13 | | | | (4 | ) |
| | | | | | | | | | | | | | | | | |
Loans and financial liabilities at fair value through profit or loss
As of December 31, 2010, 2009 and 2008, the above table includes structured credit instruments, which bookthere were no loans or financial liabilities at fair value was €7,548 million, of which 87.48% is guaranteed by insurance agencies and companies. The aforementioned amount wasother than those recognized in the held for trading portfolio (€569 million)headings “Other financial assets designated at fair value through profit and loss” and “Other
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financial liabilities designated at fair value through profit and loss” in the available-for-sale portfolio (€6,979 million).accompanying consolidated balance sheets.
Financial instruments at cost
The Group had equity instruments, derivatives with equity instruments as the underlyingunderlyings and certain discretionary profit sharing arrangements that were recognized at cost in Group’s consolidated balance sheet, as their fair value could not be reliably determined. As of December 31, 2010, 2009 and 2008, the balance of these financial instruments carried at cost at year-end amounted to €499 million, €589 million and €556 million.million, respectively. These instruments are currently classified in theavailable-for-sale financial assets portfolio.
The fair value of these instruments could not be reliably estimated because they correspondit corresponds to investmentsshares in companies that are not quoted on organized marketsexchanges, and any valuation technique employedthat could be used would entail the use of acontain significant number of non-observableunobservable inputs.
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The table below outlines the financial assets and liabilities carried at cost that were sold in 2010, 2009 and 2008:
| | | | | | | | | | | | | |
| | | | | Carrying
| | |
| | | Amount
| | Amount At
| | Gains/
|
| | | of Sale | | Sale Date | | losses |
| | | Millions of euros |
| |
| Sale of instruments at cost | | | 219 | | | | 147 | | | | 72 | |
| | | | | | | | | | | | | |
Sales of Financial Instruments at Cost | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Amount of Sale | | | 51 | | | | 73 | | | | 219 | |
| Carrying Amount at Sale Date | | | 36 | | | | 64 | | | | 147 | |
| | | | | | | | | | | | | |
| Gains/Losses | | | 15 | | | | 9 | | | | 72 | |
| | | | | | | | | | | | | |
Loans and financial liabilities through profit or loss
As of December 31, 2008, 2007 and 2006 there are not registered loans and financial liabilities (different of indicated in the present consolidated statements) as through profit or loss in the accompanying consolidated balance sheets.
| |
| 9. | CASH AND BALANCES WITH CENTRAL BANKS |
The breakdown of the balance of this headingthe headings “Cash and balances with central banks” and “Financial liabilities at amortized cost — Deposits from central banks” in the accompanying consolidated balance sheets as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Cash and Balances with Central Banks | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Cash | | | 3,915 | | | | 2,938 | | | | 2,756 | | | | 4,284 | | | | 4,218 | | | | 3,915 | |
| Balances at the Bank of Spain | | | 2,391 | | | | 11,543 | | | | 2,705 | | |
| Balances at other central banks | | | 8,336 | | | | 8,080 | | | | 7,035 | | |
| | | | | | | | | |
Total gross | | | 14,642 | | | | 22,561 | | | | 12,496 | | |
| | | | | | | | | |
| Balances at the Central Banks | | | | 15,683 | | | | 12,113 | | | | 10,727 | |
| Accrued interests | | | 17 | | | | 20 | | | | 19 | | | | 14 | | | | 13 | | | | 17 | |
| | | | | | | | | | | | | | | |
Total | | | 14,659 | | | | 22,581 | | | | 12,515 | | | | 19,981 | | | | 16,344 | | | | 14,659 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Deposits from Central Banks | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Deposits from Central Banks | | | 10,987 | | | | 21,096 | | | | 16,762 | |
| Accrued interest until expiration | | | 23 | | | | 70 | | | | 82 | |
| | | | | | | | | | | | | |
Total | | | 11,010 | | | | 21,166 | | | | 16,844 | |
| | | | | | | | | | | | | |
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| |
| 10. | FINANCIAL ASSETS AND LIABILITIESLIABILITES HELD FOR TRADING |
10.1. BREAKDOWN OF THE BALANCE
| |
| 10.1. | BREAKDOWN OF THE BALANCE |
The breakdown of the balances of these headings in the accompanying consolidated balance sheets as of December 31, 2008, 20072010, 2009 and 20062008 was as follows:
| | | | | | | | | | | | | | |
Financial Assets and Liabilities Held-for-Trading | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millions of euros | | |
| | |
Assets — | | | | | | | | | | | | | |
ASSETS — | | | | | | | | | | | | | |
| Debt securities | | | 26,556 | | | | 38,392 | | | | 30,426 | | | | 24,358 | | | | 34,672 | | | | 26,556 | |
| Other equity instruments | | | 5,797 | | | | 9,180 | | | | 9,949 | | |
| Equity instruments | | | | 5,260 | | | | 5,783 | | | | 5,797 | |
| Trading derivatives | | | 40,946 | | | | 14,764 | | | | 11,416 | | | | 33,665 | | | | 29,278 | | | | 40,946 | |
| | | | | | | | | | | | | | | |
Total | | | 73,299 | | | | 62,336 | | | | 51,791 | | | | 63,283 | | | | 69,733 | | | | 73,299 | |
| | | | | | | | | | | | | | | |
| | | |
Liabilities — | | | | | | | | | | | | | |
LIABILITIES — | | | | | | | | | | | | | |
| Trading derivatives | | | 40,309 | | | | 17,540 | | | | 13,218 | | | | 33,166 | | | | 29,000 | | | | 40,309 | |
| Short positions | | | 2,700 | | | | 1,733 | | | | 1,705 | | | | 4,046 | | | | 3,830 | | | | 2,700 | |
| | | | | | | | | | | | | | | |
Total | | | 43,009 | | | | 19,273 | | | | 14,923 | | | | 37,212 | | | | 32,830 | | | | 43,009 | |
| | | | | | | | | | | | | | | |
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10.2. DEBT INSTRUMENTS
The breakdown by type of instrument of the balance of this heading in the accompanying consolidated balance sheets as of December 31, 2008, 20072010, 2009 and 20062008 was as follows:
| | | | | | | | | | | | | | |
Debt Securities Held-for-Trading Breakdown by type of instrument | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millions of euros | | |
| | |
| Issued by central banks | | | 378 | | | | 208 | | | | 623 | | |
| Issued by Central Banks | | | | 699 | | | | 326 | | | | 378 | |
| Spanish government bonds | | | 6,453 | | | | 5,043 | | | | 3,345 | | | | 7,954 | | | | 13,463 | | | | 6,453 | |
| Foreign government bonds | | | 13,947 | | | | 22,709 | | | | 16,971 | | | | 11,744 | | | | 17,500 | | | | 13,947 | |
| Issued by Spanish financial institutions | | | 578 | | | | 1,436 | | | | 1,572 | | | | 722 | | | | 431 | | | | 578 | |
| Issued by foreign financial institutions | | | 2,247 | | | | 4,584 | | | | 4,780 | | | | 1,552 | | | | 954 | | | | 2,247 | |
| Other fixed debt securities | | | 2,953 | | | | 4,412 | | | | 3,135 | | |
| Other debt securities | | | | 1,687 | | | | 1,998 | | | | 2,953 | |
| | | | | | | | | | | | | | | |
Total | | | 26,556 | | | | 38,392 | | | | 30,426 | | | | 24,358 | | | | 34,672 | | | | 26,556 | |
| | | | | | | | | | | | | | | |
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10.3. EQUITY INSTRUMENTS
The breakdown of the balance of this heading in the accompanying consolidated balance sheets as of December 31, 2008, 20072010, 2009 and 20062008 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Equity Instruments Held-for-Trading Breakdown by Issuer | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
Shares of Spanish companies | | | 2,332 | | | | 2,996 | | | | 5,498 | | | | | | | | | | | | | |
| Credit institutions | | | 444 | | | | 237 | | | | 672 | | | | 304 | | | | 666 | | | | 444 | |
| Other | | | 1,888 | | | | 2,759 | | | | 4,826 | | |
| Other sectors | | | | 2,738 | | | | 2,602 | | | | 1,888 | |
| | | | | | | | | |
Subtotal | | | | 3,042 | | | | 3,268 | | | | 2,332 | |
| | | | | | | | | |
Shares of foreign companies | | | 3,465 | | | | 6,184 | | | | 4,451 | | | | | | | | | | | | | |
| Credit institutions | | | 205 | | | | 602 | | | | 526 | | | | 167 | | | | 156 | | | | 205 | |
| Other | | | 3,260 | | | | 5,582 | | | | 3,925 | | |
| Other sectors | | | | 2,051 | | | | 2,359 | | | | 3,260 | |
| | | | | | | | | |
Subtotal | | | | 2,218 | | | | 2,515 | | | | 3,465 | |
| | | | | | | | | |
Total | | | 5,797 | | | | 9,180 | | | | 9,949 | | | | 5,260 | | | | 5,783 | | | | 5,797 | |
| | | | | | | | | |
10.4. TRADING DERIVATIVES
| |
| 10.4. | TRADING DERIVATIVES |
The trading derivatives portfolio arises from the Group’s need to manage the risks incurred by it in the course of its normal business activity, mostly for the positions held with customers. TradingAs of December 31, 2010, 2009 and 2008, trading derivatives arewere principally contracted in non organizednon-organized markets, with non-resident credit entities as counterpartthe main counterparties, and related to foreign currencies risk,exchange and interest rate risk and equity securities.shares.
F-71F-82
The detail,Below is a breakdown by transaction type and market, of the balancesfair value of this headingoutstanding financial trading derivatives recognized in the accompanying consolidated balance sheets as of December 31, 2008, 2007 and 2006 was as follows shownheld by the main companies in the Group, divided into organized markets and non organizednon-organized (Over The Counter-“OTC”) markets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Interest
| | | Equity
| | | | | | | | | | | | | |
| | | Currency
| | | Rate
| | | Price
| | | Commodities
| | | Credit
| | | Other
| | | | |
2008 | | Risk | | | Risk | | | Risk | | | Risk | | | Risk | | | Risks | | | Total | |
| | | Millions of euros | |
| |
Organised markets | | | — | | | | 5 | | | | (228 | ) | | | — | | | | 2 | | | | — | | | | (221 | ) |
| Financial futures | | | — | | | | — | | | | 4 | | | | — | | | | — | | | | — | | | | 4 | |
| Options | | | — | | | | 5 | | | | (232 | ) | | | — | | | | 2 | | | | — | | | | (225 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
OTC markets | | | (1,491 | ) | | | 1,288 | | | | 674 | | | | 92 | | | | 296 | | | | — | | | | 859 | |
Credit institutions | | | (1,676 | ) | | | (1,652 | ) | | | (165 | ) | | | 15 | | | | (196 | ) | | | — | | | | (3,674 | ) |
| Forward transactions | | | (978 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (978 | ) |
| Future rate agreements (FRAs) | | | — | | | | 68 | | | | — | | | | — | | | | — | | | | — | | | | 68 | |
| Swaps | | | (672 | ) | | | (1,580 | ) | | | 154 | | | | 15 | | | | (196 | ) | | | — | | | | (2,279 | ) |
| Options | | | (26 | ) | | | (140 | ) | | | (319 | ) | | | — | | | | — | | | | — | | | | (485 | ) |
Other financial Institutions | | | (112 | ) | | | 1,335 | | | | (151 | ) | | | 27 | | | | 582 | | | | — | | | | 1,681 | |
| Forward transactions | | | (110 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (110 | ) |
| Future rate agreements (FRAs) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Swaps | | | — | | | | 1,278 | | | | 24 | | | | 12 | | | | 582 | | | | — | | | | 1,896 | |
| Options | | | (2 | ) | | | 57 | | | | (175 | ) | | | 15 | | | | — | | | | — | | | | (105 | ) |
Other sectors | | | 297 | | | | 1,605 | | | | 990 | | | | 50 | | | | (90 | ) | | | — | | | | 2,852 | |
| Forward transactions | | | 378 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 378 | |
| Future rate agreements (FRAs) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Swaps | | | 10 | | | | 1,482 | | | | 49 | | | | 62 | | | | (90 | ) | | | — | | | | 1,513 | |
| Options | | | (91 | ) | | | 119 | | | | 962 | | | | (12 | ) | | | — | | | | — | | | | 978 | |
| Other products | | | — | | | | 4 | | | | (21 | ) | | | — | | | | — | | | | — | | | | (17 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | (1,491 | ) | | | 1,288 | | | | 446 | | | | 92 | | | | 296 | | | | — | | | | 638 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Asset Trading Derivatives | | | 10,940 | | | | 22,574 | | | | 5,081 | | | | 174 | | | | 2,174 | | | | 2 | | | | 40,945 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Liability Trading Derivatives | | | (12,431 | ) | | | (21,281 | ) | | | (4,636 | ) | | | (81 | ) | | | (1,878 | ) | | | (2 | ) | | | (40,309 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding Financial Trading Derivatives. Breakdown by Markets and Transaction Types
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Equity
| | | Precious
| | | | | | | | | | | | | |
| | | Currency
| | | Interest
| | | Price
| | | Metals
| | | Commodities
| | | Credit
| | | Other
| | | | |
2010 | | Risk | | | Rate Risk | | | Risk | | | Risk | | | Risk | | | Risk | | | Risks | | | Total | |
| | | Millions of euros | |
| |
Organized markets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial futures | | | — | | | | 2 | | | | 6 | | | | — | | | | — | | | | — | | | | — | | | | 8 | |
| Options | | | (3 | ) | | | — | | | | (348 | ) | | | (11 | ) | | | (7 | ) | | | — | | | | — | | | | (369 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | (3 | ) | | | 2 | | | | (342 | ) | | | (11 | ) | | | (7 | ) | | | — | | | | — | | | | (361 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC markets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Credit institutions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forward transactions | | | (96 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (96 | ) |
| Future rate agreements (FRAs) | | | — | | | | 15 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15 | |
| Swaps | | | (541 | ) | | | (1,534 | ) | | | (4 | ) | | | 2 | | | | 28 | | | | — | | | | — | | | | (2,049 | ) |
| Options | | | (97 | ) | | | (786 | ) | | | 45 | | | | — | | | | — | | | | — | | | | 1 | | | | (837 | ) |
| Other products | | | (1 | ) | | | 11 | | | | — | | | | — | | | | — | | | | (175 | ) | | | — | | | | (165 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | (735 | ) | | | (2,294 | ) | | | 41 | | | | 2 | | | | 28 | | | | (175 | ) | | | 1 | | | | (3,132 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other financial institutions Forward transactions | | | 54 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 54 | |
| Future rate agreements (FRAs) | | | — | | | | 4 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4 | |
| Swaps | | | — | | | | 1,174 | | | | 31 | | | | — | | | | (5 | ) | | | — | | | | — | | | | 1,200 | |
| Options | | | (12 | ) | | | (56 | ) | | | (144 | ) | | | — | | | | — | | | | — | | | | — | | | | (212 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | 319 | | | | — | | | | 319 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 42 | | | | 1,122 | | | | (113 | ) | | | — | | | | (5 | ) | | | 319 | | | | — | | | | 1,365 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other sectors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forward transactions | | | 385 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 385 | |
| Future rate agreements (FRAs) | | | — | | | | 22 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 22 | |
| Swaps | | | 18 | | | | 1,628 | | | | 145 | | | | — | | | | (15 | ) | | | — | | | | — | | | | 1,776 | |
| Options | | | (41 | ) | | | 81 | | | | 395 | | | | — | | | | — | | | | — | | | | — | | | | 435 | |
| Other products | | | — | | | | 14 | | | | — | | | | — | | | | — | | | | (5 | ) | | | — | | | | 9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 362 | | | | 1,745 | | | | 540 | | | | — | | | | (15 | ) | | | (5 | ) | | | — | | | | 2,627 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | (331 | ) | | | 573 | | | | 468 | | | | 2 | | | | 8 | | | | 139 | | | | 1 | | | | 860 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | (334 | ) | | | 575 | | | | 126 | | | | (9 | ) | | | 1 | | | | 139 | | | | 1 | | | | 499 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Asset Trading Derivatives | | | 6,007 | | | | 22,978 | | | | 3,343 | | | | 14 | | | | 186 | | | | 1,125 | | | | 12 | | | | 33,665 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Liability Trading Derivatives | | | (6,341 | ) | | | (22,404 | ) | | | (3,216 | ) | | | (23 | ) | | | (185 | ) | | | (986 | ) | | | (11 | ) | | | (33,166 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-72F-83
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Interest
| | | Equity
| | | | | | | | | | | | | |
| | | Currency
| | | Rate
| | | Price
| | | Commodities
| | | Credit
| | | Other
| | | | |
2007 | | Risk | | | Risk | | | Risk | | | Risk | | | Risk | | | Risks | | | Total | |
| | | Millions of euros | |
| |
Organised markets | | | (1 | ) | | | 1 | | | | 214 | | | | 1 | | | | — | | | | — | | | | 215 | |
| Financial futures | | | — | | | | — | | | | 2 | | | | — | | | | — | | | | — | | | | 2 | |
| Options | | | (1 | ) | | | — | | | | 212 | | | | 1 | | | | — | | | | — | | | | 212 | |
| Other products | | | — | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 1 | |
OTC markets | | | (1,762 | ) | | | 764 | | | | (2,063 | ) | | | 2 | | | | 50 | | | | 18 | | | | (2,997 | ) |
Credit institutions | | | (1,672 | ) | | | (417 | ) | | | (1,140 | ) | | | 2 | | | | 115 | | | | 15 | | | | (3,103 | ) |
| Forward transactions | | | (1,379 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,379 | ) |
| Future rate agreements (FRAs) | | | — | | | | 70 | | | | — | | | | — | | | | — | | | | — | | | | 70 | |
| Swaps | | | (343 | ) | | | (328 | ) | | | (287 | ) | | | 2 | | | | — | | | | — | | | | (956 | ) |
| Options | | | 50 | | | | (149 | ) | | | (853 | ) | | | — | | | | — | | | | 9 | | | | (943 | ) |
| Other products | | | — | | | | (10 | ) | | | — | | | | — | | | | 115 | | | | — | | | | 105 | |
Other financial Institutions | | | (160 | ) | | | 1,716 | | | | (840 | ) | | | — | | | | 91 | | | | — | | | | 807 | |
| Forward transactions | | | (161 | ) | | | — | | | | (2 | ) | | | — | | | | — | | | | — | | | | (163 | ) |
| Future rate agreements (FRAs) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Swaps | | | — | | | | 1,695 | | | | 22 | | | | — | | | | — | | | | — | | | | 1,717 | |
| Options | | | 1 | | | | 21 | | | | (860 | ) | | | — | | | | — | | | | — | | | | (838 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | 91 | | | | — | | | | 91 | |
Other sectors | | | 70 | | | | (535 | ) | | | (83 | ) | | | — | | | | (156 | ) | | | 3 | | | | (701 | ) |
| Forward transactions | | | 27 | | | | — | | | | (1 | ) | | | — | | | | — | | | | — | | | | 26 | |
| Future rate agreements (FRAs) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Swaps | | | (1 | ) | | | (646 | ) | | | (251 | ) | | | — | | | | — | | | | — | | | | (898 | ) |
| Options | | | 44 | | | | 111 | | | | 169 | | | | — | | | | — | | | | 3 | | | | 327 | |
| Other products | | | — | | | | — | | | | — | | | | — | | | | (156 | ) | | | — | | | | (156 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | (1,763 | ) | | | 765 | | | | (1,849 | ) | | | 3 | | | | 50 | | | | 18 | | | | (2,782 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Asset Trading Derivatives | | | 2,038 | | | | 9,866 | | | | 2,497 | | | | 21 | | | | 307 | | | | 35 | | | | 14,764 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Liability Trading Derivatives | | | (3,800 | ) | | | (9,101 | ) | | | (4,345 | ) | | | (18 | ) | | | (258 | ) | | | (23 | ) | | | (17,540 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding Financial Trading Derivatives. Breakdown by Markets and Transaction Types
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Equity
| | | Precious
| | | | | | | | | | | | | |
| | | Currency
| | | Interest
| | | Price
| | | Metals
| | | Commodities
| | | Credit
| | | Other
| | | | |
2009 | | Risk | | | Rate Risk | | | Risk | | | Risk | | | Risk | | | Risk | | | Risks | | | Total | |
| | | Millions of euros | |
| |
Organized markets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Financial futures | | | — | | | | 2 | | | | 7 | | | | — | | | | — | | | | — | | | | — | | | | 9 | |
| Options | | | — | | | | — | | | | (143 | ) | | | — | | | | — | | | | — | | | | — | | | | (143 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | — | | | | 2 | | | | (136 | ) | | | — | | | | — | | | | — | | | | — | | | | (134 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC markets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Credit institutions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forward transactions | | | 251 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 251 | |
| Future rate agreements (FRAs) | | | — | | | | 30 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30 | |
| Swaps | | | (568 | ) | | | (1,559 | ) | | | (126 | ) | | | 2 | | | | 18 | | | | — | | | | — | | | | (2,233 | ) |
| Options | | | (3 | ) | | | (243 | ) | | | (536 | ) | | | — | | | | (6 | ) | | | — | | | | 3 | | | | (785 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | (66 | ) | | | — | | | | (66 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | (320 | ) | | | (1,772 | ) | | | (662 | ) | | | 2 | | | | 12 | | | | (66 | ) | | | 3 | | | | (2,803 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other financial institutions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forward transactions | | | 28 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 28 | |
| Future rate agreements (FRAs) | | | — | | | | (2 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2 | ) |
| Swaps | | | — | | | | 932 | | | | 29 | | | | — | | | | 1 | | | | — | | | | — | | | | 962 | |
| Options | | | (1 | ) | | | (55 | ) | | | (341 | ) | | | — | | | | — | | | | — | | | | — | | | | (397 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | 345 | | | | — | | | | 345 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 27 | | | | 875 | | | | (312 | ) | | | — | | | | 1 | | | | 345 | | | | — | | | | 936 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other sectors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forward transactions | | | 351 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 351 | |
| Future rate agreements (FRAs) | | | — | | | | (1 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) |
| Swaps | | | 7 | | | | 1,383 | | | | 44 | | | | — | | | | (9 | ) | | | — | | | | — | | | | 1,425 | |
| Options | | | 45 | | | | 155 | | | | 336 | | | | — | | | | 3 | | | | — | | | | 1 | | | | 540 | |
| Other products | | | — | | | | 18 | | | | (3 | ) | | | — | | | | — | | | | (51 | ) | | | — | | | | (36 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 403 | | | | 1,555 | | | | 377 | | | | — | | | | (6 | ) | | | (51 | ) | | | 1 | | | | 2,279 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 110 | | | | 658 | | | | (597 | ) | | | 2 | | | | 7 | | | | 228 | | | | 4 | | | | 412 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 110 | | | | 660 | | | | (733 | ) | | | 2 | | | | 7 | | | | 228 | | | | 4 | | | | 278 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Asset Trading Derivatives | | | 5,953 | | | | 19,398 | | | | 2,836 | | | | 2 | | | | 59 | | | | 1,018 | | | | 12 | | | | 29,278 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Liability Trading Derivatives | | | (5,843 | ) | | | (18,738 | ) | | | (3,569 | ) | | | — | | | | (52 | ) | | | (790 | ) | | | (8 | ) | | | (29,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-73
F-84
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Interest
| | | Equity
| | | | | | | | | | | | | |
| | | Currency
| | | Rate
| | | Price
| | | Commodities
| | | Credit
| | | Other
| | | | |
2006 | | Risk | | | Risk | | | Risk | | | Risk | | | Risk | | | Risks | | | Total | |
| | | Millions of euros | |
| |
Organised markets | | | (747 | ) | | | — | | | | 270 | | | | 2 | | | | — | | | | 1 | | | | (474 | ) |
| Financial futures | | | 13 | | | | — | | | | 1 | | | | — | | | | — | | | | — | | | | 14 | |
| Options | | | (760 | ) | | | — | | | | 269 | | | | 2 | | | | — | | | | 1 | | | | (488 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
OTC markets | | | (240 | ) | | | 587 | | | | (1,654 | ) | | | 5 | | | | (4 | ) | | | (22 | ) | | | (1,328 | ) |
Credit institutions | | | (267 | ) | | | (297 | ) | | | (637 | ) | | | 1 | | | | (9 | ) | | | (22 | ) | | | (1,231 | ) |
| Forward transactions | | | 8 | | | | — | | | | — | | | | 1 | | | | — | | | | — | | | | 9 | |
| Future rate agreements (FRAs) | | | — | | | | 44 | | | | — | | | | — | | | | — | | | | — | | | | 44 | |
| Swaps | | | (269 | ) | | | (177 | ) | | | (24 | ) | | | — | | | | — | | | | — | | | | (470 | ) |
| Options | | | (6 | ) | | | (164 | ) | | | (613 | ) | | | — | | | | (9 | ) | | | (22 | ) | | | (814 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Other financial Institutions | | | (5 | ) | | | 953 | | | | (570 | ) | | | — | | | | 3 | | | | — | | | | 381 | |
| Forward transactions | | | (3 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (3 | ) |
| Future rate agreements (FRAs) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Swaps | | | — | | | | 1,045 | | | | 7 | | | | — | | | | — | | | | — | | | | 1,052 | |
| Options | | | (2 | ) | | | (92 | ) | | | (577 | ) | | | — | | | | 3 | | | | — | | | | (668 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Other sectors | | | 32 | | | | (69 | ) | | | (447 | ) | | | 4 | | | | 2 | | | | — | | | | (478 | ) |
| Forward transactions | | | 2 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2 | |
| Future rate agreements (FRAs) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Swaps | | | — | | | | (346 | ) | | | (396 | ) | | | 4 | | | | — | | | | — | | | | (738 | ) |
| Options | | | 30 | | | | 277 | | | | (51 | ) | | | — | | | | 2 | | | | — | | | | 258 | |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | (987 | ) | | | 587 | | | | (1,384 | ) | | | 7 | | | | (4 | ) | | | (21 | ) | | | (1,802 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Asset Trading Derivatives | | | 469 | | | | 8,518 | | | | 2,262 | | | | 35 | | | | 81 | | | | 51 | | | | 11,416 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Liability Trading Derivatives | | | (1,456 | ) | | | (7,931 | ) | | | (3,646 | ) | | | (28 | ) | | | (85 | ) | | | (72 | ) | | | (13,218 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding Financial Trading Derivatives. Breakdown by Markets and Transaction Types
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Equity
| | | Precious
| | | | | | | | | | | | | |
| | | Currency
| | | Interest
| | | Price
| | | Metals
| | | Commodities
| | | Credit
| | | Other
| | | | |
2008 | | Risk | | | Rate Risk | | | Risk | | | Risk | | | Risk | | | Risk | | | Risks | | | Total | |
| | | Millions of euros | |
| |
Organized markets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial futures | | | — | | | | — | | | | 4 | | | | — | | | | — | | | | — | | | | — | | | | 4 | |
| Options | | | — | | | | 5 | | | | (232 | ) | | | — | | | | — | | | | 2 | | | | — | | | | (225 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | — | | | | 5 | | | | (228 | ) | | | — | | | | — | | | | 2 | | | | — | | | | (221 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC markets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Credit institutions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forward transactions | | | (978 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (978 | ) |
| Future rate agreements (FRAs) | | | — | | | | 68 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 68 | |
| Swaps | | | (672 | ) | | | (1,580 | ) | | | 154 | | | | — | | | | 15 | | | | (196 | ) | | | — | | | | (2,279 | ) |
| Options | | | (26 | ) | | | (140 | ) | | | (319 | ) | | | — | | | | — | | | | — | | | | — | | | | (485 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | (1,676 | ) | | | (1,652 | ) | | | (165 | ) | | | — | | | | 15 | | | | (196 | ) | | | — | | | | (3,674 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other financial institutions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forward transactions | | | (110 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (110 | ) |
| Future rate agreements (FRAs) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Swaps | | | — | | | | 1,278 | | | | 24 | | | | — | | | | 12 | | | | 580 | | | | — | | | | 1,894 | |
| Options | | | (2 | ) | | | 57 | | | | (175 | ) | | | — | | | | 15 | | | | — | | | | — | | | | (105 | ) |
| Other products | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | (112 | ) | | | 1,335 | | | | (151 | ) | | | — | | | | 27 | | | | 580 | | | | — | | | | 1,679 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other sectors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forward transactions | | | 378 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 378 | |
| Future rate agreements (FRAs) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Swaps | | | 10 | | | | 1,482 | | | | 49 | | | | — | | | | 63 | | | | (90 | ) | | | — | | | | 1,514 | |
| Options | | | (91 | ) | | | 119 | | | | 962 | | | | — | | | | (12 | ) | | | — | | | | — | | | | 978 | |
| Other products | | | — | | | | 4 | | | | (21 | ) | | | — | | | | — | | | | — | | | | — | | | | (17 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 297 | | | | 1,605 | | | | 990 | | | | — | | | | 51 | | | | (90 | ) | | | — | | | | 2,853 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | (1,491 | ) | | | 1,288 | | | | 674 | | | | — | | | | 93 | | | | 294 | | | | — | | | | 858 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | (1,491 | ) | | | 1,293 | | | | 446 | | | | — | | | | 93 | | | | 296 | | | | — | | | | 637 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Asset Trading Derivatives | | | 10,940 | | | | 22,574 | | | | 5,082 | | | | — | | | | 174 | | | | 2,174 | | | | 2 | | | | 40,946 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: Liability Trading Derivatives | | | (12,431 | ) | | | (21,281 | ) | | | (4,636 | ) | | | — | | | | (81 | ) | | | (1,878 | ) | | | (2 | ) | | | (40,309 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-74
F-85
| |
| 11. | OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS |
The detailbreakdown of the balancebalances of this headingthese headings in the accompanying consolidated balance sheets as of December 31, 2008, 20072010, 2009 and 2006, based on the nature of the related transactions,2008 was as follows:
| | | | | | | | | | | | | | |
Other Financial Assets Designated at Fair Value through Profit or
| | | | | | | | |
Loss. Breakdown by Type of Instruments | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millions of euros | | |
| | |
Assets | | | | | | | | | | | | | |
Assets — | | | | | | | | | | | | | |
Debt securities | | | 516 | | | | 421 | | | | 56 | | | | 688 | | | | 639 | | | | 516 | |
| Unit-Linked products | | | 516 | | | | 421 | | | | 56 | | |
| Unit-linked products | | | | 103 | | | | 95 | | | | 516 | |
| Other securities | | | | 585 | | | | 544 | | | | — | |
Equity instruments | | | 1,238 | | | | 746 | | | | 921 | | | | 2,086 | | | | 1,698 | | | | 1,238 | |
| Unit-Linked products | | | 921 | | | | 329 | | | | 472 | | |
| Unit-linked products | | | | 1,467 | | | | 1,242 | | | | 921 | |
| Other securities | | | 317 | | | | 417 | | | | 449 | | | | 619 | | | | 456 | | | | 317 | |
| | | | | | | | | | | | | | | |
Total | | | 1,754 | | | | 1,167 | | | | 977 | | | | 2,774 | | | | 2,337 | | | | 1,754 | |
| | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | |
Liabilities — | | | | | | | | | | | | | |
Other financial liabilities | | | 1,033 | | | | 449 | | | | 582 | | | | 1,607 | | | | 1,367 | | | | 1,033 | |
| Unit-Linked products | | | 1,033 | | | | 449 | | | | 582 | | |
| Unit-linked products | | | | 1,607 | | | | 1,367 | | | | 1,033 | |
| | | | | | | | | | | | | | | |
Total | | | 1,033 | | | | 449 | | | | 582 | | | | 1,607 | | | | 1,367 | | | | 1,033 | |
| | | | | | | | | | | | | | | |
| |
| 12. | AVAILABLE-FOR-SALEAVAILABLE FOR SALE FINANCIAL ASSETS |
12.1. BREAKDOWN OF THE BALANCE
| |
| 12.1. | BREAKDOWN OF THE BALANCE |
The detail of the balance of this heading in the accompanying consolidated balance sheets as of December 31, 2010, 2009 and 2008, 2007 and 2006, based onbroken down by the nature of the related transactions,financial instruments, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Available-for-Sale Financial Assets | | | 2010 | | 2009 | | 2008 | | | |
| | | Millions of euros | | | Millions of euros | |
| |
| Debt securities | | | 39,831 | | | | 37,336 | | | | 32,218 | | | | 50,875 | | | | 57,071 | | | | 39,831 | | | | | |
| Other equity instruments | | | 7,949 | | | | 11,096 | | | | 10,037 | | |
| Equity instruments | | | | 5,581 | | | | 6,450 | | | | 7,949 | | | | | |
| | | | | | | | | | | | | | | |
Total | | | 47,780 | | | | 48,432 | | | | 42,255 | | | | 56,456 | | | | 63,521 | | | | 47,780 | | | | | |
| | | | | | | | | | | | | | | |
F-75F-86
12.212.2. DEBT SECURITIES
The detail of the balance of the heading “Debt securities” as of December 31, 2010, 2009 and 2008, 2007 and 2006, based onbroken down by the nature of the related transactions,financial instruments, was as follows:
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2008 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic | | | 229 | | | | (62 | ) | | | 11,910 | |
| Spanish Government and other Spanish Government securities | | | 138 | | | | — | | | | 6,371 | |
| Other debt securities | | | 91 | | | | (62 | ) | | | 5,539 | |
International — | | | 586 | | | | (774 | ) | | | 27,920 | |
United States - | | | 155 | | | | (286 | ) | | | 10,442 | |
| Government securities | | | 15 | | | | (1 | ) | | | 840 | |
| US Treasury and other US Government agencies | | | — | | | | — | | | | 444 | |
| States and political subdivisions | | | 15 | | | | (1 | ) | | | 396 | |
| Other securities | | | 140 | | | | (285 | ) | | | 9,602 | |
Other Countries | | | 431 | | | | (488 | ) | | | 17,478 | |
| Securities of other foreign Governments | | | 261 | | | | (232 | ) | | | 9,653 | |
| Other debt securities | | | 170 | | | | (256 | ) | | | 7,825 | |
| | | | | | | | | | | | | |
Total net | | | 815 | | | | (836 | ) | | | 39,830 | |
| | | | | | | | | | | | | |
Debt SecuritiesAvailable-for-Sale by Type of Financial Instrument
| | | | | | | | | | | | | |
2010 | | Unrealized Gains | | | Unrealized Losses | | | Fair Value | |
| | | Millions of euros | |
| |
Domestic Debt Securities | | | | | | | | | | | | |
| Spanish Government and other government agency debt securities | | | 58 | | | | (1,264 | ) | | | 15,337 | |
| Other debt securities | | | 49 | | | | (206 | ) | | | 5,229 | |
| Issue by Central Banks | | | — | | | | — | | | | — | |
| Issue by credit institutions | | | 24 | | | | (156 | ) | | | 4,090 | |
| Issue by other issuers | | | 25 | | | | (50 | ) | | | 1,139 | |
| | | | | | | | | | | | | |
Subtotal | | | 107 | | | | (1,470 | ) | | | 20,566 | |
| | | | | | | | | | | | | |
Foreign Debt Securities | | | | | | | | | | | | |
Mexico | | | 470 | | | | (17 | ) | | | 10,106 | |
| Mexican Government and other government agency debt securities | | | 441 | | | | (14 | ) | | | 9,417 | |
| Other debt securities | | | 29 | | | | (3 | ) | | | 689 | |
| Issue by Central Banks | | | — | | | | — | | | | — | |
| Issue by credit institutions | | | 28 | | | | (2 | ) | | | 579 | |
| Issue by other issuers | | | 1 | | | | (1 | ) | | | 110 | |
The United States | | | 216 | | | | (234 | ) | | | 6,832 | |
| Government securities | | | 13 | | | | (9 | ) | | | 771 | |
| US Treasury and other US Government agencies | | | 6 | | | | (8 | ) | | | 578 | |
| States and political subdivisions | | | 7 | | | | (1 | ) | | | 193 | |
| Other debt securities | | | 203 | | | | (225 | ) | | | 6,061 | |
| Issue by Central Banks | | | — | | | | — | | | | — | |
| Issue by credit institutions | | | 83 | | | | (191 | ) | | | 2,873 | |
| Issue by other issuers | | | 120 | | | | (34 | ) | | | 3,188 | |
Other countries | | | 394 | | | | (629 | ) | | | 12,930 | |
| Other foreign governments and other government agency debt securities | | | 169 | | | | (371 | ) | | | 6,100 | |
| Other debt securities | | | 225 | | | | (258 | ) | | | 6,830 | |
| Issue by Central Banks | | | 1 | | | | — | | | | 945 | |
| Issue by credit institutions | | | 177 | | | | (188 | ) | | | 4,420 | |
| Issue by other issuers | | | 47 | | | | (70 | ) | | | 1,465 | |
| | | | | | | | | | | | | |
Subtotal | | | 1,080 | | | | (880 | ) | | | 30,309 | |
| | | | | | | | | | | | | |
Total | | | 1,187 | | | | (2,350 | ) | | | 50,875 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2007 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic | | | 150 | | | | (77 | ) | | | 10,161 | |
| Spanish Government and other Spanish Government securities | | | 79 | | | | (31 | ) | | | 5,274 | |
| Other debt securities | | | 71 | | | | (46 | ) | | | 4,887 | |
International — | | | 737 | | | | (287 | ) | | | 27,175 | |
United States - | | | 50 | | | | (45 | ) | | | 9,056 | |
| Government securities | | | 6 | | | | (2 | ) | | | 579 | |
| US Treasury and other US Government agencies | | | 1 | | | | — | | | | 61 | |
| States and political subdivisions | | | 5 | | | | (2 | ) | | | 518 | |
| Other securities | | | 44 | | | | (43 | ) | | | 8,477 | |
Other Countries | | | 687 | | | | (242 | ) | | | 18,119 | |
| Securities of other foreign Governments | | | 562 | | | | (128 | ) | | | 11,278 | |
| Other debt securities | | | 125 | | | | (114 | ) | | | 6,841 | |
| | | | | | | | | | | | | |
Total net | | | 887 | | | | (364 | ) | | | 37,336 | |
| | | | | | | | | | | | | |
The decrease in the balance of the heading “Financial assets held for trading — Debt securities” in 2010 is due, primarily, to the sale of securities and the changes in the valuations of these portfolios.
F-76F-87
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2006 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic | | | 291 | | | | (18 | ) | | | 9,494 | |
| Spanish Government and other Spanish Government securities | | | 279 | | | | (16 | ) | | | 6,859 | |
| Other debt securities | | | 12 | | | | (2 | ) | | | 2,635 | |
International — | | | 852 | | | | (130 | ) | | | 22,724 | |
United States - | | | 13 | | | | (21 | ) | | | 5,506 | |
| Government securities | | | 3 | | | | (2 | ) | | | 653 | |
| US Treasury and other US Government agencies | | | 3 | | | | (2 | ) | | | 343 | |
| States and political subdivisions | | | — | | | | — | | | | 310 | |
| Other securities | | | 10 | | | | (19 | ) | | | 4,853 | |
Other Countries | | | 839 | | | | (109 | ) | | | 17,218 | |
| Securities of other foreign Governments | | | 588 | | | | (60 | ) | | | 10,386 | |
| Other debt securities | | | 251 | | | | (49 | ) | | | 6,832 | |
| | | | | | | | | | | | | |
Total net | | | 1,143 | | | | (148 | ) | | | 32,218 | |
| | | | | | | | | | | | | |
Debt Securities. Available-for-Sale by Type of Financial Instrument
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2009 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic Debt Securities | | | | | | | | | | | | |
| Spanish Government and other government agency debt securities | | | 309 | | | | (70 | ) | | | 18,551 | |
| Other debt securities | | | 178 | | | | (125 | ) | | | 6,318 | |
| | | | | | | | | | | | | |
Subtotal | | | 487 | | | | (195 | ) | | | 24,869 | |
| | | | | | | | | | | | | |
Foreign Debt Securities | | | | | | | | | | | | |
| The United States | | | 174 | | | | (173 | ) | | | 6,805 | |
| Government securities | | | 11 | | | | (2 | ) | | | 637 | |
| US Treasury and other US Government agencies | | | 4 | | | | (2 | ) | | | 416 | |
| States and political subdivisions | | | 7 | | | | — | | | | 221 | |
| Other debt securities | | | 163 | | | | (171 | ) | | | 6,168 | |
| Other countries | | | 893 | | | | (560 | ) | | | 25,397 | |
| Other foreign governments and other government agency debt securities | | | 697 | | | | (392 | ) | | | 17,363 | |
| Other debt securities | | | 196 | | | | (168 | ) | | | 8,034 | |
| | | | | | | | | | | | | |
Subtotal | | | 1,067 | | | | (733 | ) | | | 32,202 | |
| | | | | | | | | | | | | |
Total | | | 1,554 | | | | (928 | ) | | | 57,071 | |
| | | | | | | | | | | | | |
Debt Securities. Available-for-Sale by Type of Financial Instrument
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2008 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic Debt Securities | | | | | | | | | | | | |
| Spanish Government and other government agency debt securities | | | 138 | | | | — | | | | 6,371 | |
| Other debt securities | | | 91 | | | | (62 | ) | | | 5,539 | |
| | | | | | | | | | | | | |
Subtotal | | | 229 | | | | (62 | ) | | | 11,910 | |
| | | | | | | | | | | | | |
Foreign Debt Securities | | | | | | | | | | | | |
| The United States | | | 155 | | | | (286 | ) | | | 10,442 | |
| Government securities | | | 15 | | | | (1 | ) | | | 840 | |
| US Treasury and other US Government agencies | | | — | | | | — | | | | 444 | |
| States and political subdivisions | | | 15 | | | | (1 | ) | | | 396 | |
| Other debt securities | | | 140 | | | | (285 | ) | | | 9,602 | |
| Other countries | | | 431 | | | | (488 | ) | | | 17,478 | |
| Other foreign governments and other government agency debt securities | | | 261 | | | | (232 | ) | | | 9,653 | |
| Other debt securities | | | 170 | | | | (256 | ) | | | 7,825 | |
| | | | | | | | | | | | | |
Subtotal | | | 586 | | | | (774 | ) | | | 27,920 | |
| | | | | | | | | | | | | |
Total | | | 815 | | | | (836 | ) | | | 39,830 | |
| | | | | | | | | | | | | |
F-88
As of December 31, 2010, the credit ratings of the issuers of debt securities in theavailable-for-sale portfolio were as follows:
| | | | | | | | | |
Available-for-Sale Financial Assets Debt Secutities by Rating | | Fair Value | | | % | |
| | | Millions of euros | |
| |
| AAA | | | 11,638 | | | | 22.9 | % |
| AA+ | | | 12,210 | | | | 24.0 | % |
| AA | | | 5,022 | | | | 9.9 | % |
| AA- | | | 2,523 | | | | 5.0 | % |
| A+ | | | 1,651 | | | | 3.2 | % |
| A | | | 8,661 | | | | 17.0 | % |
| A− | | | 574 | | | | 1.1 | % |
| With rating BBB+ or below | | | 3,761 | | | | 7.4 | % |
| Without rating | | | 4,835 | | | | 9.5 | % |
| | | | | | | | | |
Total | | | 50,875 | | | | 100.0 | % |
| | | | | | | | | |
12.3 OTHER12.3. EQUITY INSTRUMENTS
The breakdown of the balance of the heading “Other equity“Equity instruments”, broken down by the nature of the operationsfinancial instruments as of December 31, 2008, 20072010, 2009 and 20062008 was as follows:
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2008 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Other equity instruments listed | | | 1,190 | | | | (236 | ) | | | 7,082 | |
Shares of Spanish companies | | | 1,189 | | | | (95 | ) | | | 4,639 | |
| Credit institutions | | | — | | | | (9 | ) | | | 22 | |
| Other entities | | | 1,189 | | | | (86 | ) | | | 4,617 | |
Shares of foreign companies listed | | | 1 | | | | (141 | ) | | | 2,443 | |
| United States | | | — | | | | (11 | ) | | | 28 | |
| Other countries | | | 1 | | | | (130 | ) | | | 2,416 | |
Other equity instruments unlisted | | | 7 | | | | (1 | ) | | | 867 | |
Shares of Spanish companies | | | — | | | | (1 | ) | | | 36 | |
| Credit institutions | | | — | | | | — | | | | 1 | |
| Other entities | | | — | | | | (1 | ) | | | 35 | |
Shares of foreign companies unlisted | | | 7 | | | | — | | | | 831 | |
| United States | | | — | | | | — | | | | 626 | |
| Other countries | | | 7 | | | | — | | | | 205 | |
| | | | | | | | | | | | | |
TOTAL | | | 1,197 | | | | (237 | ) | | | 7,949 | |
| | | | | | | | | | | | | |
F-77
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2007 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Other equity instruments listed | | | 4,449 | | | | (24 | ) | | | 10,797 | |
Shares of Spanish companies | | | 3,322 | | | | — | | | | 7,032 | |
| Credit institutions | | | 4 | | | | — | | | | 35 | |
| Other entities | | | 3,318 | | | | — | | | | 6,997 | |
Shares of foreign companies listed | | | 1,127 | | | | (24 | ) | | | 3,765 | |
| United States | | | — | | | | (1 | ) | | | 419 | |
| Other countries | | | 1,127 | | | | (23 | ) | | | 3,346 | |
Other equity instruments unlisted | | | 52 | | | | (5 | ) | | | 299 | |
Shares of Spanish companies | | | 64 | | | | (5 | ) | | | 132 | |
| Credit institutions | | | — | | | | — | | | | 2 | |
| Other entities | | | 64 | | | | (5 | ) | | | 130 | |
Shares of foreign companies unlisted | | | (12 | ) | | | — | | | | 167 | |
| United States | | | — | | | | — | | | | 70 | |
| Other countries | | | (12 | ) | | | — | | | | 97 | |
| | | | | | | | | | | | | |
TOTAL | | | 4,501 | | | | (29 | ) | | | 11,096 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2006 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Other equity instruments listed | | | 3,628 | | | | (15 | ) | | | 9,867 | |
Shares of Spanish companies | | | 2,817 | | | | — | | | | 7,342 | |
Shares of foreign companies listed | | | 811 | | | | (15 | ) | | | 2,525 | |
| United States | | | 1 | | | | — | | | | 28 | |
| Other countries | | | 810 | | | | (15 | ) | | | 2,497 | |
Other equity instruments unlisted | | | — | | | | — | | | | 170 | |
Shares of Spanish companies | | | — | | | | — | | | | 39 | |
Shares of foreign companies unlisted | | | — | | | | — | | | | 131 | |
| United States | | | — | | | | �� | | | | 26 | |
| Other countries | | | — | | | | — | | | | 105 | |
| | | | | | | | | | | | | |
TOTAL | | | 3,628 | | | | (15 | ) | | | 10,037 | |
| | | | | | | | | | | | | |
12.4 GAINS/LOSSESEquity Instruments. Available-for-Sale by Type of Financial Instrument
The amount of gains/losses, net of taxs, recognised in the heading of equity “Valuation adjustment — Available-for-sale assets” as of December 31, 2008 was as follow:
| | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 |
| | | Millions of euros |
| |
| Acumulated gains/losses | | | 931 | | | | 3,546 | | | | 3,323 | |
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2010 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Equity instruments listed | | | | | | | | | | | | |
| Listed Spanish company shares | | | 1,212 | | | | (7 | ) | | | 4,583 | |
| Credit institutions | | | — | | | | — | | | | 3 | |
| Other entities | | | 1,212 | | | | (7 | ) | | | 4,580 | |
| Listed foreign company shares | | | 8 | | | | (25 | ) | | | 253 | |
| United States | | | 1 | | | | — | | | | 13 | |
| Other countries | | | 7 | | | | (25 | ) | | | 240 | |
| | | | | | | | | | | | | |
Subtotal | | | 1,220 | | | | (32 | ) | | | 4,836 | |
| | | | | | | | | | | | | |
Unlisted equity instruments | | | | | | | | | | | | |
| Unlisted Spanish company shares | | | — | | | | — | | | | 25 | |
| Credit institutions | | | — | | | | — | | | | 1 | |
| Other entities | | | — | | | | — | | | | 24 | |
| Unlisted foreign companies shares | | | 63 | | | | — | | | | 720 | |
| United States | | | 55 | | | | — | | | | 649 | |
| Other countries | | | 8 | | | | — | | | | 71 | |
| | | | | | | | | | | | | |
Subtotal | | | 63 | | | | — | | | | 745 | |
| | | | | | | | | | | | | |
Total | | | 1,283 | | | | (32 | ) | | | 5,581 | |
| | | | | | | | | | | | | |
These unrealised losses are considered temporary, because they have mainly arisen in a period shorter than one year and the decline is mainly attributable to adverse interest rate movements.
F-78
F-89
Equity Instruments. Available-for-Sale by Type of Financial Instrument
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2009 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Equity instruments listed | | | | | | | | | | | | |
| Listed Spanish company shares | | | 1,738 | | | | (12 | ) | | | 5,383 | |
| Credit institutions | | | — | | | | — | | | | — | |
| Other entities | | | 1,738 | | | | (12 | ) | | | 5,383 | |
| Listed foreign company shares | | | 12 | | | | (28 | ) | | | 250 | |
| United States | | | — | | | | (8 | ) | | | 8 | |
| Other countries | | | 12 | | | | (20 | ) | | | 242 | |
| | | | | | | | | | | | | |
Subtotal | | | 1,750 | | | | (40 | ) | | | 5,633 | |
| | | | | | | | | | | | | |
Unlisted equity instruments | | | | | | | | | | | | |
| Unlisted Spanish company shares | | | — | | | | — | | | | 26 | |
| Credit institutions | | | — | | | | — | | | | 1 | |
| Other entities | | | — | | | | — | | | | 25 | |
| Unlisted foreign companies shares | | | 109 | | | | — | | | | 791 | |
| United States | | | 104 | | | | — | | | | 729 | |
| Other countries | | | 5 | | | | — | | | | 62 | |
| | | | | | | | | | | | | |
Subtotal | | | 109 | | | | — | | | | 817 | |
| | | | | | | | | | | | | |
Total | | | 1,859 | | | | (40 | ) | | | 6,450 | |
| | | | | | | | | | | | | |
Equity Instruments. Available-for-Sale by Type of Financial Instrument
| | | | | | | | | | | | | |
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2008 | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Equity instruments listed | | | | | | | | | | | | |
| Listed Spanish company shares | | | 1,189 | | | | (95 | ) | | | 4,639 | |
| Credit institutions | | | — | | | | (9 | ) | | | 22 | |
| Other entities | | | 1,189 | | | | (86 | ) | | | 4,617 | |
| Listed foreign company shares | | | 1 | | | | (141 | ) | | | 2,443 | |
| United States | | | — | | | | (11 | ) | | | 28 | |
| Other countries | | | 1 | | | | (130 | ) | | | 2,416 | |
| | | | | | | | | | | | | |
Subtotal | | | 1,190 | | | | (236 | ) | | | 7,082 | |
| | | | | | | | | | | | | |
Unlisted equity instruments | | | | | | | | | | | | |
| Unlisted Spanish company shares | | | — | | | | (1 | ) | | | 36 | |
| Credit institutions | | | — | | | | — | | | | 1 | |
| Other entities | | | — | | | | (1 | ) | | | 35 | |
| Unlisted foreign companies shares | | | 7 | | | | — | | | | 831 | |
| United States | | | — | | | | — | | | | 626 | |
| Other countries | | | 7 | | | | — | | | | 205 | |
| | | | | | | | | | | | | |
Subtotal | | | 7 | | | | (1 | ) | | | 867 | |
| | | | | | | | | | | | | |
Total | | | 1,197 | | | | (237 | ) | | | 7,949 | |
| | | | | | | | | | | | | |
F-90
The changes of accumulatedin the gains/losses, net of tax, intaxes, recognized under the equity heading “Valuation adjustments —Available-for-sale financial assets” for the year ended December 31, 2010, 2009 and 2008 2007, and 2006 werewas as follow:follows:
| | | | | | | | | | | | | | |
Changes in Valuation Adjustments — Available-for-Sale Financial Assets | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
Balance at the beginning | | | | 1,951 | | | | 931 | | | | 3,546 | |
| Valuation gains and losses | | | | (1,952 | ) | | | 1,520 | | | | (2,065 | ) |
| Income tax | | | | 540 | | | | (483 | ) | | | 1,172 | |
| Amounts transferred to income | | | | (206 | ) | | | (18 | ) | | | (1,722 | ) |
| | | Millions of euros | | | | | | | | |
| | |
Balance at beginning of year | | | 3,546 | | | | 3,323 | | | | 3,002 | | |
| Measurement gains and losses | | | (2,065 | ) | | | 1,857 | | | | 1,264 | | |
| Income tax | | | 1,172 | | | | (97 | ) | | | 178 | | |
| Amounts transfers to income(*) | | | (1,722 | ) | | | (1,537 | ) | | | (1,121 | ) | |
| | | | | | | | | |
Balance at end of year | | | 931 | | | | 3,546 | | | | 3,323 | | |
Balance at the end | | | | 333 | | | | 1,951 | | | | 931 | |
| | | | | | | | | | | | | | | |
| Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| Debt securities | | | | (746 | ) | | | 456 | | | | (116 | ) |
| Equity instruments | | | 1,047 | | | | 3,215 | | | | 2,620 | | | | 1,079 | | | | 1,495 | | | | 1,047 | |
| Debt securities | | | (116 | ) | | | 331 | | | | 703 | | |
| | | | | | | | | |
The losses recognized under the heading “Valuation adjustments — Available for sale financial assets” in the consolidated income statement as of December 31, 2010, correspond mainly to Spanish government debt securities.
| | |
(*) | | Registered in the heading “Gains and losses on financial instruments (net)” of the consolidated income statement (Note 42) |
Some 13.7% of the losses recognized under the heading “Valuation adjustments —Available-for-sale financial assets” of the debt securities were generated over more than twelve months. However, as no impairment has been estimated following an analysis of these unrealized losses, it can be concluded that they are temporary, because: the interest payment periods of all the fixed-income securities have been satisfied; and because there is no evidence that the issuer will not continue to comply with payment obligations, nor that future payments of both principal and interests will not be sufficient to recover the cost of the debt securities.
The losses recognized under the heading “Impairment losses on financial assets (net) — Available for sale assets” in the income statement year ended December 31, 2010 amounted to €155 million (€277 million and €145 million for the year ended December 31, 2009 and 2008, respectively) (see Note 49).
| |
| 13. | LOANS AND RECEIVABLES |
13.1. BREAKDOWN OF THE BALANCE
| |
| 13.1. | BREAKDOWN OF THE BALANCE |
The detail of the balance of this heading in the accompanying consolidated balance sheets as of December 31, 2008, 20072010, 2009 and 2006,2008, based on the nature of the financial instrument, is as follows:
| | | | | | | | | | | | | |
Loans and Receivables | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Loans and advances to credit institutions | | | 23,637 | | | | 22,239 | | | | 33,856 | |
| Loans and advances to customers | | | 338,857 | | | | 323,442 | | | | 335,260 | |
| Debt securities | | | 2,213 | | | | 436 | | | | 378 | |
| | | | | | | | | | | | | |
Total | | | 364,707 | | | | 346,117 | | | | 369,494 | |
| | | | | | | | | | | | | |
The increase in 2010 of the “Debt securities” item in the above table is mainly due to the reclassification of some debt instruments issued by governments and registered under the heading“Available-for-sale financial assets” in 2009.
F-91
| |
| 13.2. | LOANS AND ADVANCES TO CREDIT INSTITUTIONS |
The detail of the balance under this heading in the accompanying consolidated balance sheets as of December 31, 2010, 2009 and 2008, broken down by the nature of the related financial instrument, is as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Loans and advances to credit institutions | | | 33,856 | | | | 24,527 | | | | 21,264 | |
| Loans and advances to customers | | | 335,260 | | | | 313,178 | | | | 258,317 | |
| Debt securities | | | 378 | | | | 60 | | | | 77 | |
| | | | | | | | | | | | | |
Total | | | 369,494 | | | | 337,765 | | | | 279,658 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loans and Advances to Credit Institutions | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Reciprocal accounts | | | 168 | | | | 226 | | | | 390 | |
| Deposits with agreed maturity | | | 7,307 | | | | 8,301 | | | | 8,005 | |
| Demand deposits | | | 2,008 | | | | 2,091 | | | | 6,433 | |
| Other accounts | | | 6,299 | | | | 6,125 | | | | 9,250 | |
| Reverse repurchase agreements | | | 7,822 | | | | 5,457 | | | | 9,601 | |
| | | | | | | | | | | | | |
Total gross | | | 23,604 | | | | 22,200 | | | | 33,679 | |
| | | | | | | | | | | | | |
Valuation adjustments | | | 33 | | | | 39 | | | | 177 | |
| Impairment losses | | | (67 | ) | | | (68 | ) | | | (74 | ) |
| Accrued interests and fees | | | 101 | | | | 110 | | | | 223 | |
| Hedging derivatives and others | | | (1 | ) | | | (3 | ) | | | 28 | |
| | | | | | | | | | | | | |
Total | | | 23,637 | | | | 22,239 | | | | 33,856 | |
| | | | | | | | | | | | | |
13.2. LOANS AND ADVANCES TO CREDIT INSTITUTIONS
| |
| 13.3. | LOANS AND ADVANCES TO CUSTOMERS |
The detail of the balance ofunder this heading in the accompanying consolidated balance sheets as of December 31, 2010, 2009 and 2008, 2007 and 2006, based onbroken down by the nature of the related financial instrument, wasis as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Reciprocal accounts | | | 390 | | | | 138 | | | | 131 | |
| Deposits with agreed maturity | | | 8,005 | | | | 9,388 | | | | 9,469 | |
| Demand deposits | | | 6,433 | | | | 834 | | | | 439 | |
| Other accounts | | | 9,250 | | | | 4,610 | | | | 5,675 | |
| Reverse repurchase agreements | | | 9,601 | | | | 9,422 | | | | 5,490 | |
| | | | | | | | | | | | | |
Total gross | | | 33,679 | | | | 24,392 | | | | 21,204 | |
| | | | | | | | | | | | | |
| Valuation adjustments | | | 177 | | | | 135 | | | | 60 | |
| Impairment losses | | | (74 | ) | | | (10 | ) | | | (6 | ) |
| Accrued interest and fees | | | 223 | | | | 107 | | | | 63 | |
| Hedging derivatives and others | | | 28 | | | | 38 | | | | 3 | |
| | | | | | | | | | | | | |
Total | | | 33,856 | | | | 24,527 | | | | 21,264 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loans and Advances to Customers | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Financial paper | | | 1,982 | | | | 602 | | | | 587 | |
| Commercial credit | | | 21,229 | | | | 24,031 | | | | 29,215 | |
| Secured loans | | | 150,782 | | | | 148,874 | | | | 145,522 | |
| Credit accounts | | | 23,705 | | | | 19,683 | | | | 21,593 | |
| Other loans | | | 101,999 | | | | 98,238 | | | | 111,597 | |
| Reverse repurchase agreements | | | 4,764 | | | | 987 | | | | 1,658 | |
| Receivable on demand and other | | | 19,246 | | | | 15,253 | | | | 13,372 | |
| Finance leases | | | 8,141 | | | | 8,222 | | | | 9,341 | |
| Impaired assets | | | 15,361 | | | | 15,197 | | | | 8,437 | |
Total gross | | | 347,210 | | | | 331,087 | | | | 341,322 | |
Valuation adjustments | | | (8,353 | ) | | | (7,645 | ) | | | (6,062 | ) |
| Impairment losses | | | (9,396 | ) | | | (8,720 | ) | | | (7,431 | ) |
| Accrued interests and fees | | | 195 | | | | 320 | | | | 719 | |
| Hedging derivatives and others | | | 848 | | | | 755 | | | | 650 | |
| | | | | | | | | | | | | |
Total net | | | 338,857 | | | | 323,442 | | | | 335,260 | |
| | | | | | | | | | | | | |
Of all the “Loans and advances to customers” as of December 31, 2010, 23.1% were concluded with fixed-interest conditions and 76.9% were variable interest.
F-79F-92
13.3. LOANS AND ADVANCES TO CUSTOMERS
The detail, by loan type and status, of the balance of this heading in the consolidated balance sheets as of December 31, 2008, 2007 and 2006, was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Financial paper | | | 587 | | | | 387 | | | | 9 | |
| Commercial credit | | | 29,215 | | | | 36,108 | | | | 22,453 | |
| Secured loans | | | 145,522 | | | | 135,557 | | | | 116,737 | |
| Credit accounts | | | 21,593 | | | | 23,835 | | | | 21,700 | |
| Other loans | | | 111,597 | | | | 94,695 | | | | 78,990 | |
| Reverse repurchase agreements | | | 1,658 | | | | 2,000 | | | | 1,526 | |
| Receivable on demand and other | | | 13,372 | | | | 14,582 | | | | 12,182 | |
| Finance leases | | | 9,341 | | | | 9,149 | | | | 8,053 | |
| Impaired assets | | | 8,437 | | | | 3,358 | | | | 2,492 | |
| | | | | | | | | | | | | |
Total gross | | | 341,322 | | | | 319,671 | | | | 264,142 | |
| | | | | | | | | | | | | |
| Valuation adjustments | | | (6,062 | ) | | | (6,493 | ) | | | (5,825 | ) |
| Impairment losses | | | (7,431 | ) | | | (7,138 | ) | | | (6,420 | ) |
| Accrued interests and fees | | | 719 | | | | 549 | | | | 341 | |
| Hedging derivatives and others | | | 650 | | | | 96 | | | | 254 | |
| | | | | | | | | | | | | |
Total | | | 335,260 | | | | 313,178 | | | | 258,317 | |
| | | | | | | | | | | | | |
The Group, via several of its banks, provides its customers with financing to purchase assets, including movable and immovable property, in the form of the finance lease arrangements recognized under this heading. The breakdown of these finance leases as of December 31, 2008, 20072010, 2009 and 20062008 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Financial Lease Arrangements | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Movable property | | | 6,114 | | | | 5,982 | | | | 4,700 | | | | 4,748 | | | | 4,963 | | | | 6,158 | |
| Inmovable property | | | 3,271 | | | | 3,166 | | | | 3,353 | | |
| Real Estate | | | | 3,393 | | | | 3,259 | | | | 3,271 | |
| Fixed rate | | | 33 | % | | | 28 | % | | | 10 | % | | | 42% | | | | 38% | | | | 33% | |
| Variable rate | | | 67 | % | | | 72 | % | | | 90 | % | |
| Floating rate | | | | 58% | | | | 62% | | | | 67% | |
As of December 31, 2008, unaccrued finance revenue2010, non-accrued financial income from finance leases granted to customers amounted to €119€132 million. The unsecuredunguaranteed residual value of thosethese contracts totalled €519amounted to €435 million. Impairment losses determined collectively on finance lease arrangements meanwhile totalled €15amounted to €12 million.
The heading “Loans and receivables — Loans and advances to individuals” subheadingcustomers” in the accompanying consolidated balance sheets includes certainmortgage loans that, as mentioned in Note 35, are considered a suitable guarantee for the issue of long-term mortgage covered bonds (Note 23.4), pursuant to the Mortgage Market Act.
The heading “Loans and receivables — Loans and advances to customers” heading of the accompanying consolidated balance sheets includes securitized loans that have not been derecognized sinceas mentioned in Note 2.2.2. The amounts recognized in the Group has retained Group substantially all the related risks or rewards dueaccompanying consolidated balance sheets corresponding to the fact that it has granted subordinated financing or other types of credit enhancements that absorb either substantially all expected credit losses on the asset transferred or the probable variation in attendant net cash flows.
F-80
The on-balance sheet amounts of saidthese securitized loans not derecognized as of December 31, 2008, 20072010, 2009 and 20062008 are set forth below:
| | | | | | | | | | | | | | |
Securitized Loans | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millions of euros | | |
| | |
| Securitised mortgage assets | | | 34,012 | | | | 17,214 | | | | 2,320 | | |
| Other securitised assets | | | 10,341 | | | | 11,007 | | | | 6,736 | | |
| Securitized mortgage assets | | | | 31,884 | | | | 33,786 | | | | 34,032 | |
| Other securitized assets | | | | 10,563 | | | | 10,597 | | | | 10,341 | |
| Commercial and industrial loans | | | 2,634 | | | | 3,097 | | | | 1,975 | | | | 6,263 | | | | 4,356 | | | | 2,634 | |
| Leasing | | | 2,238 | | | | 2,361 | | | | — | | |
| Finance leases | | | | 771 | | | | 1,380 | | | | 2,238 | |
| Loans to individuals | | | 5,124 | | | | 5,154 | | | | 4,741 | | | | 3,403 | | | | 4,536 | | | | 5,124 | |
| Other | | | 345 | | | | 395 | | | | 20 | | |
| Rest | | | | 126 | | | | 325 | | | | 345 | |
| | | | | | | | | | | | | | | |
Total | | | 44,353 | | | | 28,221 | | | | 9,056 | | | | 42,447 | | | | 44,383 | | | | 44,373 | |
| | | | | | | | | | | | | | | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities associated to assets retained on the balance sheet(*) | | | 14,948 | | | | 19,249 | | | | 8,807 | | | | 8,846 | | | | 9,012 | | | | 14,948 | |
| | | | | | | | | |
| | |
| (*) | | These liabilities are recognized under “Financial liabilities at amortized cost — Debt certificates”securities” in the accompanying consolidated balance sheets.sheets (Note 22.4)23). |
Meanwhile, certainSome other securitized loans have been derecognized where substantially all attendant risks or benefits were effectively transferred.
As of December 31, 2008, 20072010, 2009 and 2006,2008, the outstanding balances of derecognized securitized loans were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Securitised mortgage assets | | | 132 | | | | 173 | | | | 209 | |
| Other securitised assets | | | 413 | | | | 585 | | | | 849 | |
| | | | | | | | | | | | | |
Total | | | 545 | | | | 758 | | | | 1,058 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Derecognized Securitized Loans | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Securitized mortgage assets | | | 24 | | | | 116 | | | | 132 | |
| Other securitized assets | | | 176 | | | | 276 | | | | 413 | |
| | | | | | | | | | | | | |
Total | | | 200 | | | | 392 | | | | 545 | |
| | | | | | | | | | | | | |
F-93
| |
| 14. | HELD-TO-MATURITY INVESTMENTS |
As of December 31, 2008, 2007 and 2006, the detailThe breakdown of the balance of this heading in the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | | | | | |
| | | Amortised
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2008 | | Cost | | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic | | | 2,392 | | | | 7 | | | | (60 | ) | | | 2,339 | |
| Spanish Governments and other Spanish | | | | | | | | | | | | | | | | |
| Governments securities | | | 1,412 | | | | 7 | | | | (7 | ) | | | 1,412 | |
| Other debt securities | | | 980 | | | | — | | | | (53 | ) | | | 927 | |
International | | | 2,890 | | | | 25 | | | | (33 | ) | | | 2,882 | |
| Securities of other foreign Governments | | | 2,432 | | | | 22 | | | | (17 | ) | | | 2,437 | |
| Other debt securities | | | 458 | | | | 3 | | | | (16 | ) | | | 445 | |
| | | | | | | | | | | | | | | | | |
Total | | | 5,282 | | | | 32 | | | | (93 | ) | | | 5,221 | |
| | | | | | | | | | | | | | | | | |
Held-to-Maturity Investments. Breakdown by Type of Financial Instrument
| | | | | | | | | | | | | | | | | |
| | | Amortized
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2010 | | Cost | | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic Debt Securities | | | | | | | | | | | | | | | | |
| Spanish Government and other government agency debt securities | | | 6,611 | | | | 2 | | | | (671 | ) | | | 5,942 | |
| Other domestic debt securities | | | 892 | | | | — | | | | (63 | ) | | | 829 | |
| Issue by credit institutions | | | 290 | | | | — | | | | (13 | ) | | | 277 | |
| Issue by other issuers | | | 602 | | | | — | | | | (50 | ) | | | 552 | |
| | | | | | | | | | | | | | | | | |
Subtotal | | | 7,503 | | | | 2 | | | | (734 | ) | | | 6,771 | |
| | | | | | | | | | | | | | | | | |
Foreign Debt Securities | | | | | | | | | | | | | | | | |
| Other foreign governments and other government agency debt securities not issued by the governments of the countries where they operate | | | 2,181 | | | | 10 | | | | (20 | ) | | | 2,171 | |
| Issue by credit institutions | | | 262 | | | | 6 | | | | (21 | ) | | | 247 | |
| | | | | | | | | | | | | | | | | |
Subtotal | | | 2,443 | | | | 16 | | | | (41 | ) | | | 2,418 | |
| | | | | | | | | | | | | | | | | |
Total | | | 9,946 | | | | 18 | | | | (775 | ) | | | 9,189 | |
| | | | | | | | | | | | | | | | | |
F-81
| | | | | | | | | | | | | | | | | |
| | | Amortised
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2007 | | Cost | | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic | | | 2,402 | | | | — | | | | (131 | ) | | | 2,271 | |
| Spanish Governments and other Spanish | | | | | | | | | | | | | | | | |
| Governments securities | | | 1,417 | | | | — | | | | (68 | ) | | | 1,349 | |
| Other debt securities | | | 985 | | | | — | | | | (63 | ) | | | 922 | |
International | | | 3,182 | | | | — | | | | (119 | ) | | | 3,063 | |
| | | | | | | | | | | | | | | | | |
Total | | | 5,584 | | | | — | | | | (250 | ) | | | 5,334 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | Amortised
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2006 | | Cost | | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic | | | 2,404 | | | | 2 | | | | (69 | ) | | | 2,337 | |
| Spanish Governments and other Spanish | | | | | | | | | | | | | | | | |
| Governments securities | | | 1,417 | | | | 1 | | | | (40 | ) | | | 1,378 | |
| Other debt securities | | | 987 | | | | 1 | | | | (29 | ) | | | 959 | |
International | | | 3,502 | | | | 5 | | | | (86 | ) | | | 3,421 | |
| | | | | | | | | | | | | | | | | |
Total | | | 5,906 | | | | 7 | | | | (155 | ) | | | 5,758 | |
| | | | | | | | | | | | | | | | | |
The net increase in the balance in 2010 is due primarily to the acquisition of debt securities from the Spanish government.
The foreign securities by the Group as of December 31, 2008, 20072010, 2009 and 20062008 in the held to maturityheld-to-maturity portfolio correspondscorrespond to European issuers.
Held-to-Maturity Investments. Breakdown by Type of Financial Instrument
| | | | | | | | | | | | | | | | | |
| | | Amortized
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2009 | | Cost | | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic Debt Securities | | | | | | | | | | | | | | | | |
| Spanish Government and other government agency debt securities | | | 1,674 | | | | 21 | | | | (13 | ) | | | 1,682 | |
| Other domestic debt securities | | | 952 | | | | 8 | | | | (18 | ) | | | 942 | |
| | | | | | | | | | | | | | | | | |
| Subtotal | | | 2,626 | | | | 29 | | | | (31 | ) | | | 2,624 | |
| | | | | | | | | | | | | | | | | |
Foreign Debt Securities | | | | | | | | | | | | | | | | |
| Government and other government agency debt securities | | | 2,399 | | | | 64 | | | | (7 | ) | | | 2,456 | |
| Other debt securities | | | 412 | | | | 7 | | | | (6 | ) | | | 413 | |
| | | | | | | | | | | | | | | | | |
| Subtotal | | | 2,811 | | | | 71 | | | | (13 | ) | | | 2,869 | |
| | | | | | | | | | | | | | | | | |
Total | | | 5,437 | | | | 100 | | | | (44 | ) | | | 5,493 | |
| | | | | | | | | | | | | | | | | |
F-94
Held-to-Maturity Investments. Breakdown by Type of Financial Instrument
| | | | | | | | | | | | | | | | | |
| | | Amortized
| | | Unrealized
| | | Unrealized
| | | Fair
| |
2008 | | Cost | | | Gains | | | Losses | | | Value | |
| | | Millions of euros | |
| |
Domestic Debt Securities | | | | | | | | | | | | | | | | |
| Spanish Government and other government agency debt securities | | | 1,412 | | | | 7 | | | | (7 | ) | | | 1,412 | |
| Other domestic debt securities | | | 980 | | | | — | | | | (53 | ) | | | 927 | |
| | | | | | | | | | | | | | | | | |
| Subtotal | | | 2,392 | | | | 7 | | | | (60 | ) | | | 2,339 | |
| | | | | | | | | | | | | | | | | |
Foreign Debt Securities | | | | | | | | | | | | | | | | |
| Government and other government agency debt securities | | | 2,432 | | | | 22 | | | | (17 | ) | | | 2,437 | |
| Other debt securities | | | 458 | | | | 3 | | | | (16 | ) | | | 445 | |
| | | | | | | | | | | | | | | | | |
| Subtotal | | | 2,890 | | | | 25 | | | | (33 | ) | | | 2,882 | |
| | | | | | | | | | | | | | | | | |
Total | | | 5,282 | | | | 32 | | | | (93 | ) | | | 5,221 | |
| | | | | | | | | | | | | | | | | |
As of December 31, 2010, the distribution to the credit ratings of the issuers of debt securities of theheld-to-maturity investments was as follows:
| | | | | | | | | |
Held to Maturuty Investments
| | | | | | |
Debt Secutities by Rating | | Carrying Amount | | | % | |
| | | Millions of euros | | | | |
| |
| AAA | | | 1,908 | | | | 19.2 | % |
| AA+ | | | 6,703 | | | | 67.4 | % |
| AA− | | | 1,222 | | | | 12.3 | % |
| With rating A+ or below | | | 113 | | | | 1.1 | % |
| | | | | | | | | |
| Total | | | 9,946 | | | | 100.0 | % |
| | | | | | | | | |
Following an analysis of the unrealized losses, it can be concluded that they are temporary, because: the interest payment periods of all the fixed-income securities have been satisfied; and because there is no evidence that the issuer will not continue to comply with payment obligations, nor that future payments of both principal and interests will not be sufficient to recover the cost of the securities.
The following is a summary of the gross changes for December 31,in 2010, 2009 and 2008 2007 and 2006 in the balance of this heading in the accompanying consolidated balance sheets, were summarised as follows not consideringincluding impairment losses:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at beginning of year | | | 5,589 | | | | 5,911 | | | | 3,964 | |
| Acquisitions | | | — | | | | — | | | | 2,211 | |
| Redemptions | | | (284 | ) | | | (300 | ) | | | (274 | ) |
| Other | | | (20 | ) | | | (22 | ) | | | 10 | |
| | | | | | | | | | | | | |
Balance at end of year | | | 5,285 | | | | 5,589 | | | | 5,911 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Held-to-Maturity Investments Changes on the Period | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the beginning | | | 5,438 | | | | 5,285 | | | | 5,589 | |
| Acquisitions | | | 4,969 | | | | 426 | | | | — | |
| Redemptions and others | | | (460 | ) | | | (273 | ) | | | (304 | ) |
Balance at the end | | | 9,947 | | | | 5,438 | | | | 5,285 | |
| Impairment | | | (1 | ) | | | (1 | ) | | | (3 | ) |
| | | | | | | | | | | | | |
Total | | | 9,946 | | | | 5,437 | | | | 5,282 | |
| | | | | | | | | | | | | |
F-95
| |
| 15. | HEDGING DERIVATIVES (RECEIVABLE AND PAYABLE) AND FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES |
The naturebreakdown of principal risks hedges by the Group is analyzedbalance of these items in note 7.the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | |
Hedging Derivatives and Fair Value Changes of the
| | | | | | | | | |
Hedged Items in Portfolio Hedges of Interest Rate Risk | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
ASSETS — | | | | | | | | | | | | |
| Fair value changes of the hedged items in portfolio hedges of interest rate risk | | | 40 | | | | — | | | | — | |
| Hedging derivatives | | | 3,563 | | | | 3,595 | | | | 3,833 | |
LIABILITIES — | | | | | | | | | | | | |
| Fair value changes of the hedged items in portfolio hedges of interest rate risk | | | (2 | ) | | | — | | | | — | |
| Hedging derivatives | | | 1,664 | | | | 1,308 | | | | 1,226 | |
As of December 31, 2008, 20072010, 2009 and 2006,2008, the main positions hedged by the Group and the derivatives assigned to hedge those positions are:
1. Fair value hedge:
| | |
| | • | Available for sale fixed rateFair value hedge: |
| | |
| - | Available-for-sale fixed-interest debt securities: this risk is hedged using interest-rate derivatives (fixed- variable(fixed-variable swaps). |
| |
| | •- | Long term fixed ratefixed-interest debt issued by Group: this risk is hedged using interest-rate derivatives (fixed- variable(fixed-variable swaps). |
| |
| | •- | Available for saleAvailable-for-sale equity securities: this risk is hedged using equity swaps. |
| |
| | •- | Fixed rateFixed-interest loans: this risk is hedged using interest-rate derivatives (fixed- variable(fixed-variable swaps). |
|
| - | Fixed-interest deposit portfolio hedges: this risk is hedged using fixed-variable swaps and derivatives for interest rate. The valuation of the deposit hedges corresponding to interest-rate risk is recognized under the heading “Changes in the fair value of the hedged items in the portfolio hedges of interest-rate risk”. |
2. Cash flow hedge: Most of the hedged items are floating interest rate | | |
| • | Cash-flow hedge: Most of the hedged items are floating interest-rate loans: this risk is hedged using foreign-exchange and interest-rate swaps. |
|
| • | Net foreign-currency investment hedge: The risks hedged are foreign-currency investments in the Group’s subsidiaries abroad. This risk is hedged mainly with foreign-exchange options and forward currency purchase. |
Note 7 analyzes the Group’s main risks that are hedged using currency and interest rate swaps.these financial instruments.
F-82
F-96
3. Net investment in a foreign operation hedge: Most of risks hedged are investments in foreign currency in foreign subsidiaries. This risk is hedged mainly with exchange rate options and forward currency purchase.
As of December 31, 2008, 2007 and 2006 there were no hedges of highly probable forecast transaction in the Group.
The detaildetails of the fair value of the hedging derivatives, held by the Group as of December 31, 2008, 2007 and 2006organized hedged risk, recognized in the accompanying consolidated balance sheets wasare as follows:
| | | | | | | | | | | | | |
| | | | | | Interest
| | | | |
| | | Exchange
| | | Rate
| | | | |
2008 | | Risk | | | Risk | | | Total | |
| | | Millions of euros | |
| |
Non organised markets | | | | | | | | | | | | |
Credit institutions | | | 204 | | | | 2,290 | | | | 2,494 | |
| Fair value hedge | | | — | | | | 1,972 | | | | 1,972 | |
| Cash flow hedge | | | 104 | | | | 338 | | | | 443 | |
| Net investment in a foreign operation hedge | | | 99 | | | | (20 | ) | | | 79 | |
Other financial institutions | | | — | | | | 100 | | | | 100 | |
| Fair value hedge | | | — | | | | 68 | | | | 68 | |
| Cash flow hedge | | | — | | | | 32 | | | | 32 | |
Other sectors | | | 11 | | | | 1 | | | | 13 | |
| Fair value hedge | | | — | | | | 1 | | | | 1 | |
| Cash flow hedge | | | 11 | | | | — | | | | 11 | |
| | | | | | | | | | | | | |
Total | | | 215 | | | | 2,391 | | | | 2,606 | |
| | | | | | | | | | | | | |
of which: Asset Hedging Derivatives | | | 227 | | | | 3,606 | | | | 3,833 | |
| | | | | | | | | | | | | |
of which: Liability hedging Derivatives | | | (11 | ) | | | (1,215 | ) | | | (1,226 | ) |
| | | | | | | | | | | | | |
Hedging Derivatives. Breakdown of the Fair Value by Markets and Transaction Type
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Interest
| | Equity
| | | | | Currency
| | Interest
| | Equity
| | Other
| | | |
| | | Exchange
| | Rate
| | Price
| | | | |
2007 | | Risk | | Risk | | Risk | | Total | | |
2010 | | | Risk | | Rate Risk | | Price Risk | | Risks | | Total | |
| | | Millions of euros | | | Millions of euros | |
| |
Organised Markets | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | (1 | ) | | | — | | | | — | | | | (1 | ) | |
Non organised markets | | | | | | | | | | | | | | | | | |
OTC markets | | | | | | | | | | | | | | | | | | | | | |
Credit institutions | | | 18 | | | | (719 | ) | | | (72 | ) | | | (773 | ) | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | — | | | | (693 | ) | | | (72 | ) | | | (765 | ) | | | — | | | | 1,645 | | | | 7 | | | | 3 | | | | 1,655 | |
Of wich: Macro hedge | | | | — | | | | (282 | ) | | | — | | | | — | | | | (282 | ) |
| Cash flow hedge | | | — | | | | (26 | ) | | | — | | | | (26 | ) | | | (4 | ) | | | 160 | | | | — | | | | — | | | | 156 | |
| Net investment in a foreign operation hedge | | | 18 | | | | — | | | | — | | | | 18 | | | | 3 | | | | (6 | ) | | | — | | | | — | | | | (3 | ) |
Other financial institutions | | | 8 | | | | 144 | | | | (135 | ) | | | 17 | | |
| | | | | | | | | | | | | |
Subtotal | | | | (1 | ) | | | 1,799 | | | | 7 | | | | 3 | | | | 1,808 | |
| | | | | | | | | | | | | |
Other financial Institutions | | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | — | | | | 100 | | | | (135 | ) | | | (35 | ) | | | — | | | | 109 | | | | 5 | | | | — | | | | 114 | |
Of wich: Macro hedge | | | | — | | | | (20 | ) | | | — | | | | — | | | | (20 | ) |
| Cash flow hedge | | | — | | | | 44 | | | | — | | | | 44 | | | | — | | | | (1 | ) | | | — | | | | — | | | | (1 | ) |
| Net investment in a foreign operation hedge | | | 8 | | | | — | | | | — | | | | 8 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Subtotal | | | | — | | | | 108 | | | | 5 | | | | — | | | | 113 | |
| | | | | | | | | | | | | |
Other sectors | | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | | — | | | | (12 | ) | | | — | | | | — | | | | (12 | ) |
Of wich: Macro hedge | | | | — | | | | (2 | ) | | | — | | | | — | | | | (2 | ) |
| Cash flow hedge | | | | — | | | | (10 | ) | | | — | | | | — | | | | (10 | ) |
| Net investment in a foreign operation hedge | | | | — | | | | — | | | | — | | | | — | | | | — | |
Subtotal | | | | — | | | | (22 | ) | | | — | | | | — | | | | (22 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 25 | | | | (575 | ) | | | (207 | ) | | | (757 | ) | | | (1 | ) | | | 1,885 | | | | 12 | | | | 3 | | | | 1,899 | |
| | | | | | | | | | | | | | | | | | | | | |
of which: Asset Hedging Derivatives | | | 35 | | | | 1,015 | | | | — | | | | 1,050 | | | | 14 | | | | 3,486 | | | | 60 | | | | 3 | | | | 3,563 | |
| | | | | | | | | | | | | | | | | | | | | |
of which: Liability hedging Derivatives | | | (10 | ) | | | (1,590 | ) | | | (207 | ) | | | (1,807 | ) | |
of which: Liability Hedging Derivatives | | | | (15 | ) | | | (1,601 | ) | | | (48 | ) | | | — | | | | (1,664 | ) |
| | | | | | | | | | | | | | | | | | | | | |
F-83F-97
| | | | | | | | | | | | | |
| | | Interest
| | | Equity
| | | | |
| | | Rate
| | | Price
| | | | |
2006 | | Risk | | | Risk | | | Total | |
| | | Millions of euros | |
| |
Non organised markets Credit institutions | | | (382 | ) | | | (116 | ) | | | (498 | ) |
| Fair value hedge | | | (404 | ) | | | (116 | ) | | | (520 | ) |
| Cash flow hedge | | | 22 | | | | — | | | | 22 | |
Other financial institutions | | | 178 | | | | (3 | ) | | | 175 | |
| Fair value hedge | | | 126 | | | | (3 | ) | | | 123 | |
| Cash flow hedge | | | 52 | | | | — | | | | 52 | |
Other sectors | | | 9 | | | | (3 | ) | | | 6 | |
| Fair value hedge | | | 9 | | | | (3 | ) | | | 6 | |
| | | | | | | | | | | | | |
Total | | | (195 | ) | | | (122 | ) | | | (317 | ) |
| | | | | | | | | | | | | |
of which: Asset Hedging Derivatives | | | 1,915 | | | | 48 | | | | 1,963 | |
| | | | | | | | | | | | | |
of which: Liability hedging Derivatives | | | (2,110 | ) | | | (170 | ) | | | (2,280 | ) |
| | | | | | | | | | | | | |
Hedging Derivatives. Breakdown of Fair Value by Markets and Transaction Type
| | | | | | | | | | | | | | | | | | | | | |
| | | Currency
| | | Interest
| | | Equity
| | | Other
| | | | |
2009 | | Risk | | | Rate Risk | | | Price Risk | | | Risks | | | Total | |
| | | Millions of euros | |
| |
OTC markets | | | | | | | | | | | | | | | | | | | | |
Credit institutions | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | — | | | | 1,985 | | | | (32 | ) | | | — | | | | 1,953 | |
| Cash flow hedge | | | 17 | | | | 258 | | | | (4 | ) | | | (4 | ) | | | 267 | |
| Net investment in a foreign operation hedge | | | 1 | | | | (27 | ) | | | — | | | | — | | | | (26 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 18 | | | | 2,216 | | | | (36 | ) | | | (4 | ) | | | 2,194 | |
| | | | | | | | | | | | | | | | | | | | | |
Other financial Institutions | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | — | | | | 123 | | | | (21 | ) | | | — | | | | 102 | |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | — | | | | 123 | | | | (21 | ) | | | — | | | | 102 | |
| | | | | | | | | | | | | | | | | | | | | |
Other sectors | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | — | | | | (9 | ) | | | — | | | | — | | | | (9 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | — | | | | (9 | ) | | | — | | | | — | | | | (9 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 18 | | | | 2,330 | | | | (57 | ) | | | (4 | ) | | | 2,287 | |
| | | | | | | | | | | | | | | | | | | | | |
Of which: Asset Hedging Derivatives | | | 22 | | | | 3,492 | | | | 81 | | | | — | | | | 3,595 | |
| | | | | | | | | | | | | | | | | | | | | |
Of which: Liability Hedging Derivatives | | | (4 | ) | | | (1,162 | ) | | | (138 | ) | | | (4 | ) | | | (1,308 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Hedging Derivatives. Breakdown of the Fair Value by Markets and Transaction Type
| | | | | | | | | | | | | | | | | | | | | |
| | | Currency
| | | Interest
| | | Equity
| | | Other
| | | | |
2008 | | Risk | | | Rate Risk | | | Price Risk | | | Risks | | | Total | |
| | | Millions of euros | |
| |
OTC markets | | | | | | | | | | | | | | | | | | | | |
Credit institutions | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | — | | | | 1,972 | | | | — | | | | — | | | | 1,972 | |
| Cash flow hedge | | | 106 | | | | 338 | | | | — | | | | — | | | | 444 | |
| Net investment in a foreign operation hedge | | | 99 | | | | (20 | ) | | | — | | | | — | | | | 79 | |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 205 | | | | 2,290 | | | | — | | | | — | | | | 2,495 | |
| | | | | | | | | | | | | | | | | | | | | |
Other financial Institutions | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | — | | | | 68 | | | | — | | | | — | | | | 68 | |
| Cash flow hedge | | | — | | | | 32 | | | | — | | | | — | | | | 32 | |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | — | | | | 100 | | | | — | | | | — | | | | 100 | |
| | | | | | | | | | | | | | | | | | | | | |
Other sectors | | | | | | | | | | | | | | | | | | | | |
| Fair value hedge | | | — | | | | 1 | | | | — | | | | — | | | | 1 | |
| Cash flow hedge | | | 11 | | | | — | | | | — | | | | — | | | | 11 | |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 11 | | | | 1 | | | | — | | | | — | | | | 12 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 216 | | | | 2,391 | | | | — | | | | — | | | | 2,607 | |
| | | | | | | | | | | | | | | | | | | | | |
of which: Asset Hedging Derivatives | | | 227 | | | | 3,606 | | | | — | | | | — | | | | 3,833 | |
| | | | | | | | | | | | | | | | | | | | | |
of which: Liability Hedging Derivatives | | | (11 | ) | | | (1,215 | ) | | | — | | | | — | | | | (1,226 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
F-98
The most significant cash flows forecasted for the coming years for cash flow hedging held on the balance sheet as of December 31, 2010 are shown below:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | From 3
| | | | | | |
| | | 3 Months
| | Months to
| | From 1 to
| | More than
| | |
Cash Flows of Hedging Instruments | | or Less | | 1 Year | | 5 Years | | 5 Years | | Total |
| | | Millions of euros |
| |
| Receivable cash inflows | | | 103 | | | | 292 | | | | 1,080 | | | | 2,276 | | | | 3,751 | |
| Payable cash outflows | | | 103 | | | | 168 | | | | 815 | | | | 2,395 | | | | 3,481 | |
The most significant forecasted cash flows thatindicated above will impact the Group has hedged, being its impact on theconsolidated income statement expected in the following periods:
| | | | | | | | | | | | | | | | | |
| | | | | | More Than
| | | | | | | |
| | | | | | 3 Months
| | | | | | | |
| | | 3 Months
| | | but Less
| | | From 1 to
| | | More Than
| |
| | | or Less | | | Than 1 Year | | | 5 Years | | | 5 Years | |
| | | Millions of Euros | |
| |
| Cash inflows from assets | | | 174 | | | | 399 | | | | 330 | | | | 148 | |
| Cash outflows from liabilities | | | 75 | | | | 217 | | | | 313 | | | | 205 | |
statements until 2049. The amounts previously recognized in equity from cash flow hedge that were removed from equity and included in consolidated income statement — in the heading “Gains or losses of financial assets and liabilities (net) or in the heading “Net Exchange differences”“Exchange differences (net)” — during the years 2010, 2009 and 2008 reached €34 million, €11 million and 2007 €12 and €13 millions,million, respectively.
The amount for derivatives designated as accounting hedges that did not pass the effectiveness test in 2010 was not significant.
| |
| 16. | NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
The non-current assets held for sale recorded as assets in the accompanying consolidated balances sheets ascomposition of December 31, 2008 related to foreclosed assets for carrying out the guarantee to ensure the recovery of loans. These properties are assets available for sale, which is considered highly probable. The sale of most of these assets is expected to be completed within one year of the date on which they are classified as “non-current assets held for sale”.
F-84
As of December 31, 2008, 2007 and 2006, the changes in the heading “Non-current assets held for sale” of the consolidated balance sheets were as follow:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Revalued cost — | | | | | | | | | | | | |
Balance at beginning of year | | | 306 | | | | 268 | | | | 401 | |
| Additions | | | 515 | | | | 487 | | | | 279 | |
| Retirements | | | (374 | ) | | | (744 | ) | | | (370 | ) |
| Acquisition of subsidiaries in the year | | | — | | | | 15 | | | | 17 | |
| Transfers | | | 57 | | | | 265 | | | | 13 | |
| Exchange difference and other | | | 2 | | | | 15 | | | | (72 | ) |
Balance at end of year | | | 506 | | | | 306 | | | | 268 | |
Impairment — | | | | | | | | | | | | |
| Balance at beginning of year | | | 66 | | | | 82 | | | | 170 | |
| Additions | | | 38 | | | | 38 | | | | 61 | |
| Retirements | | | (22 | ) | | | (43 | ) | | | (105 | ) |
| Transfers | | | 25 | | | | 8 | | | | 6 | |
| Exchange difference and other | | | (45 | ) | | | (19 | ) | | | (50 | ) |
Balance at end of year | | | 62 | | | | 66 | | | | 82 | |
| | | | | | | | | | | | | |
Balance total at end of year | | | 444 | | | | 240 | | | | 186 | |
| | | | | | | | | | | | | |
As of December 31, 2008, 2007 and 2006, the balance of this heading related basically to foreclosed assets or recovered assets of finance leases. As of December 31, 2008, the balance of the foreclosed assets amounted to €333 million, €318 million of which corresponds to real state assets.
On March 4, 2008 BBVA Bancomer, S.A de C.V concluded the sale of its corporate headquarters, Centro Bancomer and its car park, with a gross gain of €61.3 million, recognized, as of December 31, 2008, in the heading “Gains in written off assets not classified as non-current“Non-current assets held for sale” in the accompanying consolidated income statementsbalance sheets, broken down by the origin of 2008. As of December 31, 2007 thesethe assets, were recognized in the heading “Tangible assets — Land and buildings for own use” (Note 19) in the accompanying consolidated balance sheets. Jointly with this operation BBVA Bancomer subscribed a contract for the renting of Centro Bancomer and its car park for a 3 year period extendable for 2 more years.is as follows:
The fair value of the items included in non current assets held for sale was determined by reference to appraisals performed by companies registered as valuers in each of the geographical areas in which the assets are located.
In the case of Spain, the independent valuation and appraisal companies authorised by the Bank of Spain and entrusted with the appraisal of these assets were: Krata, S.A., Gesvalt, S.A., Alia Tasaciones, S.A., Tasvalor, S.A. and Trinsa, S.A.
Management provides the assumptions, including both quantitative and qualitative information, about the specified asset or liability to the third party valuation and appraisal companies. We primarily utilize the third-parties to accumulate the data from multiple sources and assemble a report that summarizes the information obtained. We then use that information to determine the fair value. The third-party valuation firm is supervised by our personnel who are knowledgeable about valuations and fair value. We evaluate the appropriateness of the valuation methodology utilized.
As of December 31, 2008, 2007 and 2006, there were no liabilities associated with non-current assets held for sale.
F-85
| |
17. | INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD |
17.1. INVESTMENTS IN ASSOCIATES
The following table shows the detail of the most significant Group’s investments in associates as of December 31, 2008, 2007 and 2006:
| | | | | | | | | | | | | |
Investments in Associates | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Citic International Financial Holdings Limited CIFH | | | 541 | | | | 432 | | | | — | |
| Occidental Hoteles Management, S.L.(*) | | | 128 | | | | 131 | | | | — | |
| Tubos Reunidos, S.A. | | | 54 | | | | 85 | | | | 69 | |
| BBVA Elcano Empresarial II, S.C.R., S.A. | | | 39 | | | | 57 | | | | 31 | |
| BBVA Elcano Empresarial, S.C.R., S.A. | | | 39 | | | | 57 | | | | 31 | |
| Rest of companies | | | 93 | | | | 84 | | | | 75 | |
| | | | | | | | | | | | | |
Total | | | 894 | | | | 846 | | | | 206 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Non-Current Assets Held-for-Sale
| | | | | | | | | |
Breakdown by type of Asset | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Property, plants and equipment | | | 252 | | | | 397 | | | | 151 | |
| Buildings for own use | | | 188 | | | | 313 | | | | 79 | |
| Operating leases | | | 64 | | | | 84 | | | | 72 | |
| Foreclosures and recoveries | | | 1,513 | | | | 861 | | | | 391 | |
| Foreclosures | | | 1,427 | | | | 795 | | | | 364 | |
| Recoveries from financial leases | | | 86 | | | | 66 | | | | 27 | |
| Accrued amortization(*) | | | (52 | ) | | | (41 | ) | | | (34 | ) |
| Impairment losses | | | (184 | ) | | | (167 | ) | | | (64 | ) |
| | | | | | | | | | | | | |
Total | | | 1,529 | | | | 1,050 | | | | 444 | |
| | | | | | | | | | | | | |
| | |
| (*) | | Former Metropolitan Participaciones, S.L.Until classified as non-current assets held for sale |
The detail of the balance and gross changes asAs of December 31, 2010, 2009 and 2008, 2007there were no liabilities associated with non-current assets held for sale.
F-99
As of December 31, 2010, 2009 and 20062008, the changes in thisthe heading “Non-current assets held for sale” of the accompanying consolidated balance sheets were as follow:
| | | | | | | | | | | | | | | | | |
Non-Current Assets Held-for-Sale.
| | | | | | | | | | | | |
Changes in the Period | | 2010 | | | 2009 | | | 2008 | | | | |
| | | Millions of euros | |
| |
| Balance at the beginning | | | 1,217 | | | | 506 | | | | 306 | | | | | |
| Additions | | | 1,513 | | | | 919 | | | | 515 | | | | | |
| Retirements | | | (1,017 | ) | | | (780 | ) | | | (374 | ) | | | | |
| Acquisition of subsidiaries | | | — | | | | — | | | | — | | | | | |
| Transfers | | | 145 | | | | 493 | | | | 57 | | | | | |
| Exchange difference and other | | | (172 | ) | | | 79 | | | | 2 | | | | | |
| | | | | | | | | | | | | | | | | |
| Balance at the end(1) | | | 1,686 | | | | 1,217 | | | | 506 | | | | | |
| | | | | | | | | | | | | | | | | |
Impairment — | | | | | | | | | | | | | | | | |
| Balance at the beginning | | | 167 | | | | 62 | | | | 66 | | | | | |
| Additions | | | 221 | | | | 134 | | | | 38 | | | | | |
| Retirements | | | (44 | ) | | | (7 | ) | | | (22 | ) | | | | |
| Transfers | | | 38 | | | | 77 | | | | 25 | | | | | |
| Exchange difference and other | | | (225 | ) | | | (99 | ) | | | (45 | ) | | | | |
| | | | | | | | | | | | | | | | | |
| Balance at the end(2) | | | 157 | | | | 167 | | | | 62 | | | | | |
| | | | | | | | | | | | | | | | | |
Total(1) — (2) | | | 1,529 | | | | 1,050 | | | | 444 | | | | | |
| | | | | | | | | | | | | | | | | |
| |
| 16.1. | FROM TANGIBLE ASSETS FOR OWN USE |
The most significant changes in the balance of the heading “Non-current assets held for sale — From tangible assets for own use”, in 2010, 2009 and 2008, were a result of the following operations:
Sale of property with leaseback in 2010 and 2009.
In 2009, 1,150 properties (offices and other singular buildings) belonging to the Group in Spain were reclassified to this heading at an amount of €426 million, for which a sales plan had been established. As of December 31, 2008, these assets were recognized under the heading “Tangible assets — Property, plants and equipment — For own use” of the accompanying consolidated balance sheets (Note 19).
In 2010 and 2009, the Bank sold 164 and 971 properties, respectively, in Spain to investments not related to BBVA Group for a total sale price of €404 million and €1,263 million at market prices, respectively, without making funds available to the buyers to pay the price of these transactions.
At the same time the Bank signed long-term operating leases with these investors on the aforementioned properties for periods of 10, 15, 20, 25 or 30 years (according to the property) and renewable. Most have obligatory periods of 20 or 30 years. Most can be extended for a maximum of three additional5-year periods, up to a total of 35 to 45 years. The total annual nominal income from the real estate in said operating lease arrangements amounted to €115 million. This income is updated annually based on the terms and conditions set forth in said arrangements.
In 2010 and 2009, a total of €113 and €31 million, respectively, were registered to the enclosed income statement for income from rents (Note 46.2) corresponding to said lease contracts.
The sale agreements also established call options for each of the properties at the termination of each of the lease agreements so that the Bank can repurchase these properties The repurchasing price of these call options will be the market value as determined by an independent expert. For this reason, these transactions have been considered as firm sales. Therefore, the Group made a gross profit of €273 and €914 million, recognized under the heading “Gains (losses) in non-current assets held for sale not classified as discontinued operations” in the accompanying consolidated income statements for 2010 and 2009 (see Note 52).
F-100
The current value of the future minimum payments the Bank will incur in the mandatory period, as of December 31, 2010, is €106 million in 1 year, €349 million between 2 and 5 years and €649 million in more than 5 years.
Sale of the Bancomer building in 2008
On March 4, 2008, BBVA Bancomer, S.A. de C.V. completed the process of selling its Centro Bancomer property together with its car part, for which it obtained a gross profit of €61.3 million, recognized under the heading “Gains (losses) in non-current assets held for sale not classified as discontinued operations” in the accompanying consolidated income statement for 2008 (see Note 52). This transaction was carried out without the purchaser receiving any type of finance from any BBVA Group entity.
Jointly with the sale agreement, an operational leasing agreement was concluded for this property and its car park for a3-year period extendable for 2 more years.
16.2. FROM FORECLOSURES OR RECOVERIES
As of December 31, 2010, the balance of the heading “Non-current assets held for sale - Foreclosures or recoveries” was made up of €1,114 million of assets for residential use, €209 million of assets for tertiary use (industrial, commercial or offices) and €10 million of assets for agricultural use.
In 2010, the additions of assets through foreclosures or recoveries amounted to €1,306 million. The derecognitions in 2010 through sales of such assets amounted to €700 million.
As of December 31, 2010, mean maturity of the assets through foreclosures or recoveries was less than 2 years.
In 2010, some of the sales operations of these assets were financed by some Group entities. The amount of the loans granted to the buyers of these assets was €193 million, with a mean percentage financed of 90.4% of the price of sale.
As of December 31, 2010, there were €32 million of gains from the financed sale of these assets yet to be recognized for transactions completed in 2010 as well as in previous years.
The breakdown of the balances of “Investments in entities accounted for using the equity method” in accompanying the consolidated balance sheets is as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millons of euros | |
| |
| Balance at beginning of year | | | 846 | | | | 206 | | | | 946 | |
| Acquisitions: | | | 655 | | | | 626 | | | | 28 | |
Of which: | | | | | | | | | | | | |
| Citic International Financial Holdings Limited (CIFH) | | | 655 | | | | 432 | | | | — | |
| Occidental Hoteles Management, S.L. | | | — | | | | 131 | | | | — | |
| Disposals | | | (782 | ) | | | — | | | | (802 | ) |
Of which: | | | | | | | | | | | | |
| Tubos Reunidos, S.A.(*) | | | (41 | ) | | | — | | | | — | |
| Transfers and others | | | (739 | ) | | | — | | | | — | |
Of which: | | | 175 | | | | 14 | | | | 34 | |
| | | | | | | | | | | | | |
| Balance at end of year | | | 894 | | | | 846 | | | | 206 | |
| | | | | | | | | | | | | |
Of which: | | | | | | | | | | | | |
| Goodwill | | | 217 | | | | 119 | | | | 4 | |
| CIFH | | | 214 | | | | 115 | | | | — | |
| Other | | | 3 | | | | 4 | | | | 4 | |
| | | | | | | | | | | | | |
Investments in Entities Accounted for Using the Equity Method | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Associate entities | | | 4,247 | | | | 2,614 | | | | 894 | |
| Jointly controlled entities | | | 300 | | | | 308 | | | | 573 | |
| | | | | | | | | | | | | |
Total | | | 4,547 | | | | 2,922 | | | | 1,467 | |
| | | | | | | | | | | | | |
F-101
17.1. ASSOCIATES
The following table shows the carrying amount of the most significant of the Group’s investments in associates in the accompanying consolidated balance sheets:
| | | | | | | | | | | | | |
Associates Entities | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Grupo CITIC | | | 4,022 | | | | 2,296 | | | | 541 | |
| Occidental Hoteles Management, S.L.(*) | | | — | | | | 84 | | | | 128 | |
| Tubos Reunidos, S.A.(**) | | | 51 | | | | 52 | | | | 54 | |
| BBVA Elcano Empresarial II, S.C.R.R.S., S.A. | | | 37 | | | | 49 | | | | 39 | |
| BBVA Elcano Empresarial, S.C.R.R.S., S.A. | | | 37 | | | | 49 | | | | 39 | |
| Rest of associate | | | 100 | | | | 84 | | | | 93 | |
| | | | | | | | | | | | | |
Total | | | 4,247 | | | | 2,614 | | | | 894 | |
| | | | | | | | | | | | | |
| | |
| (*) | | Corresponds toSince November 2010 the sale of the 0.853% of the capitalcompany had been accounted for as a jointly controlled entitie. |
|
| (**) | | Company that quoted in Madrid’s stock in January 2008 (see appendix VI).exchange market. |
The following tables showinvestment in the book valueCITIC Group includes the investment in Citic International Financial Holdings Limited (“CIFH”) and the fair valueChina National Citic Bank (“CNCB”).
Appendix IV shows details of listed associates accounted for using the equity method as of December 31, 2008 and 2007, calculated on the base of its official listed:2010.
| | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Book
| | | Fair
| | | Book
| | | Fair
| |
Company | | Value | | | Value | | | Value | | | Value | |
| | | Millions of euros | |
| |
| Tubos Reunidos, S.A. | | | 54 | | | | 85 | | | | 85 | | | | 241 | |
| Citic International Financial Holdings Limited(*) | | | — | | | | — | | | | 432 | | | | 355 | |
The details of the balance and gross changes as of December 31, 2010, 2009 and 2008 under this heading in the accompanying consolidated balance sheets are as follows:
| | | | | | | | | | | | | | | | | |
Associates Entities. Changes in the Year Breakdown of Goodwill | | 2010 | | | 2009 | | | 2008 | | | | |
| | | Millions of euros | |
| |
Balance at the beginning | | | 2,614 | | | | 894 | | | | 846 | | | | | |
| Acquisitions and capital increases(*) | | | 1,210 | | | | 53 | | | | 655 | | | | | |
| Disposals | | | (9 | ) | | | (2 | ) | | | (782 | ) | | | | |
| Transfers and others(**) | | | 432 | | | | 1,669 | | | | 175 | | | | | |
| | | | | | | | | | | | | | | | | |
Balance at the end | | | 4,247 | | | | 2,614 | | | | 894 | | | | | |
| | | | | | | | | | | | | | | | | |
Of which: | | | | | | | | | | | | | | | | |
Goodwill | | | 1,574 | | | | 844 | | | | 217 | | | | | |
| CITIC Group | | | 1,570 | | | | 841 | | | | 214 | | | | | |
| Rest | | | 4 | | | | 3 | | | | 3 | | | | | |
| | |
| (*) | | DelistedThe change of 2010 corresponds basically to the acquisition of 4.93% of CNCB formalized in April 2010 |
|
| (**) | | Correspond mainly to the reclassification from the Hong Kong stockheading“Available-for-sale financial assets ‘” of CNCB investmentand in 2009 and in 2010 due to the exchange in November 2008.rate development. |
F-86
Appendix V shows associate entities as of December 31, 2008.
Agreement with the CITIC Group
On November 22, 2006The BBVA reached an agreementGroup holds several agreements with the banking group CITIC Group (“CITIC”) to develop a strategic alliance in the Chinese market. In accordance with this agreement, BBVA acquired in March 2007 a 14.58% ownership interest, for an investment of €483 million in “Citic International Financial Holdings” (“CIFH”) which develops its activity in Hong Kong, being quoted as well in the Hong Kong Stock Exchange. The investment in CIFH, despite representing less than 20%, is accounted for using the equity method because it exercises significant influence under the terms of this strategic agreement.
Under the terms of the same agreement, BBVA acquired in March 2007 a 4.83% ownership interest, for an investment of €719 million in “China Citic Bank” (“CNCB”).
In June of 2008, BBVA signed a new agreement with the CITIC Group. Under the terms of the new agreement, the Group committed to raising its interests in CIFH and CNCB to around 30% and 10%, respectively. As of December 31, 2008, the Group had increased its stakes in CIFH and CNCB to 29.68% and 9.93%, respectively.
The investment in CIFH was made in cash after this company delisted from the Hong Kong Stock Exchange. Subsequently, CIFH sold its investment in CNCB (15%) to its existing shareholders on a proportionate basis. This acquisition, coupled with the purchase of an additional 0.65% stake from the CITIC Group, raised BBVA’s ownership interest in CNCB at year-end 2008 to 9.93%. These acquisitions entailed a total payout of €926 million.
Subsequent to year-end, BBVA acquired an additional 0.14% of CNCB for €19 million, bringing its overall ownership interest to 10.07%, as had been agreed.
Under the terms of the new agreement, BBVA also has an option to acquire an additional percentage, subject to certain conditions, during a two-year period, which could bring its interest in CNCB to 15%. As of December 31, 2008 and 2007, BBVA’s interest in CNCB was including under “Available-for-sale financial assets” in the accompanying consolidated balance sheets (Note 12).
The Group considers that BBVA’s investment in CNCB is considered strategic for the Group, as it is the platform for developing its business in continental China and is also key tofor the development of CITIC’s international business initiatives together with CITIC. In addition,business. BBVA has the status of “sole strategic investor” atin CNCB. In 2009, BBVA’s share in CNCB was reclassified from “Available for sale financial assets” of the accompanying consolidated balance sheets (Note 12) to the heading “Investments in entities accounted for using the equity method — Associates” since the Group gained significant influence in the holding.
F-102
Furthermore, on April 1, 2010, after obtaining the corresponding authorizations, the purchase of an additional 4.93% of CNCB’s capital was finalized for €1,197 million.
The roleAs of strategic foreign investorDecember 31, 2010, BBVA had a 29.68% holding in commercial banksCIFH and 15% in the People’s Republic of China entails compliance with the following principles: to invest with a long-term horizon, to upgrade corporate governance, to undertake business alliances and to fend off the competition. Under this framework, BBVA participates in the definition of key policies at CNCB through its representation on the Board of Directors (BBVA will have 2 out of 15 seats on the Board under the new agreement) and on the Strategy Committee (1 member out of a total of 6).
In addition, under the umbrella of its strategic commitment to CNCB, BBVA is working together with CNCB on the idea of signing cooperation alliances under profit sharing regimes in the car financing and private banking segments. All strategic cooperation between the two parties is developed under the guidance and oversight of the Cooperation Committee created to this end by BBVA and CNCB, with both entities equally represented. Along these lines, the two entities’ executives are in constant contact and there is an ongoing flow of information regarding business models, risk management and control tools and technology.CNCB.
17.2. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES
TheThis heading of the accompanying consolidated balance sheets encompasses the jointly controlled entities that the Group has considered should be accounted for using the equity method (see Note 2.1) because reflectthis better reflects the economic reality of such holdings, must be accounted by the “equity method” (Note 2.1.b) are registered in this heading of accompanying consolidated balance sheet.holdings.
F-87
The following table shows the detailbalances of the most significant of the Group’s investments in the primary jointly controlled entities as of December 31, 2008, 2007 and 2006:in the accompanying consolidated balance sheets:
| | | | | | | | | | | | | | | | | | | |
Jointly Controlled Entities | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Corporación IBV Participaciones Empresariales S.A. | | | 385 | | | | 574 | | | | 565 | | | | 71 | | | | 157 | | | | 385 | |
| Occidental Hoteles Management, S.L.(*) | | | | 88 | | | | — | | | | — | |
Fideicomiso F/403853-5 BBVA Bancomer SoS ZIBAT | | | 20 | | | | — | | | | — | | | | 22 | | | | 20 | | | | 20 | |
| I+D Mexico, S.A. | | | | 22 | | | | 15 | | | | 14 | |
| Fideicomiso Hares BBVA Bancomer F/47997-2(**) | | | | — | | | | 15 | | | | 12 | |
| Fideicomiso F/70413 Mirasierra | | | | 14 | | | | 12 | | | | — | |
| Fideicomiso F/402770-2 Alamar | | | | 11 | | | | 10 | | | | — | |
| Fideicomiso F/403112-6 Dos lagos | | | | 11 | | | | 9 | | | | — | |
| Las Pedrazas Golf, S.L. | | | 16 | | | | — | | | | — | | | | 10 | | | | 9 | | | | 16 | |
| Dintransa Rentrucks, S.A. | | | 15 | | | | — | | | | — | | |
| Altitude Software SGPS, S.A. | | | | 10 | | | | — | | | | — | |
| Rest | | | 137 | | | | 122 | | | | 118 | | | | 41 | | | | 61 | | | | 111 | |
| | | | | | | | | | | | | | | |
Total | | | 573 | | | | 696 | | | | 683 | | | | 300 | | | | 308 | | | | 558 | |
| | | | | | | | | | | | | | | |
Of which | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill | | | | | | | | | | | | | | | 9 | | | | 5 | | | | 8 | |
| Grupo Profesional Planeación y Proyectos S.A. de C.V. | | | 4 | | | | 4 | | | | 5 | | |
| Dintransa Rentrucks, S.A. | | | 8 | | | | — | | | | — | | |
| Rest | | | 4 | | | | 2 | | | | — | | |
| | | | | | | | | |
| | | | 16 | | | | 6 | | | | 5 | | |
| | | | | | | | | |
| | |
| (*) | | Since November 2010 the company had been accounted for as a jointly controlled entitie. |
|
| (**) | | Since august 2010 the company had been accounter for as a subsidiary. |
If the jointly controlled entities accounted for using equity method had been accounted for by the proportionate method, the Group had been increased as follow,effect on the Group’s main consolidated figures as of December 31, 2010, 2009 and 2008 2007 and 2006:would have been as follows:
| | | | | | | | | | | | | |
Increase | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Group’s Asset | | | 910 | | | | 1,009 | | | | 1,017 | |
| Net interest income | | | 139 | | | | 122 | | | | 88 | |
| Gross Income | | | 17 | | | | 40 | | | | 297 | |
| | | | | | | | | | | | | |
Jointly Controlled Entities. Effect on the Group’s main figures | | 2010 | | 2009 | | 2008 |
| | | Millions of euros |
| |
| Assets | | | 1,062 | | | | 863 | | | | 910 | |
| Liabilities | | | 313 | | | | 469 | | | | 139 | |
| Net operating income | | | 15 | | | | (12 | ) | | | 17 | |
Appendix V showDetails of the jointly controlled entities consolidated using the equity method as of December 31, 2008.2010 are shown in Appendix IV.
F-103
| |
| 17.3. | INFORMATION ABOUT ASSOCIATES AND JOINTLY CONTROLLED ENTITIES BY THE PROPORTIONATE CONSOLIDATIONEQUITY METHOD |
The following table provides relevant information of the balance sheet and income statement of associates and jointly controlled entities byaccounted for using the proportionate consolidationequity method as of December 31, 2010, 2009 and 2008, 2007 and 2006, respectively (Appendix V)(see Appendix IV).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | | 2010(*) | | 2009(*) | | 2008(*) | |
| | | | | Jointly
| | | | Jointly
| | | | Jointly
| | | | | Jointly
| | | | Jointly
| | | | Jointly
| |
| | | | | Controlled
| | | | Controlled
| | | | Controlled
| | |
Items (*) | | Associates | | Entities | | Associates | | Entities | | Associates | | Entities | | |
Associates and Jointly Controlles Entities
| | | | | Controlled
| | | | Controlled
| | | | Controlled
| |
Financial Main figures | | | Associates | | Entities | | Associates | | Entities | | Associates | | Entities | |
| | | Millions of euros | | | Millions of euros | |
| |
| Current Assets | | | 745 | | | | 559 | | | | 423 | | | | 680 | | | | 125 | | | | 655 | | | | 19,979 | | | | 279 | | | | 10,611 | | | | 347 | | | | 745 | | | | 559 | |
| Non-current Assets | | | 4,162 | | | | 349 | | | | 2,116 | | | | 329 | | | | 109 | | | | 324 | | | | 17,911 | | | | 780 | | | | 8,463 | | | | 514 | | | | 4,162 | | | | 349 | |
| Current Liabilities | | | 230 | | | | 136 | | | | 385 | | | | 199 | | | | 47 | | | | 191 | | | | 32,314 | | | | 179 | | | | 10,356 | | | | 108 | | | | 230 | | | | 136 | |
| Non-current Liabilities | | | 4,677 | | | | 772 | | | | 2,154 | | | | 810 | | | | 187 | | | | 788 | | | | 5,576 | | | | 879 | | | | 8,719 | | | | 754 | | | | 4,677 | | | | 772 | |
| | | | | | | | | | | | | | | |
| Net sales | | | 210 | | | | 102 | | | | 181 | | | | 109 | | | | 131 | | | | 145 | | | | 855 | | | | 168 | | | | 605 | | | | 84 | | | | 210 | | | | 102 | |
| Operating Income | | | 99 | | | | 17 | | | | 64 | | | | 40 | | | | 21 | | | | 297 | | | | 450 | | | | 15 | | | | 244 | | | | (12 | ) | | | 99 | | | | 17 | |
| Net Income | | | 93 | | | | 286 | | | | 29 | | | | 221 | | | | 13 | | | | 269 | | | | 339 | | | | 1 | | | | 166 | | | | (14 | ) | | | 93 | | | | 286 | |
| | | | | | | | | | | | | | | |
| | |
| (*) | | Non audited information |
F-88
17.4. NOTIFICATIONS ABOUT ACQUISITION OF HOLDINGS
The notificationsAppendix V shown on the acquisitionacquisitions and disposaldisposals of holdings in associates or jointly controlled entities and the notification dates thereof, in compliance with Article 86 of the Spanish Corporations LawAct and Article 53 of the Securities Market LawAct 24/1988, are listed in Appendix VI.1988.
17.5 IMPAIRMENT
DuringNo impairment losses on the goodwill of jointly-controlled entities were recognized in 2010. For the year ended December 31, 2009, €3 million of impairment losses on goodwill in jointly controlled entities were recognized, of which most were related to Econta Gestión Integral, S.L. For the year ended December 31, 2008, and 2007, theno impairment on goodwill in associates and jointly controlled entities has not registered impairment.
During 2006, the goodwill in jointly controlled entities was impaired for €6 million.recognized.
This heading ofin the accompanying consolidated balance sheets reflects the amounts to receive fromreceivable by consolidated entities whose origins arefrom reinsurance contracts with third parties.
As of December 31, 2008, 2007 and 2006,The amounts recognized in the detail of the balance of this heading in theaccompanying consolidated balance sheets was as follows:corresponding to the share of the reinsurer in the technical provisions are set forth below:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Reinsurance asset | | | 29 | | | | 43 | | | | 32 | |
| | | | | | | | | | | | | |
Reinsurance Asset | | 2010 | | 2009 | | 2008 |
| | | Millions of euros |
| |
| Reinsurance assets | | | 28 | | | | 29 | | | | 29 | |
F-89F-104
As of December 31, 2010, 2009 and 2008, 2007 and 2006, the detail and the changedetails of the balance of this heading in the accompanying consolidated balance sheets, based onbroken down by the nature of the related items, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Assets
| | | | | | | | | | | | | | | Assets
| | | |
| | | Property, Plants and Equipment | | Total
| | | | Leased Out
| | | | | For Own Use | | Total
| | | | Leased
| | | |
| | | | | | | Furniture,
| | Tangible
| | | | Under an
| | | | | | | | | Furniture,
| | Tangible
| | | | Out Under
| | | |
| | | Land and
| | Work in
| | Fixtures
| | Asset of
| | Investment
| | Operating
| | | | | Land and
| | Work in
| | Fixtures and
| | Asset of
| | Investment
| | an Operating
| | | |
2008 | | Buildings | | progress | | and Vehicles | | Own Use | | Properties | | Lease | | Total | | |
2010 | | | Buildings | | Progress | | Vehicles | | Own Use | | Properties | | Lease | | Total | |
| | | Millions of euros | | | Millions of euros | |
| |
Revalued cost — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2008 | | | 3,415 | | | | 151 | | | | 5,024 | | | | 8,590 | | | | 96 | | | | 966 | | | | 9,652 | | |
Cost — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | | 2,734 | | | | 435 | | | | 5,599 | | | | 8,768 | | | | 1,803 | | | | 989 | | | | 11,560 | |
| Additions | | | 156 | | | | 101 | | | | 561 | | | | 818 | | | | 41 | | | | 220 | | | | 1,079 | | | | 194 | | | | 179 | | | | 357 | | | | 730 | | | | 66 | | | | 245 | | | | 1,041 | |
| Retirements | | | (125 | ) | | | (55 | ) | | | (483 | ) | | | (663 | ) | | | (3 | ) | | | (28 | ) | | | (694 | ) | | | (49 | ) | | | (45 | ) | | | (156 | ) | | | (250 | ) | | | (8 | ) | | | (2 | ) | | | (260 | ) |
| Acquisition of subsidiaries in the year(*) | | | — | | | | — | | | | 16 | | | | 16 | | | | 1,661 | | | | — | | | | 1,677 | | |
| Acquisition of subsidiaries in the year | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Disposal of entities in the year | | | (12 | ) | | | (2 | ) | | | (5 | ) | | | (19 | ) | | | — | | | | — | | | | (19 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Transfers | | | (326 | ) | | | 263 | | | | (22 | ) | | | (85 | ) | | | (8 | ) | | | (162 | ) | | | (255 | ) | | | 387 | | | | (335 | ) | | | (81 | ) | | | (29 | ) | | | 32 | | | | (221 | ) | | | (218 | ) |
| Exchange difference and other | | | (78 | ) | | | (36 | ) | | | (225 | ) | | | (339 | ) | | | (1 | ) | | | — | | | | (340 | ) | | | 140 | | | | (19 | ) | | | (264 | ) | | | (144 | ) | | | (52 | ) | | | 4 | | | | (192 | ) |
Balance at 31 December 2008 | | | 3,030 | | | | 422 | | | | 4,866 | | | | 8,318 | | | | 1,786 | | | | 996 | | | | 11,100 | | |
| Accumulated depreciation — Balance at 1 January 2008 | | | (725 | ) | | | — | | | | (3,402 | ) | | | (4,127 | ) | | | (14 | ) | | | (245 | ) | | | (4,386 | ) | |
Balance at the end | | | | 3,406 | | | | 215 | | | | 5,455 | | | | 9,075 | | | | 1,841 | | | | 1,015 | | | | 11,931 | |
Accrued depreciation — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | | 750 | | | | — | | | | 3,818 | | | | 4,568 | | | | 53 | | | | 265 | | | | 4,886 | |
| Additions | | | (77 | ) | | | — | | | | (356 | ) | | | (433 | ) | | | (1 | ) | | | (18 | ) | | | (452 | ) | | | 86 | | | | — | | | | 362 | | | | 448 | | | | 15 | | | | 7 | | | | 470 | |
| Retirements | | | 30 | | | | — | | | | 490 | | | | 520 | | | | 3 | | | | 4 | | | | 527 | | | | (6 | ) | | | — | | | | (142 | ) | | | (148 | ) | | | (1 | ) | | | (1 | ) | | | (150 | ) |
| Acquisition of subsidiaries in the year(*) | | | — | | | | — | | | | (4 | ) | | | (4 | ) | | | (33 | ) | | | — | | | | (37 | ) | |
| Acquisition of subsidiaries in the year | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Disposal of entities in the year | | | 3 | | | | — | | | | 4 | | | | 7 | | | | — | | | | — | | | | 7 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Transfers | | | 11 | | | | — | | | | 4 | | | | 15 | | | | — | | | | — | | | | 15 | | | | 27 | | | | — | | | | (47 | ) | | | (20 | ) | | | (1 | ) | | | (110 | ) | | | (131 | ) |
| Exchange difference and other | | | 29 | | | | — | | | | 136 | | | | 165 | | | | — | | | | — | | | | 165 | | | | 32 | | | | — | | | | (244 | ) | | | (212 | ) | | | — | | | | 111 | | | | (101 | ) |
Balance at 31 December 2008 | | | (729 | ) | | | — | | | | (3,128 | ) | | | (3,857 | ) | | | (45 | ) | | | (259 | ) | | | (4,161 | ) | |
Impairment —
Balance at 1 January 2008 | | | (21 | ) | | | — | | | | (5 | ) | | | (26 | ) | | | (1 | ) | | | (2 | ) | | | (29 | ) | |
Balance at the end | | | | 889 | | | | — | | | | 3,747 | | | | 4,636 | | | | 66 | | | | 272 | | | | 4,974 | |
Impairment — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | | 15 | | | | — | | | | 4 | | | | 19 | | | | 116 | | | | 32 | | | | 167 | |
| Additions | | | (3 | ) | | | — | | | | — | | | | (3 | ) | | | (4 | ) | | | (1 | ) | | | (8 | ) | | | 8 | | | | — | | | | 1 | | | | 9 | | | | 83 | | | | — | | | | 92 | |
| Retirements | | | 1 | | | | — | | | | — | | | | 1 | | | | — | | | | — | | | | 1 | | | | (2 | ) | | | — | | | | (5 | ) | | | (7 | ) | | | — | | | | (14 | ) | | | (21 | ) |
| Acquisition of subsidiaries in the year(*) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Acquisition of subsidiaries in the year | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Exchange difference and other | | | 7 | | | | — | | | | 2 | | | | 9 | | | | (3 | ) | | | (2 | ) | | | 4 | | | | 10 | | | | — | | | | — | | | | 10 | | | | 7 | | | | 1 | | | | 18 | |
Balance at 31 December 2008 | | | (16 | ) | | | — | | | | (3 | ) | | | (19 | ) | | | (8 | ) | | | (5 | ) | | | (32 | ) | |
Balance at the end | | | | 31 | | | | — | | | | — | | | | 31 | | | | 206 | | | | 19 | | | | 256 | |
Net tangible assets — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net tangible assets —
Balance at 1 January 2008 | | | 2,669 | | | | 151 | | | | 1,617 | | | | 4,437 | | | | 82 | | | | 719 | | | | 5,238 | | |
Balance at the beginning | | | | 1,969 | | | | 435 | | | | 1,777 | | | | 4,181 | | | | 1,634 | | | | 692 | | | | 6,507 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2008 | | | 2,285 | | | | 422 | | | | 1,735 | | | | 4,442 | | | | 1,734 | | | | 732 | | | | 6,908 | | |
Balance at the end | | | | 2,486 | | | | 215 | | | | 1,708 | | | | 4,408 | | | | 1,569 | | | | 724 | | | | 6,701 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-105
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Assets
| | | | |
| | | For Own Use | | | Total
| | | | | | Leased
| | | | |
| | | | | | | | | Furniture,
| | | Tangible
| | | | | | Out Under
| | | | |
| | | Land and
| | | Work in
| | | Fixtures and
| | | Asset of
| | | Investment
| | | an Operating
| | | Total
| |
2009 | | Buildings | | | Progress | | | Vehicles | | | Own Use | | | Properties | | | Lease | | | | |
| | | Millions of euros | |
| |
Cost — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | 3,030 | | | | 422 | | | | 4,866 | | | | 8,318 | | | | 1,786 | | | | 996 | | | | 11,100 | |
| Additions | | | 120 | | | | 102 | | | | 437 | | | | 659 | | | | 74 | | | | 210 | | | | 943 | |
| Retirements | | | (22 | ) | | | (73 | ) | | | (661 | ) | | | (756 | ) | | | (35 | ) | | | (2 | ) | | | (793 | ) |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Disposal of entities in the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Transfers | | | (747 | ) | | | (16 | ) | | | (23 | ) | | | (786 | ) | | | (11 | ) | | | (212 | ) | | | (1,009 | ) |
| Exchange difference and other | | | 353 | | | | — | | | | 980 | | | | 1,333 | | | | (11 | ) | | | (3 | ) | | | 1,319 | |
Balance at the end | | | 2,734 | | | | 435 | | | | 5,599 | | | | 8,768 | | | | 1,803 | | | | 989 | | | | 11,560 | |
Accrued depreciation — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | 729 | | | | — | | | | 3,128 | | | | 3,857 | | | | 45 | | | | 259 | | | | 4,161 | |
| Additions | | | 66 | | | | — | | | | 349 | | | | 415 | | | | 11 | | | | 8 | | | | 434 | |
| Retirements | | | (15 | ) | | | — | | | | (511 | ) | | | (526 | ) | | | — | | | | (1 | ) | | | (527 | ) |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Disposal of entities in the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Transfers | | | (253 | ) | | | — | | | | (15 | ) | | | (268 | ) | | | (2 | ) | | | (103 | ) | | | (373 | ) |
| Exchange difference and other | | | 223 | | | | — | | | | 867 | | | | 1,090 | | | | (1 | ) | | | 102 | | | | 1,191 | |
Balance at the end | | | 750 | | | | — | | | | 3,818 | | | | 4,568 | | | | 53 | | | | 265 | | | | 4,886 | |
Impairment — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | 16 | | | | — | | | | 3 | | | | 19 | | | | 8 | | | | 5 | | | | 32 | |
| Additions | | | 7 | | | | — | | | | 17 | | | | 24 | | | | 93 | | | | 38 | | | | 155 | |
| Retirements | | | (2 | ) | | | — | | | | (17 | ) | | | (19 | ) | | | (1 | ) | | | — | | | | (20 | ) |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Exchange difference and other | | | (6 | ) | | | — | | | | 1 | | | | (5 | ) | | | 16 | | | | (11 | ) | | | — | |
Balance at the end | | | 15 | | | | — | | | | 4 | | | | 19 | | | | 116 | | | | 32 | | | | 167 | |
Net tangible assets — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | 2,285 | | | | 422 | | | | 1,735 | | | | 4,442 | | | | 1,734 | | | | 732 | | | | 6,908 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the end | | | 1,969 | | | | 435 | | | | 1,777 | | | | 4,181 | | | | 1,634 | | | | 692 | | | | 6,507 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-106
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Assets
| | | | |
| | | For Own Use | | | Total
| | | | | | Leased
| | | | |
| | | | | | | | | Furniture,
| | | tangible
| | | | | | Out Under
| | | | |
| | | Land and
| | | | | | Fixtures and
| | | asset of
| | | Investment
| | | an Operating
| | | | |
2008 | | Buildings | | | Work in Progress | | | Vehicles | | | Own Use | | | Properties | | | Lease | | | Total | |
| | | Millions of euros | |
| |
Cost — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | 3,415 | | | | 151 | | | | 5,024 | | | | 8,590 | | | | 96 | | | | 966 | | | | 9,652 | |
| Additions | | | 156 | | | | 101 | | | | 561 | | | | 818 | | | | 41 | | | | 220 | | | | 1,079 | |
| Retirements | | | (125 | ) | | | (55 | ) | | | (483 | ) | | | (663 | ) | | | (3 | ) | | | (28 | ) | | | (694 | ) |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | 16 | | | | 16 | | | | 1,661 | | | | — | | | | 1,677 | |
| Disposal of entities in the year | | | (12 | ) | | | (2 | ) | | | (5 | ) | | | (19 | ) | | | — | | | | — | | | | (19 | ) |
| Transfers | | | (326 | ) | | | 263 | | | | (22 | ) | | | (85 | ) | | | (8 | ) | | | (162 | ) | | | (255 | ) |
| Exchange difference and other | | | (78 | ) | | | (36 | ) | | | (225 | ) | | | (339 | ) | | | (1 | ) | | | — | | | | (340 | ) |
Balance at the end | | | 3,030 | | | | 422 | | | | 4,866 | | | | 8,318 | | | | 1,786 | | | | 996 | | | | 11,100 | |
Accrued depreciation — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | 725 | | | | — | | | | 3,402 | | | | 4,127 | | | | 14 | | | | 245 | | | | 4,386 | |
| Additions | | | 77 | | | | — | | | | 356 | | | | 433 | | | | 1 | | | | 8 | | | | 442 | |
| Retirements | | | (30 | ) | | | — | | | | (490 | ) | | | (520 | ) | | | (3 | ) | | | (4 | ) | | | (527 | ) |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | 4 | | | | 4 | | | | 33 | | | | — | | | | 37 | |
| Disposal of entities in the year | | | (3 | ) | | | — | | | | (4 | ) | | | (7 | ) | | | — | | | | — | | | | (7 | ) |
| Transfers | | | (11 | ) | | | — | | | | (4 | ) | | | (15 | ) | | | — | | | | — | | | | (15 | ) |
| Exchange difference and other | | | (29 | ) | | | — | | | | (136 | ) | | | (165 | ) | | | — | | | | 10 | | | | (155 | ) |
Balance at the end | | | 729 | | | | — | | | | 3,128 | | | | 3,857 | | | | 45 | | | | 259 | | | | 4,161 | |
Impairment — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | 21 | | | | — | | | | 5 | | | | 26 | | | | 1 | | | | 2 | | | | 29 | |
| Additions | | | 3 | | | | — | | | | — | | | | 3 | | | | 4 | | | | 1 | | | | 8 | |
| Retirements | | | (1 | ) | | | — | | | | — | | | | (1 | ) | | | — | | | | — | | | | (1 | ) |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Exchange difference and other | | | (7 | ) | | | — | | | | (2 | ) | | | (9 | ) | | | 3 | | | | 2 | | | | (4 | ) |
Balance at the end | | | 16 | | | | — | | | | 3 | | | | 19 | | | | 8 | | | | 5 | | | | 32 | |
Net tangible assets — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the beginning | | | 2,669 | | | | 151 | | | | 1,617 | | | | 4,437 | | | | 82 | | | | 719 | | | | 5,238 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the end | | | 2,285 | | | | 422 | | | | 1,735 | | | | 4,442 | | | | 1,734 | | | | 732 | | | | 6,908 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The main changes under this heading in 2009 and 2008 are as follows:
2009
| | |
(*) | • | The reduction in the balance of the heading “Tangible assets — For own use — Land and buildings” in 2009 is mainly the result of the transfer of some properties owned by the Bank in Spain to the heading “Non-current assets held for sale”, as mentioned in Note 16. |
2008
| | |
| • | The balance under the heading “Investment properties” has increasedincludes mainly due to the incorporationrented buildings of the assets of Fondo Inmobiliarioreal estate fund BBVA Propiedad FII (see Appendix II) which ishas been fully consolidated since 2008 (see |
F-107
| | |
| | Appendix II) following the Group’s acquisition by the Group in 2008 of a 95.65% stake. The activity of this real estate fund is subject to regulations by the Spanish Securities and Exchange Commission (CNMV). |
F-90
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Assets
| | | | |
| | | Property, Plants and Equipment | | | Total
| | | | | | Leased
| | | | |
| | | | | | | | | Furniture,
| | | Tangible
| | | | | | Out Under
| | | | |
| | | Land and
| | | Work in
| | | Fixtures and
| | | Assets of
| | | Investment
| | | an Operating
| | | | |
2007 | | Buildings | | | Progress | | | Vehicles | | | Own Use | | | Properties | | | Lease | | | Total | |
| | | Millions of euros | |
| |
Revalued cost — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2007 | | | 3,088 | | | | 24 | | | | 4,974 | | | | 8,086 | | | | 76 | | | | 881 | | | | 9,043 | |
| Additions | | | 501 | | | | 138 | | | | 577 | | | | 1,216 | | | | 38 | | | | 213 | | | | 1,467 | |
| Retirements | | | (116 | ) | | | (29 | ) | | | (165 | ) | | | (310 | ) | | | (2 | ) | | | (16 | ) | | | (328 | ) |
| Acquisition of subsidiaries in the year | | | 388 | | | | 32 | | | | 65 | | | | 485 | | | | — | | | | 57 | | | | 542 | |
| Disposal of entities in the year | | | — | | | | — | | | | (19 | ) | | | (19 | ) | | | (16 | ) | | | (160 | ) | | | (195 | ) |
| Transfers | | | (272 | ) | | | (8 | ) | | | (174 | ) | | | (454 | ) | | | 1 | | | | — | | | | (453 | ) |
| Exchange difference and other | | | (174 | ) | | | (6 | ) | | | (234 | ) | | | (414 | ) | | | (1 | ) | | | (9 | ) | | | (424 | ) |
Balance at 31 December 2007 | | | 3,415 | | | | 151 | | | | 5,024 | | | | 8,590 | | | | 96 | | | | 966 | | | | 9,652 | |
Accumulated depreciation — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at 1 January 2007 | | | (798 | ) | | | — | | | | (3,445 | ) | | | (4,243 | ) | | | (14 | ) | | | (231 | ) | | | (4,488 | ) |
| Additions | | | (54 | ) | | | — | | | | (340 | ) | | | (394 | ) | | | (3 | ) | | | (79 | ) | | | (476 | ) |
| Retirements | | | 6 | | | | — | | | | 114 | | | | 120 | | | | — | | | | 77 | | | | 197 | |
| Acquisition of subsidiaries in the year | | | (8 | ) | | | — | | | | (4 | ) | | | (12 | ) | | | — | | | | (21 | ) | | | (33 | ) |
| Disposal of entities in the year | | | — | | | | — | | | | 24 | | | | 24 | | | | — | | | | — | | | | 24 | |
| Transfers | | | 65 | | | | — | | | | 81 | | | | 146 | | | | — | | | | — | | | | 146 | |
| Exchange difference and other | | | 64 | | | | — | | | | 168 | | | | 232 | | | | 4 | | | | 9 | | | | 245 | |
Balance at 31 December 2007 | | | (725 | ) | | | — | | | | (3,402 | ) | | | (4,127 | ) | | | (13 | ) | | | (245 | ) | | | (4,385 | ) |
Impairment — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2007 | | | (27 | ) | | | — | | | | — | | | | (27 | ) | | | (1 | ) | | | — | | | | (28 | ) |
| Additions | | | (6 | ) | | | — | | | | (5 | ) | | | (11 | ) | | | — | | | | — | | | | (11 | ) |
| Retirements | | | 3 | | | | 4 | | | | — | | | | 7 | | | | — | | | | — | | | | 7 | |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2 | ) | | | (2 | ) |
| Exchange difference and other | | | 9 | | | | (4 | ) | | | — | | | | 5 | | | | — | | | | — | | | | 5 | |
Balance at 31 December 2007 | | | (21 | ) | | | — | | | | (5 | ) | | | (26 | ) | | | (1 | ) | | | (2 | ) | | | (29 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net tangible assets - Balance at 1 January 2007 | | | 2,263 | | | | 24 | | | | 1,529 | | | | 3,816 | | | | 61 | | | | 650 | | | | 4,527 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2007 | | | 2,669 | | | | 151 | | | | 1,617 | | | | 4,437 | | | | 82 | | | | 719 | | | | 5,238 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-91
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Assets
| | | | |
| | | Property, Plants and Equipment | | | Total
| | | | | | Leased
| | | | |
| | | | | | | | | Furniture,
| | | Tangible
| | | | | | Out Under
| | | | |
| | | Land and
| | | Work In
| | | Fixtures and
| | | Assets Of
| | | Investment
| | | an Operating
| | | | |
2006 | | Buildings | | | Progress | | | Vehicles | | | Own Use | | | Properties | | | Lease | | | Total | |
| | | Millions of euros | |
| |
Revalued cost — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2006 | | | 3,153 | | | | 19 | | | | 4,976 | | | | 8,148 | | | | 93 | | | | 630 | | | | 8,871 | |
| Additions | | | 58 | | | | 32 | | | | 436 | | | | 526 | | | | — | | | | 304 | | | | 830 | |
| Retirements | | | (14 | ) | | | (15 | ) | | | (195 | ) | | | (224 | ) | | | (5 | ) | | | (187 | ) | | | (416 | ) |
| Acquisition of subsidiaries in the year | | | 127 | | | | 2 | | | | 32 | | | | 161 | | | | — | | | | 150 | | | | 311 | |
| Disposal of entities in the year | | | (47 | ) | | | — | | | | (37 | ) | | | (84 | ) | | | — | | | | — | | | | (84 | ) |
| Transfers | | | (18 | ) | | | (7 | ) | | | 5 | | | | (20 | ) | | | (1 | ) | | | — | | | | (21 | ) |
| Exchange difference and other | | | (171 | ) | | | (7 | ) | | | (243 | ) | | | (421 | ) | | | (11 | ) | | | (16 | ) | | | (448 | ) |
Balance at 31 December 2006 | | | 3,088 | | | | 24 | | | | 4,974 | | | | 8,086 | | | | 76 | | | | 881 | | | | 9,043 | |
Accumulated depreciation — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2006 | | | (796 | ) | | | — | | | | (3,483 | ) | | | (4,279 | ) | | | (15 | ) | | | (164 | ) | | | (4,458 | ) |
| Additions | | | (68 | ) | | | — | | | | (266 | ) | | | (334 | ) | | | (1 | ) | | | (48 | ) | | | (383 | ) |
| Retirements | | | 13 | | | | — | | | | 160 | | | | 173 | | | | 1 | | | | 13 | | | | 187 | |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | (9 | ) | | | (9 | ) | | | — | | | | (48 | ) | | | (57 | ) |
| Disposal of entities in the year | | | 3 | | | | — | | | | 35 | | | | 38 | | | | — | | | | — | | | | 38 | |
| Transfers | | | 7 | | | | — | | | | 1 | | | | 8 | | | | — | | | | — | | | | 8 | |
| Exchange difference and other | | | 43 | | | | — | | | | 117 | | | | 160 | | | | 1 | | | | 16 | | | | 177 | |
Balance at 31 December 2006 | | | (798 | ) | | | — | | | | (3,445 | ) | | | (4,243 | ) | | | (14 | ) | | | (231 | ) | | | (4,488 | ) |
Impairment — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2006 | | | (28 | ) | | | — | | | | — | | | | (28 | ) | | | (1 | ) | | | — | | | | (29 | ) |
| Additions | | | (4 | ) | | | — | | | | — | | | | (4 | ) | | | — | | | | — | | | | (4 | ) |
| Retirements | | | 8 | | | | — | | | | — | | | | 8 | | | | — | | | | — | | | | 8 | |
| Acquisition of subsidiaries in the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Exchange difference and other | | | (3 | ) | | | — | | | | — | | | | (3 | ) | | | — | | | | — | | | | (3 | ) |
Balance at 31 December 2006 | | | (27 | ) | | | — | | | | — | | | | (27 | ) | | | (1 | ) | | | — | | | | (28 | ) |
Net tangible assets - | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2006 | | | 2,329 | | | | 19 | | | | 1,493 | | | | 3,841 | | | | 77 | | | | 466 | | | | 4,384 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2006 | | | 2,263 | | | | 24 | | | | 1,529 | | | | 3,816 | | | | 61 | | | | 650 | | | | 4,527 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| • | In March 2008, BBVA Bancomer bought two properties in Mexico City, one of them located on Paseo de la Reforma and the other on Parques Polanco, in which it will set up the new BBVA Bancomer Group corporate headquarters. |
In March 2008, BBVA Bancomer realized the acquisition of two buildings in the city of Mexico, one of them located on the Paseo de la Reforma and the other in Parques Polanco, in which it will establish its new corporate headquarters. These acquisitions were recognized, asAs of December 31, 2008, in2010 the heading “Tangible assets — Land and buildings for own use” in the accompanying consolidated balance sheets, for a totalcarrying amount of €71fully amortized financial assets that continue in use was €480 million.
The Group BBVA purchased, through a Real Estate company of the Group and in accordance with an agreement signed on June 19, 2007 with the “Group Gmp” (GMP), the “Parque Empresarial Foresta” located in a development area in the north of Madrid, where the new Corporate Headquarter will be build. This project has meant to the BBVA Group an investment of €434 million, recognized, as of December 31, 2008 and 2007, in the headings “Land and Buildings” and “works in progress” for an amount of €353 million and €81 million, respectively.
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The land and buildings acquired in 2007 in the “Parque Empresarial Foresta”, for the purpose of building a new corporate headquarters, were not deemed impaired at either December 31, 2008 or 2007. The main activity of the Group is carried out through a network of banking officesbank branches located geographically as shown in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Number of Branches | | | Number of branches | |
Area | | 2008 | | 2007 | | 2006 | | |
Bank Branches by Geographical Location | | | 2010 | | 2009 | | 2008 | |
| |
| Spain | | | 3,375 | | | | 3,595 | | | | 3,635 | | | | 3,024 | | | | 3,055 | | | | 3,375 | |
| United States | | | 4,267 | | | | 4,291 | | | | 3,742 | | |
| Americas | | | | 4,193 | | | | 4,267 | | | | 4,267 | |
| Rest of the world | | | 145 | | | | 142 | | | | 122 | | | | 144 | | | | 144 | | | | 145 | |
| | | | | | | | | | | | | | | |
Total | | | 7,787 | | | | 8,028 | | | | 7,499 | | | | 7,361 | | | | 7,466 | | | | 7,787 | |
| | | | | | | | | | | | | | | |
As of December 31, 2008, 20072010, 2009 and 2006,2008, the percentage of branches which were leased from third parties in Spain was 83%, 77% and 47.3%, 47.3%respectively, and 46.9%57%, respectively. As of December 31, 2008, 200755% and 2006, the percentage of branches which were leased from third parties61% in Latin America, was 61%, 56.7%respectively. The increase in the number of branches leased in Spain is mainly due to the sale and 60%, respectively.leaseback operations carried out in 2010 and 2009 described above (see Note 16).
Following theThe following table shows the detail of the net carrying amount of the tangible assets based oncorresponding to Spanish or foreign entities as of December 31, 2008, 20072010, 2009 and 2006:2008:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Tangible Assets by Spanish and Foreign
| | | | | | | | |
Subsidiaries Net Assets Values | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Foreign subsidiaries | | | 2,276 | | | | 2,271 | | | | 2,670 | | | | 2,741 | | | | 2,473 | | | | 2,276 | |
| BBVA, S.A. and Spanish subsidiaries | | | 4,633 | | | | 2,967 | | | | 1,857 | | |
| BBVA and Spanish subsidiaries | | | | 3,960 | | | | 4,034 | | | | 4,632 | |
| | | | | | | | | | | | | | | |
Total | | | 6,909 | | | | 5,238 | | | | 4,527 | | | | 6,701 | | | | 6,507 | | | | 6,908 | |
| | | | | | | | | | | | | | | |
Moreover, theThe amount of tangible assets under finance leasesfinancial lease schemes on which it is expected to exercise the purchase option to purchase was €2 millioninsignificant as December 31, 2008. As of December 31, 20072010, 2009 and 2006 the amount of tangible assets under finance leases on which it is expected exercise the option to purchase was not significant.2008.
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20.1. GOODWILL
As of December 31, 2010, 2009 and 2008, 2007 and 2006, the detaildetails of the balance of this heading andin the changes, according toaccompanying consolidated balance sheets, broken down by the companiescash-generating units (“CGU”) that originated them, waswere as follows:
| | | | | | | | | | | | | | | | | |
| | | Balance at
| | | | | | | | | | |
| | | beginning of
| | | Exchange
| | | | | | Balance at
| |
2008 | | year | | | Differences | | | Other (*) | | | end of Year | |
| | | Millions of euros | |
| |
| BBVA USA Bancshares, Inc. | | | 6,265 | | | | 366 | | | | 12 | | | | 6,643 | |
| Grupo Financiero Bancomer, S.A. de C.V. | | | 485 | | | | (79 | ) | | | — | | | | 406 | |
| Hipotecaria Nacional S.A. C.V. | | | 213 | | | | (35 | ) | | | — | | | | 178 | |
| BBVA Colombia, S.A. | | | 204 | | | | (11 | ) | | | — | | | | 193 | |
| BBVA Inversiones Chile, S.A. | | | 87 | | | | (16 | ) | | | — | | | | 71 | |
| Maggiore Fleet, S.p.A. | | | 34 | | | | — | | | | — | | | | 34 | |
| BBVA Chile, S.A. | | | 34 | | | | (6 | ) | | | — | | | | 28 | |
| BBVA Puerto Rico, S. A | | | 31 | | | | 2 | | | | — | | | | 33 | |
| FORUM Servicios Financieros,S.A. | | | 28 | | | | (3 | ) | | | — | | | | 25 | |
| AFP Provida, S.A. | | | 21 | | | | (3 | ) | | | — | | | | 18 | |
| BBVA Portugal,S.A. | | | 16 | | | | — | | | | — | | | | 16 | |
| Finanzia, Banco de Crédito, S.A. | | | 5 | | | | — | | | | — | | | | 5 | |
| BBVA Finanzia S.p.A. | | | 4 | | | | — | | | | — | | | | 4 | |
| BBVA Bancomer USA | | | 4 | | | | — | | | | — | | | | 4 | |
| FORUM Distribuidora, S.A. | | | 2 | | | | (1 | ) | | | — | | | | 1 | |
| BBVA Renting S.p.A. | | | 3 | | | | — | | | | (3 | ) | | | — | |
| | | | | | | | | | | | | | | | | |
FULLY CONSOLIDATED COMPANIES | | | 7,436 | | | | 214 | | | | 9 | | | | 7,659 | |
| | | | | | | | | | | | | | | | | |
Goodwill. Breakdown by CGU and Changes of the Period
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Balance at
| | | | | | Exchange
| | | | | | | | | Balance at
| |
2010 | | the Beginning | | | Additions | | | Difference | | | Impairment | | | Rest | | | the End | |
| | | Millions of euros | |
| |
| The United States | | | 5,357 | | | | — | | | | 418 | | | | — | | | | (2 | ) | | | 5,773 | |
| Mexico | | | 593 | | | | — | | | | 85 | | | | — | | | | — | | | | 678 | |
| Colombia | | | 205 | | | | — | | | | 31 | | | | — | | | | — | | | | 236 | |
| Chile | | | 65 | | | | — | | | | 11 | | | | — | | | | — | | | | 76 | |
| Chile Pensions | | | 108 | | | | — | | | | 18 | | | | — | | | | — | | | | 126 | |
| Spain and Portugal | | | 68 | | | | — | | | | — | | | | (13 | ) | | | — | | | | 55 | |
| Global markets(*) | | | — | | | | 1 | | | | 1 | | | | — | | | | 3 | | | | 5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 6,396 | | | | 1 | | | | 564 | | | | (13 | ) | | | 1 | | | | 6,949 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (*) | | The goodwills ofSince February 2010, Group PYPSA (CGU Global Markets), accounted for using the four banks merged in 2008 are included (see Note 3)proportionate method (previously accounted for using the equity method) |
There were no additions to, retirements or impairmentsGoodwill. Breakdown by CGU and Changes of the goodwill carried in the accompanying consolidated balance sheets in 2008.Period
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Balance at
| | | | | | Exchange
| | | | | | | | | Balance at
| |
2009 | | the Beginning | | | Additions | | | Difference | | | Impairment | | | Rest | | | the End | |
| | | Millions of euros | |
| |
| The United States | | | 6,676 | | | | — | | | | (226 | ) | | | (1,097 | ) | | | 4 | | | | 5,357 | |
| Mexico | | | 588 | | | | — | | | | 9 | | | | — | | | | (4 | ) | | | 593 | |
| Colombia | | | 193 | | | | — | | | | 12 | | | | — | | | | — | | | | 205 | |
| Chile | | | 54 | | | | — | | | | 11 | | | | — | | | | — | | | | 65 | |
| Chile Pensions | | | 89 | | | | — | | | | 19 | | | | — | | | | — | | | | 108 | |
| Spain and Portugal | | | 59 | | | | — | | | | — | | | | — | | | | 9 | | | | 68 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 7,659 | | | | — | | | | (175 | ) | | | (1,097 | ) | | | 9 | | | | 6,396 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill. Breakdown by CGU and Changes of the Period
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Balance at
| | | | | | Exchange
| | | | | | | | | Balance at
| |
2008 | | the Beginning | | | Additions | | | Difference | | | Impairment | | | Rest | | | the End | |
| |
| The United States | | | 6,296 | | | | — | | | | 368 | | | | — | | | | 12 | | | | 6,676 | |
| Mexico | | | 702 | | | | — | | | | (114 | ) | | | — | | | | — | | | | 588 | |
| Colombia | | | 204 | | | | — | | | | (11 | ) | | | — | | | | — | | | | 193 | |
| Chile | | | 64 | | | | — | | | | (10 | ) | | | — | | | | — | | | | 54 | |
| Chile Pensions | | | 108 | | | | — | | | | (19 | ) | | | — | | | | — | | | | 89 | |
| Spain and Portugal | | | 62 | | | | — | | | | — | | | | — | | | | (3 | ) | | | 59 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 7,436 | | | | — | | | | 214 | | | | — | | | | 9 | | | | 7,659 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
F-94F-109
| | | | | | | | | | | | | | | | | | | | | |
| | | Balance at
| | | | | | | | | | | | | |
| | | beginning of
| | | | | | | | | Exchange
| | | Balance at
| |
2007 | | year | | | Additions | | | Other | | | Differences | | | end of year | |
| | | Millions of euros | |
| |
| BBVA USA Bancshares, Inc. | | | 1,679 | | | | 5,171 | | | | (558 | ) | | | (27 | ) | | | 6,266 | |
of which: | | | | | | | | | | | | | | | | | | | | |
Laredo National Bank | | | 422 | | | | — | | | | (43 | ) | | | — | | | | 379 | |
Texas Regional Bank | | | 1,257 | | | | — | | | | (129 | ) | | | (27 | ) | | | 1,101 | |
State National Bank | | | — | | | | 270 | | | | (33 | ) | | | — | | | | 237 | |
Compass Bank | | | — | | | | 4,901 | | | | (353 | ) | | | — | | | | 4,549 | |
| Grupo Financiero Bancomer, S.A. de C.V. | | | 544 | | | | — | | | | (59 | ) | | | — | | | | 485 | |
| Hipotecaria Nacional S.A. C.V. | | | 239 | | | | — | | | | (26 | ) | | | — | | | | 213 | |
| BBVA Colombia, S.A. | | | 213 | | | | — | | | | (1 | ) | | | (8 | ) | | | 204 | |
| BBVA Pensiones Chile, S.A. | | | 90 | | | | — | | | | (3 | ) | | | — | | | | 87 | |
| Maggiore Fleet, S.p.A. | | | 36 | | | | — | | | | — | | | | (2 | ) | | | 34 | |
| BBVA Chile, S.A. | | | 35 | | | | — | | | | (1 | ) | | | — | | | | 34 | |
| BBVA Puerto Rico, S.A. | | | 35 | | | | — | | | | (4 | ) | | | — | | | | 31 | |
| FORUM Servicios Financieros,S.A. | | | 49 | | | | — | | | | (1 | ) | | | (20 | ) | | | 28 | |
| AFP Provida, S.A. | | | 22 | | | | — | | | | (1 | ) | | | — | | | | 21 | |
| BBVA Portugal,S.A. | | | 16 | | | | — | | | | — | | | | — | | | | 16 | |
| Finanzia, Banco de Crédito, S.A. | | | 5 | | | | — | | | | — | | | | — | | | | 5 | |
| BBVA Finanzia S.p.A. | | | 4 | | | | — | | | | — | | | | — | | | | 4 | |
| BBVA Bancomer USA | | | 4 | | | | — | | | | — | | | | — | | | | 4 | |
| BBVA Renting S.p.A. | | | — | | | | 1 | | | | — | | | | 2 | | | | 3 | |
| FORUM Distribuidora, S.A. | | | 2 | | | | — | | | | — | | | | — | | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | |
FULLY CONSOLIDATED COMPANIES | | | 2,973 | | | | 5,172 | | | | (654 | ) | | | (55 | ) | | | 7,436 | |
| | | | | | | | | | | | | | | | | | | | | |
As described in Note 2.2.8, the cash-generating units to which goodwill has been allocated are tested for impairment by including the allocated goodwill in their carrying amount. This analysis is performed at least annually and always if there is any indication of impairment.
There were no retirements or impairmentsAs of December 31, 2010, 2009 and 2008, the Group performed the goodwill carried inimpairment tests. The results from each of these tests on the accompanying consolidated balance sheets in 2007.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Balance at
| | | | | | | | | | | | | | | | | | | |
| | | Beginning of
| | | | | | | | | | | | Exchange
| | | | | | Balance at
| |
2006 | | Year | | | Additions | | | Other | | | Retirements | | | Differences | | | Impairment | | | End of Year | |
| | | Millions of euros | |
| |
| Texas Regional Bancshares, Inc. | | | — | | | | 1,294 | | | | — | | | | (37 | ) | | | — | | | | — | | | | 1,257 | |
| Grupo Financiero BBVA Bancomer, S.A. de C.V. | | | 617 | | | | — | | | | — | | | | (73 | ) | | | — | | | | — | | | | 544 | |
| Grupo Laredo | | | 474 | | | | — | | | | — | | | | (49 | ) | | | — | | | | (3 | ) | | | 422 | |
| Hipotecaria Nacional, S.A. de C.V. | | | 259 | | | | — | | | | — | | | | (30 | ) | | | — | | | | 10 | | | | 239 | |
| Grupo BBVA Colombia | | | 267 | | | | — | | | | — | | | | (19 | ) | | | — | | | | (35 | ) | | | 213 | |
| BBVA Pensiones Chile, S.A. | | | 104 | | | | — | | | | — | | | | (14 | ) | | | — | | | | — | | | | 90 | |
| Forum Servicios Financieros, S.A. | | | — | | | | 51 | | | | — | | | | (2 | ) | | | — | | | | — | | | | 49 | |
| Maggiore Fleet, S.p.A. | | | — | | | | 36 | | | | — | | | | — | | | | — | | | | — | | | | 36 | |
| BBVA Chile, S.A. | | | 41 | | | | — | | | | — | | | | (6 | ) | | | — | | | | — | | | | 35 | |
| BBVA Puerto Rico, S.A. | | | 39 | | | | — | | | | — | | | | (4 | ) | | | — | | | | — | | | | 35 | |
| AFP Provida | | | 26 | | | | — | | | | — | | | | (4 | ) | | | — | | | | — | | | | 22 | |
| BBVA Portugal, S.A. | | | 16 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16 | |
| Finanzia, Banco de Crédito, S.A. | | | 5 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5 | |
| BBVA Bancomer USA(*) | | | 5 | | | | — | | | | — | | | | (1 | ) | | | — | | | | — | | | | 4 | |
| BBVA Finanzia, S.p.A. | | | — | | | | 4 | | | | — | | | | — | | | | — | | | | — | | | | 4 | |
| Forum Distribuidora, S.A. | | | — | | | | 2 | | | | — | | | | — | | | | — | | | | — | | | | 2 | |
Invesco Management No1 | | | — | | | | 6 | | | | — | | | | — | | | | (6 | ) | | | — | | | | — | |
| Other companies | | | 5 | | | | 3 | | | | (9 | ) | | | — | | | | — | | | | 1 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
FULLY CONSOLIDATED COMPANIES | | | 1,858 | | | | 1,396 | | | | (9 | ) | | | (239 | ) | | | (6 | ) | | | (27 | ) | | | 2,973 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
dates mentioned were as follows:
| | |
(*) | • | Former Valley BankAs of December 31, 2010, there were no impairment losses on the goodwill recognized in the Group’s cash-generating units, except for the insignificant impairment on the goodwill for the cash-generating unit in Spain and Portugal for the impairment on the investments in Rentrucks, Alquiler y Servicios de Transportes, S.A. and in BBVA Finanzia SpA (for €9 million and €4 million, respectively). |
Annually an impairment testThe most significant goodwill corresponds to the CGU in the United States. The recoverable amount of this CGU is carried out for each company that generates goodwill.equal to its value in use. This test comparesis calculated as the presentdiscounted value of futurethe cash flowsflow projections that are expected to be obtained by each company with its book value and goodwill, in order to determine whether or not its value is impaired.Management estimates based on the latest budgets available for the next five years. As of December 31, 2008,20010, the Group used a sustainable growth rate of 4.2% (4.3% as a resultof December 31, 2009) to extrapolate the cash flows in perpetuity which was based on the US real GDP growth rate. The discount rate used to discount the cash flows is the cost of capital assigned to the CGU, and stood at 11.4% as of December 31, 2010 (11.2% as of December 31, 2009), which consists of the impairment tests carried out, there were no losses due to impairments in the value of these companies.
In 2007, the Group acquired 100% of the capital shares of State National Bancshares Inc. and Compass Bancshares Inc. The detail of the book value of the consolidated assets and liabilities of Compass Bancshares Inc. and State Nacional Bancshares, Inc. previous to its acquisition and the corresponding acquisition costs, gross of tax,
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which according to the acquisition method have been allocated at the moment of purchase and which are definitive, were as follow:
| | | | | | | | | |
Acquisition Cost of Compass Bancshares, Inc. | | Book Value | | | Fair Value | |
| | | Millions of euros | |
| |
Compass Bancshares, Inc. value at the date of acquisition | | | — | | | | — | |
| Cash | | | 426 | | | | 426 | |
| Loans and receivables | | | 18,610 | | | | 18,221 | |
| Financial assets | | | 5,692 | | | | 5,631 | |
| Tangible assets | | | 443 | | | | 514 | |
| Intangible assets obtained from previous business combinations | | | 560 | | | | 2 | |
| Intangible assets identify at the date of the business combination(*) | | | — | | | | 545 | |
| Other assets | | | 390 | | | | 391 | |
| Financial liabilities | | | (23,521 | ) | | | (23,518 | ) |
| Other liabilities | | | (378 | ) | | | (402 | ) |
| Recognised contingent liabilities | | | — | | | | — | |
| Deferred tax | | | — | | | | (18 | ) |
| | | | | | | | | |
Total Stockholders’ equity | | | 2,222 | | | | 1,792 | |
| | | | | | | | | |
Goodwill | | | | | | | 4,901 | |
| | | | | | | | | |
free risk rate plus a risk premium.
| | |
(*) | • | The balanceAs of intangible assets identified at the acquisition date corresponds mainly to fair value gains allocated to core depositsDecember 31, 2009, impairment losses of €1,097 million were estimated in the amountUnited States cash-generating unit which were recognized under “Impairment losses on other assets (net) — Goodwill and other intangible assets” in the accompanying consolidated income statement for 2009 (Note 50). The impairment loss of €466 million.this unit was attributed to the significant decline in economic and credit conditions in the states in which the Group operates in the United States. The valuations were verified by an independent expert, not the Group’s accounts auditor. |
| | | | | | | | | |
Acquisition Cost of State National Bancshares, Inc. | | Book Value | | | Fair Value | |
| | | Millions of euros | |
| |
State National Bancshares, Inc. value at the date of acquisition | | | — | | | | — | |
| Cash | | | 82 | | | | 82 | |
| Loans and receivables | | | 899 | | | | 884 | |
| Financial assets | | | 207 | | | | 204 | |
| Tangible assets | | | 45 | | | | 47 | |
| Intangible assets obtained from previous business combinatios | | | 88 | | | | — | |
| Intangible assets identify at the date of the business combination | | | — | | | | 28 | |
| Other assets | | | 8 | | | | 7 | |
| Financial liabilities | | | (1,145 | ) | | | (1,146 | ) |
| Other liabilities | | | (5 | ) | | | (7 | ) |
| Recognised contingent liabilities | | | — | | | | — | |
| Deferred tax | | | — | | | | 9 | |
| | | | | | | | | |
Total Stockholders’ equity | | | 179 | | | | 108 | |
| | | | | | | | | |
Goodwill | | | | | | | 270 | |
| | | | | | | | | |
The valuations were conducted by Duff & Phelps (an independent expert), applying different valuation methods onBoth the basis of each assetUS unit’s fair values and liability. The methods used arethe fair values assigned to its assets and liabilities were based on the present value ofestimates and assumptions that the cash flows that business or asset is expectedGroup’s Management deemed most likely given the circumstances. However, some changes to generatethe valuation assumptions used could result in differences in the future,impairment test result. If the Market Transaction Methoddiscount rate had increased or decreased by 50 basis points, the difference between the carrying amount and its recoverable amount would have increased or decreased by up to €573 million and €664 million, respectively. If the Cost Method.growth rate had increased or decreased by 50 basis points, the difference between the carrying amount and its recoverable amount would have increased or decreased by €555 million and €480 million, respectively.
| | |
| • | As of December 31, 2008, there were no impairment losses on the goodwill recognized in the Group’s cash-generating units. |
During 2008 there have not been effects of gains, losses, error corrections and other significant adjustments in relation with assets, liabilities and contingent liabilities in the acquired entities in 2007 o prior periods.
F-97
20.2. OTHER INTANGIBLE ASSETS
The detaildetails of the balance ofunder this heading in the accompanying consolidated balance sheets as of December 31, 2010, 2009 and 2008 2007 and 2006 wasare as follows:
| | | | | | | | | | | | |
Other Intangible Assets. Breakdown by Type of Assets | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | | Millions of euros | |
| | | | | | | | | Average
| |
| | | | | | | | | Useful
| | |
| | | | | | | | | Life
| | |
| | | 2008 | | 2007 | | 2006 | | (years) | | |
| | | Millions of euros | | | | |
| | |
| Computer software acquisition expense | | | 258 | | | | 42 | | | | 56 | | | | 5 | | |
| Computer software acquisition expenses | | | | 749 | | | | 464 | | | | 259 | |
| Other deferred charges | | | 113 | | | | 202 | | | | 116 | | | | 5 | | | | 28 | | | | 29 | | | | 113 | |
| Other intangible assets | | | 408 | | | | 571 | | | | 132 | | | | 5 | | | | 282 | | | | 360 | | | | 409 | |
| Impairment | | | (1 | ) | | | (7 | ) | | | (8 | ) | | | | | | | (1 | ) | | | (1 | ) | | | (1 | ) |
| | | | | | | | | | | | | | | |
Total | | | 780 | | | | 808 | | | | 296 | | | | | | | | 1,058 | | | | 852 | | | | 780 | |
| | | | | | | | | | | | | | | |
F-110
The changes infor the year ended, December 31, 2010, 2009 and 2008 2007 and 2006 inunder this heading werein the accompanying consolidated balance sheets are as follows:
| | | | | | | | | | | | | | | | | | |
Other Intangible Assets. Changes Over the Period | | | Notes | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millons de euros | | |
| | |
Balance at beginning of year | | | 808 | | | | 296 | | | | 212 | | |
Balance at the beginning | | | | | | | | 852 | | | | 780 | | | | 808 | |
| Additions | | | 242 | | | | 134 | | | | 171 | | | | | | | | 458 | | | | 362 | | | | 242 | |
| Year amortization | | | (256 | ) | | | (151 | ) | | | (89 | ) | |
| Amortization in the year | | | | 47 | | | | (291 | ) | | | (262 | ) | | | (256 | ) |
| Exchange differences and other | | | 13 | | | | 530 | | | | 2 | | | | | | | | 39 | | | | (28 | ) | | | (13 | ) |
| Impairment | | | (27 | ) | | | (1 | ) | | | — | | | | 50 | | | | — | | | | — | | | | (1 | ) |
| | | | | | | | | | | | | | | |
Balance at end of year | | | 780 | | | | 808 | | | | 296 | | |
Balance at the end | | | | | | | | 1,058 | | | | 852 | | | | 780 | |
| | | | | | | | | | | | | | | |
As of December 31, 2010, the totally amortized intangible assets still in use amounted to €294 million.
| |
| 21. | REST OFTAX ASSETS AND LIABILITIES |
The detail of the balance of these headings in the consolidated balance sheets as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Assets — | | | | | | | | | | | | |
| Inventories(*) | | | 1,066 | | | | 457 | | | | 470 | |
| Transactions in transit | | | 33 | | | | 203 | | | | 106 | |
| Accrued interest | | | 383 | | | | 604 | | | | 674 | |
| Prepaid expenses | | | 206 | | | | 359 | | | | 279 | |
| Other prepayments and accrued income | | | 177 | | | | 245 | | | | 395 | |
| Other | | | 1,296 | | | | 1,033 | | | | 1,104 | |
| | | | | | | | | | | | | |
Total | | | 2,778 | | | | 2,297 | | | | 2,354 | |
| | | | | | | | | | | | | |
Liabilities — | | | | | | | | | | | | |
| Transactions in transit | | | 53 | | | | 54 | | | | 140 | |
| Accrued interest | | | 1,918 | | | | 1,820 | | | | 1,510 | |
| Unmatured accrued expenses | | | 1,321 | | | | 1,381 | | | | 1,169 | |
| Other accrued expenses and deferred income | | | 597 | | | | 439 | | | | 341 | |
| Other | | | 586 | | | | 498 | | | | 579 | |
| | | | | | | | | | | | | |
Total | | | 2,557 | | | | 2,372 | | | | 2,229 | |
| | | | | | | | | | | | | |
| | |
(*) | | The balance of the heading Inventories in the consolidated financial statements relates basically to the following companies: Anida Desarrollos Inmobiliarios, S.A., Inensur Brunete, S.L., Monasterio Desarrollo, |
F-98
| | |
| | S.L., Desarrollo Urbanístico Chamartín, S.A., Marina Llar, S.L., Montealiaga, S.A, Anida Desarrollo Singulares, S.L. and Anida Operaciones Singulares, S.L. |
The heading “Inventories” includes the purchases of land and property to customers in troubles that the Group real estate companies held for sale or in their development business.
| |
22. | FINANCIAL LIABILITIES MEASURED AT AMORTISED COST |
The detail of the items composing the balances of this heading in the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Deposits from central banks | | | 16,844 | | | | 27,326 | | | | 15,238 | |
| Deposits from credit institutions | | | 49,961 | | | | 60,772 | | | | 42,567 | |
| Deposits from customers | | | 255,236 | | | | 219,610 | | | | 186,749 | |
| Debt certificates (including bonds) | | | 104,157 | | | | 102,247 | | | | 86,482 | |
| Subordinated liabilities | | | 16,987 | | | | 15,662 | | | | 13,597 | |
| Other financial liabilities(*) | | | 7,420 | | | | 6,239 | | | | 6,772 | |
| | | | | | | | | | | | | |
Total | | | 450,605 | | | | 431,856 | | | | 351,405 | |
| | | | | | | | | | | | | |
| | |
(*) | | As of December 31, 2008, 2007 and 2006, “Other financial liabilities” included €626 million, €570 million and €469 million, respectively, in connection with the third interim dividend declared each year (Note 4). |
22.1. DEPOSITS FROM CENTRAL BANKS21.1. Consolidated tax group
The breakdown of the balance of this heading in the consolidated balance sheets as of December 31, 2008, 2007 and 2006 is as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Bank of Spain | | | 4,036 | | | | 19,454 | | | | 7,265 | |
| Credit account drawdowns | | | 37 | | | | 8,209 | | | | 4,010 | |
| Other State debt and Treasury bills under repurchase agreement | | | 2,904 | | | | — | | | | — | |
| Other assets under repurchase agreement | | | 1,095 | | | | 11,245 | | | | 3,255 | |
| Other central banks | | | 12,726 | | | | 7,802 | | | | 7,926 | |
| | | | | | | | | | | | | |
Total gross | | | 16,762 | | | | 27,256 | | | | 15,191 | |
| | | | | | | | | | | | | |
| Accrued interest until expiration | | | 82 | | | | 70 | | | | 47 | |
| | | | | | | | | | | | | |
Total | | | 16,844 | | | | 27,326 | | | | 15,238 | |
| | | | | | | | | | | | | |
As of December 31, 2008, 2007 and 2006, the financing limit assigned to the Group by the Bank of Spain and the rest of central banks and the one that it had been drawn down this one, was as follow:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Assigned | | | 16,049 | | | | 10,320 | | | | 8,136 | |
| Drawn down | | | 125 | | | | 8,053 | | | | 4,535 | |
| | | | | | | | | | | | | |
F-99
22.2 DEPOSITS FROM CREDIT INSTITUTIONS
The breakdown of the balance of this heading in the consolidated balance sheets, based on the nature of the related transactions, as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Reciprocal accounts | | | 90 | | | | 3,059 | | | | 78 | |
| Deposits with agreed maturity | | | 35,785 | | | | 33,576 | | | | 27,016 | |
| Demand deposits | | | 1,228 | | | | 1,410 | | | | 1,782 | |
| Other accounts | | | 547 | | | | 362 | | | | 393 | |
| Repurchase agreements | | | 11,923 | | | | 21,988 | | | | 13,017 | |
| | | | | | | | | | | | | |
Subtotal | | | 49,573 | | | | 60,395 | | | | 42,286 | |
| | | | | | | | | | | | | |
| Accrued interest until expiration | | | 388 | | | | 377 | | | | 281 | |
| | | | | | | | | | | | | |
Total | | | 49,961 | | | | 60,772 | | | | 42,567 | |
| | | | | | | | | | | | | |
The detail, by geographical area and on the nature of the related instruments, of this heading as of December 31, 2008, 2007 and 2006 disregarding valuation adjustments was as follows:
| | | | | | | | | | | | | | | | | |
| | | | | | Deposits with
| | | Funds Received
| | | | |
| | | Demand
| | | Agree
| | | Under Financial
| | | | |
2008 | | Deposits | | | Maturity | | | Asset Transfers | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 676 | | | | 4,413 | | | | 1,131 | | | | 6,220 | |
| Rest of Europe | | | 82 | | | | 17,542 | | | | 2,669 | | | | 20,293 | |
| United States | | | 40 | | | | 8,164 | | | | 1,093 | | | | 9,297 | |
| Latin America | | | 439 | | | | 3,518 | | | | 7,030 | | | | 10,987 | |
| Rest of the world | | | 80 | | | | 2,696 | | | | — | | | | 2,776 | |
| | | | | | | | | | | | | | | | | |
Total | | | 1,317 | | | | 36,333 | | | | 11,923 | | | | 49,573 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | Deposits with
| | | Funds Received
| | | | |
| | | Demand
| | | Agree
| | | Under Financial
| | | | |
2007 | | Deposits | | | Maturity | | | Asset Transfers | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 790 | | | | 5,247 | | | | 3,239 | | | | 9,276 | |
| Rest of Europe | | | 231 | | | | 13,126 | | | | 3,943 | | | | 17,300 | |
| United States | | | 3,077 | | | | 6,853 | | | | 881 | | | | 10,811 | |
| Latin America | | | 331 | | | | 3,962 | | | | 13,925 | | | | 18,218 | |
| Rest of the world | | | 40 | | | | 4,750 | | | | — | | | | 4,790 | |
| | | | | | | | | | | | | | | | | |
Total | | | 4,469 | | | | 33,938 | | | | 21,988 | | | | 60,395 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | Deposits with
| | | Funds Received
| | | | |
| | | Demand
| | | Agree
| | | Under Financial
| | | | |
2006 | | Deposits | | | Maturity | | | Asset Transfers | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 807 | | | | 5,001 | | | | 1,683 | | | | 7,491 | |
| Rest of Europe | | | 642 | | | | 12,640 | | | | 4,621 | | | | 17,903 | |
| United States | | | 110 | | | | 2,653 | | | | 797 | | | | 3,560 | |
| Latin America | | | 239 | | | | 3,166 | | | | 5,916 | | | | 9,321 | |
| Rest of the world | | | 61 | | | | 3,950 | | | | — | | | | 4,011 | |
| | | | | | | | | | | | | | | | | |
Total | | | 1,859 | | | | 27,410 | | | | 13,017 | | | | 42,286 | |
| | | | | | | | | | | | | | | | | |
F-100
22.3 DEPOSITS FROM CUSTOMERS
The breakdown of the balance of this heading in the accompanying consolidated balance sheets, based on the nature of the related transactions, as of December 2008, 2007 and 2006, was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
General Government | | | 18,837 | | | | 16,372 | | | | 14,171 | |
| Spanish | | | 6,320 | | | | 6,844 | | | | 7,109 | |
| Foreign | | | 12,496 | | | | 9,512 | | | | 7,038 | |
| Accrued interest | | | 21 | | | | 16 | | | | 24 | |
Other resident sectors - | | | 98,630 | | | | 90,863 | | | | 88,811 | |
| Current accounts | | | 20,725 | | | | 22,798 | | | | 25,346 | |
| Savings accounts | | | 23,863 | | | | 21,389 | | | | 22,460 | |
| Fixed-term deposits | | | 43,829 | | | | 36,911 | | | | 30,894 | |
| Reverse repos | | | 9,339 | | | | 8,785 | | | | 9,081 | |
| Other accounts | | | 62 | | | | 141 | | | | 318 | |
| Accrued interest | | | 812 | | | | 839 | | | | 712 | |
Non-resident sectors | | | 137,769 | | | | 112,375 | | | | 83,767 | |
| Current accounts | | | 28,160 | | | | 25,453 | | | | 19,043 | |
| Savings accounts | | | 22,840 | | | | 19,057 | | | | 13,636 | |
| Fixed-term deposits | | | 79,094 | | | | 58,492 | | | | 40,906 | |
| Repurchase agreements | | | 6,890 | | | | 8,545 | | | | 9,555 | |
| Other accounts | | | 104 | | | | 166 | | | | 67 | |
| Accrued interest | | | 681 | | | | 662 | | | | 560 | |
| | | | | | | | | | | | | |
Total | | | 255,236 | | | | 219,610 | | | | 186,749 | |
| | | | | | | | | | | | | |
| Of which: | | | | | | | | | | | | |
| Deposits from customers without valuation adjustment | | | 254,075 | | | | 218,509 | | | | 185,900 | |
| Accrued interest | | | 1,161 | | | | 1,101 | | | | 849 | |
| In euros | | | 121,895 | | | | 107,371 | | | | 102,731 | |
| In foreign currency | | | 133,341 | | | | 112,239 | | | | 84,018 | |
The detail, by geographical area, of this heading as of December 31, 2008, 2007 and 2006 disregarding valuation adjustments was as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Deposits with
| | | | | | | |
| | | Demand
| | | Saving
| | | Agreed
| | | | | | | |
2008 | | Deposits | | | Deposits | | | Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 26,209 | | | | 23,892 | | | | 45,299 | | | | 9,746 | | | | 105,146 | |
| Rest of Europe | | | 3,214 | | | | 360 | | | | 22,733 | | | | 34 | | | | 26,341 | |
| United States | | | 8,289 | | | | 10,899 | | | | 36,997 | | | | — | | | | 56,185 | |
| Latin America | | | 20,219 | | | | 9,911 | | | | 20,195 | | | | 6,868 | | | | 57,193 | |
| Rest of the world | | | 1,576 | | | | 2,488 | | | | 4,796 | | | | — | | | | 8,860 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 59,507 | | | | 47,550 | | | | 130,020 | | | | 16,648 | | | | 253,725 | |
| | | | | | | | | | | | | | | | | | | | | |
F-101
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Deposits with
| | | | | | | |
| | | Demand
| | | Saving
| | | Agreed
| | | | | | | |
2007 | | Deposits | | | Deposits | | | Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 28,339 | | | | 21,467 | | | | 36,242 | | | | 9,199 | | | | 95,247 | |
| Rest of Europe | | | 3,055 | | | | 315 | | | | 12,555 | | | | 10 | | | | 15,935 | |
| United States | | | 6,996 | | | | 7,877 | | | | 22,964 | | | | 148 | | | | 37,985 | |
| Latin America | | | 18,677 | | | | 9,445 | | | | 21,854 | | | | 8,392 | | | | 58,368 | |
| Rest of the world | | | 1,656 | | | | 2,842 | | | | 4,439 | | | | — | | | | 8,937 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 58,723 | | | | 41,946 | | | | 98,054 | | | | 17,749 | | | | 216,472 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Deposits with
| | | | | | | |
| | | Demand
| | | Saving
| | | Agreed
| | | | | | | |
2006 | | Deposits | | | Deposits | | | Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 30,906 | | | | 22,525 | | | | 31,325 | | | | 10,303 | | | | 95,059 | |
| Rest of Europe | | | 2,746 | | | | 1,049 | | | | 7,244 | | | | 448 | | | | 11,487 | |
| United States | | | 1,420 | | | | 2,019 | | | | 10,529 | | | | 57 | | | | 14,025 | |
| Latin America | | | 17,817 | | | | 11,466 | | | | 22,461 | | | | 9,064 | | | | 60,808 | |
| Rest of the world | | | 795 | | | | 403 | | | | 2,876 | | | | — | | | | 4,074 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 53,684 | | | | 37,462 | | | | 74,435 | | | | 19,872 | | | | 185,453 | |
| | | | | | | | | | | | | | | | | | | | | |
F-102
22.4 DEBT CERTIFICATES (INCLUDING BONDS) AND SUBORDINATED LIABILITIES
The breakdown of the balance of the heading “Debt certificate (including Bonds)” in the accompanying consolidated balance sheets as of December 31, 2008, 2007 and 2006, by the nature of the transactions, was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Promissory notes and bills | | | | | | | | | | | | |
| In euros | | | 9,593 | | | | 4,902 | | | | 6,671 | |
| In other currencies | | | 10,392 | | | | 857 | | | | 885 | |
Subtotal | | | 19,985 | | | | 5,759 | | | | 7,556 | |
Bonds and debentures issued | | | | | | | | | | | | |
In euros — | | | | | | | | | | | | |
| Non-convertible bonds and debentures at floating interest rates | | | 11,577 | | | | 18,955 | | | | 18,346 | |
| Non-convertible bonds and debentures | | | 4,736 | | | | 6,154 | | | | 6,438 | |
| Covered bonds | | | 38,481 | | | | 38,680 | | | | 35,808 | |
| Bonds from securitization realized by the Group (Note 13) | | | 13,783 | | | | 19,229 | | | | 8,764 | |
| Valuation adjustments(*) | | | 2,668 | | | | 252 | | | | 734 | |
In foreign currencies — | | | | | | | | | | | | |
| Non-convertible bonds and debentures at floating interest rates | | | 8,980 | | | | 10,707 | | | | 7,866 | |
| Non-convertible bonds and debentures | | | 1,601 | | | | 1,322 | | | | 626 | |
| Covered bonds | | | 1,005 | | | | 1,049 | | | | 221 | |
| Other securities associate to financial activities | | | 15 | | | | — | | | | — | |
| Bonds from securitization realized by the Group (Note 13) | | | 1,165 | | | | 20 | | | | 43 | |
| Valuation adjustments(*) | | | 161 | | | | 120 | | | | 80 | |
| | | | | | | | | | | | | |
Subtotal | | | 84,172 | | | | 96,488 | | | | 78,926 | |
| | | | | | | | | | | | | |
Total | | | 104,157 | | | | 102,247 | | | | 86,482 | |
| | | | | | | | | | | | | |
| | |
(*) | | Hedge transactions and issue expenses |
The breakdown of the balance of the heading “Subordinated liabilities” in the accompanying consolidated balance sheets, by the nature of the transactions, was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Subordinated debt | | | 10,785 | | | | 10,834 | | | | 9,385 | |
| Preference shares | | | 5,464 | | | | 4,561 | | | | 4,025 | |
Total gross | | | 16,249 | | | | 15,395 | | | | 13,410 | |
| Valuation adjustments | | | 738 | | | | 267 | | | | 187 | |
| | | | | | | | | | | | | |
Total | | | 16,987 | | | | 15,662 | | | | 13,597 | |
| | | | | | | | | | | | | |
F-103
The changes as of December 31, 2008, 2007 and 2006 in the heading “Debt certificates (including Bonds)” and “Subordinated liabilities” were as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | |
| | | Balance at
| | | | | | | | | Exchange
| | | Balance at
| |
| | | Beginning
| | | | | | Repurchase
| | | Differences
| | | the End
| |
Issuances of the Entity | | of Year | | | Issuances | | | or Refund | | | and Others | | | of Year | |
| | | Millions of euros | |
| |
| Debt certificates issued in the European Union | | | 109,173 | | | | 107,848 | | | | (85,671 | ) | | | (20,193 | ) | | | 111,158 | |
| With information brochure | | | 109,140 | | | | 107,848 | | | | (85,671 | ) | | | (20,193 | ) | | | 111,125 | |
| Without information brochure | | | 33 | | | | — | | | | — | | | | — | | | | 33 | |
| Other debt certificates issued outside European Union | | | 8,737 | | | | 42,494 | | | | (40,844 | ) | | | (401 | ) | | | 9,986 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 117,910 | | | | 150,342 | | | | (126,515 | ) | | | (20,594 | ) | | | 121,144 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | |
| | | Balance at
| | | | | | | | | Exchange
| | | Balance at
| |
| | | Beginning
| | | | | | Repurchase
| | | Differences and
| | | the End
| |
Issuances of the Entity | | of Year | | | Issuances | | | or Refund | | | Others | | | of Year | |
| | | Millions of euros | |
| |
| Debt certificates issued in the European Union | | | 95,107 | | | | 64,972 | | | | (40,801 | ) | | | (9,641 | ) | | | 109,637 | |
| With information brochure | | | 95,077 | | | | 64,967 | | | | (40,801 | ) | | | (9,639 | ) | | | 109,604 | |
| Without information brochure | | | 30 | | | | 5 | | | | — | | | | (2 | ) | | | 33 | |
| Other debt certificates issued outside European Union | | | 5,471 | | | | 3,589 | | | | (1,213 | ) | | | 425 | | | | 8,272 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 100,578 | | | | 68,561 | | | | (42,014 | ) | | | (9,216 | ) | | | 117,909 | |
| | | | | | | | | | | | | | | | | | | | | |
The detail of the most significant issuances, repurchases or refunds of debt instruments issued by the bank or Group entities as of December 31, 2008, 2007 and 2006 are shown on Appendix IX.
22.4.1 Promissory notes and bills:
These promissory notes were issued mainly by the Group’s subsidiary Banco de Financiación, S.A. and BBVA.
22.4.2. Bonds and debentures issued:
Following the table shows the (weighted average) interest rate relating to fixed and floating rate bonds and debentures issued in euros and foreign currencies as of December 31, 2008, 2007 and 2006:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | | | | Foreign
| | | | | | Foreign
| | | | | | Foreign
| |
| | | Euros | | | Currency | | | Euros | | | Currency | | | Euros | | | Currency | |
| |
| Fixed rate | | | 3.86 | % | | | 4.79 | % | | | 3.87 | % | | | 5.12 | % | | | 3.83 | % | | | 5.34 | % |
| Floating rate | | | 4.41 | % | | | 4.97 | % | | | 4.68 | % | | | 5.97 | % | | | 3.67 | % | | | 5.25 | % |
Most of the foreign-currency issuances are denominated in U.S. dollars.
22.4.3. Subordinated liabilities
22.4.3.1. Subordinated debt
These issuances are non-convertible subordinated debt and, accordingly, for debt seniority purposes, they rank behind ordinary debt.
The breakdown of this heading in the accompanying consolidated balance sheets, without factoring in valuation adjustments, by currency of issuance and interest rate is disclosed in Appendix IX.
F-104
The issues of BBVA Capital Funding, LTD., BBVA Subordinated Capital, S.A.U. and BBVA Global Finance, LTD. are guaranteed (secondary liability) by the Bank.
22.4.3.2. Preference shares
The detail, by company, of this heading in the consolidated balance sheets as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| BBVA Internacional, Ltd.(1) | | | 500 | | | | 500 | | | | 1,000 | |
| BBVA Capital Finance, S.A.U. | | | 2,975 | | | | 1,975 | | | | 1,975 | |
| Banco Provincial, S.A | | | 70 | | | | 66 | | | | — | |
| BBVA International Preferred, S.A.U.(2) | | | 1,901 | | | | 2,003 | | | | 1,050 | |
| Phoenix Loan Holdings, Inc. | | | 18 | | | | 17 | | | | — | |
| | | | | | | | | | | | | |
Total | | | 5,464 | | | | 4,561 | | | | 4,025 | |
| | | | | | | | | | | | | |
| | |
(1) | | Listed on the Spanish AIAF market. |
|
(2) | | Listed in London Stock Exchange and New York Stock Exchange. |
The breakdown of the nominal of each of the issuances of the aforementioned companies as of December 31, 2008, 2007 and 2006, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | | | | Amount
| | | | | | Amount
| | | | | | Amount
| |
| | | | | | issued
| | | | | | issued
| | | | | | issued
| |
| | | Currency | | | (Millions) | | | Currency | | | (Millions) | | | Currency | | | (Millions) | |
| |
| BBVA International, Ltd. | | | | | | | | | | | | | | | | | | | | | | | | |
| December 2002 | | | EUR | | | | 500 | | | | EUR | | | | 500 | | | | EUR | | | | 500 | |
| BBVA Capital Finance, S.A.U. | | | | | | | | | | | | | | | | | | | | | | | | |
| December 2003 | | | EUR | | | | 350 | | | | EUR | | | | 350 | | | | EUR | | | | 350 | |
| July 2004 | | | EUR | | | | 500 | | | | EUR | | | | 500 | | | | EUR | | | | 500 | |
| December 2004 | | | EUR | | | | 1,125 | | | | EUR | | | | 1,125 | | | | EUR | | | | 1,125 | |
| December 2008 | | | EUR | | | | 1,000 | | | | — | | | | — | | | | — | | | | — | |
| BBVA International Preferred, S.A.U. | | | | | | | | | | | | | | | | | | | | | | | | |
| September 2005 | | | EUR | | | | 550 | | | | EUR | | | | 550 | | | | EUR | | | | 500 | |
| September 2006 | | | EUR | | | | 500 | | | | EUR | | | | 500 | | | | EUR | | | | 500 | |
| April 2007 | | | USD | | | | 600 | | | | USD | | | | 600 | | | | — | | | | — | |
| July 2007 | | | GBP | | | | 400 | | | | GBP | | | | 400 | | | | — | | | | — | |
| Banco Provincial, S.A. — Banco Universal | | | | | | | | | | | | | | | | | | | | | | | | |
| October 2007 | | | BS | | | | 150,000 | | | | BS | | | | 150,000 | | | | — | | | | — | |
| November 2007 | | | BS | | | | 58,266 | | | | BS | | | | 58,000 | | | | — | | | | — | |
| Phoenix Loan Holdings Inc. | | | | | | | | | | | | | | | | | | | | | | | | |
| November 2007 | | | USD | | | | 21 | | | | USD | | | | 28 | | | | — | | | | — | |
These issues were subscribed by third parties outside the Group and are wholly or partially redeemable at the issuer company’s option after five or ten years from the issue date, depending on the terms of each issue.
The issuances of BBVA International Ltd BBVA, BBVA Capital Finance, S.A. and BBVA International Preferred, S.A.U, are subordinately guaranteed by the Bank.
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| |
23. | LIABILITIES UNDER INSURANCE CONTRACTS |
The detail of the balance of this heading in the consolidated balance sheets as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Technical provisions for: | | | | | | | | | | | | |
| Mathematical reserves | | | 5,503 | | | | 5,847 | | | | 5,465 | |
| Provision for unpaid claims reported | | | 640 | | | | 580 | | | | 655 | |
| Other insurance technical provisions | | | 428 | | | | 440 | | | | 788 | |
| | | | | | | | | | | | | |
Total | | | 6,571 | | | | 6,867 | | | | 6,908 | |
| | | | | | | | | | | | | |
The detail of the balance of this heading in the consolidated balance sheets as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Provisions for pensions and similar obligations (Note 25) | | | 6,359 | | | | 5,967 | | | | 6,358 | |
| Provisions for taxes and other legal contingents | | | 263 | | | | 225 | | | | 232 | |
| Provisions for contingent exposures and commitments (Note 7) | | | 421 | | | | 546 | | | | 502 | |
| Other provisions | | | 1,635 | | | | 1,604 | | | | 1,557 | |
| | | | | | | | | | | | | |
Total | | | 8,678 | | | | 8,342 | | | | 8,649 | |
| | | | | | | | | | | | | |
The changes in 2008, 2007 and 2006 in the balances of this heading in the accompanying consolidated balance sheets were as follows:
| | | | | | | | | | | | | |
| | | Provisions for Pensions and Similar Obligation | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at beginning of the year | | | 5,967 | | | | 6,358 | | | | 6,240 | |
| Add — | | | | | | | | | | | | |
| Year provision with a charge to income for the year | | | 1,309 | | | | 417 | | | | 1,410 | |
Of which: | | | | | | | | | | | | |
| Interest expenses and similar charges | | | 252 | | | | 242 | | | | 254 | |
| Personnel expenses | | | 55 | | | | 71 | | | | 74 | |
| Provision expenses | | | 1,002 | | | | 104 | | | | 1,081 | |
| Charges in reserves(*) | | | 74 | | | | — | | | | — | |
| Transfers and other changes | | | (1 | ) | | | (4 | ) | | | — | |
| Less — | | | | | | | | | | | | |
| Payments | | | (963 | ) | | | (843 | ) | | | (1,208 | ) |
| Amount use and other variations | | | (27 | ) | | | 39 | | | | (84 | ) |
| | | | | | | | | | | | | |
Balance at end of the year | | | 6,359 | | | | 5,967 | | | | 6,358 | |
| | | | | | | | | | | | | |
| | |
(*) | | Correspond to actuarial losses (gains) arising on certain defined benefit post-employment commitments recognised in “Reserves” within the Group’s consolidated equity (see Note 2.2.3.). |
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| | | | | | | | | | | | | |
| | | Commitments and Contingent Risks Provisions | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at beginning of the year | | | 546 | | | | 502 | | | | 452 | |
| Add — | | | | | | | | | | | | |
| Year provision with a charge to income for the year | | | 97 | | | | 93 | | | | 74 | |
| Transfers and other Changes | | | — | | | | — | | | | 5 | |
| Less — | | | | | | | | | | | | |
| Available funds | | | (216 | ) | | | (46 | ) | | | (17 | ) |
| Amount use and other variations | | | (6 | ) | | | (3 | ) | | | (12 | ) |
| | | | | | | | | | | | | |
Balance at end of the year | | | 421 | | | | 546 | | | | 502 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Provisions for Taxes and Other Provisions | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at beginning of the year | | | 1,829 | | | | 1,789 | | | | 2,009 | |
| Add — | | | | | | | | | | | | |
| Year provision with a charge to income for the year | | | 705 | | | | 275 | | | | 353 | |
| Adquisition of subsidiaries | | | — | | | | 56 | | | | 4 | |
| Transfers and other Changes | | | 254 | | | | 14 | | | | 101 | |
| Less — | | | | | | | | | | | | |
| Available funds | | | (245 | ) | | | (140 | ) | | | (51 | ) |
| Amount use and other variations | | | (645 | ) | | | (165 | ) | | | (608 | ) |
| Disposal of subsidiaries | | | — | | | | — | | | | (19 | ) |
| | | | | | | | | | | | | |
Balance at end of the year | | | 1,898 | | | | 1,829 | | | | 1,789 | |
| | | | | | | | | | | | | |
| |
25. | COMMITMENTS WITH PERSONNEL |
As described in note 2.2.3, the Group holds both defined benefit and defined contribution post-employment commitments; the proportion of defined contribution benefits is gradually increasing, mainly due to new hires.
| |
25.1. | COMMITMENTS WITH PERSONNEL FOR POST-EMPLOYMENT DEFINED CONTRIBUTION PLANS |
The commitments with personnel for post-employemnt defined contribution correspond to contributions on behalf of current employees made anually by the Group. These contributions are accrued and charged to the consolidated income statement in the corresponding financial year (see Note 2.2.3). No liability is therefore recognised in the accompanying consolidated balance sheets.
The contributions to the defined contribution plans in 2008, 2007 and 2006 were €71, €58 and €53 million of euros, respectively.
| |
25.2 | COMMITMENTS FOR POST-EMPLOYMENT DEFINED BENEFIT PLANS AND OTHER LONG-TERM POST-EMPLOYMENT BENEFITS |
Commitments relating to pensions in defined benefit plans correspond principally to employees who have retired or taken early retirement from the Group and to certain groups of personnel still employed in the Group in the case of pension benefits, while commitments relating to permanent disability and death benefits correspond to the bulk of its active labor force.
F-107
Following the table shows the commitments for defined benefit plans and the long-term post-employment benefits, which are recognized as porvisiones on the accompanying consolidated balance sheets (Note 24), as of December 31, 2008, 2007, 2006, 2005 and 2004:
| | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | | | 2005 | | | 2004 | |
| | | Millions of euros | |
| |
| Post-employment welfare benefits | | | 7,985 | | | | 7,816 | | | | 8,173 | | | | 7,639 | | | | 7,404 | |
| Assets and Insurance contracts coverages | | | 1,626 | | | | 1,883 | | | | 1,816 | | | | 1,399 | | | | 555 | |
| Net assets | | | — | | | | (34 | ) | | | — | | | | — | | | | — | |
| Net liabilities | | | 6,359 | | | | 5,967 | | | | 6,357 | | | | 6,240 | | | | 6,849 | |
The commitments for defined contributions plans as well as the rest of long-term post-employment benefits, in Spain and abroad, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Commitments in Spain | | | Commitments Abroad | | | Total | |
| | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Post-employment benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Post-employment benefits | | | 3,060 | | | | 3,115 | | | | 3,386 | | | | 903 | | | | 1,097 | | | | 956 | | | | 3,963 | | | | 4,212 | | | | 4,342 | |
| Early retirement | | | 3,437 | | | | 2,950 | | | | 3,186 | | | | — | | | | — | | | | — | | | | 3,437 | | | | 2,950 | | | | 3,186 | |
| Post-employment welfare benefits | | | 221 | | | | 234 | | | | 223 | | | | 364 | | | | 420 | | | | 422 | | | | 585 | | | | 654 | | | | 645 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 6,718 | | | | 6,299 | | | | 6,795 | | | | 1,267 | | | | 1,517 | | | | 1,378 | | | | 7,985 | | | | 7,816 | | | | 8,173 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Insurance contracts coverages | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Post-employment benefits | | | 436 | | | | 467 | | | | 569 | | | | — | | | | — | | | | — | | | | 436 | | | | 467 | | | | 569 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 436 | | | | 467 | | | | 569 | | | | — | | | | — | | | | — | | | | 436 | | | | 467 | | | | 569 | |
Other plan assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Post-employment benefits | | | — | | | | — | | | | — | | | | 889 | | | | 1,062 | | | | 879 | | | | 889 | | | | 1,062 | | | | 879 | |
| Post-employment welfare benefits | | | — | | | | — | | | | — | | | | 301 | | | | 354 | | | | 368 | | | | 301 | | | | 354 | | | | 368 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | — | | | | — | | | | — | | | | 1,190 | | | | 1,416 | | | | 1,247 | | | | 1,190 | | | | 1,416 | | | | 1,247 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net commitments of plan assets | | | 6,282 | | | | 5,832 | | | | 6,226 | | | | 77 | | | | 101 | | | | 131 | | | | 6,359 | | | | 5,933 | | | | 6,357 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets | | | — | | | | — | | | | — | | | | — | | | | (34 | ) | | | — | | | | — | | | | (34 | ) | | | — | |
| Net liabilities(*) | | | 6,282 | | | | 5,832 | | | | 6,226 | | | | 77 | | | | 135 | | | | 131 | | | | 6,359 | | | | 5,967 | | | | 6,357 | |
| | |
(*) | | Recognized under the heading “Provisions — Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets. |
Additionally, there are other commitments with personnel for long service bonuses which were recognized under the heading “Other provisions” of the accompanying consolidated balance sheets (Note 24) and amounted to €36 million as of December 31, 2008, €11 million due to Spanish companies and €25 million due to abroad companies.
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25.2.1. Main Commitments in Spain:
The most significant actuarial assumptions used as of December 31, 2008, 2007 and 2006, to quantify these commitments were as follows:
| | | | | | | |
| | | 2008 | | 2007 | | 2006 |
| |
| Mortality tables | | PERM/F 2000P. | | PERM/F 2000P. | | PERM/F 2000P. |
| Discount rate (cumulative annual) | | 4.5%/AA corporate | | 4.5%/AA corporate | | 4%/AA corporate |
| | | bond yield curve | | bond yield curve | | bond yield curve |
| Consumer price index (cumulative annual) | | 2% | | 2% | | 1.5% |
| Salary growth rate (cumulative annual) | | At least 3% | | At least 3% | | At least 2.5% |
| | | (depending on | | (depending on | | (depending on |
| | | employee) | | employee) | | employee) |
| Retirement ages | | First date at which the employees are entitled to retire or contractually agreed at the individual level in the case of early retirements |
The disclosure of the different commitments with personnel in Spain is as follows:
Pension commitments
The situation of pension commitments in defined benefit plans as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Commitments to retired employees | | | 2,852 | | | | 2,733 | | | | 3,186 | |
| Vested contingencies in respect of current employees | | | 208 | | | | 382 | | | | 200 | |
| | | | | | | | | | | | | |
Net Commitments(*) | | | 3,060 | | | | 3,115 | | | | 3,386 | |
| | | | | | | | | | | | | |
| | |
(*) | | Recorded in the heading “Funds for Pensions and Similar Obligations” |
To cover certain pension commitments, insurance contracts have been contracted with insurance companies not related to the group. These commitments are covered by assets and therefore are presented in the accompanying consolidated balance sheets for the net amount commitment less plan assets. As of December 31, 2008, 2007 and 2006, the amount of the plan assets to the mentioned insurance contracts (shown in the previous table under the heading “Plan Insurance contracts”) equalled the amount of the commitments covered, therefore its net value was zero in the accompanying consolidated balance sheets.
On the other hand, the rest of commitments mentioned in the previous table include commitments by defined benefit for which insurance contracts have been contracted with BBVA Seguros, S.A. de Seguros y Reaseguros, which is 99.94% owned by the Group. The assets in which the insurance company has invested the amount of the contracts can not be considered plan assets according to IAS 19 and are presented in the accompanying consolidated balance sheets in different headings of Assets depending on the classification of financial instruments that corresponds. The commitments are recognized under the heading “Funds for pensions and similar obligations” of the accompanying consolidated balance sheets (Note 24).
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The changes of these commitments net of plan insurance contracts, contracted with insurance companies related to the group, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at beginning of year | | | 2,648 | | | | 2,817 | | | | 2,816 | |
| Interest cost | | | 116 | | | | 109 | | | | 110 | |
| Current service cost | | | 14 | | | | 18 | | | | 23 | |
| Payments made | | | (167 | ) | | | (163 | ) | | | (159 | ) |
| Other changes | | | 8 | | | | 1 | | | | 11 | |
| Actuarial losses (gains) | | | 5 | | | | (134 | ) | | | 16 | |
| | | | | | | | | | | | | |
Balance at end of year | | | 2,624 | | | | 2,648 | | | | 2,817 | |
| | | | | | | | | | | | | |
The estimated amount of commitments in million of euros for the next 10 years was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014-2018 | |
| |
Pension commitments | | | 173 | | | | 178 | | | | 178 | | | | 177 | | | | 176 | | | | 850 | |
Early retirements
In 2008 the Group offered to certain employees the possibility of taking early retirement before the age stipulated in the collective labour agreement in force. This offer was accepted by 2,044 employees (575 and 1,887 employees in 2007 and 2006, respectively).
The early retirements commitments in Spain as of December 31, 2008, 2007 and 2006 were recognised as provisions in the heading “Provisions for Pensions and Similar Obligations” (Note 24) in the accompanying consolidated balance sheets amounted to €3,437 million, €2,950 million, and €3,186 million, respectively.
The changes of these commitments in 2008, 2007 and 2006 for all Group’s companies in Spain, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at beginning of the year | | | 2,950 | | | | 3,186 | | | | 2,583 | |
| Interest cost | | | 117 | | | | 112 | | | | 92 | |
| Current services cost | | | 1,004 | | | | 294 | | | | 1,019 | |
| Payments made | | | (618 | ) | | | (587 | ) | | | (505 | ) |
| Other changes | | | (14 | ) | | | — | | | | (3 | ) |
| Actuarial losses (gains) | | | (2 | ) | | | (55 | ) | | | — | |
| | | | | | | | | | | | | |
Balance at end of the year | | | 3,437 | | | | 2,950 | | | | 3,186 | |
| | | | | | | | | | | | | |
The cost of the early retirements in 2008 were recognised in the heading “Provision Expense (Net) — Transfers to funds for pensions and similar obligations — Early retirements” in the accompanying consolidated income statements.
The estimated amount of commitments in million of euros for the next 10 years were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014-2018 | |
| |
Early Retirements | | | 606 | | | | 539 | | | | 498 | | | | 458 | | | | 415 | | | | 1,293 | |
Other long-term commitments with personnel
As of October 18, 2007, the Bank has signed an Agreement Approval of Benefits for their employees in Spain. The agreement implies the standardization of the existing welfare benefits for every group of employees, and in
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some cases in which a service is provided, its quantification in an annual amount in cash. These welfare benefits include post-employment welfare benefits and other commitments with personnel.
Post-employment welfare benefits
The detail of these commitments as of December 31, 2008, 2007 and 2006 were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Post-employment welfare benefit commitments to retired employees | | | 181 | | | | 192 | | | | 169 | |
| Vested post-employment welfare benefit contingencies in respect of current employees | | | 40 | | | | 42 | | | | 54 | |
| | | | | | | | | | | | | |
Net Commitments(*) | | | 221 | | | | 234 | | | | 223 | |
| | | | | | | | | | | | | |
| | |
(*) | | Recorded in the heading “Funds for Pensions and Similar Obligations” |
The changes of these commitments in 2008, 2007 and 2006 for all Group’s companies in Spain, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at beginning of year | | | 234 | | | | 223 | | | | 211 | |
| Interest cost | | | 11 | | | | 9 | | | | 9 | |
| Current service cost | | | 2 | | | | 2 | | | | 2 | |
| Payments made | | | (43 | ) | | | (12 | ) | | | (13 | ) |
| Prior service cost or changes in the plan | | | — | | | | 8 | | | | — | |
| Other changes | | | 16 | | | | 3 | | | | 6 | |
| Actuarial losses (gains) | | | 1 | | | | 1 | | | | 8 | |
| | | | | | | | | | | | | |
Balance at end of year | | | 221 | | | | 234 | | | | 223 | |
| | | | | | | | | | | | | |
The estimated amount of commitments in million of euros for the next 10 years were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014-2018 | |
| |
Post-employment welfare benefits | | | 20 | | | | 19 | | | | 18 | | | | 17 | | | | 17 | | | | 81 | |
Summary on the consolidated income statements by defined contribution plans commitments
Following is a summary of the charges to the consolidated income statements in 2008, 2007 and 2006 for post-employment benefits commitments of companies in Spain
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Interest expense and similar charges | | | | | | | | | | | | |
| Interest cost of pension funds | | | 244 | | | | 230 | | | | 210 | |
Personnel expenses | | | | | | | | | | | | |
| Transfer to pensions plans | | | 14 | | | | 18 | | | | 27 | |
| Social attentions | | | 2 | | | | 2 | | | | 2 | |
Provision expense (net) | | | | | | | | | | | | |
| Transfer to fund for pension and similar obligations | | | | | | | | | | | | |
| Pension funds | | | 8 | | | | (180 | ) | | | 23 | |
| Early retirements | | | 1,004 | | | | 294 | | | | 1,019 | |
| | | | | | | | | | | | | |
Total | | | 1,272 | | | | 364 | | | | 1,281 | |
| | | | | | | | | | | | | |
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Other commitments with personnel
Long-service cash bonuses
In addition to the aforementioned post-employment welfare benefits, the Group maintained certain commitments in Spain with certain employees, called “Long-service bonuses”. These commitments were both in the payment of a certain amount in cash and in the delivery of shares from Banco Bilbao Vizcaya Argentaria S.A., when they complete a given number of years of effective service.
The aforementioned Agreement Approval of Benefits established that the Long-service bonuses ended as of December 31, 2007. Such employees are entitled to receive, to the date of seniority established, only the value of the accrued commitment until December 31, 2007.
In November 2007, the Group in Spain offered to those employees the option to redeem the accrued value of such share benefits prior to the date of seniority established. The offer was accepted by most of employees and the settlement (by delivery of shares or cash) took place in the month of December 2007.
The accrued value of the long-service bonuses until December 31, 2008 for employees, who have not opted for early settlement, is recognized under the heading “Provisions — Other provisions” of the accompanying consolidated balance sheets and amounted to €11 million.
25.2.2. Commitments abroad:
As of December 31, 2008 and 2007 the main commitments with personnel abroad are related to Mexico, Portugal and United States, which jointly represent 94% and 96%, respectively of the total amount of commitments with personnel abroad and 15% and 19%, respectively of the total of the commitments with personnel of BBVA Group.
As of December 31, 2006, the main foreign post-retirement commitments corresponded to those in place in Mexico and Portugal, which jointly represented 66.6% of total commitments with personnel abroad, and 11.1% of total BBVA Group commitments with personnel anywhere in the world.
As of December 31, 2008 the details by countries of the various commitments with personnel of Group BBVA abroad are as follows:
| | | | | | | | | | | | | |
| | | | | | Plan
| | | Net
| |
| | | Commitments | | | Assets | | | Commitments | |
| | | Millions of euros | |
| |
Post-employment benefits | | | | | | | | | | | | |
Pension commitments | | | | | | | | | | | | |
| Mexico | | | 387 | | | | 436 | | | | (49 | ) |
| Portugal | | | 283 | | | | 283 | | | | — | |
| United States | | | 167 | | | | 133 | | | | 34 | |
| Rest | | | 66 | | | | 37 | | | | 29 | |
| | | | | | | | | | | | | |
| | | | 903 | | | | 889 | | | | 14 | |
Post-employment welfare benefits | | | | | | | | | | | | |
| Mexico | | | 360 | | | | 301 | | | | 59 | |
| Portugal | | | — | | | | — | | | | — | |
| United States | | | — | | | | — | | | | — | |
| Rest | | | 4 | | | | — | | | | 4 | |
| | | | | | | | | | | | | |
| | | | 364 | | | | 301 | | | | 63 | |
Total commitments | | | 1,267 | | | | 1,190 | | | | 77 | |
| | | | | | | | | | | | | |
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25.2.2.1. Commitments with personnel in Mexico:
In Mexico, the main actuarial assumptions used in quantifying the commitments with personnel as of December 31, 2008, 2007 and 2006, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| |
| Mortality tables | | | EMSSA 97 | | | | EMSSA 97 | | | | EMSSA 97 | |
| Discount rate (cumulative annual) | | | 10.3 | % | | | 8.8 | % | | | 9.0 | % |
| Consumer price index (cumulative annual) | | | 3.8 | % | | | 3.6 | % | | | 3.5 | % |
| Medical cost trend rates | | | 6.8 | % | | | 5.8 | % | | | 5.5 | % |
| Expected rate of return on plan assets | | | 9.8 | % | | | 8.8 | % | | | 9.0 | % |
Pension commitments
Plan assets are those assets that are to be used directly to settle the vested obligations and which meet the following conditions: they are not owned by the Group entities; they are available only to pay post-employment benefits; and they cannot be returned to the Group entities. The return of plan assets amounts to €11 million. The vested obligations related to these commitments were disclosed net of the balances of the aforementioned plan assets in the accompanying consolidated balance sheets.
As of December 31 2008 the plan assets related to these commitments are in full debt securities.
A new defined contribution plan was put in place in Mexico on a voluntary basis; it substitutes current commitments under the defined benefit plan. Approximately 70% of the workforce opted to sign up for the new plan, triggering a decrease in the pension obligations included in the tables presented to explain the variation in commitments in 2008.
The changes of these commitments and plan assets in 2008, for all Group’s companies in Mexico, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | |
| | | | | | Plan
| | | Net
| |
| | | Commitments | | | Assets | | | Commitments | |
| | | Millions of euros | |
| |
Balance at beginning of year | | | 584 | | | | 572 | | | | 12 | |
| Finance expenses | | | 49 | | | | — | | | | 49 | |
| Finance income | | | — | | | | 48 | | | | (48 | ) |
| Current service cost | | | 15 | | | | — | | | | 15 | |
| Prior service cost of changes in the plan | | | — | | | | — | | | | — | |
| Acquisitions or divestments made | | | — | | | | — | | | | — | |
| Effect of reductions or settlement | | | (66 | ) | | | — | | | | (66 | ) |
| Payments | | | (31 | ) | | | (31 | ) | | | — | |
| Exhange difference | | | (88 | ) | | | (95 | ) | | | 7 | |
| Actuarial losses (gains) | | | (47 | ) | | | (37 | ) | | | (10 | ) |
| Contributions | | | — | | | | 8 | | | | (8 | ) |
| Other movements | | | (29 | ) | | | (29 | ) | | | — | |
| | | | | | | | | | | | | |
Balance at end of year | | | 387 | | | | 436 | | | | (49 | ) |
| | | | | | | | | | | | | |
As of December 31, 2007 the net commitments of plan assets amount to €12 million of euros. As of December 31, 2006 the commitments are over covered by the plan assets.
The table above includes, in both the commitments and plan assets columns, the portion of the existing plan pending transfer (as of December 31, 2008) to the new defined contribution system, corresponding to the employees that have accepted migration to the new scheme, in the amount of €33 million.
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The commitments net of the aforementioned Plan assets were recognized in the heading “Funds for Pensions and Similar Obligations” in the accompanying consolidated balance sheets (Note 24).
The estimated payments for commitments in million of euros for the next 10 years were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014-2018 | |
| |
Pensions | | | 30 | | | | 30 | | | | 30 | | | | 31 | | | | 31 | | | | 174 | |
Following is a detail of the charges of these commitments, for all Group’s companies in Mexico, on the consolidated income statements corresponding to 2008:
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
| Interest expense and similar charges | | | 1 | | | | 1 | |
| Personnel expenses | | | 15 | | | | 17 | |
| Provisions expense (net) | | | (66 | ) | | | (3 | ) |
| | | | | | | | | |
Total | | | (50 | ) | | | 15 | |
| | | | | | | | | |
Post-employment welfare benefits
Plan assets are used directly to settle the vested obligations and which meet the following conditions: they are not owned by the Group entities; they are available only to pay post-employment benefits; and they cannot be returned to the Group entities. The return of plan assets of post-employment welfare benefits commitments amounts to €7 million. The vested obligations related to these commitments were disclosed net of the balances of the aforementioned plan assets in the accompanying consolidated balance sheets.
As of December 31, 2008 the plan assets to these commitments relate in full to debt securities.
The commitments net of the aforementioned plan assets were recognized in the heading “Provisions-Provisions for Pensions and Similar Obligations” in the accompanying consolidated balance sheets (Note 24).
The changes of these commitments and plan assets in 2008, for all Groups’ companies in Mexico, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | |
| | | | | | Plan
| | | Net
| |
| | | Commitments | | | Assets | | | Commitments | |
| | | Millions of euros | |
| |
Balance at beginning of year | | | 416 | | | | 354 | | | | 62 | |
| Finance expenses | | | 35 | | | | — | | | | 35 | |
| Finance income | | | — | | | | 30 | | | | (30 | ) |
| Current service cost | | | 14 | | | | — | | | | 14 | |
| Prior service cost of changes in the plan | | | — | | | | — | | | | — | |
| Acquisitions or divestments made | | | — | | | | — | | | | — | |
| Effect of reductions or settlement | | | (17 | ) | | | — | | | | (17 | ) |
| Payments | | | (19 | ) | | | (19 | ) | | | — | |
| Exhange difference | | | (71 | ) | | | (64 | ) | | | (7 | ) |
| Actuarial losses (gains) | | | 2 | | | | (23 | ) | | | 25 | |
| Contributions | | | — | | | | 23 | | | | (23 | ) |
| Other movements | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Balance at end of year | | | 360 | | | | 301 | | | | 59 | |
| | | | | | | | | | | | | |
As of December 31, 2007 and 2006 the commitments net of plan assets amounted to €62 million and €54 million, respectively.
F-114
Following is a detail of the charges of these commitments, for all Group’s companies in Mexico, on the consolidated income statements corresponding to 2008 and 2007:
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
| Interest expense and similar charges | | | 5 | | | | 5 | |
| Personnel expenses | | | 14 | | | | 16 | |
| Provisions expense (net) | | | (17 | ) | | | 13 | |
| | | | | | | | | |
Total | | | 2 | | | | 34 | |
| | | | | | | | | |
The sensibility analysis to changes in rates in 2008 trend in the growth of medical care costs of BBVA Bancomer, S.A. was as follows:
| | | | | | | | | |
| | | 1% Increase | | | 1% Decrease | |
| | | Millions of euros | |
| |
| Increase/Decrease in current services cost and interest cost | | | 11 | | | | (9 | ) |
| Increase/Decrease in commitments | | | 72 | | | | (57 | ) |
25.2.2.2. Pension Commitments in Portugal:
In Portugal, the main actuarial assumptions used in quantifying the commitments as of December 31, 2008, 2007 and 2006, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| |
| Mortality tables | | | TV88/90 | | | | TV88/90 | | | | TV88/90 | |
| Discount rate (cumulative annual) | | | 5.9 | % | | | 5.3 | % | | | 4.8 | % |
| Consumer price index (cumulative annual) | | | 2.0 | % | | | 2.0 | % | | | 2.0 | % |
| Salary growth rate (cumulative annual) | | | 3.0 | % | | | 3.0 | % | | | 3.0 | % |
| Expected rate of return on plan assets | | | 4.6 | % | | | 4.6 | % | | | 4.5 | % |
Plan assets are assets that are to be used directly to settle the vested obligations and which meet the following conditions: they are not owned by the Group entities; they are available only to pay post-employment benefits; and they cannot be returned to the Group entities. The return of plan assets of pension commitments amounts to negative €4 million. The vested obligations related to these commitments were disclosed net of the balances of the aforementioned plan assets in the accompanying consolidated balance sheets.
The distribution of the mainly category of plan assets to 2008 and 2007 for all Group’s companies in Portugal was as follows:
| | | | | | | | | |
| | | % | |
| | | 2008 | | | 2007 | |
| |
Equity securities | | | 8.7 | | | | 13.0 | |
Debt securities | | | 85.3 | | | | 83.5 | |
Property, Land and Buildings | | | 0.5 | | | | 0.3 | |
Cash | | | 3.6 | | | | 0.8 | |
Other investments | | | 1.9 | | | | 2.4 | |
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The changes of these commitments and plan assets in 2008, for all Group’s companies in Portugal, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | |
| | | | | | Plan
| | | Net
| |
| | | Commitments | | | Assets | | | Commitments | |
| | | Millions of euros | |
| |
Balance at beginning of year | | | 295 | | | | 292 | | | | 3 | |
| Finance expenses | | | 15 | | | | — | | | | 15 | |
| Finance income | | | — | | | | 13 | | | | (13 | ) |
| Current service cost | | | 4 | | | | — | | | | 4 | |
| Prior service cost of changes in the plan | | | — | | | | — | | | | — | |
| Acquisitions or divestments made | | | — | | | | — | | | | — | |
| Effect of reductions or settlement | | | — | | | | — | | | | — | |
| Payments | | | (15 | ) | | | (15 | ) | | | — | |
| Exhange difference | | | — | | | | — | | | | — | |
| Actuarial losses (gains) | | | (16 | ) | | | (17 | ) | | | 1 | |
| Contributions | | | — | | | | 10 | | | | (10 | ) |
| Other movements | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Balance at end of year | | | 283 | | | | 283 | | | | — | |
| | | | | | | | | | | | | |
As of December 31, 2007 and 2006 the commitments net of plan assets amounted to €3 million and €39 million, respectively.
The commitments net of the aforementioned plan assets were recognized in the heading “Funds for Pensions and Similar Obligations” in the accompanying consolidated balance sheets (Note 24).
The estimated amount of commitments in million of euros for the next 10 years was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014-2018 | |
| |
Pensions | | | 15 | | | | 15 | | | | 16 | | | | 16 | | | | 16 | | | | 80 | |
Following is a detail of the changes on the consolidated income statements corresponding to 2008 for the commitments for pensions in Portuguese entities:
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
| Interest expense and similar charges | | | 2 | | | | 2 | |
| Personnel expenses | | | 4 | | | | 5 | |
| Provisions expense (net) | | | — | | | | 11 | |
| | | | | | | | | |
Total | | | 6 | | | | 18 | |
| | | | | | | | | |
25.2.2.3. Pension Commitments in United States:
In United States, the main actuarial assumptions used in quantifying the commitments as of December 31, 2008 and 2007, were as follows:
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| |
| Moratility tables | | | RP 2000 Projected | | | | RP 2000 Projected | |
| Discount rate (cumulative annual) | | | 6.9 | % | | | 6.6 | % |
| Consumer price index (cumulative annual) | | | 2.5 | % | | | 2.5 | % |
| Salary growth rate (cumulative annual) | | | 4.0 | % | | | 4.0 | % |
| Expected rate of return on plan assets | | | 7.5 | % | | | 7.5 | % |
| Medical care growth rate | | | n/a | | | | n/a | |
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Plan assets are the assets that are to be used directly to settle the vested obligations and which meet the following conditions: they are not owned by the Group entities; they are available only to pay post-employment benefits; and they cannot be returned to the Group entities. The return of plan assets of pension commitments amounts to negative €40 million of euros. The vested obligations related to these commitments were disclosed net of the balances of the aforementioned plan assets in the accompanying consolidated balance sheets.
The distribution of the mainly category of plan assets to 2008 and 2007 was as follows:
| | | | | | | | | |
| | | % | |
| | | 2008 | | | 2007 | |
| |
Equity securities | | | 52.7 | | | | 59.2 | |
Debt securities | | | 46 | | | | 39.9 | |
Cash | | | 1.3 | | | | — | |
The changes of these commitments and plan assets in 2008, for all Group’s companies in United States, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | |
| | | | | | Plan
| | | Net
| |
| | | Commitments | | | Assets | | | Commitments | |
| | | Millions of euros | |
| |
Balance at beginning of year | | | 159 | | | | 166 | | | | (7 | ) |
| Finance expenses | | | 10 | | | | — | | | | 10 | |
| Finance income | | | — | | | | 12 | | | | (12 | ) |
| Current service cost | | | 5 | | | | — | | | | 5 | |
| Prior service cost of changes in the plan | | | 1 | | | | — | | | | 1 | |
| Acquisitions or divestments made | | | — | | | | — | | | | — | |
| Effect of reductions or settlement | | | (3 | ) | | | — | | | | (3 | ) |
| Payments | | | (7 | ) | | | (7 | ) | | | — | |
| Exhange difference | | | 10 | | | | 10 | | | | — | |
| Actuarial losses (gains) | | | (8 | ) | | | (52 | ) | | | 44 | |
| Contributions | | | — | | | | 4 | | | | (4 | ) |
| Other movements | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Balance at end of year | | | 167 | | | | 133 | | | | 34 | |
| | | | | | | | | | | | | |
As of December 31, 2007 commitments net of plan assets amounted to negative €7 million.
The commitments net of the aforementioned plan assets were recognized in the heading “Funds for Pensions and Similar Obligations” in the accompanying consolidated balance sheets (Note 24).
The estimated amount of commitments in million of euros for the next 10 years was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014-2018 | |
| |
Pensions | | | 7 | | | | 7 | | | | 8 | | | | 8 | | | | 9 | | | | 61 | |
Following is a detail of the charges on the consolidated income statements corresponding to 2008 and 2007 for all Groups’ companies in United States:
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
| Interest expense and similar charges | | | (2 | ) | | | — | |
| Personnel expenses | | | 5 | | | | 2 | |
| Provisions expense (net) | | | (2 | ) | | | (6 | ) |
| | | | | | | | | |
Total | | | 1 | | | | (4 | ) |
| | | | | | | | | |
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25.2.2.4. Commitments with personnel in rest of countries
In rest of countries, the commitments for post-employment defined contribution plans and other post-employment benefits as of December 31, 2008 amounted to €66 million and €4 million, respectively.
Following is a detail of the charges on the consolidated income statements corresponding to 2008 and 2007 for all Group’s companies in rest of countries:
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
| Interest expense and similar charges | | | 2 | | | | 3 | |
| Personnel expenses | | | 1 | | | | 3 | |
| Provisions expense (net) | | | — | | | | 5 | |
| | | | | | | | | |
Total | | | 3 | | | | 11 | |
| | | | | | | | | |
The detail, by consolidated company, of the balance of the heading “Minority Interests” of consolidated equity in 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| BBVA Colombia Group | | | 26 | | | | 23 | | | | 18 | |
| BBVA Chile Group | | | 129 | | | | 116 | | | | 95 | |
| BBVA Banco Continental Group | | | 278 | | | | 246 | | | | 235 | |
| BBVA Banco Provincial Group | | | 413 | | | | 267 | | | | 224 | |
| Provida Group | | | 65 | | | | 79 | | | | 66 | |
| BBVA Banco Francés Group | | | 88 | | | | 87 | | | | 52 | |
| Other companies | | | 50 | | | | 62 | | | | 78 | |
| | | | | | | | | | | | | |
Total | | | 1,049 | | | | 880 | | | | 768 | |
| | | | | | | | | | | | | |
Following is the amount of the share of profit in 2008, 2007 and 2006 of the minority group. These amounts are recognized in the heading “Minority interests” of the consolidated income statements:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| BBVA Colombia Group | | | 5 | | | | 5 | | | | 3 | |
| BBVA Chile Group | | | 28 | | | | 15 | | | | 3 | |
| BBVA Banco Continental Group | | | 97 | | | | 76 | | | | 67 | |
| BBVA Banco Provincial Group | | | 175 | | | | 106 | | | | 69 | |
| Provida Group | | | 3 | | | | 28 | | | | 25 | |
| BBVA Banco Francés Group | | | 44 | | | | 36 | | | | 43 | |
| Other companies | | | 14 | | | | 23 | | | | 25 | |
| | | | | | | | | | | | | |
Total | | | 366 | | | | 289 | | | | 235 | |
| | | | | | | | | | | | | |
As of December 31, 2008, the capital of Banco Bilbao Vizcaya Argentaria, S.A. amounted to €1,836,504,869.29, and consisted of 3,747,969,121 fully subscribed and paid registered shares of €0.49 par value each.
On September 10, 2007 the capital increase approved on the Extraordinary General Meeting of Shareholders of June 21, 2007 was carried out with the issuance of 196,000,000 ordinary shares of the same class and series to the
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previously existing ones as part of the payment for the acquisition of the total share capital of Compass Bancshares Inc. As of December 31, 2008, there was no significant capital increase in progress at any of the Group companies.
All the shares of BBVA carry the same voting and dividend rights and no single shareholder enjoys special voting rights. There are no shares that are not representative of an interest in the Bank’s capital.
The shares of BBVA are quoted on the computerized trading system of the Spanish stock exchanges and on the Frankfurt, London, Zurich, Milan and Mexico stock market.
American Depositary Shares (ADSs) quoted in New York are also traded on the Lima (Peru) Stock Exchange, by virtue of an exchange agreement entered into between these two markets.
Also, as of December 31, 2008, the shares of BBVA Banco Continental, S.A., Banco Provincial S.A., BBVA Colombia, S.A., BBVA Chile, S.A., BBVA Banco Frances, S.A. and AFP Provida were quoted on their respective local stock markets, being the last two quoted as well on the New York Stock Exchange. As well, BBVA Banco Frances, S.A. is listed on theLatin-American market of the Madrid Stock Exchange.
As of December 31, 2008, BBVA was not aware of any shareholder holding a significant interest in its equity other than Mr. Manuel Jove Capellán who, at that date, owned 4.34% of BBVA through the following vehicles: Inveravante Inversiones Universales, S.L., Bourdet Inversiones, SICAV, S.A. and Doniños de Inversiones, SICAV, S.A. The reduction in Mr. Manuel Jové’s shareholding with respect to the 5.01% interest he held at year-end 2007 is the result of a securities loan (specifically the loan of 25,000,000 shares) undertaken in accordance with additional provision 18 of Law 62/2003, of December 30. The settlement of the loan in the future will ultimately restore Mr. Jové’s ownership stake to 5.01%.
Meanwhile, State Street Bank and Trust Co., Chase Nominees Ltd, The Bank of New York International Nominees and Clearstream AG, in their capacity as international custodian/depositary banks, held 4.62%, 4.15%, 3.56% and 3.4% of the share capital of BBVA, respectively, as of December 31, 2008.
BBVA is not aware of any direct or indirect interests through which ownership or control of the Bank may be exercised.
BBVA has not been notified of the existence of any side agreements that regulate the exercise of voting rights at the Bank’s General Meetings, or which restrict or place conditions upon the free transferability of BBVA shares. Neither is the Bank aware of any agreement that might result in changes in the control of the issuer.
At the Annual General Meeting celebrated on February 28, 2004 the shareholders resolved to delegate to the Board of Directors, in accordance with Article 153.1.b) of the Spanish Corporations Law, the power to increase capital, on one or several occasions, by a maximum par value equal to 50% of the Company’s subscribed and paid capital at the date of the resolution, i.e. €830,758,750.54. The legally stipulated year within which the directors can carry out this increase is five years. The only disposition done by BBVA under this authorization was made in November 2006 by an amount of €78,947,368.22.
At the Annual General Meeting celebrated on March 18, 2006, the shareholders resolved to delegate to the Board of Directors the right to issue fixed-income securities of any kind, including redeemable and exchangeable bonds, non-convertible into equity. The Board of Directors has a maximum legal period of five years as of said date to issue, on one or several occasions, directly or through subsidiary companies fully underwritten by the Bank, any kind of debt instruments, documented in debentures, any class of bonds, promissory notes, any class of mortgage bonds, warrants, totally or partially exchangeable for equity that the Company or another company may already have issued, or via contracts for difference (CD’s), or any other senior or secured nominative or bearer fixed-income securities (including covered bonds) in euros or any other currency that can be subscribed in cash or kind, with or without the incorporation of rights to the securities (warrants), subordinated or not, with a limited or open-ended term. The total maximum nominal amount authorised is €105,000 million, this amount was increased by €30,000 million by the Ordinary General Meeting celebrated on March 16, 2007. This amount was increase in €50,000 million by the Ordinary General Meeting of March 14, 2008. Accordingly, the maximum total nominal amount delegated by the General Meeting was settled at €185,000 million.
F-119
At the Annual General Meeting celebrated on March 14, 2008 the shareholders resolved to delegate to the Board of Directors the right to issue bonds, convertibleand/or exchangeable into Company shares, within the five year period as of the date of the resolution for a maximum total of €9,000 million. The delegation includes the right to establish the different aspects and conditions of each issuance, including the power to exclude the preferential subscription rights of shareholders in accordance with Article 159.2 of the Spanish Corporations Law, as well as determining the basis and methods of the conversion and resolving to increase capital stock in the amount considered necessary.
The balance of this heading in the consolidated balance sheet amounts to €12,770 million and includes, inter alia, the amounts of the share premiums arising from the capital increases, in particular the capital increase in 2007 for an amount of €3,191 million (see Note 27), as well as the surpluses arising from the merger of Banco Bilbao, S.A. and Banco Vizcaya, S.A., amounted to €641 million.
The revised Spanish Corporations Law expressly permits the use of the share premium balance to increase capital and establishes no specific restrictions as to its use.
The breakdown of the balance of this heading in the accompanying consolidated balance sheets as of December 2008, 2007 and 2006 is as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Legal reserve | | | 367 | | | | 348 | | | | 332 | |
| Restricted reserve for retired capital | | | 88 | | | | 88 | | | | 88 | |
| Restricted reserve for Parent Company shares | | | 604 | | | | 912 | | | | 815 | |
| Restricted reserve for redenomination of capital in euros | | | 2 | | | | 2 | | | | 2 | |
| Revaluation Royal Decree-Law 7/1996 | | | 82 | | | | 85 | | | | 176 | |
| Voluntary reserves | | | 1,927 | | | | 822 | | | | 672 | |
| Consolidation reserves attributed to the Bank and dependents consolidated companies | | | 6,340 | | | | 3,803 | | | | 1,544 | |
| | | | | | | | | | | | | |
Total | | | 9,410 | | | | 6,060 | | | | 3,629 | |
| | | | | | | | | | | | | |
Under the revised Corporations Law, 10% of profit for each year must be transferred to the legal reserve until the balance of this reserve reaches 20% of capital. This limit had already been reached by Banco Bilbao Vizcaya Argentaria, S.A. as of December 31, 2008. The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased capital amount.
Except as mentioned above, until the legal reserve exceeds 20% of capital, it can only be used to offset losses, provided that sufficient other reserves are not available for this purpose.
| |
29.2. | RESTRICTED RESERVES: |
Pursuant to the Consolidated Spanish Companies Law, the respective restricted reserves were recorded in relation to the reduction of the par value of each share in April 2000, the treasury shares held by the bank at each period-end, and the customer loans outstanding at those dates that were granted for the purchase of, or are secured by, Bank shares.
Pursuant to Law 46/1998 on the introduction of the euro, the respective restricted reserves were recorded in relation to the redenomination of capital in euros.
F-120
| |
29.3. | REVALUATION ROYAL DECREE-LAW 7/1996 (ASSET REVALUATIONS AND REGULARISATIONS): |
Prior to the merger, Banco de Bilbao, S.A. and Banco de Vizcaya, S.A. availed themselves of the asset revaluations and regularisations provisions of the applicable enabling legislation. In addition, on December 31, 1996, the Banco Bilbao Vizcaya revalued its tangible assets pursuant to Royal Decree-Law7/1996 by applying the maximum coefficients authorized, up to the limit of the market value arising from the existing measurements. The resulting increases in the cost and accumulated depreciation of tangible assets and, where appropriate, in the cost of equity securities, were allocated as follows:
| | | | |
| | 2008 | |
| | Millions of euros | |
|
Legal revaluations and regularisations of tangible assets: | | | | |
Cost | | | 187 | |
Less: | | | | |
Single revaluation tax (3)% | | | (6 | ) |
Balance as of December 31, 1999 | | | 181 | |
Adjustment as a result of review by the tax authorities in 2000 | | | (5 | ) |
Transfer to voluntary reserves | | | (94 | ) |
| | | | |
Total
| | | 82 | |
| | | | |
Following the review of the balance of the account Revaluation Reserve Royal Decree-Law 7/1996 by the tax authorities in 2000, this balance can only be used, free of tax, to offset recorded losses and to increase capital until January 1, 2007. From that date, the remaining balance of this account can also be taken to unrestricted reserves, provided that the surplus has been depreciated or the revalue assets have been transferred or derecognised.
29.4 RESERVES AND LOSSES AT CONSOLIDATED COMPANIES:
The breakdown, by company or corporate group, of the balances of these headings in the accompanying consolidated balance sheets is as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Fully and proportionately consolidated companies | | | | | | | | | | | | |
| BBVA Bancomer Group | | | 3,489 | | | | 2,782 | | | | 2,187 | |
| Provida Group | | | 333 | | | | 264 | | | | 214 | |
| BBVA Banco Provincial Group | | | 198 | | | | 84 | | | | 35 | |
| BBVA Continental Group | | | 95 | | | | 79 | | | | 58 | |
| BBVA Puerto Rico Group | | | 44 | | | | 43 | | | | 38 | |
| BBVA USA Bancshares Group | | | (84 | ) | | | 23 | | | | 2 | |
| BBVA Chile Group | | | (85 | ) | | | (109 | ) | | | (102 | ) |
| BBVA Portugal Group | | | (220 | ) | | | (236 | ) | | | (207 | ) |
| BBVA Colombia Group | | | (264 | ) | | | (313 | ) | | | (341 | ) |
| BBVA Banco Francés Group | | | (305 | ) | | | (441 | ) | | | (602 | ) |
| BBVA Luxinvest, S.A. | | | 1,232 | | | | 1,295 | | | | 999 | |
| Corporacion General Financiera, S.A. | | | 979 | | | | 965 | | | | 701 | |
| BBVA Seguros, S.A. | | | 862 | | | | 681 | | | | 485 | |
| Anida Grupo Inmobiliario, S.L | | | 380 | | | | 296 | | | | 218 | |
| Cidessa Uno, S.L | | | 298 | | | | 197 | | | | 73 | |
| BBVA Suiza, S.A. | | | 222 | | | | 197 | | | | 171 | |
| Bilbao Vizcaya Holding, S.A. | | | 150 | | | | 104 | | | | 54 | |
F-121
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Finanzia, Banco de Crédito, S.A. | | | 144 | | | | 139 | | | | 115 | |
| Compañía de Cartera e Inversiones, S.A. | | | 121 | | | | (10 | ) | | | 84 | |
| Banco Industrial de Bilbao, S.A. | | | 114 | | | | 95 | | | | 95 | |
| BBVA Panama, S.A. | | | 108 | | | | 85 | | | | 79 | |
| Banco de Crédito Local, S.A. | | | (243 | ) | | | (243 | ) | | | (249 | ) |
| BBVA International Investment Corporation | | | (418 | ) | | | (424 | ) | | | (424 | ) |
| Other | | | 135 | | | | (5 | ) | | | (89 | ) |
| | | | | | | | | | | | | |
Subtotal | | | 7,285 | | | | 5,548 | | | | 3,594 | |
| | | | | | | | | | | | | |
For using the equity method: | | | 609 | | | | 451 | | | | 360 | |
| | | | | | | | | | | | | |
| Corp. IBV Participaciones Empresariales, S.A. | | | 437 | | | | 428 | | | | 326 | |
| Citic Intern.Final.Holding | | | 151 | | | | (5 | ) | | | — | |
| Tubos Reunidos, S.A. | | | 53 | | | | 66 | | | | 56 | |
| Other | | | (32 | ) | | | (38 | ) | | | (22 | ) |
| | | | | | | | | | | | | |
Total | | | 7,894 | | | | 5,999 | | | | 3,954 | |
| | | | | | | | | | | | | |
For the purpose of allocating the reserves and accumulated losses at consolidated companies shown in the foregoing table, the transfers of reserves arising from the dividends paid and the writedowns or transactions between these companies are taken into account in the period in which they took place.
As of December 31, 2008, 2007 and 2006, the individual financial statements of the subsidiaries giving rise to the balances itemized in “Reserves and losses at consolidated companies — Fully and proportionately consolidated companies” in the table above included €2,217 million, €1,706 million and €1,743 million, respectively, of restricted reserves, all of which are restricted for companies shares.
F-122
As of December 31, 2008, 2007 and 2006 the Group companies performed the following transactions involving Bank shares:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Number of
| | | Millions of
| | | Number of
| | | Millions of
| | | Number of
| | | Millions of
| |
| | | Shares | | | Euros | | | Shares | | | Euros | | | Shares | | | Euros | |
| |
Balance at beginning of year | | | 15,836,692 | | | | 389 | | | | 8,306,205 | | | | 147 | | | | 7,609,267 | | | | 96 | |
| + Purchases | | | 1,118,942,855 | | | | 14,096 | | | | 921,700,213 | | | | 16,156 | | | | 338,017,080 | | | | 5,677 | |
| - Sales | | | (1,073,239,664 | ) | | | (13,685 | ) | | | (914,169,726 | ) | | | (16,041 | ) | | | (337,319,748 | ) | | | (5,639 | ) |
| +/- Other | | | — | | | | (60 | ) | | | — | | | | (1 | ) | | | (394 | ) | | | (1 | ) |
| +/- Derivatives over BBVA shares | | | — | | | | (20 | ) | | | — | | | | 128 | | | | — | | | | 14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at end of year | | | 61,539,883 | | | | 720 | | | | 15,836,692 | | | | 389 | | | | 8,306,205 | | | | 147 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| Held by the BBVA S.A. | | | 4,091,197 | | | | 143 | | | | 291,850 | | | | 129 | | | | 2,462,171 | | | | 40 | |
| Held by Corporación General Financiera | | | 57,436,183 | | | | 577 | | | | 15,525,688 | | | | 260 | | | | 5,827,394 | | | | 107 | |
| Held by other entities of the Group | | | 12,503 | | | | — | | | | 19,154 | | | | — | | | | 16,640 | | | | — | |
| Average purchase price | | | 12.60 | | | | | | | | 17.53 | | | | | | | | 16.80 | | | | | |
| Average selling price | | | 12.52 | | | | | | | | 17.51 | | | | | | | | 16.77 | | | | | |
| Net gain or losses on transactions (Stockholders’funds-Reserves) | | | (172 | ) | | | | | | | (26 | ) | | | | | | | 17 | | | | | |
The percentages of treasury shares held by the Group in 2008, 2007 and 2006 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Min | | | Max | | | Min | | | Max | | | Min | | | Max | |
| |
| % treasury shares | | | 0.318 | % | | | 3.935 | % | | | 0.136 | % | | | 1.919 | % | | | 0.020 | % | | | 0.858 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
The number of shares of Banco Bilbao Vizcaya Argentaria S.A., with nominal value per share €0.49, accepted in pledge as of December 31, 2008, 2007 and 2006 was as follow:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Number of shares in pledge | | | 98,228,254 | | | | 96,613,490 | | | | 74,453,876 | |
| Nominal value | | | 0.49 | | | | 0.49 | | | | 0.49 | |
| % of share capital | | | 2.62 | % | | | 2.58 | % | | | 2.10 | % |
The number of BBVA shares own by third parties but manage by entities of the Group as of December 31, 2008, 2007 and 2006 was as follow:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Number of shares property of third parties | | | 104,534,298 | | | | 105,857,665 | | | | 99,849,614 | |
| Nominal value | | | 0.49 | | | | 0.49 | | | | 0.49 | |
| % of share capital | | | 2.8 | % | | | 2.8 | % | | | 2.8 | % |
F-123
As of December 31, 2008, 2007 and 2006, the capital of the Group exceeded the minimum level required by the rules in force in every date (Note 1.8), as shown below:
| | | | | | | | | | | | | |
| | | 2008 (*) | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Basic equity | | | 22,107 | | | | 19,115 | | | | 18,313 | |
| Capital | | | 1,837 | | | | 1,837 | | | | 1,740 | |
| Parent company reserves | | | 20,768 | | | | 18,389 | | | | 13,527 | |
| Minority interests | | | 928 | | | | 760 | | | | 514 | |
| Other equity instruments | | | 5,391 | | | | 4,491 | | | | 4,025 | |
| Deductions (Goodwill and others) | | | (9,998 | ) | | | (9,654 | ) | | | (4,180 | ) |
| Attributed net income (less dividends) | | | 3,181 | | | | 3,292 | | | | 2,687 | |
Additional equity | | | 12,387 | | | | 13,147 | | | | 12,344 | |
Other deductions | | | (957 | ) | | | (1,786 | ) | | | (1,223 | ) |
Additional Capital due to mixed Group (**) | | | 1,129 | | | | 1,160 | | | | 980 | |
Total Stockholders’ equity | | | 34,666 | | | | 31,636 | | | | 30,414 | |
Minimum equity required | | | 23,653 | | | | 25,496 | | | | 21,047 | |
| | |
(*) | | Provisionals data |
|
(**) | | Mainly Insurance entities of the Group. |
| |
A) | Consolidated tax group |
Pursuant to current legislation, the Consolidated Tax Group includes Banco Bilbao Vizcaya Argentaria, S.A.,BBVA as the Parent company, and, as subsidiaries, the Spanish subsidiaries that meet the requirements provided for inunder Spanish legislation regulating the taxation ofregime for the consolidated net income of corporate groups.
The Group’s other banks and subsidiaries file individual tax returns in accordance with the tax legislation in force in each country.
| |
B) | Years open for review by the tax authorities |
21.2 Years open for review by the tax authorities
At the date these consolidated financial statements were prepared,The years open to review in the Consolidated Tax Group had 2001as of December 31, 2010 are 2004 and subsequentfollowing for the main taxes applicable.
The rest of the Spanish consolidated entities in general have the last four years open for reviewinspection by the tax authorities for the main taxes applicable, except for those in which there has been an interruption of the limitation period due to it.the start of an inspection.
In 2008,2009, as a result of an inspectionaction by the tax authorities, tax assessmentsinspections proceedings were accepted covering fiscalinstituted for the years throughsince (and including) 2003, inclusive, some of which were signed under objection. Althoughcontested. After considering the temporary nature of certain of the items assessed, provisions were set aside for the amounts, if any, that might arise from these assessments.
Over the year ended December 31, 2009, notice was also given of the start of inspections for the years 2004 to 2006 for the main taxes to which the tax assessments weregroup is subject. These inspections had not official at the datebeen completed as of preparing the accompanying consolidated financial statements, their potential impact on equity was fully provisioned at year-end 2008.December 31, 2010.
In view of the varying interpretations that can be made of the applicable tax legislation, the outcome of the tax auditsinspections of the open years that could be conducted by the tax authorities in the future could give rise to contingent tax liabilities which cannot be objectively quantified at the present time. However, the Banks’ Board of Directors and its tax advisers consider that the possibility of these contingent liabilities becoming actual liabilities is remote and, in any case, the tax charge which might arise there fromtherefore would not materially affect the Group’s accompanying consolidated financial statements.
F-124F-111
21.3 Reconciliation
The reconciliation of the corporationcorporate tax expense resulting from the application of the standard tax rate and the expense registered by this tax in the accompanying consolidated income statements is as follows:
| | | | | | | | | | | | | |
Reconciliation of the Corporate Tax Expense Resulting
| | | | | | | | | |
from the Application of the Standard Rate and the
| | | | | | | | | |
Expense Registered by this Tax | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Corporation tax(*) | | | 1,927 | | | | 1,721 | | | | 2,078 | |
| Decreases due to permanent differences: | | | (559 | ) | | | (633 | ) | | | (690 | ) |
| Tax credits and tax relief at consolidated Companies | | | (180 | ) | | | (223 | ) | | | (441 | ) |
| Other items net | | | (379 | ) | | | (410 | ) | | | (249 | ) |
| Net increases (decreases) due to temporary differences | | | (19 | ) | | | 96 | | | | 580 | |
Charge for income tax and other taxes | | | 1,349 | | | | 1,184 | | | | 1,968 | |
| Deferred tax assets and liabilities recorded (utilized) | | | 19 | | | | (96 | ) | | | (580 | ) |
Income tax and other taxes accrued in the period | | | 1,368 | | | | 1,088 | | | | 1,388 | |
| Adjustments to prior years’ income tax and other taxes | | | 59 | | | | 53 | | | | 153 | |
| | | | | | | | | | | | | |
Income tax and other taxes | | | 1,427 | | | | 1,141 | | | | 1,541 | |
| | | | | | | | | | | | | |
The effective tax rate for 2010, 2009 and 2008 is as follows:
| | | | | | | | | | | | | |
Effective Tax Rate | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Income from: | | | | | | | | | | | | |
| Consolidated Tax Group | | | 2,398 | | | | 4,066 | | | | 2,492 | |
| Other Spanish Entities | | | (70 | ) | | | (77 | ) | | | 40 | |
| Foreign Entities | | | 4,094 | | | | 1,747 | | | | 4,394 | |
| | | | | | | | | | | | | |
Total | | | 6,422 | | | | 5,736 | | | | 6,926 | |
| | | | | | | | | | | | | |
| Income tax and other taxes | | | 1,427 | | | | 1,141 | | | | 1,541 | |
Effective Tax Rate | | | 22.22 | % | | | 19.89 | % | | | 22.25 | % |
21.4 Tax recognized in total equity
In addition to the corporationincome tax expense recognized in the accompanying consolidated income statements, the group has recognized the following amounts for these items in the consolidated equity as of December 31, 2008, 20072010, 2009 and 2006 was as follows:2008:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Corporation tax(*) | | | 2,078 | | | | 2,761 | | | | 2,461 | |
| Decreases due to permanent differences: | | | | | | | | | | | | |
| Tax credits and tax relief at consolidated Companies | | | (441 | ) | | | (439 | ) | | | (353 | ) |
| Other items net | | | (249 | ) | | | (229 | ) | | | (151 | ) |
| Net increases (decreases) due to temporary differences | | | 580 | | | | (262 | ) | | | (38 | ) |
Charge for income tax and other taxes | | | 1,968 | | | | 1,831 | | | | 1,919 | |
| Deferred tax assets and liabilities recorded (utilised) | | | (580 | ) | | | 262 | | | | 38 | |
Income tax and other taxes accrued in the year | | | 1,388 | | | | 2,093 | | | | 1,957 | |
| Adjustments to prior years’ income tax and other taxes | | | 153 | | | | (14 | ) | | | 102 | |
| | | | | | | | | | | | | |
Income tax and other taxes | | | 1,541 | | | | 2,079 | | | | 2,059 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Tax Recognized in Total Equity | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Charges to total equity | | | | | | | | | | | | |
| Debt securities | | | — | | | | (276 | ) | | | (19 | ) |
| Equity instruments | | | (354 | ) | | | (441 | ) | | | (168 | ) |
| Subtotal | | | (354 | ) | | | (717 | ) | | | (187 | ) |
Credits to total equity(*) | | | | | | | | | | | | |
| Debt securities and others | | | 192 | | | | 1 | | | | 2 | |
| | | | | | | | | | | | | |
Subtotal | | | 192 | | | | 1 | | | | 2 | |
| | | | | | | | | | | | | |
Total | | | (162 | ) | | | (716 | ) | | | (185 | ) |
| | | | | | | | | | | | | |
| | |
| (*) | | Tax rate 30% in 2008, 32.5% in 2007 and 35% in 2006.asset credit to total equity as of December 31, 2010, due primaly to debt instruments unrealized losses. |
F-112
The effective tax rate as of December 31, 2008, 2007 and 2006 was as follows:21.5 Deferred taxes
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Consolidated Tax Group | | | 2,492 | | | | 4,422 | | | | 3,376 | |
| Other Spanish entities | | | 40 | | | | 4 | | | | 102 | |
| Foreign entities | | | 4,394 | | | | 4,069 | | | | 3,552 | |
| | | | | | | | | | | | | |
| | | | 6,926 | | | | 8,495 | | | | 7,030 | |
| | | | | | | | | | | | | |
| Income tax | | | 1,541 | | | | 2,079 | | | | 2,059 | |
| | | | | | | | | | | | | |
Effective tax rate | | | 22.25 | % | | | 24.48 | % | | | 29.29 | % |
| | | | | | | | | | | | | |
| |
D) | tax recognized in equity |
In addition to the income tax recognized in the consolidated income statements during 2008, 2007 and 2006, the Group recognized the following amounts in consolidated equity:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Charges to equity net | | | | | | | | | | | | |
| Debt securities | | | (19 | ) | | | (36 | ) | | | (291 | ) |
| Equity instruments | | | (168 | ) | | | (1,373 | ) | | | (1,105 | ) |
Credits to equity net | | | | | | | | | | | | |
| Other | | | 2 | | | | 22 | | | | 41 | |
| | | | | | | | | | | | | |
Total | | | (185 | ) | | | (1,387 | ) | | | (1,355 | ) |
| | | | | | | | | | | | | |
The balance of the heading “Tax Assets”assets” in the accompanying consolidated balance sheets includes the tax receivables relating to deferred tax assets; in turn, the balance of the heading “Tax Liabilities”liabilities” includes the liabilityliabilities relating to the Group’s various deferred tax liabilities.
F-125
The detaildetails of deferredthe most important tax assets and liabilities wasare as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Deferred tax assets: | | | 6,484 | | | | 5,207 | | | | 5,340 | |
| | | | | | | | | | | | | |
| Of which: | | | | | | | | | | | | |
| Pensions commitments | | | 1,654 | | | | 1,519 | | | | 1,640 | |
| Portfolio | | | 335 | | | | 587 | | | | 672 | |
| Loan loss provisions | | | 1,436 | | | | 1,400 | | | | 1,464 | |
| Tax losses and other | | | 1,631 | | | | 805 | | | | 927 | |
| | | | | | | | | | | | | |
Deferred tax liabilities | | | 2,266 | | | | 2,817 | | | | 2,369 | |
| | | | | | | | | | | | | |
| Of which: | | | | | | | | | | | | |
| Free depreciation and other | | | (1,282 | ) | | | (2,235 | ) | | | (1,769 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Tax Assets and Liabilities. Breakdown | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Tax assets - | | | | | | | | | | | | |
| Current | | | 1,113 | | | | 1,187 | | | | 1,266 | |
| Deferred | | | 5,536 | | | | 5,086 | | | | 5,218 | |
| Pensions | | | 1,392 | | | | 1,483 | | | | 1,659 | |
| Portfolio | | | 1,546 | | | | 987 | | | | 1,205 | |
| Other assets | | | 234 | | | | 221 | | | | 140 | |
| Impairment losses | | | 1,648 | | | | 1,632 | | | | 1,453 | |
| Other | | | 699 | | | | 737 | | | | 720 | |
| Tax losses | | | 17 | | | | 26 | | | | 40 | |
| | | | | | | | | | | | | |
Total | | | 6,649 | | | | 6,273 | | | | 6,484 | |
| | | | | | | | | | | | | |
Tax Liabilities - | | | | | | | | | | | | |
| Current | | | 604 | | | | 539 | | | | 984 | |
| Deferred | | | 1,591 | | | | 1,669 | | | | 1,282 | |
| Portfolio | | | 1,280 | | | | 1,265 | | | | 977 | |
| Charge for income tax and other taxes | | | 311 | | | | 404 | | | | 305 | |
| | | | | | | | | | | | | |
Total | | | 2,195 | | | | 2,208 | | | | 2,266 | |
| | | | | | | | | | | | | |
As of December 31, 2008,2010, the estimated balance of temporary differences estimated in connection with investments in subsidiaries, branches and associates and investments in jointly controlled entities in respect of which nowas €503 million. No deferred tax liabilities have been recognized with respect to this in the accompanying consolidated balance sheet, amounted to €397 million.sheet.
The amortization of certain components of goodwill for tax purposes gives rise to temporary differences triggered by the resulting differences in the tax and accounting bases of goodwill balances. In this regard, and as a general rule, the Group’s accounting policy is to recognize deferred tax liabilities in respect of the aforementionedthese temporary differences at the Group companies that are subject to this particular tax shelter.benefit.
F-113
| |
| 22. | OTHER ASSETS AND LIABILITIES |
The breakdown of the balance of these headings in the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | |
Other Assets and Liabilities | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Assets - | | | | | | | | | | | | |
| Inventories | | | 2,788 | | | | 1,933 | | | | 1,066 | |
Of which: | | | | | | | | | | | | |
| Real estate agencies | | | 2,729 | | | | 1,930 | | | | 1,064 | |
| Transactions in transit | | | 26 | | | | 55 | | | | 33 | |
| Accrued interest | | | 538 | | | | 581 | | | | 383 | |
| Unaccrued prepaid expenses | | | 402 | | | | 421 | | | | 206 | |
| Other prepayments and accrued income | | | 136 | | | | 160 | | | | 177 | |
| Other items | | | 1,175 | | | | 1,383 | | | | 1,296 | |
| | | | | | | | | | | | | |
Total | | | 4,527 | | | | 3,952 | | | | 2,778 | |
| | | | | | | | | | | | | |
Liabilities - | | | | | | | | | | | | |
| Transactions in transit | | | 58 | | | | 49 | | | | 53 | |
| Accrued interest | | | 2,162 | | | | 2,079 | | | | 1,918 | |
| Unpaid accrued expenses | | | 1,516 | | | | 1,412 | | | | 1,321 | |
| Other accrued expenses and deferred income | | | 646 | | | | 667 | | | | 597 | |
| Other items | | | 847 | | | | 780 | | | | 586 | |
| | | | | | | | | | | | | |
Total | | | 3,067 | | | | 2,908 | | | | 2,557 | |
| | | | | | | | | | | | | |
The heading “Inventories” includes the net carrying amount of the purchases of land and property that the Group’s property companies hold for sale or for their business. The amounts under this heading include real-estate assets bought by these companies from distressed customers (mainly in Spain), net of their corresponding impairment. In 2010, 2009 and 2008, the accumulated valuation adjustment due to impairment losses on these assets amounted to €1,088 million, €606 million and €85 million, respectively.
The principal companies in the Group that engage in real estate business activity and make up nearly all of the amount in the “Inventory” heading of the accompanying consolidated balance sheets are as follows: Anida Desarrollos Inmobiliarios, S.A., Desarrollo Urbanístico Chamartín, S.A., Anida Desarrollo Singulares, S.L., Anida Operaciones Singulares, S.L. and Anida Inmuebles España y Portugal, S.L.
| |
| 23. | FINANCIAL LIABILITIES AT AMORTIZED COST |
The breakdown of the balance of this heading in the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | |
Financial Liabilities at Amortized Cost | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Deposits from central banks (Note 9) | | | 11,010 | | | | 21,166 | | | | 16,844 | |
| Deposits from credit institutions | | | 57,170 | | | | 49,146 | | | | 49,961 | |
| Customer deposits | | | 275,789 | | | | 254,183 | | | | 255,236 | |
| Debt certificates | | | 85,179 | | | | 99,939 | | | | 104,157 | |
| Subordinated liabilities | | | 17,420 | | | | 17,878 | | | | 16,987 | |
| Other financial liabilities | | | 6,596 | | | | 5,624 | | | | 7,420 | |
| | | | | | | | | | | | | |
Total | | | 453,164 | | | | 447,936 | | | | 450,605 | |
| | | | | | | | | | | | | |
F-114
23.1. DEPOSITS FROM CENTRAL BANKS
The breakdown of the balance under this heading in the accompanying consolidated balance sheets is presented in Note 9.
23.2. DEPOSITS FROM CREDIT INSTITUTIONS
The breakdown of the balance of this heading in the consolidated balance sheets, according to the nature of the financial instruments, is as follows:
| | | | | | | | | | | | | |
Deposits from Credit Institutions | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Reciprocal accounts | | | 140 | | | | 68 | | | | 90 | |
| Deposits with agreed maturity | | | 38,265 | | | | 30,608 | | | | 35,785 | |
| Demand deposits | | | 1,530 | | | | 1,273 | | | | 1,228 | |
| Other accounts | | | 696 | | | | 733 | | | | 547 | |
| Repurchase agreements | | | 16,314 | | | | 16,263 | | | | 11,923 | |
| | | | | | | | | | | | | |
Subtotal | | | 56,945 | | | | 48,945 | | | | 49,573 | |
| | | | | | | | | | | | | |
| Accrued interest until expiration | | | 225 | | | | 201 | | | | 388 | |
| | | | | | | | | | | | | |
Total | | | 57,170 | | | | 49,146 | | | | 49,961 | |
| | | | | | | | | | | | | |
The breakdown by geographical area and the nature of the related instruments of this heading in the accompanying consolidated balance sheets, disregarding valuation adjustments, was as follows:
| | | | | | | | | | | | | | | | | |
| | | Demand
| | | Deposits with
| | | | | | | |
2010 | | Deposits | | | Agreed Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 961 | | | | 7,566 | | | | 340 | | | | 8,867 | |
| Rest of Europe | | | 151 | | | | 16,160 | | | | 6,315 | | | | 22,626 | |
| The United States | | | 147 | | | | 6,027 | | | | 665 | | | | 6,839 | |
| Latin America | | | 356 | | | | 5,408 | | | | 8,994 | | | | 14,758 | |
| Rest of the world | | | 56 | | | | 3,799 | | | | — | | | | 3,855 | |
| | | | | | | | | | | | | | | | | |
Total | | | 1,671 | | | | 38,960 | | | | 16,314 | | | | 56,945 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | Demand
| | | Deposits with
| | | | | | | |
2009 | | Deposits | | | Agreed Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 456 | | | | 6,414 | | | | 822 | | | | 7,692 | |
| Rest of Europe | | | 382 | | | | 15,404 | | | | 4,686 | | | | 20,472 | |
| The United States | | | 150 | | | | 5,611 | | | | 811 | | | | 6,572 | |
| Latin America | | | 336 | | | | 1,576 | | | | 9,945 | | | | 11,857 | |
| Rest of the world | | | 16 | | | | 2,336 | | | | — | | | | 2,352 | |
| | | | | | | | | | | | | | | | | |
Total | | | 1,340 | | | | 31,341 | | | | 16,264 | | | | 48,945 | |
| | | | | | | | | | | | | | | | | |
F-115
| | | | | | | | | | | | | | | | | |
| | | Demand
| | | Deposits with
| | | | | | | |
2008 | | Deposits | | | Agreed Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 676 | | | | 4,413 | | | | 1,131 | | | | 6,220 | |
| Rest of Europe | | | 82 | | | | 17,542 | | | | 2,669 | | | | 20,293 | |
| The United States | | | 40 | | | | 8,164 | | | | 1,093 | | | | 9,297 | |
| Latin America | | | 439 | | | | 3,518 | | | | 7,030 | | | | 10,987 | |
| Rest of the world | | | 80 | | | | 2,696 | | | | — | | | | 2,776 | |
| | | | | | | | | | | | | | | | | |
Total | | | 1,317 | | | | 36,333 | | | | 11,923 | | | | 49,573 | |
| | | | | | | | | | | | | | | | | |
23.3. CUSTOMERS DEPOSITS
The breakdown of this heading of the accompanying consolidated balance sheets, by type of financial instruments, was as follows:
| | | | | | | | | | | | | |
Customer Deposits | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Millions of euros | | | | |
| |
Government and other government agencies | | | 30,982 | | | | 15,297 | | | | 18,837 | |
| Spanish | | | 17,404 | | | | 4,291 | | | | 6,320 | |
| Foreign | | | 13,563 | | | | 10,997 | | | | 12,496 | |
| Accrued interests | | | 15 | | | | 9 | | | | 21 | |
Other resident sectors | | | 116,217 | | | | 93,190 | | | | 98,630 | |
| Current accounts | | | 18,705 | | | | 20,243 | | | | 20,725 | |
| Savings accounts | | | 24,520 | | | | 27,137 | | | | 23,863 | |
| Fixed-term deposits | | | 49,160 | | | | 35,135 | | | | 43,829 | |
| Repurchase agreements | | | 23,197 | | | | 10,186 | | | | 9,339 | |
| Other accounts | | | 46 | | | | 31 | | | | 62 | |
| Accrued interests | | | 589 | | | | 458 | | | | 812 | |
Non-resident sectors | | | 128,590 | | | | 145,696 | | | | 137,769 | |
| Current accounts | | | 39,567 | | | | 33,697 | | | | 28,160 | |
| Savings accounts | | | 26,435 | | | | 23,394 | | | | 22,840 | |
| Fixed-term deposits | | | 56,752 | | | | 83,754 | | | | 79,094 | |
| Repurchase agreements | | | 5,370 | | | | 4,415 | | | | 6,890 | |
| Other accounts | | | 122 | | | | 103 | | | | 104 | |
| Accrued interests | | | 344 | | | | 333 | | | | 681 | |
| | | | | | | | | | | | | |
Total | | | 275,789 | | | | 254,183 | | | | 255,236 | |
| | | | | | | | | | | | | |
| Of which: | | | | | | | | | | | | |
| In euros | | | 151,806 | | | | 114,066 | | | | 121,895 | |
| In foreign currency | | | 123,983 | | | | 140,117 | | | | 133,341 | |
| Of which: | | | | | | | | | | | | |
| Deposits from other creditors without valuation adjustment | | | 275,055 | | | | 253,566 | | | | 254,075 | |
| Accrued interests | | | 734 | | | | 617 | | | | 1,161 | |
F-116
The breakdown by geographical area of this heading in the accompanying consolidated balance sheets, by type of instrument and geographical area, disregarding valuation adjustments, was as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Deposits
| | | | | | | |
| | | Demand
| | | Savings
| | | with Agreed
| | | | | | | |
2010 | | Deposits | | | Deposits | | | Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 21,848 | | | | 24,707 | | | | 67,838 | | | | 18,640 | | | | 133,033 | |
| Rest of Europe | | | 3,784 | | | | 482 | | | | 18,245 | | | | 1,609 | | | | 24,120 | |
| The United States | | | 13,985 | | | | 11,363 | | | | 17,147 | | | | — | | | | 42,495 | |
| Latin America | | | 28,685 | | | | 15,844 | | | | 23,724 | | | | 3,762 | | | | 72,015 | |
| Rest of the world | | | 357 | | | | 201 | | | | 2,620 | | | | — | | | | 3,178 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 68,659 | | | | 52,597 | | | | 129,574 | | | | 24,011 | | | | 274,841 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Deposits
| | | | | | | |
| | | Demand
| | | Savings
| | | with Agreed
| | | | | | | |
2009 | | Deposits | | | Deposits | | | Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 23,836 | | | | 27,245 | | | | 38,370 | | | | 7,572 | | | | 97,023 | |
| Rest of Europe | | | 2,975 | | | | 457 | | | | 18,764 | | | | 3 | | | | 22,199 | |
| The United States | | | 11,548 | | | | 10,146 | | | | 46,292 | | | | — | | | | 67,986 | |
| Latin America | | | 24,390 | | | | 13,593 | | | | 20,631 | | | | 4,413 | | | | 63,027 | |
| Rest of the world | | | 440 | | | | 181 | | | | 2,527 | | | | — | | | | 3,148 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 63,189 | | | | 51,622 | | | | 126,584 | | | | 11,988 | | | | 253,383 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Deposits
| | | | | | | |
| | | Demand
| | | Savings
| | | with Agreed
| | | | | | | |
2008 | | Deposits | | | Deposits | | | Maturity | | | Repos | | | Total | |
| | | Millions of euros | |
| |
| Spain | | | 26,209 | | | | 23,892 | | | | 45,299 | | | | 9,745 | | | | 105,145 | |
| Rest of Europe | | | 3,214 | | | | 360 | | | | 22,733 | | | | 34 | | | | 26,341 | |
| The United States | | | 8,288 | | | | 10,899 | | | | 36,997 | | | | — | | | | 56,184 | |
| Latin America | | | 20,219 | | | | 9,911 | | | | 20,195 | | | | 6,867 | | | | 57,192 | |
| Rest of the world | | | 1,576 | | | | 2,488 | | | | 4,796 | | | | — | | | | 8,860 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 59,506 | | | | 47,550 | | | | 130,020 | | | | 16,646 | | | | 253,722 | |
| | | | | | | | | | | | | | | | | | | | | |
23.4. DEBT CERTIFICATES AND SUBORDINATED LIABILITIES
The breakdown of the headings “Debt certificates (including bonds)” and “Subordinated liabilities” in the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | |
Debt Certificates and Subordinated Liabilities | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Debt Certificates | | | 85,179 | | | | 99,939 | | | | 104,157 | |
| Promissory notes and bills | | | 13,215 | | | | 29,582 | | | | 19,985 | |
| Bonds and debentures | | | 71,964 | | | | 70,357 | | | | 84,172 | |
| Subordinated Liabilities | | | 17,420 | | | | 17,878 | | | | 16,987 | |
| | | | | | | | | | | | | |
Total | | | 102,599 | | | | 117,817 | | | | 121,144 | |
| | | | | | | | | | | | | |
F-117
The changes in 2010, 2009 and 2008 under the headings “Debt certificates (including bonds)” and “Subordinated liabilities” was as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Exchange
| | | | |
| | | Balance at the
| | | | | | Repurchase or
| | | Differences and
| | | Balance at the
| |
2010 | | Beginning | | | Issuances | | | Redemption | | | Other | | | End | |
| | | Millions of euros | |
| |
| Debt certificates issued in the European Union | | | 107,069 | | | | 129,697 | | | | (149,965 | ) | | | 3,768 | | | | 90,569 | |
| With information brochure | | | 107,035 | | | | 129,697 | | | | (149,962 | ) | | | 3,768 | | | | 90,538 | |
| Without information brochure | | | 34 | | | | — | | | | (3 | ) | | | — | | | | 31 | |
| Other debt certificates issued outside the European Union | | | 10,748 | | | | 2,622 | | | | (2,097 | ) | | | 758 | | | | 12,031 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 117,817 | | | | 132,319 | | | | (152,062 | ) | | | 4,526 | | | | 102,600 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Exchange
| | | | |
| | | Balance at the
| | | | | | Repurchase or
| | | Differences and
| | | Balance at the
| |
2009 | | Beginning | | | Issuances | | | Redemption | | | Other | | | End | |
| | | Millions of euros | |
| |
| Debt certificates issued in the European Union | | | 111,159 | | | | 129,107 | | | | (126,713 | ) | | | (6,484 | ) | | | 107,069 | |
| With information brochure | | | 111,126 | | | | 129,107 | | | | (126,713 | ) | | | (6,485 | ) | | | 107,035 | |
| Without information brochure | | | 33 | | | | — | | | | — | | | | 1 | | | | 34 | |
| Other debt certificates issued outside the European Union | | | 9,986 | | | | 4,894 | | | | (4,343 | ) | | | 211 | | | | 10,748 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 121,145 | | | | 134,001 | | | | (131,056 | ) | | | (6,273 | ) | | | 117,817 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Exchange
| | | | |
| | | Balance at the
| | | | | | Repurchase or
| | | Differences and
| | | Balance at the
| |
2008 | | Beginning | | | Issuances | | | Redemption | | | Other | | | End | |
| | | Millions of euros | |
| |
| Debt certificates issued in the European Union | | | 109,173 | | | | 107,848 | | | | (85,671 | ) | | | (20,192 | ) | | | 111,158 | |
| With information brochure | | | 109,140 | | | | 107,848 | | | | (85,671 | ) | | | (20,192 | ) | | | 111,125 | |
| Without information brochure | | | 33 | | | | — | | | | — | | | | — | | | | 33 | |
| Other debt certificates issued outside the European Union | | | 8,737 | | | | 42,494 | | | | (40,844 | ) | | | (401 | ) | | | 9,986 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 117,910 | | | | 150,342 | | | | (126,515 | ) | | | (20,593 | ) | | | 121,144 | |
| | | | | | | | | | | | | | | | | | | | | |
The detail of the most significant outstanding issuances, repurchases or refunds of debt instruments issued by the Bank or companies in the Group as of December 31, 2010, 2009 and 2008 are shown on Appendix VIII.
F-118
23.4.1 Promissory notes and bills
The breakdown of the balance under this heading “Promissory notes and bills”, by currency, is as follows:
| | | | | | | | | | | | | |
Promissory Notes and Bills | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| In euros | | | 7,672 | | | | 11,024 | | | | 9,593 | |
| In other currencies | | | 5,543 | | | | 18,558 | | | | 10,392 | |
| | | | | | | | | | | | | |
Total | | | 13,215 | | | | 29,582 | | | | 19,985 | |
| | | | | | | | | | | | | |
These promissory notes were issued mainly by BBVA, S.A. and Banco de Financiación, S.A.
23.4.2. Bonds and debentures issued
The breakdown of the balance under this heading “Bonds and debentures issued”, by financial instrument and currency, is as follows:
| | | | | | | | | | | | | |
Bonds and Debentures Issued | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
In euros - | | | | | | | | | | | | |
| Non-convertible bonds and debentures at floating interest rates | | | 6,776 | | | | 8,593 | | | | 11,577 | |
| Non-convertible bonds and debentures at fixed interest rates | | | 7,493 | | | | 5,932 | | | | 4,736 | |
| Covered bonds | | | 37,170 | | | | 34,708 | | | | 38,481 | |
| Hybrid financial instruments | | | 373 | | | | 389 | | | | — | |
| Securitization bonds realized by the Group | | | 8,047 | | | | 8,407 | | | | 13,783 | |
| Accrued interest and others(*) | | | 2,952 | | | | 2,731 | | | | 2,668 | |
In foreign currency - | | | | | | | | | | | | |
| Non-convertible bonds and debentures at floating interest rates | | | 3,767 | | | | 4,808 | | | | 8,980 | |
| Non-convertible bonds and debentures at fixed interest rates | | | 2,681 | | | | 2,089 | | | | 1,601 | |
| Covered bonds | | | 772 | | | | 731 | | | | 1,005 | |
| Hybrid financial instruments | | | 1,119 | | | | 1,342 | | | | — | |
| Other securities associated to financial activities | | | — | | | | — | | | | 15 | |
| Securitization bonds realized by the Group | | | 799 | | | | 605 | | | | 1,165 | |
| | | | | | | | | | | | | |
| Accrued interest and others(*) | | | 15 | | | | 22 | | | | 161 | |
| | | | | | | | | | | | | |
Total | | | 71,964 | | | | 70,357 | | | | 84,172 | |
| | | | | | | | | | | | | |
| | |
| (*) | | Hedging operations and issuance costs. |
The following table shows the weighted average interest rates of fixed and floating rate bonds and debentures issued in euros and foreign currencies in 2010, 2009 and 2008:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | 2009 | | 2008 |
| | | | | Foreign
| | | | Foreign
| | | | Foreign
|
Interests Rates of Promissory Notes and Bills Issued | | Euros | | Currency | | Euros | | Currency | | Euros | | Currency |
| |
| Fixed rate | | | 3.75 | % | | | 5.31 | % | | | 3.86 | % | | | 5.00 | % | | | 3.86 | % | | | 4.79 | % |
| Floating rate | | | 1.30 | % | | | 3.00 | % | | | 0.90 | % | | | 2.56 | % | | | 4.41 | % | | | 4.97 | % |
Most of the foreign-currency issuances are denominated in U.S. dollars.
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23.4.3. Subordinated liabilities
The breakdown of the heading “Subordinated liabilities” of the accompanying consolidated balance sheets, by type of financial instruments, was as follows:
| | | | | | | | | | | | | |
Subordinated Liabilities | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Subordinated debt | | | 11,569 | | | | 12,117 | | | | 10,785 | |
| Preferred securities | | | 5,202 | | | | 5,188 | | | | 5,464 | |
| | | | | | | | | | | | | |
Subtotal | | | 16,771 | | | | 17,305 | | | | 16,249 | |
| | | | | | | | | | | | | |
| Accrued interest until expiration | | | 649 | | | | 573 | | | | 738 | |
| | | | | | | | | | | | | |
Total | | | 17,420 | | | | 17,878 | | | | 16,987 | |
| | | | | | | | | | | | | |
23.4.3.1. Subordinated debt
These issuances are non-convertible subordinated debt and, accordingly, for debt seniority purposes, they rank behind ordinary debt.
The breakdown of this heading in the accompanying consolidated balance sheets, disregarding valuation adjustments, by currency of issuance and interest rate, is disclosed in Appendix VIII.
The item “Subordinated Liabilities” in the accompanying consolidated balance sheets includes the issue of convertible subordinated obligations at a value of €2,000 million issued by BBVA in September 2009. These obligations have a 5% annual coupon, payable quarterly, and can be converted into Bank shares after the first year, at the Bank’s discretion, at each of the coupon payment dates, and by obligation on the date of their final maturity date, October 15, 2014. These obligations have been recognized as financial liabilities given that the number of Bank shares to be delivered is variable. The number of said shares will be that value at the date of conversion (determined based on the quoted value of the five sessions preceding the conversion) is equal to the nominal value of the obligations.
23.4.3.2. Preferred securities
The breakdown by issuer of this heading in the accompanying consolidated balance sheets is as follows:
| | | | | | | | | | | | | |
Preferred Securities by Issuer | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| BBVA International, Ltd.(1) | | | 500 | | | | 500 | | | | 500 | |
| BBVA Capital Finance, S.A.U.(1) | | | 2,975 | | | | 2,975 | | | | 2,975 | |
| Banco Provincial, S.A | | | 37 | | | | 67 | | | | 70 | |
| BBVA International Preferred, S.A.U.(2) | | | 1,671 | | | | 1,628 | | | | 1,901 | |
| Phoenix Loan Holdings, Inc. | | | 19 | | | | 18 | | | | 18 | |
| | | | | | | | | | | | | |
Total | | | 5,202 | | | | 5,188 | | | | 5,464 | |
| | | | | | | | | | | | | |
| | |
| (1) | | Traded on the Spanish AIAF market, |
|
| (2) | | Traded on the London Stock Exchange and New York Stock Exchanges, |
These issues were fully subscribed by third parties outside the Group and are wholly or partially redeemable at the issuer company’s option after five or ten years from the issue date, depending on the terms of each issue.
Of the above, the issuances of BBVA International, Ltd., BBVA Capital Finance, S.A.U. and BBVA International Preferred, S.A.U., are subordinately guaranteed by the Bank.
In 2009, there was a partial exchange of three issues of preferred securities of the company BBVA International Preferred, S.A.U. for two new preferred securities in the same company. As a result of said exchange, two issues in euros at €801 million and another in pounds sterling at 369 million pounds, which were substituted
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with one issue in euros at €645 million and another in pounds sterling at 251 million pounds. The debt instruments issued have substantially different conditions than those amortized in terms of their current value. Therefore, the Group recognized gains of €228 million in the heading “Net gains (losses) on financial assets and liabilities” in the accompanying consolidated income statements for 2009 (see Note 44).
The breakdown of the issues of preferred securities in the accompanying consolidated balance sheets, disregarding valuation adjustments, by currency of issuance and interest rate of the issues, is disclosed in Appendix VIII.
23.5. Other financial liabilities
The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:
| | | | | | | | | | | | | |
Other Financial Liabilities | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Creditors for other financial liabilities | | | 2,295 | | | | 1,776 | | | | 3,191 | |
| Collection accounts | | | 2,068 | | | | 2,049 | | | | 2,077 | |
| Creditors for other payment obligations | | | 1,829 | | | | 1,799 | | | | 1,526 | |
| Dividend payable but pending payment | | | 404 | | | | — | | | | 626 | |
| | | | | | | | | | | | | |
Total | | | 6,596 | | | | 5,624 | | | | 7,420 | |
| | | | | | | | | | | | | |
As of December 31, 2010 and 2008, the “Dividend payable but pending payment” from the table above corresponds to the third interim dividend against the 2010 and 2008 results, paid in January of the following years, (see Note 4). As of December 31, 2009, said heading did not include the third interim dividend, as it was paid in December 2009.
| |
| 24. | LIABILITIES UNDER INSURANCE CONTRACTS |
The breakdown of the balance of this item in the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | |
Liabilities under Insurance Contracts
| | | | | | | | | |
Technical Reserve and Provisions | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Mathematical reserves | | | 6,766 | | | | 5,994 | | | | 5,503 | |
| Provision for unpaid claims reported | | | 759 | | | | 712 | | | | 640 | |
| Provisions for unexpired risks and other provisions | | | 509 | | | | 480 | | | | 428 | |
| | | | | | | | | | | | | |
Total | | | 8,034 | | | | 7,186 | | | | 6,571 | |
| | | | | | | | | | | | | |
The details of the balance of this heading in the accompanying consolidated balance sheets as of December 31, 2010, 2009 and 2008 are as follows:
| | | | | | | | | | | | | |
Provisions. Breakdown by Concepts | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Provisions for pensions and similar obligations | | | 5,980 | | | | 6,246 | | | | 6,359 | |
| Provisions for taxes and other legal contingencies | | | 304 | | | | 299 | | | | 263 | |
| Provisions for contingent exposures and commitments | | | 264 | | | | 243 | | | | 421 | |
| Other provisions | | | 1,774 | | | | 1,771 | | | | 1,635 | |
| | | | | | | | | | | | | |
Total | | | 8,322 | | | | 8,559 | | | | 8,678 | |
| | | | | | | | | | | | | |
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The changes in 2010, 2009 and 2008 in the balances of this heading in the accompanying consolidated balance sheets are as follows:
| | | | | | | | | | | | | | | | | |
Provisions for Pensions and Similar Obligations.
| | | | | | | | | | | | |
Changes Over the Period | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Millions of euros | |
| |
Balance at the beginning | | | | | | | 6,246 | | | | 6,359 | | | | 5,967 | |
| Add - | | | | | | | | | | | | | | | | |
| Charge to income for the year | | | | | | | 607 | | | | 747 | | | | 1,229 | |
| Interest expenses and similar charges | | | 39.2 | | | | 259 | | | | 274 | | | | 254 | |
| Personnel expenses | | | 46.1 | | | | 37 | | | | 44 | | | | 56 | |
| Provision expenses | | | | | | | 311 | | | | 429 | | | | 919 | |
| Charges to reserves(*) | | | 26.2 | | | | 63 | | | | 146 | | | | 63 | |
| Transfers and other changes | | | | | | | 16 | | | | 111 | | | | 65 | |
| Less - | | | | | | | | | | | | | | | | |
| Payments | | | | | | | (815 | ) | | | (980 | ) | | | (828 | ) |
| Amount used and other changes | | | | | | | (137 | ) | | | (137 | ) | | | (137 | ) |
| | | | | | | | | | | | | | | | | |
Balance at the end | | | | | | | 5,980 | | | | 6,246 | | | | 6,359 | |
| | | | | | | | | | | | | | | | | |
| | |
| (*) | | Correspond to actuarial losses (gains) arising from certain defined-benefit post-employment commitments recognized in “Reserves” in the consolidated balance sheets (see Note 2.2.3.). |
| | | | | | | | | | | | | |
Provisions for Contingent Exposures and Commitments.
| | | | | | | | | |
Changes Over the Period | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at beginning | | | 243 | | | | 421 | | | | 546 | |
| Add - | | | | | | | | | | | | |
| Charge to income for the year | | | 62 | | | | 110 | | | | 97 | |
| Transfers and other changes | | | 5 | | | | — | | | | — | |
| Less - | | | | | | | | | | | | |
| Available funds | | | (40 | ) | | | (280 | ) | | | (216 | ) |
| Amount used and other variations | | | (6 | ) | | | (8 | ) | | | (6 | ) |
| | | | | | | | | | | | | |
Balance at the end | | | 264 | | | | 243 | | | | 421 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Provisions for Taxes, Legal Contingents and Other Provisions
| | | | | | | | | |
Changes Over the Period | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at beginning | | | 2,070 | | | | 1,898 | | | | 1,829 | |
| Add - | | | | | | | | | | | | |
| Charge to income for the year | | | 145 | | | | 152 | | | | 705 | |
| Acquisition of subsidiaries | | | — | | | | — | | | | — | |
| Transfers and other changes | | | 41 | | | | 360 | | | | 254 | |
| Less - | | | | | | | | | | | | |
| Available funds | | | (90 | ) | | | (103 | ) | | | (245 | ) |
| Amount used and other variations | | | (88 | ) | | | (237 | ) | | | (645 | ) |
| Disposal of subsidiaries | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Balance at the end | | | 2,078 | | | | 2,070 | | | | 1,898 | |
| | | | | | | | | | | | | |
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| |
| 26. | PENSIONS AND OTHER COMMITMENTS |
As described in Note 2.2.12, the Group has assumed both defined-benefit and defined-contribution post-employment commitments with its employees; the proportion of defined-contribution plans is gradually increasing, mainly due to new hires.
26.1. PENSION COMMITMENTS THROUGH DEFINED-CONTRIBUTION PLANS
The commitments with employees for pensions in post-employment defined-contribution plans correspond to current contributions the Group makes every year on behalf of active employees. These contributions are accrued and charged to the consolidated income statement in the corresponding financial year (see Note 2.2.12). No liability is therefore recognized in the accompanying consolidated balance sheets.
The amounts registered under this item in the accompanying consolidated income statements for contributions to these plans in 2010, 2009 and 2008 were €84, €68 and €71 million, respectively (see Note 46.1).
| |
| 26.2 | PENSION COMMITMENTS THROUGH DEFINED-BENEFIT PLANS AND OTHERLONG-TERM BENEFITS |
Pension commitments in defined-benefit plans correspond mainly to employees who have retired or taken early retirement from the Group and to certain groups of employees still active in the Group in the case of pension benefits, and to the majority of active employees in the case of permanent incapacity and death benefits.
The breakdown of the BBVA Group’s aggregate amounts for pension commitments in defined-benefit plans and other post-employment commitments (such as early retirement and welfare benefits) registered under the heading “Provisions — Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets for the last five years, are as follows.
| | | | | | | | | | | | | | | | | | | | | |
Commitments and Plan Assets in Defined-Benefit Plans
| | | | | | | | | | | | | | | |
and Other Post-Employment Commitments | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Pension and post-employment benefits | | | 8,082 | | | | 7,996 | | | | 7,987 | | | | 7,816 | | | | 8,173 | |
| Assets and insurance contracts coverage | | | 2,102 | | | | 1,750 | | | | 1,628 | | | | 1,883 | | | | 1,816 | |
| Net assets | | | — | | | | — | | | | — | | | | (34 | ) | | | — | |
| Net liabilities(*) | | | 5,980 | | | | 6,246 | | | | 6,359 | | | | 5,967 | | | | 6,357 | |
| | |
| (*) | | Registered under the heading “Provisions — Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets |
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The breakdown of the pension commitments in defined-benefit plans and other post-employment commitments as of December 31, 2010, 2009 and 2008, as well as the corresponding insurance contracts or coverage, distinguishing between employees in Spain and the rest of the BBVA, S.A. companies and branches abroad, is as follows.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pensions and Early-Retirement
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commitments and Welfare
| | Commitments in Spain | | | Commitments Abroad | | | Total BBVA Group | |
Benefits: Spain and Abroad | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Post-employment benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension commitments | | | 2,857 | | | | 2,946 | | | | 3,060 | | | | 1,122 | | | | 998 | | | | 904 | | | | 3,979 | | | | 3,944 | | | | 3,964 | |
| Early retirements | | | 3,106 | | | | 3,309 | | | | 3,437 | | | | — | | | | — | | | | — | | | | 3,106 | | | | 3,309 | | | | 3,437 | |
| Post-employment welfare benefits | | | 220 | | | | 222 | | | | 221 | | | | 777 | | | | 521 | | | | 365 | | | | 997 | | | | 743 | | | | 586 | |
Total post-employment benefits(1) | | | 6,183 | | | | 6,477 | | | | 6,718 | | | | 1,899 | | | | 1,519 | | | | 1,269 | | | | 8,082 | | | | 7,996 | | | | 7,987 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Insurance contracts coverage | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension commitments | | | 430 | | | | 455 | | | | 436 | | | | — | | | | — | | | | — | | | | 430 | | | | 455 | | | | 436 | |
Other plan assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension commitments | | | — | | | | — | | | | — | | | | 1,052 | | | | 953 | | | | 891 | | | | 1,052 | | | | 953 | | | | 891 | |
| Post-employment welfare benefits | | | — | | | | — | | | | — | | | | 620 | | | | 342 | | | | 301 | | | | 620 | | | | 342 | | | | 301 | |
Total plan assets and insurance contracts coverage(2) | | | 430 | | | | 455 | | | | 436 | | | | 1,672 | | | | 1,295 | | | | 1,192 | | | | 2,102 | | | | 1,750 | | | | 1,628 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total net commitments(1) — (2) | | | 5,753 | | | | 6,022 | | | | 6,282 | | | | 227 | | | | 224 | | | | 77 | | | | 5,980 | | | | 6,246 | | | | 6,359 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
of which: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Net liabilities(*) | | | 5,753 | | | | 6,022 | | | | 6,282 | | | | 227 | | | | 224 | | | | 77 | | | | 5,980 | | | | 6,246 | | | | 6,359 | |
| | |
| (*) | | Registered under the heading “Provisions — Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets |
Additionally, there are other commitments to employees, including long-service awards which are recognized under the heading “Other provisions” in the accompanying consolidated balance sheets (see Note 25). These amounted to €39 million, €39 million and €36 million as of December 31, 2010, 2009 and 2008, respectively, of which €11 million, €13 million and €11 million correspond to Spanish companies and €28 million, €26 million and €25 million correspond to companies and branches abroad.
The balance of the heading “Provisions — Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets as of December 31, 2010 included €209.3 million, for commitments for post-employment benefits maintained with previous members of the Board of Directors and the Bank’s Management Committee. No charges for those concepts were recognized in the consolidate income statements in 2010.
F-124
The aggregated total of the changes in all the net commitments from companies in Spain and abroad in 2010, 2009 and 2008 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Commitments Spain and Abroad:
| | Commitments in Spain | | | Commitments Abroad | | | Total BBVA Group | |
Summary of Changes in the Period | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 6,022 | | | | 6,282 | | | | 5,832 | | | | 224 | | | | 76 | | | | 100 | | | | 6,246 | | | | 6,358 | | | | 5,932 | |
| Interest costs | | | 244 | | | | 259 | | | | 244 | | | | 131 | | | | 105 | | | | 116 | | | | 375 | | | | 364 | | | | 360 | |
| Expected return on plan assets | | | — | | | | — | | | | — | | | | (116 | ) | | | (90 | ) | | | (106 | ) | | | (116 | ) | | | (90 | ) | | | (106 | ) |
| Current service cost | | | 6 | | | | 20 | | | | 16 | | | | 37 | | | | 26 | | | | 43 | | | | 43 | | | | 46 | | | | 59 | |
| Cost for early retirements | | | 296 | | | | 430 | | | | 1,004 | | | | 9 | | | | — | | | | — | | | | 305 | | | | 430 | | | | 1,004 | |
| Past service cost or changes in the plan | | | — | | | | 36 | | | | 8 | | | | 9 | | | | 7 | | | | 1 | | | | 9 | | | | 43 | | | | 9 | |
| Benefits paid in the period | | | (815 | ) | | | (980 | ) | | | (828 | ) | | | — | | | | — | | | | — | | | | (815 | ) | | | (980 | ) | | | (828 | ) |
| Acquisitions and divestitures | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | — | | | | — | | | | — | | | | — | | | | 6 | | | | (88 | ) | | | — | | | | 6 | | | | (88 | ) |
| Contributions in the period | | | — | | | | — | | | | — | | | | (137 | ) | | | (55 | ) | | | (50 | ) | | | (137 | ) | | | (55 | ) | | | (50 | ) |
| Actuarial gains and losses | | | (4 | ) | | | 3 | | | | 4 | | | | 72 | | | | 146 | | | | 59 | | | | 68 | | | | 149 | | | | 63 | |
| Exchage differences | | | — | | | | — | | | | — | | | | 26 | | | | 2 | | | | 1 | | | | 26 | | | | 2 | | | | 1 | |
| Other changes | | | 4 | | | | (28 | ) | | | 2 | | | | (29 | ) | | | 1 | | | | — | | | | (25 | ) | | | (27 | ) | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the End | | | 5,753 | | | | 6,022 | | | | 6,282 | | | | 227 | | | | 224 | | | | 76 | | | | 5,980 | | | | 6,246 | | | | 6,358 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The net charges registered in the accompanying consolidated income statement and under the heading “Reserves” of the accompanying consolidated balance sheets (see Note 2.2.11) of the BBVA Group for the commitments in post-employment benefits in entities in Spain and abroad, are as follows:
| | | | | | | | | | | | | | | | | |
Total Post-employments Benefits BBVA Group:
| | | | | | | | | | | | |
Income Statements and Equity Effects. | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Interest and similar expenses | | | 39.1 | | | | 259 | | | | 274 | | | | 254 | |
| Interest costs | | | | | | | 375 | | | | 364 | | | | 360 | |
| Expected return on plan assets | | | | | | | (116 | ) | | | (90 | ) | | | (106 | ) |
Personnel expenses | | | | | | | 127 | | | | 132 | | | | 143 | |
| Defined-contribution plan expense | | | 46.1 | | | | 84 | | | | 68 | | | | 71 | |
| Defined-benefit plan expense | | | 46.1 | | | | 37 | | | | 44 | | | | 56 | |
| Other personnel expenses — Welfare benefits | | | | | | | 6 | | | | 20 | | | | 16 | |
Provision — Pension funds and similar obligations | | | 48 | | | | 405 | | | | 552 | | | | 985 | |
| Pension funds | | | 25 | | | | 9 | | | | (5 | ) | | | (83 | ) |
| Early retirements | | | 25 | | | | 301 | | | | 431 | | | | 1,003 | |
| Other provisions | | | | | | | 95 | | | | 126 | | | | 65 | |
Total Effects in Income Statements: Debit (Credit) | | | | | | | 791 | | | | 958 | | | | 1,382 | |
Total Effects in Equity: Debit (Credit) to Reserves(*) | | | | | | | 64 | | | | 149 | | | | 62 | |
| | |
| (*) | | Correspond to actuarial losses (gains) arising from pension commitments and welfare benefits recognized in “Reserves”. For Early reitirements are recognized in the Income Statements (see Note 2.2.3.). |
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26.2.1 Commitments in Spain
The most significant actuarial assumptions used as of December 31, 2010, 2009 and 2008, to quantify these commitments are as follows:
| | | | | | | |
Actuarial Assumptions
| | | | | | |
Commitments with Employees in Spain | | 2010 | | 2009 | | 2008 |
| |
| Mortality tables | | PERM/F 2000P. | | PERM/F 2000P. | | PERM/F 2000P. |
| Discount rate (cumulative annual) | | 4.5%/AA Corporate
Bond Yield Curve | | 4.5%/AA Corporate
Bond Yield Curve | | 4.5%/AA Corporate
Bond Yield Curve |
| Consumer price index (cumulative annual) | | 2% | | 2% | | 2% |
| Salary growth rate (cumulative annual) | | At least 3%
(depending on
employee) | | At least 3%
(depending on
employee) | | At least 3%
(depending on
employee) |
| Retirement age | | | | | | |
| | | First date at which the employees are entitled to retire or contractually |
| | | agreed at the individual level in the case of early retirements |
The breakdown of the various commitments to employees in Spain is as follows:
• Pension commitments in Spain
The breakdown of pension commitments in defined-benefit plans as of December 31, 2010, 2009 and 2008 is as follows:
| | | | | | | | | | | | | |
Pension Commitments Spain | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Pension commitments to retired employees | | | 2,765 | | | | 2,847 | | | | 2,852 | |
| Vested contingencies in respect of current employees | | | 92 | | | | 99 | | | | 208 | |
| | | | | | | | | | | | | |
Total(*) | | | 2,857 | | | | 2,946 | | | | 3,060 | |
| | | | | | | | | | | | | |
| | |
| (*) | | Recognized under the heading “Provisions-Provisions for pension and similar obligations” in the accompanyng consolidated balance sheets |
Insurance contracts have been contracted with insurance companies not related to the group to cover some pension commitments in Spain. These commitments are covered by assets and therefore are presented in the accompanying consolidated balance sheets for the net amount of the commitment less plan assets. As of December 31, 2010, 2009 and 2008, the plan assets related to the aforementioned insurance contracts (shown under the heading “Insurance contract cover”) equaled the amount of the commitments covered, therefore its net value was zero in the accompanying consolidated balance sheets.
The rest of commitments included in the previous table include defined-benefit commitments for which insurance has been contracted with BBVA Seguros, S.A. de Seguros y Reaseguros, which is 99.95% owned by the Group. The assets in which the insurance company has invested the amount of the policies cannot be considered plan assets under IAS 19 and are presented in the accompanying consolidated balance sheets under different headings of “assets”, depending on the classification of their corresponding financial instruments. The commitments are recognized under the heading “Provisions — Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets (see Note 25).
• Early retirements in Spain
In 2010 the Group offered certain employees the possibility of taking early retirement before the age stipulated in the collective labor agreement in force. This offer was accepted by 683 employees (857 and 2.044 in 2009 and 2008, respectively).
F-126
The early retirements commitments in Spain as of December 31, 2010, 2009 and 2008 are recognized under the heading “Provisions — Provisions for pensions and similar obligations” (see Note 25) in the accompanying consolidated balance sheets amounted to €3,106 million, €3,309 million and €3,437 million, respectively.
The cost of early retirements for the year was recognized under the heading “Provision Expense (Net) — Transfers to funds for pensions and similar obligations — Early retirements” in the accompanying consolidated income statements (see Note 48).
• Other long-term commitments with employees in Spain
The long-term commitments with employees include post-employment welfare benefits and other commitments with employees.
• Post-employment welfare benefits in Spain
The details of these commitments as of December 31, 2010, 2009 and 2008 are as follows:
| | | | | | | | | | | | | |
Post-Employment Welfare Benefits Commitments in Spain | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Post-employment welfare benefit commitments to retired employees | | | 180 | | | | 183 | | | | 181 | |
| Vested post-employment welfare benefit contingencies in respect of current employees | | | 40 | | | | 39 | | | | 40 | |
| | | | | | | | | | | | | |
Total Commitments(*) | | | 220 | | | | 222 | | | | 221 | |
| | | | | | | | | | | | | |
| | |
| (*) | | Recognized under the heading “Provisions-Provisions for pension and similar obligations” in the accompanyng consolidated balance sheets |
| |
| • | Other commitments with employees — Long-service awards |
In addition to the post-employment welfare benefits mentioned above, the Group maintained certain commitments in Spain with some employees, called “Long-service awards”. These commitments were for payment of a certain amount in cash and for the allotment of Banco Bilbao Vizcaya Argentaria S.A. shares, when these employees complete a given number of years of effective service. The Group has offered these employees the option to redeem the accrued value of such share benefits prior to the established date of seniority. The value of the long-service awards as of December 31, 2010 for employees who did not choose early settlement is recognized under the heading “Provisions — Other provisions” (Note 25) of the accompanying consolidated balance sheets as of December 31, 2010, 2009 and 2008 with the amount of €11 million, €13 million and €12 million, respectively.
F-127
Breakdown of changes in commitments with employees in Spain
The changes in the net commitments with employees in Spain in 2010, 2009 and 2008 were as follows:
| | | | | | | | | | | | | | | | | |
Net Commitments in Spain :
| | | | | Early
| | | Welfare
| | | Total
| |
Changes in the Year 2010 | | Pensions | | | Retirements | | | Benefits | | | Spain | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 2,491 | | | | 3,309 | | | | 222 | | | | 6,022 | |
| Interest costs | | | 107 | | | | 127 | | | | 10 | | | | 244 | |
| Expected return on plan assets | | | — | | | | — | | | | — | | | | — | |
| Current service cost | | | 4 | | | | — | | | | 2 | | | | 6 | |
| Cost for early retirements | | | — | | | | 296 | | | | — | | | | 296 | |
| Past service cost or changes in the plan | | | — | | | | — | | | | — | | | | — | |
| Benefits paid in the period | | | (170 | ) | | | (627 | ) | | | (18 | ) | | | (815 | ) |
| Acquisitions and divestitures | | | — | | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | — | | | | — | | | | — | | | | — | |
| Contributions in the period | | | — | | | | — | | | | — | | | | — | |
| Actuarial gains and losses | | | (9 | ) | | | 6 | | | | (1 | ) | | | (4 | ) |
| Exchage differences | | | — | | | | — | | | | — | | | | — | |
| Other changes | | | 4 | | | | (5 | ) | | | 5 | | | | 4 | |
| | | | | | | | | | | | | | | | | |
Balance at the End | | | 2,427 | | | | 3,106 | | | | 220 | | | | 5,753 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Net Commitments in Spain :
| | | | | Early
| | | Welfare
| | | Total
| |
Changes in the Year 2009 | | Pensions | | | Retirements | | | Benefits | | | Spain | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 2,624 | | | | 3,437 | | | | 221 | | | | 6,282 | |
| Interest costs | | | 114 | | | | 135 | | | | 10 | | | | 259 | |
| Expected return on plan assets | | | — | | | | — | | | | — | | | | — | |
| Current service cost | | | 18 | | | | — | | | | 2 | | | | 20 | |
| Cost for early retirements | | | — | | | | 430 | | | | — | | | | 430 | |
| Past service cost or changes in the plan | | | 31 | | | | — | | | | 5 | | | | 36 | |
| Benefits paid in the period | | | (249 | ) | | | (712 | ) | | | (19 | ) | | | (980 | ) |
| Effect of curtailments and settlements | | | — | | | | — | | | | — | | | | — | |
| Contributions in the period | | | — | | | | — | | | | — | | | | — | |
| Actuarial gains and losses | | | 2 | | | | 4 | | | | (3 | ) | | | 3 | |
| Other changes | | | (49 | ) | | | 15 | | | | 6 | | | | (28 | ) |
| | | | | | | | | | | | | | | | | |
Balance at the End | | | 2,491 | | | | 3,309 | | | | 222 | | | | 6,022 | |
| | | | | | | | | | | | | | | | | |
F-128
| | | | | | | | | | | | | | | | | |
Net Commitments in Spain :
| | | | | Early
| | | Welfare
| | | Total
| |
Changes in the Year 2008 | | Pensions | | | Retirements | | | Benefits | | | Spain | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 2,648 | | | | 2,950 | | | | 234 | | | | 5,832 | |
| Interest costs | | | 116 | | | | 117 | | | | 11 | | | | 244 | |
| Expected return on plan assets | | | — | | | | — | | | | — | | | | — | |
| Current service cost | | | 14 | | | | — | | | | 2 | | | | 16 | |
| Cost for early retirements | | | — | | | | 1,004 | | | | — | | | | 1,004 | |
| Past service cost or changes in the plan | | | 8 | | | | — | | | | — | | | | 8 | |
| Benefits paid in the period | | | (167 | ) | | | (618 | ) | | | (43 | ) | | | (828 | ) |
| Acquisitions and divestitures | | | — | | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | — | | | | — | | | | — | | | | — | |
| Contributions in the period | | | — | | | | — | | | | — | | | | — | |
| Actuarial gains and losses | | | 5 | | | | (2 | ) | | | 1 | | | | 4 | |
| Exchage differences | | | — | | | | — | | | | — | | | | — | |
| Other changes | | | — | | | | (14 | ) | | | 16 | | | | 2 | |
| | | | | | | | | | | | | | | | | |
Balance at the End | | | 2,624 | | | | 3,437 | | | | 221 | | | | 6,282 | |
| | | | | | | | | | | | | | | | | |
The net charges registered in the accompanying consolidated income statement and under the heading “Reserves” of the accompanying consolidated balance sheets (see Note 2.2.12) of the BBVA Group for commitments to post-employment benefits in Spain are as follows:
| | | | | | | | | | | | | |
Post-employments Benefits in Spain
| | | | | | | | | |
Income Statements and Equity Effects | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Interest and similar expenses | | | 244 | | | | 259 | | | | 244 | |
| Personnel expenses | | | 6 | | | | 20 | | | | 16 | |
| Provision (net) — Early retirements | | | 301 | | | | 431 | | | | 1,003 | |
Total Effects in Income Statements: Debit (Credit) | | | 551 | | | | 710 | | | | 1,263 | |
| | | | | | | | | | | | | |
Total Effects in Equity: Debit (Credit) to Reserves(*) | | | (9 | ) | | | 2 | | | | 5 | |
| | | | | | | | | | | | | |
26.2.2. Commitments abroad:
The main post-employment commitments through defined-contribution plans with employees abroad correspond to those in Mexico, Portugal and the United States, which jointly represent 95% of the total commitments with employees abroad as of December 31, 2010, and 22% of the total commitments with employees in the Group as a whole as of December 31, 2010 (94% and 18%, respectively, as of December 31, 2009 and 94% and 15%, respectively, as of December 31, 2008).
F-129
As of December 31, 2010, the breakdown by country of the various commitments with employees of the BBVA Group abroad was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Post-Employment
| | Commitments | | | Plan Assets | | | Net Commitments | |
Commitments Abroad | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Pension Commitments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mexico | | | 508 | | | | 398 | | | | 387 | | | | 519 | | | | 424 | | | | 436 | | | | (11 | ) | | | (26 | ) | | | (49 | ) |
| Portugal | | | 288 | | | | 321 | | | | 283 | | | | 290 | | | | 320 | | | | 283 | | | | (2 | ) | | | 1 | | | | — | |
| The United States | | | 236 | | | | 195 | | | | 168 | | | | 191 | | | | 163 | | | | 135 | | | | 45 | | | | 32 | | | | 33 | |
| Rest of countries | | | 90 | | | | 84 | | | | 66 | | | | 52 | | | | 46 | | | | 37 | | | | 38 | | | | 38 | | | | 29 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 1,122 | | | | 998 | | | | 904 | | | | 1,052 | | | | 953 | | | | 891 | | | | 70 | | | | 45 | | | | 13 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Post-Employment Welfare Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mexico | | | 766 | | | | 511 | | | | 360 | | | | 620 | | | | 342 | | | | 301 | | | | 146 | | | | 169 | | | | 59 | |
| Portugal | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| The United States | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Rest of countries | | | 11 | | | | 10 | | | | 4 | | | | — | | | | — | | | | — | | | | 11 | | | | 10 | | | | 4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 777 | | | | 521 | | | | 364 | | | | 620 | | | | 342 | | | | 301 | | | | 157 | | | | 179 | | | | 63 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1,899 | | | | 1,519 | | | | 1,268 | | | | 1,672 | | | | 1,295 | | | | 1,192 | | | | 227 | | | | 224 | | | | 76 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The changes in the net post-employment commitments with employees abroad in 2010 were as follows:
| | | | | | | | | | | | | | | | | | | | | |
Net Commitments Abroad:
| | | | | | | | United
| | | Rest of
| | | Total
| |
Changes in the Year 2010 | | Mexico | | | Portugal | | | States | | | Countries | | | Abroad | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 143 | | | | 1 | | | | 32 | | | | 48 | | | | 224 | |
| Interest cost | | | 94 | | | | 17 | | | | 12 | | | | 8 | | | | 131 | |
| Expected return on plan assets | | | (87 | ) | | | (13 | ) | | | (13 | ) | | | (3 | ) | | | (116 | ) |
| Current service cost | | | 26 | | | | 5 | | | | 5 | | | | 2 | | | | 37 | |
| Cost for early retirements | | | — | | | | 9 | | | | — | | | | — | | | | 9 | |
| Past service cost or changes in the plan | | | 8 | | | | — | | | | — | | | | 1 | | | | 9 | |
| Benefits paid in the period | | | — | | | | — | | | | — | | | | — | | | | (0 | ) |
| Acquisitions and divestitures | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | — | | | | — | | | | — | | | | — | | | | — | |
| Contributions in the period | | | (114 | ) | | | (17 | ) | | | (2 | ) | | | (3 | ) | | | (137 | ) |
| Actuarial gains and losses | | | 45 | | | | 19 | | | | 9 | | | | (1 | ) | | | 72 | |
| Exchage differences | | | 20 | | | | — | | | | 2 | | | | 4 | | | | 26 | |
| Other changes | | | (1 | ) | | | (22 | ) | | | 1 | | | | (7 | ) | | | (29 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Balance at the End | | | 135 | | | | (2 | ) | | | 45 | | | | 49 | | | | 227 | |
| | | | | | | | | | | | | | | | | | | | | |
F-130
| | | | | | | | | | | | | | | | | | | | | |
Net Commitments Abroad:
| | | | | | | | United
| | | Rest of
| | | Total
| |
Changes in the Year 2009 | | Mexico | | | Portugal | | | States | | | Countries | | | Abroad | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 10 | | | | — | | | | 33 | | | | 33 | | | | 76 | |
| Interest cost | | | 72 | | | | 16 | | | | 11 | | | | 6 | | | | 105 | |
| Expected return on plan assets | | | (65 | ) | | | (13 | ) | | | (10 | ) | | | (2 | ) | | | (90 | ) |
| Current service cost | | | 15 | | | | 4 | | | | 4 | | | | 3 | | | | 26 | |
| Cost for early retirements | | | — | | | | — | | | | — | | | | — | | | | — | |
| Past service cost or changes in the plan | | | 1 | | | | — | | | | — | | | | 6 | | | | 7 | |
| Benefits paid in the period | | | — | | | | — | | | | — | | | | — | | | | — | |
| Acquisitions and divestitures | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | (5 | ) | | | 10 | | | | — | | | | 1 | | | | 6 | |
| Contributions in the period | | | (12 | ) | | | (29 | ) | | | (12 | ) | | | (2 | ) | | | (55 | ) |
| Actuarial gains and losses | | | 127 | | | | 13 | | | | 7 | | | | (1 | ) | | | 146 | |
| Exchage differences | | | — | | | | — | | | | (1 | ) | | | 3 | | | | 2 | |
| Other changes | | | — | | | | — | | | | — | | | | 1 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | | |
Balance at the End | | | 143 | | | | 1 | | | | 32 | | | | 48 | | | | 224 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Net Commitments Abroad:
| | | | | | | | United
| | | Rest of
| | | Total
| |
Changes in the Year 2008 | | Mexico | | | Portugal | | | States | | | Countries | | | Abroad | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 74 | | | | 3 | | | | (6 | ) | | | 29 | | | | 100 | |
| Interest cost | | | 84 | | | | 15 | | | | 9 | | | | 8 | | | | 116 | |
| Expected return on plan assets | | | (78 | ) | | | (13 | ) | | | (12 | ) | | | (3 | ) | | | (106 | ) |
| Current service cost | | | 29 | | | | 4 | | | | 5 | | | | 5 | | | | 43 | |
| Cost for early retirements | | | — | | | | — | | | | — | | | | — | | | | — | |
| Past service cost or changes in the plan | | | — | | | | — | | | | 1 | | | | — | | | | 1 | |
| Benefits paid in the period | | | — | | | | — | | | | — | | | | — | | | | — | |
| Acquisitions and divestitures | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | (83 | ) | | | — | | | | (2 | ) | | | (3 | ) | | | (88 | ) |
| Contributions in the period | | | (31 | ) | | | (10 | ) | | | (3 | ) | | | (6 | ) | | | (50 | ) |
| Actuarial gains and losses | | | 15 | | | | 1 | | | | 41 | | | | 2 | | | | 59 | |
| Exchage differences | | | — | | | | — | | | | — | | | | 1 | | | | 1 | |
| Other changes | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Balance at the End | | | 10 | | | | — | | | | 33 | | | | 33 | | | | 76 | |
| | | | | | | | | | | | | | | | | | | | | |
In the tables above, “Benefits paid in the period” are presented net, as the difference between the commitments and plan assets for the same amount. These payments corresponding to 2010, amounted to €36 million for pensions in Mexico, €18 million for welfare benefits in Mexico, €16 million for pensions in Portugal and €8 million for pensions in the United States.
F-131
The net charges registered in the accompanying consolidated income statement and under the heading “Reserves” of the accompanying consolidated balance sheets (see Note 2.2.12) of the BBVA Group for commitments to post-employment benefits abroad are as follows:
| | | | | | | | | | | | | |
Commitments with employees Abroad:
| | | | | | | | | |
Income Statements and Equity Effects. | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Interest and similar expenses | | | 15 | | | | 15 | | | | 10 | |
| Personnel expenses | | | 37 | | | | 24 | | | | 40 | |
| Provisions (net) | | | 9 | | | | (5 | ) | | | (83 | ) |
Total Effects in Income Statements: Debit (Credit) | | | 61 | | | | 34 | | | | (33 | ) |
| | | | | | | | | | | | | |
Total Effects in Equity: Debit (Credit) to Reserves(*) | | | 73 | | | | 147 | | | | 57 | |
| | | | | | | | | | | | | |
• Commitments with employees in Mexico:
In Mexico, the main actuarial assumptions used in quantifying the commitments with employees as of December 31, 2010, 2009 and 2008, were as follows:
| | | | | | | |
Post-Employment Actuarial Assumptions in Mexico | | 2010 | | 2009 | | 2008 |
| |
| Mortality tables | | EMSSA 97 | | EMSSA 97 | | EMSSA 97 |
| Discount rate (cumulative annual) | | 8.75% | | 9.25% | | 10.25% |
| Consumer price index (cumulative annual) | | 3.75% | | 3.75% | | 3.75% |
| Medical cost trend rate | | 6.75% | | 6.75% | | 6.75% |
| Expected rate of return on plan assets | | 9.00% | | 9.40% | | 9.75% |
• Pension commitments in Mexico
The changes of these commitments and plan assets in 2010, for all Group’s companies in Mexico, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pension Commitments and Plan Assets
| | Commitments | | | Plan Assets | | | Net Commitments | |
in Mexico: Changes in the period | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 398 | | | | 387 | | | | 584 | | | | 424 | | | | 436 | | | | 572 | | | | (26 | ) | | | (49 | ) | | | 12 | |
| Interest cost | | | 40 | | | | 35 | | | | 49 | | | | — | | | | — | | | | — | | | | 40 | | | | 35 | | | | 49 | |
| Expected return on plan assets | | | — | | | | — | | | | — | | | | 42 | | | | 37 | | | | 48 | | | | (42 | ) | | | (37 | ) | | | (48 | ) |
| Current service cost | | | 7 | | | | 4 | | | | 15 | | | | — | | | | — | | | | — | | | | 7 | | | | 4 | | | | 15 | |
| Past service cost or changes in the plan | | | 8 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 8 | | | | 1 | | | | — | |
| Benefits paid in the period | | | (36 | ) | | | (31 | ) | | | (31 | ) | | | (36 | ) | | | (31 | ) | | | (31 | ) | | | (0 | ) | | | — | | | | — | |
| Effect of curtailments and settlements | | | — | | | | (1 | ) | | | (66 | ) | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | (66 | ) |
| Contributions in the period | | | — | | | | — | | | | — | | | | 45 | | | | 3 | | | | 8 | | | | (45 | ) | | | (3 | ) | | | (8 | ) |
| Actuarial gains and losses | | | 33 | | | | 30 | | | | (47 | ) | | | 66 | | | | 6 | | | | (37 | ) | | | (33 | ) | | | 24 | | | | (10 | ) |
| Exchage differences | | | 57 | | | | 6 | | | | (88 | ) | | | 61 | | | | 6 | | | | (95 | ) | | | (4 | ) | | | — | | | | 7 | |
| Other changes | | | — | | | | (33 | ) | | | (29 | ) | | | (83 | ) | | | (33 | ) | | | (29 | ) | | | 83 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the End | | | 508 | | | | 398 | | | | 387 | | | | 519 | | | | 424 | | | | 436 | | | | (11 | ) | | | (26 | ) | | | (49 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The plan assets related to these commitments are to be used directly to settle the vested obligations and meet the following conditions: They are not owned by the Group entities; they are available only to pay post-employment benefits; and they cannot be returned to the Group entities. In 2010, the return on plan assets amounts to €108 million.
As of December 31, 2010 the plan assets for these commitments were all in debt securities.
F-132
The vested obligations related to these commitments are presented in the accompanying consolidated balance sheets net of the plan assets for these commitments recognized under the heading “Provisions — Provisions for pensions and similar obligations” (see Note 25).
On December 2008, a new defined-contribution plan was put in place in Mexico on a voluntary basis; it substitutes the current defined-benefit plan commitments. Approximately 70% of the workforce opted to sign up for the new plan, triggering a decrease in the pension obligations included in the changes in commitments in 2009.
• Post-employment welfare benefits in Mexico
The changes in these commitments and plan assets in 2010 for all Groups’ companies in Mexico were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Welfare Benefits Commitments and
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Plan Assets in Mexico: Changes in the
| | Commitments | | | Plan Assets | | | Net Commitments | |
period | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 511 | | | | 360 | | | | 416 | | | | 342 | | | | 301 | | | | 354 | | | | 169 | | | | 59 | | | | 62 | |
| Interest costs | | | 54 | | | | 37 | | | | 35 | | | | — | | | | — | | | | — | | | | 54 | | | | 37 | | | | 35 | |
| Expected return on plan assets | | | — | | | | — | | | | — | | | | 45 | | | | 28 | | | | 30 | | | | (45 | ) | | | (28 | ) | | | (30 | ) |
| Current service cost | | | 19 | | | | 11 | | | | 14 | | | | — | | | | — | | | | — | | | | 19 | | | | 11 | | | | 14 | |
| Past service cost or changes in the plan | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Benefits paid in the period | | | (18 | ) | | | (18 | ) | | | (19 | ) | | | (18 | ) | | | (18 | ) | | | (19 | ) | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | — | | | | (4 | ) | | | (17 | ) | | | — | | | | — | | | | — | | | | — | | | | (4 | ) | | | (17 | ) |
| Contributions in the period | | | — | | | | — | | | | — | | | | 69 | | | | 9 | | | | 23 | | | | (69 | ) | | | (9 | ) | | | (23 | ) |
| Actuarial gains and losses | | | 127 | | | | 119 | | | | 2 | | | | 49 | | | | 16 | | | | (23 | ) | | | 78 | | | | 103 | | | | 25 | |
| Exchage differences | | | 73 | | | | 6 | | | | (71 | ) | | | 49 | | | | 6 | | | | (64 | ) | | | 24 | | | | — | | | | (7 | ) |
| Other changes | | | — | | | | — | | | | — | | | | 84 | | | | — | | | | — | | | | (84 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the End | | | 766 | | | | 511 | | | | 360 | | | | 620 | | | | 342 | | | | 301 | | | | 146 | | | | 169 | | | | 59 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The plan assets related to these commitments are to be used directly to settle the vested obligations and meet the following conditions: They are not owned by the Group entities; they are available only to pay post-employment benefits; and they cannot be returned to the Group entities. In 2010, the return on plan assets for the post-employment welfare benefits commitments amounts to €94 million.
The plan assets for these commitments are all in debt securities.
The vested obligations related to these commitments are presented in the accompanying consolidated balance sheets net of the plan assets for these commitments recognized under the heading “Provisions — Provisions for pensions and similar obligations” (see Note 25).
The sensitivity analysis to changes in medical cost trend rates costs for 2010 is as follows:
| | | | | | | | | |
| | | 1%
| | 1%
|
Welfare Benefits in Mexico. Sensitivity Analysis | | Increase | | Decrease |
| | | Millions of euros |
| |
| Increase/Decrease in current service cost and interest cost | | | 21 | | | | (16 | ) |
| Increase/Decrease in commitments | | | 155 | | | | (121 | ) |
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• Pension Commitments in Portugal:
In Portugal, the main actuarial assumptions used in quantifying the commitments with employees as of December 31, 2010, 2009 and 2008, were as follows:
| | | | | | | |
Post-Employment Actuarial Assumptions in Portugal | | 2010 | | 2010 | | 2009 |
| |
| Mortality tables | | TV88/90 | | TV88/90 | | TV88/90 |
| Discount rate (cumulative annual) | | 5.35% | | 5.35% | | 5.90% |
| Consumer price index (cumulative annual) | | 1.75% | | 2.00% | | 2.00% |
| Salary growth rate (cumulative annual) | | 2.75% | | 3.00% | | 3.00% |
| Expected rate of return on plan assets | | 4.40% | | 4.50% | | 4.60% |
The changes to these commitments and plan assets in 2010, for all the Group’s companies in Portugal, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pensions Net Commitments in
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portugal:
| | Commitments | | | Plan Assets | | | Net Commitments | |
Changes in the period | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 321 | | | | 283 | | | | 295 | | | | 320 | | | | 283 | | | | 292 | | | | 1 | | | | — | | | | 3 | |
| Interest cost | | | 17 | | | | 16 | | | | 15 | | | | — | | | | — | | | | — | | | | 17 | | | | 16 | | | | 15 | |
| Expected return on plan assets | | | — | | | | — | | | | — | | | | 13 | | | | 13 | | | | 13 | | | | (13 | ) | | | (13 | ) | | | (13 | ) |
| Current service cost | | | 5 | | | | 4 | | | | 4 | | | | — | | | | — | | | | — | | | | 5 | | | | 4 | | | | 4 | |
| Cost for early retirements | | | 9 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9 | | | | — | | | | — | |
| Past service cost or changes in the plan | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Benefits paid in the period | | | (16 | ) | | | (16 | ) | | | (15 | ) | | | (16 | ) | | | (16 | ) | | | (15 | ) | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | — | | | | 10 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10 | | | | — | |
| Contributions in the period | | | — | | | | — | | | | — | | | | 17 | | | | 29 | | | | 10 | | | | (17 | ) | | | (29 | ) | | | (10 | ) |
| Actuarial gains and losses | | | (25 | ) | | | 24 | | | | (16 | ) | | | (44 | ) | | | 11 | | | | (17 | ) | | | 19 | | | | 13 | | | | 1 | |
| Exchage differences | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Other changes | | | (22 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (22 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the End | | | 288 | | | | 321 | | | | 283 | | | | 290 | | | | 320 | | | | 283 | | | | (2 | ) | | | 1 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The plan assets related to these commitments are to be used directly to settle the vested obligations and meet the following conditions: They are not owned by the Group entities; they are available only to pay post-employment benefits; and they cannot be returned to the Group entities. In 2010 the return on plan assets related to these pension commitments reached -31 million euros.
The vested obligations related to these commitments are presented in the accompanying consolidated balance sheets net of the plan assets for these commitments recognized under the heading “Provisions — Provisions for pensions and similar obligations” (see Note 25).
The distribution of the main categories of plan assets related to these commitments as of 31 December, 2010, 2009 and 2008 for all Group’s companies in Portugal was as follows:
| | | | | | | | | | | | | |
| | | Percentage | |
Plan Assets Categories in Portugal | | 2010 | | | 2009 | | | 2008 | |
| |
| Equity instruments | | | — | | | | — | | | | 8.7 | |
| Debt securities | | | 91.5 | | | | 93.2 | | | | 85.3 | |
| Property, Land and Buildings | | | 0.5 | | | | — | | | | 0.5 | |
| Cash | | | 8.0 | | | | 5.2 | | | | 3.6 | |
| Other investments | | | — | | | | 1.6 | | | | 1.9 | |
| | | | | | | | | | | | | |
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• Pension commitments in the United States:
In the United States, the main actuarial assumptions used in quantifying the commitments with employees as of December 31, 2010, 2009 and 2008, were as follows:
| | | | | | | |
Post-Employment Actuarial
| | | | | | |
Assumptions in the United States | | 2010 | | 2009 | | 2008 |
| |
| Mortality tables | | RP 2000 Projected | | RP 2000 Projected | | RP 2000 Projected |
| Discount rate (cumulative annual) | | 5.44% | | 5.93% | | 6.92% |
| Consumer price index (cumulative annual) | | 2.50% | | 2.50% | | 2.50% |
| Salary growth rate (cumulative annual) | | 3.50% | | 3.50% | | 4.00% |
| Expected rate of return on plan assets | | 7.50% | | 7.50% | | 7.50% |
The changes of these commitments and plan assets in 2010, for all Group’s companies in United States, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pensions Net Commitments in the
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
United States
| | Commitments | | | Plan Assets | | | Net Commitments | |
Changes in the Period | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the Beginning | | | 195 | | | | 168 | | | | 162 | | | | 163 | | | | 135 | | | | 168 | | | | 32 | | | | 33 | | | | (6 | ) |
| Interest cost | | | 12 | | | | 11 | | | | 9 | | | | — | | | | — | | | | — | | | | 12 | | | | 11 | | | | 9 | |
| Expected return on plan assets | | | — | | | | — | | | | — | | | | 13 | | | | 10 | | | | 12 | | | | (13 | ) | | | (10 | ) | | | (12 | ) |
| Current service cost | | | 5 | | | | 4 | | | | 5 | | | | — | | | | — | | | | — | | | | 5 | | | | 4 | | | | 5 | |
| Past service cost or changes in the plan | | | — | | | | — | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1 | |
| Benefits paid in the period | | | (7 | ) | | | (6 | ) | | | (7 | ) | | | (7 | ) | | | (6 | ) | | | (7 | ) | | | — | | | | — | | | | — | |
| Effect of curtailments and settlements | | | — | | | | — | | | | (2 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2 | ) |
| Contributions in the period | | | — | | | | — | | | | — | | | | 2 | | | | 12 | | | | 3 | | | | (2 | ) | | | (12 | ) | | | (3 | ) |
| Actuarial gains and losses | | | 16 | | | | 24 | | | | (9 | ) | | | 7 | | | | 17 | | | | (50 | ) | | | 9 | | | | 7 | | | | 41 | |
| Exchage differences | | | 14 | | | | (6 | ) | | | 9 | | | | 12 | | | | (5 | ) | | | 9 | | | | 2 | | | | (1 | ) | | | — | |
| Other changes | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the End | | | 236 | | | | 195 | | | | 168 | | | | 191 | | | | 163 | | | | 135 | | | | 45 | | | | 32 | | | | 33 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The plan assets related to these commitments are to be used directly to settle the vested obligations and meet the following conditions: They are not owned by the Group entities; they are available only to pay post-employment benefits; and they cannot be returned to the Group entities. In 2010 the return on plan assets related to these pension commitments reached €20 million.
The vested obligations related to these commitments are presented in the accompanying consolidated balance sheets net of the plan assets for these commitments recognized under the heading “Provisions — Provisions for pensions and similar obligations” (see Note 25).
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The distribution of the main category of plan assets related to these commitments as of 31 December, 2010, 2009 and 2008 for all the companies in the United States was as follows:
| | | | | | | | | | | | | |
Plan Assets Categories for
| | | | | | | | | |
Pension Commitments in the United
| | Percentage | |
States | | 2010 | | | 2009 | | | 2008 | |
| |
| Equity instruments | | | 62.4 | | | | 63.6 | | | | 52.7 | |
| Debt securities | | | 35.7 | | | | 35.1 | | | | 46.0 | |
| Property, Land and Buildings | | | — | | | | — | | | | — | |
| Cash | | | 1.9 | | | | 1.3 | | | | 1.3 | |
| Other investments | | | — | | | | — | | | | — | |
| |
| 26.2.3 | Estimated future payments for commitments with employees in the BBVA Group |
The estimated benefit payments in millions of euros over the next 10 years for all the companies in Spain, Mexico, Portugal and the United States are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
Expected Future Benefits for
| | | | | | | | | | | | | | | | | | |
Post-Employment Commitments | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016-2020 | |
| | | Millions of euros | |
| |
| Pensions Spain | | | 791 | | | | 734 | | | | 688 | | | | 637 | | | | 580 | | | | 1,939 | |
| Early retirement Spain | | | 596 | | | | 541 | | | | 497 | | | | 448 | | | | 392 | | | | 1,043 | |
| Pension Mexico | | | 60 | | | | 59 | | | | 61 | | | | 65 | | | | 70 | | | | 441 | |
| Pensions Portugal | | | 17 | | | | 17 | | | | 17 | | | | 17 | | | | 17 | | | | 84 | |
| Pensions The United States | | | 8 | | | | 9 | | | | 10 | | | | 11 | | | | 12 | | | | 72 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 876 | | | | 819 | | | | 776 | | | | 730 | | | | 679 | | | | 2,536 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
The BBVA Board of Directors, at its meeting on November 1, 2010, under the delegation conferred by the AGM held on March 13, 2009, agreed to a BBVA capital increase (including the pre-emptive subscription right for former shareholders) that was completed for a nominal amount of €364,040,190.36, with the issue and release into circulation of 742,939,164 new ordinary shares of the same class and series as the previously existing ones, with a par value of €0.49 each and represented through book-entry accounts. The subscription price of the new shares was €6.75 per share, of which forty-nine euro cents (€0.49) corresponded to the par value and six euros and twenty-six cents (€6.26) corresponded to the share premium (Note 28), therefore, the total effective amount of the common stock increase was €5,014,839,357.
After the aforementioned capital increase, BBVA’s share capital, as of December 31, 2010 amounted to €2,200,545,059.65, divided into 4,490,908,285 fully subscribed andpaid-up registered shares, all of the same class and series, at €0.49 par value each, represented through book-entry accounts.
All BBVA shares carry the same voting and dividend rights and no single stockholder enjoys special voting rights. There are no shares that do not represent an interest in the Bank’s common stock.
BBVA shares are traded on the continuous market in Spain, as well as on the London and Mexico stock markets. American Depositary Shares (ADSs) traded on the New York Stock Exchange are also traded on the Lima Stock Exchange (Peru), under an exchange agreement between these two markets.
Also, as of December 31, 2010, the shares of BBVA Banco Continental, S.A., Banco Provincial S.A., BBVA Colombia, S.A., BBVA Chile, S.A., BBVA Banco Frances, S.A. and AFP Provida were listed on their respective local stock markets, the last two also being listed on the New York Stock Exchange. BBVA Banco Frances, S.A. is also listed on the Latin American market of the Madrid Stock Exchange.
As of December 31, 2010, Manuel Jove Capellán owned 5.07% of BBVA common stock through the company Inveravante Inversiones Universales, S.L.
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Furthermore, as of December 31, 2010, State Street Bank and Trust Co., Chase Nominees Ltd. and The Bank of New York Mellon, S.A. NV, in their capacity as international custodian/depositary banks, held 7.22%, 5.95% and 3.65% of BBVA common stock, respectively. Of said positions held by the custodian banks, there are no individual shareholder with direct or indirect holdings greater than or equal to 3% of the BBVA common stock, except in the case of the Blackrock Inc. company that, on February 4, 2010, reported to the Spanish Securities and Exchange Commission (CNMV) that, as a result of the acquisition on December 1, 2009 of the Barclays Global Investors (BGI) company, now has an indirect holding of BBVA common stock totaling 4.45% through the Blackrock Investment Management company.
BBVA is not aware of any direct or indirect interests through which ownership or control of the Bank may be exercised.
BBVA has not been notified of the existence of any agreements between shareholders to regulate the exercise of voting rights at the Bank’s AGMs, or to restrict or place conditions upon the free transferability of BBVA shares. The Bank is also not aware of any agreement that might result in changes in the control of the issuer.
The AGM held on March 13, 2009, under the fifth point of the Agenda, resolved to confer authority on the Board of Directors, pursuant to article 153.1.b) of the Corporations Act (now Article 297.1b) of the Corporations Act), to resolve to increase the common stock on one or several occasions up to the maximum nominal amount representing 50% of the Company’s common stock that is subscribed and paid up on the date on which the resolution is adopted, i.e., €918,252,434.60. Article 159.2 of the Corporations Act (now Article 506 of the Corporations Act) empowers the Board to exclude the pre-emptive subscription right in relation to these share issues, under the terms and with the limitations of the aforementioned agreement. The directors have five years from the date of the adoption of the agreement by the General Meeting, i.e. March 13, 2009, to perform this common stock increase.
On the signing of this agreement, the Board of Directors agreed on a share capital increase of the Bank with the pre-emptive subscription right, as described above, on November 1, 2010. The Board of Directors, at its meeting on July 27, 2009, agreed to a share capital increase for the amount required to address the conversion of the convertible obligations agreed upon on said date, as described below. This will be carried out through the issue and release into circulation of up to 444,444,445 ordinary shares with a par value of €0.49 each and without prejudice to the adjustments that may arise according to the anti-dilution mechanisms.
At the AGM held on March 14, 2008 the shareholders resolved to delegate to the Board of Directors for a five-year period the right to issue bonds, convertibleand/or exchangeable into Bank shares for a maximum total of €9,000 million. The powers include the right to establish the different aspects and conditions of each issue, including the power to exclude pre-emptive subscription right of shareholders in accordance with the Corporations Act (now the Corporations Act), to determine the basis and methods of conversion and to increase capital stock in the amount considered necessary. In virtue of said authorization, the Board of Directors, at its meeting on July 27, 2009, agreed to proceed to the issue of convertible obligations for an amount of €2,000 million with the exclusion of the pre-emptive subscription right (see Note 23.4), as well as the corresponding Bank’s share capital increase needed to address the conversion of said convertible obligations, on the basis of the conferral to the Board of Directors to increase share capital, as adopted by the aforementioned AGM held on March 13, 2009.
Previously, the AGM held on March 18, 2006 had agreed to delegate to the Board of Directors the faculty to issue, within a maximum legal period of five years as of said date, on one or several occasions, directly or through subsidiary companies fully underwritten by the Bank, any kind of debt instruments through debentures, any class of bonds, promissory notes, any class of commercial paper or warrants, which may be totally or partially exchangeable for equity that the Company or another company may already have issued, or via contracts for difference (CFD), or any other senior or secured nominative or bearer debt securities (including mortgage-backed bonds) in euros or any other currency that can be subscribed in cash or kind, with or without the incorporation of rights to the securities (warrants), subordinated or not, with a limited or open-ended term. The total maximum nominal amount authorized is €105,000 million. This amount was increased by €30,000 million by the Ordinary General Stockholders’ Meeting held on March 16, 2007, by €50,000 million by the AGM on March 14 2008, and by an additional €50,000 million by the AGM on March 13, 2009. Accordingly, the maximum total nominal amount delegated by the General Meeting was €235,000 million.
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The amounts under this heading in the accompanying consolidated balance sheets total €17,104, €12,453 and €12,770 million as of 31 December, 2010, 2009 and 2008, respectively.
The change in the amount in 2010 is due to the share premium of the aforementioned capital increase.
The change in the balance in 2009 is the result of a charge of €317 million corresponding to the payment to shareholders on April 20, 2009 as a complement to dividends for 2008, which was approved at the AGM on March 13, 2009.
This payment consisted in a total of 60,451,115 treasury stock (see Note 30) at one (1) share for each sixty-two (62) held by shareholders at market close on April 9, 2009. These shares are valued at €5.25 each (the average weighted price per share of Banco Bilbao Vizcaya Argentaria, S.A. in the Spanish stock market (continuous market) on March 12, the day before that of the AGM mentioned above.
The amended Spanish Corporation Act expressly permits the use of the share premium balance to increase capital and establishes no specific restrictions as to its use.
The breakdown of the balance of this heading in the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | |
Reserves. Breakdown by concepts | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Legal reserve | | | 367 | | | | 367 | | | | 367 | |
| Restricted reserve for retired capital | | | 88 | | | | 88 | | | | 88 | |
| Restricted reserve for Parent Company shares | | | 456 | | | | 470 | | | | 604 | |
| Restricted reserve for redenomination of capital in euros | | | 2 | | | | 2 | | | | 2 | |
| Revaluation Royal Decree-Law 7/1996 | | | 32 | | | | 48 | | | | 82 | |
| Voluntary reserves | | | 4,168 | | | | 2,918 | | | | 1,927 | |
| Consolidation reserves attributed to the Bank and dependents consolidated companies | | | 9,247 | | | | 8,181 | | | | 6,340 | |
| | | | | | | | | | | | | |
Total | | | 14,360 | | | | 12,074 | | | | 9,410 | |
| | | | | | | | | | | | | |
29.1. LEGAL RESERVE
Under the amended Corporations Act, 10% of any profit made each year must be transferred to the legal reserve until the balance of this reserve reaches 20% of the share capital. This limit of 20% of share capital had already been reached BBVA as of December 31, 2010, once the proposal for applying the 2010 earnings was considered (see Note 4). The legal reserve may also be used to increase the share capital in the part exceeding the 10% of the capital already increased.
Until the legal reserve exceeds 20% of capital, it can only be used to offset losses, provided that sufficient other reserves are not available for this purpose.
29.2. RESTRICTED RESERVES
BBVA has recognized a restricted reserve resulting from the reduction of the nominal value of each share in April 2000, and another restricted reserve resulting from the amount of treasury stock held by the Bank at each period-end, as well as by the amount of customer loans outstanding at those dates that were granted for the purchase of, or are secured by, the Bank’s shares.
Finally, pursuant to Law 46/1998 on the introduction of the euro, a restricted reserve is recognized as a result of the rounding effect of the redenomination of the share capital in euros.
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| |
| 29.3. | REVALUATION OF ROYAL DECREE-LAW 7/1996 (REVALUATION AND REGULARIZATION OF THE BALANCE SHEET) |
Prior to the merger, Banco de Bilbao, S.A. and Banco de Vizcaya, S.A. availed themselves of the legal provisions applicable to the regularization and revaluation of balance sheets. Thus, on December 31, 1996, Banco Bilbao Vizcaya, S.A. revalued its tangible assets pursuant to Royal Decree-Law 7/1996 of June 7 by applying the maximum coefficients authorized, up to the limit of the market value arising from the existing valuations. The resulting increases in the cost and depreciation of tangible fixed assets were calculated and allocated as follows:
| | | | | | | | | | | | | |
Revaluation and Regularization of the Balance Sheet | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Legal revaluations and regularizations of tangible assets: | | | | | | | | | | | | |
| Cost | | | 187 | | | | 187 | | | | 187 | |
| Less: | | | | | | | | | | | | |
| Single revaluation tax (3%) | | | (6 | ) | | | (6 | ) | | | (6 | ) |
| Balance as of December 31, 1999 | | | 181 | | | | 181 | | | | 181 | |
| | | | | | | | | | | | | |
| Rectification as a result of review by the tax authorities in 2000 | | | (5 | ) | | | (5 | ) | | | (5 | ) |
| Transfer to voluntary reserves | | | (144 | ) | | | (128 | ) | | | (94 | ) |
| | | | | | | | | | | | | |
Total | | | 32 | | | | 48 | | | | 82 | |
| | | | | | | | | | | | | |
Following the review of the balance of the “Revaluation Reserve pursuant to Royal Decree-Law 7/1996”, June 7, account by the tax authorities in 2000, this balance could only be used, free of tax, to offset recognized losses and to increase share capital until January 1, 2007. From that date, the remaining balance of this account can also be allocated to unrestricted reserves, provided that the surplus has been depreciated or the revalued assets have been transferred or derecognized. As of December 31, 2010, 2009 and 2008, the balance of restricted reserves (not yet classified as unrestricted reserves) amounted to €32, €48 million and €82 million, respectively.
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29.4. RESERVES (LOSSES) BY ENTITY
The breakdown, by company or corporate group, of the item “Reserves” in the accompanying consolidated balance sheets is as follows:
| | | | | | | | | | | | | |
Reserves Assigned to the Consolidation Process | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Accumulated reserves (losses) | | | | | | | | | | | | |
| BBVA, S.A. (Reserves asigned to the holding company) | | | 4,760 | | | | 1,676 | | | | 1,516 | |
| Grupo BBVA Bancomer | | | 4,306 | | | | 4,022 | | | | 3,489 | |
| Grupo Chile | | | 540 | | | | 419 | | | | 248 | |
| Grupo BBVA Banco Provincial | | | 593 | | | | 413 | | | | 198 | |
| Grupo BBVA Continental | | | 183 | | | | 127 | | | | 95 | |
| Grupo BBVA Puerto Rico | | | 5 | | | | 72 | | | | 44 | |
| Grupo BBVA USA Bancshares | | | (960 | ) | | | 71 | | | | (84 | ) |
| Grupo BBVA Portugal | | | (207 | ) | | | (207 | ) | | | (220 | ) |
| Grupo BBVA Colombia | | | (144 | ) | | | (209 | ) | | | (264 | ) |
| Grupo BBVA Banco Francés | | | (113 | ) | | | (139 | ) | | | (305 | ) |
| BBVA Seguros, S.A. | | | 1,275 | | | | 1,052 | | | | 862 | |
| Corporacion General Financiera, S.A. | | | 1,356 | | | | 1,229 | | | | 979 | |
| BBVA Luxinvest, S.A. | | | 1,231 | | | | 1,239 | | | | 1,232 | |
| Cidessa Uno, S.L. | | | 1,016 | | | | 746 | | | | 298 | |
| Anida Grupo Inmobiliario, S.L. | | | 377 | | | | 401 | | | | 380 | |
| BBVA Suiza, S.A. | | | 249 | | | | 233 | | | | 222 | |
| Bilbao Vizcaya Holding, S.A. | | | 150 | | | | 166 | | | | 150 | |
| BBVA Panamá, S.A. | | | 147 | | | | 118 | | | | 108 | |
| BBVA Ireland Public Limited Company | | | 144 | | | | 103 | | | | 103 | |
| Almacenes Generales de Deposito, S.A.E. | | | — | | | | 105 | | | | 97 | |
| Compañía de Cartera e Inversiones, S.A. | | | 141 | | | | 123 | | | | 121 | |
| Anida Desarrollos Singulares, S.L. | | | (299 | ) | | | (21 | ) | | | — | |
| Participaciones Arenal, S.L. | | | (181 | ) | | | (181 | ) | | | (182 | ) |
| Anida Operaciones Singulares, S.L. | | | (117 | ) | | | (1 | ) | | | — | |
| BBVA Propiedad F.I.I. | | | (116 | ) | | | (12 | ) | | | (11 | ) |
| Compañía Chilena de Inversiones, S.L. | | | (87 | ) | | | (135 | ) | | | (135 | ) |
| Finanzia, Banco de Crédito, S.A. | | | (49 | ) | | | 146 | | | | 144 | |
| Rest | | | 105 | | | | 211 | | | | (288 | ) |
| | | | | | | | | | | | | |
Subtotal | | | 14,305 | | | | 11,766 | | | | 8,801 | |
| | | | | | | | | | | | | |
Reserves (losses) of entities accounted for using the equity method: | | | | | | | | | | | | |
| Grupo CITIC | | | 93 | | | | 31 | | | | 151 | |
| Tubos Reunidos, S.A. | | | 52 | | | | 51 | | | | 53 | |
| Corp. IBV Participaciones Empresariales, S.A. | | | 4 | | | | 249 | | | | 437 | |
| Part. Servired, Sdad.Civil | | | 12 | | | | 24 | | | | 8 | |
| Occidental Hoteles Management, S.L. | | | (44 | ) | | | (13 | ) | | | (3 | ) |
| Hestenar, S.L. | | | (15 | ) | | | (2 | ) | | | (0 | ) |
| Rest | | | (47 | ) | | | (31 | ) | | | (37 | ) |
| | | | | | | | | | | | | |
Subtotal | | | 55 | | | | 309 | | | | 609 | |
| | | | | | | | | | | | | |
Total Reserves | | | 14,360 | | | | 12,075 | | | | 9,410 | |
| | | | | | | | | | | | | |
For the purpose of allocating the reserves and accumulated losses at the consolidated companies shown in the above table, the transfers of reserves arising from the dividends paid and transactions between these companies are taken into account in the period in which they took place.
As of December 31, 2010, 2009 and 2008, €2,612 million, €2,140 and 2,217 million, respectively, in the individual financial statements of the subsidiaries were restricted reserves.
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In 2010, 2009 and 2008 the Group companies performed the following transactions with shares issued by the Bank:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | Number of
| | | Millions of
| | | Number of
| | | Millions of
| | | Number of
| | | Millions of
| |
Treasury Stock | | Shares | | | Euros | | | Shares | | | Euros | | | Shares | | | Euros | |
| |
Balance at beginning | | | 16,642,054 | | | | 224 | | | | 61,539,883 | | | | 720 | | | | 15,836,692 | | | | 389 | |
| + Purchases | | | 821,828,799 | | | | 7,828 | | | | 688,601,601 | | | | 6,431 | | | | 1,118,942,855 | | | | 14,096 | |
| − Sales and other changes | | | (780,423,886 | ) | | | (7,545 | ) | | | (733,499,430 | ) | | | (6,835 | ) | | | (1,073,239,664 | ) | | | (13,745 | ) |
| +/− Derivatives over BBVA shares | | | — | | | | 45 | | | | — | | | | (92 | ) | | | — | | | | (20 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at the end | | | 58,046,967 | | | | 552 | | | | 16,642,054 | | | | 224 | | | | 61,539,883 | | | | 720 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| Held by BBVA | | | 2,838,798 | | | | 83 | | | | 8,900,623 | | | | 128 | | | | 4,091,197 | | | | 143 | |
| Held by Corporación General Financiera, S.A. | | | 55,207,640 | | | | 469 | | | | 7,740,902 | | | | 96 | | | | 57,436,183 | | | | 577 | |
| Held by other subsidiaries | | | 529 | | | | | | | | 529 | | | | | | | | 12,503 | | | | | |
| Average purchase price in euros | | | 9.53 | | | | | | | | 9.34 | | | | | | | | 12.60 | | | | | |
| Average selling price in euros | | | 9.48 | | | | | | | | 8.95 | | | | | | | | 12.52 | | | | | |
| Net gain or losses on transactions (Shareholder’s funds-Reserves) | | | | | | | (106 | ) | | | | | | | (238 | ) | | | | | | | (172 | ) |
The amount under the heading of “Sales and other changes” in the above table in 2009 includes the allocation of treasury stock to the shareholders as an additional remuneration to complement the dividends for 2008 (see Note 28).
The percentages of treasury stock held by the Group in 2010, 2009 and 2008 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | 2009 | | 2008 |
Treasury Stock | | Min | | Max | | Min | | Max | | Min | | Max |
| |
| % treasury stock | | | 0.352 | % | | | 2.396 | % | | | 0.020 | % | | | 2.850 | % | | | 0.318 | % | | | 3.935 | % |
The number of shares of BBVA accepted in pledge as of December 31, 2010, 2009 and 2008 was as follows:
| | | | | | | | | | | | | |
Shares of BBVA Accepted in Pledge | | 2010 | | | 2009 | | | 2008 | |
| |
| Number of shares in pledge | | | 107,180,992 | | | | 92,503,914 | | | | 98,228,254 | |
| Nominal value | | | 0.49 | | | | 0.49 | | | | 0.49 | |
| % of share capital | | | 2.39 | % | | | 2.47 | % | | | 2.62 | % |
The number of BBVA shares owned by third parties but managed by a company in the Group as of December 31, 2010, 2009 and 2008 was as follows:
| | | | | | | | | | | | | |
Shares of BBVA Owned by Third Parties but
| | | | | | | | | |
Managed by the Group | | 2010 | | | 2009 | | | 2008 | |
| |
| Number of shares property of third parties | | | 96,107,765 | | | | 82,319,422 | | | | 104,534,298 | |
| Nominal value | | | 0.49 | | | | 0.49 | | | | 0.49 | |
| % of share capital | | | 2.14 | % | | | 2.20 | % | | | 2.79 | % |
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| |
| 31. | VALUATION ADJUSTMENTS |
The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:
| | | | | | | | | | | | | | | | | |
Valuation Adjustments | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Available-for-sale financial assets | | | 12.4 | | | | 333 | | | | 1,951 | | | | 931 | |
| Cash flow hedging | | | | | | | 49 | | | | 188 | | | | 207 | |
| Hedging of net investments in foreign transactions | | | | | | | (158 | ) | | | 219 | | | | 247 | |
| Exchange differences | | | 2.2.16 | | | | (978 | ) | | | (2,236 | ) | | | (2,231 | ) |
| Non-current assets held for sale | | | | | | | — | | | | — | | | | — | |
| Entities accounted for using the equity method | | | | | | | (16 | ) | | | (184 | ) | | | (84 | ) |
| Other valuation adjustments | | | | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
Total | | | | | | | (770 | ) | | | (62 | ) | | | (930 | ) |
| | | | | | | | | | | | | | | | | |
The balances recognized under these headings are presented net of tax.
| |
| 32. | NON-CONTROLLING INTEREST |
The breakdown by consolidated company of the balance under the heading “Non-controlling interests” of total equity in the accompanying consolidated balance sheets was as follows:
| | | | | | | | | | | | | |
Non-Controlling Interest | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| BBVA Colombia Group | | | 36 | | | | 30 | | | | 26 | |
| BBVA Chile Group | | | 375 | | | | 280 | | | | 194 | |
| BBVA Banco Continental Group | | | 501 | | | | 391 | | | | 278 | |
| BBVA Banco Provincial Group | | | 431 | | | | 590 | | | | 413 | |
| BBVA Banco Francés Group | | | 161 | | | | 127 | | | | 88 | |
| Other companies | | | 52 | | | | 45 | | | | 50 | |
| | | | | | | | | | | | | |
Total | | | 1,556 | | | | 1,463 | | | | 1,049 | |
| | | | | | | | | | | | | |
These amounts are broken down by consolidated company under the heading “Net income attributed to non-controlling interests” in the accompanying consolidated income statements:
| | | | | | | | | | | | | |
Net Income atributed to Non-Controlling Interests | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| BBVA Colombia Group | | | 8 | | | | 6 | | | | 5 | |
| BBVA Chile Group | | | 89 | | | | 64 | | | | 31 | |
| BBVA Banco Continental Group | | | 150 | | | | 126 | | | | 97 | |
| BBVA Banco Provincial Group | | | 98 | | | | 148 | | | | 175 | |
| BBVA Banco Francés Group | | | 37 | | | | 33 | | | | 44 | |
| Other companies | | | 7 | | | | 8 | | | | 13 | |
| | | | | | | | | | | | | |
Total | | | 389 | | | | 385 | | | | 365 | |
| | | | | | | | | | | | | |
| |
| 33. | CAPITAL BASE AND CAPITAL MANAGEMENT |
Capital base
Bank of Spain Circular 3/2008, of 22 May 2008, modified by Circular 9/2010 of 22 December 2010, on the calculation and control of minimum capital base requirements, and subsequent amendments, regulates the minimum capital base requirements for Spanish credit institutions — both as individual entities and as consolidated
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groups— and how to calculate them, as well as the various internal capital adequacy assessment processes they should have in place and the information they should disclose to the market.
Circular 3/2008 and subsequent amendments implement Spanish legislation on capital base and consolidated supervision of financial institutions, as well as adapting Spanish law to the relevant European Union Directives, in compliance with the Accord by the Basel Committee on Banking Supervision (Basel II).
The minimum capital base requirements established by Circular3/2008 are calculated according to the Group’s exposure to credit and dilution risk, counterparty and liquidity risk relating to the trading portfolio, exchange rate risk and operational risk. In addition, the Group must fulfill the risk concentration limits established in said Circular and the internal Corporate Governance obligations.
As of December 31, 2010, 2009 and 2008, the Group’s capital exceeded the minimum capital base level required by regulations in force on each date as shown below:
| | | | | | | | | | | | | |
Capital Base | | 2010(*) | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Basic equity | | | 34,352 | | | | 27,114 | | | | 22,107 | |
| Common Stock | | | 2,201 | | | | 1,837 | | | | 1,837 | |
| Parent company reserves | | | 28,738 | | | | 20,892 | | | | 21,394 | |
| Reserves in consolidated companies | | | 1,720 | | | | 1,600 | | | | (626 | ) |
| Non-controlling interests | | | 1,325 | | | | 1,245 | | | | 928 | |
| Other equity instruments | | | 7,175 | | | | 7,130 | | | | 5,391 | |
| Deductions (Goodwill and others) | | | (10,331 | ) | | | (8,177 | ) | | | (9,998 | ) |
| Attributed net income (less dividends) | | | 3,526 | | | | 2,587 | | | | 3,181 | |
Additional equity | | | 7,472 | | | | 12,116 | | | | 12,543 | |
Other deductions | | | (4,477 | ) | | | (2,133 | ) | | | (957 | ) |
Additional equity due to mixed group(**) | | | 1,291 | | | | 1,305 | | | | 1,129 | |
Total Equity | | | 38,639 | | | | 38,402 | | | | 34,822 | |
| | | | | | | | | | | | | |
Minimum equity required | | | 25,066 | | | | 23,282 | | | | 24,124 | |
| | | | | | | | | | | | | |
| | |
| (*) | | Provisional data. |
|
| (**) | | Mainly insurance companies in the Group. |
The results of the stress tests of European financial institutions, published on July 23, 2010, suggested that the BBVA Group will maintain its current solvency levels in 2011, even in the most adverse scenario that incorporates the additional impact of a possible sovereign risk crisis.
Capital management
Capital management in the Group has a twofold aim: to preserve the level of capitalization, in accordance with the business objectives in all the countries in which it operates; and, at the same time, to maximize the return on shareholders’ funds through the efficient allocation of capital to the different units, good management of the balance sheet and appropriate use of the various instruments forming the basis of the Group’s equity: stock, preferential stock and subordinate debt.
This capital management is carried out in accordance with the criteria of the Bank of Spain Circular 3/2008 and subsequent amendments both in terms of determining the capital base and the solvency ratios. This regulation allows each entity to apply its own internal ratings based (IRB) approach to risk and capital management.
The Group carries out an integrated management of these risks, in accordance with its internal policies (see Note 7) and its internal capital estimation model has received the Bank of Spain’s approval for certain portfolios.
Capital is allocated to each business area (see Note 6) according to economic risk capital (ERC) criteria, which are based on the concept of unexpected loss with a specific confidence level, as a function of a solvency target
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determined by the Group. This target is established at two levels: Core equity: which determines the allocated capital and serves as a reference to calculate the return generated on equity (ROE) by each business; and total capital, which determines the additional allocation in terms of subordinate debt and preferred securities.
Because of its sensitivity to risk, ERC is an element linked to policies for managing the actual businesses. The procedure provides a harmonized basis for assigning capital to businesses according to the risks incurred and makes it easier to compare returns. The calculation of the CaR combines credit risk, market risk, structural risk associated with the balance sheet equity positions, operational risk, fixed assets risks and technical risks in the case of insurance companies. These calculations are carried out using internal models that have been defined following the guidelines and requirements established under the Basel II Capital Accord, with economic criteria prevailing over regulatory ones.
| |
| 34. | FINANCIAL GUARANTEES AND DRAWABLE BY THIRD PARTIES |
The breakdown of the balances of these items as of December 31, 2008, 20072010, 2009 and 20062008 was as follows:
| | | | | | | | | | | | | | |
Financial Guarantees and Drawable by Third Parties | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millions of euros | | |
| | |
Contingent exposures — | | | | | | | | | | | | | |
Contingent Exposures | | | | | | | | | | | | | |
| Collateral, bank guarantees and indemnities | | | 27,649 | | | | 27,997 | | | | 24,708 | | | | 28,092 | | | | 26,266 | | | | 27,649 | |
| Rediscounts, endorsements and acceptances | | | 81 | | | | 58 | | | | 44 | | | | 49 | | | | 45 | | | | 81 | |
| Other | | | 8,222 | | | | 8,804 | | | | 5,235 | | |
| Rest | | | | 8,300 | | | | 6,874 | | | | 8,222 | |
| | | | | | | | | | | | | | | |
Total | | | | 36,441 | | | | 33,185 | | | | 35,952 | |
| | | | 35,952 | | | | 36,859 | | | | 29,987 | | | | | | | | |
| | | | | | | | | |
Contingent commitments — | | | | | | | | | | | | | |
Contingent Commitments | | | | | | | | | | | | | |
| Drawable by third parties: | | | 92,663 | | | | 101,444 | | | | 98,226 | | | | 86,790 | | | | 84,925 | | | | 92,663 | |
| Credit institutions | | | 2,021 | | | | 2,619 | | | | 4,356 | | | | 2,303 | | | | 2,257 | | | | 2,021 | |
| General government sector | | | 4,221 | | | | 4,419 | | | | 3,122 | | |
| Government and other government agency | | | | 4,135 | | | | 4,567 | | | | 4,221 | |
| Other resident sectors | | | 37,529 | | | | 42,448 | | | | 43,730 | | | | 27,201 | | | | 29,604 | | | | 37,529 | |
| Non-resident sector | | | 48,892 | | | | 51,958 | | | | 47,018 | | | | 53,151 | | | | 48,497 | | | | 48,892 | |
| Other commitments | | | 6,234 | | | | 5,496 | | | | 4,995 | | | | 3,784 | | | | 7,398 | | | | 6,234 | |
| | | | | | | | | | | | | | | |
Total | | | 98,897 | | | | 106,940 | | | | 103,221 | | | | 90,574 | | | | 92,323 | | | | 98,897 | |
| | | | | | | | | | | | | | | |
Since a significant portion of these amounts will reach maturity without any payment obligation materializing for the consolidated companies, the aggregate balance of these commitments cannot be considered as an actual future requirement for financing or liquidity to be provided by the Group to third parties.
Income from the guarantee instruments is recorded under the heading “FeeIn 2010, 2009 and Commission Income” in the consolidated income statement and is calculated by applying the rate established in the related contract to the nominal amount of the guarantee (see Note 41).
F-126
In 2008 2007 and 2006 no issuances of debt securities carried out by associate entities, jointly controlled entities (accounted for using the equity method) and non Groupor non-Group entities have been guaranteed.
| |
34.35. | ASSETS ASSIGNED TO OTHER OWN AND THIRD-PARTY OBLIGATIONS |
As ofIn addition to those mentioned in other notes in these annual financial statements as at December 31, 2010 and 2009 and 2008, 2007(see Notes 13 and 2006, the face amount of26), the assets owned by theof consolidated entities pledged as security forthat guaranteed their own transactions,obligations amounted to €76,259€81,631 million, €58,406€81,231 million and €45,774 million, respectively, and related basically€76,259 million. These amounts mainly correspond to the pledgeissue of certain assets as security for financing liabilities with the Bank of Spainlong-term covered bonds (Note 22.4)23.4) which, pursuant to the Mortgage Market LawAct, are admitted as securitythird-party collateral and to assets allocated as collateral for obligationcertain lines of short-term finance assigned to third parties.the Group by central banks.
As of December 31, 2010, 2009 and 2008, 2007 and 2006, therenone of the Group’s assets were nolinked to any additional assets assigned to own or third-party obligations toapart from those described in the different headings of thesevarious notes to the accompanying consolidated annual financial statements.
F-144
| |
35.36. | OTHER CONTINGENT ASSETS AND CONTINGENT LIABILITIES |
As of December 31, 2008, 20072010, 2009 and 2006,2008, there were no significant contingent assets or liabilities registered in the financial statements attached.
| |
36.37. | PURCHASE AND SALE COMMITMENTS AND FUTURE PAYMENT OBLIGATIONS |
The financial instruments sold with a commitment to subsequently repurchase them are not derecognized from the consolidated balance sheets and the amount received from the sale is considered financing from third parties.
The financial instruments acquired with a commitment to subsequently resell them are not recognized in the consolidated balance sheets and the amount paid for the sale is considered credit given to third parties.
The breakdown of sale and purchase commitments of the BBVA Group BBVA as of December 31, 2008, 20072010, 2009 and 20062008 was as follow:follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Financial instruments sales with repurchase commitments | | | 32,569 | | | | 50,982 | | | | 36,139 | |
| Financial instruments purchase with resale commitments | | | 11,259 | | | | 11,423 | | | | 7,018 | |
| | | | | | | | | | | | | |
Purchase and Sale Commitments | | 2010 | | 2009 | | 2008 |
| | | Millions of euros |
| |
| Financial instruments sold with repurchase commitments | | | 40,323 | | | | 29,409 | | | | 32,569 | |
| Financial instruments purchased with resale commitments | | | 8,693 | | | | 7,023 | | | | 11,515 | |
FollowingBelow is a breakdown of the maturity of other future payment obligations fromdue later than December 31, 2008:2010:
| | | | | | | | | | | | | | | | | | | | | |
| | | Up to 1
| | | | | | | | | | | | | |
| | | Year | | | 1 to 3 Years | | | 3 to 5 Years | | | Over 5 Years | | | Total | |
| | | Millions of euros | |
| |
| Financial leases | | | — | | | | — | | | | — | | | | — | | | | — | |
| Operational leases | | | 336 | | | | 51 | | | | 36 | | | | 105 | | | | 528 | |
| Purchase commitments | | | 33 | | | | 4 | | | | — | | | | — | | | | 37 | |
| Technology and systems projects | | | 10 | | | | — | | | | — | | | | — | | | | 10 | |
| Other projects | | | 23 | | | | 4 | | | | — | | | | — | | | | 27 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 369 | | | | 55 | | | | 36 | | | | 105 | | | | 565 | |
| | | | | | | | | | | | | | | | | | | | | |
| |
37. | TRANSACTIONS FOR THE ACCOUNT OF THIRD PARTIES |
As of December 31, 2008, 2007 and 2006, the detail of the most significant items composing this heading was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Financial instruments entrusted by third parties | | | 510,019 | | | | 567,263 | | | | 524,151 | |
| Conditional bills and other securities received for collection | | | 5,208 | | | | 20,824 | | | | 3,640 | |
| Securities received in credit | | | 71 | | | | 632 | | | | 70 | |
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As of December 31, 2008, 2007 and 2006, the off balance sheet customer funds was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
The off balanced sheet customer funds | | | 114,840 | | | | 165,314 | | | | 157,550 | |
| - Commercialised by the Group | | | | | | | | | | | | |
| - Investment companies and mutual funds | | | 37,076 | | | | 63,487 | | | | 62,246 | |
| - Pension funds | | | 42,701 | | | | 59,143 | | | | 55,505 | |
| - Saving insurance contracts | | | 10,398 | | | | 10,437 | | | | 13,104 | |
| - Customer portfolios managed on a discretionary basis | | | 24,582 | | | | 31,936 | | | | 26,465 | |
Of which: | | | | | | | | | | | | |
| Portfolios managed on a discretionary | | | 12,176 | | | | 18,904 | | | | 13,995 | |
| - Commercialised by the Group managed by third parties outside the Group | | | | | | | | | | | | |
| - Investment companies and mutual funds | | | 59 | | | | 156 | | | | 115 | |
| - Pension funds | | | 24 | | | | 128 | | | | 97 | |
| - Saving insurance contracts | | | — | | | | 27 | | | | 18 | |
| | | | | | | | | | | | | | | | | | | | | |
Maturity of Future Payment
| | Up to
| | | | | | | | | | | | | |
Obligations | | 1 Year | | | 1 to 3 Years | | | 3 to 5 Years | | | Over 5 Years | | | Total | |
| | | Millions of euros | |
| |
| Finance leases | | | — | | | | — | | | | — | | | | — | | | | — | |
| Operating leases | | | 144 | | | | 71 | | | | 29 | | | | 89 | | | | 332 | |
| Purchase commitments | | | 26 | | | | — | | | | — | | | | — | | | | 26 | |
| Technology and systems projects | | | 14 | | | | — | | | | — | | | | — | | | | 14 | |
| Other projects | | | 12 | | | | — | | | | — | | | | — | | | | 12 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | 170 | | | | 71 | | | | 29 | | | | 89 | | | | 358 | |
| | | | | | | | | | | | | | | | | | | | | |
| |
| 38. | TRANSACTIONS ON BEHALF OF THIRD PARTIES |
As of December 31, 2010, 2009 and 2008, the details of the most significant items under this heading were as follows:
| | | | | | | | | | | | | |
Transactions on Behalf of Third Parties | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Financial instruments entrusted by third parties | | | 534,243 | | | | 530,109 | | | | 510,019 | |
| Conditional bills and other securities received for collection | | | 4,256 | | | | 4,428 | | | | 5,208 | |
| Securities received in credit | | | 999 | | | | 489 | | | | 71 | |
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As of December 31, 2010, 2009 and 2008, the off-balance sheet customer funds were as follows:
| | | | | | | | | | | | | |
Off-Balance Sheet Customer Funds by Type | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Commercialized by the Group | | | | | | | | | | | | |
| Investment companies and mutual funds | | | 41,006 | | | | 39,849 | | | | 37,076 | |
| Pension funds | | | 72,598 | | | | 57,264 | | | | 42,701 | |
| Saving insurance contracts | | | 9,296 | | | | 9,814 | | | | 10,398 | |
| Customer portfolios managed on a discretionary basis | | | 25,435 | | | | 26,501 | | | | 24,582 | |
Of which: | | | | | | | | | | | | |
| Portfolios managed on a discretionary | | | 10,494 | | | | 10,757 | | | | 12,176 | |
| Commercialized by the Group managed by third parties outside the Group | | | | | | | | | | | | |
| Investment companies and mutual funds | | | 76 | | | | 85 | | | | 59 | |
| Pension funds | | | 21 | | | | 24 | | | | 24 | |
| Saving insurance contracts | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Total | | | 148,432 | | | | 133,537 | | | | 114,840 | |
| | | | | | | | | | | | | |
| |
| 39. | INTEREST, INCOME AND EXPENSE AND SIMILAR ITEMSEXPENSES |
| |
38.1.39.1. | INTEREST AND SIMILAR INCOMEInterest And Similar Income |
The breakdown of the most significant interest and similar income earned by the Group in 2008, 20072010, 2009 and 20062008 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Interest and Similar Income. Breakdown by Origin. | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Central Banks | | | 479 | | | | 458 | | | | 444 | | | | 239 | | | | 254 | | | | 479 | |
| Loans and advances to credit institutions | | | 1,323 | | | | 1,664 | | | | 958 | | | | 402 | | | | 631 | | | | 1,323 | |
| Loans and advances to customers | | | 23,580 | | | | 19,208 | | | | 13,599 | | | | 16,002 | | | | 18,119 | | | | 23,580 | |
| General government | | | 736 | | | | 668 | | | | 539 | | |
| Government and other government agency | | | | 485 | | | | 485 | | | | 736 | |
| Resident sector | | | 11,177 | | | | 9,281 | | | | 6,394 | | | | 5,887 | | | | 7,884 | | | | 11,177 | |
| Non resident sector | | | 11,667 | | | | 9,259 | | | | 6,666 | | | | 9,630 | | | | 9,750 | | | | 11,667 | |
| Debt securities | | | 3,706 | | | | 3,472 | | | | 3,197 | | | | 3,080 | | | | 3,342 | | | | 3,706 | |
| Trading | | | 2,241 | | | | 2,028 | | | | 1,363 | | |
| Investment | | | 1,465 | | | | 1,444 | | | | 1,834 | | |
| Held for trading | | | | 956 | | | | 1,570 | | | | 2,241 | |
Available-for-sale financial assets andheld-to-madurity investments | | | | 2,124 | | | | 1,772 | | | | 1,465 | |
| Rectification of income as a result of hedging transactions | | | 175 | | | | 177 | | | | 684 | | | | 63 | | | | 177 | | | | 175 | |
| Insurance activity income | | | 812 | | | | 821 | | | | 774 | | |
| Other gains (losses) | | | 329 | | | | 376 | | | | 386 | | |
| Insurance activity | | | | 975 | | | | 940 | | | | 812 | |
| Other income | | | | 373 | | | | 312 | | | | 329 | |
| | | | | | | | | | | | | | | |
Total | | | 30,404 | | | | 26,176 | | | | 20,042 | | | | 21,134 | | | | 23,775 | | | | 30,404 | |
| | | | | | | | | | | | | | | |
The amounts recognized in consolidated equity during the yearas of December 31, 2010, 2009 and 2008, in connection with fair value hedgeshedging derivatives and the amounts derecognized from consolidated equity and taken to the consolidated income statement during the yearthose years are disclosed in the accompanying consolidated statements of consolidated changes in total equity.recognized income and expenses.
F-128F-146
The breakdownfollowing table shows the adjustments in income resulting from hedge accounting, broken down by type of the balance of this heading in the accompanying consolidated income statements by geographic area as of December 31, 2008, 2007 and 2006 was as follows:hedge:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Domestic | | | 15,391 | | | | 13,709 | | | | 9,801 | |
| Foreign | | | 15,014 | | | | 12,467 | | | | 10,242 | |
| European Union | | | 1,974 | | | | 1,652 | | | | 1,262 | |
| OECD | | | 8,671 | | | | 7,336 | | | | 6,200 | |
| Rest of countries | | | 4,369 | | | | 3,479 | | | | 2,780 | |
| | | | | | | | | | | | | |
Total | | | 30,404 | | | | 26,176 | | | | 20,042 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Adjustments in Income Resulting
| | | | | | | | | |
from Hedge Accounting | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Cash flow hedging | | | 213 | | | | 295 | | | | 152 | |
Fair value hedging | | | (150 | ) | | | (118 | ) | | | 23 | |
| | | | | | | | | | | | | |
Total | | | 63 | | | | 177 | | | | 175 | |
| | | | | | | | | | | | | |
| |
38.2. | INTEREST EXPENSE AND SIMILAR CHARGES |
The breakdown of the balance of this heading in the accompanying consolidated income statements as of December 31, 2008, 2007 and 2006 wasby geographical area is as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Bank of Spain and other central banks | | | 384 | | | | 365 | | | | 300 | |
| Deposits from credit institutions | | | 3,115 | | | | 3,119 | | | | 2,343 | |
| Deposits from customers | | | 9,057 | | | | 7,840 | | | | 5,038 | |
| Debt certificates | | | 3,631 | | | | 3,658 | | | | 2,821 | |
| Subordinated liabilities | | | 1,121 | | | | 868 | | | | 567 | |
| Rectification of expenses as a result of hedging transactions | | | 421 | | | | (327 | ) | | | (231 | ) |
| Cost attributable to pension funds (Note 24) | | | 254 | | | | 241 | | | | 255 | |
| Insurance | | | 571 | | | | 616 | | | | 633 | |
| Other charges | | | 164 | | | | 168 | | | | 178 | |
| | | | | | | | | | | | | |
Total | | | 18,718 | | | | 16,548 | | | | 11,904 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Interest and Similar Income.
| | | | | | | | | |
Breakdown by Geographical Area | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Domestic market | | | 8,906 | | | | 11,224 | | | | 15,391 | |
| Foreign | | | 12,228 | | | | 12,551 | | | | 15,013 | |
| European Union | | | 744 | | | | 1,089 | | | | 1,974 | |
| Rest of OECD | | | 7,417 | | | | 7,153 | | | | 8,671 | |
| Rest of countries | | | 4,067 | | | | 4,309 | | | | 4,368 | |
| | | | | | | | | | | | | |
Total | | | 21,134 | | | | 23,775 | | | | 30,404 | |
| | | | | | | | | | | | | |
| |
38.3.39.2. | AInterest And Similar Expenses |
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
| | | | | | | | | | | | | |
Interest and Similar Expenses. Breakdown by Origin | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Bank of Spain and other central banks | | | 184 | | | | 202 | | | | 384 | |
| Deposits from credit institutions | | | 1,081 | | | | 1,511 | | | | 3,115 | |
| Customers deposits | | | 3,570 | | | | 4,312 | | | | 9,057 | |
| Debt certificates | | | 2,627 | | | | 2,681 | | | | 3,631 | |
| Subordinated liabilities | | | 829 | | | | 1,397 | | | | 1,121 | |
| Rectification of expenses as a result of hedging transactions | | | (1,587 | ) | | | (1,215 | ) | | | 421 | |
| Cost attributable to pension funds (Note 26) | | | 259 | | | | 274 | | | | 254 | |
| Insurance activity | | | 707 | | | | 679 | | | | 571 | |
| Other charges | | | 144 | | | | 52 | | | | 164 | |
| | | | | | | | | | | | | |
Total | | | 7,814 | | | | 9,893 | | | | 18,718 | |
| | | | | | | | | | | | | |
The following table shows the adjustments in expenses resulting from hedge accounting, broken down by type of hedge:
| | | | | | | | | | | | | |
Adjustments in Expenses Resulting from Hedge Accounting | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Cash flow hedging | | | — | | | | (35 | ) | | | (33 | ) |
| Fair value hedging | | | (1,587 | ) | | | (1,180 | ) | | | 454 | |
| | | | | | | | | | | | | |
TOTAL | | | (1,587 | ) | | | (1,215 | ) | | | 421 | |
| | | | | | | | | | | | | |
F-147
| |
VERAGES RETURN ON INVESTMENTS AND AVERAGE BORROWING COST39.3. | Averages Return On Investments and Average Borrowing Cost |
The detail of the average return on investments in 20082010, 2009 and 20072008 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | | 2010 | | 2009 | | 2008 | |
| | | Average
| | | | Interest
| | Average
| | | | Interest
| | | | | Interest and
| | | | | | Interest and
| | | | | | Interest and
| | | |
Assets | | Balances | | Expenses | | Rates (%) | | Balances | | Expenses | | Rates (%) | | |
| | | | Average
| | Similar
| | Interest
| | Average
| | Similar
| | Interest
| | Average
| | Similar
| | Interest
| |
ASSETS | | | Balances | | Income | | Rates (%) | | Balances | | Income | | Rates (%) | | Balances | | Income | | Rates (%) | |
| | | Millions of euros | | | Millions of euros | |
| |
| Cash and balances with central banks | | | 14,396 | | | | 479 | | | | 3.32 | | | | 16,038 | | | | 458 | | | | 2.86 | | | | 21,342 | | | | 239 | | | | 1.12 | | | | 18,638 | | | | 253 | | | | 1.36 | | | | 14,396 | | | | 479 | | | | 3.32 | |
| Securities portfolio and derivatives | | | 118,356 | | | | 4,659 | | | | 3.94 | | | | 107,236 | | | | 4,386 | | | | 4.09 | | | | 145,990 | | | | 3,939 | | | | 2.70 | | | | 138,030 | | | | 4,207 | | | | 3.05 | | | | 118,356 | | | | 4,659 | | | | 3.94 | |
| Loans and advances to credit institutions | | | 31,229 | | | | 1,367 | | | | 4.38 | | | | 39,509 | | | | 1,777 | | | | 4.50 | | | | 25,561 | | | | 501 | | | | 1.96 | | | | 26,152 | | | | 697 | | | | 2.66 | | | | 31,229 | | | | 1,367 | | | | 4.38 | |
| Euros | | | 21,724 | | | | 933 | | | | 4.30 | | | | 29,522 | | | | 1,138 | | | | 5.39 | | | | 15,888 | | | | 210 | | | | 1.32 | | | | 16,190 | | | | 353 | | | | 2.18 | | | | 21,724 | | | | 933 | | | | 4.30 | |
| Foreign currency | | | 9,505 | | | | 434 | | | | 4.57 | | | | 9,987 | | | | 639 | | | | 6.39 | | | | 9,673 | | | | 291 | | | | 3.01 | | | | 9,962 | | | | 344 | | | | 3.45 | | | | 9,505 | | | | 434 | | | | 4.57 | |
| Loans and advances to customers | | | 321,498 | | | | 23,720 | | | | 7.38 | | | | 275,647 | | | | 19,290 | | | | 7.00 | | | | 333,021 | | | | 16,296 | | | | 4.89 | | | | 328,969 | | | | 18,498 | | | | 5.62 | | | | 321,498 | | | | 23,720 | | | | 7.38 | |
| Euros | | | 218,634 | | | | 13,072 | | | | 5.98 | | | | 201,045 | | | | 10,747 | | | | 5.22 | | | | 219,857 | | | | 7,023 | | | | 3.19 | | | | 222,254 | | | | 9,262 | | | | 4.17 | | | | 218,634 | | | | 13,072 | | | | 5.98 | |
| Foreign currency | | | 102,864 | | | | 10,648 | | | | 10.35 | | | | 74,602 | | | | 8,543 | | | | 11.45 | | | | 113,164 | | | | 9,273 | | | | 8.19 | | | | 106,715 | | | | 9,236 | | | | 8.65 | | | | 102,864 | | | | 10,648 | | | | 10.35 | |
| Other finance income | | | — | | | | 179 | | | | — | | | | — | | | | 265 | | | | — | | | | — | | | | 159 | | | | — | | | | — | | | | 120 | | | | — | | | | — | | | | 179 | | | | — | |
| Other assets | | | 32,377 | | | | — | | | | — | | | | 22,770 | | | | — | | | | — | | | | 32,894 | | | | — | | | | — | | | | 31,180 | | | | — | | | | — | | | | 32,377 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ASSETS/FINANCE INCOME | | | 517,856 | | | | 30,404 | | | | 5.87 | | | | 461,200 | | | | 26,176 | | | | 5.68 | | |
ASSETS/INTEREST AND SIMILAR INCOME | | | | 558,808 | | | | 21,134 | | | | 3.78 | | | | 542,969 | | | | 23,775 | | | | 4.38 | | | | 517,856 | | | | 30,404 | | | | 5.87 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The average borrowing cost in 2010, 2009 and 2008 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Interest and
| | | | | | | | | Interest and
| | | | | | | | | Interest and
| | | | |
| | | Average
| | | Similar
| | | Interest
| | | Average
| | | Similar
| | | Interest
| | | Average
| | | Similar
| | | Interest
| |
LIABILITIES | | Balances | | | Expenses | | | Rates (%) | | | Balances | | | Expenses | | | Rates (%) | | | Balances | | | Expenses | | | Rates (%) | |
| | | Millions of euros | |
| |
| Deposits from central banks and credit institutions | | | 80,177 | | | | 1,515 | | | | 1.89 | | | | 74,017 | | | | 2,143 | | | | 2.89 | | | | 77,159 | | | | 3,809 | | | | 4.94 | |
| Euros | | | 45,217 | | | | 863 | | | | 1.91 | | | | 35,093 | | | | 967 | | | | 2.75 | | | | 32,790 | | | | 1,604 | | | | 4.89 | |
| Foreign currency | | | 34,960 | | | | 652 | | | | 1.87 | | | | 38,924 | | | | 1,176 | | | | 3.02 | | | | 44,369 | | | | 2,205 | | | | 4.97 | |
| Customer deposits | | | 259,330 | | | | 3,550 | | | | 1.37 | | | | 249,106 | | | | 4,056 | | | | 1.63 | | | | 237,387 | | | | 8,390 | | | | 3.53 | |
| Euros | | | 121,956 | | | | 1,246 | | | | 1.02 | | | | 116,422 | | | | 1,326 | | | | 1.14 | | | | 115,166 | | | | 3,765 | | | | 3.27 | |
| Foreign currency | | | 137,374 | | | | 2,304 | | | | 1.68 | | | | 132,684 | | | | 2,730 | | | | 2.06 | | | | 122,221 | | | | 4,625 | | | | 3.78 | |
| Debt certificates and subordinated liabilities | | | 119,684 | | | | 2,334 | | | | 1.95 | | | | 120,228 | | | | 3,098 | | | | 2.58 | | | | 119,249 | | | | 6,100 | | | | 5.12 | |
| Euros | | | 89,020 | | | | 1,569 | | | | 1.76 | | | | 91,730 | | | | 2,305 | | | | 2.51 | | | | 96,764 | | | | 5,055 | | | | 5.22 | |
| Foreign currency | | | 30,664 | | | | 765 | | | | 2.49 | | | | 28,498 | | | | 793 | | | | 2.78 | | | | 22,485 | | | | 1,045 | | | | 4.65 | |
| Other finance expenses | | | — | | | | 415 | | | | — | | | | — | | | | 596 | | | | — | | | | — | | | | 418 | | | | — | |
| Other liabilities | | | 66,541 | | | | — | | | | — | | | | 70,020 | | | | — | | | | — | | | | 56,867 | | | | — | | | | — | |
| Equity | | | 33,076 | | | | — | | | | — | | | | 29,598 | | | | — | | | | — | | | | 27,194 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES+EQUITY/INTEREST AND SIMILAR EXPENSES | | | 558,808 | | | | 7,814 | | | | 1.40 | | | | 542,969 | | | | 9,893 | | | | 1.82 | | | | 517,856 | | | | 18,717 | | | | 3.61 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-129F-148
The average borrowing costchange in 2008the balance under the headings “Interest and 2007 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Average
| | | | | | Interest
| | | Average
| | | | | | Interest
| |
Liabilities | | Balances | | | Expenses | | | Rates (%) | | | Balances | | | Expenses | | | Rates (%) | |
| | | Millions of euros | |
| |
| Deposits from central banks and credit institutions | | | 77,159 | | | | 3,809 | | | | 4.94 | | | | 65,822 | | | | 3,469 | | | | 5.27 | |
| Euros | | | 32,790 | | | | 1,604 | | | | 4.89 | | | | 27,388 | | | | 1,261 | | | | 4.60 | |
| Foreign currency | | | 44,369 | | | | 2,205 | | | | 4.97 | | | | 38,434 | | | | 2,209 | | | | 5.75 | |
| Customer deposits | | | 237,387 | | | | 8,390 | | | | 3.53 | | | | 205,740 | | | | 7,013 | | | | 3.41 | |
| Euros | | | 115,166 | | | | 3,765 | | | | 3.27 | | | | 109,605 | | | | 3,133 | | | | 2.83 | |
| Foreign currency | | | 122,221 | | | | 4,625 | | | | 3.78 | | | | 96,135 | | | | 3,880 | | | | 4.04 | |
| Marketable securities and subordinated liabilities | | | 119,249 | | | | 6,100 | | | | 5.12 | | | | 116,247 | | | | 5,658 | | | | 4.87 | |
| Euros | | | 96,764 | | | | 5,055 | | | | 5.22 | | | | 99,612 | | | | 4,675 | | | | 4.67 | |
| Foreign currency | | | 22,485 | | | | 1,045 | | | | 4.65 | | | | 16,635 | | | | 983 | | | | 5.91 | |
| Other finance expenses | | | — | | | | 418 | | | | — | | | | — | | | | 408 | | | | — | |
| Other liabilities | | | 56,867 | | | | — | | | | — | | | | 48,776 | | | | — | | | | — | |
| Equity | | | 27,194 | | | | — | | | | — | | | | 24,615 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES + EQUITY/ FINANCE EXPENSE | | | 517,856 | | | | 18,717 | | | | 3.61 | | | | 461,200 | | | | 16,548 | | | | 3.59 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
The variation on financesimilar income” and “Interest and similar expenses” in the accompanying consolidated income and on financial costs in 2008 with respect to 2007, thatstatements is determined by the variation inresult of changing prices (price effect) and the variation in thechanging volume of activity (volume effect), was as follows:can be seen below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Volume Price-Effect 2008/2007 | | | 2010/2009 | | 2009/2008 | |
| | | Volume Effect(1) | | Price Effect(2) | | Total Effect | | |
Interest Income and Expense and Similar Items.
| | | Volume
| | Price
| | | | Volume
| | | | Total
| |
Change in the Balance | | | Effect(1) | | Effect (2) | | Total Effect | | Effect(1) | | Price Effect(2) | | Effect | |
| | | Millions of euros | | | Millions of euros | |
| |
| Cash and balances with central banks | | | (46 | ) | | | 66 | | | | 21 | | | | 37 | | | | (51 | ) | | | (14 | ) | | | 141 | | | | (366 | ) | | | (225 | ) |
| Securities portfolio and derivatives | | | 468 | | | | (195 | ) | | | 273 | | | | 243 | | | | (511 | ) | | | (268 | ) | | | 774 | | | | (1,226 | ) | | | (452 | ) |
| Loans and advances to credit institutions | | | (368 | ) | | | (41 | ) | | | (409 | ) | | | (16 | ) | | | (179 | ) | | | (195 | ) | | | (222 | ) | | | (448 | ) | | | (670 | ) |
| Euros | | | 37 | | | | (242 | ) | | | (205 | ) | | | (7 | ) | | | (136 | ) | | | (142 | ) | | | (238 | ) | | | (342 | ) | | | (580 | ) |
| Foreign currency | | | (29 | ) | | | (175 | ) | | | (204 | ) | | | (10 | ) | | | (43 | ) | | | (53 | ) | | | 21 | | | | (112 | ) | | | (91 | ) |
| Loans and advances to customers | | | 3,270 | | | | 1,159 | | | | 4,430 | | | | 228 | | | | (2,429 | ) | | | (2,201 | ) | | | 551 | | | | (5,774 | ) | | | (5,222 | ) |
| Euros | | | 698 | | | | 1,627 | | | | 2,325 | | | | (100 | ) | | | (2,139 | ) | | | (2,239 | ) | | | 216 | | | | (4,027 | ) | | | (3,810 | ) |
| Foreign currency | | | 3,269 | | | | (1,164 | ) | | | 2,105 | | | | 558 | | | | (521 | ) | | | 37 | | | | 399 | | | | (1,811 | ) | | | (1,412 | ) |
| Other financial income | | | — | | | | (86 | ) | | | (86 | ) | |
| Other financial incomes | | | | — | | | | 39 | | | | 39 | | | | — | | | | (59 | ) | | | (59 | ) |
| | | | | | | | | | | | | | | | | | | | | |
FINANCE INCOME | | | 3,297 | | | | 932 | | | | 4,229 | | |
INTEREST AND SIMILAR INCOME | | | | 693 | | | | (3,333 | ) | | | (2,641 | ) | | | 1,474 | | | | (8,104 | ) | | | (6,629 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Deposits from central banks and credit institutions | | | 609 | | | | (269 | ) | | | 340 | | | | 178 | | | | (806 | ) | | | (628 | ) | | | (155 | ) | | | (1,512 | ) | | | (1,667 | ) |
| Euros | | | 253 | | | | 91 | | | | 344 | | | | 279 | | | | (382 | ) | | | (104 | ) | | | 113 | | | | (750 | ) | | | (637 | ) |
| Foreign currency | | | 348 | | | | (351 | ) | | | (3 | ) | | | (120 | ) | | | (404 | ) | | | (524 | ) | | | (271 | ) | | | (759 | ) | | | (1,029 | ) |
| Customer deposits | | | 1,101 | | | | 277 | | | | 1,377 | | | | 166 | | | | (672 | ) | | | (505 | ) | | | 414 | | | | (4,748 | ) | | | (4,334 | ) |
| Euros | | | 167 | | | | 493 | | | | 660 | | | | 63 | | | | (143 | ) | | | (80 | ) | | | 41 | | | | (2,480 | ) | | | (2,439 | ) |
| Foreign currency | | | 1,066 | | | | (321 | ) | | | 745 | | | | 96 | | | | (522 | ) | | | (425 | ) | | | 396 | | | | (2,291 | ) | | | (1,895 | ) |
| Marketable securities and subordinated liabilities | | | 162 | | | | 281 | | | | 443 | | |
| Debt certificates and subordinated liabilities | | | | (14 | ) | | | (750 | ) | | | (764 | ) | | | 50 | | | | (3,052 | ) | | | (3,002 | ) |
| Euros | | | (142 | ) | | | 522 | | | | 380 | | | | (68 | ) | | | (668 | ) | | | (736 | ) | | | (263 | ) | | | (2,481 | ) | | | (2,744 | ) |
| Foreign currency | | | 349 | | | | (287 | ) | | | 62 | | | | 60 | | | | (88 | ) | | | (27 | ) | | | 280 | | | | (537 | ) | | | (258 | ) |
| Other finance expense | | | — | | | | 10 | | | | 10 | | |
| Other financial expenses | | | | — | | | | (181 | ) | | | (181 | ) | | | — | | | | 178 | | | | 178 | |
| | | | | | | | | | | | | | | | | | | | | |
FINANCE EXPENSE | | | 2,084 | | | | 86 | | | | 2,170 | | |
INTEREST AND SIMILAR EXPENSES | | | | 288 | | | | (2,367 | ) | | | (2,079 | ) | | | 908 | | | | (9,733 | ) | | | (8,825 | ) |
| | | | | | | | | | | | | | | | | | | | | |
NET INTEREST INCOME | | | 1,213 | | | | 846 | | | | 2,059 | | | | | | | | | | | | (562 | ) | | | | | | | | | | | 2,197 | |
| | | | | | | | | | | | | | | | | | | | | |
F-130
| | |
| (1) | | The volume effect is calculated by multiplyingas the result of the interest rate forof the first yearinitial period multiplied by the difference between the average balances for the twoof both periods. |
| |
| (2) | | The price effect is calculated by multiplyingas the result of the average balance forof the second yearlast period multiplied by the difference between the interest rates for the twoof both periods. |
The amount recorded underbalances for this heading in the accompanying consolidated income statements relates in fullcorrespond to dividends from otheron shares and equity instruments. Theinstruments other than those from shares in entities accounted for using the equity method (see Note 41), as can be seen in the breakdown was as follows:below:
| | | | | | | | | | | |
Dividend Income | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millions of euros | | |
| | |
Dividends from other shares and other equity instrument | | | | | | | | | | | | | |
Dividends from: | | | | | | | | | | | | | |
| Financial assets held for trading | | | 110 | | | | 121 | | | | 121 | | | | 157 | | | | 131 | | | | 110 | |
| Other financial assets designated at fair value through profit or loss | | | — | | | | — | | | | — | | |
| Available-for-sale financial assets | | | 337 | | | | 227 | | | | 259 | | | | 372 | | | | 312 | | | | 337 | |
| | | | | | | | | | | | | | | |
Total | | | 447 | | | | 348 | | | | 380 | | | | 529 | | | | 443 | | | | 447 | |
| | | | | | | | | | | | | | | |
F-149
| |
40.41. | SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD |
The breakdown of the share of profit contributed by theor loss of entities accounted for using the equity method as of December 31, 2008, 2007 and 2006 wasin the accompanying consolidated income statements is as follows:
| | | | | | | | | | | |
Investments in Entities Accounted for Using the Equity Method | | | 2010 | | 2009 | | 2008 | |
| | | | | | | | | | | | Millions of euros | |
| | | 2008 | | 2007 | | 2006 | |
| | | Millions of euros | | |
| | |
| CITIC Group | | | | 337 | | | | 164 | | | | 18 | |
| Corporación IBV Participaciones Empresariales, S.A. | | | 233 | | | | 209 | | | | 251 | | | | 16 | | | | 18 | | | | 233 | |
| Tubos Reunidos, S.A. | | | | — | | | | 1 | | | | 20 | |
| Occidental Hoteles Management, S.L. | | | | (29 | ) | | | (31 | ) | | | (9 | ) |
| Hestenar, S.L. | | | | — | | | | (13 | ) | | | (1 | ) |
| Las Pedrazas Golf, S.L. | | | | 1 | | | | (7 | ) | | | — | |
| Servired Española de Medios de Pago, S.A. | | | 26 | | | | — | | | | — | | | | 8 | | | | (2 | ) | | | 26 | |
| Tubos Reunidos, S.A. | | | 20 | | | | 20 | | | | 14 | | |
| CITIC International Financial Holding Limited CIFH | | | 18 | | | | 7 | | | | — | | |
| Rest | | | (4 | ) | | | 5 | | | | 43 | | | | 2 | | | | (10 | ) | | | 6 | |
| | | | | | | | | | | | | | | |
Total | | | 293 | | | | 241 | | | | 308 | | | | 335 | | | | 120 | | | | 293 | |
| | | | | | | | | | | | | | | |
F-131
| |
41.42. | FEE AND COMMISSION INCOME |
The breakdown of the balance ofunder this heading in the accompanying consolidated income statements of income as of December 31, 2008, 2007 and 2006 wasis as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Fee and Commission Income. Breakdown by Main Items | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Commitment fees | | | 62 | | | | 55 | | | | 56 | | | | 133 | | | | 97 | | | | 62 | |
| Contingent liabilities | | | 243 | | | | 229 | | | | 204 | | | | 282 | | | | 260 | | | | 243 | |
| Documentary credits | | | 45 | | | | 38 | | | | 33 | | |
| Letters of credit | | | | 45 | | | | 42 | | | | 45 | |
| Bank and other guarantees | | | 198 | | | | 191 | | | | 171 | | | | 237 | | | | 218 | | | | 198 | |
| Arising from exchange of foreign currencies and banknotes | | | 24 | | | | 24 | | | | 20 | | | | 19 | | | | 14 | | | | 24 | |
| Collection and payment services | | | 2,655 | | | | 2,567 | | | | 2,274 | | | | 2,500 | | | | 2,573 | | | | 2,655 | |
| Securities services | | | 1,895 | | | | 2,089 | | | | 2,017 | | | | 1,651 | | | | 1,636 | | | | 1,895 | |
| Counselling on and management of one-off transactions | | | 9 | | | | 16 | | | | 14 | | | | 11 | | | | 7 | | | | 9 | |
| Financial and similar counselling services | | | 24 | | | | 23 | | | | 18 | | | | 60 | | | | 43 | | | | 24 | |
| Factoring transactions | | | 28 | | | | 25 | | | | 19 | | | | 29 | | | | 27 | | | | 28 | |
| Non-banking financial products sales | | | 96 | | | | 87 | | | | 80 | | | | 102 | | | | 83 | | | | 96 | |
| Other fees and commissions | | | 503 | | | | 488 | | | | 431 | | | | 595 | | | | 565 | | | | 503 | |
| | | | | | | | | | | | | | | |
Total | | | 5,539 | | | | 5,603 | | | | 5,133 | | | | 5,382 | | | | 5,305 | | | | 5,539 | |
| | | | | | | | | | | | | | | |
| |
42.43. | FEE AND COMMISSION EXPENSES |
The breakdown of the balance ofunder this heading in the accompanying consolidated income statements as of December 31, 2008, 2007 and 2006 wasis as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Fee and Commission Expenses. Breakdown by Main Items | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Brokerage fees on lending and deposit transactions | | | 8 | | | | 7 | | | | 11 | | | | 5 | | | | 7 | | | | 8 | |
| Fees and commissions assigned to third parties | | | 728 | | | | 612 | | | | 561 | | | | 578 | | | | 610 | | | | 728 | |
| Other fees and commissions | | | 275 | | | | 424 | | | | 372 | | | | 262 | | | | 258 | | | | 276 | |
| | | | | | | | | | | | | | | |
Total | | | 1,012 | | | | 1,043 | | | | 943 | | | | 845 | | | | 875 | | | | 1,012 | |
| | | | | | | | | | | | | | | |
F-150
| |
43.44. | NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES |
The detailbreakdown of the balance under this heading, by source of the related items, in the accompanying consolidated income statements was as follows:
| | | | | | | | | | | | | |
Gains (Losses) on Financial Assets and Liabilities (Net) | | 2010 | | | 2008 | | | 2009 | |
| | | Millions of euros | |
| Financial assets held for trading | | | 643 | | | | 321 | | | | 265 | |
| Other financial assets designated at fair value through profit or loss | | | 83 | | | | 79 | | | | (17 | ) |
| Other financial instruments not designated at fair value through profit or loss | | | 715 | | | | 492 | | | | 1,080 | |
Available-for-sale financial assets | | | 653 | | | | 504 | | | | 996 | |
| Loans and receivables | | | 25 | | | | 20 | | | | 13 | |
| Rest | | | 37 | | | | (32 | ) | | | 71 | |
| | | | | | | | | | | | | |
Total | | | 1,441 | | | | 892 | | | | 1,328 | |
| | | | | | | | | | | | | |
The balance under this heading in the accompanying consolidated income statements, asbroken down by the nature of December 31, 2008, 2007 and 2006 wasthe financial instruments, is as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Financial assets held for trading | | | 265 | | | | 709 | | | | 829 | |
| Other financial assets designated at fair value through profit or loss | | | (17 | ) | | | 43 | | | | 62 | |
| Other financial instruments not at fair value through profit or loss | | | 1,080 | | | | 793 | | | | 370 | |
| Available-for-sale financial assets | | | 996 | | | | 709 | | | | 612 | |
| Loans and receivables | | | 13 | | | | 63 | | | | 77 | |
| Other | | | 71 | | | | 21 | | | | (319 | ) |
| | | | | | | | | | | | | |
Total | | | 1,328 | | | | 1,545 | | | | 1,261 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Net Gains (Losses) on Financial Assets and Liabilities
| | | | | | | | | |
Breakdown by Nature of the Financial Instrument | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Debt instruments | | | 783 | | | | 875 | | | | (143 | ) |
| Equity instruments | | | (318 | ) | | | 1,271 | | | | (1,986 | ) |
| Loans and advances to customers | | | 33 | | | | 38 | | | | 106 | |
| Derivatives | | | 847 | | | | (1,318 | ) | | | 3,305 | |
| Customer deposits | | | — | | | | (2 | ) | | | 13 | |
| Rest | | | 96 | | | | 28 | | | | 33 | |
| | | | | | | | | | | | | |
Total | | | 1,441 | | | | 892 | | | | 1,328 | |
| | | | | | | | | | | | | |
F-132
The breakdown of the balance of the impact of the derivatives (trading and hedging) on this heading in the accompanying consolidated income statements by the nature of financial instruments as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Debt instruments | | | (143 | ) | | | (6 | ) | | | 174 | |
| Equity instruments | | | (1,986 | ) | | | 1,026 | | | | 2,106 | |
| Loans and advances to customers | | | 106 | | | | 88 | | | | 113 | |
| Derivatives | | | 3,305 | | | | 409 | | | | (1,169 | ) |
| Deposits from customers | | | 13 | | | | — | | | | — | |
| Other | | | 33 | | | | 28 | | | | 37 | |
| | | | | | | | | | | | | |
Total | | | 1,328 | | | | 1,545 | | | | 1,261 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Derivatives Trading and Hedging | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Trading derivatives | | | | | | | | | | | | |
| Interest rate agreements | | | 133 | | | | (213 | ) | | | 568 | |
| Security agreements | | | 712 | | | | (993 | ) | | | 2,621 | |
| Commodity agreements | | | (5 | ) | | | (2 | ) | | | 42 | |
| Credit derivative agreements | | | (63 | ) | | | (130 | ) | | | 217 | |
| Foreign-exchange agreements | | | 79 | | | | 64 | | | | (152 | ) |
| Other agreements | | | (1 | ) | | | 10 | | | | (57 | ) |
| | | | | | | | | | | | | |
Subtotal | | | 855 | | | | (1,264 | ) | | | 3,239 | |
| | | | | | | | | | | | | |
Hedging Derivatives Ineffectiveness | | | | | | | | | | | | |
| Fair value hedging | | | (8 | ) | | | (55 | ) | | | 66 | |
| Hedging derivative | | | (127 | ) | | | 58 | | | | 2,513 | |
| Hedged item | | | 119 | | | | (113 | ) | | | (2,447 | ) |
| Cash flow hedging | | | — | | | | 1 | | | | — | |
| | | | | | | | | | | | | |
Subtotal | | | (8 | ) | | | (54 | ) | | | 66 | |
| | | | | | | | | | | | | |
Total | | | 847 | | | | (1,318 | ) | | | 3,305 | |
| | | | | | | | | | | | | |
F-151
In 2008, related toaddition, in 2010 and 2009, negative €287 million and positive €52 million, respectively, have been recognized under the most significant fair value hedges, were recordedheading “Net Exchange differences” in the accompanying consolidated income statement, €2,519 million of gains for the hedging instruments and €2,556 million of losses for hedge instruments attributable to hedge risk.
As of December 31, 2008, the amounts recognised in profit or loss by the ineffective portion of cash flow hedges and hedges of a net investment in athrough foreign operation are not significants.exchange trading derivatives.
| |
44.45. | OTHER OPERATING INCOME AND EXPENSES |
The detailbreakdown of the balance under the heading “Other operating income” ofin the accompanying consolidated income statements as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Other Operating Income. Breakdown by main Items | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Income on insurance and reinsurance contracts | | | 2,512 | | | | 2,605 | | | | 2,736 | | | | 2,597 | | | | 2,567 | | | | 2,512 | |
| Financial income from non-financial services | | | 485 | | | | 655 | | | | 460 | | | | 647 | | | | 493 | | | | 485 | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| Real estate agencies | | | 40 | | | | 279 | | | | 189 | | | | 202 | | | | 42 | | | | 40 | |
| Rest of operating income | | | 562 | | | | 329 | | | | 217 | | |
| Rest of other operating income | | | | 299 | | | | 340 | | | | 562 | |
Of which: | | | | | | | | | | | | | |
| Net operating profit from rented buildings | | | | 60 | | | | 57 | | | | 20 | |
| | | | | | | | | | | | | | | |
Total | | | 3,559 | | | | 3,589 | | | | 3,413 | | | | 3,543 | | | | 3,400 | | | | 3,559 | |
| | | | | | | | | | | | | | | |
The detailbreakdown of the balance under the heading “Other operating expenses” ofexpense” in the accompanying consolidated income statements as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Other Operating Expenses. Breakdown by main Item | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Expenses on insurance and reinsurance contracts | | | 1,896 | | | | 2,052 | | | | 2,209 | | | | 1,815 | | | | 1,847 | | | | 1,896 | |
| Change in inventories | | | 403 | | | | 467 | | | | 329 | | | | 554 | | | | 417 | | | | 403 | |
| Rest of operating expenses | | | 794 | | | | 532 | | | | 385 | | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| Fondo de garantía de depositos | | | 251 | | | | 225 | | | | 215 | | |
| Real estate agencies | | | | 171 | | | | 29 | | | | 27 | |
| Rest of other operating expenses | | | | 879 | | | | 889 | | | | 794 | |
Of which: | | | | | | | | | | | | | |
| Contributions to guaranted banks deposits funds | | | | 386 | | | | 323 | | | | 251 | |
| | | | | | | | | | | | | | | |
Total | | | 3,093 | | | | 3,051 | | | | 2,923 | | | | 3,248 | | | | 3,153 | | | | 3,093 | |
| | | | | | | | | | | | | | | |
F-133
| |
45.46. | ADMINISTRATIONADMINISTRATIVE COSTS |
| |
45.146.1 | PERSONNEL EXPENSES |
The detailbreakdown of the balance ofunder this heading in the accompanying consolidated income statements as of December 31, 2008, 2007 and 2006 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Personnel Expenses. Breakdown by main Concepts | | | Notes | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Wages and salaries | | | 3,593 | | | | 3,297 | | | | 3,012 | | | | | | | | 3,740 | | | | 3,607 | | | | 3,593 | |
| Social security costs | | | 566 | | | | 546 | | | | 504 | | | | | | | | 567 | | | | 531 | | | | 566 | |
| Transfers to internal pension provisions (Note 25) | | | 56 | | | | 56 | | | | 74 | | |
| Contributions to external pension funds (Note 25 and Note 2.2.3) | | | 71 | | | | 58 | | | | 53 | | |
| Defined-benefit plan expense | | | | 26.2 | | | | 37 | | | | 44 | | | | 56 | |
| Defined-contribution plan expense | | | | 26.1 | | | | 84 | | | | 68 | | | | 71 | |
| Other personnel expenses | | | 430 | | | | 378 | | | | 346 | | | | | | | | 386 | | | | 401 | | | | 430 | |
| | | | | | | | | | | | | | | |
Total | | | 4,716 | | | | 4,335 | | | | 3,989 | | | | | | | | 4,814 | | | | 4,651 | | | | 4,716 | |
| | | | | | | | | | | | | | | |
F-152
The breakdown of number of employees in the Group in 2010, 2009 and 2008, by professional categories and geographical areas, was as follows:
| | | | | | | | | | | | | |
| | | Average number of employees | |
Average Number of Employees by Geographical Areas | | 2010 | | | 2009 | | | 2008 | |
| |
Spanish banks | | | | | | | | | | | | |
| Executive managers | | | 1,084 | | | | 1,043 | | | | 1,053 | |
| Other line personnel | | | 20,901 | | | | 20,700 | | | | 21,268 | |
| Clerical staff | | | 4,644 | | | | 5,296 | | | | 6,152 | |
| Branches abroad | | | 666 | | | | 653 | | | | 720 | |
| | | | | | | | | | | | | |
| Subtotal | | | 27,295 | | | | 27,692 | | | | 29,193 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Companies abroad | | | | | | | | | | | | |
| Mexico | | | 26,693 | | | | 26,675 | | | | 27,369 | |
| Venezuela | | | 5,592 | | | | 5,935 | | | | 6,154 | |
| Argentina | | | 4,247 | | | | 4,156 | | | | 4,242 | |
| Colombia | | | 4,317 | | | | 4,289 | | | | 4,382 | |
| Peru | | | 4,379 | | | | 4,222 | | | | 3,836 | |
| United States | | | 11,033 | | | | 10,705 | | | | 12,029 | |
| Other | | | 4,796 | | | | 4,839 | | | | 4,918 | |
| | | | | | | | | | | | | |
| Subtotal | | | 61,057 | | | | 60,821 | | | | 62,930 | |
| | | | | | | | | | | | | |
Pension fund managers | | | 6,229 | | | | 5,642 | | | | 8,470 | |
Other non-banking companies | | | 10,174 | | | | 10,261 | | | | 11,343 | |
| | | | | | | | | | | | | |
Total | | | 104,755 | | | | 104,416 | | | | 111,936 | |
| | | | | | | | | | | | | |
As of December 31, 2008, certain Group companies implemented corporate programs for the acquisition of shares with discount of Banco Bilbao Vizcaya Argentaria S.A. The cost of these programs is recognised under the heading “Other personnel expenses”.
The detail, by professional category and by geographical area,breakdown of the average number of employees in the Group in 2010, 2009 and 2008, 2007 and 2006,by gender, was as follows:
| | | | | | | | | | | | | |
| | | Average Number of Employees | |
| | | 2008 | | | 2007 | | | 2006 | |
| |
Spanish banks | | | | | | | | | | | | |
| Executives | | | 1,053 | | | | 1,102 | | | | 1,104 | |
| Other line personnel | | | 21,268 | | | | 21,672 | | | | 21,818 | |
| Clerical staff | | | 6,152 | | | | 6,849 | | | | 7,141 | |
| Abroad branches | | | 720 | | | | 745 | | | | 676 | |
| | | | | | | | | | | | | |
| | | | 29,193 | | | | 30,368 | | | | 30,739 | |
| | | | | | | | | | | | | |
Companies abroad | | | | | | | | | | | | |
| Mexico | | | 27,369 | | | | 26,568 | | | | 25,157 | |
| Venezuela | | | 6,154 | | | | 5,793 | | | | 5,555 | |
| Argentina | | | 4,242 | | | | 3,955 | | | | 3,604 | |
| Colombia | | | 4,382 | | | | 4,639 | | | | 5,155 | |
| Peru | | | 3,836 | | | | 3,349 | | | | 2,705 | |
| United States | | | 12,029 | | | | 6,767 | | | | 1,685 | |
| Other | | | 4,918 | | | | 4,780 | | | | 4,490 | |
| | | | | | | | | | | | | |
| | | | 62,930 | | | | 55,851 | | | | 48,351 | |
| | | | | | | | | | | | | |
Pension fund managers | | | 8,470 | | | | 8,969 | | | | 8,297 | |
Other non-banking companies | | | 11,343 | | | | 9,327 | | | | 8,351 | |
| | | | | | | | | | | | | |
Total | | | 111,936 | | | | 104,515 | | | | 95,738 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | Male | | | Female | | | Male | | | Female | | | Male | | | Female | |
| |
Average Number of Employees | | | 50,804 | | | | 53,951 | | | | 50,755 | | | | 53,661 | | | | 54,356 | | | | 57,580 | |
Of which: | | | | | | | | | | | | | | | | | | | | | | | | |
| BBVA, S.A. | | | 15,616 | | | | 11,218 | | | | 15,947 | | | | 11,213 | | | | 16,874 | | | | 11,643 | |
F-134
The detail,total number of employees in the Group as of December 31, 2010, 2009 and 2008, broken down by professional category and by gender, of the average number of employees in 2008 and 2007, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Number of Employees
| | | | | | | | | | | | | | |
by Professional
| | | 2010 | | 2009 | | 2008 | |
Category and Gender | | | Male | | Female | | Male | | Female | | Male | | Female | |
| | | 2008
| | 2007
| |
| | | Average Number | | Average Number | | |
| | | Men | | Women | | Men | | Women | | |
| | |
| Executives | | | 1,629 | | | | 316 | | | | 1,667 | | | | 318 | | |
| Executive managers | | | | 1,659 | | | | 338 | | | | 1,646 | | | | 328 | | | | 1,627 | | | | 319 | |
| Other line personnel | | | 23,392 | | | | 19,927 | | | | 24,506 | | | | 16,337 | | | | 23,779 | | | | 20,066 | | | | 21,960 | | | | 18,687 | | | | 22,983 | | | | 19,092 | |
| Clerical staff | | | 29,335 | | | | 37,337 | | | | 28,993 | | | | 32,694 | | | | 26,034 | | | | 35,100 | | | | 26,913 | | | | 34,187 | | | | 29,169 | | | | 35,782 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 54,356 | | | | 57,580 | | | | 55,166 | | | | 49,349 | | | | 51,472 | | | | 55,504 | | | | 50,519 | | | | 53,202 | | | | 53,779 | | | | 55,193 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Equity-instrument-based employee remuneration —
BBVA has a variable multi-year remuneration scheme in place as part of the remuneration policy established for its executive team. It is based on the award of Bank shares that are instrumented through annual overlapping medium- and long-term programs. These consist of allocating individuals theoretical shares (“units”) that at the end of each program are converted into real BBVA shares, provided certain initially established conditions are met, with
F-153
the number depending on a scale linked to an indicator of value generation for the shareholder, and dependent on the individual performing well during the period the program is in operation.
At the Annual General Meeting heldconclusion of each program, the final number of shares to be granted will be equal to the result of multiplying the initial number of assigned “units” by a coefficient on March 18, 2006,a scale of between 0 and 2, which is linked to the movement of the Total Shareholders Return (TSR) indicator. This indicator measures the return on investment for shareholders as the sum of the revaluation of the Bank’s shareholders approvedshares plus dividends or other similar concepts during the period of each program/plan by comparing the movement of this indicator for a long-termshare-basedgroup of banks of reference in Europe and the United States.
Below are the main features of each of the equity-based remuneration planschemes currently in force in the BBVA Group.
Multi-Year Variable Share-Based Remuneration Plans for the BBVA Executive Team
The beneficiaries of these programs are the members of the Group’s managementexecutive team, (“the Plan”). The Plan has a term of three years from 1 January 2006 and will be settled in the first half of 2009.
Under this Plan the Bank promises to deliver ordinary shares of BBVA to the members of the Group’s management team (includingincluding executive directors and management committeethe BBVA’s Management Committee members of BBVA). A number of “theoretical shares” will be allocated to the beneficiaries based on the annual variable remuneration earned by each member in the last three years and on their level of responsibility. This number will serve as the basis for the calculation of the BBVA shares that will be delivered, as the case may be, when the Plan expires. The specific number of BBVA shares to be delivered to each beneficiary on expiry of the Plan will be calculated by multiplying the number of “theoretical shares” allocated by a coefficient ranging from 0 to 2. The value of the coefficient established by comparing the performance of the Total Shareholder Return (TSR) — share appreciation plus dividends — of the Bank over the term of the Plan with the performance of the same indicator for 13 leading European banks. The amount of the obligation that will be registered in the consolidated financial statements will be determined by multiplying the number of the shares by the estimated average price at the moment of the liquidation of the Plan (€15.02 at the moment of approved the Plan).(see Note 56):
Both TSR and estimated average price per share were considered market variations at• 2009-2010 program
The Bank’s AGM on March 13, 2009 approved the moment2009-2010 Program, with a completion date of calculated the cost of the Plan when the Plan was initiated (Note 2.2.19). The value of the TSR calculated by Montecarlo simulations was €0.896, while the calculation of the estimated average price was of €15.02.December 31, 2010.
As of December 31, 2008,2010, the estimatedtotal number of theoretical“units” assigned to the beneficiaries of this program was 6,752,579.
Once the 2009/2010 Program period was completed, the TSR for BBVA and the 18 reference banks was then determined; given the final positioning of BBVA, it resulted in the application of a multiplier ratio of 0 to the assigned units, the Program will be settled without the allocation of shares forto the Groupbeneficiaries.
The Bank’s AGM on March 12, 2010 approved the2010-2011 Program, with a completion date of December 31, 2011.
This program incorporates some restrictions to granting shares to the beneficiaries after the settlement. These shares are available as a whole, including executive directors and BBVA’s Management Committee members (Note 54), was 9,715,468.follows:
| | |
| • | 40 percent of the shares received shall be freely transferable by the beneficiaries at the time of their delivery; |
|
| • | 30 percent of the shares are transferable a year after the settlement date of the program; and |
|
| • | 30 percent are transferable starting two years after the settlement date of the program. |
As of December 31, 2008,2010, the total accrued amount during the Plan’s life is €131 million. For the year 2008 the expense amounted to €40 million and was recognized under the heading “Personnel Expenses — Other personnel expenses” in the Group’s consolidated income statement with charge to “Equity-Other equity instrument-Rest” in the consolidated balance sheet asnumber of December 31, 2008, net of tax effect.
At the date of preparing the accompanying consolidated financial statements, the value of the TSR applicable to settlement of the Plan has been set as the Group ranked third among the 13 benchmark banks, that using a multiplier coeficient of 1.42 applied“units” assigned to the numberbeneficiaries of theoretical shares result in a total of 13,795,964 shares in the Group. Nonetheless, at that same date, the definitive price of the shares to be delivered as consideration had not been set so that its definitive cost, which could translate into a higher or lower charge against consolidated reserves, cannot be determined until the Plan’s settlement date.this program was 3,314,050.
BBVA Compass long termlong-term incentive plan —
The boardRemuneration Committee of directorsBBVA Compass has approved various long-term remuneration plans with BBVA shares for members of Compass Bancshares (“Compass”) approved a long term restricted share plan to provide incentives to certain officersthe management team and key employees of BBVA Compass Bancshares and its subsidiaries. Thisaffiliates.
Currently, BBVA Compass is operating the following plans:
The starting date of this plan enters into effect inwas January 1, 2008, and duration of three years.its completion date will be December 31, 2010.
The plan consists in assigning “restricted share units” to the beneficiaries. Each of these units represents an obligation byon the part of BBVA Compass Bancshares to delivergrant an equivalent number of BBVA American DepositoryDepositary Shares that are not permitted to be sold, transferred, pledged or assigned during(ADS) after a designated restrictioncertain period, conditional on compliance with specific criteria.
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period, but which otherwise have voting and dividend rights associated withThe total number of “restricted share units” assigned to the beneficiaries of this plan was 821,511.
On November 27, 2009, the Remuneration Committee of BBVA American Depository Shares duringCompass agreed to increase the restriction periodand/or the assignation of restricted share units, representing each of these units the obligation of Compass to deliver an equivalent number of ADS oncein the restrictionexisting plan and set up a new plan for the period has ended assuming2009-2011, with a completion date of December 31, 2011.
This plan consists of granting “units” or theoretical shares to management staff (as described at the compliance with certain requirements.start of this section on remuneration based on equity instruments.
The initial maximumtotal number of BBVA American Depository Shares available for distribution under the Compass Restricted Share Plan is 1,320,911 (1 ADS is equivalent to one BBVA ordinary share) representing a 0.035% of the share capital of the bank.
As of December 31, 2008 only“units” and “restricted share units” have been assigned. Asassigned to the beneficiaries of this plan was 1,128,628.
In May 2010, the Remuneration Committee of BBVA Compass approved a new long-term share-based remuneration plan solely for members of the executive team of BBVA Compass and its affiliates, for the period2010-2012, with the completion date on December 31, 2008 1,067,593 restricted share units have been assigned to 408 employees and have restriction periods that will lapse during 2009, 2010, and 2011, representing 0.028% of the banks share capital.2012.
The amounttotal number of “units” assigned to the beneficiaries of this plan was 986,542.
During the period of operation of each of the schemes mentioned above, the sum of the commitment to be accounted for at the date of the accompanying consolidated financial statements was obtained by multiplying the number of “units” assigned by the expected share price and the expected value of the coefficient, both estimated at the date of the entry into force of each of the schemes.
The cost of these programs/plans is broken up throughout their operational life. The expense associated with the above-described awards that has been accruedin 2010, 2009 and 2008 for those programs/plans reached $33 million, €18 million and €46 million, respectively. It is recognized under the heading “Personnel expenses — Other personnel expenses” ofin the accompanying consolidated income statement for the year ended December 31, 2008 amounted to $8.4 million (€5.77 million),statements, and a balancing entry has been recognized net of the correspondent tax effect inmade under the heading “Stockholder’s equity“Stockholders’ funds — Other equity instruments” ofin the consolidated balance sheet assheets, net of December 31, 2008.tax effect.
45.2 GENERAL AND ADMINISTRATIVE EXPENSES
| |
| 46.2 | GENERAL AND ADMINISTRATIVE EXPENSES |
The breakdown of the balance ofunder this heading in the accompanying consolidated income statements as of December 31,for 2010, 2009 and 2008 2007 and 2006 was as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Technology and systems | | | 598 | | | | 539 | | | | 495 | |
| Communications | | | 260 | | | | 236 | | | | 218 | |
| Advertising | | | 273 | | | | 248 | | | | 207 | |
| Property, fixtures and materials | | | 617 | | | | 520 | | | | 451 | |
Of which: | | | | | | | | | | | | |
| Rents expenses(*) | | | 268 | | | | 205 | | | | 173 | |
| Taxes other than income tax | | | 295 | | | | 258 | | | | 203 | |
| Other expenses | | | 997 | | | | 1,117 | | | | 768 | |
| | | | | | | | | | | | | |
Total | | | 3,040 | | | | 2,918 | | | | 2,342 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
General and Administrative Expenses.
| | | | | | | | | |
Breakdown by Main concepts | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Technology and systems | | | 563 | | | | 577 | | | | 598 | |
| Communications | | | 284 | | | | 254 | | | | 260 | |
| Advertising | | | 345 | | | | 262 | | | | 273 | |
| Property, fixtures and materials | | | 750 | | | | 643 | | | | 617 | |
Of which: | | | | | | | | | | | | |
| Rent expenses(*) | | | 397 | | | | 304 | | | | 268 | |
| Taxes | | | 322 | | | | 266 | | | | 295 | |
| Other administration expenses | | | 1,129 | | | | 1,009 | | | | 997 | |
| | | | | | | | | | | | | |
Total | | | 3,393 | | | | 3,011 | | | | 3,040 | |
| | | | | | | | | | | | | |
| | |
| (*) | | The consolidated companies do not expect to terminate the lease contracts early. |
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| |
| 47. | DEPRECIATION AND AMORTIZATION |
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
| | | | | | | | | | | | | | | | | |
Depreciation and Amortization | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Millions of euros | |
| |
| Tangible assets | | | 19 | | | | 470 | | | | 435 | | | | 443 | |
| For own use | | | | | | | 448 | | | | 416 | | | | 434 | |
| Investment properties | | | | | | | 15 | | | | 11 | | | | 1 | |
| Operating lease | | | | | | | 7 | | | | 8 | | | | 8 | |
| Other Intangible assets | | | 20.2 | | | | 291 | | | | 262 | | | | 256 | |
| | | | | | | | | | | | | | | | | |
Total | | | | | | | 761 | | | | 697 | | | | 699 | |
| | | | | | | | | | | | | | | | | |
The net allowances charged to the income statement in connection withunder the headings “Pension Commitments“Provisions for pensions and similar obligations”, “Risks“Provisions for contingent exposures and contingent commitments”, “Tax provisions”“Provisions for taxes and other legal contingencies” and “Other provisions” (Note 25) in 2008, 2007 and 2006the accompanying consolidated income statements were as follow:follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Provisions to Pension Commitments and similar obligations | | | 985 | | | | 135 | | | | 1,068 | |
| Spain | | | 1,008 | | | | 84 | | | | 1,040 | |
| Mexico | | | (57 | ) | | | 19 | | | | (10 | ) |
| Portugal | | | — | | | | 7 | | | | 35 | |
| USA | | | 9 | | | | (3 | ) | | | — | |
| Rest of the countries | | | 25 | | | | 28 | | | | 3 | |
| Provisions to risks and contingent commitments | | | (119 | ) | | | 48 | | | | 57 | |
| Provisions to tax and other provisions | | | 564 | | | | 52 | | | | 213 | |
| | | | | | | | | | | | | |
Total | | | 1,431 | | | | 235 | | | | 1,338 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Provisions (Net) | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Provisions for pensions and similar obligations | | | 26 | | | | 405 | | | | 552 | | | | 985 | |
| Provisions for contingent exposures and commitments | | | | | | | 22 | | | | (170 | ) | | | (118 | ) |
| Provisions for taxes and other legal contingencies | | | | | | | 6 | | | | 5 | | | | 4 | |
| Other Provisions | | | | | | | 49 | | | | 71 | | | | 560 | |
| | | | | | | | | | | | | | | | | |
Total | | | | | | | 482 | | | | 458 | | | | 1,431 | |
| | | | | | | | | | | | | | | | | |
| |
47.49. | IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET) |
The detailbreakdown of impairment losses on financial assets broken down by the nature of these assets as of December 31, 2008, 2007 and 2006in the accompanying consolidated income statements was as follow:follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Other financial instruments not at fair value through profit or loss | | | | | | | | | | | | |
| Available-for-sale financial assets | | | 145 | | | | 1 | | | | (20 | ) |
| Debt securities | | | 144 | | | | 1 | | | | (21 | ) |
| Other equity instruments | | | 2 | | | | — | | | | 1 | |
| Loans and receivalbles | | | (1 | ) | | | — | | | | — | |
| Held-to-maturity investments | | | 2,797 | | | | 1,902 | | | | 1,477 | |
Of which: | | | | | | | | | | | | |
| Recovery of writen-off assets | | | 192 | | | | 226 | | | | 184 | |
| | | | | | | | | | | | | |
Total | | | 2,941 | | | | 1,903 | | | | 1,457 | |
| | | | | | | | | | | | | |
| |
48. | IMPAIRMENT ON OTHER ASSETS (NET) |
The detail of impairment on non-financial assets by nature of these assets as of December 31, 2008, 2007 and 2006 was as follow:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Goodwill | | | — | | | | — | | | | 13 | |
| Other intangible assets | | | 1 | | | | 1 | | | | — | |
| Tangible assets | | | 13 | | | | 12 | | | | (5 | ) |
| Inventories | | | 26 | | | | — | | | | — | |
| Rest | | | 5 | | | | — | | | | 4 | |
| | | | | | | | | | | | | |
Total | | | 45 | | | | 13 | | | | 12 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Impairment Losses on Financial Assets (Net)
| | | | | | | | | | | | |
Breakdown by main concepts | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Available-for-sale financial assets | | | 12 | | | | 155 | | | | 277 | | | | 145 | |
| Debt securities | | | | | | | 4 | | | | 167 | | | | 144 | |
| Other equity instruments | | | | | | | 151 | | | | 110 | | | | 1 | |
Held-to-maturity investments | | | 14 | | | | — | | | | (3 | ) | | | (1 | ) |
| Loans and receivables | | | 7 | | | | 4,563 | | | | 5,199 | | | | 2,797 | |
Of which: | | | | | | | | | | | | | | | | |
| Recovery of written-off assets | | | 7 | | | | 253 | | | | 187 | | | | 192 | |
| | | | | | | | | | | | | | | | | |
Total | | | | | | | 4,718 | | | | 5,473 | | | | 2,941 | |
| | | | | | | | | | | | | | | | | |
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| |
49.50. | IMPAIRMENT LOSSES ON OTHER ASSETS (NET) |
The breakdown of impairment losses of non-financial assets broken down by the nature of these assets in the accompanying consolidated income statements was as follows:
| | | | | | | | | | | | | | | | | |
Impairment Losses on Other Assets (Net) | | Notes | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| Goodwill | | | 20.1 - 17 | | | | 13 | | | | 1,100 | | | | — | |
| Other intangible assets | | | 20.2 | | | | — | | | | — | | | | 1 | |
| Tangible assets | | | 19 | | | | 92 | | | | 155 | | | | 13 | |
| For own use | | | | | | | 9 | | | | 62 | | | | 8 | |
| Investment properties | | | | | | | 83 | | | | 93 | | | | 5 | |
| Inventories | | | 22 | | | | 370 | | | | 334 | | | | 26 | |
| Rest | | | | | | | 14 | | | | 29 | | | | 5 | |
| | | | | | | | | | | | | | | | | |
Total | | | | | | | 489 | | | | 1,618 | | | | 45 | |
| | | | | | | | | | | | | | | | | |
| |
| 51. | GAINS (LOSSES) IN WRITTEN OFFON DERECOGNIZED ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE |
The breakdown of the balances ofunder these headings in the accompanying consolidated income statements as of December 31,for 2010, 2009 and 2008 2007 and 2006 was as follows:
| | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | |
Gains and Losses on Derecognized Assets Not
| | | | | | | | |
Classified as Non-current Assets Held for Sale | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
Gains | | | | | | | | | | | | | | | | | | | | | | | | |
| Disposal of tangible assets | | | 27 | | | | 2 | | | | 936 | | |
| | | | | | | | | |
| Disposal of investments in entities | | | | 40 | | | | 6 | | | | 27 | |
| Disposal of intangible assets and other | | | 75 | | | | 39 | | | | 35 | | | | 17 | | | | 28 | | | | 75 | |
Losses: | | | | | | | | | | | | | | | | | | | | | | | | |
| Disposal of tangible assets | | | (14 | ) | | | (7 | ) | | | — | | |
| Disposal of investments in entities | | | | (11 | ) | | | (2 | ) | | | (14 | ) |
| Disposal of intangible assets and other | | | (16 | ) | | | (21 | ) | | | (15 | ) | | | (5 | ) | | | (12 | ) | | | (16 | ) |
| | | | | | | | | | | | | | | |
Total | | | 72 | | | | 13 | | | | 956 | | | | 41 | | | | 20 | | | | 72 | |
| | | | | | | | | | | | | | | |
| |
50.52. | GAINS AND LOSSES(LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS |
The detail ofdetails under the heading “Gains and losses in non-current assets held for sale not classified as discontinued operations” ofin the accompanying consolidated income statementstatements for 2010, 2009 and 2008 were as of December 31, 2008, 2007 and 2006 was as follow:follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Gains for real estate | | | 21 | | | | 344 | | | | 18 | |
Of which: | | | | | | | | | | | | |
| Sales of buildings Madrid -SPAIN-(1) | | | — | | | | 279 | | | | — | |
| Sales of buildings Mexico D.F. -MEXICO-(2) | | | 64 | | | | — | | | | — | |
| Gains for sale of available-for-sale assets | | | 727 | | | | 847 | | | | 523 | |
Of which: | | | | | | | | | | | | |
| Bradesco | | | 727 | | | | — | | | | — | |
| Iberdrola | | | — | | | | 847 | | | | — | |
| Repsol | | | — | | | | — | | | | 523 | |
Total | | | 748 | | | | 1,191 | | | | 541 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Gains and Losses in Non-current Assets Held for
| | | | | | | | | |
Sale | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Gains for real estate | | | 374 | | | | 986 | | | | 61 | |
Of which: | | | | | | | | | | | | |
| Foreclosed | | | 17 | | | | 5 | | | | (40 | ) |
| Sale of buildings for own use (Note 16.1) | | | 285 | | | | 925 | | | | 64 | |
Impairment of non-current assets held for sale | | | (247 | ) | | | (127 | ) | | | (40 | ) |
Gains on sale ofavailable-for-sale financial assets | | | — | | | | — | | | | 727 | |
| | | | | | | | | | | | | |
Total | | | 127 | | | | 859 | | | | 748 | |
| | | | | | | | | | | | | |
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“Gains for real estate” above refer mainly to the Group’s sales of property with leaseback in Spain (€273 million and €914 million) in 2010 and 2009, respectively, and the sale of a Bancomer property in 2008 (€61 million) (see Note 16.1).
| | |
(1) | | Sale of BBVA’s buildings located on Castellana 81, Alcalá, 16 and Hortaleza-Vía de los Poblados (all of them in Madrid). The sale of this buildings amounted to €579 million. |
|
(2) | | Sale of BBVA Bancomer’s building in the city of Mexico (Note 16). |
AsThe “Gains (losses) onavailable-for-sale financial assets” correspond to several sales of December 31, 2008 the impairmet loss of non-current assets held for sale was €62 millions.stakes in Bradesco during 2008.
| |
51.53. | CONSOLIDATEDCONSOLIDATES STATEMENT OF CASH FLOWS |
Cash flows from operating activities amounted to negative €1,992increased in 2010 by €8,503 million, compared with the increase of €2,567 million in 2008, compared to €17,290 million in 2007.2009. The most significant changes occurred in the headings of “Loans and advances” andreceivables”, “Financial liabilities at amortized cost” and trading portfolio.“Financial assets held for trading”.
Cash flows from investinginvestment activities amounted to negative €2,865decreased in 2010 by €7,078 million, compared with the decrease of €643 million in 2008, compared to negative €7,987 million in 2007.2009. The most significant changes occurred in “Subsidiaries and other business units”change is included under the heading“Held-to-maturity investments”.
Cash flows from financing activities amounted to negative €2,271increased in 2010 by €1,148 million, compared with the decrease of €74 million in 2008, compared to €1,996 million in 2007.2009. The most significant movements are shown in the line of “Adquisitiondetailing the acquisition and amortization of own equity instrument”.instruments.
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The table below breaks down the main cash flows from and used in investing activities in 2008as of December 31, 2010, 2009 and 2007:2008:
| | | | | | | | | | | | | | | | | |
| | | 2008
| | |
| | | Cash Flows of Investment Activities | | |
Main Cash Flows in Investing Activities
| | | Cash Flows in Investment Activities | |
2010 | | | Investments (−) | | Divestments (+) | |
| | | Investments (−) | | Desinvestments (+) | | | Millions of euros | |
| |
| Tangible assets | | | 1,199 | | | | 168 | | | | 1,040 | | | | 261 | |
| Intangible assets | | | 402 | | | | 31 | | | | 464 | | | | 6 | |
| Investments | | | 672 | | | | 9 | | | | 1,209 | | | | 1 | |
| Subsidiaries and other business units | | | 1,559 | | | | 13 | | | | 77 | | | | 69 | |
| Non-current assets and liabilities associated held for sale | | | 515 | | | | 374 | | |
| Non-current assets held for sale and associated liabilities | | | | 1,464 | | | | 1,347 | |
| Held-to-maturity investments | | | — | | | | 283 | | | | 4,508 | | | | — | |
| Other settlements related with investement activities | | | 270 | | | | 874 | | |
| Other settlements related to investement activities | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| | | 2007
| | |
| | | Cash Flows of Investment Activities | | |
Main Cash Flows in Investing Activities
| | | Cash Flows in Investment Activities | |
2009 | | | Investments (−) | | Divestments (+) | |
| | | Investments (−) | | Desinvestments (+) | | | Millions of euros | |
| |
| Tangible assets | | | 1,836 | | | | 328 | | | | 931 | | | | 793 | |
| Intangible assets | | | 134 | | | | 146 | | | | 380 | | | | 147 | |
| Investments | | | 690 | | | | 227 | | | | 2 | | | | 1 | |
| Subsidiaries and other business units | | | 7,082 | | | | 11 | | | | 7 | | | | 32 | |
Compass Bancshares, Inc. (Note 3)(*) | | | 6,693 | | | | — | | |
State Nacional Bancshares, Inc. (Note 3) | | | 378 | | | | — | | |
Other | | | 12 | | | | — | | |
| Non-current assets and liabilities associated held for sale | | | 487 | | | | 744 | | |
| Non-current assets held for sale and associated liabilities | | | | 920 | | | | 780 | |
| Held-to-maturity investments | | | — | | | | 321 | | | | 156 | | | | — | |
| Other settlements related with investement activities | | | 719 | | | | 1,184 | | |
| | | | | | | |
| Other settlements related to investement activities | | | | — | | | | — | |
| | | | | | | | | |
Main Cash Flows in Investing Activities
| | Cash Flows in Investment Activities | |
2008 | | Investments (−) | | | Divestments (+) | |
| | | Millions of euros | |
| |
| Intangible assets | | | 402 | | | | 31 | |
| Investments | | | 672 | | | | 9 | |
| Subsidiaries and other business units | | | 1,559 | | | | 13 | |
| Non-current assets held for sale and associated liabilities | | | 515 | | | | 374 | |
Held-to-maturity investments | | | — | | | | 283 | |
| Other settlements related to investement activities | | | 270 | | | | 874 | |
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| | |
(*) | | An investment of €6,672 million (of which €3,385 million was paid in cash and the rest in shares issued pursuant to a rights issue) plus €21 million in transaction expenses directly attributable to the acquisition. |
| |
52.54. | ACCOUNTANTSACCOUNTANT FEES AND SERVICES |
The detaildetails of the fees for the services provided tocontracted by the companies of the Group companies byin 2010 with their respective accountants in 2008 wasauditors and other audit companies were as follows:
| | | | | |
Fees for Audits Conducted | | Millions of euros | |
| |
Audits of the companies audited by firms belonging to the Deloitte worldwide organisationorganization and other reports related with the audit | | | 12.2 | |
Fees for audits conducted by other firms | | | —16.4 | |
Other reports required pursuant to applicable legislation and tax regulations issued by the national supervisory bodies of the countries in which the Group operates, reviewed by firms belonging to the Deloitte worldwide organisationorganization | | | 5.33.8 | |
| Fees for audits conducted by other firms | | | — | |
The detail ofOther companies in the Group contracted other services provided to the various Group companies in 2008 was(other than audits) as of December 31, 2010, as follows:
| | | | | |
Other Services Contracted | | Millions of euros | |
| |
Firms belonging to the Deloitte worldwide organisationorganization | | | 1.52.6 | |
| Other firms | | | 7.017.6 | |
| | |
| (*) | | Including €1.3 million related to fees for tax services. |
The services provided by our accountants meet the independence requirements established inunder Law 44/2002, of 22 November, on Measures Reforming the Financial System and inby the Sarbanes-Oxley Act of 2002 adopted by the Securities and Exchange Commission (SEC), and; accordingly they did not include the performance of any work that is incompatible with the auditing function.
F-139
| |
53.55. | RELATED PARTY TRANSACTIONS |
As financial institutions, BBVA and other entities ofcompanies in the Group engage in their condition of financial entities maintain transactions with related parties in the normal course of their business. All these transactions are of nolittle relevance and are performedcarried out in market conditions.
| |
53.1 | SIGNIFICANT TRANSACTIONS WITH SHAREHOLDERS |
As of December 31, 2008 the balance of the transactions maintained with significant shareholder’s (see Note 27) correspond to “Deposits from customers” for an amount of €27 million and “Loans and advances to customers” for an amount of €4 million, all of them under normal market conditions.
| |
53.255.1 | TRANSACTIONS WITH SIGNIFICANT SHAREHOLDERS |
As of December 31, 2010, the balances of transactions with significant shareholders (see Note 27) correspond to “Customer deposits”, at €57 million, “Loans and advances to customers”, at €49 million and “Contingent exposures”, at €20 million, all of them in normal market conditions.
F-159
| |
| 55.2 | TRANSACTIONS WITH THE BBVA GROUP |
The balances of the main aggregates in the accompanying consolidated financial statementsbalance sheets arising from the transactions carried out by the Group with associatedassociates and jointly controlled companies accounted for using the equity method (Note(see Note 2.1), as of December 31, 2008, 2007 and 2006 were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Assets: | | | | | | | | | | | | |
| Due from credit institutions | | | 27 | | | | 32 | | | | — | |
| Total net lending | | | 507 | | | | 610 | | | | 374 | |
Liabilities: | | | | | | | | | | | | |
| Due to credit institutions | | | 1 | | | | — | | | | — | |
| Deposits | | | 23 | | | | 55 | | | | 83 | |
| Debt certificates | | | 344 | | | | 440 | | | | 463 | |
Memorandum accounts: | | | | | | | | | | | | |
| Contingent risks | | | 37 | | | | 129 | | | | 23 | |
| Commitments contingents | | | 415 | | | | 443 | | | | 457 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balances arising from transactions with Entities of the
| | | | | | |
Group | | 2010 | | 2009 | | 2008 |
| | | Millions of euros |
| |
Assets: | | | | | | | | | | | | |
| Loans and advances to credit institutions | | | 87 | | | | 45 | | | | 27 | |
| Loans and advances to customers | | | 457 | | | | 613 | | | | 507 | |
Liabilities: | | | | | | | | | | | | |
| Deposits from credit institutions | | | — | | | | 3 | | | | 1 | |
| Customer deposits | | | 89 | | | | 76 | | | | 23 | |
| Debt certificates | | | 8 | | | | 142 | | | | 344 | |
Memorandum accounts: | | | | | | | | | | | | |
| Contingent exposures | | | 55 | | | | 36 | | | | 37 | |
| Contingents commitments | | | 327 | | | | 340 | | | | 415 | |
The balances of the main aggregates in the accompanying consolidated income statements resulting from transactions with associated and jointly controlled entities that consolidated by the equity method, in the years 2008, 2007 and 2006, were as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Statement of income: | | | | | | | | | | | | |
| Financial Revenues | | | 36 | | | | 33 | | | | 12 | |
| Financial Expenses | | | 22 | | | | 18 | | | | 13 | |
| | | | | | | | | | | | | |
Balances of Income Statement arising from
| | | | | | |
transactions with Entities of the Group | | 2010 | | 2009 | | 2008 |
| | | Millions of euros |
| |
Income statement: | | | | | | | | | | | | |
| Financial incomes | | | 14 | | | | 18 | | | | 36 | |
| Financial costs | | | 2 | | | | 6 | | | | 22 | |
There are no other material effects onin the accompanying consolidated financial statements of the Group arising from dealings with these companies, other than the effects arising from using the equity method (Note(see Note 2.1), and from the insurance policies to cover pension or similar commitments (Note 24)(see Note 26).
As of December 31, 2008, 2007 and 2006,2010, the notional amount of the futures transactions arranged by the Group with the main related companies mentioned above amounted to approximately €101€1,373 million €74(of which €1,282 million and €9 million, respectively.in 2010 correspond to futures transactions with the CITIC Group).
In addition, as part of its normal activity, the Group has entered into agreements and commitments of various types with shareholders of subsidiaries and associates, which have no material effects on the accompanying consolidated financial statements.
F-140
| |
53.355.3 | TRANSACTIONS WITH KEY ENTITY PERSONNELMEMBERS OF THE BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE |
The information on the remuneration of key personnel (membersmembers of the Board of Directors of BBVA and of the Group’s Management Committee)Committee is included in Note 55.56.
The amount disposed of the loans granted to members of Board of Directors as of December 31, 2008 totalled €33 thousand.2010 and 2009 totaled €531 and €806 thousand, respectively.
The amount disposed of the loans granted as of December 31, 2008,2010 and 2009 to the Management Committee, excluding the executive directors, amounted to €3,891 thousand. €4,924 and €3,912 thousand, respectively.
As of December 31, 2008, 20072010 and 2006,2009, there were no guarantees, finance leases or commercial loans provided on behalf of members of the Bank’s Board of Directors or Management Committee amounted to €13 thousand.Committee.
F-160
As of December 31, 2008, the amount disposed of theThe loans granted to parties related to key personnel (the aforementioned members of the Board of Directors of BBVA and of the Management Committee) totalled €8,593 thousand. Committee as mentioned above) as of December 31, 2010 and 2009 amounted to €28,493 thousand and €51,882 thousand, respectively.
As of December 31, 2008,2010 and 2009, the other exposure, guarantees, financial leases and commercial loans to parties related to key personnel (guarantees, finance leases and commercial loans) amounted to €18,794 thousand.€4,424 thousand and €24,514 thousand, respectively.
| |
53.455.4 | TRANSACTIONS WITH OTHER RELATED PARTIES |
As of December 31, 2008,2010 and 2009, the company doesGroup did not presentperform any transactiontransactions with other related parties that doesdid not belong to the normal course of their business, that iswas not under market conditions and that iswas relevant for the equity, and income ofor the entity and for the presentation of the financial situation of this.the BBVA Group.
| |
54.56. | REMUNERATION OF THE BANK’SBOARD OF DIRECTORS AND SENIORMEMBERS OF THE BANK’S MANAGEMENT COMMITTEE |
RemunerationsRemuneration and other benefits of the members of the boardBoard of Directors and the members of the management committee.Management Committee.
— Remuneration of non-executive directors
| |
| • | Remuneration of non-executive directors |
The remuneration paid to theindividual non-executive members of the Board of Directors during 2008in 2010 is indicated below. The figures are given individually for each non-executive director and itemised in thousand euros:below, broken down by type of remuneration:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Appointments and
| | | | |
| | | Board | | | Standing Committee | | | Audit | | | Risk | | | Compensation | | | Total | |
| | | Thousand of euros | |
| |
| Tomás Alfaro Drake | | | 129 | | | �� | — | | | | 71 | | | | — | | | | — | | | | 200 | |
| Juan Carlos Álvarez Mezquíriz | | | 129 | | | | 167 | | | | — | | | | — | | | | 42 | | | | 338 | |
| Rafael Bermejo Blanco | | | 129 | | | | — | | | | 179 | | | | 107 | | | | — | | | | 415 | |
| Richard C. Breeden | | | 350 | | | | — | | | | — | | | | — | | | | — | | | | 350 | |
| Ramón Bustamante y de La Mora | | | 129 | | | | — | | | | 71 | | | | 107 | | | | — | | | | 307 | |
| José Antonio Fernández Rivero(*) | | | 129 | | | | — | | | | — | | | | 214 | | | | — | | | | 343 | |
| Ignacio Ferrero Jordi | | | 129 | | | | 167 | | | | — | | | | — | | | | 42 | | | | 338 | |
| Román Knörr Borrás | | | 129 | | | | 167 | | | | — | | | | — | | | | — | | | | 296 | |
| Carlos Loring Martínez de Irujo | | | 129 | | | | — | | | | 71 | | | | — | | | | 107 | | | | 307 | |
| Enrique Medina Fernández | | | 129 | | | | 167 | | | | — | | | | 107 | | | | — | | | | 403 | |
| Susana Rodríguez Vidarte | | | 129 | | | | — | | | | 71 | | | | — | | | | 42 | | | | 242 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1,640 | | | | 668 | | | | 463 | | | | 535 | | | | 233 | | | | 3,539 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Appointments
| | | | | | | | | | |
| | | | | | Standing-
| | | | | | | | | and
| | | Appointments
| | | Compensation
| | | | |
| | | Board of
| | | Executive
| | | Audit
| | | Risk
| | | Compensation
| | | Committee
| | | Committee
| | | | |
Year 2010 Remuneration of Non-Executive Directors | | Directors | | | Committee | | | Committee | | | Committee | | | Committee(4) | | | (5) | | | (5) | | | Total | |
| | | Thousand of euros | |
| |
| Tomás Alfaro Drake | | | 129 | | | | — | | | | 71 | | | | — | | | | — | | | | 59 | | | | — | | | | 259 | |
| Juan Carlos Alvarez Mezquiriz | | | 129 | | | | 167 | | | | — | | | | — | | | | 18 | | | | — | | | | 25 | | | | 339 | |
| Rafael Bermejo Blanco | | | 129 | | | | — | | | | 179 | | | | 107 | | | | — | | | | — | | | | — | | | | 415 | |
| Ramón Bustamante y de la Mora | | | 129 | | | | — | | | | 71 | | | | 107 | | | | — | | | | — | | | | — | | | | 307 | |
| José Antonio Fernández Rivero(1) | | | 129 | | | | — | | | | — | | | | 214 | | | | — | | | | 23 | | | | — | | | | 366 | |
| Ignacio Ferrero Jordi | | | 129 | | | | 167 | | | | — | | | | — | | | | 18 | | | | — | | | | 25 | | | | 339 | |
| Carlos Loring Martinez de Irujo | | | 129 | | | | — | | | | 71 | | | | — | | | | 45 | | | | — | | | | 62 | | | | 307 | |
| José Maldonado Ramos(2) | | | 129 | | | | — | | | | — | | | | 107 | | | | — | | | | 23 | | | | 25 | | | | 284 | |
| Enrique Medina Fernández | | | 129 | | | | 167 | | | | — | | | | 107 | | | | — | | | | — | | | | — | | | | 403 | |
| Susana Rodríguez Vidarte | | | 129 | | | | — | | | | 71 | | | | — | | | | 18 | | | | 23 | | | | 25 | | | | 266 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total(3) | | | 1,290 | | | | 501 | | | | 463 | | | | 642 | | | | 99 | | | | 128 | | | | 162 | | | | 3,284 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Mr. José Antonio Fernández Rivero, apart from the amounts detailed in the table above, also received a total of €652 thousand in early retirement benefit as a former director of BBVA. |
|
| (2) | | Mr. José Maldonado Ramos, who resigned as chief executive of BBVA on December 22, 2009, received in the year 2010 apart from the amounts detailed in the table above, a total of €805 thousand in accrued variable compensation in 2009 by his former post of Company Secretary. |
|
| (3) | | Mr. Roman Knörr Borras, who resigned as executive director on March 23, 2010, received in the year 2010 the total amount of €74 thousand as compensation for their membership of the Board of Directors and Standing-Executive Committee until that date. |
|
| (4) | | By agreement of the Board of Directors on May 25, 2010, created two new Appointments and Compensation Committees, which replaced the former Appointments and Compensation Committee. |
|
| (5) | | Remuneration received from June 1, 2010. |
F-161
| |
| • | Remuneration of executive directors |
The remuneration paid to individual executive directors in 2010 is indicated below, broken down by type of remuneration:
| | | | | | | | | | | | | |
| | | Fixed
| | | Variable
| | | | |
Year 2010 Remuneration of Executive Directors | | Remuneration | | | Remuneration(1) | | | Total | |
| | | Thousand of euros | |
| |
| Chairman and CEO | | | 1,928 | | | | 3,388 | | | | 5,316 | |
| President and COO(2) | | | 1,249 | | | | 1,482 | | | | 2,731 | |
| | | | | | | | | | | | | |
Total | | | 3,177 | | | | 4,870 | | | | 8,046 | |
| | | | | | | | | | | | | |
| | |
| (1) | | The figures relate to variable remuneration for 2009 paid in 2010. |
|
| (2) | | The variable remuneration for 2009 of COO, who was appointed on September 29, 2009, includes the remuneration received as Director of Resources and Media in the period of 2009 in which he occupied that function (9 months ) and earned as COO since his appointment. |
In addition, the executive directors receivedpayment-in-kind during 2010 totaling €32 thousand, of which €10 thousand relates to Chairman and CEO, €22 thousand relates to President and COO.
The Executive Directors accrued variable remuneration for 2010, to be paid in 2011, amounting to €3,011 thousand in the case of the Chairman and CEO and €1,889 thousand in the case of the President and COO.
These amounts are recognized under the item “Other liabilities — Accruals” on the liability side in the accompanying consolidated balance sheet as of December 31, 2010.
| |
| • | Remuneration of the members of the management committee(*) |
The remuneration paid in 2010 to the members of BBVA’s Management Committee amounted to €7,376 thousand in fixed remuneration and €15,174 thousand in variable remuneration accrued in 2009 and paid in 2010.
In addition, the members of the Management Committee received remuneration in kind and other items totaling €807 thousand in 2010.
| | |
| (*) | | Mr José Antonio Fernández Rivero, apart from the amounts detailed above, also received a total of €652 thousand during the six months ended 2008 in early retirement payments as a former member of the BBVA management. |
F-141
— Remuneration of executive directors
The remuneration paid to the non-executive members of the Board of Directors during the six months ended June 30, 2008 is indicated below. The figures are given individually for each non-executive director:
| | | | | | | | | | | | | |
| | | Fixed
| | | Variable
| | | | |
| | | Remunerations | | | Remunerations (*) | | | Total (**) | |
| | | Thousand of euros | |
| |
| Chairman & CEO | | | 1,928 | | | | 3,802 | | | | 5,729 | |
| President & CEO | | | 1,425 | | | | 3,183 | | | | 4,609 | |
| Company Secretary | | | 665 | | | | 886 | | | | 1,552 | |
| | | | | | | | | | | | | |
Total | | | 4,019 | | | | 7,871 | | | | 11,890 | |
| | | | | | | | | | | | | |
| | |
(*) | | Figures relating to variable remuneration for 2007 paid in 2008. |
|
(**) | | In addition, the executive directors received remuneration in kind during 2008 totalling €38 thousand, of which €9 thousand relates to Chairman & CEO, €16 thousand relates to President & COO and €13 thousand to Company Secretary. |
Meanwhile, the executive directors accrued variable remuneration in 2008 to be paid in 2009 in the amount of €3,416 thousand in the case of the Chairman and CEO, €2,861 thousand in the case of the President and CEO and €815 thousand in the case of the Board Secretary. These amounts are recognized under the heading “Other liabilities — Accrued interest” on the liability side of the consolidated balance sheet as of December 31, 2008.
— Remuneration of the members of the management committee
The remuneration paid during the year 2008 to the members of BBVA’s Management Committee, excluding executive directors, comprised €6,768 thousand in fixed remuneration and €13,320 thousand in variable remuneration accrued in 2008 and paid in 2009.
In addition, the members of the Management Committee, excluding executive directors, received remuneration in kind totalling €369 thousand in the year 2008.
| | |
(*) | | This paragraphsection includes information on the members of the Management committeeCommittee as of December 31, 2008,2010, excluding the executive directors. |
| |
| • | variable multi-year stock remuneration program for executive directors and members of the management committee |
— PSettlement of the multi-year variable share-based remuneration plan forension commitments2009-2010
The provisions recordedAGM of the Bank held on March 13, 2009 approved a Multi-Year Variable Share-Based Remuneration Plan for shares for 2009/2010 (hereinafter, the 2009/2010 Program) for the members of the BBVA’s executive team, and whose result is obtained by multiplying the initial number of assigned “units” by a coefficient on a scale of between 0 and 2, which is linked to the movement of the Total Shareholders Return (TSR) indicator of the Bank during 2009/2010 compared with the change of this same indicator in a group of international banks of reference.
The number of “units” allocated to executive directors under this program, in accordance with the resolution of the AGM, was 215,000 for the Chairman and CEO, and 131,707 for the President and COO, and 817,464 for the members of the Management Committee who held this position as of December 31, 2008 to cover the commitments assumed in relation to2010, excluding executive director pensions, including the allowances recorded in 2008, amounted to €19,968 thousand, broken down as follows:
| | | | |
| | Thousand of euros | |
|
Chairman & CEO | | | 72,547 | |
President & COO | | | 52,495 | |
Company Secretary | | | 8,710 | |
| | | | |
Total
| | | 133,752 | |
| | | | |
directors.
Insurance premiums amounting to €78 thousand were paidOnce the 2009/2010 Program period was completed, on behalf of the non-executive directors on the Board of Directors.
The provisions charged as of December 31, 20082010, the TSR for post-employment commitments forBBVA and the Management committee members, excluding executive directors, amounted to €51,326 thousand. Of these, €16,678 thousand were charged18 reference banks was then determined; given the final positioning of BBVA, it resulted in the year.application of a multiplier ratio of 0 to the assigned units, the Program was settled without the allocation of shares to the beneficiaries.
F-142F-162
- Long-termMulti-year variable share-based remuneration plan for remuneration with shares(2006-2008)2010-2011 for executive directors and members of the management committee
The AGM 18thof the Bank on March 2006,12, 2010, approved a long-term plannew multi-year variable share-based remuneration scheme for remuneration of executives with shares for the period2006-2008.2010-2011 The plan was for(hereinafter “the2010-2011 program”) aimed at members of the management team, including theBBVA executive directors and members of the Management committeeteam. It is to end on December 31, 2011 and will be paid out insettled on April 15, 2012, although the second half of 2009.Regulation that governs it includes provisions for early settlement.
The plan allocated each beneficiary a certain number of theoretical shares as a function of their variable pay and their level of responsibility. At the end of the plan, the theoretical shares are used as a basis to allocate BBVA shares to the beneficiaries, should the initial requirements be met.
Theprecise number of shares to be deliveredgiven to each beneficiary isof the Program 2010/2011 will also be determined by multiplying the number of theoretical sharesunits allocated to them by a coefficient of between 0 and 2. This coefficient reflects the relative performance of BBVA’s total shareholder valuestockholder return (TSR) during the period2006-20082010-2011 compared againstwith the TSR of its European peer group.a group of the Bank’s international peers.
Although this groupThese shares will be given to the beneficiaries after the settlement of banks was determined in a resolution approvedthe program. They will be able to use these shares as follows: (i) 40 percent of the shares received will be freely transferable by shareholders in general meeting on March 18, 2006, the Board,beneficiaries at the proposalmoment they are received; (ii) 30 percent of the Appointments and Remuneration Committee, exercisingshares received will be transferable one year after the powers delegated to its at the shareholders’ meeting, agreed to modify the compositionsettlement date of the peer group inprogram; and (iii) the wake of M&A activity at certainremaining 30 percent will be transferable starting two years after the settlement date of the banks, adjusting the Plan coefficients so as not to distort its ultimate execution.program.
The number of theoretical shares allocated tounits assigned for the executive directors in accordance withunder the plan ratified at the shareholders’ meeting, was 320,000AGM resolution is 105,000 for the Chairman &and CEO 270,000and 90,000 for the President & CEO and 100,000 for the Board Secretary.COO.
The total number of theoretical shares allocatedunits assigned under this Program to the Management Committee members who held this position on December 31, 2010, excluding executive directors, as of December 31, 2008, was 1,124,166.385.000.
Upon conclusion of the Plan on December 31, 2008, the TSR was determined for BBVA and its peers in accordance with the terms established at the outset. BBVA ranked third among its peers, so that the coefficient to be applied to the number of theoretical shares assigned to each beneficiary to determine the number of BBVA shares to be distributed to them is a factor of 1.42.
As a result, the number of shares to be delivered under the Plan, the settlement of which will be submitted to the Bank’s shareholders in general meeting, to each of the executive directors and members of the Management Committee as of year-end as a group, is as follows:
| | | | | | | | | | | | | |
| | | No Assigned
| | | | | | Number of
| |
| | | Theoretical Shares | | | Multiplier Ratio | | | Shares | |
| |
| Chairman & CEO | | | 320,000 | | | | 1.42 | | | | 454,400 | |
| President & COO | | | 270,000 | | | | 1.42 | | | | 383,400 | |
| Company Secretary | | | 100,000 | | | | 1.42 | | | | 142,000 | |
| Other members of Board of Directors | | | 1,124,166 | | | | 1.42 | | | | 1,596,316 | |
| | | | | | | | | | | | | |
— Scheme for remuneration of non-executive directors with deferred delivery of shares
| |
| • | Scheme for remuneration of non-executive directors with deferred distribution of shares |
The Annual General Meeting,Bank’s AGM on March 18th,18, 2006 resolved under agenda item eight resolved to establish a remuneration scheme using deferred deliverydistribution of shares to the Bank’s non-executive directors, to substitutereplace the earlier post-employment scheme that had coveredin place for these directors.
The new plan assigns theoretical shares each yearis based on the annual assignment to non-executive director beneficiariesdirectors of a number of “theoretical shares” equivalent to 20% of the total remuneration paid toreceived by each of them in the previous year, usingThe share price used in the calculation is the average closing price of the BBVA shares in the seventy stock closing prices frommarket sessions before the sixty trading sessions prior todates of the annual general meetingordinary AGMs that approve the financial statementsannual accounts for each year. The shares will be given to each beneficiary on the years covered bydate he or she leaves the scheme starting from the year 2007. These shares, where applicable, are to be delivered when the beneficiaries cease to be directors onposition of director for any grounds other thanreason except serious derelictionbreach of duties.
F-143
The number of theoretical shares“theoretical shares” allocated to non-executive director beneficiaries under the deferred share deliverydistribution scheme approved atby the shareholders’ meeting in 2008AGM for 2010, corresponding to 20% of the total remuneration paid to each in 2007,2009, is set forthout below:
| | | | | | | | | | | | | | | | | |
| | | | | Accumulated
| | | Theorical
| | Accumulated
| |
| | | Theoretical
| | Theoretical
| | |
Directors | | Shares | | Shares | | |
Scheme for Remuneration of Non-Executive Directors
| | | Shares
| | Theorical
| |
with Deferred Distribution of Shares | | | Assigned in 2010 | | Shares | |
| |
| Tomás Alfaro Drake | | | 2,655 | | | | 4,062 | | | | 3,521 | | | | 13,228 | |
| Juan Carlos Álvarez Mezquíriz | | | 4,477 | | | | 23,968 | | |
| Juan Carlos Alvarez Mezquiriz | | | | 5,952 | | | | 39,463 | |
| Rafael Bermejo Blanco | | | 4,306 | | | | 4,306 | | | | 7,286 | | | | 23,275 | |
| Ramón Bustamante y de la Mora | | | 4,064 | | | | 23,987 | | | | 5,401 | | | | 38,049 | |
| José Antonio Fernández Rivero | | | 4,533 | | | | 14,452 | | | | 6,026 | | | | 30,141 | |
| Ignacio Ferrero Jordi | | | 4,477 | | | | 24,540 | | | | 5,952 | | | | 40,035 | |
| Román Knörr Borrás | | | 3,912 | | | | 19,503 | | |
| Carlos Loring Martínez de Irujo | | | 4,067 | | | | 11,751 | | | | 5,405 | | | | 25,823 | |
| Enrique Medina Fernández | | | 5,322 | | | | 33,357 | | | | 7,079 | | | | 51,787 | |
| Susana Rodríguez Vidarte | | | 3,085 | | | | 13,596 | | | | 4,274 | | | | 24,724 | |
| | | | | | | | | | | |
Total | | | 40,898 | | | | 173,522 | | |
Total(*) | | | | 50,896 | | | | 286,525 | |
| | | | | | | | | | | |
— Severance payments
| | |
| (*) | | Additionally, were also assigned to Don Roman Knorr Borras, who resigned as director as of March 23, 2010, 5,198 theoretical shares equivalent to 20% of the remuneration received by him in 2009. |
F-163
The provisions registered as of December 31, 2010 for pension commitments to the President and COO are €14,551 thousand, of which €941 thousand were charged against 2010 earnings. As of this date, there are no other pension obligations to executive directors.
In addition, insurance premiums amounting to €95 thousand were paid on behalf of the non-executive members on the Board of Directors.
The Chairmanprovisions registered as of December 31, 2010 for pension commitments for the Management Committee members, excluding executive directors, amounted to €51,986 thousand. Of these, €6,756 thousand were charged against 2010 earnings.
| |
| • | Termination of the contractual relationship. |
There were no commitments as of December 31, 2010 for the payment of compensation to executive directors.
In the case of the board will be entitled to retire as an executive director atCOO, the provisions of his contract stipulate that in the event that he loses this position for any time after his 65th birthday and the President & COO and the Company Secretary after their 62nd birthday. They will all be entitled to the maximum percentage established under their contracts for retirement pension, and vesting their right to the pension once they reach said ages will render the indemnity agreed under their contracts null and void.
The contracts of the Bank’s executive directors (Chairman & CEO, President & COO, and Company Secretary) recognise their entitlement to be compensated should they leave their post for groundsreason other than theirof his own decision,will, retirement, disablementinvalidity or serious dereliction of duty. Hadduty, he will take early retirement with a pension that may be received as a life annuity or a capital sum equal to 75% of his pensionable salary if this occurred during the year 2009, they would have received the following amounts: €80,833 thousand for the Chairman & CEO; €60,991 thousand for the President & COO, and €13,958 thousand for the Company Secretary.
In order to receive such compensation, directors must place their directorships at the disposalshould occur before he reaches 55 years of the board, resign from any posts that they may hold as representatives of the Bank in other companies, and waive prior employment agreements with the Bank, including any senior management positions and any right to obtain compensation other than that already indicated.
On standing down, they will be rendered unable to provide services to other financial institutions in competition with the Bankage, or its subsidiaries for two years, as established in the board regulations.85% after this age.
| |
55.57. | DETAIL OF THE DIRECTORS’ HOLDINGS IN COMPANIES WITH SIMILAR BUSINESS ACTIVITIES |
As of December 31, 2008 pursuantPursuant to Article 127 third section229.2 of the Spanish Corporations Law, introducedAct, approved by Law 26/2003Legislative Royal Decree 1/2010 of 172 July amending Securities Market Law 24/19882010, as of July 28, andDecember 31, 2010, no members of the revised Corporations Law,Board of Directors have a direct or indirect holding in order to reinforce the transparencycommon stock of listed companies, set forth below are the companies engaging in an activity that is identical, similar or complementary to that which constitutes the corporate purpose of BBVA, in whichBBVA. None of the directors hold executive or administrative positions or functions at these companies.
Furthermore, it indicates that individuals associated to the members of the Board of Directors, have a direct or indirect ownership interest. Noneas of the directors discharge executive or administrative functions at these companies.
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| | | | | | | | | | |
| | Investments | |
| | | | | | | Type of
| |
| | | | | | | Ownership
| |
Surname (s) and First Name
| | Company
| | Number of Shares | | | Interest | |
|
Alfaro Drake, Tomás | | — | | | — | | | | — | |
Alvarez Mezquiriz, Juan Carlos | | — | | | — | | | | — | |
Bermejo Blanco, Rafael | | Banco Santander | | | 7,400 | | | | Direct | |
| | Banco Popular Español | | | 14,180 | | | | Direct | |
Breeden, Richard C. | | — | | | — | | | | — | |
Bustamante y de la Mora, Ramón | | — | | | — | | | | — | |
Fernández Rivero, José Antonio | | — | | | — | | | | — | |
Ferrero Jordi, Ignacio | | Banco Santander | | | 12,245 | | | | Indirect | |
| | Banco Popular Español | | | 2,490 | | | | Indirect | |
Goirigolzarri Tellaeche, José Ignacio | | | | | — | | | | | |
González Rodríguez, Francisco | | RBC Dexia Investor Services España, S.A. | | | 76,040 | | | | Indirect | |
Knörr Borrás, Román | | — | | | — | | | | — | |
Loring Martínez de Irujo, Carlos | | — | | | — | | | | — | |
Maldonado Ramos, José | | — | | | — | | | | — | |
Medina Fernández, Enrique | | — | | | — | | | | — | |
Rodríguez Vidarte, Susana | | — | | | — | | | | — | |
December 31, 2010 were holders of 6,594 shares of Banco Santander, S.A. and of 414 shares of Banco Español de Crédito, S.A. (Banesto).
On March 15, 2002,58.1. ENVIRONMENTAL IMPACT
Given the Bankactivities in which the Group companies engage, the Group has no environmental liabilities, expenses, assets, provisions or contingencies that could have a significant effect on its consolidated equity, financial situation and profits. Consequently, as of Spain initiated a proceeding against BBVA and 16 of its former directors and executives, as a result of the existence of funds (approximately €225 million) belonging to BBV that were not includedDecember 31, 2010, there is no item in the entity’sGroup’s consolidated financial statements until they were voluntarily regularized by being recordedthat requires disclosure in the 2000 consolidated income statement as extraordinary income, for which the related corporation tax was recorded and paid. BBVA notified the Bank of Spain of these matters on January 19, 2001.
On May 22, 2002, the Council of the Spanish Securities and Exchange Commission (CNMV) commenced a proceeding against BBVA for possible contravention of the Securities Market Law (under Article 99 ñ) thereof owingan environmental information report pursuant to the same events as those which gave rise to the Bank of Spain’s proceeding.
The commencement of proceedings to determine an eventual criminal liability of the individuals involved in those events triggered the suspension of the above mentioned proceedings until a definitive criminal resolution was issued. These criminal proceedings finished by definitive court resolutions on 2007 without criminal liability for any person involved in them. The end of these criminal proceedings has allowed the re-opening of the proceedings: on June 13, 2007 the Bank of Spain, and on July 26, 2007 the Spanish National Securities Market Commission (CNMV), notified the end of the proceeding development suspension.
On July 18, 2008, the board of the Bank of Spain sanctioned BBVA with a fine of one million euros for a serious breach as typified in article 5.p) of the “Ley de Disciplina e Intervención de las Entidades de Crédito” (Law regulating the conduct of financial entities) and also imposed various sanctions on the managers and executives responsible for such conduct none of whom are presently members of the Board of Directors, or hold executive office at BBVA.
On July 18, 2008, the Ministry of Economy Order of October 8, 2001, and Finance sanctionedno specific disclosure of information on environmental matters is included in these statements.
58.2. OTHER INFORMATION
The Group is party to certain legal actions in a number of jurisdictions, including, among others, Spain, Mexico and the entity withUnited States, arising out of its ordinary business operations. BBVA considers that none of those actions is material and none is expected to result in a fine of two million euros, as a resultsignificant adverse effect on BBVA’s financial position at either the individual or consolidated level. Management believes that adequate provisions have been made in respect of the proceeding initiated bylitigation arising out of its ordinary business operations. BBVA has not disclosed to the Spanish Securities and Exchange Commission, for a very serious breachmarkets any contingent liability that could arise from said legal actions as typified in Article 99, n) of the “Ley del Mercado de Valores” (law regulating securities markets).it does not consider them material.
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Both sanctions have been appealed within the Ministry of Economy and Finance, but no decisions have been issued as of the date of this report.
Subsequent toThe Directors of the year-end close, the Directors ofentities Finanzia Banco de Crédito, Local de España, S.A. and BBVA Factoring E.F.C., S.A. (both sole shareholder companies), in their respective Board meetings held on January 26, 2009,S.A.U. and Banco Bilbao Vizcaya Argentaria, S.A., in its Board meetingmeetings of their respective boards of directors held on January 27, 2009,28, 2011 and February 1, 2011, respectively, have approved a project for the proposal to merge the first two sole shareholder companies intotakeover of Finanzia Banco de Crédito, S.A.U. by Banco Bilbao Vizcaya Argentaria, S.A. and the subsequent transferen bloc of their assetsall its equity interest to BBVA,Banco Bilbao Vizcaya Argentaria, S.A., which will acquire by universal successionall the transferors’ rights and obligations.obligations of the companies it had purchased through universal succession.
The merger agreement will be submitted to shareholders for approval in general meetingat the AGM during the first quarter of the year. Given that the merged companies are wholly and directlycompany is fully owned by Banco Bilbao Vizcaya Argentaria, S.A., in accordance with article 250.1Article 49.1 of Act 3/2009 of 3 April 2009 on the Spanish Public Limited Companies Act,structural modifications of trading corporations, it will not be necessary to carry out any share capital increase the capital of Banco Bilbao Vizcaya Argentaria, S.A. or for managementprepare reports to be prepared by the managers of the companies involved in the merger, or for reports to be prepared by independent experts on the merger proposal.
As of January 17, 2011, Banco Bilbao Vizcaya Argentaria, S.A. acquired its condition as sole shareholder as a result of the acquisition of shares in possession of the Corporación General Financiera, S.A. and Cidessa Uno, S.L. as of December 31, 2010.
Since January 1, 2011 until the preparation of these annual consolidated financial statements, no other events, not mentioned above, have taken place that have significantly affected the Group’s results or its equity position.
As of March 22, 2011 after having obtained the necessary authorizations, BBVA has completed the acquisition of 24.89% of the total issued capital of the turkish bank garanti (see Note 3).
| |
58.60. | DIFFERENCES BETWEEN EU-IFRS REQUIRED TO BE APPLIED UNDER THE BANK OF SPAIN’S CIRCULAR 4/2004 AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND OTHER REQUIRED DISCLOSURES. |
As described in Note 1, the accompanying Consolidated Financial Statements of the BBVA Group are presented in the formats stipulated by the Bank of Spain’s Circular and were prepared by applying the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. Such formats and accounting principles vary in certain respects from those generally accepted in the United States (“U.S. GAAP”).
Following is a summary of components of the main differences between EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and U.S. GAAP:
| | | | | | | | | |
| • | | | Net income attributed to parent company and Stockholders’ EquityShareholders’ equity reconciliation betweenEU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and U.S. GAAP | GAAP(*) | | A | |
| • | | | Consolidated Financial Statements | | | B | |
| • | | | Additional information Main disclosures required by U.S. accounting regulations for banks and additional disclosures required under U.S. GAAP | | | C | |
| | |
| (*) | | BBVA is availing itself of the accommodation in Item 17(c)(2)(iv) ofForm 20-F with respect to the application of IAS 21 for highly inflationary economies (Venezuela). Therefore, this reconciliation has been prepared in accordance with Item 18 ofForm 20-F which is different from that required by US GAAP. See Item 16 below and the discussion under Venezuela for additional information. |
The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts and allocations of assets and liabilities and disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimated but any difference should not be material.
IFRS 1First-time adoption of International Financial Reporting Standardsprovides a number of exemptions and exceptions from full retrospective.retrospective application. Net income stockholders’attributed to parent company, shareholders’ equity and the reconciliation to U.S. GAAP shown below would have been different if the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 had been applied fully retrospectively.
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A) NET INCOME ATTRIBUTED TO PARENT COMPANY AND SHAREHOLDERS’ EQUITY RECONCILIATION BETWEEN EU-IFRS REQUIRED TO BE APPLIED UNDER THE BANK OF SPAIN’S CIRCULAR 4/2004 AND U.S. GAAP.
| |
A) | NET INCOME AND STOCKHOLDERS’ EQUITY RECONCILIATION BETWEEN EU-IFRS REQUIRED TO BE APPLIED UNDER THE BANK OF SPAIN’S CIRCULAR 4/2004 AND U.S. GAAP. |
Accounting practices used by the Bank in preparing the Consolidated Financial Statements conform toEU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, but do not conform to U.S. GAAP. A summarized reconciliation of stockholders’shareholders’ equity as of December 31, 2008, 20072010, 2009 and 20062008 and net income attributed to parent company for the years 2008, 2007ended December 31, 2010, 2009 and 20062008 to U.S. GAAP is set forth below.
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The following tables set forth the adjustments to consolidated net income attributed to parent company and to consolidated stockholders’shareholders’ equity which would be required if U.S. GAAP had been applied to the accompanying Consolidated Financial Statements:
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Increase (Decrease) |
| | | | | Increase (Decrease) Year Ended December 31, | | | | | Year Ended December 31, |
| | | Item # | | 2008 | | 2007 | | 2006 | | | Item | | 2010 | | 2009 | | 2008 |
| | | | | (Millions of euros, except per share data) | | | | | Millions of euros, except per share data |
| |
NET INCOME | | | | | | | | | | | | | | | | | | | | | | | | | | |
Profit for the year under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | 5,385 | | | | 6,415 | | | | 4,971 | | |
| Income attributed to the minority interest under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 (*) | | | | | (365 | ) | | | (289 | ) | | | (235 | ) | |
Net Income attributed to parent company under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | 5,020 | | | | 6,126 | | | | 4,736 | | |
Net income for the year under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | | | 4,995 | | | | 4,595 | | | | 5,385 | |
| Net income attributed to non-controlling interests under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | | | (389 | ) | | | (385 | ) | | | (365 | ) |
Net income attributed to parent company under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | | | 4,606 | | | | 4,210 | | | | 5,020 | |
Adjustments to conform to U.S. GAAP: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Business combination with Argentaria | | 1 | | | (36 | ) | | | (31 | ) | | | (22 | ) | | | 1 | | | | (22 | ) | | | (22 | ) | | | (36 | ) |
| Valuation of assets | | 2 | | | (32 | ) | | | 110 | | | | (1 | ) | | | 2 | | | | (276 | ) | | | (910 | ) | | | (32 | ) |
| Valuation of financial instruments | | 3 | | | — | | | | (9 | ) | | | 74 | | | | 3 | | | | — | | | | — | | | | — | |
| Accounting of goodwill | | 4 | | | (2 | ) | | | (118 | ) | | | (346 | ) | | | 4 | | | | (2 | ) | | | 713 | | | | (2 | ) |
| Impact of SFAS 133 | | 6 | | | (128 | ) | | | 29 | | | | 17 | | |
| Accounting of derivatives | | | | 6 | | | | (34 | ) | | | (34 | ) | | | (128 | ) |
| Loans adjustments | | 7 | | | (1,152 | ) | | | (924 | ) | | | 445 | | | | 7 | | | | — | | | | — | | | | (1,152 | ) |
| Tax effect of U.S. GAAP adjustments and deferred taxation under SFAS 109 | | 8 | | | 402 | | | | 226 | | | | 69 | | |
| | | | | | | | | |
Net income in accordance with U.S. GAAP | | | | | 4,070 | | | | 5,409 | | | | 4,972 | | |
| Pension plan cost | | | | 8 | | | | (64 | ) | | | (221 | ) | | | — | |
| Tax effect of U.S. GAAP adjustments and deferred taxation | | | | 9 | | | | 91 | | | | 89 | | | | 402 | |
Net income attributed to parent company in accordance with U.S. GAAP(*) | | | | | | | 4,299 | | | | 3,825 | | | | 4,070 | |
Other comprehensive income, (loss) net of tax: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign currency translation adjustments | | | | | (1,001 | ) | | | (1,873 | ) | | | (708 | ) | |
| Foreign currency translation adjustments and others | | | | | | | 1,784 | | | | (76 | ) | | | (1,001 | ) |
| Unrealized gains on securities: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized holding gains (losses) arising during period, net of tax | | | | | (2,657 | ) | | | 487 | | | | 110 | | | | | | | (1,680 | ) | | | 943 | | | | (2,657 | ) |
| Derivative instruments and hedging activities | | | | | 175 | | | | 285 | | | | 107 | | | | | | | (531 | ) | | | (4 | ) | | | 175 | |
| | | | | | | | | |
Comprehensive income (losses) in accordance with U.S. GAAP | | 9 | | | 587 | | | | 4,308 | | | | 4,481 | | |
Net income per share (Euros)(see Note 58.10) | | | | | 1.10 | | | | 1.50 | | | | 1.46 | | |
Comprehensive income (losses) in accordance with U.S. GAAP (*) | | | | 10 | | | | 3,872 | | | | 4,688 | | | | 587 | |
Earning per share (Euros)(see note 60. A.11) (**) | | | | | | | 1.14 | | | | 1.03 | | | | 1.10 | |
| | |
| (*) | | Under EU-IFRS required to be applied underIn accordance with Item 18 ofForm 20-F. |
|
| (**) | | At the Bank of Spain’s Circular 4/2004 total stockholders’ equity and net income includes the equity and net income corresponding to the stockholders of both the Parent and the minority interests. Under U.S. GAAP, total stockholders’ equity and net income is made up onlydate of the equity portion attributedissuance of these financial statements, the scrip dividend (“Dividendo Option”) mentioned in Note 4 is not distributed. Therefore, the conditions to equity holders ofrestate the Parent. Therefore, for reporting purposes, the minority interest portion is excluded of total stockholders’ equityEarning Per Share under IAS 33 and net income.ASC 260 are not met. |
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| | | | | | | | | | | | | | | |
| | | | | Increase (Decrease) Year
| |
| | | | | Ended December 31, | |
| | | Item # | | 2008 | | | 2007 | | | 2006 | |
| | | | | (Millions of euros) | |
| |
TOTAL STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | |
Total Stockholders’ equity under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | 26,705 | | | | 27,943 | | | | 22,318 | |
| Minority interest under IFRS (*) | | | | | (1,049 | ) | | | (880 | ) | | | (768 | ) |
Total stockholders’ equity without minority interest under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | 25,656 | | | | 27,063 | | | | 21,550 | |
Adjustments to conform to U.S. GAAP: | | | | | | | | | | | | | | |
| Business combination with Argentaria | | 1 | | | 5,469 | | | | 5,505 | | | | 5,537 | |
| Valuation of assets | | 2 | | | (74 | ) | | | (41 | ) | | | (152 | ) |
| Valuation of financial instruments | | 3 | | | 36 | | | | 57 | | | | 110 | |
| Accounting of goodwill | | 4 | | | 2,573 | | | | 2,877 | | | | 2,842 | |
| Translation of financial statements in high-inflation countries | | 5 | | | (192 | ) | | | (221 | ) | | | (239 | ) |
| Impact of SFAS 133 | | 6 | | | 35 | | | | 160 | | | | 116 | |
| Loans adjustments | | 7 | | | 36 | | | | 1,188 | | | | 2,115 | |
| Tax effect of U.S. GAAP adjustments and deferred taxation under SFAS 109 | | 8 | | | (795 | ) | | | (1,203 | ) | | | (1,418 | ) |
| | | | | | | | | | | | | | | |
Total stockholders’ equity in accordance with U.S. GAAP | | | | | 32,744 | | | | 35,384 | | | | 30,461 | |
| | | | | | | | | | | | | | | | | |
| | | | | Increase (Decrease) |
| | | | | As of December 31, |
| | | Item | | 2010 | | 2009 | | 2008 |
| | | | | Millions of euros |
| |
TOTAL EQUITY | | | | | | | | | | | | | | | | |
| Total equity under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | | | 37,475 | | | | 30,763 | | | | 26,705 | |
Non-controlling interests under EU-IFRS | | | | | | | (1,556 | ) | | | (1,463 | ) | | | (1,049 | ) |
Total equity without non-controlling interests under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | | | 35,919 | | | | 29,300 | | | | 25,656 | |
| Adjustments to conform to U.S. GAAP: | | | | | | | | | | | | | | | | |
| Business combination with Argentaria | | | 1 | | | | 5,425 | | | | 5,447 | | | | 5,469 | |
| Valuation of assets | | | 2 | | | | (1,260 | ) | | | (984 | ) | | | (74 | ) |
| Valuation of financial instruments | | | 3 | | | | — | | | | 18 | | | | 36 | |
| Accounting of goodwill | | | 4 | | | | 3,657 | | | | 3,332 | | | | 2,573 | |
| Adjustments related to inflation-due to IFRS-1 | | | 5 | | | | (229 | ) | | | (199 | ) | | | (192 | ) |
| Accounting of derivatives | | | 6 | | | | (48 | ) | | | 7 | | | | 35 | |
| Loans adjustments | | | 7 | | | | — | | | | — | | | | 36 | |
| Tax effect of U.S. GAAP adjustments and deferred taxation | | | 9 | | | | (651 | ) | | | (749 | ) | | | (795 | ) |
Total shareholders’ equity in accordance with U.S. GAAP(*) (**) | | | | | | | 42,813 | | | | 36,172 | | | | 32,744 | |
| | |
| (*) | | In accordance with Item 18 ofForm 20-F. |
|
| (**) | | Under EU-IFRS requiredUS GAAP “Shareholders’ equity” is equivalent to be applied under the Bank“Total equity” net of Spain’s Circular 4/2004 total stockholders’ equity and net income includes the equity and net income corresponding to the stockholders of both the parent and the minority interests. Under U.S. GAAP, total stockholders’ equity and net income is made up only of the equity portion attributed to equity holders of the Parent. Therefore, for reporting purposes, the minority“Non controlling interest portion is excluded of total stockholders’ equity and net income.in subsidiaries”. |
The differences included in the tables above are explained in the following items:
| |
| 1. | Business Combination with ArgentariaBUSINESS COMBINATION WITH ARGENTARIA — |
Banco Bilbao Vizcaya, S.A. and Argentaria, Caja Postal y Banco Hipotecario, S.A. (Argentaria) merged, being January 28, 2000 the date from which such merger was legally effective. According to Spanish GAAP at that date, this business combination was accounted for using the method of pooling of interest and therefore no goodwill was accounted. IFRS 1First-time adoption of International Financial Reporting Standardsgrants an exemption to apply IFRS 3Business Combinationsprospectively and thus not to restate business combinations that occurred before the date of transition to IFRS, which is January 1, 2004. Therefore, this merger has been accounted for using the method of pooling of interest and no goodwill was accounted. Since the transaction did not comply with the U.S. GAAP requirements of APB 16 for pooling of interest method, under U.S. GAAP this business combination was accounted for using the purchase method. The excess of the fair value of the new shares issued in exchange for the Argentaria shares over the net worth of Argentaria under U.S. GAAP as of the date of the merger, was approximately €6,316 million and
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approximately €6,316 million and was calculated considering the necessary adjustments to the net worth of Argentaria as of January 28, 2000 under Spanish GAAP, as described below:
| | | | | |
| | | (Millions of euros)euros | |
| |
| Approximate Argentaria net worth as of January 28, 2000 under Spanish GAAP | | | 3,454 | |
| | | | | |
| (i) Reversal of the net effect of the restatement of fixed assets and equity securities | | | (129 | ) |
| (ii) Reduction for employees and third party loans issued to purchase shares of capital stock | | | (123 | ) |
| (iii) Goodwill amortization adjustments | | | 101 | |
| (iv) Up-front premium reversal | | | 108 | |
| (v) Valuation of investment securities | | | 1,926 | |
| (vi) Effect of adjustments to conform to U.S. GAAP for investments in affiliated Companies | | | (87 | ) |
| (vii) Tax effect of above mentioned adjustments | | | (608 | ) |
| (viii) Other adjustments | | | 35 | |
| | | | | |
| Subtotal | | | 1,223 | |
| | | | | |
| Approximate Argentaria net worth as of January 28, 2000 under U.S. GAAP | | | 4,677 | |
| |
| i. | Revaluation of property and equity securities |
Certain of the Spanish and foreign consolidated companies had stepped up (increased) the cost and accumulated depreciation of property and equipment and, where appropriate, the carrying values of their equity investment securities pursuant to the relevant local legislation. Also, the buildings and equity securities owned by certain of the companies in the Group, whose shareholders’ meetings adopted merger resolutions in 1991, were stepped up. Under U.S. GAAP these step ups are not permitted to be reflected in the financial statements.
ii. — Employee and other third party loans
Certain Group banks granted loans to shareholders, employees and customers for the acquisition of Argentaria, Caja Postal y Banco Hipotecario, S.A. shares. Under Spanish GAAP, these loans were recorded in the Consolidated Financial Statements under the caption “Credit, Loans and Discounts”. Under U.S. GAAP, these loans should be recorded as a reduction of total stockholders’shareholders’ equity because the only recourse for collection is the shares themselves.
iii. — Goodwill
Under Spanish GAAP, the general policy of the Group was to amortize goodwill over a maximum period of 10 years. However, a different period was used to amortize goodwill in some of the subsidiaries acquired. Until 2001, for purposes of calculating the effect of applying U.S. GAAP, goodwill arising on acquisitions was amortized in 10 years. Since July 2001, as required by SFAS 142,ASC 350, goodwill is no longer amortized.
Additionally, in 1998 and as a result of the merger, goodwill from Banco Exterior de España, S.A. was fully written off for Spanish GAAP purposes. Until June 2001, under U.S. GAAP this goodwill was amortized over the estimated economic life as there was no economic or fair value basis for the impairment made under Spanish GAAP. Since July 2001, as required by SFAS 142,ASC 350, goodwill is no longer amortized.
iv. — Up-front premium reversal
In 1998 the Bank arranged hedging transactions for which it paid a premium, which was recorded under the “Extraordinary Losses” caption in the income statement for 1998, to mitigate the adverse effect of the negative spread that arise between the average return on the mortgage loans financed by certain mortgage bonds and the fixed interest rates of such mortgage bonds. Under U.S. GAAP, the premium was recognized at inception as an asset,
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asset, amortized over the life of the hedging transaction under SFAS 80 and that upon adoption of SFAS 133ASC 815, the derivative has been recorded at fair value through income, as it does not qualify for hedge accounting under U.S. GAAP.
v. — Valuation of investment securities
Under SFAS 115, ASC 320-10-35-1b,available-for-sale securities mustshall be recordedmeasured at marketfair value and the unrealized holding gains and losses shall be reported in total stockholders’ equity.“Other comprehensive income”.
vi. — Investments in affiliated Companiescompanies
Under Spanish GAAP, investments in non-consolidated listed affiliated companies owned over 3% and in non-consolidated unlisted affiliated companies owned over 20% were recorded by the equity method. Under U.S. GAAP investments in affiliated companies over 20% but less than 50% are accounted for by the equity method and those exceeding 50% by the global integrationconsolidation method. Listed investments of less than 20% are accounted for at market value.
The excess of the fair value of the new shares issued in exchange for the Argentaria shares over the net worth of Argentaria, was allocated to the following specific items:
| | | | | |
2000 | | Millions of euros | |
| |
Net Lendinglending | | | 611 | |
Investment Securities-Heldsecurities-held to Maturitymaturity | | | 306 | |
Premises and Equipmentequipment | | | 129 | |
| Other assets and liabilities | | | (113 | ) |
Long Term Debtterm debt | | | (173 | ) |
Tax Effecteffect | | | (220 | ) |
| Goodwill | | | 5,776 | |
| | | | | |
| | | | 6,316 | |
| | | | | |
For U.S. GAAP purposes, BBVA amortizes the excess of the fair value assigned to the specific items over their remaining economic life. The amortization of the excess allocated to specific assets and liabilities was €36.5€22 million (net of tax), €31.4€22 million (net of tax) and €22.2€36 million (net of tax) infor the years ended December 31, 2010, 2009 and 2008, 2007 and 2006, respectively.
Until December 31, 2001 BBVA amortized the goodwill on a straight line basis over a period of 25 years. Since January, 2002 BBVA stopped the amortization of the remaining goodwill pursuant to SFAS 142ASC 350, and it has been assigned to different Reporting Unitsreporting units and tested for impairment as described in Note 2.2.11.2.2.8. As of December 31, 20082010 goodwill was €5,333 million.
The adjustment to total stockholders’shareholders’ equity, that reflects both effects, was €5,469€5,425 million, €5,505€5,447 million and €5,537€5,469 million as of December 31, 2008, 20072010, 2009 and 2006,2008, respectively.
| |
| 2. | Valuation of assetsVALUATION OF ASSETS — |
This adjustment basically relates to the following:
• Revaluation of property
| |
| • | Revaluation of property |
As described in Note 29.3,29.3. of the Consolidated Financial Statements, certain of the Spanish and foreign consolidated companies restated the cost and accumulated depreciation of property and equipment pursuant to the relevant legislation.
Fixed asset depreciation is computed on thethat restated value and the total amount charged to income is deductible for corporate income tax purposes. In addition, results on sales or dispositions of fixed assets are determined as the difference between the selling price and the net restated value.
Under U.S. GAAP these revaluations are not permitted to be reflected in the financial statements.
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The amounts of the adjustments indicated below have been calculated to reflect the reversal of the additional depreciation on the revalued property and equipment (€4.784 million, €5.03€4 million and €8.10€4 million as of
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December 31, 2008, 20072010, 2009 and 2006,2008, respectively) and the additional income that would have resulted if the Group had not restated the fixed assets that have been sold (€5.888 million, €122.92€9 million and €2.92€6 million as offor the years ended December 31, 2008, 20072010, 2009 and 2006,2008, respectively). The adjustment to total stockholders’shareholders’ equity reflects the reversal of the unamortized revaluation surplus (€148.09(a decrease of €123 million, €158.76€135 million and €286.71€148 million as of December 31, 2008, 20072010, 2009 and 2006,2008, respectively).
• Valuation of property
In accordance with the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, certain property and equipment items were revalued and, therefore, this value was used as deemed cost on January 1, 2004 taking into consideration that, at the date of the revaluation, this deemed cost was comparable to fair value.
Under U.S. GAAP, these adjustments to the deemed cost are not permitted due to the fact that they do not reflect an actual impairment.
Consequently, there is an adjustment in the reconciliation to U.S. GAAP to reflect in the income statement the additional depreciation on the revalued property and equipment (€3.233 million, €3.23€3 million and €3.23€3 million as offor the years ended December 31, 2010, 2009 and 2008, 2007 and 2006, respectively) and the additional income (losses) related to property and equipment with different book value under U.S. GAAP which have been sold (losses of €38.6 million as of December 31, 2008 and income of €36.3 million as of December 31, 2006). The adjustment to total stockholders’shareholders’ equity reflects the reversal of the adjustments to the attributed cost (€67.35(an increase of €61 million, €109.18€64 million and €112.41€67 million as of December 31, 2008, 20072010, 2009 and 2006,2008, respectively).
| |
3.• | ValuationSale and leaseback of financial instrumentsfixed assets |
In 2009, 1,150 properties (offices and other singular buildings) belonging to the Group in Spain were reclassified to heading “Non-current assets held for sale” at an amount of €426 million, for which a sales plan had been established.
In 2010 and 2009, the Bank sold 164 and 971 of mentioned properties, respectively, in Spain to investors not related to BBVA Group for a total sale price of €404 million and €1,263 million at market prices, respectively, without making funds available to the buyers to pay the price of these transactions.
At the same time the Bank signed long-term operating leases with these investors on the aforementioned properties for periods of 10, 15, 20, 25 or 30 years (according to the property) and renewable.
The sale agreements also established call options for each of the properties at the termination of each of the lease agreements so that the Bank can repurchase these properties The repurchasing price of these call options will be the market value as determined by an independent expert. Therefore, the Group made a gross profit of €273 and €914 million, recognized under the heading “Gains (losses) in non-current assets held for sale not classified as discontinued operations” in the accompanying consolidated income statements for 2010 and 2009.
Under EU-IFRS (IAS 17), we accounted for this transaction as a sale and lease-back because of:
| | |
| • | We considered that there is no reasonable certainty that the repurchase option will be exercised, because it is at fair value, and there are no other indicators that we expect would economically force us to exercise the repurchase option; and |
|
| • | We completed an analysis of the other main factors of the transaction and concluded that the lease agreements had the characteristics of operating leases, the sale price and lease payments were at fair value so, in effect, there had been a normal sale transaction and the gain on the sale of the properties was recognized immediately in the consolidated statement of income for the year 2009 and 2010. |
Under U.S. GAAP (ASC840-40-25-13) this transaction does not qualify as a sale and lease-back because the existence of a repurchase option of the properties at fair value implies a continuing involvement of the seller-lessee and, consequently, the transaction cannot be considered as a sale.
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Accordingly, in order to account for the transaction in conformity with the financing method underASC 840-40-25-13, we have made an adjustment to:
| | |
| • | undo the sale, place the properties under repurchase agreement back in the accounting books (€404 million as of December 31, 2010 and €301 million as of December 31,2009) and continue to depreciate them for the year 2010 and 2009 (€11 million and €4 million, respectively); |
|
| • | eliminate the profit on sale (€273 million of income as of the date of the transaction in 2010 and €914 million of income as of the date of the transaction in 2010) and create a liability for the total amount of the cash received; and |
|
| • | reclassify the operating leases rental payments incurred by the Group (€113 million for the year 2010 and €31 million for year 2009) as interest expense. |
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| 3. | VALUATION OF FINANCIAL INSTRUMENTS — |
Group’s criteria of accounting for such securities are described in Note 2.2.1. The recognition, measurement and disclosure criteria included in IAS 32 and 39, were applied retrospectively to January 1, 2004 (the date of transition to the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004). Certain Debtdebt securities were recognized at fair value of that date under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 through total stockholders’shareholders’ equity. Therefore in 2009 and 2008, there is an adjustment in the reconciliation of stockholders’shareholders’ equity to U.S. GAAP to reflect the reversal of the adjustments to the fair value (an increase of €32.15 million, €46.76 million and €61.37 million asvalue. As of December 31, 2008, 20072010, such debt securities were amortizated and 2006, respectively).for that reason there is no adjustment in the reconciliation to US GAAP that affected shareholders’ equity for that concept.
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| 4. | Accounting of goodwillACCOUNTING OF GOODWILL — |
The breakdown of this adjustment is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Stockholders’ Equity | | | Net Income | |
| | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Goodwill charged to reserves in 1998 and 1999 | | | 65 | | | | 65 | | | | 65 | | | | — | | | | — | | | | — | |
| Different period of amortization of goodwill reversed | | | 99 | | | | 99 | | | | 99 | | | | — | | | | — | | | | — | |
| Amortization under Spanish GAAP not reversed under U.S. GAAP | | | (154 | ) | | | (154 | ) | | | (154 | ) | | | — | | | | — | | | | — | |
| Reversal of amortization | | | 970 | | | | 970 | | | | 970 | | | | — | | | | — | | | | — | |
| Reversal of Step Acquisition | | | 2,310 | | | | 2,648 | | | | 2,930 | | | | — | | | | — | | | | — | |
| Step Acquisition of BBVA Bancomer | | | (1,170 | ) | | | (1,200 | ) | | | (1,105 | ) | | | 1 | | | | (100 | ) | | | (344 | ) |
| Acquisition of Compass | | | 405 | | | | 405 | | | | — | | | | — | | | | — | | | | — | |
| Others | | | 48 | | | | 43 | | | | 37 | | | | (3 | ) | | | (18 | ) | | | (2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustment 4 in reconciliation to U.S. GAAP | | | 2,573 | | | | 2,877 | | | | 2,842 | | | | (2 | ) | | | (118 | ) | | | (346 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Net Income Attributed
| |
| | | Shareholders’ Equity | | | to Parent Company | |
| | | 2010 | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of Euros | |
| |
| Goodwill previous to IFRS1 | | | 981 | | | | 981 | | | | 981 | | | | — | | | | — | | | | — | |
| Reversal of Step Acquisition | | | 2,704 | | | | 2,330 | | | | 2,310 | | | | — | | | | — | | | | — | |
| Step Acquisition of BBVA Bancomer | | | (1,194 | ) | | | (1,171 | ) | | | (1,170 | ) | | | (1 | ) | | | 2 | | | | 1 | |
| Adquisition and impairment of Compass | | | 1,182 | | | | 1,095 | | | | 398 | | | | — | | | | 711 | | | | — | |
| Others | | | (16 | ) | | | 97 | | | | 54 | | | | (1 | ) | | | — | | | | (3 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustment 4 in reconciliation to U.S. GAAP | | | 3,657 | | | | 3,332 | | | | 2,573 | | | | (2 | ) | | | 713 | | | | (2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
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The main reasons that generate a difference between EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and U.S. GAAP in goodwill are the following:
Adjustments related to Goodwillgoodwill previous to IFRS-1IFRS 1
The items included in the table above mentioned as“Goodwill chargeditem “Goodwill previous to reserves in 1998 and 1999”,“Different period of amortization of goodwill reversed”,“Amortization under Spanish GAAP not reversed under U.S. GAAP” and“Reversal of amortization”, referIFRS 1” refers to certain impairments or amortizations of goodwill accounted for under Spanish GAAP previous to the date of adoption of IFRS-1. These impairments or amortizations were not acceptable under U.S. GAAP because they did not satisfy the SFAS 142ASC 350 requirements. Therefore, there is an adjustment in the reconciliation of stockholders’shareholders’ equity to U.S. GAAP to reflect the reversal of these impairments and amortizations of goodwill recorded prior to January 1, 2004.
Reversal of step acquisition
Investments acquired subsequent to obtaining control over a company (i.e. transactions involving the purchase of equity interests from minority shareholders) were treated as “equity transactions”. The amount of goodwill recorded under prior GAAP, atas of January 1, 2004, transition date to the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, was recorded on the transactions performed after control was obtained. These amounts were charged to “minority interest”“non-controlling interests” and the surplus amount werewas charged to total stockholders’shareholders’ equity.
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Under U.S. GAAP, these acquisitions are accounted for using the “purchase method” and, consequently, there is an adjustment in the reconciliation to U.S. GAAP to reflect the reversal of goodwill recorded prior to January 1, 2004, and the increase of stockholders’shareholders’ equity.
Step Acquisition of BBVA Bancomer
On March 20, 2004, BBVA completed the tender offer on 40.6% of the capital stock of Grupo Financiero BBVA Bancomer, S.A. de C.V. (“Bancomer”). The final number of shares presented in the offer and accepted by BBVA was 3,660,295,210, which represent 39.45% of the capital stock of Bancomer. Following the acquisition of these shares through the tender offer, the ownership interest held by BBVA in the capital of Bancomer was 98.88%. Lastly, as of December 31, 2006, as a result of the purchase of shares subsisting in the market, BBVA’s holding in Bancomer increased to 99.96%.
BBVA Bancomer, S.A. de C.V. washas been consolidated by Group BBVA since July 2000, when the merger of Grupo Financiero BBV-Probursa, S.A. de C.V. (a wholly-owned subsidiary of BBVA) and Grupo Financiero BBVA Bancomer, S.A. de C.V. was carried out.
Since March 20, 2004 the BBVA Group’s consolidated income statement reflected a decrease in “Minority Interest”“Non-controlling interests” caption related to the business combination described above while the rest of consolidated the income statement’s captions did not change because Bancomer was already a fully consolidated company before the acquisition of minoritynon controlling interest.
The cash paid for the acquired entity was €3,324 million. In connection with this business combination there are no contingent payments, options, or commitments specified in the acquisition agreement.
TheUnder EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, the business combination is registered as equity transaction and no amounts were allocated to assets or liabilities of the company acquired.
Under U.S. GAAP, once the process ofafter allocating the purchase price to all acquired assets and assumed liabilities of the company acquired, the goodwill was €1,060.2€1,060 million. The entire amount of goodwill was allocated to the Mexico reporting unit. This unit is included in the “Mexico and the United States” segment (now “Mexico” as explained in Note 6).segment. The reconciliation of
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the net worth acquired and the fair value of the assets and liabilities acquired for purposes of U.S. GAAP was as follows:
| | | | | |
| | | Millions of euros | |
| |
Net worth acquiredWorth Adquired | | | 1,207 | |
| Investment securities | | | (32 | ) |
| Net loans and leases | | | 622 | |
PremisesPermises and equipment | | | (28 | ) |
| Intangible assets | | | 970 | |
Other Assetsassets | | | 189 | |
Time Depositsdeposits | | | (124 | ) |
| Long term debt | | | (50 | ) |
| Other liabilities | | | (490 | ) |
| | | | | |
Fair value under U.S. GAAP | | | 2,264 | |
| | | | | |
The identified intangible assets arewere related to “core deposits”, which were calculated according to the purchase method and arewere amortized over a period of 40 months. As of December 31, 2010, all core deposits are amortized. Additionally, the allocated amount of net loans and leases arewere amortized over a weighted-average period of 3 years. Under U.S. GAAP, the adjustment (net of tax) in the income statement was negative €1 million, €100.2 million and €344.4 million as of December 31, 2008, 2007 and 2006, respectively, mainly related to the additional amortization expenses of assets and liabilities subject to amortization.
The “Other liabilities” caption includes basically temporary differences arising from different accounting and tax values of assets and liabilities allocated in the acquisition. Because the amounts allocated to certain assets are non deductible under Spanish Tax Law, additional goodwill and the corresponding deferred tax liabilities have been considered under U.S. GAAP.
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Since Bancomer was consolidated by Group BBVA atas of July 1, 2000, there are no purchased research and development assets that were acquired and written off.
Acquisition of Compass
On February 16, 2007, BBVA entered into a definitive agreement to acquire 100% of the share capital of Compass. On September 7, 2007, BBVA completed the acquisition.
Under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, the amount of goodwill was calculated at the date in which BBVA obtained the control (September 7, 2007). Under US GAAP, EITF IssueNo. 99-12,Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combinationprovides guidance on the measurement date to be used in a business combination.EITF 99-12 specifies that the value of acquirer’s marketable equity securities issued to effect a purchase business combination should be determinated, pursuant to the guidance in paragraph 22 of FASB Statement No. 141 (ACS805-20),Business Combinations, based on the market price of the securities over a reasonable period of time before and after the terms of the acquisition are agreed to and announced. The date of measurement of the value of the acquirer’s marketable equity securities should not be influenced by the need to obtain shareholder or regulatory approvals. In addition, paragraph 7 of Issue 2 ofEITF 99-12 ASC 805 states that the measurement date is the earliest date, from the date the terms of the acquisition are agreed to and announced to the date of financial applications of the formula do not result in a change in the number of shares or the amount of other consideration. According to this BBVA considered the announcement date (February 16, 2007) as the measurement date under US GAAP. Consequently, there is an adjustment in the reconciliation to U.S. GAAP to reflect the different amount of goodwill.
This difference resulted in a reconciling item to stockholders’shareholders’ equity (an increase of €405€415 million, €384 million and €398 million as of December 31, 2010, 2009 and 2008, respectively).
Goodwill impairment test
As indicated in Note 2.2.8 of the Consolidated Financial Statements, the Group performed the goodwill impairment test under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.
In accordance with the applicable accounting guidance under U.S. GAAP, the Group performs annual tests to identify potential impairment of goodwill. The tests are required to be performed annually and more frequently if events or circumstances indicate a potential impairment may exist. In the first step (“step one”) of the impairment test, the Group compares the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is required to be performed to measure the amount of impairment loss, if any. The second step (“step two”) of the impairment test compares the implied fair value of goodwill attributed to each reporting unit to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination; the Group allocates the fair value determined in the step one for the Reporting Unit (RU) to all of the assets and liabilities of that unit as if the reporting unit had been acquired in business combination. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
As of December 31, 2007).2010, there were no losses due to impairments under US GAAP.
As of December 31, 2009, the results of the goodwill impairment test under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 estimated impairment losses of €1,097 million in the United States Cash-Generating Unit (“CGU”) which were recognized under “Impairment losses on other assets (net) — Goodwill and other tangible assets” in the income statement for 2009. The impairment loss of this unit is attributed to the significant decline in economic and credit conditions in the states in which the Group operates in the United States. The valuations were verified by an independent expert, not the Group’s statutory auditor.
Under U.S. GAAP, the Group tested its identified Reporting Units for impairment as of December 31, 2009. This test indicated a goodwill impairment of €385 million within the United States reporting unit; accordingly, the Group recorded this goodwill impairment charges in 2009. The impairment recognized in the United States
F-153F-173
ImpairmentReporting Unit is attributed to the decrease in revenues caused by the significant decline in U.S. economic conditions.
A discounted cash flow model was selected asBoth the main method to determinestep one fair values of the reporting units and the step two allocations of the fair valuevalues of our Reporting Units; although other methodologies such as using quoted market valuesthe reporting units’ assets and market multiples were also used. Cash flowliabilities are based upon management’s estimates require judgment and assumptions. Although management has used the Bankestimates and assumptions it believes to be most appropriate in the circumstances, it should be noted that theeven relatively minor changes in certain valuation assumptions used in determiningmanagement’s calculations would result in significant differences in the cash flows are consistent with assumptions marketplace participants would use in their estimatesresults of their fair value.the impairment tests.
The principalThere is a difference in the impairment test of goodwill because under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 there is no step two as required by U.S. GAAP. This difference resulted in a reconciling item to the Net income for the year ended December 31, 2009. This adjustment reflects the reversal of the excess of charges in 2009 to the United States Reporting Unit’s goodwill amounted to €711 million as of December 31, 2009.
Under U.S. GAAP, the BBVA Group’s goodwill assigned to each Reporting Unit as of December, 31, 2010, 2009 and 2008 2007 and 2006 for annual impairment test purposes are the following:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
| Spain and Portugal | | | 4,286 | | | | 4,353 | | | | 4,081 | |
| Global Businesses | | | 1,489 | | | | 1,410 | | | | 1,681 | |
| Pensions in South America | | | 208 | | | | 251 | | | | 270 | |
| México | | | 2,265 | | | | 2,713 | | | | 3,040 | |
| Chile | | | 86 | | | | 104 | | | | 126 | |
| United States and Puerto Rico | | | 7,098 | | | | 6,698 | | | | 1,724 | |
| Colombia | | | 193 | | | | 204 | | | | 213 | |
| | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
| The United States | | | 6,975 | | | | 6,472 | | | | 7,098 | |
| Spain and Portugal | | | 4,282 | | | | 4,294 | | | | 4,286 | |
| Mexico | | | 2,636 | | | | 2,302 | | | | 2,265 | |
| Wholesale Banking & Global Market | | | 1,489 | | | | 1,489 | | | | 1,489 | |
| Pension in South América | | | 294 | | | | 252 | | | | 208 | |
| Chile | | | 121 | | | | 104 | | | | 86 | |
| Colombia | | | 236 | | | | 205 | | | | 192 | |
| Other Reporting Units | | | 13 | | | | 10 | | | | 10 | |
| | | | | | | | | | | | | |
Total | | | 16,047 | | | | 15,128 | | | | 15,634 | |
| | | | | | | | | | | | | |
Expected cash flows have been calculated using the “maximum payable dividend” for each period, considering net income and excess of minimum capital required. For financial statements and macroeconomics scenarios, a five year horizon was used to determine fair value. The risk free rate, the market risk premium and the country risk premium (when applicable) were considered to determine the discount rate used for each Reporting Unit.
Year 2008, 2007 and 2006 analysis
As of December 31, 2008, 2007 and 2006, the Group has performed the required annual impairment tests of goodwill. As a result of Step 1 procedures of the above mentioned impairment test, the carrying amount of the Reporting Unit did not exceed its fair value.
| |
| 5. | Translation of financial statements in high-inflation countries —ADJUSTMENTS RELATED TO INFLATION-DUE TO IFRS-1 |
As indicated in Note 2.2.5, afterAfter the transition date to the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, which is January 1, 2004, none of the functional currencies of the consolidated subsidiaries and associates and their branches located abroad relate to hyperinflationary economies.economies, except for Venezuela which is discussed in Item 16 below. Accordingly, excluding Venezuela, as of December 31, 2008, 20072010, 2009 and 20062008 it was not necessary to adjust the financial statements of any of the consolidated subsidiaries or associates to correct for the effect of inflation.
In accordance to the exemption provided by IFRS 1 First-time Adoption of International Financial Reporting Standards, the cumulative effect of inflation recorded prior to January 1, 2004 (transition date to EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004) mainly relating to items of property, plant and equipment has not been removed. Therefore, the previous GAAP restated amounts have been used as deemed cost of property, plant and equipment as of the transition date.
Under U.S. GAAP, in prior years the financial statements of operating units in a highly inflationary economy were remeasured as if the functional currency of the operating unit were the same as that of the parent reporting currency. For the purposes of this requirement, a highly inflationary economy is one that has cumulative inflation of approximately 100 percent or more over a 3 year period. None of the countries where BBVA owned subsidiaries are currently highly inflationary countries.countries, except Venezuela.
The adjustment reflects the reversal of the chargescredits to stockholders’shareholders’ equity arising from inflation registered in dependent companiessubsidiaries established in “non highly inflationary economies” (€191.51(decrease of €229 million, €221.02€199 million and €239.49€192 million as of December 31, 2008, 20072010, 2009 and 2006,2008, respectively).
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| 6. | Impact of SFAS 133ACCOUNTING OF DERIVATIVES — |
As of December 31, 2008,2010, the main differences between IAS 39 and SFAS 133ASC 815 that have resulted in reconciling items to net income and stockholders’shareholders’ equity between IFRS and U.S. GAAP were as follows:
Fair value option
The EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 allows for the designation of a financial asset or a financial liability as held at fair value through the profit or loss if one of the criteria described in IAS 39 is met.
FAS 115ASC 320 allows for the designation of a financial asset or a financial liability as held for trading only if these are acquired and held primarily for resale in the near term to make a profit from short-term movements in market prices.
As of December 31, 2008, 20072010, 2009 and 2006,2008, we maintained certain financial assets and financial liabilities registered at fair value through the profit or loss under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 which did not meet the conditions to be designated as financial asset or financial liability held for trading under ASC 320. With the adoption ofASC 815-15-25 those financial assets and financial liabilities meet the conditions to be designated as financial asset or financial liability held for trading. However,ASC 815-15-25 not allow retrospective application and for that reason we maintain an adjustment in the reconciliation to U.S. GAAP. This difference resultedGAAP to reflect in a reconciling item tothe net income attributable to parent company (an increase of €10 million, a decrease of €6 million and a decrease of €116 million for the years ended December 31, 2010, 2009 and 2008, respectively) and shareholders’ equity (a decrease of €116.1€67 million, an increasea decrease of €9.5€76 million and a increasedecrease of €72.40€70 million as of December 31, 2010,2009 and 2008, 2007 and 2006, respectively) and stockholders’ equity (an increase of €70.47 million, an increase of €40.38 million and a decrease of €17.18 million as of December 31, 2008, 2007 and 2006, respectively) in the reconciliation to U.S. GAAP..
Retrospective application
As of December 31, 2003, in accordance with Spanish GAAP, certain fair value hedges of fixed income securities and cash flow hedges of exchange rate risk were considered to be speculative in our U.S. GAAP reconciliation adjustment, since the required documentation was not available at the date on which the aforementioned hedges were designated as such.
As of January 1, 2004, the transition date to the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, these transactions continued to be designated as hedges, since they met all the requirements for hedge accounting.
As of December 31, 2004, in accordance with U.S. GAAP the Group maintained the criteria established in prior years and considered these transactions to be speculative, which accounted for a portion of the reconciliation adjustment for derivatives and hedges.
Consequently, there is an adjustment in the reconciliation to U.S. GAAP to reflect in the net income (a(an increase of €15 million, a decrease of €10.07 million, an increase of €16.72€34 million and a decrease of €6.03€10 million for the years ended December 31, 2010, 2009 and 2008, respectively) and in shareholders’ equity (an increase of €62 million, an increase of €69 million and an increase of €96 million as of December 31, 2008, 20072010, 2009 and 2006, respectively) and in stockholders’ equity (a decrease of €96.40 million, €108.65 million and €128.48 million as of December 31, 2008, 2007 and 2006, respectively) the speculative nature of these transactions under U.S. GAAP.
Methods used to assess hedge effectiveness
Even though the methodology to assess the hedge effectiveness is the same under both GAAPs, there are certain adjustments made in order to validate the hedge effectiveness that is permitted under the EU-IFRS required to be applied under the Bank of Spain’s CircularCircul ar 4/2004 and not under U.S. GAAP.
The EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 allows to designate a hedging instrument as hedging only a portion of the time period to maturity, and therefore adjust the effectiveness test to comply with the hedging objective. Under U.S. GAAP such hedges are not allowed.
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Consequently, in 2008 and 2007 there is an adjustment to reverse these partial hedging transactions under U.S. GAAP. This difference resulted in a reconciling item to net income (a decrease of €2.2€15 million, and an increase of €2.5€6 million and a decrease of €2 million for the years ended December 31, 2010, 2009 and 2008) and shareholders’ equity (no impact as of December 31, 2010, an increase of €14 million as of December 31, 2008 and 2007, respectively) and stockholders’ equity (a decrease of €8.78 million2009 and an increase of €10.61€9 million as of December 31, 2008 and 2007, respectively)2008) in the reconciliation to U.S. GAAP. During 2006
Macro hedges
The EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 allows for the designation of a fixed-interest deposit portfolio as a hedged item in a macro-hedge under IAS 39 (see note 15 of the Consolidated Financial Statements) . Under US GAAP those macro hedges are not allowed.
Consequently, there were no hedging transactionsis an adjustment to reverse these macro hedges under U.S. GAAP. This difference resulted in a reconciling item to net income (a decrease of these types.€44 million) and shareholders’ equity (a decrease of €44 million) in the reconciliation to U.S. GAAP as of December 31, 2010.
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Other disclosures
The fair value of derivatives that afforded hedge accounting treatment under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 but did not qualify as hedges under U.S. GAAP as of December 31, 2010, 2009 and 2008 2007 and 2006 amounted positive to €281 million, negative to €8.38 million, €113.93€4 million, and €47.34negative to €8 million, respectively.
The fair value of derivatives that afforded hedge accounting treatment under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and qualify as hedges under U.S. GAAP as of December 31, 2008, 20072010, 2009 and 20062008 amounted to €2,615.07€1,618 million, negative to €643.35€2,290 million and negative to €269.08€2,615 million, respectively.
| |
| 7. | Loans adjustmentsLOANS ADJUSTMENTS — |
As weWe described in Note 2.2.1.b toof the Consolidated Financial Statements, aour methodology to estimate the “Allowance for loan is consideredlosses” under EU-IFRS required to be an impaired loan — and therefore its carrying amount is adjusted to reflect the effect of its impairment — when there is objective evidence that events have occurred which, in the case of loans, give rise to a negative impact on the future cash flows that were estimated at the time the transaction was arranged.
The potential impairment of these assets is determined individually or collectively. The quantification of impairment losses is determined on a collective basis in the following two cases:
| | |
| • | Assets classified as impaired for customers in which the amount of their operations is less than € 1 million. |
|
| • | Asset portfolio not currently impaired but which presents an inherent loss. |
Inherent loss, calculated using statistical procedures, is deemed equivalent to the portion of losses incurred on the date that the accompanying consolidated financial statements are prepared that has yet to be allocated to specific transactions.
The Group estimates collective inherent loss of credit risk corresponding to operations realized by Spanish financial entities of the Group (approximately 68.73% of the Loans and Receivables of the Group as of December 31, 2008), using the parameters set by Annex IX of the Circular 4/2004 from Bank of Spain on the basis of its experience and the Spanish banking sector information in the quantification of impairment losses and provisions for insolvencies for credit risk.
Notwithstanding the above, the Group has historic statistical data which it used in its internal ratings models (IRBs) that were approved by the Bank of Spain for some portfolios in 2008, albeit only for the purpose of estimating regulatory capitalapplied under the new Basel Accord (BIS II). It uses these internal models to calculate the economic capital required in its activities and uses the expected loss concept to quantify the cost of credit risk for incorporation in its calculation of the risk-adjusted return on capital of its operations.
To estimate the collective loss of credit risk corresponding to operations with non Spanish residents registered in foreign subsidiaries, the Group applies similar methods and criteria, using the Bank of Spain’s parameters but adaptingCircular 4/2004. The “Allowance for loan losses” under U.S. GAAP is calculated by using our internal risk models based on our historical experience.
Given the default calendars to the particular circumstancesincrease in past-due loans beginning in mid-2007 as a result of the country. Additionally, in Mexicoeconomic crisis, during 2008 our best estimate for consumer loans, credit cards, and mortgages portfolios, as well as for credit investment maintained by the Group in the United States, internal models are used to calculate the impairment losses based on historical experience of the Group (approximately 13% of the Loans and Receivables of the Group as of December 31, 2008).
In either case, the aforementioned provisionsloan portfolio required under Circular 4/2004 from Bank of Spain standards fall within the range of provisions calculated using the Group’s internal ratings models.
For the years ended December 31, 2007 and 2006, the provisions required under Circular 4/2004 from Bank of Spain standards represented the estimate of a stress scenario located in an extreme of the range of provisions calculated using the Group’s internal ratings models. Therefore, those provisions did not represent the best estimate of allowanceprovision for loan losses under U.S. GAAP of €3,956 million, which iswas €1,152 million higher than the central scenarioprovision required to be recorded under EU-IFRS required to be applied under the Bank of the range of provisions calculated using the Group’s internal ratings models. As a consequence, there wasSpain’s Circular 4/2004.
For this reason, we included an adjustment in the reconciliation of net income attributed to U.S. GAAPparent company in order to reflect2008 which resulted in a decrease of €1,152 million in net income the reversalattributed to parent company in accordance with U.S. GAAP.
As a result of the provisions recorded in excess in each year (a decrease of €924 million and an increase of €445 millionforegoing, as of December 31, 2007 and 2006, respectively) and in
F-156
stockholders’ equity2008, the excess of the accumulated allowance“Allowance for loan losses (an increaselosses” under U.S. GAAP was very similar to the “Allowance for loan losses” under EU-IFRS required to be applied under the Bank of €1,188Spain’s Circular 4/2004: €7,412 million and an increaseunder EU-IFRS required to be applied under the Bank of €2,115Spain’s Circular 4/2004 versus €7,384 million asunder U.S. GAAP.
As of December 31, 20072010 and 2006, respectively).
For the year ended December 31, 2008,2009, there is no substantialsignificant difference in the calculation made under both GAAPs because the allowancebalance of “Allowance for loan losses calculatedlosses” under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and U.S. GAAP; for that reason there is similar to the best estimate of allowance for loan losses under U.S. GAAP, which is the central scenario determined by using our internal risk models with our historical experience. Therefore, the allowance for loan losses calculated under both GAAPs are the same and the Bank has included anno adjustment in the reconciliation ofto US GAAP that affected net income attributed to parent company statement and shareholders’ equity for that concept.
Under U.S. GAAP, the Group recognized the actuarial gains or losses in the income statement for the year 2008 in order to make equivalentwhen these losses have been incurred instead of using the allowance for loan losses under U.S. GAAP to the allowance for loan losses calculated under thecorridor approach.
F-176
Under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, (aas we mentioned in Note 2.2.12 in the accompanying Consolidated Financial Statements, the Group recognizes the actuarial gains or losses arising on certain defined benefit post-employment commitments directly under the heading “Reserves”
For this reason, we have included an adjustment in the reconciliation of net income attributed to parent company for the year ended December 31, 2010 and 2009 which resulted in a decrease of €1,152€64 million and €221 million, respectively, in net income attributed to parent company in accordance with U.S. GAAP and no effect in in shareholders’ equity as of December 31, 2008).2010 and 2009.
| |
8.9. | Tax effect ofTAX EFFECT OF U.S. GAAP adjustments and deferred taxation under SFAS No. 109ADJUSTMENTS AND DEFERRED TAXATION — |
The previous adjustments to net income attributed to parent company and stockholders’shareholders’ equity do not include their related effects on corporate tax (except for the adjustments mentioned in Item 1, the acquisitionpart of BBVA Bancomer, S.A. de C.V. described in Item 54 and loans adjustments described in Item 7,5), which are disclosed under “Tax effect of above mentioned adjustments”U.S. GAAP adjustments and deferred taxation” item in the respective reconciliation statements.
As described in Note 2.2.132.2.10 of the Consolidated Financial Statements deferred tax assets and liabilities include temporary differences measured at the amount expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their tax bases, and tax loss and tax credit carryforwards. These amounts are measured at the tax rates that are expected to apply in the year when the asset will be realized or the liability settled.
As a result of the application of Statement of Financial Accounting Standards No. 109 (“SFAS 109”),ASC 740-10, Accounting for Income Taxes, the timing differences originated by the revaluation of property and equity securities and by certain provision for coverage of loan losses have been reversed.
On July 13, 2006, the FASB issued Interpretation No. 48 “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48).ASC 740-10. This statement was issued to provide additional guidance and clarification on accounting for uncertainty in income tax positions. The interpretation prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions, as well as increased disclosure requirements with regards to uncertain tax positions.
This interpretation of FASB Statement No. 109ASC 740-10 uses a two-step approach wherein a tax benefit is recognized if a position is more likely than not to be sustained. The amount of the benefit is then measured to be the highest tax benefit which is greater than fifty percent likely to be realized. FIN 48ASC 740 also sets out disclosure requirements to enhance transparency of an entity’s tax reserves.
The Group adopted the provisions of FIN 48 effective January 1, 2007. As a result of adoption,the application ofASC 740-10, the Group recorded a decrease €34.86of €2 million, in retained earningsa decrease of €19 million and a decreasean increase of €7 million in net income of €30.76 millionattributed to parent company as of December 31, 2007.2010, 2009 and 2008 respectively. Consequently, the adoption of FIN 48ASC 740-10 provokes a decrease of €65.62€80 million, €78 million and €59 million in stockholdersshareholders’ equity as of as of December 31, 2007. Additionally, as of December 31,2010, 2009 and 2008, the Group recorded a decrease €65.62 million in retained earnings and an increase in net income of €6.80 million. Consequently, there is a decrease of €58.82 million in stockholders’ equity as of December 31, 2008.respectively.
The Group is currently under audit by taxing authorities in major taxing jurisdictions around the world. It is thus reasonably possible that changes in the gross balance of unrecognized tax benefits may occur within the next 12 months (an estimate of the range of such gross changes cannot be made), but the Group does not expect such audits to result in amounts that would cause a significant change to its effective tax rate.
In the reconciliation to U.S. GAAP, the Group has recorded deferred tax assets of negative €671.20 million, €981.35 million and €86.79 million as of December 31, 2008, 2007 and 2006 and deferred tax liabilities of negative €105.70 million, €174.9 million and €238.42 million as of December 31, 2008, 2007 and 2006, respectively.
SFAS 109ASC740-10 requires providing a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. As of December 31, 2008, 20072010, 2009 and 20062008 the valuation allowance was positive €11.42€19 million, negative €10.8€20 million and negative €45.07€22 million, respectively.
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As required by SFAS 109,ASC 740-10, the effects of the change in Spanish tax laws were included in income (see Note 32.c)21.3 of theConsolidated Financial Statements).
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The following is a reconciliation of the income tax provision under IFRS to that under U.S. GAAP:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Years Ended December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
Income tax provision under IFRS | | | 1,541 | | | | 2,079 | | | | 2,059 | | | | 1,427 | | | | 1,141 | | | | 1,541 | |
| Tax effect of U.S. GAAP adjustments and deferred taxation under SFAS 109 | | | (416 | ) | | | (283 | ) | | | (238 | ) | |
| Of which: Adjustments of deferred tax liability/assets for enacted changes in tax laws of U.S. adjustments | | | — | | | | — | | | | (326 | ) | |
| Tax effect of U.S. GAAP adjustments and deferred taxation | | | | (103 | ) | | | (103 | ) | | | (416 | ) |
| | | | | | | | | |
Income tax provision under U.S. GAAP | | | 1,125 | | | | 1,796 | | | | 1,822 | | | | 1,324 | | | | 1,038 | | | | 1,125 | |
| | | | | | | | | |
The following is a reconciliation of the deferred tax assets and liabilities recorded under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and those that should be recorded under SFAS 109:ASC 740-10:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | As of December 31,
| | As of December 31,
| | As of December 31,
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2010 | | 2009 | | 2008 |
| | | 2008 | | 2007 | | 2006 | | | Deferred
| | Deferred
| | Deferred
| | Deferred
| | Deferred
| | Deferred
|
| | | Deferred Tax
| | Deferred Tax
| | Deferred Tax
| | Deferred Tax
| | Deferred Tax
| | Deferred Tax
| | | Tax
| | Tax
| | Tax
| | Tax
| | Tax
| | Tax
|
| | | Assets | | Liabilities | | Assets | | Liabilities | | Assets | | Liabilities | | | Assets | | Liabilities | | Assets | | Liabilities | | Assets | | Liabilities |
| | | Millions of euros | | | Millions of euros |
| |
As reported under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | 5,055 | | | | (1,282 | ) | | | 4,310 | | | | (2,235 | ) | | | 4,703 | | | | (1,747 | ) | | | 5,442 | | | | (1,591 | ) | | | 4,993 | | | | (1,669 | ) | | | 5,055 | | | | (1,282 | ) |
| Less- | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less — | | | | | | | | | | | | | | | | | | | |
| Timing differences recorded under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and reversed in the reconciliation to U.S. GAAP | | | (719 | ) | | | — | | | | (1,070 | ) | | | — | | | | (1,355 | ) | | | — | | | | (467 | ) | | | (434 | ) | | | (504 | ) | | | (417 | ) | | | (548 | ) | | | (171 | ) |
| Tax effect of the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 to U.S. GAAP reconciliation adjustments | | | (1 | ) | | | — | | | | (3 | ) | | | — | | | | (14 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | — | |
| Plus- | | | | | | | | | | | | | | | | | | | | | | | | | |
| Plus — | | | | | | | | | | | | | | | | | | | |
| Tax effect of the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 to U.S. GAAP reconciliation adjustments | | | 48 | | | | (106 | ) | | | 92 | | | | (175 | ) | | | 101 | | | | (238 | ) | | | 377 | | | | (49 | ) | | | 302 | | | | (66 | ) | | | 119 | | | | (106 | ) |
As reported under SFAS 109 (gross) | | | 4,384 | | | | (1,388 | ) | | | 3,329 | | | | (2,410 | ) | | | 3,435 | | | | (1,985 | ) | |
| | | | | | | | | | | | | | | |
As reported under ASC 740 (gross) | | | | 5,352 | | | | (2,074 | ) | | | 4,791 | | | | (2,152 | ) | | | 4,625 | | | | (1,559 | ) |
| | | | | | | | | | | | | | | |
| Valuation reserve | | | 11 | | | | — | | | | (22 | ) | | | — | | | | (45 | ) | | | — | | | | (19 | ) | | | — | | | | (20 | ) | | | — | | | | (22 | ) | | | — | |
As reported under SFAS 109 (net) | | | 4,395 | | | | (1,388 | ) | | | 3,307 | | | | (2,410 | ) | | | 3,390 | | | | (1,985 | ) | |
| | | | | | | | | | | | | | | |
As reported under ASC 740 (net) | | | | 5,333 | | | | (2,074 | ) | | | 4,771 | | | | (2,152 | ) | | | 4,603 | | | | (1,559 | ) |
| | | | | | | | | | | | | | | |
F-158F-178
The following is an analysis of deferred tax assets and liabilities as of December 31, 2008, 20072010, 2009 and 20062008 estimated in accordance with U.S. GAAP:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | (Millions of euros) | | | Millions of euros | |
| |
Deferred Tax assets | | | | | | | | | | | | | | | | | | | | | | | | |
| Investments, derivatives and other | | | | 1,889 | | | | 1,360 | | | | 862 | |
| Loan loss reserves | | | 1,425 | | | | 1,042 | | | | 830 | | | | 1,648 | | | | 1,632 | | | | 1,440 | |
| Unrealized losses on securities pension liability | | | 1,654 | | | | 1,522 | | | | 1,645 | | | | 1,405 | | | | 1,485 | | | | 1,684 | |
| Fixed assets | | | 44 | | | | 47 | | | | 86 | | | | 392 | | | | 286 | | | | 44 | |
| Net operating loss carryforward | | | 38 | | | | 121 | | | | 330 | | | | 17 | | | | 26 | | | | 38 | |
| Investments and derivatives | | | 333 | | | | — | | | | 36 | | |
| Goodwill | | | (150 | ) | | | (118 | ) | | | (74 | ) | | | 2 | | | | 2 | | | | 557 | |
| Other | | | 1,039 | | | | 715 | | | | 582 | | |
| | | | | | | | | |
Total deferred tax assets | | | 4,384 | | | | 3,329 | | | | 3,435 | | | | 5,352 | | | | 4,791 | | | | 4,625 | |
| | | | | | | | | |
| Valuation reserve | | | 11 | | | | (22 | ) | | | (45 | ) | | | (19 | ) | | | (20 | ) | | | (22 | ) |
| | | | | | | | | |
Net tax asset | | | 4,395 | | | | 3,307 | | | | 3,390 | | | | 5,333 | | | | 4,771 | | | | 4,603 | |
| | | | | | | | | |
Deferred tax liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized gains on securities pension liability | | | (1 | ) | | | — | | | | (1 | ) | | | (67 | ) | | | (22 | ) | | | (1 | ) |
| Unrealized gains on investments | | | (220 | ) | | | (1,471 | ) | | | (1,450 | ) | |
| Gains on sales of investments | | | (115 | ) | | | (107 | ) | | | (135 | ) | |
| Investments and derivatives | | | | (1,195 | ) | | | (951 | ) | | | (335 | ) |
| Fixed assets | | | (11 | ) | | | (38 | ) | | | (99 | ) | | | (179 | ) | | | (91 | ) | | | (11 | ) |
| Goodwill | | | (67 | ) | | | (84 | ) | | | (148 | ) | | | (434 | ) | | | (465 | ) | | | (238 | ) |
| Other | | | (974 | ) | | | (710 | ) | | | (152 | ) | | | (199 | ) | | | (622 | ) | | | (974 | ) |
| | | | | | | | | |
Total deferred tax liabilities | | | (1,387 | ) | | | (2,410 | ) | | | (1,985 | ) | | | (2,074 | ) | | | (2,152 | ) | | | (1,559 | ) |
| Valuation reserve | | | — | | | | — | | | | — | | |
Net tax liabilities | | | (1,387 | ) | | | (2,410 | ) | | | (1,985 | ) | |
| | | | | | | | | |
Reconciliation between the federal statutory tax rate and the effective income tax rate is as follows:
| | | | | | | | | | | | | | |
| | | As of December 31,
| | As of December 31,
| | As of December 31,
| | | | | | | | | | | | | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 |
| | | % percentages | | | Percentages |
| |
Corporate income tax at the standard rate | | | 30.00 | | | | 32.50 | | | | 35.00 | | | | 30.00 | | | | 30.00 | | | | 30.00 | |
| Decrease arising from permanent differences | | | (9.96 | ) | | | (7.86 | ) | | | (7.16 | ) | | | (8.70 | ) | | | (11.04 | ) | | | (9.96 | ) |
| Adjustments to the provision for prior years’ corporate income tax and other taxes | | | 2.21 | | | | (0.15 | ) | | | 1.45 | | | | 0.92 | | | | 0.92 | | | | 2.21 | |
Income tax provision under theEU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | 22.25 | | | | 24.49 | | | | 29.29 | | | | 22.22 | | | | 19.89 | | | | 22.25 | |
| Tax effect of U.S. GAAP adjustments and deferred taxation under SFAS 109 | | | (0.59 | ) | | | 0.44 | | | | (2.48 | ) | |
| Tax effect of U.S. GAAP adjustments and deferred taxation under ASC 740 | | | | (0.24 | ) | | | (0.11 | ) | | | (2.03 | ) |
Income tax provision under U.S. GAAP | | | 21.65 | | | | 24.93 | | | | 26.81 | | | | 21.98 | | | | 19.78 | | | | 20.22 | |
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| |
9.10. | Other Comprehensive IncomeOTHER COMPREHENSIVE INCOME — |
SFAS No. 130,ASC220-10, Reporting Comprehensive Income establishes standards for disclosing information related to comprehensive income and its components in a full set of general-purpose financial statements.
Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.
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The accumulated balances of other comprehensive income as of December 31, 2008, 20072010, 2009 and 20062008 were as follows:
| | | | | | | | | | | | | | | | | |
| | | Foreign
| | | | | | | | | | |
| | | Currency
| | | Unrealized
| | | Gains on
| | | Other
| |
| | | Translation
| | | Gains on
| | | Derivative
| | | Comprehensive
| |
| | | Adjustments | | | Securities | | | Instruments | | | Income | |
| | | Millions of euros | |
| |
Balance as of December 31, 2006 | | | (3,292 | ) | | | 3,240 | | | | 17 | | | | (35 | ) |
| Changes in 2007 | | | (1,873 | ) | | | 487 | | | | 285 | | | | (1,101 | ) |
Balance as of December 31, 2007 | | | (5,165 | ) | | | 3,727 | | | | 302 | | | | (1,137 | ) |
| Changes in 2008 | | | (1,001 | ) | | | (2,657 | ) | | | 175 | | | | (3,483 | ) |
Balance as of December 31, 2008 | | | (6,166 | ) | | | 1,070 | | | | 477 | | | | (4,619 | ) |
| | | | | | | | | | | | | | | | | |
| | | Foreign
| | | | | | | | | | |
| | | Currency
| | | | | | Derivative
| | | | |
| | | Translation
| | | Unrealized
| | | Instruments and
| | | Total Other
| |
| | | Adjustments
| | | Gains on
| | | Hedging
| | | Comprehensive
| |
| | | and Others | | | Securities | | | Activities | | | Income | |
| | | Millions of euros | |
| |
Balance as of December 31, 2008 | | | (6,166 | ) | | | 1,070 | | | | 477 | | | | (4,619 | ) |
| | | | | | | | | | | | | | | | | |
| Changes in 2009 | | | (76 | ) | | | 943 | | | | (4 | ) | | | 863 | |
| | | | | | | | | | | | | | | | | |
Balance as of December 31, 2009 | | | (6,242 | ) | | | 2,013 | | | | 473 | | | | (3,756 | ) |
| | | | | | | | | | | | | | | | | |
| Changes in 2010 | | | 1,784 | | | | (1,680 | ) | | | (531 | ) | | | (427 | ) |
| | | | | | | | | | | | | | | | | |
Balance as of December 31, 2010 | | | (4,458 | ) | | | 333 | | | | (58 | ) | | | (4,183 | ) |
| | | | | | | | | | | | | | | | | |
Taxes allocated to each component of other comprehensive income as of December 2008, 200731, 2010, 2009 and 20062008 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Before
| | | Tax
| | | | | | | | | Tax
| | | | | | Before
| | | Tax
| | | | |
| | | Tax
| | | Expense or
| | | Net of Tax
| | | Before Tax
| | | Expense or
| | | Net of Tax
| | | Tax
| | | Expense or
| | | Net of Tax
| |
| | | Amount | | | Benefit | | | Amount | | | Amount | | | Benefit | | | Amount | | | Amount | | | Benefit | | | Amount | |
| | | Millions of Euros | |
| |
| Foreign currency translations adjustment | | | (1,001 | ) | | | — | | | | (1,001 | ) | | | (1,873 | ) | | | — | | | | (1,873 | ) | | | (709 | ) | | | — | | | | (709 | ) |
| Unrealized gains on securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized holding gains arising during the period | | | (3,454 | ) | | | 797 | | | | (2,657 | ) | | | 633 | | | | (146 | ) | | | 487 | | | | 425 | | | | (314 | ) | | | 111 | |
| Derivatives Instruments and Hedging Activities | | | 228 | | | | (53 | ) | | | 175 | | | | 370 | | | | (85 | ) | | | 285 | | | | 139 | | | | (32 | ) | | | 107 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income | | | (4,227 | ) | | | 744 | | | | (3,483 | ) | | | (871 | ) | | | (231 | ) | | | (1,102 | ) | | | (145 | ) | | | (346 | ) | | | (491 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | | | | Tax
| | | | | | | | | Tax
| | | | | | | | | Tax
| | | | |
| | | Before
| | | Expense
| | | Net of
| | | Before
| | | Expense
| | | Net of
| | | Before
| | | Expense
| | | Net of
| |
| | | Tax
| | | or
| | | Tax
| | | Tax
| | | or
| | | Tax
| | | Tax
| | | or
| | | Tax
| |
| | | Amount | | | Benefit | | | Amount | | | Amount | | | Benefit | | | Amount | | | Amount | | | Benefit | | | Amount | |
| | | Millions of euros | |
| |
| Foreign Currency Translation Adjustments and Others | | | 1,784 | | | | — | | | | 1,784 | | | | (76 | ) | | | — | | | | (76 | ) | | | (1,001 | ) | | | — | | | | (1,001 | ) |
| Unrealized Gains on Securities | | | (2,184 | ) | | | 504 | | | | (1,680 | ) | | | 1,221 | | | | (278 | ) | | | 943 | | | | (3,454 | ) | | | 797 | | | | (2,657 | ) |
| Derivative Instruments and Hedging Activities | | | (691 | ) | | | 159 | | | | (531 | ) | | | (5 | ) | | | 1 | | | | (4 | ) | | | 228 | | | | (53 | ) | | | 175 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Other Comprehensive Income | | | (1,091 | ) | | | 663 | | | | (427 | ) | | | 1,140 | | | | (277 | ) | | | 863 | | | | (4,227 | ) | | | 744 | | | | (3,483 | ) |
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10.11. | Earnings per shareEARNINGS PER SHARE — |
SFAS No. 128,ASC 260, Earnings per Share, specifies the computation, presentation and disclosure requirements for earnings per share (EPS).
Basic earnings per share is computed by dividing income available to common stockholdersshareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator), which may include contingently issuable shares where all necessary conditions for issuance have been satisfied. Diluted earnings per share include the determinants of basic earnings per share and, in addition, give effect to dilutive potential common shares that were outstanding during the period.
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The computation of basic and diluted earnings per share as offor the year ended December 31, 2008, 20072010, 2009 and 20062008 is presented in the following table:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros, except per share data | |
| |
Numerator for basic earnings per share: | | | | | | | | | | | | |
Income available to common stockholders(EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004) | | | 5,020 | | | | 6,126 | | | | 4,736 | |
| Income available to common stockholders (U.S. GAAP): | | | 4,070 | | | | 5,409 | | | | 4,972 | |
Numerator for diluted earnings per share: | | | | | | | | | | | | |
Income available to common stockholders(EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004) | | | 5,020 | | | | 6,126 | | | | 4,736 | |
| Income available to common stockholders (U.S. GAAP): | | | 4,070 | | | | 5,409 | | | | 4,972 | |
Denominator for basic earnings per share | | | 3,706,000,000 | | | | 3,593,940,198 | | | | 3,405,418,793 | |
Denominator for diluted earnings per share | | | 3,706,000,000 | | | | 3,593,940,198 | | | | 3,405,418,793 | |
| EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 | | | | | | | | | | | | |
| Basic earnings per share (Euros) | | | 1.35 | | | | 1.70 | | | | 1.39 | |
| Diluted earnings per share (Euros) | | | 1.35 | | | | 1.70 | | | | 1.39 | |
| U.S. GAAP | | | | | | | | | | | | |
| Basic earnings per share (Euros) | | | 1.10 | | | | 1.50 | | | | 1.46 | |
| Diluted earnings per share (Euros) | | | 1.10 | | | | 1.50 | | | | 1.46 | |
| | | | | | | | | | | | | |
| | | Year Ended December 31, |
| | | 2010 | | 2009 | | 2008 |
| | | Millions of euros, except per share data |
| |
Numerator for basic earnings per share: | | | | | | | | | | | | |
| Income available to common shareholders (IFRS)(*) | | | 4,676 | | | | 4,228 | | | | 5,020 | |
| Income available to common shareholders (U.S. GAAP) | | | 4,299 | | | | 3,825 | | | | 4,070 | |
Numerator for diluted earnings per share: | | | | | | | | | | | | |
| Income available to common shareholders (IFRS)(*) | | | 4,676 | | | | 4,228 | | | | 5,020 | |
| Income available to common shareholders (U.S. GAAP) | | | 4,369 | | | | 3,843 | | | | 4,070 | |
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| | | | | | | | | | | | | |
| | | Year Ended December 31, |
| | | 2010 | | 2009 | | 2008 |
| | | Millions of euros, except per share data |
| |
Denominator for basic earnings per share | | | | | | | | | | | | |
| IFRS(*) | | | 3,982,754,198 | | | | 3,899,289,696 | | | | 3,846,156,552 | |
| U.S. GAAP | | | 3,761,698,126 | | | | 3,719,162,366 | | | | 3,706,204,569 | |
Denominator for diluted earnings per share | | | | | | | | | | | | |
| IFRS(*) | | | 3,982,754,198 | | | | 3,899,289,696 | | | | 3,846,156,552 | |
| U.S. GAAP | | | 3,982,754,198 | | | | 3,758,316,634 | | | | 3,706,204,569 | |
IFRS(*)(**) | | | | | | | | | | | | |
| Basic earnings per share (Euros) | | | 1.17 | | | | 1.08 | | | | 1.31 | |
| Diluted earnings per share (Euros) | | | 1.17 | | | | 1.08 | | | | 1.31 | |
U.S. GAAP(**) | | | | | | | | | | | | |
| Basic earnings per share (Euros) | | | 1.14 | | | | 1.03 | | | | 1.10 | |
| Diluted earnings per share (Euros) | | | 1.10 | | | | 1.02 | | | | 1.10 | |
At AGM held on March 13, 2009, the shareholders approved a resolution to supplement the 2008 cash dividend with a pay-out in kind of part of the share premium reserve, by delivering 60.451.115 BBVA treasury stocks. The Earnings per share ratios under EU-IFRS above would be 1.33, 1.68, 1.37 for the year 2008, 2007 and 2006, respectively. The earnings per share ratios under U.S. GAAP above would be 1.08, 1.48, 1.43 for the year 2008, 2007 and 2006, respectively.
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| (*) | | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. The presentation and disclosure requirements for earnings per share (EPS) under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 is presented in Note 5 of the Consolidated Financial Statements. |
|
| (**) | | At the date of the issuance of these financial statements, the scrip dividend (“Dividendo Opción”) mentioned in Note 4 to the Consolidated Financial Statements is not distributed. Therefore, the conditions to restate the Earning per share under IAS 33 and ASC 260 are not met. |
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11.12. | FIN 46-RASC 810- CONSOLIDATION OF SPECIAL PURPOSE ENTITIES — |
We arranged the issuance of preferred shares using special purpose vehicles (See Note 22.4.3.2)23.4.3.2 of the Consolidated Financial Statements). Our preferred security transactions are based on the following model:
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| | • | We are the sponsor in the issuance of certain debentures by special purpose vehicles (SPEs) (the issuer of preference shares) that we incorporated and for which we hold 100% of the common stock and voting rights. |
The SPEs issue preferred securities to 3rd party investors. The terms of the preferred securities are issued in perpetuity with fixed dividend coupon and can be called by the SPEs (what are the conditions for calling)SPEs.
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| | • | The SPEs lend both the proceeds raised from the preferred securities and the common stock back to us through intercompany loans with fixed maturities and fixed interest rate similar to that the dividend coupon on the preferred securities issued by the SPEs. Consequently, the SPEs use the cash received from interest payments on BBVA loans to pay dividends to the preferred securities holders. |
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| | • | We guarantee the dividend payments on the preferred securities. |
We consolidated the SPEs under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 according to SIC 12 as we controlled them. However, under U.S. GAAP, BBVA does not consolidate the special purpose vehicle (issuer) as we have concluded that we are not the primary beneficiary as considered byFIN 46-R ASC 810 for the reasons described below.
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We as sponsor of the issuer of the preference shares neither have a significant residual interest held since our common shares are not viewed as equity at risk as our investment is returned back to us through the intercompany loan, nor the loan payable to the special purpose vehicle would be considered variable interests since they assume variability. Additionally, the fact that BBVA unconditionally guarantees the trust preferred securities is not relevant, since BBVA is guaranteeing its own obligations.
Under U.S. GAAP we consider the investments in the common stock of this class of special purpose vehicles as equity-method investees according to APB Opinion No. 18.investees.
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As a result of the deconsolidation of the SPEs, the loans received from the SPEs are presented as financial liabilities under U.S. GAAP.
Consequently, the deconsolidation of the entities described in Note 22.4.3.2 to our23.4.3.2 of the Consolidated Financial Statements, has no impact on stockholdersshareholders’equity or net income attributed to parent company under U.S. GAAP. These financial instruments that are presented under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 in the caption “Subordinated liabilities — preferences shares” are presented under U.S. GAAP under the caption “Time deposits” (€5,4645,233 million).
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12.13. | Statement of Financial Accounting Standards No. 157: “Fair Value Measurement”OTHER ACCOUNTING STANDARDS EFFECTIVE IN 2010 — |
In September 2006, the FASB issued this Statement that defines fair value, establishes a frameworkASC 860 — Transfers and Servicing 166 — Accounting for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. BBVA Group adopted FAS 157 and the adoption did not have a significant effect in our results of operations, financial position or cash flows. The disclosure about fair value measurements is presented in Notes 7 and 8.
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13. | Other Accounting Standards |
StatementTransfers of Financial Accounting Standards No. 159: “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”140
In February 2007 the FASB issued this Statement that includes an amendment of FASB Statements No. 115, “Accounting for Certain InvestmentsThe Board’s objective in Debt and Equity Securities”. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option inissuing this Statement is similar, but not identical, to improve the fair value optionrelevance, representational faithfulness, and comparability of the information that a reporting entity provides in IAS 39, Financial Instruments: Recognitionits financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and Measurement.cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets.
On and after the effective date of this SFAS, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities (as defined under previous accounting standards) should be evaluated for consolidation by reporting entities in accordance with the applicable consolidation guidance. If the evaluation on the effective date results in consolidation, the reporting entity should apply the transition guidance provided in the pronouncement that requires consolidation.
This Statement is effectiveapplied as of the beginning of aneach reporting entity’s first fiscal yearannual reporting period that begins after November 15, 2007. Early adoption2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is permitted as of the beginning of a fiscal year that beginsprohibited. This Statement must be applied to transfers occurring on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements. No entity is permitted to apply the Statement retrospectively to fiscal years precedingafter the effective date unless the entity chooses early adoption.
BBVA Group elected not to apply the fair value option established by this Statement.
Statement of Financial Accounting Standards No. FAS 158: “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132”
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 158,Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R). SFAS No. 158 requires employers to recognize a net liability or asset and an offsetting adjustment to accumulate other comprehensive income to report the funded status of defined benefit pension and other post-retirement benefit plans. Previous standards required employers to disclose the complete funded status of its plans only in the notes to the financial statements.
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Additionally, SFAS No. 158 requires employers to measure plan assets and obligations at their year-end balance sheet date. Guidance relating to the recognition of the over or under funded status of the plan and additional disclosure requirements was effective for our fiscal year ended December 31, 2006. Under IFRS and U.S. GAAP, actuarial gains or losses (arising from differences between the actuarial assumptions and what had actually occurred) and prior service cost (there are no transition cost), were recognized in the consolidated income statements (see Note 2.2.4). Therefore, it did not have impact on the results of operations, financial position or cash flows. Guidance relating to the measurement date of the plans is effective for the years ending after December 15, 2008 and theThe adoption of this standard did not have a significant impact in our results of operations, financial position or cash flows, due to the fact that measurement date is December 31 for each fiscal year (see Note 27 “Commitments with personnel”).
FSPFAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13”
This FASB Staff Position (FSP) was issued in February 2008, is effective upon the initial adoption of Statement 157 and amends FASB Statement No. 157, Fair Value Measurements, to exclude FASB Statement No. 13, Accounting for Leases, and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under Statement 13. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value under FASB Statement No. 141, Business Combinations, or No. 141 (revised 2007), Business Combinations, regardless of whether those assets and liabilities are related to leases.
BBVA Group adopted this FSP and the adoptionnew statement did not have a significant effect in our results of operations, financial position or cash flows.
ASC 810 — Consolidation — Amendments to FASB Interpretation No. 46(R)
This Statement amends Interpretation 46(R) (ASC 810) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has both of the following characteristics:
a. The power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance.
b. The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.
This Statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The adoption of this new statement did not have a significant effect in our results of operations, financial position or cash flows.
ASUNo. 2009-5 Fair Value Measurements and Disclosures (ASC820-10) — Measuring Liabilities at Fair Value
This ASU amends Subtopic820-10, Fair Value Measurements and Disclosures — Overall, to clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques:
1. A valuation technique that uses:
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14. | New Accounting Standards• | The quoted prices of the identical liability when traded as an asset |
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| • | Quoted prices for similar liabilities or similar liabilities when traded as assets. |
F-182
FASB Staff PositionNo. FAS 157-2 “Effective Date2. Another valuation technique that is consistent with the principles of FASB Statement No. 157”ASC 820, for example a present value technique, or a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability.
In February 2008,The Update is effective for the FASB releasedfirst reporting period (including interim periods) beginning after August 2009. The adoption of this new statement did not have a proposed FASB Staff Position (FSPsignificant effect in our results of operations, financial position or cash flows.
SFAS 157-2ASUNo. 2009-15 — Effective DateAccounting for Own-Share Lending Agreements in Contemplation of FASB Statement No. 157)Convertible Debt Issuance
This ASU modifies Subtopic470-20 Debt — Debt with Conversion and Other options.ASC 470-20 addresses the issues arisen when an entity for which delayed the effectivecost to an investment banking firm or third-party investors of borrowing its shares is prohibitive enters into share-lending arrangements that are executed separately but in connection with a convertible debt offering.
The amendments establish that at the date of SFAS No. 157 untilissuance, the share lending arrangement shall be measured at fair value and recognised as an issuance cost, with an offset to additional paid-in capital in the financial statements of the entity. The loaned shares will be excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs, at which time the loaned shares would be included in the basic and diluted earnings- per- share calculation. Additionally, if it becomes probable that the counterparty to a share- lending arrangement will default, the issuer of the share- lending arrangement shall recognize an expense equal to the fair value of the unreturned shares, net of the fair value of probable recoveries, with an offset to additional paid- in capital and subsequent changes in the amount of the probable recoveries should also be recognized in earnings.
The Update is effective for fiscal years beginning on or after NovemberDecember 15, 2008,2009, and interim periods within those fiscal years for arrangement outstanding as of the beginning of those fiscal years. Additionally the amendments are to be applied retrospectively for all non-financialarrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009. The adoption of this new statement did not have a significant effect in our results of operations, financial position or cash flows.
ASU2010-06 Fair Value Measurements and Disclosures (ASC 820): Improving Disclosures about Fair Value Measurements
This ASU provides amendments to Subtopic820-10 that require new disclosures and clarify existing disclosures related to Fair Value Measurements. Entities will be required to present new disclosures about transfers in and out Levels 1 and 2 and about purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). The amendments also clarify existing disclosures to require disclosures about fair value measurement for each class of assets and nonfinancial liabilities except those that are recognized or disclosed atand about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3.
The Update is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in Level 3 that will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this new statement did not have a significant effect in our results of operations, financial position or cash flows.
ASU2010-09 Subsequent Events (ASC 855)- Amendments to Certain Recognition and Disclosure Requirements
This ASU modifies as follows Subtopic855-10, in order to alleviate potential conflicts with current SEC requirements:
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| • | An entity that is a SEC filer is required to evaluate subsequent events through the date that the financial statements are issued, but is not required to disclose the date through which subsequent events have been evaluated. |
F-183
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| • | An entity that is a conduit bond obligor for conduit debt securities that are traded in a public market is required to evaluate subsequent events through the date that the financial statements are issued and must disclose such date. |
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| • | All other entities will continue to be required to evaluate subsequent events through the date the financial statements are available to be issued, and must disclose such date |
The scope of the reissuance disclosure requirements have been refined to apply only to “revised” financial statements. Revised financial statements include financial statements revised either as a result of (a) correction of an error or (b) retrospective application of U.S. generally accepted accounting principles. If the financial statements of an entity, other than an SEC filer, are revised, as defined, the entity should retain the initial date, but also disclose the date through which subsequent events have been evaluated in the revised financial statements.
For entities, other than conduit bond obligors, the provisions of ASU2010-09, Amendments to Certain Recognition and Disclosure Requirements, are effective upon issuance. Conduit bond obligors are required to apply the ASU’s requirements in fiscal periods ending after June 15, 2010. The adoption of this new statement did not have a significant effect in our results of operations, financial position or cash flows.
ASU2010-10 Consolidation (ASC 810): Amendments for Certain Investment Funds
This ASU amends ASC 810 to defer the application of the consolidation requirements resulting from the issuance of Statement 167 for a reporting entity’s interest in an entity (1) that has all the attributes of an investment company or (2) for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies.
An entity that qualifies for the deferral will continue to be assessed under the overall guidance on the consolidation of variable interest entities in Subtopic810-10 (before the Statement 167 amendments) or other applicable consolidation guidance, such as the guidance for the consolidation of partnerships in Subtopic810-20.
The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009, and for interim periods within that first annual reporting period. The effective date coincides with the effective date for the Statement 167 amendments to ASC 810. Early application is not permitted. The adoption of this new statement did not have a significant effect in our results of operations, financial position or cash flows.
ASU2010-19 Foreign Currency (Topic 830) — Foreign Currency Issues: Multiple Foreign Currency Exchange Rates
This ASU amends Section S99 -SEC Materialsof Subtopic830-30 —Foreign Currency Matters — Translation of Financial Statementsto establish that, for any SEC registrants, in cases where reported balances for financial reporting purposes differ from the actual U.S. dollar denominated balances, the registrant should make disclosures that inform users of the financial statements as to the nature of these differences.
Venezuela has met the thresholds for being considered highly inflationary and accordingly, calendar year entities that have not previously accounted for their Venezuelan investment as highly inflationary will begin applying highly inflationary accounting beginning January 1, 2010. Upon the application of highly inflationary accounting requirements, a U.S. reporting currency parent and subsidiary effectively utilize the same currency (U.S. dollars) and accordingly there should no longer be any differences between the amounts reported for financial reporting purposes and the amount of any underlying U.S. dollar denominated values that are held by the subsidiary.
This ASU also amends section S99 of Subtopic830-30 to require that, for any SEC registrants, any differences that may have existed prior to applying highly inflationary accounting requirements between the reported balances for financial reporting and the U.S. dollar denominated balances should be recognized in the income statement at the time of adoption of highly inflationary accounting, unless the registrant can document that the difference was previously recognized as a cumulative translation adjustment (in which case the difference should be recognized as an adjustment to the cumulative translation adjustment).
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The provisions of this ASU are effective upon issuance (May 11, 2010). The adoption of this new statement did not have a significant effect in our results of operations, financial position or cash flows.
ASU2010-20 Receivables (Topic 310) — Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses and ASU2011-01 Receivables (Topic 310 ) Deferral of the Effective date of Disclosures about Troubled Debt Restructurings in UpdateNo. 2010-20
ASU2010-20 amends Topic 605 to enhance disclosures about the credit quality of financing receivables and the allowance for credit losses.
Existing disclosures are amended to require an entity to provide the following disclosures about its financing receivables on a recurring basis (at least annually). disaggregated basis:
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| • | A rollforward schedule of the allowance for credit losses from the beginning of the reporting period to the end of the reporting period on a portfolio segment basis, with the ending balance further disaggregated on the basis of the impairment method |
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| • | For each disaggregated ending balance in item (1) above, the related recorded investment in financing receivables |
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| • | The nonaccrual status of financing receivables by class of financing receivables |
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| • | Impaired financing receivables by class of financing receivables. |
The CompanyASU also requires an entity to provide the following additional disclosures about its financing receivables:
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| • | Credit quality indicators of financing receivables at the end of the reporting period by class of financing receivables |
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| • | The aging of past due financing receivables at the end of the reporting period by class of financing receivables |
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| • | The nature and extent of troubled debt restructurings that occurred during the period by class of financing receivables and their effect on the allowance for credit losses |
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| • | The nature and extent of financing receivables modified as troubled debt restructurings within the previous 12 months that defaulted during the reporting period by class of financing receivables and their effect on the allowance for credit losses |
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| • | Significant purchases and sales of financing receivables during the reporting period disaggregated by portfolio segment. |
For public entities the amendments in this update are effective for interim and annual reporting periods ending on or after December 15, 2010.
ASU2011-01 defers the effective date of ASU2010-20 for the new disclosures about troubled debt restructurings for public entities so that it will be the same as the effective date for the guidance for determining what constitutes a troubled debt restructuring. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The Bank does not anticipate that the adoption of this new statement at the required effective date will have a significant effect in its results of operations, financial position or cash flows.
Statement of FinancialASU2010-25 Plan Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51Defined Contribution Pension Plans (Topic 962)
This Statement was issuedASU amends Topic 962 to clarify how loans to participants should be classified and measured by defined contribution pension benefit plans.
Participant loans are currently classified as investments and are usually measured at fair value. The amendments in December 2007,this Update require that participant loans be classified as notes receivable from participants, which are segregated from plan investments and ismeasured at their unpaid principal balance plus any accrued but unpaid interest.
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The amendments in this Update should be applied retrospectively to all prior periods presented, effective for fiscal years and interim periods within those fiscal years, beginning on orending after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier2010. Early adoption is prohibited. It amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this Statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This Statement improves comparability by eliminating that diversity.permitted. The Company does not anticipate that the adoption of this new statement at the required effective date willdid not have a significant effect in itsour results of operations, financial position or cash flows.
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Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities
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| 14. | NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE AS OF DECEMBER 31, 2010 |
In March 2008 the FASB issued FASB Statement ASUNo. 161,Disclosures about Derivative Instruments and Hedging Activities.2009-13 Revenue Recognition (ASC605-25) — Multiple-Deliverable Revenue ArrangementsThe new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows.
FASB Statement No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk — related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments.
This StatementASU provides amendments to the criteria in Subtopic605-25 for separating consideration in multiple-derivable arrangements to establish a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor- specific objective evidence if available, third-party evidence if vendor- specific objective evidence is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.not available, or estimated selling price if neither vendor- specific objective evidence nor third- party evidence is available.
The Groupamendments eliminate the residual method of allocation and require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. The ASU also requires that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.
The Update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Bank does not anticipate that the adoption of this new statement at the required effective date will have a significant effect in its results of operations, financial position or cash flows.
Statement of Financial Accounting Standards ASUNo. 141 (revised 2007), Business Combinations2009-14 Software (ASC985-605) — Certain Revenue Arrangements That Include Software Elements
This revision was issued in December 2007,ASU changes the accounting model for revenue arrangements that include both tangible products and is effective for business combinations for whichsoftware elements. Tangible products containing software components and nonsoftware components those functions together to deliver the acquisition date is on or aftertangible product’s essential functionality are no longer within the beginningscope of the first annual reporting periodsoftware revenue guidance in subtopic958-605. Additionally, the amendments establish that if an undelivered element relates to a deliverable within the scope of Subtopic985-605 and a deliverable excluded from the scope of Subtopic985-605, the undelivered element shall be bifurcated into a software deliverable and a nonsoftware deliverable.
The Update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after DecemberJune 15, 2008. This Statement replaces FASB Statement No. 141, Business Combinations and establishes principles and requirements for how2010, with early adoption permitted. A vendor is required to adopt the acquirer:
1. Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interestamendments in the acquiree
2. Recognizes and measuressame period using the goodwill acquiredsame transition method that it uses to adopt the amendments in the business combination or a gain from a bargain purchase
3. Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.
This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination.Update2009-13 Revenue Recognition (ASC605-25) -Multiple-Deliverable Revenue Arrangements. The CompanyBank does not anticipate that the adoption of this new statement at the required effective date will have a significant effect in its results of operations, financial position or cash flows.
FSPASUFAS 140-3,2010-13 “Accounting for TransfersCompensation — Stock Compensation (Topic 718) — Effect of Financial Assets and Repurchase Financing Transactions”Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades
This standard was issuedASU amends Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in February 2008, andthe currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity.
The amendments in this Update are effective for financial statements issued for fiscal years, beginning after November 15, 2008, and interim periods within those fiscal years.years, beginning on or after December 15, 2010. The amendments in this Update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. Earlier application is not permitted. The objective of this FSP is to provide guidance on accounting for a transfer of a financial asset and a repurchase financing. This FSP presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under Statement 140. However, if certain criteria are met, the initial transfer and repurchase financing shall not be evaluated as a linked transaction and shall be evaluated separately under Statement 140. The CompanyBank does not anticipate that the adoption of this new statement at the required effective date will have a significant effect in its results of operations, financial position or cash flows.
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StatementASU2010-15 Financial Services — Insurance (Topic 944) — How Investments Held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Financial Accounting Standards No. 163, “Accounting for Financial Guarantee Insurance Contracts — an interpretation of FASB Statement No. 60”Those Investments
Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60,Accounting and Reporting by Insurance Enterprises.That diversity results in inconsistencies in the recognition and measurement of claim liabilities because of differing views about when a loss has been incurred under FASB Statement No. 5,Accounting for Contingencies.This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements.
This StatementASU amendmends Subtopic944-80Financial Services — Insurance — Separate Accountsto clarify that:
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| • | An insurance entity should not consider any separate account interests held for the benefit of policy holders in an investment to be the insurer’s interests and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation, unless the separate account interests are held for the benefit of a related party policy holder as defined in theVariable InterestSubsections of Subtopic810-10Consolidation-Overalland those subsections require the consideration of related parties. |
|
| • | For the purpose of evaluating whether the retention of specialized accounting for investments in consolidation is appropriate, a separate account arrangement should be considered a subsidiary. |
|
| • | An insurer is not required to consolidate an investment in which a separate account holds a controlling financial interest if the investment is not or would not be consolidated in the standalone financial statements of the separate account. |
This ASU also provides guidance on how an insurer should consolidate an investment fund in situations in which the insurer concludes that consolidation is required.
The amendments in this Update are effective for financial statements issued forfiscal years, and interim periods within those fiscal years, beginning after December 15, 2008, and2010. Early adoption is permitted. The amendments in this Update should be applied retrospectively to all interimprior periods within those fiscal years, except for some disclosures aboutupon the insurance enterprise’s risk-management activities. This Statement requiresdate of adoption. The Bank does not anticipate that disclosures about the risk-management activities of the insurance enterprise be effective for the first period (including interim periods) beginning after issuanceadoption of this Statement. Except for those disclosures, earlier application is not permitted.
Statement of Financial Accounting Standards No. 162, “The Hierarchy of Generally Accepted Accounting”
This Statement identifiesnew statement at the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).
This Statement isrequired effective on November 15, 2008.
BBVA Group adopted FAS 162 and the adoption did notdate will have a significant effect in ourits results of operations, financial position or cash flows.
FSPASUFAS 142-3,2010-17 ‘‘DeterminationRevenue Recognition — Milestone Method (Topic 605) — Milestone Method of the Useful Life of Intangible Assets”Revenue Recognition
This standard was issuedASU amends Topic 605 to determine when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. The amendments establish that a vendor can recognize consideration that is contingent upon achievement of a milestone in April 2008,its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive.
A milestone should be considered substantive in its entirety and may not be bifurcated. Whether a milestone is substantive has to be determined at the inception of the arrangement and the following criteria should be met for a milestone to be considered substantive:
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| • | Be commensurate with either a)The vendor’s performance to achieve the milestone, or b)The enhancement of the value of the item delivered as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone |
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| • | Relate solely to past performance |
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| • | Be reasonable relative to all deliverables and payment terms in the arrangement. |
An arrangement may include more than one milestone, and each milestone should be evaluated separately to determine whether the milestone is substantive. Accordingly, an arrangement may contain both substantive and nonsubstantive milestones.
A vendor’s decision to use the milestone method of revenue recognition for transactions within the scope of the amendments in this Update is a policy election. Other proportional revenue recognition methods also may be applied as long as the application of those other methods does not result in the recognition of consideration in its entirety in the period the milestone is achieved.
The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. A vendor may
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elect, but is not required, to adopt the amendments in this Update retrospectively for all prior periods. The Bank does not anticipate that the adoption of this new statement at the required effective date will have a significant effect in its results of operations, financial position or cash flows.
ASU2010-18 Receivables (Topic 310) — Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset
As a result of the amendments in this Update, modifications of loans that are accounted for within a pool under Subtopic310-30Receivables-Loans and Debt Securities acquired with Deteriorated Credit Qualitydo not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. Accounting for troubled debt restructuring would not apply to individual loans within a pool, and modified loans should remain within the pool. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change.
The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early application is permitted. Upon initial adoption of the guidance in this Update, an entity may make a onetime election to terminate accounting for loans as a pool under Subtopic310-30. This election may be applied on apool-by-pool basis. The Bank does not anticipate that the adoption of this new statement at the required effective date will have a significant effect in its results of operations, financial statements issuedposition or cash flows.
ASU2010-26 Financial Services — Insurance (Topic 944) Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
This ASU amends Topic 944 to clarify which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral, and specify that the following costs incurred in the acquisition of new and renewal contracts should be capitalized:
1. Incremental direct costs of contract acquisition. Incremental direct costs are those costs that result directly from and are essential to the contract transaction(s) and would not have been incurred by the insurance entity had the contract transaction(s) not occurred.
2. Certain costs related directly to the following acquisition activities performed by the insurer for the contract:
a. Underwriting
b. Policy issuance and processing
c. Medical and inspection
d. Sales force contract selling.
The costs related directly to those activities include only the portion of an employee’s total compensation (excluding any compensation that is capitalized as incremental direct costs of contract acquisition) and payroll-related fringe benefits related directly to time spent performing those activities for actual acquired contracts and other costs related directly to those activities that would not have been incurred if the contract had not been acquired.
3. Advertising costs should be included in deferred acquisition costs only if the capitalization criteria in the direct-response advertising guidance in Subtopic340-20, Other Assets and Deferred Costs — Capitalized Advertising Costs, are met.
The amendments in this Update should be applied prospectively for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2008,2011. Retrospective application to all prior periods presented upon the date of adoption also is permitted, but not required. Early adoption is permitted, but only at the beginning of an entity’s annual reporting period. The Bank does not anticipate that the adoption of this new statement at the required effective date will have a significant effect in its results of operations, financial position or cash flows.
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ASU2010-28 Intangibles — Goodwill and Other (Topic 350) When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts
Under Topic 350 on goodwill and other intangible assets, testing for goodwill impairment is a two-step test. When a goodwill impairment test is performed (either on an annual or interim basis), an entity must assess whether the carrying amount of a reporting unit exceeds its fair value (Step 1). If it does, an entity must perform an additional test to determine whether goodwill has been impaired and to calculate the amount of that impairment (Step 2).
The amendments in this Update modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist.
For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years. Earlier applicationyears, beginning after December 15, 2010. Early adoption is not permitted. The objectiveBank does not anticipate that the adoption of this FSP is to amendnew statement at the factors that should be consideredrequired effective date will have a significant effect in developing renewalits results of operations, financial position or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (revised 2007),flows.
ASU2010-29 Business Combinations and other U.S. generally accepted accounting principles (GAAP).
Under paragraph 11(Topic 805) Disclosure of FASB Statement No. 142, the determination of the useful life would include consideration of any legal, regulatory, or contractual provisions that enable renewal or extension of the asset’s legal or contractual life without substantial cost.Supplementary Pro Forma Information for Business Combinations
This FSP statesASU amends Topic 805 to clarify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.
The amendments also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in developing assumptions about renewalthe reported pro forma revenue and earnings.
The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or extension usedafter the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The Bank does not anticipate that the adoption of this new statement at the required effective date will have a significant effect in its results of operations, financial position or cash flows.
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| 15. | OTHER INFORMATION — VENEZUELA |
As indicated in Note 2.2.23 of the Consolidated Financial Statements, the Venezuelan economy was considered to determinebe hyperinflationary as defined by the useful lifeEU-IFRS required to be applied under the Bank of a recognized intangible asset, an entity shall consider its own historical experienceSpain’s Circular 4/2004. Accordingly, as of December 31, 2010 and 2009, it was necessary to adjust the financial statements of the Group’s subsidiaries established in renewing or extending similar arrangements; however, these assumptions should be adjustedVenezuela to correct them for the entity-specific factorseffect of inflation.
However, until 2010 the Venezuelan economy has not met the requirements to be considered highly inflationary economy under U.S. GAAP.
This difference, along with differences in paragraph 11accounting for the effects of Statement 142. Inhyperinflation, would result in a reconciling item to the absenceConsolidated Financial Statements as of that experience, an entity shall considerand for the assumptions that market participants would use about renewal or extension (consistentyear ended December 31, 2010 and 2009. However, as BBVA accounts for hyperinflationary economies in accordance with the highest and best useIAS 21 “The Effects of Changes in Foreign Exchange Rates”, it is availing itself of the asset by market participants), adjustedaccommodation in Item 17(c)(2)(iv) ofForm 20-F to exclude from the reconciliation to US GAAP the effects of differences in accounting for Venezuela as a highly inflationary economy. Therefore, the entity-specific factorsreconciliation complies with Item 18 ofForm 20-F, which is different from the requirements of US GAAP in paragraph 11 of Statement 142.this regard.
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FSP APB14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”
This FSP applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. It clarifies that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants. Additionally, this FSP specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.
FSP No. FAS 132(R)-1 Employers’ Disclosures about Postretirement Benefit Plan Assets
This FASB Staff Position, issued in December 2008, amends FASB Statement No. 132 (revised 2003),Employers’ Disclosures about Pensions and Other Postretirement Benefits,to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. It also includes a technical amendment to Statement 132(R) that requires a nonpublic entity to disclose net periodic benefit cost for each annual period for which a statement of income is presented.
The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009. Upon initial application, the provisions of this FSP are not required for earlier periods that are presented for comparative purposes. Earlier application of the provisions of this FSP is permitted. The technical amendment to Statement 132(R) (see paragraph B1(c)) is effective upon issuance of this FSP.
FSPFAS 133-1 andFIN 45-4 — Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161
This FSP, issued in September 2008, amends FASB Statement No. 133,Accounting for Derivative Instruments and Hedging Activities,to require disclosures by sellers of credit derivatives, including credit derivatives embedded in a hybrid instrument. This FSP also amends FASB Interpretation No. 45,Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,to require an additional disclosure about the current status of the payment/performance risk of a guarantee. Further, this FSP clarifies the Board’s intent about the effective date of FASB Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities.
The provisions of this FSP that amend Statement 133 and Interpretation 45 shall be effective for reporting periods (annual or interim) ending after November 15, 2008.
FSPFAS 140-4 and FIN 46(R)-8 — Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities
This FASB Staff Position, issued in December 2008, amends FASB Statement No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,to require public entities to provide additional disclosures about transfers of financial assets. It also amends FASB Interpretation No. 46 (revised December 2003),Consolidation of Variable Interest Entities,to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities.
Additionally, this FSP requires certain disclosures to be provided by a public enterprise that is a sponsor of a qualifying special-purpose entity (SPE) that holds a variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE, and a servicer of a qualifying SPE that holds a significant variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE. The disclosures required
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by this FSP are intended to provide greater transparency to financial statement users about a transferor’s continuing involvement with transferred financial assets and an enterprise’s involvement with variable interest entities and qualifying SPEs.
This FSP shall be effective for the first reporting period (interim or annual) ending after December 15, 2008, with earlier application encouraged. This FSP shall apply for each annual and interim reporting period thereafter.
FSPFAS 157-3 — Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active
This FASB Staff Position, issued in October 2008, clarifies the application of FASB Statement No. 157,Fair Value Measurements,in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active.
This FSP shall be effective upon issuance, including prior periods for which financial statements have not been issued.
FSP EITF99-20-1 — Amendments to the Impairment Guidance of EITF Issue No.99-20.
This FASB Staff Position, issued in January 2009, amends the impairment guidance in EITF IssueNo. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other-than-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other than- temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115,Accounting for Certain Investments in Debt and Equity Securities,and other related guidance.
The FSP shall be effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted.
FSP EITF03-6-1 — Determining Whether Instruments Granted in Share-Based Payment transactions Are Participating Securities
This FASB Staff Position, issued in June 2008, addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of FASB Statement No. 128,Earnings per Share.
This FSP shall be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of this FSP. Early application is not permitted.
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| B) | CONSOLIDATED FINANCIAL STATEMENTS |
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| 1. | Differences relating to the financial statements presentationDIFFERENCES RELATING TO THE FINANCIAL STATEMENTS PRESENTATION — |
In addition to differences described in Note 58.A60.A affecting net incomeand/or stockholders’shareholders’ equity, there are differences relating to the financial statements presentation between the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/4/2004 and U.S. GAAP presentation following the formatting guidelines inRegulation S-X of the Securities and Exchange Commission of the United States. Although these differences do not cause differences between both GAAP reported net incomeand/or stockholders’shareholders’ equity.
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| 2. | Consolidated Financial Statements underCONSOLIDATED FINANCIAL STATEMENTS UNDERRegulationREGULATION S-X — |
Following are the consolidated balance sheets of the BBVA Group as of December 31, 2008, 20072010, 2009 and 20062008 and the consolidated statement of income for each of the years ended December 31, 2008, 20072010, 2009 and 2006,2008, in the format for banks and bank holding companies required byRegulation S-X of the Securities and Exchange Commission of the United States of America, and, accordingly, prepared under U.S. GAAP (after reconciliation adjustments described above in Note 58.A)60.A)
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BANCO BILBAO VIZCAYA ARGENTARIA GROUP
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008, 20072010, 2009 AND 20062008
(Currency — Millions of Euros)U.S. GAAP)
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| | | | | | | | | | | | | | | 2010 | | 2009 | | 2008 | |
| | | 2008 | | 2007 | | 2006 | | | Millions of euros | |
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ASSETS | ASSETS | ASSETS |
| Cash and due from banks | | | 11,862 | | | | 4,982 | | | | 4,779 | | | | 7,435 | | | | 7,568 | | | | 11,862 | |
| Interest-bearing deposits in other banks | | | 31,831 | | | | 33,727 | | | | 19,294 | | | | 34,714 | | | | 28,350 | | | | 31,831 | |
| Securities purchased under agreements to resell | | | 6,480 | | | | 6,870 | | | | 7,117 | | | | 2,331 | | | | 3,652 | | | | 6,480 | |
| Trading securities | | | 75,063 | | | | 63,496 | | | | 52,812 | | | | 66,057 | | | | 72,070 | | | | 75,063 | |
| Investments securities | | | 53,416 | | | | 53,694 | | | | 48,236 | | |
| Net Loans and leases: | | | | | | | | | | | | | |
| Loans and leases, net of unearned income | | | 340,958 | | | | 316,743 | | | | 261,862 | | |
| Investment securities | | | | 66,401 | | | | 68,978 | | | | 53,416 | |
| Net Loans & Leases: | | | | | | | | | | | | | |
| Loans and leases net of unearned income | | | | 349,642 | | | | 331,693 | | | | 340,958 | |
| Less: Allowance for loan losses | | | (7,384 | ) | | | (5,931 | ) | | | (4,288 | ) | | | (9,801 | ) | | | (9,004 | ) | | | (7,404 | ) |
| Hedging derivatives | | | 3,929 | | | | 1,097 | | | | 2,011 | | |
| Hedging Derivatives | | | | 3,665 | | | | 3,663 | | | | 3,929 | |
| Premises and equipment, net | | | 6,462 | | | | 4,764 | | | | 3,906 | | | | 6,605 | | | | 6,353 | | | | 6,462 | |
| Investments in affiliated companies | | | 1,467 | | | | 1,535 | | | | 889 | | | | 4,547 | | | | 2,922 | | | | 1,467 | |
| Intangible assets | | | 780 | | | | 811 | | | | 466 | | | | 1,058 | | | | 852 | | | | 780 | |
| Due from customers on acceptances | | | | — | | | | — | | | | — | |
| Goodwill in consolidation | | | 15,634 | | | | 15,741 | | | | 11,142 | | | | 16,047 | | | | 15,128 | | | | 15,634 | |
| Accrual accounts | | | 383 | | | | 604 | | | | 674 | | |
| Others assets | | | 8,693 | | | | 12,436 | | | | 12,071 | | |
| Accrual Accounts | | | | 538 | | | | 581 | | | | 383 | |
| Other assets | | | | 12,528 | | | | 10,788 | | | | 8,176 | |
| | | | | | | | | | | | | | | |
Total assets | | | 549,574 | | | | 510,569 | | | | 420,971 | | | | 561,767 | | | | 543,594 | | | | 549,037 | |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| LIABILITIES AND EQUITY | | LIABILITIES AND EQUITY |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | | 92,854 | | | | 66,381 | | | | 68,632 | | |
| Savings deposits | | | 46,732 | | | | 40,523 | | | | 36,161 | | |
| Bank acceptances outstanding | | | | — | | | | — | | | | — | |
| Demand Deposits | | | | 74,763 | | | | 68,655 | | | | 69,009 | |
| Saving deposits | | | | 51,141 | | | | 50,639 | | | | 46,732 | |
| Time deposits | | | 166,322 | | | | 133,311 | | | | 101,634 | | | | 148,884 | | | | 152,933 | | | | 166,322 | |
| Due to Bank of Spain | | | 37 | | | | 8,210 | | | | 4,689 | | | | 2 | | | | 10,930 | | | | 37 | |
| Trading account liabilities | | | 43,009 | | | | 19,273 | | | | 14,923 | | | | 37,212 | | | | 32,830 | | | | 43,009 | |
| Hedging derivatives | | | 1,226 | | | | 1,807 | | | | 2,280 | | | | 1,704 | | | | 1,306 | | | | 1,226 | |
| Short-term borrowings | | | 61,832 | | | | 56,993 | | | | 52,450 | | |
| Short term borrowings | | | | 63,844 | | | | 68,985 | | | | 61,832 | |
| Long-term debt | | | 76,302 | | | | 118,128 | | | | 78,848 | | | | 111,251 | | | | 92,843 | | | | 100,147 | |
| Taxes payable | | | 2,372 | | | | 2,992 | | | | 2,608 | | | | 2,678 | | | | 2,690 | | | | 1,835 | |
| Accounts payable | | | 7,420 | | | | 6,239 | | | | 6,772 | | | | 6,596 | | | | 5,624 | | | | 7,420 | |
| Accrual accounts | | | 1,918 | | | | 1,820 | | | | 1,510 | | | | 2,162 | | | | 2,079 | | | | 1,918 | |
| Pension allowance | | | 6,359 | | | | 5,967 | | | | 6,358 | | | | 5,981 | | | | 6,246 | | | | 6,359 | |
| Other Provisions | | | 2,319 | | | | 2,374 | | | | 2,291 | | |
| Other provisions | | | | 2,341 | | | | 2,313 | | | | 2,319 | |
| Others liabilities | | | 7,241 | | | | 10,476 | | | | 10,791 | | | | 9,032 | | | | 8,054 | | | | 7,242 | |
| | | | | | | | | | | | | | | |
Total liabilities | | | 515,944 | | | | 474,494 | | | | 389,947 | | | | 517,591 | | | | 506,127 | | | | 515,407 | |
| Minority interest | | | 886 | | | | 692 | | | | 563 | | |
Stockholders’ equity | | | | | | | | | | | | | |
| Capital stock | | | 1,836 | | | | 1,836 | | | | 1,740 | | |
| | | | | | | | | |
Shareholder’s equity | | | | | | | | | | | | | |
| Common stocks | | | | 2,201 | | | | 1,836 | | | | 1,836 | |
| Additional paid-in capital | | | 12,770 | | | | 12,770 | | | | 9,580 | | | | 17,104 | | | | 12,453 | | | | 12,770 | |
| Dividends | | | (1,820 | ) | | | (1,661 | ) | | | (1,363 | ) | | | (1,067 | ) | | | (1,000 | ) | | | (1,820 | ) |
| Other capital instruments | | | (720 | ) | | | (389 | ) | | | (147 | ) | | | (553 | ) | | | (224 | ) | | | (720 | ) |
| Retained earnings | | | 20,679 | | | | 22,828 | | | | 20,651 | | | | 25,128 | | | | 23,107 | | | | 20,678 | |
| | | | | | | | | | | | | | | |
Total stockholders’ equity | | | 32,744 | | | | 35,384 | | | | 30,461 | | |
Total shareholder’s equity | | | | 42,813 | | | | 36,172 | | | | 32,744 | |
| | | | | | | | | | | | | | | |
Total liabilities and stockholders’ equity | | | 549,574 | | | | 510,569 | | | | 420,971 | | |
| Non-controlling interest | | | | 1,363 | | | | 1,295 | | | | 886 | |
| | | | | | | | | |
Total Equity | | | | 44,176 | | | | 37,467 | | | | 33,630 | |
| | | | | | | | | |
Total liabilities and equity | | | | 561,767 | | | | 543,594 | | | | 549,037 | |
| | | | | | | | | |
F-169F-191
BANCO BILBAO VIZCAYA ARGENTARIA GROUP
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED
DECEMBER 31, 2008, 20072010, 2009 AND 20062008
(Currency — Millions of Euros)U.S. GAAP)
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2010 | | 2009 | | 2008 | |
| | | 2008 | | 2007 | | 2006 | | | Millions of euros | |
| |
| Interest Income | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest and fees on loans and leases | | | 24,140 | | | | 19,191 | | | | 13,744 | | | | 16,448 | | | | 18,670 | | | | 24,141 | |
| Interest on deposits in other banks | | | 1,722 | | | | 1,684 | | | | 1,110 | | | | 1,326 | | | | 1,489 | | | | 1,722 | |
| Interest on securities purchased under agreements to resell | | | 517 | | | | 649 | | | | 383 | | | | 123 | | | | 201 | | | | 517 | |
| Interest on investment securities | | | 4,479 | | | | 4,176 | | | | 4,353 | | | | 3,652 | | | | 3,829 | | | | 4,479 | |
| | | | | | | | | | | | | | | |
Total interest income | | | 30,859 | | | | 25,700 | | | | 19,590 | | | | 21,549 | | | | 24,188 | | | | 30,859 | |
| | | | | | | | | |
| Interest Expense | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest on deposits | | | (12,982 | ) | | | (8,464 | ) | | | (5,975 | ) | | | (4,838 | ) | | | (6,139 | ) | | | (12,982 | ) |
Interest on Bank of Spain&Deposit Guarantee Fund | | | (368 | ) | | | (359 | ) | | �� | (300 | ) | | | (120 | ) | | | (79 | ) | | | (368 | ) |
| Interest on short-term borrowings | | | (2,168 | ) | | | (2,078 | ) | | | (2,180 | ) | | | (1,283 | ) | | | (1,504 | ) | | | (2,168 | ) |
| Interest on long term debt | | | (3,199 | ) | | | (5,015 | ) | | | (2,757 | ) | | | (1,102 | ) | | | (1,749 | ) | | | (3,199 | ) |
| | | | | | | | | | | | | | | |
Total interest expense | | | (18,717 | ) | | | (15,917 | ) | | | (11,212 | ) | | | (7,343 | ) | | | (9,471 | ) | | | (18,717 | ) |
| | | | | | | | | | | | | | | |
Net Interest Income | | | 12,141 | | | | 9,783 | | | | 8,378 | | | | 14,206 | | | | 14,718 | | | | 12,142 | |
| | | | | | | | | | | | | | | |
| Provision for loan losses | | | (3,956 | ) | | | (2,832 | ) | | | (1,031 | ) | | | (4,563 | ) | | | (5,199 | ) | | | (3,956 | ) |
| | | | | | | | | | | | | | | |
Net Interest Income after provision for loan losses | | | 8,186 | | | | 6,951 | | | | 7,347 | | |
Net Interest Income after provison for loan losses | | | | 9,643 | | | | 9,519 | | | | 8,186 | |
| | | | | | | | | | | | | | | |
| Non-interest income | | | | | | | | | | | | | | | | | | | | | | | | |
| Contingent liabilities (collected) | | | 243 | | | | 229 | | | | 204 | | | | 282 | | | | 260 | | | | 243 | |
| Collection and payments services (collected) | | | 2,656 | | | | 2,567 | | | | 2,274 | | | | 2,500 | | | | 2,573 | | | | 2,656 | |
| Securities services (collected) | | | 1,895 | | | | 2,089 | | | | 2,017 | | | | 1,651 | | | | 1,636 | | | | 1,895 | |
| Other transactions (collected) | | | 746 | | | | 707 | | | | 624 | | | | 949 | | | | 835 | | | | 746 | |
| Ceded to other entities and correspondents (paid) | | | (662 | ) | | | (570 | ) | | | (537 | ) | | | (545 | ) | | | (572 | ) | | | (662 | ) |
| Other transactions (paid) | | | (326 | ) | | | (299 | ) | | | (247 | ) | | | (254 | ) | | | (263 | ) | | | (326 | ) |
| Gains (losses) from: | | | | | | | | | | | | | | | | | | | | | | | | |
| Affiliated companies’ securities | | | 306 | | | | 252 | | | | 1,293 | | | | 364 | | | | 122 | | | | 306 | |
| Investment securities | | | 1,579 | | | | 1,751 | | | | 2,729 | | | | 497 | | | | 231 | | | | 1,578 | |
| Foreign exchange, derivatives and other, net | | | 382 | | | | 974 | | | | (902 | ) | |
| Foreign exchange, derivatives and other ,net | | | | 1,174 | | | | 970 | | | | 382 | |
| Other gains (losses) | | | 3,656 | | | | 2,237 | | | | 1,625 | | | | 3,415 | | | | 3,474 | | | | 3,657 | |
| | | | | | | | | | | | | | | |
Total non-interest income | | | 10,474 | | | | 9,937 | | | | 9,080 | | | | 10,033 | | | | 9,267 | | | | 10,473 | |
| | | | | | | | | | | | | | | |
| Non-interest expense | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | (4,716 | ) | | | (4,335 | ) | | | (3,989 | ) | | | (4,814 | ) | | | (4,651 | ) | | | (4,716 | ) |
| Occupancy expense of premise, depreciation and maintenance, net | | | (1,348 | ) | | | (986 | ) | | | (924 | ) | |
| Occupancy expense of premises, depreciation and maintenance, net | | | | (1,400 | ) | | | (1,306 | ) | | | (1,348 | ) |
| General and administrative expenses | | | (2,423 | ) | | | (2,198 | ) | | | (1,891 | ) | | | (2,642 | ) | | | (2,368 | ) | | | (2,423 | ) |
| Impairment of goodwill | | | — | | | | — | | | | (12 | ) | | | (14 | ) | | | (388 | ) | | | — | |
| Net provision for specific allowances | | | (1,431 | ) | | | (210 | ) | | | (1,338 | ) | | | (547 | ) | | | (680 | ) | | | (1,431 | ) |
| Other expenses | | | (3,181 | ) | | | (1,665 | ) | | | (1,239 | ) | | | (4,247 | ) | | | (4,145 | ) | | | (3,182 | ) |
| Minority shareholder’s interest | | | (365 | ) | | | (289 | ) | | | (240 | ) | |
| | | | | | | | | | | | | | | |
Total non-interest expense | | | (13,465 | ) | | | (9,683 | ) | | | (9,633 | ) | | | (13,664 | ) | | | (13,539 | ) | | | (13,100 | ) |
| | | | | | | | | | | | | | | |
Income Before Income Taxes | | | 5,194 | | | | 7,205 | | | | 6,794 | | |
| Income Before Taxes | | | | 6,012 | | | | 5,248 | | | | 5,559 | |
| | | | | | | | | | | | | | | |
| Income tax expense | | | (1,124 | ) | | | (1,796 | ) | | | (1,822 | ) | |
| Income Tax expense | | | | (1,324 | ) | | | (1,038 | ) | | | (1,124 | ) |
| | | | | | | | | | | | | | | |
Net income | | | 4,070 | | | | 5,409 | | | | 4,972 | | |
Net Income | | | | 4,688 | | | | 4,210 | | | | 4,435 | |
| | | | | | | | | | | | | | | |
| Less: net income attributed to the non-controlling interests | | | | (389 | ) | | | (385 | ) | | | (365 | ) |
| | | | | | | | | |
Net income attributed to parent company | | | | 4,299 | | | | 3,825 | | | | 4,070 | |
| | | | | | | | | |
F-170F-192
| |
| 3. | Consolidated Statements of Changes in Stockholders equityCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — |
Composition of stockholders’shareholders’ equity (considering the final dividend) as of December 31, 2008, 20072010, 2009 and 2006,2008, is presented in Note 27, 28, 29 and 30. The variation in stockholders’shareholders’ equity under U.S. GAAP as of December 31, 2008, 20072010, 2009 and 20062008 is as follows:
| | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Millions of euros | |
| |
Balance at the beginning of the year | | | 35,384 | | | | 30,461 | | | | 25,375 | |
| | | | | | | | | | | | | |
| Net income for the year | | | 4,070 | | | | 5,409 | | | | 4,972 | |
| Dividends paid | | | (1,878 | ) | | | (2,535 | ) | | | (1,995 | ) |
| Capital increase | | | — | | | | 3,288 | | | | 3,000 | |
| Other comprehensive income | | | (3,488 | ) | | | (1,101 | ) | | | (491 | ) |
Foreign Currency Translation Adjustment | | | (1,007 | ) | | | (1,873 | ) | | | (708 | ) |
Unrealized Gains on Securities | | | (2,657 | ) | | | 487 | | | | 110 | |
Derivatives Instruments and Hedging Activities (SFAS 133) | | | 176 | | | | 285 | | | | 107 | |
| Other variations | | | (1,344 | ) | | | (138 | ) | | | (400 | ) |
| | | | | | | | | | | | | |
Balance at the end of the year | | | 32,744 | | | | 35,384 | | | | 30,461 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | Millions of euros | |
| |
Balance at the begining of the year | | | 36,172 | | | | 32,744 | | | | 35,384 | |
| Capital increase | | | 5,015 | | | | — | | | | — | |
| Net income of the year | | | 4,299 | | | | 3,825 | | | | 4,070 | |
| Interim Dividends | | | (1,067 | ) | | | (1,000 | ) | | | (1,820 | ) |
| Other Comprehensive income | | | (427 | ) | | | 863 | | | | (3,481 | ) |
| Foreign currency translation adjust | | | 1,784 | | | | (76 | ) | | | (1,001 | ) |
| Unrelaized Gains on Securities | | | (1,680 | ) | | | 943 | | | | (2,656 | ) |
| Derivatives Instruments and Hedging activities (SFAS 133) | | | (531 | ) | | | (4 | ) | | | 176 | |
| Other variation(*) | | | (1,179 | ) | | | (260 | ) | | | (1,409 | ) |
| | | | | | | | | | | | | |
Balance at the end of the year | | | 42,813 | | | | 36,172 | | | | 32,744 | |
| | | | | | | | | | | | | |
| |
| (*) | Includes €558 million and €1,002 million in 2010 and 2008, respectively, corresponding to the final dividend of 2009 and 2007, respectively. |
F-171F-193
| |
| C) | MAIN DISCLOSURES REQUIRED BY U.S. ACCOUNTING REGULATIONS FOR BANKS AND ADDITIONAL DISCLOSURES REQUIRED UNDER U.S. GAAP |
| |
1. | Investment Securities — |
1. Investment Securities — The breakdown of the Group’s investment securities portfolio by issuer is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| |
| | | Cost | | | Value | | | Gains | | | Losses | | | Cost | | | Value | | | Gains | | | Losses | | | Cost | | | Value | | | Gains | | | Losses | |
| | | (Millions of euros) | |
| |
DEBT SECURITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVAILABLE FOR SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic- | | | 11,743 | | | | 11,910 | | | | 229 | | | | (62 | ) | | | 10,088 | | | | 10,161 | | | | 150 | | | | (77 | ) | | | 9,221 | | | | 9,494 | | | | 291 | | | | (18 | ) |
| Spanish Government | | | 6,233 | | | | 6,371 | | | | 138 | | | | — | | | | 5,226 | | | | 5,274 | | | | 79 | | | | (31 | ) | | | 6,596 | | | | 6,859 | | | | 279 | | | | (16 | ) |
| Other debt securities | | | 5,510 | | | | 5,539 | | | | 91 | | | | (62 | ) | | | 4,862 | | | | 4,887 | | | | 71 | | | | (46 | ) | | | 2,625 | | | | 2,635 | | | | 12 | | | | (2 | ) |
International- | | | 28,108 | | | | 27,920 | | | | 586 | | | | (774 | ) | | | 26,725 | | | | 27,175 | | | | 737 | | | | (287 | ) | | | 22,002 | | | | 22,724 | | | | 852 | | | | (130 | ) |
United States - | | | 10,573 | | | | 10,442 | | | | 155 | | | | (286 | ) | | | 9,051 | | | | 9,056 | | | | 50 | | | | (45 | ) | | | 5,514 | | | | 5,506 | | | | 13 | | | | (21 | ) |
| U.S. Treasury and other U.S. Government agencies | | | 444 | | | | 444 | | | | — | | | | — | | | | 60 | | | | 61 | | | | 1 | | | | — | | | | 342 | | | | 343 | | | | 3 | | | | (2 | ) |
| States and political subdivisions | | | 382 | | | | 396 | | | | 15 | | | | (1 | ) | | | 515 | | | | 518 | | | | 5 | | | | (2 | ) | | | 310 | | | | 310 | | | | — | | | | — | |
| Other debt securities | | | 9,747 | | | | 9,602 | | | | 140 | | | | (285 | ) | | | 8,476 | | | | 8,477 | | | | 44 | | | | (43 | ) | | | 4,862 | | | | 4,853 | | | | 10 | | | | (19 | ) |
Other countries - | | | 17,535 | | | | 17,478 | | | | 431 | | | | (488 | ) | | | 17,674 | | | | 18,119 | | | | 687 | | | | (242 | ) | | | 16,488 | | | | 17,218 | | | | 839 | | | | (109 | ) |
| Securities of other foreign Governments | | | 9,624 | | | | 9,653 | | | | 261 | | | | (232 | ) | | | 10,844 | | | | 11,278 | | | | 562 | | | | (128 | ) | | | 9,858 | | | | 10,386 | | | | 588 | | | | (60 | ) |
| Other debt securities | | | 7,911 | | | | 7,825 | | | | 170 | | | | (256 | ) | | | 6,830 | | | | 6,841 | | | | 125 | | | | (114 | ) | | | 6,630 | | | | 6,832 | | | | 251 | | | | (49 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE FOR SALE PORTFOLIO | | | 39,851 | | | | 39,830 | | | | 815 | | | | (836 | ) | | | 36,813 | | | | 37,336 | | | | 887 | | | | (364 | ) | | | 31,223 | | | | 32,218 | | | | 1,143 | | | | (148 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELD TO MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic- | | | 2,392 | | | | 2,339 | | | | 7 | | | | (60 | ) | | | 2,402 | | | | 2,271 | | | | — | | | | (131 | ) | | | 2,404 | | | | 2,337 | | | | 2 | | | | (69 | ) |
| Spanish Government | | | 1,412 | | | | 1,412 | | | | 7 | | | | (7 | ) | | | 1,417 | | | | 1,349 | | | | — | | | | (68 | ) | | | 1,417 | | | | 1,378 | | | | 1 | | | | (40 | ) |
| Other debt securities | | | 980 | | | | 927 | | | | — | | | | (53 | ) | | | 985 | | | | 922 | | | | — | | | | (63 | ) | | | 987 | | | | 959 | | | | 1 | | | | (29 | ) |
International- | | | 2,890 | | | | 2,882 | | | | 25 | | | | (33 | ) | | | 3,182 | | | | 3,063 | | | | — | | | | (119 | ) | | | 3,502 | | | | 3,421 | | | | 5 | | | | (86 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD TO MATURITY PORTFOLIO | | | 5,282 | | | | 5,221 | | | | 32 | | | | (93 | ) | | | 5,584 | | | | 5,334 | | | | — | | | | (250 | ) | | | 5,906 | | | | 5,758 | | | | 7 | | | | (155 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | 45,133 | | | | 45,051 | | | | 847 | | | | (929 | ) | | | 42,397 | | | | 42,670 | | | | 887 | | | | (614 | ) | | | 37,129 | | | | 37,976 | | | | 1,150 | | | | (303 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-172
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | | 2007 | | | 2006 | |
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| |
| | | Cost | | | Value(1) | | | Gains | | | Losses | | | Cost | | | Value(1) | | | Gains | | | Losses | | | Cost | | | Value(1) | | | Gains | | | Losses | |
| | | (Millions of euros) | |
| |
EQUITY SECURITIES — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVAILABLE FOR SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic- | | | 3,582 | | | | 4,675 | | | | 1,189 | | | | (96 | ) | | | 3,783 | | | | 7,164 | | | | 3,386 | | | | (5 | ) | | | 4,564 | | | | 7,381 | | | | 2,817 | | | | — | |
| Equity listed | | | 3,545 | | | | 4,639 | | | | 1,189 | | | | (95 | ) | | | 3,710 | | | | 7,032 | | | | 3,322 | | | | — | | | | 4,525 | | | | 7,342 | | | | 2,817 | | | | — | |
| Equity Unlisted | | | 37 | | | | 36 | | | | — | | | | (1 | ) | | | 73 | | | | 132 | | | | 64 | | | | (5 | ) | | | 39 | | | | 39 | | | | — | | | | — | |
International- | | | 3,408 | | | | 3,275 | | | | 8 | | | | (141 | ) | | | 2,841 | | | | 3,932 | | | | 1,115 | | | | (24 | ) | | | 1,860 | | | | 2,656 | | | | 811 | | | | (15 | ) |
United States- | | | 665 | | | | 654 | | | | — | | | | (11 | ) | | | 490 | | | | 489 | | | | — | | | | (1 | ) | | | 53 | | | | 54 | | | | 1 | | | | — | |
| Equity listed | | | 39 | | | | 28 | | | | — | | | | (11 | ) | | | 420 | | | | 419 | | | | — | | | | (1 | ) | | | 27 | | | | 28 | | | | 1 | | | | — | |
| Equity Unlisted | | | 626 | | | | 626 | | | | — | | | | — | | | | 70 | | | | 70 | | | | — | | | | — | | | | 26 | | | | 26 | | | | — | | | | — | |
Other countries- | | | 2,743 | | | | 2,621 | | | | 8 | | | | (130 | ) | | | 2,351 | | | | 3,443 | | | | 1,115 | | | | (23 | ) | | | 1,807 | | | | 2,602 | | | | 810 | | | | (15 | ) |
| Equity listed | | | 2,545 | | | | 2,416 | | | | 1 | | | | (130 | ) | | | 2,242 | | | | 3,346 | | | | 1,127 | | | | (23 | ) | | | 1,702 | | | | 2,497 | | | | 810 | | | | (15 | ) |
| Equity Unlisted | | | 198 | | | | 205 | | | | 7 | | | | — | | | | 109 | | | | 97 | | | | (12 | ) | | | — | | | | 105 | | | | 105 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE FOR SALE PORTFOLIO | | | 6,990 | | | | 7,950 | | | | 1,197 | | | | (237 | ) | | | 6,624 | | | | 11,096 | | | | 4,501 | | | | (29 | ) | | | 6,424 | | | | 10,037 | | | | 3,628 | | | | (15 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL EQUITY SECURITIES | | | 6,990 | | | | 7,950 | | | | 1,197 | | | | (237 | ) | | | 6,624 | | | | 11,096 | | | | 4,501 | | | | (29 | ) | | | 6,424 | | | | 10,037 | | | | 3,628 | | | | (15 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL INVESTMENT SECURITIES | | | 52,123 | | | | 53,001 | | | | 2,044 | | | | (1,166 | ) | | | 49,021 | | | | 53,766 | | | | 5,388 | | | | (643 | ) | | | 43,553 | | | | 48,026 | | | | 4,778 | | | | (318 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2010 | | | As of December 31, 2009 | | | As of December 31, 2008 | |
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| |
| | | Cost | | | Value | | | Gains | | | Losses | | | Cost | | | Value | | | Gains | | | Losses | | | Cost | | | Value | | | Gains | | | Losses | |
| | | Millions of euros | | | Millions of euros | | | Millions of euros | |
| |
DEBT SECURITIES - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVAILABLE FOR SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic - | | | 21,929 | | | | 20,566 | | | | 107 | | | | (1,470 | ) | | | 24,577 | | | | 24,869 | | | | 487 | | | | (195 | ) | | | 11,743 | | | | 11,910 | | | | 229 | | | | (62 | ) |
| Spanish Government | | | 16,543 | | | | 15,337 | | | | 58 | | | | (1,264 | ) | | | 18,312 | | | | 18,551 | | | | 309 | | | | (70 | ) | | | 6,233 | | | | 6,371 | | | | 138 | | | | — | |
| Other debt securities | | | 5,386 | | | | 5,229 | | | | 50 | | | | (206 | ) | | | 6,265 | | | | 6,318 | | | | 178 | | | | (125 | ) | | | 5,510 | | | | 5,539 | | | | 91 | | | | (62 | ) |
| Central Banks | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9 | | | | 9 | | | | — | | | | — | |
| Credit institutions | | | 4,221 | | | | 4,090 | | | | 24 | | | | (156 | ) | | | 5,097 | | | | 5,202 | | | | 134 | | | | (29 | ) | | | 4,330 | | | | 4,338 | | | | 44 | | | | (36 | ) |
| Other issuers | | | 1,165 | | | | 1,139 | | | | 25 | | | | (50 | ) | | | 1,168 | | | | 1,116 | | | | 44 | | | | (96 | ) | | | 1,171 | | | | 1,192 | | | | 47 | | | | (26 | ) |
International - | | | 30,108 | | | | 30,309 | | | | 1,081 | | | | (880 | ) | | | 31,868 | | | | 32,202 | | | | 1,067 | | | | (733 | ) | | | 28,108 | | | | 27,920 | | | | 586 | | | | (774 | ) |
United States - | | | 6,850 | | | | 6,832 | | | | 216 | | | | (234 | ) | | | 6,804 | | | | 6,805 | | | | 174 | | | | (173 | ) | | | 10,573 | | | | 10,442 | | | | 155 | | | | (286 | ) |
| U.S. Treasury and other U.S. Government agencies | | | 579 | | | | 578 | | | | 6 | | | | (8 | ) | | | 414 | | | | 416 | | | | 4 | | | | (2 | ) | | | 444 | | | | 444 | | | | — | | | | — | |
| States and political subdivisions | | | 187 | | | | 193 | | | | 7 | | | | (1 | ) | | | 214 | | | | 221 | | | | 7 | | | | — | | | | 382 | | | | 396 | | | | 15 | | | | (1 | ) |
| Other debt securities | | | 6,084 | | | | 6,061 | | | | 203 | | | | (225 | ) | | | 6,176 | | | | 6,168 | | | | 163 | | | | (171 | ) | | | 9,747 | | | | 9,602 | | | | 140 | | | | (285 | ) |
| Central Banks | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 240 | | | | 242 | | | | 13 | | | | (12 | ) |
| Credit institutions | | | 2,982 | | | | 2,873 | | | | 83 | | | | (191 | ) | | | 2,597 | | | | 2,610 | | | | 50 | | | | (37 | ) | | | 4,341 | | | | 4,327 | | | | 55 | | | | (70 | ) |
| Other issuers | | | 3,102 | | | | 3,188 | | | | 120 | | | | (34 | ) | | | 3,579 | | | | 3,558 | | | | 113 | | | | (134 | ) | | | 5,166 | | | | 5,033 | | | | 71 | | | | (204 | ) |
Other countries — (*) | | | 23,258 | | | | 23,477 | | | | 865 | | | | (646 | ) | | | 25,064 | | | | 25,397 | | | | 893 | | | | (560 | ) | | | 17,535 | | | | 17,478 | | | | 431 | | | | (488 | ) |
| Securities of other foreign Governments(**) | | | 15,733 | | | | 15,958 | | | | 610 | | | | (386 | ) | | | 17,058 | | | | 17,363 | | | | 697 | | | | (392 | ) | | | 9,624 | | | | 9,653 | | | | 261 | | | | (232 | ) |
| Other debt securities | | | 7,525 | | | | 7,519 | | | | 254 | | | | (261 | ) | | | 8,006 | | | | 8,034 | | | | 196 | | | | (168 | ) | | | 7,911 | | | | 7,825 | | | | 170 | | | | (256 | ) |
| Central Banks | | | 945 | | | | 945 | | | | 1 | | | | (0 | ) | | | 1,296 | | | | 1,297 | | | | 1 | | | | — | | | | 1,045 | | | | 1,045 | | | | — | | | | — | |
| Credit institutions | | | 4,983 | | | | 4,998 | | | | 205 | | | | (190 | ) | | | 4,795 | | | | 4,893 | | | | 185 | | | | (87 | ) | | | 5,934 | | | | 5,958 | | | | 167 | | | | (143 | ) |
| Other institutions | | | 1,597 | | | | 1,576 | | | | 49 | | | | (70 | ) | | | 1,915 | | | | 1,844 | | | | 10 | | | | (81 | ) | | | 932 | | | | 823 | | | | 3 | | | | (113 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE FOR SALE PORTFOLIO | | | 52,037 | | | | 50,875 | | | | 1,188 | | | | (2,350 | ) | | | 56,445 | | | | 57,071 | | | | 1,554 | | | | (928 | ) | | | 39,851 | | | | 39,830 | | | | 815 | | | | (836 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELD TO MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic - | | | 7,503 | | | | 6,771 | | | | 2 | | | | (734 | ) | | | 2,626 | | | | 2,624 | | | | 29 | | | | (31 | ) | | | 2,392 | | | | 2,339 | | | | 7 | | | | (60 | ) |
| Spanish Government | | | 6,611 | | | | 5,942 | | | | 2 | | | | (671 | ) | | | 1,674 | | | | 1,682 | | | | 21 | | | | (13 | ) | | | 1,412 | | | | 1,412 | | | | 7 | | | | (7 | ) |
| Other debt securities | | | 892 | | | | 829 | | | | 0 | | | | (63 | ) | | | 952 | | | | 942 | | | | 8 | | | | (18 | ) | | | 980 | | | | 927 | | | | — | | | | (53 | ) |
| Central Banks | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Credit institutions | | | 290 | | | | 277 | | | | — | | | | (13 | ) | | | 342 | | | | 344 | | | | 6 | | | | (4 | ) | | | 342 | | | | 344 | | | | — | | | | (10 | ) |
| Other institutions | | | 602 | | | | 552 | | | | — | | | | (50 | ) | | | 610 | | | | 598 | | | | 2 | | | | (14 | ) | | | 638 | | | | 583 | | | | — | | | | (43 | ) |
International - | | | 2,443 | | | | 2,418 | | | | 16 | | | | (41 | ) | | | 2,811 | | | | 2,869 | | | | 71 | | | | (13 | ) | | | 2,890 | | | | 2,882 | | | | 25 | | | | (33 | ) |
| Securities of other foreign Governments | | | 2,181 | | | | 2,171 | | | | 10 | | | | (20 | ) | | | 2,399 | | | | 2,456 | | | | 64 | | | | (7 | ) | | | 2,432 | | | | 2,437 | | | | 22 | | | | (17 | ) |
| Other debt securities. Credit Institutions | | | 262 | | | | 247 | | | | 6 | | | | (21 | ) | | | 412 | | | | 413 | | | | 7 | | | | (6 | ) | | | 458 | | | | 445 | | | | 3 | | | | (16 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD TO MATURITY PORTFOLIO | | | 9,946 | | | | 9,189 | | | | 18 | | | | (775 | ) | | | 5,437 | | | | 5,493 | | | | 100 | | | | (44 | ) | | | 5,282 | | | | 5,221 | | | | 32 | | | | (93 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | 61,983 | | | | 60,064 | | | | 1,206 | | | | (3,125 | ) | | | 61,882 | | | | 62,564 | | | | 1,654 | | | | (972 | ) | | | 45,133 | | | | 45,051 | | | | 847 | | | | (929 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(1)(*) | | The Fair Values are determined based on year-end quoted market process for listedIncludes Mexico. As of December 31, 2010 the total fair value of Mexican debt securities amounted to €10,547 million of which Mexican Government and on management’s estimate for unlistedother government agency debt securities amounted to € 9,858 million and credit institutions amounted to €579 million. |
|
| (**) | | Consists mainly of securities held by our subsidiaries issued by the Governments of the countries where they operate. As of December 31, 2010 the fair value of Securities of other foreign Governments included €9,858 million of Mexican Government and other government agency debt securities. |
F-173F-194
For credit quality information related with the rating of the debt securities see Note 12 and 14 of the Consolidated Financial Statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2010 | | | As of December 31, 2009 | | | As of December 31, 2008 | |
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| | | Amortized
| | | Fair
| | | Unrealized
| | | Unrealized
| |
| | | Cost | | | Value | | | Gains | | | Losses | | | Cost | | | Value | | | Gains | | | Losses | | | Cost | | | Value | | | Gains | | | Losses | |
| | | (Millions of euros) | | | (Millions of euros) | | | (Millions of euros) | |
| |
EQUITY SECURITIES - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVAILABLE FOR SALE PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic - | | | 3,403 | | | | 4,608 | | | | 1,212 | | | | (7 | ) | | | 3,682 | | | | 5,408 | | | | 1,738 | | | | (12 | ) | | | 3,581 | | | | 4,675 | | | | 1,189 | | | | (96 | ) |
| Equity listed | | | 3,378 | | | | 4,583 | | | | 1,212 | | | | (7 | ) | | | 3,656 | | | | 5,383 | | | | 1,738 | | | | (12 | ) | | | 3,545 | | | | 4,639 | | | | 1,189 | | | | (95 | ) |
| Equity Unlisted | | | 25 | | | | 25 | | | | — | | | | — | | | | 25 | | | | 25 | | | | — | | | | — | | | | 37 | | | | 36 | | | | — | | | | (1 | ) |
International - | | | 927 | | | | 973 | | | | 71 | | | | (25 | ) | | | 948 | | | | 1,041 | | | | 121 | | | | (28 | ) | | | 3,407 | | | | 3,274 | | | | 8 | | | | (141 | ) |
United States - | | | 605 | | | | 662 | | | | 56 | | | | — | | | | 641 | | | | 737 | | | | 104 | | | | (8 | ) | | | 664 | | | | 654 | | | | — | | | | (11 | ) |
| Equity listed | | | 11 | | | | 13 | | | | 1 | | | | — | | | | 16 | | | | 8 | | | | — | | | | (8 | ) | | | 38 | | | | 28 | | | | — | | | | (11 | ) |
| Equity Unlisted | | | 594 | | | | 649 | | | | 55 | | | | — | | | | 625 | | | | 729 | | | | 104 | | | | (0 | ) | | | 626 | | | | 626 | | | | — | | | | (0 | ) |
Other countries - | | | 322 | | | | 311 | | | | 15 | | | | (25 | ) | | | 307 | | | | 304 | | | | 17 | | | | (20 | ) | | | 2,743 | | | | 2,620 | | | | 8 | | | | (130 | ) |
| Equity listed | | | 258 | | | | 240 | | | | 7 | | | | (25 | ) | | | 250 | | | | 242 | | | | 12 | | | | (20 | ) | | | 2,545 | | | | 2,416 | | | | 1 | | | | (130 | ) |
| Equity Unlisted | | | 64 | | | | 71 | | | | 8 | | | | (0 | ) | | | 57 | | | | 62 | | | | 5 | | | | (0 | ) | | | 198 | | | | 205 | | | | 7 | | | | (0 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE FOR SALE PORTFOLIO | | | 4,330 | | | | 5,581 | | | | 1,283 | | | | (32 | ) | | | 4,630 | | | | 6,450 | | | | 1,860 | | | | (40 | ) | | | 6,988 | | | | 7,949 | | | | 1,197 | | | | (237 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL EQUITY SECURITIES | | | 4,330 | | | | 5,581 | | | | 1,283 | | | | (32 | ) | | | 4,630 | | | | 6,450 | | | | 1,860 | | | | (40 | ) | | | 6,988 | | | | 7,949 | | | | 1,197 | | | | (237 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL INVESTMENT SECURITIES | | | 66,313 | | | | 65,645 | | | | 2,489 | | | | (3,156 | ) | | | 66,512 | | | | 69,014 | | | | 3,514 | | | | (1,012 | ) | | | 52,122 | | | | 53,001 | | | | 2,044 | | | | (1,166 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-195
The total amount of losses amounted to €1,368€3,776 million, €702€1,461 million and €404€1,368 million as of December 31, 2008, 20072010, 2009 and 2006,2008, respectively.
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | As of December 31, | |
| | | 2008 | | 2007 | | 2006 | | | 2010 | | 2009 | | 2008 | |
| | | Millions of euros | | | Millions of euros | |
| |
| Equity securities | | | (26 | ) | | | (25 | ) | | | (50 | ) | | | (429 | ) | | | (226 | ) | | | (26 | ) |
| Debt securities | | | (176 | ) | | | (34 | ) | | | (36 | ) | | | (190 | ) | | | (223 | ) | | | (176 | ) |
(1) Total impairments other-than-temporary (charged to income under both GAAP) | | | (202 | ) | | | (59 | ) | | | (86 | ) | | | (619 | ) | | | (449 | ) | | | (202 | ) |
| Equity securities | | | (237 | ) | | | (29 | ) | | | (15 | ) | | | (32 | ) | | | (40 | ) | | | (237 | ) |
| Debt securities | | | (929 | ) | | | (614 | ) | | | (303 | ) | | | (3,125 | ) | | | (972 | ) | | | (929 | ) |
(2) Total temporary unrealized losses | | | (1,166 | ) | | | (643 | ) | | | (318 | ) | | | (3,157 | ) | | | (1,012 | ) | | | (1,166 | ) |
| | | | | | | | | | | | | | | |
(1)+(2) Total losses | | | (1,368 | ) | | | (702 | ) | | | (404 | ) | |
(1)+(2) Total unrecognized losses | | | | (3,776 | ) | | | (1,461 | ) | | | (1,368 | ) |
| | | | | | | | | | | | | | | |
As of December 31, 2008 and 2007, most of our unrealized losses correspond to other debt securities (both Available-for-Sale and Held-to-Maturity securities). As of December 31, 2006, unrealized losses of debt securities and equity securities correspond basically to foreign securities held by Group BBVA.
As of December 31, 2008,2010, the fair value of the debt securities is below its amortized cost. We have evaluated this decline in fair value to determine whether it is other than temporary and we have not recognized any other-than-temporary impairment for these securities for the fiscal year ended December 31, 2008 related to the following reasons:
| | |
| • | They have mainly arisen in a period shorter than one year; |
|
| • | The decline is attributable solely to adverse interest rate movements; |
|
| • | The principal and interest payments have been made as scheduled, and there is no evidence that the debtor will not continue to do so; |
|
| • | The future principal payments will be sufficient to recover the current amortized cost of the security; |
|
| • | We have the intent to hold the security until maturity or at least until the fair value of the security recovers to a level that exceeds the security’s amortized cost. |
As of December 31, 20082010 most of our unrealized losses correspond to Spanish Government debt securities (bothAvailable-for-sale andHeld-to-maturity securities).
As of December 31, 2010 the total unrealized losses generated 12 months prior to such date were 10.2% of total unrealized losses of debt securities (bothAvailable-for-sale andHeld-to-maturity securities). However, we can concluded that they are temporary and no impairment has been estimated following an analysis of these unrealized losses, because: the payment deadlines for interests have been met for all debt securities, there is no evidence that the issuer will not continue meeting the payment terms, the future payments of principal and interest are sufficient to recover the cost of the debt securities and, forHeld-to-maturity securities, we have the intent to hold the security until maturity or at least until the fair value of the security recovers to a level that exceeds the security’s amortized cost.
As of December 31, 2010, the unrealized losses that correspond to equity securities have been considered temporary and we have not recognized anyother-than-temporary impairment for thesethose investments because the unrealized losses related to theythem have mainly arisen in a period shorter than one year and additionallydue to the decrease in fair valuenegative evolution of the securities is not severe.markets affected by the economic situation.
F-196
As of December 31, 2008, 2007 and 2006, there are not realized losses that correspond to countries with transitory difficulties.
An analysis of the book valuecarrying amount of investments, exclusive of valuation reserves, by contractual maturity and fair value of the debt securities portfolio is shown below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2008 | | | December 31, 2010 | |
| | | Book Value | | | Carrying Amount | |
| | | Due in
| | Due After
| | Due After
| | | | | | | | | Due After
| | Due After
| | | | | |
| | | One Year
| | One Year to
| | Five Years to
| | Due After
| | | | | Due in One
| | One Year to
| | Five Years to
| | Due After
| | | |
| | | or Less | | Five Years | | Ten Years | | Ten Years | | Total | | | Year or Less | | Five Years | | Ten Years | | Ten Years | | Total | |
| | | (Millions of euros) | | | Millions of euros | |
| |
AVAILABLE-FOR-SALE PORTFOLIO(*) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 342 | | | | 606 | | | | 2,520 | | | | 2,903 | | | | 6,371 | | | | 982 | | | | 8,650 | | | | 3,197 | | | | 2,507 | | | | 15,337 | |
| Other debt securities | | | 1,037 | | | | 3,112 | | | | 192 | | | | 1,198 | | | | 5,539 | | | | 1,303 | | | | 2,613 | | | | 438 | | | | 876 | | | | 5,229 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 1,379 | | | | 3,718 | | | | 2,712 | | | | 4,101 | | | | 11,910 | | | | 2,285 | | | | 11,263 | | | | 3,635 | | | | 3,383 | | | | 20,566 | |
| | | | | | | | | | | | | | | | | | | | | | | |
International | | | | | | | | | | | | | | | | | | | | | |
| United States | | | | 525 | | | | 2,971 | | | | 2,340 | | | | 995 | | | | 6,832 | |
| U.S. Treasury and other U.S. government agencies | | | | 108 | | | | 195 | | | | 65 | | | | 210 | | | | 578 | |
| States and political subdivisions | | | | 29 | | | | 93 | | | | 59 | | | | 12 | | | | 193 | |
| Other U.S. securities | | | | 389 | | | | 2,683 | | | | 2,216 | | | | 773 | | | | 6,061 | |
| Other countries | | | | 3,075 | | | | 11,436 | | | | 3,571 | | | | 5,395 | | | | 23,477 | |
| Securities of other foreign governments | | | | 690 | | | | 9,156 | | | | 2,547 | | | | 3,565 | | | | 15,958 | |
| Other debt securities of other countries | | | | 2,385 | | | | 2,280 | | | | 1,024 | | | | 1,830 | | | | 7,519 | |
| | | | | | | | | | | | | |
Total International | | | | 3,601 | | | | 14,407 | | | | 5,911 | | | | 6,390 | | | | 30,309 | |
| | | | | | | | | | | | | |
TOTALAVAILABLE-FOR-SALE | | | | 5,886 | | | | 25,670 | | | | 9,546 | | | | 9,773 | | | | 50,875 | |
| | | | | | | | | | | | | |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | | 75 | | | | 98 | | | | 3,107 | | | | 3,330 | | | | 6,610 | |
| Other debt securities | | | | 38 | | | | 645 | | | | 210 | | | | — | | | | 893 | |
| | | | | | | | | | | | | |
Total Domestic | | | | 113 | | | | 743 | | | | 3,317 | | | | 3,330 | | | | 7,503 | |
| | | | | | | | | | | | | |
Total International | | | | 616 | | | | 1,392 | | | | 209 | | | | 226 | | | | 2,443 | |
| | | | | | | | | | | | | |
TOTALHELD-TO-MATURITY | | | | 729 | | | | 2,135 | | | | 3,526 | | | | 3,556 | | | | 9,946 | |
| | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | | 6,615 | | | | 27,805 | | | | 13,072 | | | | 13,329 | | | | 60,821 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2010 | |
| | | Market Value | |
| | | | | | Due After
| | | Due After
| | | | | | | |
| | | Due in One
| | | One Year to
| | | Five Years to
| | | Due After
| | | | |
| | | Year or Less | | | Five Years | | | Ten Years | | | Ten Years | | | Total | |
| | | Millions of euros | |
| |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 76 | | | | 98 | | | | 2.859 | | | | 2.909 | | | | 5.942 | |
| Other debt securities | | | 37 | | | | 612 | | | | 180 | | | | — | | | | 829 | |
| | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 113 | | | | 710 | | | | 3.039 | | | | 2.909 | | | | 6.771 | |
| | | | | | | | | | | | | | | | | | | | | |
Total International | | | 617 | | | | 1.372 | | | | 202 | | | | 227 | | | | 2.418 | |
| | | | | | | | | | | | | | | | | | | | | |
TOTALHELD-TO-MATURITY | | | 730 | | | | 2.082 | | | | 3.241 | | | | 3.136 | | | | 9.189 | |
| | | | | | | | | | | | | | | | | | | | | |
F-174F-197
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2008 | | | As of December 31, 2009 | |
| | | Book Value | | | Carrying Amount | |
| | | Due in
| | Due After
| | Due After
| | | | | | | | | Due After
| | Due After
| | | | | |
| | | One Year
| | One Year to
| | Five Years to
| | Due After
| | | | | Due in One
| | One Year to
| | Five Years to
| | Due After
| | | |
| | | or Less | | Five Years | | Ten Years | | Ten Years | | Total | | | Year or Less | | Five Years | | Ten Years | | Ten Years | | Total | |
| | | (Millions of euros) | | | Millions of euros | |
| | |
AVAILABLE-FOR-SALE PORTFOLIO(*) | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | | 127 | | | | 10,536 | | | | 5,116 | | | | 2,772 | | | | 18,551 | |
| Other debt securities | | | | 576 | | | | 4,422 | | | | 283 | | | | 1,037 | | | | 6,318 | |
| | | | | | | | | | | | | |
Total Domestic | | | | 703 | | | | 14,958 | | | | 5,399 | | | | 3,809 | | | | 24,869 | |
| | | | | | | | | | | | |
International | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| United States | | | 1,277 | | | | 3,431 | | | | 3,026 | | | | 2,708 | | | | 10,442 | | | | 838 | | | | 2,586 | | | | 1,597 | | | | 1,784 | | | | 6,805 | |
| U.S. Treasury and other U.S. government agencies | | | 61 | | | | 156 | | | | 18 | | | | 209 | | | | 444 | | | | 223 | | | | 53 | | | | — | | | | 140 | | | | 416 | |
| States and political subdivisions | | | 60 | | | | 121 | | | | 141 | | | | 74 | | | | 396 | | | | 36 | | | | 84 | | | | 79 | | | | 22 | | | | 221 | |
| Other U.S. securities | | | 1,156 | | | | 3,154 | | | | 2,867 | | | | 2,425 | | | | 9,602 | | | | 579 | | | | 2,449 | | | | 1,518 | | | | 1,622 | | | | 6,168 | |
| Other countries | | | 3,208 | | | | 5,847 | | | | 4,292 | | | | 4,131 | | | | 17,478 | | | | 2,254 | | | | 9,318 | | | | 3,614 | | | | 10,211 | | | | 25,397 | |
| Securities of other foreign governments | | | 813 | | | | 3,784 | | | | 3,113 | | | | 1,943 | | | | 9,653 | | | | 934 | | | | 5,929 | | | | 2,454 | | | | 8,046 | | | | 17,363 | |
| Other debt securities of other countries | | | 2,395 | | | | 2,063 | | | | 1,179 | | | | 2,188 | | | | 7,825 | | | | 1,320 | | | | 3,389 | | | | 1,160 | | | | 2,165 | | | | 8,034 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total International | | | 4,485 | | | | 9,278 | | | | 7,318 | | | | 6,839 | | | | 27,920 | | | | 3,092 | | | | 11,904 | | | | 5,211 | | | | 11,995 | | | | 32,202 | |
| | | | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE-FOR-SALE | | | 5,864 | | | | 12,996 | | | | 10,030 | | | | 10,940 | | | | 39,830 | | | | 3,795 | | | | 26,862 | | | | 10,610 | | | | 15,804 | | | | 57,071 | |
| | | | | | | | | | | | | | | | | | | | | | | |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 168 | | | | 121 | | | | 1,068 | | | | 54 | | | | 1,410 | | | | 5 | | | | 181 | | | | 1,425 | | | | 63 | | | | 1,674 | |
| Other debt securities | | | 26 | | | | 259 | | | | 566 | | | | 130 | | | | 980 | | | | 50 | | | | 486 | | | | 294 | | | | 122 | | | | 952 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 195 | | | | 380 | | | | 1,634 | | | | 184 | | | | 2,390 | | | | 55 | | | | 667 | | | | 1,719 | | | | 185 | | | | 2,626 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total International | | | 67 | | | | 944 | | | | 1,652 | | | | 227 | | | | 2,890 | | | | 215 | | | | 790 | | | | 1,590 | | | | 216 | | | | 2,811 | |
| | | | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD-TO-MATURITY | | | 261 | | | | 1,324 | | | | 3,286 | | | | 413 | | | | 5,282 | | | | 270 | | | | 1,457 | | | | 3,309 | | | | 401 | | | | 5,437 | |
| | | | | | | | | | | | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | 6,125 | | | | 14,318 | | | | 13,316 | | | | 11,353 | | | | 45,112 | | | | 4,065 | | | | 28,319 | | | | 13,919 | | | | 16,205 | | | | 62,508 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2008 | | | As of December 31, 2009 | |
| | | Market Value | | | Market Value | |
| | | Due in
| | Due After
| | Due After
| | | | | | | | | Due After
| | Due After
| | | | | |
| | | One Year
| | One Year to
| | Five Years to
| | Due After
| | | | | Due in One
| | One Year to
| | Five Years to
| | Due After
| | | |
| | | or Less | | Five Years | | Ten Years | | Ten Years | | Total | | | Year or Less | | Five Years | | Ten Years | | Ten Years | | Total | |
| | | (Millions of euros) | | | Millions of euros | | | |
| |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 168 | | | | 121 | | | | 1,068 | | | | 54 | | | | 1,412 | | | | 5 | | | | 181 | | | | 1,433 | | | | 63 | | | | 1,682 | |
| Other debt securities | | | 25 | | | | 245 | | | | 534 | | | | 123 | | | | 927 | | | | 50 | | | | 482 | | | | 287 | | | | 123 | | | | 942 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 193 | | | | 366 | | | | 1,602 | | | | 178 | | | | 2,339 | | | | 55 | | | | 663 | | | | 1,720 | | | | 186 | | | | 2,624 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total International | | | 66 | | | | 938 | | | | 1,650 | | | | 228 | | | | 2,882 | | | | 217 | | | | 808 | | | | 1,623 | | | | 221 | | | | 2,869 | |
| | | | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD-TO-MATURITY | | | 259 | | | | 1,304 | | | | 3,252 | | | | 406 | | | | 5,221 | | | | 272 | | | | 1,471 | | | | 3,343 | | | | 407 | | | | 5,493 | |
| | | | | | | | | | | | | | | | | | | | | | | |
F-175
F-198
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2007 | | | December 31, 2008 | |
| | | Book Value | | | Carrying Amount | |
| | | Due in
| | Due After
| | Due After
| | | | | | | | | Due After
| | Due After
| | | | | |
| | | One Year
| | One Year to
| | Five Years to
| | Due After
| | | | | Due in One
| | One Year to
| | Five Years to
| | Due After
| | | |
| | | or Less | | Five Years | | Ten Years | | Ten Years | | Total | | | Year or Less | | Five Years | | Ten Years | | Ten Years | | Total | |
| | | (Millions of euros) | | | Millions of euros | |
| |
AVAILABLE-FOR-SALE PORTFOLIO(*) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 437 | | | | 796 | | | | 1,062 | | | | 2,980 | | | | 5,274 | | | | 119 | | | | 6,694 | | | | 4,003 | | | | 3,829 | | | | 14,645 | |
| Other debt securities | | | 453 | | | | 2,935 | | | | 326 | | | | 1,173 | | | | 4,887 | | | | 1,067 | | | | 3,732 | | | | 278 | | | | 835 | | | | 5,912 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 890 | | | | 3,731 | | | | 1,388 | | | | 4,153 | | | | 10,161 | | | | 1,186 | | | | 10,426 | | | | 4,281 | | | | 4,664 | | | | 20,557 | |
| | | | | | | | | | | | | | | | | | | | | | | |
International | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| United States | | | 1,006 | | | | 3,818 | | | | 2,169 | | | | 2,062 | | | | 9,055 | | | | 985 | | | | 3,083 | | | | 1,784 | | | | 1,410 | | | | 7,262 | |
| U.S. Treasury and other U.S. government agencies | | | 14 | | | | 43 | | | | 3 | | | | — | | | | 61 | | | | 160 | | | | 18 | | | | — | | | | 245 | | | | 423 | |
| States and political subdivisions | | | 54 | | | | 114 | | | | 181 | | | | 169 | | | | 518 | | | | 70 | | | | 145 | | | | 159 | | | | 52 | | | | 426 | |
| Other U.S. securities | | | 938 | | | | 3,661 | | | | 1,985 | | | | 1,893 | | | | 8,477 | | | | 755 | | | | 2,920 | | | | 1,625 | | | | 1,113 | | | | 6,413 | |
| Other countries | | | 1,792 | | | | 4,812 | | | | 5,532 | | | | 5,983 | | | | 18,119 | | | | 2,603 | | | | 9,799 | | | | 5,438 | | | | 3,960 | | | | 21,800 | |
| Securities of other foreign governments | | | 498 | | | | 2,408 | | | | 4,199 | | | | 4,173 | | | | 11,278 | | | | 666 | | | | 7,483 | | | | 4,018 | | | | 2,088 | | | | 14,255 | |
| Other debt securities of other countries | | | 1,294 | | | | 2,404 | | | | 1,333 | | | | 1,810 | | | | 6,841 | | | | 1,937 | | | | 2,316 | | | | 1,420 | | | | 1,872 | | | | 7,545 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total International | | | 2,798 | | | | 8,630 | | | | 7,701 | | | | 8,045 | | | | 27,175 | | | | 3,588 | | | | 12,882 | | | | 7,222 | | | | 5,370 | | | | 29,062 | |
| | | | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE-FOR-SALE | | | 3,688 | | | | 12,361 | | | | 9,089 | | | | 12,198 | | | | 37,336 | | | | 4,774 | | | | 23,308 | | | | 11,503 | | | | 10,034 | | | | 49,619 | |
| | | | | | | | | | | | | | | | | | | | | | | |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 5 | | | | 292 | | | | 1,066 | | | | 54 | | | | 1,417 | | | | 110 | | | | 118 | | | | 1,053 | | | | 54 | | | | 1,335 | |
| Other debt securities | | | 4 | | | | 193 | | | | 661 | | | | 127 | | | | 985 | | | | 54 | | | | 212 | | | | 550 | | | | 128 | | | | 944 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 9 | | | | 485 | | | | 1,727 | | | | 181 | | | | 2,402 | | | | 164 | | | | 330 | | | | 1,603 | | | | 182 | | | | 2,279 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total International | | | 282 | | | | 936 | | | | 1,738 | | | | 227 | | | | 3,182 | | | | 85 | | | | 918 | | | | 1,594 | | | | 223 | | | | 2,820 | |
| | | | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD-TO-MATURITY | | | 291 | | | | 1,421 | | | | 3,465 | | | | 408 | | | | 5,584 | | | | 249 | | | | 1,248 | | | | 3,197 | | | | 405 | | | | 5,099 | |
| | | | | | | | | | | | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | 3,979 | | | | 13,782 | | | | 12,554 | | | | 12,606 | | | | 42,921 | | | | 5,023 | | | | 24,556 | | | | 14,700 | | | | 10,439 | | | | 54,718 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2007 | | | December 31, 2008 | |
| | | Market Value | | | Market Value | |
| | | Due in
| | Due After
| | Due After
| | | | | | | | | Due After
| | Due After
| | | | | |
| | | One Year
| | One Year to
| | Five Years to
| | Due After
| | | | | Due in One
| | One Year to
| | Five Years to
| | Due After
| | | |
| | | or Less | | Five Years | | Ten Years | | Ten Years | | Total | | | Year or Less | | Five Years | | Ten Years | | Ten Years | | Total | |
| | | (Millions of euros) | | | Millions of euros | |
| |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 5 | | | | 278 | | | | 1,015 | | | | 52 | | | | 1,349 | | | | 110 | | | | 119 | | | | 1,055 | | | | 54 | | | | 1,338 | |
| Other debt securities | | | 3 | | | | 180 | | | | 619 | | | | 119 | | | | 922 | | | | 52 | | | | 203 | | | | 525 | | | | 122 | | | | 902 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 8 | | | | 458 | | | | 1,634 | | | | 171 | | | | 2,271 | | | | 162 | | | | 322 | | | | 1,580 | | | | 176 | | | | 2,240 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total International | | | 271 | | | | 901 | | | | 1,673 | | | | 218 | | | | 3,063 | | | | 83 | | | | 924 | | | | 1,607 | | | | 226 | | | | 2,840 | |
| | | | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD-TO-MATURITY | | | 279 | | | | 1,359 | | | | 3,307 | | | | 389 | | | | 5,334 | | | | 245 | | | | 1,246 | | | | 3,187 | | | | 402 | | | | 5,080 | |
| | | | | | | | | | | | | | | | | | | | | | | |
F-176F-199
| | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2006 | |
| | | Book Value | |
| | | Due in
| | | Due After
| | | Due After
| | | | | | | |
| | | One Year
| | | One Year to
| | | Five Years to
| | | Due After
| | | | |
| | | or Less | | | Five Years | | | Ten Years | | | Ten Years | | | Total | |
| | | (Millions of euros) | |
| |
AVAILABLE-FOR-SALE PORTFOLIO(*) | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | 312 | | | | 1,524 | | | | 1,684 | | | | 3,339 | | | | 6,858 | |
| Other debt securities | | | 525 | | | | 709 | | | | 540 | | | | 873 | | | | 2,647 | |
| | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | 837 | | | | 2,233 | | | | 2,224 | | | | 4,212 | | | | 9,505 | |
| | | | | | | | | | | | | | | | | | | | | |
International | | | | | | | | | | | | | | | | | | | | |
| United States | | | 716 | | | | 1,356 | | | | 673 | | | | 2,760 | | | | 5,506 | |
| U.S. Treasury and other U.S. government agencies | | | 31 | | | | 8 | | | | 305 | | | | — | | | | 344 | |
| States and political subdivisions | | | 21 | | | | 52 | | | | 32 | | | | 204 | | | | 309 | |
| Other U.S. securities | | | 664 | | | | 1,296 | | | | 336 | | | | 2,556 | | | | 4,853 | |
| Other countries | | | 1,349 | | | | 5,024 | | | | 5,273 | | | | 5,572 | | | | 17,218 | |
| Securities of other foreign governments | | | 662 | | | | 2,998 | | | | 3,648 | | | | 3,077 | | | | 10,385 | |
| Other debt securities of other countries | | | 687 | | | | 2,026 | | | | 1,625 | | | | 2,495 | | | | 6,833 | |
| | | | | | | | | | | | | | | | | | | | | |
Total International | | | 2,065 | | | | 6,380 | | | | 5,946 | | | | 8,332 | | | | 22,724 | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL AVAILABLE-FOR-SALE | | | 2,902 | | | | 8,613 | | | | 8,170 | | | | 12,544 | | | | 32,229 | |
| | | | | | | | | | | | | | | | | | | | | |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | — | | | | 261 | | | | 1,100 | | | | 55 | | | | 1,417 | |
| Other debt securities | | | — | | | | 129 | | | | 707 | | | | 152 | | | | 987 | |
| | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | — | | | | 390 | | | | 1,807 | | | | 207 | | | | 2,404 | |
| | | | | | | | | | | | | | | | | | | | | |
Total International | | | 307 | | | | 1,147 | | | | 1,760 | | | | 287 | | | | 3,502 | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD-TO-MATURITY | | | 307 | | | | 1,537 | | | | 3,567 | | | | 494 | | | | 5,906 | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL DEBT SECURITIES | | | 3,209 | | | | 10,150 | | | | 11,737 | | | | 13,038 | | | | 38,135 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2006 | |
| | | Market Value | |
| | | Due in
| | | Due After
| | | Due After
| | | | | | | |
| | | One Year
| | | One Year to
| | | Five Years to
| | | Due After
| | | | |
| | | or Less | | | Five Years | | | Ten Years | | | Ten Years | | | Total | |
| | | (Millions of euros) | |
| |
HELD-TO-MATURITY PORTFOLIO | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | |
| Spanish government | | | — | | | | 260 | | | | 1,065 | | | | 52 | | | | 1,378 | |
| Other debt securities | | | — | | | | 126 | | | | 691 | | | | 142 | | | | 958 | |
| | | | | | | | | | | | | | | | | | | | | |
Total Domestic | | | — | | | | 386 | | | | 1,756 | | | | 194 | | | | 2,336 | |
| | | | | | | | | | | | | | | | | | | | | �� |
Total International | | | 306 | | | | 1,129 | | | | 1,713 | | | | 273 | | | | 3,421 | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL HELD-TO-MATURITY | | | 306 | | | | 1,515 | | | | 3,469 | | | | 467 | | | | 5,757 | |
| | | | | | | | | | | | | | | | | | | | | |
| | |
| (*) | | As we describe in Note 2.2.1 the book valuecarrying amount and market value are the same for “Trading portfolio” and “Available for sale portfolio” |
F-177
Under both EU-IFRS and U.S. GAAP, the methodology used to estimate the fair value of non-traded or unlisted securities is as follows (see Note 2.2.1.b):
| | |
| | • | Debt securities: fair value is considered to be the present value of the cash flows, using market interest rates (discounted cash flows). |
| |
| | • | Equity securities: in the cases of equity instruments whose fair value cannot be determined in a sufficiently objective manner are measured at acquisition cost. In some cases in which trigger events indicate that a specific investment could be impaired, a specific valuation of fair value is used and all available factors are considered by management to determine the fair value under both GAAP. If it is available a valuation of the company, it is used as a better measure of fair value under both GAAP. |
These methodologies include an evaluation of credit risk, market conditions (volatility, interest rate evolution, macroeconomic variables, etc...) or future expectations.
As of December 31, 2008, 20072010, 2009 and 20062008 the net gains from sales ofavailable-for-sale securities amounted to €996€653 million €1,556€504 million and €1,135€1,723 million, respectively (see Notes 43Note 44 and 50)52). As of December 31, 2008, 20072010, 2009 and 20062008 the gross realized gains on those sales amounted to €1,150€814 million, €1,635€672 million and €1,294€1,150 million, respectively. As of December 31, 2008, 20072010, 2009 and 20062008 the gross realized losses on those sales amounted to €161 million (of which €122 million corresponds to debt securities and €39 million corresponds to other equity instruments), €167 million (of which €70 million corresponds to debt securities and €97 million corresponds to other equity instruments) and €154 million (of which €58 million corresponds to debt securities and €96 million corresponds to other equity instruments), €79 million (of which €38 million corresponds to debt securities and €41 million corresponds to other equity instruments) and €159 million (of which €68 million corresponds to debt securities and €91 million corresponds to other equity instruments), respectively.
| |
| 2. | Loans and Accounting by Creditors for Impairment of a LoanLOANS AND ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN — |
The balance of the recorded investment in impaired loans (substandard loans) and of the related valuation allowance as of December 31, 20082010 is as follows:
| | | | | |
| | | 2008As of December 31,
| |
| | 2010 | |
| | | Millions of euros | |
| |
| Impaired loans requiring no reserve | | | 125281 | |
| Impaired loans requiring valuation allowance | | | 8,31215,080 | |
| | | | | |
| Total impaired loans | | | 8,43715,361 | |
| | | | | |
| Valuation allowance on impaired loans | | | 2,2995,482 | |
| | | | | |
The roll-forward allowance is shown in Note 26. The reconciliation item to U.S. GAAP is in Note 58.A.7.7.1 of the Consolidated Financial Statements.
The related amount of interest income recognized during the time within that period that the loans were impaired was:
| | | | | |
| | | 2008As December 31,
|
| | 2010 |
| | | Millions of euros | |
| |
| Interest revenue that would have been recorded if accruing | | | 1,0421,717 | |
| Net interest revenue recorded | | | 150203 | |
| |
| 3. | Investments in and Indebtedness of and to AffiliatesINVESTMENTS IN AND INDEBTEDNESS OF AND TO AFFILIATES — |
For aggregated summarized financial information with respect to significant affiliated companies for the year ended December 31, 20082010 see Note 17 and Appendix VIV for detailed information of investments in associates.
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The breakdowns of deposits from credit entities and customers as of December 31, 2008, 2007 and 2006, by domicile and type are included in Note 22.23 of the accompanying consolidated financial statements.
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As of December 31, 2008, 20072010, 2009 and 2006,2008, the time deposits, both domestic and international, (other than interbank deposits) in denominations of €71.85 thousand€75,364 (approximately US$100 thousand)100,000) or more were €97.92 billion, €96.75€83,516 million, €96,164 million and €82.24 billion,€97,923 million, respectively.
| |
| 5. | Short-Term BorrowingsSHORT-TERM BORROWINGS — |
The information about “Short-Term borrowings” required under S-X Regulations is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | |
| | | As of December 31, | | | 2010 | | 2009 | | 2008 | |
| | | 2008 | | 2007 | | 2006 | | | | | Average
| | | | Average
| | | | Average
| |
| | | Amount | | Average Rate | | Amount | | Average Rate | | Amount | | Average Rate | | | Amount | | Rate | | Amount | | Rate | | Amount | | Rate | |
| | | (In millions of euro, except %) | | | (In millions of euro, except percentages) | |
| |
Securities sold under agreements to repurchase (principally Spanish Treasury bills): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31 | | | 28,206 | | | | 4.66 | % | | | 39,902 | | | | 5.20 | % | | | 37,098 | | | | 4.27 | % | |
| As of December 31, | | | | 39,587 | | | | 2.03 | % | | | 26,171 | | | | 2.43 | % | | | 28,206 | | | | 4.66 | % |
| Average during year | | | 34,729 | | | | 5.62 | % | | | 42,461 | | | | 5.13 | % | | | 38,721 | | | | 3.61 | % | | | 31,056 | | | | 2.17 | % | | | 30,811 | | | | 2.71 | % | | | 34,729 | | | | 5.62 | % |
| Maximum quarter-end balance | | | 34,202 | | | | — | | | | 44,155 | | | | — | | | | 46,449 | | | | — | | | | 39,587 | | | | — | | | | 28,849 | | | | — | | | | 34,202 | | | | — | |
Bank promissory notes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31 | | | 20,061 | | | | 3.70 | % | | | 5,810 | | | | 3.69 | % | | | 7,596 | | | | 3.75 | % | |
| As of December 31, | | | | 13,215 | | | | 0.91 | % | | | 29,578 | | | | 0.50 | % | | | 20,061 | | | | 3.70 | % |
| Average during year | | | 15,661 | | | | 4.57 | % | | | 6,975 | | | | 3.96 | % | | | 8,212 | | | | 3.16 | % | | | 24,405 | | | | 0.55 | % | | | 27,434 | | | | 1.28 | % | | | 15,661 | | | | 4.57 | % |
| Maximum quarter-end balance | | | 20,061 | | | | — | | | | 7,133 | | | | — | | | | 9,036 | | | | — | | | | 28,937 | | | | — | | | | 30,919 | | | | — | | | | 20,061 | | | | — | |
Bonds and Subordinated debt: | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31 | | | 13,565 | | | | 4.66 | % | | | 11,281 | | | | 4.49 | % | | | 7,756 | | | | 4.01 | % | |
Bonds and Subordinated debt : | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31 , | | | | 11,041 | | | | 2.57 | % | | | 13,236 | | | | 2.54 | % | | | 13,565 | | | | 4.66 | % |
| Average during year | | | 12,447 | | | | 5.18 | % | | | 12,147 | | | | 5.21 | % | | | 8,076 | | | | 3.74 | % | | | 10,825 | | | | 3.20 | % | | | 14,820 | | | | 3.20 | % | | | 12,447 | | | | 5.18 | % |
| Maximum quarter-end balance | | | 15,822 | | | | — | | | | 15,761 | | | | — | | | | 10,872 | | | | — | | | | 13,184 | | | | — | | | | 15,609 | | | | — | | | | 15,822 | | | | — | |
Total short-term borrowings as of December 31 | | | 61,832 | | | | 4.35 | % | | | 56,993 | | | | 4.91 | % | | | 52,450 | | | | 4.16 | % | |
| | | | | | | | | | | | | | | |
Total short-term borrowings at December 31 | | | | 63,844 | | | | 1.89 | % | | | 68,985 | | | | 1.62 | % | | | 61,832 | | | | 4.35 | % |
| | | | | | | | | | | | | | | |
As of December 31, 2008, 20072010, 2009 and 2006,2008, short-term borrowings include €13,018 million, €33,233€16,396 million. €17,419 million, and €16,272€13,018 million, respectively, of securities sold under agreements to repurchase from Bank of Spain and other Spanish and foreign financial institutions.
| |
| 6. | Long Term DebtLONG TERM DEBT — |
See Notes 22 and 31.Note 23 of the Consolidated Financial Statements.
| |
| 7. | Derivative Financial Instruments and Hedging ActivitiesDERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES — |
The breakdown of the Derivative Financial Instruments is shown in Notes 10 and 15.15 of the Consolidated Financial Statements.
| |
| 7.1. | Objectives for the holding of positions in derivatives and strategies for the achievement of these objectives |
See Note 15 of the Consolidated Financial Statements.
7.1.1. Risk Management Policies
| |
| 7.1.1. | Risk Management Policies |
See Note 7.7 of the Consolidated Financial Statements.
F-201
7.1.2. Transactions whose risks are hedged for U.S. GAAP purposes
| |
| 7.1.2. | Transactions whose risks are hedged for U.S. GAAP purposes |
U.S. GAAP (SFAS 133)ASC 815 is more restrictive than IAS 39, Financial Instruments: recognition and measurement, on the types of risks that may be hedged and therefore certain hedging relationships have been discontinued under U.S. GAAP.
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Paragraph 21.f. of SFAS 133ASC 815 defines the risks that may be hedged as only one of (or a combination of) the following:
(a) the risk of changes in the overall fair value of the entire hedged item,
(b) the risk of changes in its fair value attributableattributed to changes in the designated benchmark interest rate (referred to as interest rate risk),
(c) the risk of changes in its fair value attributableattributed to changes in the related foreign currency exchange rates (referred to as foreign exchange risk) and
(d) the risk of changes in its fair value attributableattributed to both changes in the obligor’s creditworthiness and changes in the spread over the benchmark interest rate with respect to the hedged item’s credit sector at inception of the hedge (referred to as credit risk).
The same paragraph states that an entity may not simply designate prepayment risk as the risk being hedged for a financial asset unless it is represented by an embedded option in the hedged instrument.
Transactions whose risks are hedged for U.S. GAAP purposes are:
1. Available for sale fixed rate debt securities: this risk is hedged using interest-rate derivatives (interest-rate swaps through which the fixed-coupon of the bond is exchanged for a variable return).
2. Long term fixed rate debt issued: this risk is hedged using interest-rate derivatives (interest-rate swaps which replicate, on the collection leg, the payment resulting from the issue and transform it into a variable cost for the Bank).
3. Foreign currency of a net investment in a foreign subsidiary: the risk of a net investment in a foreign operation is exchanged for the currency in which the investment is denominated.
4. Available for sale equity securities: this risk is hedged using equity swaps through which the risk of variation in the price per books of the portfolio is transferred to the counterparty.
5. Fixed rate loans: this risk is hedged using interest-rate derivatives (interest-rate swaps through which the fixed-coupon of the loans is exchanged for a variable return).
6. Floating interest rate loans in foreign currencies: this risk is hedged using currency swaps.
7.2. Accounting for Derivative Instruments and Hedging Activities
| |
| 7.2. | Accounting for Derivative Instruments and Hedging Activities |
Under SFAS 133ASC 815 the accounting for changes in fair value of a derivative instrument depends on its intended use and the resulting designation.
If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item attributableattributed to the hedged risk are recognized in earnings.
If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in Other Comprehensive Income and are recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.
The gain or loss on a hedging derivative instrument that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation is reported in the same way as a translation adjustment to the extent it is effective as a hedge. The ineffective portion of net investment hedges is reported in earnings.
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Hedging transactions must be formally documented, designated and the company must describe the way the effectiveness is going to be assessed.
On the other hand when the derivative is designated as a trading transaction the changes in the fair value must be recognized in earnings.
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7.3. Additional disclosures required by U.S. GAAP: Fair Value Methods
| |
| 7.3. | Additional disclosures required by U.S. GAAP: Fair Value Methods |
The methods used by the Group in estimating the fair value of its derivative instruments are as follows:
Forward purchases/sales of foreign currency
Estimated fair value of these financial instruments is based on quotedactive market prices.
Forward purchases/sales of government debt securities
Estimated fair value of these financial instruments is based on quotedactive market prices, since they are mostly traded in organised markets.
Options and financial futures
Derivatives traded in organised markets are valued based on quoted market prices.
For options and futures traded in OTC markets, the fair value is estimated based on theoretical year-end closing prices. These year-end closing prices are calculated according to generally accepted models estimating the amounts the Group would receive or pay based upon the yield curve/ volatilities prevailing at year-end or prices.
Forward rate agreements and interest rate swaps
Fair values of these contracts are estimated based on the discounted future cash flows related to the interest rates to be collected or paid, using for this purpose the yield curve prevailing at year-end.
| |
| 8. | Pension liabilitiesPENSION LIABILITIES — |
See Notes 2.2.32.2.12 and 2526 of the Consolidated Financial Statements for a detail of the pension commitments under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.
| |
| 9. | EMPLOYERS’ DISCLOSURES ABOUT POSTRETIREMENT BENEFIT PLAN ASSETS(ASC 715-20) |
9. Disclosures about Fair Value
Employee benefits corporate policies are defined by BBVA Group as part of Financial Instruments (SFAS 107) —the coordination framework established between the headquarters and each of the countries in which it operates.
As required by SFAS No. 107, Disclosures about Fair ValueIn order to manage the assets related to defined benefit plans, BBVA Group has set the corresponding corporate investment policy. The investment policy currently in force is designed according to the criteria of Financial Instruments, (“SFAS No. 107”)prudence and aimed to minimize the Group presents estimate fair value information about financial instruments for which it is practicable to estimate that valuerisks in Note 32. Fair value of a financial instrument is the amount for which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value is best determined by values quoted through active trading markets. Active trading markets are characterized by numerous transactions of similar financial instruments between willing buyers and willing sellers. Because no active trading market exists for various types of financial instruments, many of the fair values disclosed were derived using present value discounted cash flow or other valuation techniques. As a result, the Group’s ability to actually realize these derived values cannot be assured.plan assets.
The estimated fair values disclosed under SFAS No. 107 may vary significantly between institutions based on the estimates and assumptions used in the various valuation methodologies. SFAS No. 107 excludes disclosuremain principles of goodwill, core deposits, non-financial assets such as fixed assets as well as certain financial instruments such as investments in affiliated companies.this policy are summarized below:
| | |
| • | Fixed income as the only category of allowed assets. Preference for government bonds. |
|
| • | No currency risk allowed in asset allocation |
|
| • | Requirement of specific levels of liquidity in order to meet the expected cash flow liabilities. |
|
| • | Systematized controls in duration, limiting the asset-liabilities duration gaps. |
|
| • | Standardized limitation in inflation risk. |
Accordingly, the aggregate estimate fair values presented do not represent the underlying value
Local adaptation of the Group.
The following methods and assumptions were used bycorporate investment policy is taking place gradually along the countries in which the Group in estimating its fair value disclosuresoperates, taking into account the particularities of each market. This implies the need for financial instruments for which it is practicable to estimate such value:
a) Cash and due from banks
For these short-term instruments,unifying the carrying amount is a reasonable estimate of fair value.
b) Interest-bearing deposits in other banks and securities purchased under agreement to resell
The fair value represents the present value of estimated future cash flows discounted at the average year-end market rates for each type of instrument.
c) Investment securities
F-181F-203
c.1) Fixed income:diversity of the local investment policies previously in force, considering the specific local legislations and regulations -especially with regards to investment decision making processes — .
(i) Listed securities: at closing market pricesOn average, as of December 31, 2008, 20072010 the degree of local implementation of the current investment policy for plan assets is, in its most significant aspects, well advanced with nearly 91% of assets invested in fixed income (mostly government bonds) and 2006.around 7% in equity and 2% in other assets.
(ii) Unlisted securities: on the basisMeasurement of plan assets is set using market quoted prices of other listed fixed-income securities of similar interest rate, credit risk and maturity. If no similar listed fixed-income securities can be identified, the fair value is estimated by discounting future cash-flows using year-end rates based on market rates available on securities with similar credit and maturity characteristics.
c.2) Equity securities:
(i) Listed securities: fair values are based on the December 31, 2008, 2007 and 2006 closing market price.
(ii) Unlisted securities whose fair value cannot be determined in a sufficiently objective manner: at underlying book value per the December 31, 2008, 2007 and 2006 financial statements of each investee, or otherwise based on the latest financial statements currently available.
d) Loans and leases
The fair value of the Group’s loan portfolio is based on the credit and interest rate characteristics of the individual loans within each sector of the portfolio. The fair value of loans was estimated by discounting scheduled cash flows through the estimated maturity using prevailing market rates at year-end, and is implemented as follows:
d.1)The estimate of the provision for probable loan losses includes consideration of risk premiums applicable to various types of loans based on factors such as the current situationunderlying assets are market quoted and priced instruments. In addition, no significant concentrations of the economic sector in which each borrower operates, the economic situation of each borrower and guarantees obtained. Accordingly, the allowance for probable loan losses is considered a reasonable estimate of the discount required to reflect the impact of credit risk.
d.2)For fixed and floating-rate loans for which the interest rate was similar to the average rates available for each type of loan (such as commercial or mortgage loans)risks within plan assets have been identified as of December 31, 2008, 20072010 and 2006, the carrying amount, netinvestments of the related allowance for probable loan losses, is considered a reasonable estimate of fair value.
d.3)For the remaining loans which the Group determined were at rates differentplans are deemed to those currently offered, the fair values are estimated as the present value of future cash flows discounted at the average year-end market interest rates at which similar loans are being granted to borrowers with similar credit ratings and remaining maturities.
e) Deposits and Short Term Borrowings
The fair value represents the present value of estimated future cash flows discounted at the average year-end market rates for each type of instrument.
f) Long-Term Debt
The fair value is estimated on the basis of the discounted present value of the cash flows over the remaining term of such debt. The discount rates were determined based on market rates available as of December 31, 2008, 2007 and 2006 on debt with similar credit and maturity characteristics of the Group’s.
g) Commitments and Contingencies
g.1)Guarantees and other sureties provided and documentary credits:
It is estimated that the differential, if any, between the fee charged by the Group for these transactions and the average year-end market fee would not give rise to a material difference.
g.2) Derivative Products:
The fair value of these products as of December 31, 2008, 2007 and 2006, considering the related discounted cash-flows and the year-end prevailing rates and market values is presented in Note 10.
F-182
See Note 2.2.1.a for more information of fair value of financial instruments.be sufficiently diversified.
| |
| 10. | Segment InformationDISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (ASC825-10) — |
See Note 8 of the Consolidated Financial Statements for disclosures about Fair Value of Financial Instruments, as required byASC 825-10.
| |
| 11. | SEGMENT INFORMATION — |
See Note 6 of the Consolidated Financial Statements, for a detail of the segment information under the EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.
| |
11.12. | Business combination in 2008BUSINESS COMBINATION IN 2010 — |
See Note 3 for details of the effect on income statementConsolidated Financial Statements for information of business combinations produced during 2008.Business combinations.
| |
12.13. | FIN 48“UNRECOGNIZED TAX BENEFITS” (ASC605-15) — |
As of December 31, 20082010 and December 31, 2007,2009, the Group’s unrecognized tax benefits, including related interest expense and penalties was 1.136€1,091 million and 1.006€1,052 million, respectively, of which 612€701 million, if recognized, would reduce the annual effective tax rate. As the Group is presently under audit by number of tax authorities, it is reasonably possible that unrecognized tax benefits could change significantly over the next 12 months. The Group does not expect that any such changes would have a material impact on its annual effective tax rate.
Due to the inherent complexities arising from the nature of the Group’s businesses, and from conducting business are being taxed in a substantial number of jurisdictions, significant judgements and estimates are required to be made. Agreement of tax liabilities between BBVA and the many tax jurisdictions in which Group files tax returns may not be finalized for several years. Thus, the Group’s final tax-related assets and liabilities may ultimately be different than those currently reported.
The following is a roll-forward of the Company’s FIN 48Bank’sASC 605-15 unrecognized tax benefits from December 31, 20072008 to December 31, 2008.2010.
| | | | | |
| | | In millionsMillions of euros | |
| |
Total unrecognized tax benefits as of December 31, 2007 | | | 1,006 | |
Net amount of increases for current year’s tax positions | | | 11 | |
Gross amount of increases for prior years’ tax positions | | | 124 | |
Gross amount of decreases for prior years’ tax positions | | | (4 | ) |
Foreign exchange and acquisitions | | | (1 | ) |
Total unrecognized tax benefits as of December 31, 2008 | | | 1,136 | |
The following is a roll-forward of the Company’s FIN 48 unrecognized tax benefits from January 1, 2007 to December 31, 2007.
| | | | |
| | In millions of euros | |
|
Total unrecognized tax benefits as of January 1, 2007 | | | 882 | |
| Net amount of increases for current year’s tax positions | | | 13 | |
| Gross amount of increases for prior years’ tax positions | | | 129113 | |
| Gross amount of decreases for prior years’ tax positions | | | (179 | ) |
Foreign exchange, acquisitions and acquisitionsothers | | | 11(191 | ) |
Total unrecognized tax benefits as of December 31, 20072009 | | | 1,0061,052 | |
| Net amount of increases for current year’s tax positions | | | 7 | |
| Gross amount of increases for prior years’ tax positions | | | 77 | |
| Gross amount of decreases for prior years’ tax positions | | | (7 | ) |
| Foreign exchange, acquisitions and others | | | (38 | ) |
Total unrecognized tax benefits as of December 31, 2010 | | | 1,091 | |
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The Group classifies interestsinterest as interest expensesexpense but penalties are classified as tax expense. During the year ended December 31, 2008,2010, the Group recognized approximately €49€34 million in interestsinterest and penalties. The Group had approximately €255€333 million for the payment of interestsinterest and penalties accrued as of December 31, 2008.2010.
F-183
The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:
| | | | | |
Jurisdiction | | Tax yearYear | |
| |
| Spain | | | 2004-20082004 - 2010 | |
| United States | | | 2005-20082005 - 2010 | |
| Puerto Rico | | | 2003-20082006 - 2010 | |
| Peru | | | 2005-20082006 - 2010 | |
| Colombia | | | 2003-20082005 - 2010 | |
| Argentina | | | 2003-20082005 - 2010 | |
| Venezuela | | | 2003-20082004 - 2010 | |
| Mexico | | | 2006-20082005 - 2010 | |
| |
13.14. | Financial Statements of Guarantors and Issuers of Guaranteed Securities RegisteredDISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES(ASC 815-10-50 — DERIVATIVES AND HEDGING) — |
In March 2008 the FASB issued FASB Statement No. 161 (ASC815-10-50),Disclosures about Derivative Instruments and Hedging Activities.The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.
See Note 10, 15, 39 and 44 of the Consolidated Financial Statements for disclosures about derivative instruments and hedging activities, as required byASC815-10-5.
| |
| 15. | DISCLOSURES ABOUT THE CREDIT QUALITY OF FINANCING RECEIVABLES AND THE ALLOWANCE FOR CREDIT LOSSES (ASC 310) — |
In 2010 the FASB issued ASU 2010-20, which amends ASC 310 to enhance disclosures about the credit quality of financing receivables and the allowance for credit losses.
See Note 7 and 13 of the Consolidated Financial Statements for the significant disclosures about credit quality of financing receivables and the allowance for credit losses.
| |
| 16. | FINANCIAL STATEMENTS OF GUARANTORS AND ISSUERS OF GUARANTEED SECURITIES REGISTERED — |
In accordance with Reg. S-XRule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered, BBVA International Preferred, S.A. (Unipersonal) — issuer of registered preferred securities guaranteed by Banco Bilbao Vizcaya Argentaria, S.A. — do not file the financial statements required for a registrant byRegulation S-X as BBVA International Preferred, S.A. (Unipersonal) is 100% owned finance subsidiary of Banco Bilbao Vizcaya Argentaria, S.A. who fully and unconditionally guarantees the preferred securities (Serie C“C” is listed in the United States). No other subsidiary of the Bank guarantees such securities. We are not aware of any legal or economic restrictions on the ability of this subsidiary to transfer funds to our parent company in the form of cash dividends, loans or advances, capital repatriation or otherwise. There is no assurance that in the future such restrictions will not be adopted.
F-184F-205
APPENDIX I Financial Statements of Banco Bilbao Vizcaya Argentaria,I. FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
BALANCE SHEETS AS OF DECEMBER 31, 20082010 AND 20072009
| | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | | 2010 | | 2009 | |
| | | Millions of euros | | | Millions of euros | |
| |
ASSETS | ASSETS | | | | | | | | |
| | | |
CASH AND BALANCES WITH CENTRAL BANKS | | | 2,687 | | | | 12,216 | | | | 4,165 | | | | 3,286 | |
| | | | | | | | | | | |
FINANCIAL ASSETS HELD FOR TRADING | | | 59,987 | | | | 41,180 | | | | 51,348 | | | | 57,532 | |
| | | | | | | | | | | |
| Loans and advances to credit institutions | | | — | | | | — | | | | — | | | | — | |
| | | | | | | |
| Money market operations through counterparties | | | — | | | | — | | |
| | | | | | | |
| Loans and advances to customers | | | | — | | | | — | |
| Debt securities | | | 14,953 | | | | 17,006 | | | | 13,016 | | | | 22,833 | |
| | | | | | | |
| Other equity instruments | | | 5,605 | | | | 9,037 | | |
| | | | | | | |
| Equity instruments | | | | 4,608 | | | | 4,996 | |
| Trading derivatives | | | 39,429 | | | | 15,137 | | | | 33,724 | | | | 29,703 | |
| | | | | | | | | | | |
| Memorandum item: Loaned and advanced as collateral | | | 5,012 | | | | 5,919 | | |
Memorandum item: Loaned or advanced as collateral | | | | 8,669 | | | | 12,665 | |
| | | | | | | | | | | |
OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | |
| Loans and advances to credit institutions | | | — | | | | — | | | | — | | | | — | |
| | | | | | | |
| Money market operations through counterparties | | | — | | | | — | | |
| | | | | | | |
| Loans and advances to customers | | | | — | | | | — | |
| Debt securities | | | — | | | | — | | | | — | | | | — | |
| | | | | | | |
| Other equity instruments | | | — | | | | — | | |
| Memorandum item: Loaned and advanced as collateral | | | — | | | | — | | |
| Equity instruments | | | | — | | | | — | |
Memorandum item: Loaned or advanced as collateral | | | | — | | | | — | |
| | | | | | | | | | | |
AVAILABLE-FOR-SALE FINANCIAL ASSETS | | | 18,726 | | | | 18,709 | | | | 26,712 | | | | 35,964 | |
| | | | | | | | | | | |
| Debt securities | | | 11,873 | | | | 9,142 | | | | 22,131 | | | | 30,610 | |
| | | | | | | |
| Other equity instruments | | | 6,853 | | | | 9,567 | | |
| | | | | | | |
| Memorandum item: Loaned and advanced as collateral | | | 7,694 | | | | 2,573 | | |
| Equity instruments | | | | 4,581 | | | | 5,354 | |
Memorandum item: Loaned or advanced as collateral | | | | 5,901 | | | | 23,777 | |
| | | | | | | | | | | |
LOANS AND RECEIVABLES | | | 272,114 | | | | 246,322 | | | | 264,278 | | | | 256,355 | |
| | | | | | | | | | | |
| Loans and advances to credit institutions | | | 45,274 | | | | 35,199 | | | | 28,882 | | | | 27,863 | |
| | | | | | | |
| Loans and advances to customers | | | 226,836 | | | | 211,123 | | | | 234,031 | | | | 228,491 | |
| | | | | | | |
| Debt securities | | | 4 | | | | — | | | | 1,365 | | | | 1 | |
| | | | | | | | | | | |
| Memorandum item: Loaned and advanced as collateral | | | 4,683 | | | | 4,240 | | |
Memorandum item: Loaned or advanced as collateral | | | | 42,333 | | | | 40,040 | |
| | | | | | | | | | | |
HELD-TO-MATURITY INVESTMENTS | | | 5,282 | | | | 5,584 | | | | 9,946 | | | | 5,437 | |
| | | | | | | | | | | |
| Memorandum item: Loaned and advanced as collateral | | | 729 | | | | 2,085 | | |
Memorandum item: Loaned or advanced as collateral | | | | — | | | | 1,178 | |
| | | | | | | | | | | |
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | | | — | | | | — | | | | 40 | | | | — | |
| | | | | | | | | | | |
HEDGING DERIVATIVES | | | 3,047 | | | | 779 | | | | 2,988 | | | | 3,082 | |
| | | | | | | | | | | |
NON-CURRENT ASSETS HELD FOR SALE | | | 149 | | | | 49 | | | | 958 | | | | 570 | |
| | | | | | | | | | | |
INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD | | | | 24,368 | | | | 22,120 | |
| | | | | | | |
| Associates | | | | 3,612 | | | | 2,296 | |
| Jointly controlled entities | | | | 14 | | | | 17 | |
| Subsidiaries | | | | 20,742 | | | | 19,807 | |
| | | | | | | |
INSURANCE CONTRACTS LINKED TO PENSIONS | | | | 1,847 | | | | 1,883 | |
| | | | | | | |
TANGIBLE ASSETS | | | | 1,459 | | | | 1,464 | |
| | | | | | | |
| Property, plants and equipment | | | | 1,458 | | | | 1,461 | |
| For own use | | | | 1,458 | | | | 1,461 | |
| Other assets leased out under an operating lease | | | | — | | | | — | |
| Investment properties | | | | 1 | | | | 3 | |
| | | | | | | |
| Memorandum item: Loaned or advanced as collateral | | | | — | | | | — | |
| | | | | | | |
INTANGIBLE ASSETS | | | | 410 | | | | 246 | |
| | | | | | | |
| Goodwill | | | | — | | | | — | |
| Other intangible assets | | | | 410 | | | | 246 | |
| | | | | | | |
TAX ASSETS | | | | 3,161 | | | | 3,188 | |
| | | | | | | |
| Current | | | | 324 | | | | 448 | |
| Deferred | | | | 2,837 | | | | 2,740 | |
| | | | | | | |
OTHER ASSETS | | | | 431 | | | | 718 | |
| | | | | | | |
TOTAL ASSETS | | | | 392,111 | | | | 391,845 | |
| | | | | | | |
I-1
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD | | | 21,668 | | | | 21,668 | |
| | | | | | | | | |
| Associates | | | 452 | | | | 505 | |
| | | | | | | | | |
| Jointly controlled entities | | | 4 | | | | 4 | |
| | | | | | | | | |
| Group entities | | | 21,212 | | | | 21,159 | |
| | | | | | | | | |
INSURANCE CONTRACTS LINKED TO PENSIONS | | | 1,996 | | | | 2,004 | |
| | | | | | | | | |
TANGIBLE ASSETS | | | 1,895 | | | | 1,870 | |
| | | | | | | | | |
| Property, plants and equipment | | | 1,884 | | | | 1,859 | |
| | | | | | | | | |
| For own use | | | 1,884 | | | | 1,859 | |
| | | | | | | | | |
| Other assets leased out under an operating lease | | | — | | | | — | |
| | | | | | | | | |
| Investment properties | | | 11 | | | | 11 | |
| | | | | | | | | |
| Memorandum item: Loaned and advanced as collateral | | | — | | | | — | |
| | | | | | | | | |
INTANGIBLE ASSETS | | | 166 | | | | 90 | |
| | | | | | | | | |
| Goodwill | | | — | | | | — | |
| | | | | | | | | |
| Other intangible assets | | | 166 | | | | 90 | |
| | | | | | | | | |
TAX ASSETS | | | 3,568 | | | | 3,227 | |
| | | | | | | | | |
| Current | | | 320 | | | | 150 | |
| | | | | | | | | |
| Deferred | | | 3,248 | | | | 3,077 | |
| | | | | | | | | |
OTHER ASSETS | | | 735 | | | | 768 | |
| | | | | | | | | |
TOTAL ASSETS | | | 392,020 | | | | 354,466 | |
| | | | | | | | | |
APPENDIX I (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009
| | | | | | | | | |
| | | 2010 | | | 2009 | |
| | | Millions of euros | |
| |
LIABILITIES AND EQUITY | | | | | | | | |
| | | | | | | | | |
FINANCIAL LIABILITIES HELD FOR TRADING | | | 35,680 | | | | 31,943 | |
| | | | | | | | | |
| Deposits from central banks | | | — | | | | — | |
| Deposits from credit institutions | | | — | | | | — | |
| Customer deposits | | | — | | | | — | |
| Debt certificates | | | — | | | | — | |
| Trading derivatives | | | 32,294 | | | | 28,577 | |
| Short positions | | | 3,386 | | | | 3,366 | |
| Other financial liabilities | | | — | | | | — | |
| | | | | | | | | |
OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | | | — | | | | — | |
| Deposits from central banks | | | — | | | | — | |
| Deposits from credit institutions | | | — | | | | — | |
| Customer deposits | | | — | | | | — | |
| Debt certificates | | | — | | | | — | |
| Subordinated liabilities | | | — | | | | — | |
| Other financial liabilities | | | — | | | | — | |
| | | | | | | | | |
FINANCIAL LIABILITIES AT AMORTIZED COST | | | 320,592 | | | | 328,389 | |
| | | | | | | | | |
| Deposits from central banks | | | 10,867 | | | | 20,376 | |
| Deposits from credit institutions | | | 42,015 | | | | 40,201 | |
| Customer deposits | | | 194,079 | | | | 180,407 | |
| Debt certificates | | | 56,007 | | | | 69,453 | |
| Subordinated liabilities | | | 13,099 | | | | 14,481 | |
| Other financial liabilities | | | 4,525 | | | | 3,471 | |
| | | | | | | | | |
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | | | (2 | ) | | | — | |
| | | | | | | | | |
HEDGING DERIVATIVES | | | 1,391 | | | | 1,014 | |
| | | | | | | | | |
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE | | | — | | | | — | |
| | | | | | | | | |
PROVISIONS | | | 6,613 | | | | 6,790 | |
| | | | | | | | | |
| Provisions for pensions and similar obligations | | | 5,177 | | | | 5,426 | |
| Provisions for taxes and other legal contingencies | | | — | | | | — | |
| Provisions for contingent exposures and commitments | | | 177 | | | | 201 | |
| Other provisions | | | 1,259 | | | | 1,163 | |
| | | | | | | | | |
TAX LIABILITIES | | | 488 | | | | 715 | |
| | | | | | | | | |
| Current | | | — | | | | — | |
| Deferred | | | 488 | | | | 715 | |
| | | | | | | | | |
OTHER LIABILITIES | | | 1,192 | | | | 1,317 | |
| | | | | | | | | |
TOTAL LIABILITIES | | | 365,954 | | | | 370,168 | |
| | | | | | | | | |
STOCKHOLDERS’ FUNDS | | | 26,183 | | | | 20,034 | |
| | | | | | | | | |
Common Stock | | | 2,201 | | | | 1,837 | |
| | | | | | | | | |
| Issued | | | 2,201 | | | | 1,837 | |
| Unpaid and uncalled(-) | | | — | | | | — | |
| | | | | | | | | |
Share premium | | | 17,104 | | | | 12,453 | |
| | | | | | | | | |
Reserves | | | 5,114 | | | | 3,893 | |
| | | | | | | | | |
Other equity instruments | | | 23 | | | | 10 | |
| | | | | | | | | |
| Equity component of compound financial instruments | | | — | | | | — | |
| Other equity instruments | | | 23 | | | | 10 | |
| | | | | | | | | |
Less: Treasury stock | | | (84 | ) | | | (128 | ) |
| | | | | | | | | |
Income attributed | | | 2,904 | | | | 2,981 | |
| | | | | | | | | |
Less: Dividends and remuneration | | | (1,079 | ) | | | (1,012 | ) |
| | | | | | | | | |
VALUATION ADJUSTMENTS | | | (26 | ) | | | 1,643 | |
| | | | | | | | | |
Available-for-sale financial assets | | | 39 | | | | 1,567 | |
| Cash flow hedging | | | (62 | ) | | | 80 | |
| Hedging of net investment in foreign transactions | | | — | | | | — | |
| Exchange differences | | | (3 | ) | | | (4 | ) |
Non-current assetsheld-for-sale | | | — | | | | — | |
| Other valuation adjustments | | | — | | | | — | |
| | | | | | | | | |
TOTAL EQUITY | | | 26,157 | | | | 21,677 | |
| | | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | | 392,111 | | | | 391,845 | |
| | | | | | | | | |
| | | | | | | | | |
| Memorandum Item | | 2010 | | | 2009 | |
| | | Millions of euros | |
| |
CONTINGENT EXPOSURES | | | 57,764 | | | | 58,174 | |
| | | | | | | | | |
CONTINGENT COMMITMENTS | | | 58,885 | | | | 64,428 | |
| | | | | | | | | |
I-2
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
| LIABILITIES AND EQUITY |
FINANCIAL LIABILITIES HELD FOR TRADING | | | 40,538 | | | | 18,724 | |
| | | | | | | | | |
| Deposits from central banks | | | — | | | | — | |
| | | | | | | | | |
| Deposits from credit institutions | | | — | | | | — | |
| | | | | | | | | |
| Deposits from customers | | | — | | | | — | |
| | | | | | | | | |
| Debt certificates | | | — | | | | — | |
| | | | | | | | | |
| Trading derivatives | | | 37,885 | | | | 17,562 | |
| | | | | | | | | |
| Short positions | | | 2,653 | | | | 1,162 | |
| | | | | | | | | |
| Other financial liabilities | | | — | | | | — | |
| | | | | | | | | |
OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | | | — | | | | — | |
| | | | | | | | | |
| Deposits from central banks | | | — | | | | — | |
| | | | | | | | | |
| Deposits from credit institutions | | | — | | | | — | |
| | | | | | | | | |
| Deposits from customers | | | — | | | | — | |
| | | | | | | | | |
| Debt certificates | | | — | | | | — | |
| | | | | | | | | |
| Subordinated liabilities | | | — | | | | — | |
| | | | | | | | | |
| Other financial liabilities | | | — | | | | — | |
| | | | | | | | | |
FINANCIAL LIABILITIES AT AMORTISED COST | | | 322,197 | | | | 303,051 | |
| | | | | | | | | |
| Deposits from central banks | | | 13,697 | | | | 22,984 | |
| | | | | | | | | |
| Deposits from credit institutions | | | 43,972 | | | | 46,852 | |
| | | | | | | | | |
| Deposits from customers | | | 188,311 | | | | 172,253 | |
| | | | | | | | | |
| Debt certificates | | | 58,837 | | | | 44,248 | |
| | | | | | | | | |
| Subordinated liabilities | | | 13,332 | | | | 12,593 | |
| | | | | | | | | |
| Other financial liabilities | | | 4,048 | | | | 4,121 | |
| | | | | | | | | |
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | | | — | | | | — | |
| | | | | | | | | |
HEDGING DERIVATIVES | | | 824 | | | | 1,766 - | |
| | | | | | | | | |
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE | | | — | | | | — | |
| | | | | | | | | |
PROVISIONS | | | 7,071 | | | | 6,637 | |
| | | | | | | | | |
| Provisions for pensions and similar obligations | | | 5,651 | | | | 5,184 | |
| | | | | | | | | |
| Provisions for taxes | | | — | | | | — | |
| | | | | | | | | |
| Provisions for contingent exposures and commitments | | | 387 | | | | 525 | |
| | | | | | | | | |
| Other provisions | | | 1,033 | | | | 928 | |
| | | | | | | | | |
TAX LIABILITIES | | | 633 | | | | 1,715 | |
| | | | | | | | | |
| Current | | | — | | | | — | |
| | | | | | | | | |
| Deferred | | | 633 | | | | 1,715 | |
OTHER LIABILITIES | | | 1,044 | | | | 968 | |
| | | | | | | | | |
TOTAL LIABILITIES | | | 372,307 | | | | 332,861 | |
| | | | | | | | | |
APPENDIX I (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
I-3
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
STOCKHOLDER’S EQUITY | | | 18,562 | | | | 18,717 | |
| | | | | | | | | |
Capital | | | 1,837 | | | | 1,837 | |
| | | | | | | | | |
| Issued | | | 1,837 | | | | 1,837 | |
| | | | | | | | | |
| Less: Unpaid and uncalled (-) | | | — | | | | — | |
| | | | | | | | | |
Share premium | | | 12,770 | | | | 12,770 | |
| | | | | | | | | |
Reserves | | | 3,070 | | | | 2,257 | |
| | | | | | | | | |
Other equity instruments | | | 71 | | | | 49 | |
| | | | | | | | | |
| Equity component of compound financial instruments | | | — | | | | — | |
| | | | | | | | | |
| Other | | | 71 | | | | 49 | |
| | | | | | | | | |
Less: Treasury shares | | | (143 | ) | | | (129 | ) |
| | | | | | | | | |
Income | | | 2,835 | | | | 3,612 | |
| | | | | | | | | |
Less: Dividends and remuneration | | | (1,878 | ) | | | (1,679 | ) |
| | | | | | | | | |
VALUATION ADJUSTMENTS | | | 1,151 | | | | 2,888 | |
| | | | | | | | | |
| Available-for-sale financial assets | | | 937 | | | | 2,950 | |
| | | | | | | | | |
| Cash flow hedges | | | 141 | | | | (80 | ) |
| | | | | | | | | |
| Hedges of net investments in foreign operations | | | — | | | | — | |
| | | | | | | | | |
| Exchange differences | | | 73 | | | | 18 | |
| | | | | | | | | |
| Non-current liabilities held-for-sale | | | — | | | | — | |
| | | | | | | | | |
| Other valuation adjustments | | | — | | | | — | |
| | | | | | | | | |
TOTAL STOCKHOLDERS’ EQUITY | | | 19,713 | | | | 21,605 | |
| | | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | | 392,020 | | | | 354,466 | |
| | | | | | | | | |
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
CONTINGENT EXPOSURES | | | 64,729 | | | | 73,903 | |
| | | | | | | | | |
CONTINGENT COMMITMENTS | | | 69,671 | | | | 76,246 | |
| | | | | | | | | |
I-4
INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 20082010 AND 20072009
| | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | | 2010 | | 2009 | |
| | | Millions of euros | | | Millions of euros | |
| |
| INTEREST AND SIMILAR INCOME | | | 15,854 | | | | 13,785 | | | | 8,759 | | | | 11,420 | |
| | | | �� | | | | | | | | |
| INTEREST EXPENSE AND SIMILAR CHARGES | | | (12,178 | ) | | | (10,933 | ) | |
| INTEREST AND SIMILAR EXPENSES | | | | (3,718 | ) | | | (5,330 | ) |
| | | | | | | | | | | |
NET INTEREST INCOME | | | 3,676 | | | | 2,852 | | | | 5,041 | | | | 6,090 | |
| | | | | | | | | | | |
| DIVIDEND INCOME | | | 2,318 | | | | 1,810 | | | | 2,129 | | | | 1,773 | |
| | | | | | | | | | | |
| FEE AND COMMISSION INCOME | | | 2,034 | | | | 2,174 | | | | 1,806 | | | | 1,948 | |
| | | | | | | | | | | |
| FEE AND COMMISSION EXPENSES | | | (359 | ) | | | (381 | ) | | | (270 | ) | | | (303 | ) |
| | | | | | | | | | | |
| NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES | | | 632 | | | | 872 | | | | 738 | | | | 96 | |
| Financial instruments held for trading | | | | 256 | | | | (133 | ) |
| Other financial instruments at fair value through profit or loss | | | | — | | | | — | |
| Other financial instruments not at fair value through profit or loss | | | | 482 | | | | 229 | |
| Rest | | | | — | | | | — | |
| | | | | | | | | | | |
| Held for trading | | | (2 | ) | | | 465 | | |
| | | | | | | |
| Other financial instruments designated at fair value through profit or loss | | | — | | | | — | | |
| | | | | | | |
| Other financial instruments not designated at fair value through profit or loss | | | 634 | | | | 407 | | |
| | | | | | | |
| Other | | | — | | | | — | | |
| | | | | | | |
| NET EXCHANGE DIFFERENCES | | | (20 | ) | | | 266 | | |
| EXCHANGE DIFFERENCES (NET) | | | | 112 | | | | 259 | |
| | | | | | | | | | | |
| OTHER OPERATING INCOME | | | 83 | | | | 95 | | | | 102 | | | | 81 | |
| | | | | | | | | | | |
| OTHER OPERATING EXPENSES | | | (100 | ) | | | (101 | ) | | | (106 | ) | | | (98 | ) |
| | | | | | | | | | | |
GROSS INCOME | | | 8,264 | | | | 7,587 | | | | 9,552 | | | | 9,846 | |
| | | | | | | | | | | |
| ADMINISTRATION COSTS | | | (3,324 | ) | | | (3,420 | ) | | | (3,409 | ) | | | (3,337 | ) |
| | | | | | | |
| Personnel expenses | | | (2,258 | ) | | | (2,238 | ) | | | (2,202 | ) | | | (2,251 | ) |
| | | | | | | |
| General and administrative expenses | | | (1,066 | ) | | | (1,182 | ) | | | (1,207 | ) | | | (1,086 | ) |
| | | | | | | | | | | |
| DEPRECIATION AND AMORTIZATION | | | (219 | ) | | | (209 | ) | | | (276 | ) | | | (243 | ) |
| | | | | | | | | | | |
| PROVISIONS (NET) | | | (1,327 | ) | | | (299 | ) | | | (405 | ) | | | (269 | ) |
| | | | | | | | | | | |
| IMPAIRMENT (NET) | | | (996 | ) | | | (598 | ) | |
| | | | | | | |
| IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET) | | | | (1,925 | ) | | | (1,698 | ) |
| Loans and receivables | | | (900 | ) | | | (602 | ) | | | (1,794 | ) | | | (1,518 | ) |
| | | | | | | |
| Other financial instruments not designated at fair value through profit or loss | | | (96 | ) | | | 4 | | |
| Other financial instruments not at fair value through profit or loss | | | | (131 | ) | | | (180 | ) |
| | | | | | | | | | | |
NET OPERATING INCOME | | | 2,398 | | | | 3,061 | | | | 3,537 | | | | 4,299 | |
| | | | | | | | | | | |
| IMPAIRMENT ON OTHER ASSETS (NET) | | | (8 | ) | | | (18 | ) | |
| | | | | | | |
| Goodwill and other intangible asset | | | — | | | | — | | |
| | | | | | | |
| IMPAIRMENT LOSSES ON OTHER ASSETS (NET) | | | | (258 | ) | | | (1,746 | ) |
| Goodwill and other intangible assets | | | | — | | | | — | |
| Other assets | | | (8 | ) | | | (18 | ) | | | (258 | ) | | | (1,746 | ) |
| | | | | | | | | | | |
| GAINS (LOSSES) IN WRITTEN OF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE | | | — | | | | 39 | | |
| GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE | | | | 5 | | | | 3 | |
| | | | | | | | | | | |
| NEGATIVE GOODWILL | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | |
| GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS | | | 736 | | | | 1,165 | | | | 129 | | | | 892 | |
| | | | | | | | | | | |
INCOME BEFORE TAX | | | 3,126 | | | | 4,247 | | | | 3,413 | | | | 3,448 | |
| | | | | | | | | | | |
| TAX EXPENSE (INCOME) | | | (291 | ) | | | (635 | ) | |
| INCOME TAX | | | | (509 | ) | | | (467 | ) |
| | | | | | | | | | | |
INCOME FROM CONTINUED OPERATIONS | | | 2,835 | | | | 3,612 | | |
INCOME FROM CONTINUING TRANSACTIONS | | | | 2,904 | | | | 2,981 | |
| | | | | | | | | | | |
| INCOME FROM DISCONTINUED OPERATIONS (NET) | | | — | | | | — | | |
| INCOME FROM DISCONTINUED TRANSACTIONS (NET) | | | | — | | | | — | |
| | | | | | | | | | | |
INCOME FOR THE YEAR | | | 2,835 | | | | 3,612 | | |
NET INCOME | | | | 2,904 | | | | 2,981 | |
| | | | | | | | | | | |
I-3
APPENDIX I. (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
STATEMENTS OF RECOGNIZED INCOME AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
| | | | | | | | | |
| | | 2010 | | | 2009 | |
| | | Millions of euros | |
| |
NET INCOME RECOGNIZED IN INCOME STATEMENT | | | 2,904 | | | | 2,981 | |
| | | | | | | | | |
OTHER RECOGNIZED INCOME (EXPENSES) | | | (1,669 | ) | | | 492 | |
| | | | | | | | | |
Available-for-sale financial assets | | | (2,038 | ) | | | 1,028 | |
| | | | | | | | | |
| Valuation gains/(losses) | | | (1,756 | ) | | | 1,045 | |
| Amounts removed to income statement | | | (282 | ) | | | (17 | ) |
| Reclassifications | | | — | | | | — | |
| | | | | | | | | |
Cash flow hedging | | | (190 | ) | | | (85 | ) |
| | | | | | | | | |
| Valuation gains/(losses) | | | (159 | ) | | | (80 | ) |
| Amounts removed to income statement | | | (31 | ) | | | (5 | ) |
| Amounts removed to the initial carrying amount of the hedged items | | | — | | | | — | |
| Reclassifications | | | — | | | | — | |
| | | | | | | | | |
Hedging of net investment in foreign transactions | | | — | | | | — | |
| | | | | | | | | |
| Valuation gains/(losses) | | | — | | | | — | |
| Amounts removed to income statement | | | — | | | | — | |
| Reclassifications | | | — | | | | — | |
| | | | | | | | | |
Exchange differences | | | — | | | | (79 | ) |
| | | | | | | | | |
| Valuation gains/(losses) | | | (4 | ) | | | (6 | ) |
| Amounts removed to income statement | | | 4 | | | | (73 | ) |
| Reclassifications | | | — | | | | — | |
| | | | | | | | | |
Non-current assets held for sale | | | — | | | | — | |
| | | | | | | | | |
| Valuation gains/(losses) | | | — | | | | — | |
| Amounts removed to income statement | | | — | | | | — | |
| Reclassifications | | | — | | | | — | |
| | | | | | | | | |
Actuarial gains and losses in post-employment plans | | | — | | | | — | |
| | | | | | | | | |
Rest of recognized income and expenses | | | — | | | | — | |
| | | | | | | | | |
Income tax | | | 559 | | | | (372 | ) |
| | | | | | | | | |
TOTAL RECOGNIZED INCOME/EXPENSES | | | 1,235 | | | | 3,473 | |
| | | | | | | | | |
I-4
APPENDIX I. (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Equity Attributed to the Parent Company | | | | |
| | | Stockholders’ Funds | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | Less:
| | | | | | | | | | |
| | | | | | | | | Reserves
| | | Other
| | | Less:
| | | | | | Dividends
| | | Total
| | | | | | | |
| | | Common
| | | Share
| | | (Accumulated
| | | Equity
| | | Treasury
| | | Profit for
| | | and
| | | Stockholders’
| | | Valuation
| | | Total
| |
| | | Stock | | | Premium | | | Losses) | | | Instruments | | | Stock | | | the Year | | | Remunerations | | | Funds | | | Adjustments | | | Equity | |
| | | Millions of euros | |
| |
Balances as of January 1, 2010 | | | 1,837 | | | | 12,453 | | | | 3,893 | | | | 10 | | | | (128 | ) | | | 2,981 | | | | (1,012 | ) | | | 20,034 | | | | 1,643 | | | | 21,677 | |
| Effect of changes in accounting policies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of correction of errors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted initial balance | | | 1,837 | | | | 12,453 | | | | 3,893 | | | | 10 | | | | (128 | ) | | | 2,981 | | | | (1,012 | ) | | | 20,034 | | | | 1,643 | | | | 21,677 | |
Total income/expense recognized | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,904 | | | | — | | | | 2,904 | | | | (1,669 | ) | | | 1,235 | |
Other changes in equity | | | 364 | | | | 4,651 | | | | 1,221 | | | | 13 | | | | 44 | | | | (2,981 | ) | | | (67 | ) | | | 3,245 | | | | — | | | | 3,245 | |
| Common stock increase | | | 364 | | | | 4,651 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,015 | | | | — | | | | 5,015 | |
| Common stock reduction | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Conversion of financial liabilities into capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase of other equity instruments | | | — | | | | — | | | | — | | | | 13 | | | | — | | | | — | | | | — | | | | 13 | | | | — | | | | 13 | |
| Reclassification of financial liabilities to other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | ——— | | | | — | | | | — | |
| Reclassification of other equity instruments to financial liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Dividend distribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | (562 | ) | | | (1,079 | ) | | | (1,641 | ) | | | — | | | | (1,641 | ) |
| Transactions including treasury stock and other equity instruments (net) | | | — | | | | — | | | | (88 | ) | | | — | | | | 44 | | | | — | | | | — | | | | (44 | ) | | | — | | | | (44 | ) |
| Transfers between total equity entries | | | — | | | | — | | | | 1,407 | | | | — | | | | — | | | | (2,419 | ) | | | 1,012 | | | | — | | | | — | | | | — | |
| Increase/Reduction due to business combinations | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Payments with equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Rest of increases/reductions in total equity | | | — | | | | — | | | | (98 | ) | | | — | | | | — | | | | — | | | | — | | | | (98 | ) | | | — | | | | (98 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances as of December 31, 2010 | | | 2,201 | | | | 17,104 | | | | 5,114 | | | | 23 | | | | (84 | ) | | | 2,904 | | | | (1,079 | ) | | | 26,183 | | | | (26 | ) | | | 26,157 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
I-5
APPENDIX I. (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA
ARGENTARIA, S.A.
STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED DECEMBER 31, 20082010 AND 20072009
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Stockholders’ Equity | | | | | | | Total Equity Attributed to the Parent Company | | | |
| | | Stockholders’ Equity | | | | | | | Stockholders’ Funds | | | | | |
| | | | | | | | | Other
| | Less:
| | | | Less:
| | Total
| | | | Total
| | | | | | | Reserves
| | Other
| | Less:
| | | | Less:
| | | | | | | |
| | | Share
| | Share
| | | | Equity
| | Treasury
| | Profit for
| | Dividend and
| | Stockholders’
| | Valuation
| | Stockholders’
| | | Common
| | Share
| | (Accumulated
| | Equity
| | Treasury
| | Profit for
| | Dividends
| | Total
| | Valuation
| | Total
| |
| | | Capital | | Premium | | Reserves | | Instruments | | Shares | | the Year | | Remunerations | | Equity | | Adjustments | | Equity | | | Stock | | Premium | | Losses) | | Instruments | | Stock | | the Year | | and Remunerations | | Stockholders’ Funds | | Adjustments | | Equity | |
| | | Millions of euros | | | Millions of euros | |
| |
Balance at January 1, 2008 | | | 1,837 | | | | 12,770 | | | | 2,257 | | | | 49 | | | | 129 | | | | 3,612 | | | | 1,679 | | | | 18,717 | | | | 2,888 | | | | 21,605 | | |
| Effects of changes in accounting policies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| | | |
Balances as of January 1, 2009 | | | | 1,837 | | | | 12,770 | | | | 3,070 | | | | 71 | | | | (143 | ) | | | 2,835 | | | | (1,878 | ) | | | 18,562 | | | | 1,151 | | | | 19,713 | |
| | | |
| Effect of changes in accounting policies | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
| Effect of correction of errors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
Adjusted initial balance | | | 1,837 | | | | 12,770 | | | | 2,257 | | | | 49 | | | | 129 | | | | 3,612 | | | | 1,679 | | | | 18,717 | | | | 2,888 | | | | 21,605 | | | | 1,837 | | | | 12,770 | | | | 3,070 | | | | 71 | | | | (143 | ) | | | 2,835 | | | | (1,878 | ) | | | 18,562 | | | | 1,151 | | | | 19,713 | |
| | | |
Total income/expense recognized | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,835 | | | | — | | | | 2,835 | | | | (1,737 | ) | | | 1,098 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,981 | | | | — | | | | 2,981 | | | | 492 | | | | 3,473 | |
| | | |
Other changes in equity | | | — | | | | — | | | | 813 | | | | 22 | | | | 14 | | | | (3,612 | ) | | | 199 | | | | (2,990 | ) | | | — | | | | (2,990 | ) | | | — | | | | (317 | ) | | | 823 | | | | (61 | ) | | | 15 | | | | (2,835 | ) | | | 866 | | | | (1,509 | ) | | | — | | | | (1,509 | ) |
| Increased of capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Capital reduction | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| | | |
| Common stock increase | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
| Common stock reduction | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
| Conversion of financial liabilities into capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
| Increase of other equity instruments | | | — | | | | — | | | | — | | | | 22 | | | | — | | | | — | | | | — | | | | 22 | | | | — | | | | 22 | | | | — | | | | — | | | | — | | | | 5 | | | | — | | | | — | | | | — | | | | 5 | | | | — | | | | 5 | |
| | | |
| Reclassification of financial liabilities to other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
| Reclassification of other equity instruments to financial liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
| Dividend distribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,038 | | | | (1,878 | ) | | | 2,916 | | | | — | | | | 2,916 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,012 | ) | | | (1,012 | ) | | | — | | | | (1,012 | ) |
| Transactions including treasury shares and other equity instruments (net) | | | — | | | | — | | | | (74 | ) | | | — | | | | 14 | | | | — | | | | — | | | | (88 | ) | | | — | | | | (88 | ) | |
| | | |
| Transactions including treasury stock and other equity instruments (net) | | | | — | | | | — | | | | (99 | ) | | | — | | | | 15 | | | | — | | | | — | | | | (84 | ) | | | — | | | | (84 | ) |
| | | |
| Transfers between total equity entries | | | — | | | | — | | | | 895 | | | | — | | | | — | | | | (2,574 | ) | | | (1,679 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 957 | | | | — | | | | — | | | | (2,835 | ) | | | 1,878 | | | | — | | | | — | | | | — | |
| Increase/Reduction in business combinations | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| | | |
| Increase/Reduction due to business combinations | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
| Payments with equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (317 | ) | | | — | | | | (66 | ) | | | — | | | | — | | | | — | | | | (383 | ) | | | — | | | | (383 | ) |
| Rest of increase/reductions in total equity | | | — | | | | — | | | | (8 | ) | | | — | | | | — | | | | — | | | | — | | | | (8 | ) | | | — | | | | (8 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2008 | | | 1,837 | | | | 12,770 | | | | 3,070 | | | | 71 | | | | 143 | | | | 2,835 | | | | 1,878 | | | | 18,562 | | | | 1,151 | | | | 19,713 | | |
| Rest of increases/reductions in total equity | | | | — | | | | — | | | | (35 | ) | | | — | | | | — | | | | — | | | | — | | | | (35 | ) | | | — | | | | (35 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
Balances as of December 31, 2009 | | | | 1,837 | | | | 12,453 | | | | 3,893 | | | | 10 | | | | (128 | ) | | | 2,981 | | | | (1,012 | ) | | | 20,034 | | | | 1,643 | | | | 21,677 | |
| | | | | | | | | | | | | | | | | | | | | | | |
I-6
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Stockholders’ Equity
| | | | | | | |
| | | Stockholders’ Equity | | | | | | | |
| | | | | | | | | | | | Other
| | | Less:
| | | | | | Less:
| | | Total
| | | | | | Total
| |
| | | Share
| | | Share
| | | | | | Equity
| | | Treasury
| | | Profit for
| | | Dividend and
| | | Stockholders’
| | | Valuation
| | | Stockholders’
| |
| | | Capital | | | Premium | | | Reserves | | | Instruments | | | Shares | | | the Year | | | Remunerations | | | Equity | | | Adjustments | | | Equity | |
| | | Millions of euros | |
| |
Balance at January 1, 2007 | | | 1,740 | | | | 9,579 | | | | 2,085 | | | | 26 | | | | 40 | | | | 2,440 | | | | 1,364 | | | | 14,466 | | | | 2,264 | | | | 16,730 | |
| Effects of changes in accounting policies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Effect of correction of errors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Adjusted initial balance | | | 1,740 | | | | 9,579 | | | | 2,085 | | | | 26 | | | | 40 | | | | 2,440 | | | | 1,364 | | | | 14,466 | | | | 2,264 | | | | 16,730 | |
Total income/expense recognized | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,612 | | | | — | | | | 3,612 | | | | 624 | | | | 4,236 | |
Other changes in equity | | | 97 | | | | 3,191 | | | | 172 | | | | 23 | | | | 89 | | | | (2,440 | ) | | | 315 | | | | 639 | | | | — | | | | 639 | |
| Increased of capital | | | 97 | | | | 3,191 | | | | (24 | ) | | | — | | | | — | | | | — | | | | — | | | | 3,264 | | | | — | | | | 3,264 | |
| Capital reduction | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Conversion of financial liabilities into capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase of other equity instruments | | | — | | | | — | | | | — | | | | 23 | | | | — | | | | — | | | | — | | | | 23 | | | | — | | | | 23 | |
| Reclassification of financial liabilities to other equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Reclassification of other equity instruments to financial instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Dividend distribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | 856 | | | | (1,679 | ) | | | 2,535 | | | | — | | | | 2,535 | |
| Transactions including treasury shares and other equity instruments (net) | | | — | | | | — | | | | (24 | ) | | | — | | | | 89 | | | | — | | | | — | | | | (113 | ) | | | — | | | | (113 | ) |
| Transfers between total equity entries | | | — | | | | — | | | | 220 | | | | — | | | | — | | | | (1,584 | ) | | | (1,364 | ) | | | — | | | | — | | | | — | |
| Increase/Reduction in business combinations | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Payments with equity instruments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Rest of increase/reductions in total equity | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Balance as of December 31, 2007 | | | 1,837 | | | | 12,770 | | | | 2,257 | | | | 49 | | | | 129 | | | | 3,612 | | | | 1,679 | | | | 18,717 | | | | 2,888 | | | | 21,605 | |
I-7
CHANGES IN TOTAL EQUITYAPPENDIX I. (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 — (Continued)
| | | | | | | | | |
Changes in Total Equity | | 2008 | | | 2007 | |
| | | Millions of euros | |
| |
INCOME FOR THE YEAR | | | 2,835 | | | | 3,612 | |
OTHER RECOGNIZED INCOME (EXPENSES) | | | (1,737 | ) | | | 624 | |
| Available-for-sale financial assets | | | (2,838 | ) | | | 1,178 | |
| Revaluation gains/losses | | | (1,727 | ) | | | 1,892 | |
| Amounts transferred to income statement | | | (1,111 | ) | | | (714 | ) |
| Reclassifications | | | — | | | | — | |
| Cash flow hedges | | | 310 | | | | 14 | |
| Revaluation gains/losses | | | 298 | | | | 1 | |
| Amounts transferred to income statement | | | 12 | | | | 13 | |
| Amounts transferred to the initial carrying amount of the hedged items | | | — | | | | — | |
| Reclassifications | | | — | | | | — | |
| Hedges of net investment in foreign operations | | | — | | | | — | |
| Revaluation gains/losses | | | — | | | | — | |
| Amounts transferred to income statement | | | — | | | | — | |
| Reclassifications | | | — | | | | — | |
| Exchange differences | | | 86 | | | | 33 | |
| Revaluation gains/losses | | | 104 | | | | 26 | |
| Amounts transferred to income statement | | | (18 | ) | | | 7 | |
| Reclassifications | | | — | | | | — | |
| Non-current assets held for sale | | | — | | | | — | |
| Revaluation gains/losses | | | — | | | | — | |
| Amounts transferred to income statement | | | — | | | | — | |
| Reclassifications | | | — | | | | — | |
| Actuarial gains and losses in post-employment plans | | | — | | | | — | |
| Rest of recognized income and expenses | | | — | | | | — | |
| Income tax | | | 705 | | | | (601 | ) |
| | | | | | | | | |
TOTAL INCOME AND EXPENSES FOR THE YEAR | | | 1,098 | | | | 4,236 | |
| | | | | | | | | |
I-8
CASH FLOW STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 20082010 AND 20072009
| | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | | 2010 | | 2009 | |
| | | Millions of euros | | | Millions of euros | |
| |
CASH FLOW FROM OPERATING ACTIVITIES(1) | | | (7,399 | ) | | | 14,838 | | | | 5,867 | | | | 2,372 | |
Profit for the year | | | 2,835 | | | | 3,612 | | |
| | | | | | | |
Net income for the year | | | | 2,904 | | | | 2,981 | |
| | | | | | | |
Adjustments to obtain the cash flow from operating activities: | | | (2,232 | ) | | | 318 | | | | (1,141 | ) | | | 934 | |
| | | | | | | |
| Depreciation and amortization | | | 219 | | | | 209 | | | | 276 | | | | 243 | |
| Other adjustments | | | (2,451 | ) | | | 109 | | | | (1,417 | ) | | | 691 | |
| | | | | | | |
Net increase/decrease in operating assets | | | 46,475 | | | | 37,923 | | | | (7,251 | ) | | | (2,022 | ) |
| | | | | | | |
| Financial assets held for trading | | | 18,807 | | | | 5,325 | | | | (6,184 | ) | | | (2,455 | ) |
| Other financial assets designated at fair value through profit or loss | | | — | | | | — | | | | — | | | | — | |
| Available-for-sale financial assets | | | (754 | ) | | | 816 | | | | (9,252 | ) | | | 17,238 | |
| Loans and receivables | | | 25,792 | | | | 33,492 | | | | 7,963 | | | | (15,759 | ) |
| Other operating assets | | | 2,630 | | | | (1,710 | ) | | | 222 | | | | (1,046 | ) |
| | | | | | | |
Net increase/decrease in operating liabilities | | | 38,182 | | | | 48,196 | | | | (3,656 | ) | | | (4,032 | ) |
| Financial liabilities | | | 21,814 | | | | 5,066 | | |
| | | | | | | |
| Financial liabilities held for trading | | | | 3,737 | | | | (8,594 | ) |
| Other financial liabilities designated at fair value through profit or loss | | | — | | | | — | | | | — | | | | — | |
| Financial liabilities measured at amortised cost | | | 18,351 | | | | 44,378 | | |
| Financial liabilities at amortized cost | | | | (6,821 | ) | | | 5,668 | |
| Other operating liabilities | | | (1,983 | ) | | | (1,248 | ) | | | (572 | ) | | | (1,106 | ) |
| | | | | | | |
Collection/Payments for income tax | | | 291 | | | | 635 | | | | 509 | | | | 467 | |
| | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES(2) | | | (217 | ) | | | (6,799 | ) | | | (7,108 | ) | | | (656 | ) |
| | | | | | | |
Investment | | | 1,491 | | | | 8,973 | | | | 8,329 | | | | 2,306 | |
| | | | | | | |
| Tangible assets | | | 282 | | | | 266 | | | | 222 | | | | 268 | |
| Intangible assets | | | 112 | | | | 51 | | | | 260 | | | | 138 | |
| Investments in entities accounted for using the equity method | | | 696 | | | | 7,890 | | |
| | | | | | | |
| Investments | | | | 1,864 | | | | 1,039 | |
| Other business units | | | | — | | | | — | |
| Non-current assets held for sale and associated liabilities | | | | 1,014 | | | | 436 | |
Held-to-maturity investments | | | | 4,969 | | | | 425 | |
| Other settlements related to investing activities | | | | — | | | | — | |
| | | | | | | |
Divestments | | | | 1,221 | | | | 1,650 | |
| | | | | | | |
| Tangible assets | | | | — | | | | 6 | |
| Intangible assets | | | | — | | | | — | |
| Investments | | | | 12 | | | | 21 | |
| Subsidiaries and other business units | | | — | | | | — | | | | — | | | | — | |
| Non-current assets held for sale and associated liabilities | | | 131 | | | | 47 | | | | 749 | | | | 1,350 | |
| Held-to-maturity investments | | | — | | | | — | | | | 232 | | | | 257 | |
| Other payments related to investing activities | | | 270 | | | | 719 | | |
Divestments | | | 1,274 | | | | 2,174 | | |
| Tangible assets | | | 14 | | | | 10 | | |
| Intangible assets | | | — | | | | — | | |
| Investments in entities accounted for using the equity method | | | 7 | | | | 43 | | |
| Subsidiaries and other business units | | | — | | | | — | | |
| Non- current assets held for sale and associated liabilities | | | 949 | | | | 1,821 | | |
| Held-to-maturity investments | | | 284 | | | | 300 | | |
| Other collections related to investing activities | | | 20 | | | | — | | | | 228 | | | | 16 | |
| | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES(3) | | | (1,912 | ) | | | 908 | | | | 2,121 | | | | (1,118 | ) |
| | | | | | | |
Investment | | | 11,360 | | | | 16,755 | | | | 7,622 | | | | 7,785 | |
| | | | | | | |
| Dividends | | | 2,860 | | | | 2,434 | | | | 1,237 | | | | 1,638 | |
| Subordinated liabilities | | | 600 | | | | 2,320 | | | | 1,524 | | | | 1,682 | |
| Amortization of own equity instruments | | | — | | | | — | | |
| Acquisition of own equity instruments | | | 7,900 | | | | 12,001 | | |
| Common stock amortization | | | | — | | | | — | |
| Treasury stock acquisition | | | | 4,828 | | | | 4,232 | |
| Other items relating to financing activities | | | — | | | | — | | | | 33 | | | | 233 | |
| | | | | | | |
Divestments | | | 9,448 | | | | 17,663 | | | | 9,743 | | | | 6,667 | |
| | | | | | | |
| Subordinated liabilities | | | 1,295 | | | | 2,442 | | | | — | | | | 2,927 | |
| Issuance of own equity instruments | | | — | | | | 3,263 | | |
| Disposal of own equity instruments | | | 7,747 | | | | 11,888 | | |
| Common stock increase | | | | 4,914 | | | | — | |
| Treasury stock disposal | | | | 4,829 | | | | 3,740 | |
| Other items relating to financing activities | | | 406 | | | | 70 | | | | — | | | | — | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH OR CASH EQUIVALENTS(4) | | | (1 | ) | | | 5 | | |
| | | | | | | |
EFFECT OF EXCHANGE RATE CHANGES(4) | | | | (1 | ) | | | 1 | |
| | | | | | | |
NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (1+2+3+4) | | | (9,529 | ) | | | 8,952 | | | | 879 | | | | 599 | |
CASH OR CASH EQUIVALENTS AT BEGINNING OF YEAR | | | 12,216 | | | | 3,264 | | |
| | | | | | | | | | | |
CASH OR CASH EQUIVALENTS AT END OF YEAR | | | 2,687 | | | | 12,216 | | |
CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR | | | | 3,286 | | | | 2,687 | |
| | | | | | | | | | | |
| Cash | | | 668 | | | | 630 | | |
| Balance of cash equivalent in central banks | | | 2,019 | | | | 11,586 | | |
| Other financial assets | | | — | | | | — | | |
| Less:bank overdraft refundable on demand | | | — | | | | — | | |
CASH OR CASH EQUIVALENTS AT END OF THE YEAR | | | | 4,165 | | | | 3,286 | |
| | | | | | | | | | | |
TOTAL CASH OR CASH EQUIVALENTS AT END OF YEAR | | | 2,687 | | | | 12,216 | | |
| | | | | | | |
| | | | | | | | | |
| | | Millions of euros | |
COMPONENTS OF CASH AND EQUIVALENT AT END OF THE YEAR | | 2010 | | | 2009 | |
| |
| Cash | | | 616 | | | | 650 | |
| Balance of cash equivalent in central banks | | | 3,549 | | | | 2,636 | |
| Other financial assets | | | — | | | | — | |
| Less: Bank overdraft refundable on demand | | | — | | | | — | |
| | | | | | | | | |
TOTAL CASH OR CASH EQUIVALENTS AT END OF THE YEAR | | | 4,165 | | | | 3,286 | |
| | | | | | | | | |
I-9I-7
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUPII. Additional Information On Consolidated Subsidiaries Composing The BBVA Group
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | For the
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of euros (*) | |
| |
| AAI HOLDINGS, INC | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| ADMINISTRAD. DE FONDOS PARA EL RETIRO-BANCOMER,S.A DE C.V. | | MEXICO | | PENSIONS | | | 17.50 | | | | 82.50 | | | | 100.00 | | | | 302,164 | | | | 151,825 | | | | 28,044 | | | | 84,131 | | | | 39,650 | |
| ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA(AFP PROVIDA) | | CHILE | | PENSIONS | | | 12.70 | | | | 51.62 | | | | 64.32 | | | | 191,473 | | | | 340,987 | | | | 76,787 | | | | 279,565 | | | | (15,365 | ) |
| AFP GENESIS ADMINISTRADORA DE FONDOS, S.A. | | ECUADOR | | PENSIONS | | | 0.00 | | | | 100.00 | | | | 100.00 | | | | 3,249 | | | | 5,747 | | | | 2,532 | | | | 1,031 | | | | 2,184 | |
| AFP HORIZONTE, S.A. | | PERU | | PENSIONS | | | 24.85 | | | | 75.15 | | | | 100.00 | | | | 33,616 | | | | 56,826 | | | | 19,912 | | | | 34,530 | | | | 2,384 | |
| AFP PREVISION BBV-ADM.DE FONDOS DE PENSIONES S.A. | | BOLIVIA | | PENSIONS | | | 75.00 | | | | 5.00 | | | | 80.00 | | | | 2,063 | | | | 12,687 | | | | 6,121 | | | | 3,786 | | | | 2,780 | |
| ALMACENES GENERALES DE DEPOSITO, S.A.E. DE | | SPAIN | | PORTFOLIO | | | 83.90 | | | | 16.10 | | | | 100.00 | | | | 12,649 | | | | 113,131 | | | | 2,997 | | | | 103,795 | | | | 6,339 | |
| ALTITUDE INVESTMENTS LIMITED | | UNITED KINGDOM | | FINANCIAL SERV. | | | 51.00 | | | | — | | | | 51.00 | | | | 225 | | | | 992 | | | | 753 | | | | 1,016 | | | | (777 | ) |
| ALTURA MARKETS, SOCIEDAD DE VALORES, S.A. | | SPAIN | | SECURITIES | | | 50.00 | | | | — | | | | 50.00 | | | | 5,000 | | | | 1,491,084 | | | | 1,463,685 | | | | 12,041 | | | | 15,358 | |
| ANIDA CARTERA SINGULAR, S.L | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 260 | | | | — | | | | 5,260 | | | | (5,000 | ) |
| ANIDA DESARROLLOS INMOBILIARIOS, S.L | | SPAIN | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 112,477 | | | | 250,890 | | | | 85,910 | | | | 166,877 | | | | (1,897 | ) |
| ANIDA DESARROLLOS SINGULARES, S.L | | SPAIN | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 594,494 | | | | 610,811 | | | | 4,964 | | | | (21,281 | ) |
| ANIDA GERMANIA IMMOBILIEN ONE, GMBH | | ALEMANIA | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 4,099 | | | | 19,658 | | | | 15,567 | | | | 8,328 | | | | (4,237 | ) |
| ANIDA GRUPO INMOBILIARIO, S.L | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 198,357 | | | | 667,126 | | | | 94,755 | | | | 499,998 | | | | 72,373 | |
| ANIDA INMOBILIARIA, S.A. DE C.V. | | MEXICO | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 91,316 | | | | 72,965 | | | | 72 | | | | 73,424 | | | | (531 | ) |
| ANIDA OPERACIONES SINGULARES, S.L | | SPAIN | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 3 | | | | 1,649,249 | | | | 1,650,489 | | | | 3 | | | | (1,243 | ) |
| ANIDA PROYECTOS INMOBILIARIOS, S.A. DE C.V. | | MEXICO | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 72,012 | | | | 102,069 | | | | 30,058 | | | | 72,729 | | | | (718 | ) |
| ANIDA SERVICIOS INMOBILIARIOS, S.A. DE C.V. | | MEXICO | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 793 | | | | 1,008 | | | | 211 | | | | 537 | | | | 260 | |
| APLICA SOLUCIONES ARGENTINAS, S.A. | | ARGENTINA | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 1,538 | | | | 3,639 | | | | 1,925 | | | | 1,468 | | | | 246 | |
| APLICA SOLUCIONES GLOBALES, S.L | | SPAIN | | SERVICES | | | 94.98 | | | | 5.02 | | | | 100.00 | | | | 60 | | | | 66,128 | | | | 67,329 | | | | 288 | | | | (1,489 | ) |
| APLICA TECNOLOGIA AVANZADA, S.A. DE C.V. | | MEXICO | | SERVICES | | | 100.00 | | | | — | | | | 100.00 | | | | 4 | | | | 38,817 | | | | 38,101 | | | | 2,966 | | | | (2,250 | ) |
| APOYO MERCANTIL S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 777 | | | | 120,708 | | | | 119,931 | | | | 3,040 | | | | (2,263 | ) |
| ARAGON CAPITAL, S.L | | SPAIN | | PORTFOLIO | | | 99.90 | | | | 0.10 | | | | 100.00 | | | | 37,925 | | | | 32,901 | | | | 98 | | | | 31,819 | | | | 984 | |
| ARIZONA FINANCIAL PRODUCTS, INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 661,400 | | | | 666,141 | | | | 4,741 | | | | 642,442 | | | | 18,958 | |
| ARIZONA KACHINA HOLDINGS, INC | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| ATREA HOMES IN SPAIN LTD | | UNITED KINGDOM | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 11 | | | | 351 | | | | (340 | ) | | | — | |
| ATUEL FIDEICOMISOS, S.A. | | ARGENTINA | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 6,269 | | | | 6,288 | | | | 18 | | | | 5,607 | | | | 663 | |
II-1
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | For the
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of Euros (*) | |
| |
| AUTOMERCANTIL-COMERCIO E ALUGER DE VEICULOS AUTOM., LDA | | PORTUGAL | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 7,209 | | | | 60,301 | | | | 50,960 | | | | 9,449 | | | | (108 | ) |
| BAHIA SUR RESORT, S.C | | SPAIN | | NO ACTIVITY | | | 99.95 | | | | — | | | | 99.95 | | | | 1,436 | | | | 1,438 | | | | 15 | | | | 1,423 | | | | — | |
| BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A. | | PANAMA | | BANKING | | | 54.11 | | | | 44.81 | | | | 98.92 | | | | 19,464 | | | | 1,193,426 | | | | 1,036,611 | | | | 128,625 | | | | 28,190 | |
| BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL), S.A. | | PORTUGAL | | BANKING | | | 9.52 | | | | 90.48 | | | | 100.00 | | | | 278,916 | | | | 6,903,307 | | | | 6,662,510 | | | | 223,477 | | | | 17,320 | |
| BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A. | | CHILE | | BANKING | | | 55.97 | | | | 12.21 | | | | 68.18 | | | | 303,531 | | | | 8,587,405 | | | | 8,075,856 | | | | 456,634 | | | | 54,915 | |
| BANCO BILBAO VIZCAYA ARGENTARIA PUERTO RICO | | PUERTO RICO | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 99,693 | | | | 4,317,976 | | | | 3,952,085 | | | | 342,472 | | | | 23,419 | |
| BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY, S.A. | | URUGUAY | | BANKING | | | 100.00 | | | | — | | | | 100.00 | | | | 17,049 | | | | 489,055 | | | | 450,065 | | | | 30,031 | | | | 8,959 | |
| BANCO CONTINENTAL, S.A. | | PERU | | BANKING | | | — | | | | 92.08 | | | | 92.08 | | | | 470,732 | | | | 7,698,528 | | | | 7,187,325 | | | | 342,406 | | | | 168,797 | |
| BANCO DE CREDITO LOCAL, S.A. | | SPAIN | | BANKING | | | 100.00 | | | | — | | | | 100.00 | | | | 509,594 | | | | 11,311,890 | | | | 11,166,097 | | | | 58,905 | | | | 86,888 | |
| BANCO DE PROMOCION DE NEGOCIOS, S.A. | | SPAIN | | BANKING | | | — | | | | 99.82 | | | | 99.82 | | | | 15,151 | | | | 33,869 | | | | 392 | | | | 32,410 | | | | 1,067 | |
| BANCO DEPOSITARIO BBVA, S.A. | | SPAIN | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 1,595 | | | | 898,558 | | | | 805,258 | | | | 48,510 | | | | 44,790 | |
| BANCO INDUSTRIAL DE BILBAO, S.A. | | SPAIN | | BANKING | | | — | | | | 99.93 | | | | 99.93 | | | | 97,220 | | | | 291,669 | | | | 15,740 | | | | 219,664 | | | | 56,265 | |
| BANCO OCCIDENTAL, S.A. | | SPAIN | | BANKING | | | 49.43 | | | | 50.57 | | | | 100.00 | | | | 15,812 | | | | 17,423 | | | | 365 | | | | 16,431 | | | | 627 | |
| BANCO PROVINCIAL OVERSEAS N.V. | | NETHERLANDS ANTILLES | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 26,801 | | | | 426,998 | | | | 400,530 | | | | 19,006 | | | | 7,462 | |
| BANCO PROVINCIAL S.A. — BANCO UNIVERSAL | | VENEZUELA | | BANKING | | | 1.85 | | | | 53.75 | | | | 55.60 | | | | 153,859 | | | | 9,495,115 | | | | 8,582,684 | | | | 564,493 | | | | 347,938 | |
| BANCOMER FINANCIAL SERVICES INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 1,903 | | | | 663 | | | | (1,240 | ) | | | 1,914 | | | | (11 | ) |
| BANCOMER FOREIGN EXCHANGE INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 4,201 | | | | 5,772 | | | | 1,571 | | | | 2,940 | | | | 1,261 | |
| BANCOMER PAYMENT SERVICES INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 38 | | | | 28 | | | | (10 | ) | | | 41 | | | | (3 | ) |
| BANCOMER TRANSFER SERVICES, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 17,228 | | | | 68,836 | | | | 51,607 | | | | 8,236 | | | | 8,993 | |
| BANKERS INVESTMENT SERVICES, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 637 | | | | 679 | | | | 42 | | | | 630 | | | | 7 | |
| BBV AMERICA, S.L. | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 479,328 | | | | 889,260 | | | | — | | | | 695,890 | | | | 193,370 | |
| BBV SECURITIES HOLDINGS, S.A. | | SPAIN | | PORTFOLIO | | | 99.86 | | | | 0.14 | | | | 100.00 | | | | 13,327 | | | | 47,941 | | | | 29,648 | | | | 16,159 | | | | 2,134 | |
| BBVA & PARTNERS ALTERNATIVE INVESTMENT A.V., S.A. | | SPAIN | | SECURITIES | | | 70.00 | | | | — | | | | 70.00 | | | | 1,331 | | | | 12,592 | | | | 6,753 | | | | 4,165 | | | | 1,674 | |
| BBVA ADMINISTRADORA GENERAL DE FONDOS S.A. | | CHILE | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 18,388 | | | | 19,309 | | | | 919 | | | | 16,714 | | | | 1,676 | |
| BBVA ASESORIAS FINANCIERAS, S.A. | | CHILE | | FINANCIAL SERV. | | | — | | | | 98.60 | | | | 98.60 | | | | 13,973 | | | | 14,531 | | | | 359 | | | | 13,335 | | | | 837 | |
| BBVA ASSET MANAGEMENT, S.A., SGIIC | | SPAIN | | FINANCIAL SERV. | | | 17.00 | | | | 83.00 | | | | 100.00 | | | | 11,436 | | | | 209,515 | | | | 122,872 | | | | 21,589 | | | | 65,054 | |
| BBVA BANCO DE FINANCIACION S.A. | | SPAIN | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 64,200 | | | | 5,765,224 | | | | 5,692,947 | | | | 70,808 | | | | 1,469 | |
| BBVA BANCO FRANCES, S.A. | | ARGENTINA | | BANKING | | | 45.65 | | | | 30.35 | | | | 76.00 | | | | 40,139 | | | | 4,486,157 | | | | 4,064,180 | | | | 353,683 | | | | 68,294 | |
| BBVA BANCOMER ASSET MANAGEMENT INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| BBVA BANCOMER FINANCIAL HOLDINGS, INC | | UNITED STATES | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 40,350 | | | | 37,567 | | | | (2,746 | ) | | | 39,394 | | | | 919 | |
| BBVA BANCOMER GESTION, S.A. DE C.V. | | MEXICO | | FINANCIAL SERV. | | | — | | | | 99.99 | | | | 99.99 | | | | 22,245 | | | | 37,892 | | | | 15,643 | | | | 6,910 | | | | 15,339 | |
| BBVA BANCOMER HOLDINGS CORPORATION | | UNITED STATES | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 9,835 | | | | 9,835 | | | | — | | | | 7,490 | | | | 2,345 | |
II-2
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | For the
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of Euros (*) | |
| |
| BBVA BANCOMER OPERADORA, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 108,236 | | | | 280,141 | | | | 171,905 | | | | (9,550 | ) | | | 117,786 | |
| BBVA BANCOMER SERVICIOS ADMINISTRATIVOS, S.A. DE C.V. | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 954 | | | | 6,155 | | | | 5,201 | | | | 514 | | | | 440 | |
| BBVA BANCOMER SERVICIOS, S.A. | | MEXICO | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 453,310 | | | | 475,676 | | | | 22,366 | | | | 350,078 | | | | 103,232 | |
| BBVA BANCOMER USA | | UNITED STATES | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 7,103 | | | | 93,620 | | | | 86,518 | | | | 15,855 | | | | (8,753 | ) |
| BBVA BANCOMER, S.A. DE C.V. | | MEXICO | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 4,181,301 | | | | 59,174,003 | | | | 54,982,771 | | | | 3,068,463 | | | | 1,122,769 | |
| BBVA BRASIL BANCO DE INVESTIMENTO, S.A. | | BRASIL | | BANKING | | | 100.00 | | | | — | | | | 100.00 | | | | 16,166 | | | | 30,830 | | | | 4,872 | | | | 23,971 | | | | 1,987 | |
| BBVA BROKER, CORREDURIA DE SEGUROS Y REASEGUROS, S.A. | | SPAIN | | FINANCIAL SERV. | | | 99.94 | | | | 0.06 | | | | 100.00 | | | | 297 | | | | 23,116 | | | | 2,768 | | | | 15,005 | | | | 5,343 | |
| BBVA CAPITAL FINANCE, S.A. | | SPAIN | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 60 | | | | 3,001,677 | | | | 3,001,455 | | | | 198 | | | | 24 | |
| BBVA CAPITAL FUNDING, LTD. | | CAYMAN ISLANDS | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | — | | | | 1,174,864 | | | | 1,173,183 | | | | 1,713 | | | | (32 | ) |
| BBVA CARTERA DE INVERSIONES,SICAV,S.A. | | SPAIN | | VARIABLE CAPITAL | | | 100.00 | | | | — | | | | 100.00 | | | | 118,445 | | | | 111,651 | | | | 108 | | | | 113,870 | | | | (2,327 | ) |
| BBVA COLOMBIA, S.A. | | COLOMBIA | | BANKING | | | 76.20 | | | | 19.23 | | | | 95.43 | | | | 263,965 | | | | 6,505,196 | | | | 5,937,078 | | | | 442,448 | | | | 125,670 | |
| BBVA COMERCIALIZADORA LTDA | | CHILE | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | (282 | ) | | | 195 | | | | 476 | | | | 54 | | | | (335 | ) |
| BBVA CONSOLIDAR SEGUROS, S.A. | | ARGENTINA | | INSURANCES | | | 87.78 | | | | 12.22 | | | | 100.00 | | | | 6,514 | | | | 39,656 | | | | 23,060 | | | | 11,168 | | | | 5,428 | |
| BBVA CONSULTORIA, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 2,227 | | | | 2,186 | | | | 38 | | | | 3,479 | | | | (1,331 | ) |
| BBVA CORREDORA TECNICA DE SEGUROS BHIF LTDA | | CHILE | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 21,994 | | | | 23,626 | | | | 1,630 | | | | 17,459 | | | | 4,537 | |
| BBVA CORREDORES DE BOLSA, S.A. | | CHILE | | SECURITIES | | | — | | | | 100.00 | | | | 100.00 | | | | 22,740 | | | | 160,243 | | | | 137,505 | | | | 20,782 | | | | 1,956 | |
| BBVA DINERO EXPRESS, S.A.U | | SPAIN | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 2,186 | | | | 9,658 | | | | 5,505 | | | | 3,444 | | | | 709 | |
BBVAE-COMMERCE, S.A. | | SPAIN | | SERVICES | | | 100.00 | | | | — | | | | 100.00 | | | | 30,879 | | | | 35,235 | | | | — | | | | 33,281 | | | | 1,954 | |
| BBVA FACTORING E.F.C., S.A. | | SPAIN | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 126,447 | | | | 6,786,041 | | | | 6,523,179 | | | | 228,768 | | | | 34,094 | |
| BBVA FACTORING LIMITADA | | CHILE | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 2,807 | | | | 17,326 | | | | 14,520 | | | | 3,216 | | | | (410 | ) |
| BBVA FIDUCIARIA , S.A. | | COLOMBIA | | FINANCIAL SERV. | | | — | | | | 99.99 | | | | 99.99 | | | | 9,956 | | | | 11,305 | | | | 1,346 | | | | 7,150 | | | | 2,809 | |
| BBVA FINANCE (UK), LTD. | | UNITED KINGDOM | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 3,324 | | | | 23,168 | | | | 13,145 | | | | 9,703 | | | | 320 | |
| BBVA FINANCE SPA. | | ITALY | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 4,648 | | | | 5,460 | | | | 447 | | | | 4,963 | | | | 50 | |
| BBVA FINANCIAMIENTO AUTOMOTRIZ, S.A. | | CHILE | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 85,607 | | | | 85,696 | | | | 89 | | | | 75,949 | | | | 9,658 | |
| BBVA FINANZIA, S.P.A | | ITALY | | FINANCIAL SERV. | | | 50.00 | | | | 50.00 | | | | 100.00 | | | | 36,465 | | | | 447,794 | | | | 434,679 | | | | 26,269 | | | | (13,154 | ) |
| BBVA FUNDOS, S.G. DE FUNDOS DE PENSOES, S.A. | | PORTUGAL | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 998 | | | | 5,525 | | | | 570 | | | | 3,319 | | | | 1,636 | |
| BBVA GEST, S.G. DE FUNDOS DE INVESTIMENTO MOBILIARIO, S.A. | | PORTUGAL | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 998 | | | | 6,842 | | | | 523 | | | | 4,965 | | | | 1,354 | |
| BBVA GLOBAL FINANCE LTD. | | CAYMAN ISLANDS | | FINANCIAL SERV. | | | 100.00 | | | | 0.00 | | | | 100.00 | | | | — | | | | 586,894 | | | | 583,286 | | | | 3,437 | | | | 171 | |
| BBVA GLOBAL MARKETS RESEARCH, S.A. | | SPAIN | | FINANCIAL SERV. | | | 99.99 | | | | 0.01 | | | | 100.00 | | | | 501 | | | | 4,728 | | | | 3,196 | | | | 1,479 | | | | 53 | |
| BBVA HORIZONTE PENSIONES Y CESANTIAS, S.A. | | COLOMBIA | | PENSIONS | | | 78.52 | | | | 21.43 | | | | 99.95 | | | | 36,879 | | | | 72,698 | | | | 18,157 | | | | 45,713 | | | | 8,828 | |
| BBVA INMOBILIARIA E INVERSIONES S.A. | | CHILE | | REAL ESTATE INSTR. | | | — | | | | 68.11 | | | | 68.11 | | | | 3,893 | | | | 21,428 | | | | 15,713 | | | | 6,581 | | | | (866 | ) |
II-3
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | For The
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of euros (*) | |
| |
| BBVA INSERVEX, S.A. | | SPAIN | | SERVICES | | | 100.00 | | | | — | | | | 100.00 | | | | 1,205 | | | | 2,447 | | | | 262 | | | | 1,442 | | | | 743 | |
| BBVA INSTITUIÇAO FINANCEI.CREDITO, S.A. | | PORTUGAL | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 43,626 | | | | 396,129 | | | | 359,727 | | | | 34,556 | | | | 1,846 | |
| BBVA INTERNATIONAL INVESTMENT CORPORATION | | PUERTO RICO | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 2,769,952 | | | | 2,143,991 | | | | 29 | | | | 1,525,791 | | | | 618,171 | |
| BBVA INTERNATIONAL LIMITED | | CAYMAN ISLANDS | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 1 | | | | 509,587 | | | | 507,027 | | | | 2,699 | | | | (139 | ) |
| BBVA INTERNATIONAL PREFERRED, S.A.U | | SPAIN | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 60 | | | | 1,929,850 | | | | 1,929,623 | | | | 124 | | | | 103 | |
| BBVA INVERSIONES CHILE, S.A. | | CHILE | | FINANCIAL SERV. | | | 36.65 | | | | 63.35 | | | | 100.00 | | | | 306,854 | | | | 374,617 | | | | 8,633 | | | | 375,143 | | | | (9,159 | ) |
| BBVA INVESTMENTS, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 10,921 | | | | 12,191 | | | | 1,270 | | | | 8,315 | | | | 2,606 | |
| BBVA IRELAND PUBLIC LIMITED COMPANY | | IRELAND | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 180,381 | | | | 2,302,336 | | | | 1,980,247 | | | | 300,774 | | | | 21,315 | |
| BBVA LEASIMO — SOCIEDADE DE LOCAÇAO FINANCEIRA, S.A. | | PORTUGAL | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 11,576 | | | | 42,560 | | | | 32,227 | | | | 10,222 | | | | 111 | |
| BBVA LEASING S.A. COMPAÑÍA DE FINANCIAMIENTO COMERCIAL | | COLOMBIA | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 16,295 | | | | 52,254 | | | | 35,942 | | | | 15,971 | | | | 341 | |
| BBVA LUXINVEST, S.A. | | LUXEMBOURG | | PORTFOLIO | | | 36.00 | | | | 64.00 | | | | 100.00 | | | | 255,843 | | | | 1,529,677 | | | | 86,200 | | | | 1,408,176 | | | | 35,301 | |
BBVA MEDIACION OPERADOR DE BANCA-SEGUROS
VINCULADO, S.A. | | SPAIN | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 60 | | | | 89,356 | | | | 77,387 | | | | 6,061 | | | | 5,908 | |
| BBVA NOMINEES LIMITED | | UNITED KINGDOM | | SERVICES | | | 100.00 | | | | — | | | | 100.00 | | | | — | | | | 1 | | | | — | | | | 1 | | | | — | |
| BBVA PARAGUAY, S.A. | | PARAGUAY | | BANKING | | | 99.99 | | | | — | | | | 99.99 | | | | 22,598 | | | | 625,831 | | | | 569,516 | | | | 31,422 | | | | 24,893 | |
| BBVA PARTICIPACIONES INTERNACIONAL, S.L. | | SPAIN | | PORTFOLIO | | | 92.69 | | | | 7.31 | | | | 100.00 | | | | 273,365 | | | | 345,195 | | | | 2,768 | | | | 332,119 | | | | 10,308 | |
| BBVA PATRIMONIOS GESTORA SGIIC, S.A. | | SPAIN | | FINANCIAL SERV. | | | 99.98 | | | | 0.02 | | | | 100.00 | | | | 3,907 | | | | 51,584 | | | | 4,157 | | | | 40,143 | | | | 7,284 | |
| BBVA PENSIONES, SA, ENTIDAD GESTORA DE FONDOS DE PENSIONES | | SPAIN | | PENSIONS | | | 100.00 | | | | — | | | | 100.00 | | | | 12,922 | | | | 74,573 | | | | 34,419 | | | | 25,938 | | | | 14,216 | |
| BBVA PLANIFICACION PATRIMONIAL, S.L | | SPAIN | | FINANCIAL SERV. | | | 80.00 | | | | 20.00 | | | | 100.00 | | | | 1 | | | | 514 | | | | 10 | | | | 485 | | | | 19 | |
| BBVA PRIVANZA (JERSEY), LTD. | | CHANNEL ISLANDS | | NO ACTIVITY OTHER
INVESTMENTS | | | — | | | | 100.00 | | | | 100.00 | | | | 20,610 | | | | 21,759 | | | | 10 | | | | 17,638 | | | | 4,111 | |
| BBVA PROPIEDAD F.I.I | | SPAIN | | COMPANIES, | | | — | | | | 95.65 | | | | 95.65 | | | | 1,522,714 | | | | 1,655,365 | | | | 75,248 | | | | 1,573,328 | | | | 6,789 | |
| BBVA PUERTO RICO HOLDING CORPORATION | | PUERTO RICO | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 255,804 | | | | 100,177 | | | | 8 | | | | 100,217 | | | | (48 | ) |
| BBVA RE LIMITED | | IRELAND | | INSURANCES | | | — | | | | 100.00 | | | | 100.00 | | | | 656 | | | | 48,632 | | | | 30,913 | | | | 13,215 | | | | 4,504 | |
| BBVA RENTING, S.A. | | SPAIN | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 20,976 | | | | 789,704 | | | | 695,902 | | | | 90,792 | | | | 3,010 | |
| BBVA RENTING, SPA | | ITALY | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 1,925 | | | | 36,750 | | | | 35,569 | | | | 1,797 | | | | (616 | ) |
| BBVA SECURITIES INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 30,267 | | | | 26,039 | | | | 4,574 | | | | 20,913 | | | | 552 | |
| BBVA SECURITIES OF PUERTO RICO, INC. | | PUERTO RICO | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 4,726 | | | | 5,831 | | | | 503 | | | | 4,820 | | | | 508 | |
| BBVA SEGUROS COLOMBIA , S.A. | | COLOMBIA | | INSURANCES | | | 94.00 | | | | 6.00 | | | | 100.00 | | | | 9,259 | | | | 32,225 | | | | 19,671 | | | | 10,447 | | | | 2,107 | |
II-4
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | For The
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of euros (*) | |
| |
| BBVA SEGUROS DE VIDA COLOMBIA, S.A. | | COLOMBIA | | INSURANCES | | | 94.00 | | | | 6.00 | | | | 100.00 | | | | 13,242 | | | | 183,692 | | | | 153,770 | | | | 25,787 | | | | 4,135 | |
| BBVA SEGUROS DE VIDA, S.A. | | CHILE | | INSURANCES | | | — | | | | 100.00 | | | | 100.00 | | | | 24,840 | | | | 308,595 | | | | 283,754 | | | | 24,977 | | | | (136 | ) |
| BBVA SEGUROS INC. | | PUERTO RICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 180 | | | | 3,384 | | | | 661 | | | | 1,851 | | | | 872 | |
| BBVA SEGUROS, S.A., DE SEGUROS Y REASEGUROS | | SPAIN | | INSURANCES | | | 94.30 | | | | 5.64 | | | | 99.94 | | | | 414,525 | | | | 11,474,162 | | | | 10,523,770 | | | | 692,709 | | | | 257,683 | |
| BBVA SENIOR FINANCE, S.A.U. | | SPAIN | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 60 | | | | 11,704,747 | | | | 11,704,466 | | | | 378 | | | | (97 | ) |
| BBVA SERVICIOS, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 354 | | | | 19,174 | | | | 5,497 | | | | 5,440 | | | | 8,237 | |
| BBVA SOCIEDAD DE LEASING INMOBILIARIO, S.A. | | CHILE | | FINANCIAL SERV. | | | — | | | | 97.49 | | | | 97.49 | | | | 9,063 | | | | 36,224 | | | | 26,926 | | | | 8,786 | | | | 512 | |
| BBVA SUBORDINATED CAPITAL S.A.U. | | SPAIN | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 130 | | | | 3,930,607 | | | | 3,930,373 | | | | 324 | | | | (90 | ) |
| BBVA SUIZA, S.A. (BBVA SWITZERLAND) | | SUIZA | | BANKING | | | 39.72 | | | | 60.28 | | | | 100.00 | | | | 55,795 | | | | 951,366 | | | | 645,983 | | | | 295,139 | | | | 10,244 | |
| BBVA TRADE, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 6,379 | | | | 19,177 | | | | 11,054 | | | | 4,882 | | | | 3,241 | |
| BBVA U.S.SENIOR S.A.U | | SPAIN | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 132 | | | | 5,061,163 | | | | 5,060,986 | | | | 182 | | | | (5 | ) |
| BBVA USA BANCSHARES, INC | | UNITED STATES | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 9,417,869 | | | | 9,076,103 | | | | 8,472 | | | | 9,326,607 | | | | (258,976 | ) |
| BBVA VALORES COLOMBIA, S.A. COMISIONISTA DE BOLSA | | COLOMBIA | | SECURITIES | | | — | | | | 100.00 | | | | 100.00 | | | | 3,405 | | | | 3,991 | | | | 582 | | | | 2,570 | | | | 839 | |
| BBVA(SUIZA) S.A. OFICINA DE REPRESENTACION | | URUGUAY | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 11 | | | | 2,264 | | | | 2,253 | | | | 11 | | | | — | |
| BCL INTERNATIONAL FINANCE, LTD. | | CAYMAN ISLANDS | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 112,943 | | | | 112,939 | | | | 15 | | | | (11 | ) |
| BEXCARTERA, SICAV S.A. | | SPAIN | | NO ACTIVITY | | | — | | | | 80.78 | | | | 80.78 | | | | 9,352 | | | | 13,526 | | | | 72 | | | | 13,454 | | | | — | |
| BIBJ MANAGEMENT, LTD. | | CHANNEL ISLANDS | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| BIBJ NOMINEES, LTD. | | CHANNEL ISLANDS | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| BILBAO VIZCAYA AMERICA B.V | | PAISES BAJOS | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 756,000 | | | | 483,360 | | | | 189 | | | | 402,089 | | | | 81,082 | |
| BILBAO VIZCAYA HOLDING, S.A. | | SPAIN | | PORTFOLIO | | | 89.00 | | | | 11.00 | | | | 100.00 | | | | 34,771 | | | | 201,339 | | | | 6,681 | | | | 187,190 | | | | 7,468 | |
| BLUE INDICO INVESTMENTS, S.L | | SPAIN | | PORTFOLIO | | | 99.99 | | | | 0.01 | | | | 100.00 | | | | 18,221 | | | | 51,060 | | | | 1 | | | | 49,865 | | | | 1,194 | |
| BROOKLINE INVESTMENTS,S.L | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 33,969 | | | | 32,395 | | | | 524 | | | | 31,897 | | | | (26 | ) |
| C B TRANSPORT ,INC | | UNITED STATES | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 14,450 | | | | 17,862 | | | | 3,411 | | | | 16,231 | | | | (1,780 | ) |
| CANAL COMPANY, LTD. | | CHANNEL ISLANDS | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 26 | | | | 793 | | | | 7 | | | | 763 | | | | 23 | |
| CAPITAL INVESTMENT COUNSEL, INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 19,439 | | | | 20,937 | | | | 1,498 | | | | 18,533 | | | | 906 | |
| CARTERA E INVERSIONES S.A., CIA DE | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 60,541 | | | | 217,651 | | | | 48,160 | | | | 68,236 | | | | 101,255 | |
| CASA DE BOLSA BBVA BANCOMER, S.A. DE C.V. | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 54,497 | | | | 67,976 | | | | 13,476 | | | | 16,195 | | | | 38,305 | |
| CASA DE CAMBIO MULTIDIVISAS, S.A DE C.V. | | MEXICO | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 145 | | | | 145 | | | | — | | | | 143 | | | | 2 | |
| CENTRAL BANK OF THE SOUTH | | UNITED STATES | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 1,176 | | | | 3,709 | | | | 2,534 | | | | 1,144 | | | | 31 | |
II-5
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | For The
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of euros (*) | |
| |
| CIA. GLOBAL DE MANDATOS Y REPRESENTACIONES, S.A. | | URUGUAY | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 108 | | | | 180 | | | | 2 | | | | 178 | | | | — | |
| CIDESSA DOS, S.L. | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 11,602 | | | | 11,925 | | | | 127 | | | | 11,613 | | | | 185 | |
| CIDESSA UNO, S.L. | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 4,754 | | | | 690,939 | | | | 109 | | | | 248,054 | | | | 442,776 | |
| CIERVANA, S.L. | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 53,164 | | | | 68,947 | | | | 2,442 | | | | 55,428 | | | | 11,077 | |
| COMPASS AUTO RECEIVABLES CORPORATION | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 3,002 | | | | 3,003 | | | | 1 | | | | 3,005 | | | | (3 | ) |
| COMERCIALIZADORA CORPORATIVA SAC | | PERU | | FINANCIAL SERV. | | | — | | | | 99.99 | | | | 99.99 | | | | 120 | | | | 272 | | | | 151 | | | | 114 | | | | 7 | |
| COMERCIALIZADORA DE SERVICIOS FINANCIEROS, S.A. | | COLOMBIA | | SERVICES | | | — | | | | 99.98 | | | | 99.98 | | | | 96 | | | | 206 | | | | 111 | | | | 97 | | | | (2 | ) |
| COMPASS ARIZONA ACQUISITION, CORP. | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPASS ASSET ACCEPTANCE COMPANY, LLC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 341,239 | | | | 341,569 | | | | 329 | | | | 326,948 | | | | 14,292 | |
| COMPASS BANCSHARES, INC. | | UNITED STATES | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 9,058,349 | | | | 9,358,516 | | | | 300,166 | | | | 9,314,819 | | | | (256,469 | ) |
| COMPASS BANK | | UNITED STATES | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 9,101,163 | | | | 46,842,954 | | | | 37,741,791 | | | | 9,348,126 | | | | (246,963 | ) |
| COMPASS BROKERAGE, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 22,919 | | | | 24,358 | | | | 1,438 | | | | 18,734 | | | | 4,186 | |
| COMPASS CAPITAL MARKETS, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 5,138,466 | | | | 5,138,466 | | | | — | | | | 5,003,740 | | | | 134,726 | |
| COMPASS CONSULTING & BENEFITS, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 12,121 | | | | 12,705 | | | | 583 | | | | 11,562 | | | | 560 | |
| COMPASS CUSTODIAL SERVICES, INC. | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPASS FIDUCIARY SERVICES, LTD., INC. | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 9 | | | | 9 | | | | 1 | | | | 9 | | | | (1 | ) |
| COMPASS FINANCIAL CORPORATION | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 6,512 | | | | 51,683 | | | | 45,170 | | | | 7,099 | | | | (586 | ) |
| COMPASS GP,INC | | UNITED STATES | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 32,458 | | | | 41,091 | | | | 8,633 | | | | 31,855 | | | | 603 | |
| COMPASS INSURANCE AGENCY, INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 118,981 | | | | 132,232 | | | | 13,249 | | | | 110,076 | | | | 8,907 | |
| COMPASS INVESTMENTS, INC | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPASS LIMITED PARTNER, INC | | UNITED STATES | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 4,444,607 | | | | 4,444,607 | | | | 1 | | | | 4,329,440 | | | | 115,166 | |
| COMPASS LOAN HOLDINGS TRS, INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 55,768 | | | | 58,210 | | | | 2,442 | | | | 55,259 | | | | 509 | |
| COMPASS MORTAGE CORPORATION | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 1,830,203 | | | | 1,831,372 | | | | 1,169 | | | | 1,782,160 | | | | 48,043 | |
| COMPASS MORTGAGE FINANCING, INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 25 | | | | 25 | | | | — | | | | 25 | | | | — | |
| COMPASS MULTISTATE SERVICES CORPORATION | | UNITED STATES | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 2,695 | | | | 2,761 | | | | 66 | | | | 2,695 | | | | — | |
| COMPASS SECURITIES, INC | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPASS SOUTHWEST, LP | | UNITED STATES | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 3,629,145 | | | | 3,630,558 | | | | 1,413 | | | | 3,529,350 | | | | 99,795 | |
| COMPASS TEXAS ACQUISITION CORPORATION | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1,627 | | | | 1,643 | | | | 17 | | | | 1,626 | | | | — | |
| COMPASS TEXAS MORTGAGE FINANCING, INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 25 | | | | 25 | | | | — | | | | 25 | | | | — | |
| COMPASS TRUST II | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPASS UNDERWRITERS, INC | | UNITED STATES | | INSURANCES | | | — | | | | 100.00 | | | | 100.00 | | | | 147 | | | | 147 | | | | 1 | | | | 141 | | | | 5 | |
| COMPASS WEALTH MANAGERS COMPANY | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
II-6
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | For The
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of euros (*) | |
| |
| COMPAÑIA CHILENA DE INVERSIONES, S.L | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 232,976 | | | | 173,294 | | | | 2,295 | | | | 171,112 | | | | (113 | ) |
| COMUNIDAD FINANCIERA ÍNDICO, S.L | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 349 | | | | 495 | | | | 128 | | | | 350 | | | | 17 | |
| CONSOLIDAR A.F.J.P., S.A. | | ARGENTINA | | PENSIONS | | | 46.11 | | | | 53.89 | | | | 100.00 | | | | 52,900 | | | | 58,868 | | | | 9,629 | | | | 56,570 | | | | (7,331 | ) |
| CONSOLIDAR ASEGURADORA DE RIESGOS DEL TRABAJO, S.A. | | ARGENTINA | | INSURANCES | | | 87.50 | | | | 12.50 | | | | 100.00 | | | | 32,598 | | | | 166,487 | | | | 131,121 | | | | 26,102 | | | | 9,264 | |
| CONSOLIDAR CIA. DE SEGUROS DE RETIRO, S.A. | | ARGENTINA | | INSURANCES | | | 33.33 | | | | 66.67 | | | | 100.00 | | | | 14,224 | | | | 538,662 | | | | 517,328 | | | | 17,838 | | | | 3,496 | |
| CONSOLIDAR CIA. DE SEGUROS DE VIDA, S.A. | | ARGENTINA | | INSURANCES | | | 34.04 | | | | 65.96 | | | | 100.00 | | | | 27,225 | | | | 47,184 | | | | 4,010 | | | | 40,378 | | | | 2,796 | |
| CONSOLIDAR COMERCIALIZADORA, S.A. | | ARGENTINA | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 553 | | | | 3,817 | | | | 3,265 | | | | 935 | | | | (383 | ) |
| CONTINENTAL BOLSA, SDAD. AGENTE DE BOLSA S.A. | | PERU | | SECURITIES | | | — | | | | 100.00 | | | | 100.00 | | | | 3,860 | | | | 6,395 | | | | 2,535 | | | | 2,688 | | | | 1,172 | |
| CONTINENTAL DPR FINANCE COMPANY | | CAYMAN ISLANDS | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 182,651 | | | | 182,651 | | | | — | | | | — | |
| CONTINENTAL S.A. SOCIEDAD ADMINISTRADORA DE FONDOS | | PERU | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 5,021 | | | | 6,303 | | | | 1,284 | | | | 4,469 | | | | 550 | |
| CONTINENTAL SOCIEDAD TITULIZADORA, S.A. | | PERU | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 414 | | | | 453 | | | | 37 | | | | 392 | | | | 24 | |
| CONTRATACION DE PERSONAL, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 1,280 | | | | 8,150 | | | | 6,871 | | | | 346 | | | | 933 | |
| CORPORACION DE ALIMENTACION Y BEBIDAS, S.A. | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 138,508 | | | | 164,531 | | | | 2,409 | | | | 157,487 | | | | 4,635 | |
| CORPORACION GENERAL FINANCIERA, S.A. | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 452,431 | | | | 1,432,107 | | | | 11,784 | | | | 1,400,480 | | | | 19,843 | |
| CORPORACION INDUSTRIAL Y DE SERVICIOS, S.L | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 1,251 | | | | 5,573 | | | | 577 | | | | 4,870 | | | | 126 | |
| DESARROLLADORA Y VENDEDORA DE CASAS, S.A. DE C.V. | | MEXICO | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 17 | | | | 17 | | | | — | | | | 22 | | | | (5 | ) |
| DESARROLLO URBANISTICO DE CHAMARTIN, S.A. | | SPAIN | | REAL STATE | | | — | | | | 72.50 | | | | 72.50 | | | | 29,330 | | | | 59,259 | | | | 17,074 | | | | 42,167 | | | | 18 | |
| DESITEL TECNOLOGIA Y SISTEMAS, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 1,299 | | | | 1,345 | | | | 45 | | | | 1,147 | | | | 153 | |
| DEUSTO, S.A. DE INVERSION MOBILIARIA | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 11,492 | | | | 17,074 | | | | 1,544 | | | | 15,176 | | | | 354 | |
| DINERO EXPRESS SERVICIOS GLOBALES, S.A. | | SPAIN | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 10,421 | | | | 3,807 | | | | 19,850 | | | | 6,238 | | | | (22,281 | ) |
| EL ENCINAR METROPOLITANO, S.A. | | SPAIN | | REAL STATE | | | — | | | | 98.92 | | | | 98.92 | | | | 5,641 | | | | 9,057 | | | | 3,495 | | | | 5,266 | | | | 296 | |
| EL OASIS DE LAS RAMBLAS, S.L | | SPAIN | | REAL STATE | | | — | | | | 70.00 | | | | 70.00 | | | | 167 | | | | 493 | | | | 340 | | | | 135 | | | | 18 | |
| ELANCHOVE, S.A. | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 1,500 | | | | 3,878 | | | | 1,541 | | | | 2,413 | | | | (76 | ) |
| EMPRESA INSTANT CREDIT, C.A | | VENEZUELA | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| ESPANHOLA COMERCIAL E SERVIÇOS, LTDA | | BRASIL | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | — | | | | 1,585 | | | | 267 | | | | 6,031 | | | | (4,713 | ) |
| ESTACION DE AUTOBUSES CHAMARTIN, S.A. | | SPAIN | | SERVICES | | | — | | | | 51.00 | | | | 51.00 | | | | 31 | | | | 30 | | | | — | | | | 31 | | | | (1 | ) |
| EUROPEA DE TITULIZACION, S.A., SDAD.GEST.DE FDOS.DE TITUL | | SPAIN | | FINANCIAL SERV. | | | 85.99 | | | | — | | | | 85.99 | | | | 1,815 | | | | 11,599 | | | | 1,337 | | | | 6,162 | | | | 4,100 | |
| EXPLOTACIONES AGROPECUARIAS VALDELAYEGUA, S.A. | | SPAIN | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 9,121 | | | | 9,128 | | | | 8 | | | | 9,361 | | | | (241 | ) |
FIDEIC. No.711, EN BANCO INVEX, S.A. INSTITUCION DE BANCA MÚLTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 124,766 | | | | 122,022 | | | | (2,700 | ) | | | 5,444 | |
FIDEICOMISO29764-8 SOCIO LIQUIDADOR POSICION DE TERCEROS | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 28,422 | | | | 28,970 | | | | 549 | | | | 25,746 | | | | 2,675 | |
II-7
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | For The
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of euros (*) | |
| |
| FIDEICOMISO 474031 MANEJO DE GARANTIAS | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 2 | | | | 2 | | | | — | | | | 2 | | | | — | |
FIDEICOMISO BBVA BANCOMER SERVICIOS No F/47433-8, S.A. | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 32,442 | | | | 51,540 | | | | 19,099 | | | | 23,289 | | | | 9,152 | |
| FIDEICOMISO INVEX 228 | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| FIDEICOMISO INVEX 367 | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| FIDEICOMISO INVEX 393 | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| FIDEICOMISO INVEX 411 | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
FIDEICOMISO No.402900-5 ADMINISTRACION DE INMUEBLES | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 2,631 | | | | 2,580 | | | | — | | | | 2,580 | | | | — | |
FIDEICOMISO No.752 EN BANCO INVEX, S.A.,INSTITUCION DE BANCA MULTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 55,999 | | | | 55,067 | | | | (170 | ) | | | 1,102 | |
FIDEICOMISO No.781en BANCO INVEX, S.A.,INSTITUCION DE BANCA MULTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO (FIDEIC. 3ra EMISION) | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 287,718 | | | | 296,867 | | | | 1,653 | | | | (10,802 | ) |
FIDEICOMISO No.847 EN BANCO INVEX, S.A.,INSTITUCION DE BANCA MULTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO (FIDEIC. 4a EMISION) | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 25.00 | | | | 301,319 | | | | 305,535 | | | | 790 | | | | (5,006 | ) |
| FIDEICOMISO SOCIO LIQUIDADOR DE OP.FINANC.DERIVADAS | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 16,692 | | | | 17,476 | | | | 784 | | | | 15,833 | | | | 859 | |
| FINANCEIRA DO COMERCIO EXTERIOR S.A.R | | PORTUGAL | | NO ACTIVITY | | | 100.00 | | | | — | | | | 100.00 | | | | 51 | | | | 37 | | | | — | | | | 44 | | | | (7 | ) |
| FINANCIERA AYUDAMOS S.A. DE C.V., SOFOMER | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 4,616 | | | | 4,960 | | | | 345 | | | | 5,092 | | | | (477 | ) |
| FINANCIERA ESPAÑOLA, S.A. | | SPAIN | | PORTFOLIO | | | 85.85 | | | | 14.15 | | | | 100.00 | | | | 4,522 | | | | 6,812 | | | | 1 | | | | 6,654 | | | | 157 | |
| FINANZIA AUTORENTING, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 33,561 | | | | 651,086 | | | | 642,804 | | | | 21,454 | | | | (13,172 | ) |
| FINANZIA, BANCO DE CREDITO, S.A. | | SPAIN | | BANKING | | | — | | | | 100.00 | | | | 100.00 | | | | 56,203 | | | | 7,403,407 | | | | 7,245,109 | | | | 162,626 | | | | (4,328 | ) |
| FIRS TIER CORPORATION | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| FRANCES ADMINISTRADORA DE INVERSIONES, S.A. | | ARGENTINA | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 5,912 | | | | 9,521 | | | | 3,610 | | | | 5,220 | | | | 691 | |
| FRANCES VALORES SOCIEDAD DE BOLSA, S.A. | | ARGENTINA | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 2,133 | | | | 2,652 | | | | 519 | | | | 1,550 | | | | 583 | |
| FUTURO FAMILIAR, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 191 | | | | 483 | | | | 293 | | | | 124 | | | | 66 | |
| FW CAPITAL I | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| GENTE BBVA, S.A. | | CHILE | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | (243 | ) | | | 5,790 | | | | 6,034 | | | | 55 | | | | (299 | ) |
| GESTION DE PREVISION Y PENSIONES, S.A. | | SPAIN | | PENSIONS | | | 60.00 | | | | — | | | | 60.00 | | | | 8,830 | | | | 26,532 | | | | 2,123 | | | | 20,873 | | | | 3,536 | |
| GESTION Y ADMINISTRACION DE RECIBOS, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 150 | | | | 2,763 | | | | 876 | | | | 1,182 | | | | 705 | |
| GOBERNALIA GLOBAL NET, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 947 | | | | 2,491 | | | | 1,188 | | | | 1,396 | | | | (93 | ) |
| GRAN JORGE JUAN, S.A. | | SPAIN | | REAL STATE | | | 100.00 | | | | — | | | | 100.00 | | | | 110,115 | | | | 494,296 | | | | 411,493 | | | | 101,894 | | | | (19,091 | ) |
| GRANFIDUCIARIA | | COLOMBIA | | FINANCIAL SERV. | | | — | | | | 90.00 | | | | 90.00 | | | | — | | | | 245 | | | | 108 | | | | 158 | | | | (21 | ) |
II-8
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of voting rights
| | | | | | | |
| | | | | | | controlled by the bank | | | | | | Investee data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | for the
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | period ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of Euros (*) | |
| |
| GRELAR GALICIA, S.A. | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 4,500 | | | | 4,687 | | | | — | | | | 4,500 | | | | 187 | |
| GRUPO FINANCIERO BBVA BANCOMER, S.A. DE C.V. | | MEXICO | | FINANCIAL SERV. | | | 48.97 | | | | 51.00 | | | | 99.97 | | | | 6,050,885 | | | | 5,603,415 | | | | 820 | | | | 4,013,560 | | | | 1,589,035 | |
| HIPOTECARIA NACIONAL MEXICANA INCORPORATED | | UNITED STATES | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 206 | | | | 315 | | | | 110 | | | | 105 | | | | 100 | |
| HIPOTECARIA NACIONAL, S.A. DE C.V. | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 202,262 | | | | 219,458 | | | | 17,195 | | | | 139,766 | | | | 62,497 | |
| HOLDING CONTINENTAL, S.A. | | PERU | | PORTFOLIO | | | 50.00 | | | | — | | | | 50.00 | | | | 123,678 | | | | 504,399 | | | | 83 | | | | 347,754 | | | | 156,562 | |
| HOLDING DE PARTICIPACIONES INDUSTRIALES 2000, S.A. | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 3,618 | | | | 4,470 | | | | — | | | | 4,321 | | | | 149 | |
| HOMEOWNERS LOAN CORPORATION | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 7,684 | | | | 8,987 | | | | 1,302 | | | | 5,974 | | | | 1,711 | |
| HUMAN RESOURCES PROVIDER | | UNITED STATES | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 1,131,354 | | | | 1,131,402 | | | | 48 | | | | 1,093,050 | | | | 38,304 | |
| HUMAN RESOURCES SUPPORT, INC | | UNITED STATES | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 1,130,007 | | | | 1,133,128 | | | | 3,121 | | | | 1,091,845 | | | | 38,162 | |
| HYDROX HOLDINGS, INC. | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| IBERDROLA SERVICIOS FINANCIEROS, E.F.C, S.A. | | SPAIN | | FINANCIAL SERV. | | | — | | | | 84.00 | | | | 84.00 | | | | 7,290 | | | | 9,641 | | | | 74 | | | | 9,334 | | | | 233 | |
| IBERNEGOCIO DE TRADE, S.L. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 1,586 | | | | 1,737 | | | | 150 | | | | 16,662 | | | | (15,075 | ) |
| INENSUR BRUNETE, S.L. | | SPAIN | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 48,715 | | | | 105,290 | | | | 82,553 | | | | 23,504 | | | | (767 | ) |
| INGENIERIA EMPRESARIAL MULTIBA, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 99.99 | | | | 99.99 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| INMOBILIARIA ASUDI, S.A. | | SPAIN | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 2,886 | | | | 3,239 | | | | — | | | | 3,092 | | | | 147 | |
| INMOBILIARIA BILBAO, S.A. | | SPAIN | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 3,657 | | | | 3,812 | | | | 1 | | | | 3,658 | | | | 153 | |
| INMUEBLES Y RECUPERACIONES CONTINENTAL, S.A. | | PERU | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 3,586 | | | | 7,252 | | | | 3,668 | | | | 219 | | | | 3,365 | |
| INVERAHORRO, S.L. | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 474 | | | | 520 | | | | 3 | | | | 502 | | | | 15 | |
| INVERSIONES ALDAMA, C.A. | | VENEZUELA | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| INVERSIONES BANPRO INTERNATIONAL INC. N.V. | | NETHERLANDS ANTILLES | | PORTFOLIO | | | 48.00 | | | | — | | | | 48.00 | | | | 11,390 | | | | 29,312 | | | | 1,050 | | | | 20,747 | | | | 7,515 | |
| INVERSIONES BAPROBA, C.A. | | VENEZUELA | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 1,307 | | | | 1,159 | | | | 230 | | | | 706 | | | | 223 | |
| INVERSIONES P.H.R.4, C.A. | | VENEZUELA | | NO ACTIVITY | | | — | | | | 60.46 | | | | 60.46 | | | | — | | | | 50 | | | | — | | | | 50 | | | | — | |
| INVERSIONES T, C.A. | | VENEZUELA | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| INVERSORA OTAR, S.A. | | ARGENTINA | | PORTFOLIO | | | — | | | | 99.96 | | | | 99.96 | | | | 2,156 | | | | 40,876 | | | | 25 | | | | 37,083 | | | | 3,768 | |
INVESCO MANAGEMENT No 1, S.A. | | LUXEMBOURG | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 10,016 | | | | 10,480 | | | | 494 | | | | 10,945 | | | | (959 | ) |
INVESCO MANAGEMENT No 2, S.A. | | LUXEMBOURG | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 11,334 | | | | 19,021 | | | | (6,108 | ) | | | (1,579 | ) |
| JARDINES DE SARRIENA, S.L. | | SPAIN | | REAL STATE | | | — | | | | 85.00 | | | | 85.00 | | | | 255 | | | | 503 | | | | 165 | | | | 369 | | | | (31 | ) |
II-9
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of voting rights
| | | | | | | |
| | | | | | | controlled by the bank | | | | | | Investee data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | for the
| |
| | | | | | | | | | | | | | | | carrying
| | | as of
| | | as of
| | | Equity
| | | period ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of Euros (*) | |
| |
| LIQUIDITY ADVISORS, L.P | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 851,032 | | | | 853,671 | | | | 2,639 | | | | 834,089 | | | | 16,943 | |
| MAGGIORE FLEET, S.P.A. | | ITALY | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 67,785 | | | | 202,340 | | | | 166,006 | | | | 34,869 | | | | 1,465 | |
| MARINA LLAR, S.L. | | SPAIN | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 19,071 | | | | 58,547 | | | | 39,476 | | | | 19,796 | | | | (725 | ) |
| MARQUES DE CUBAS 21, S.L. | | SPAIN | | REAL STATE | | | 100.00 | | | | — | | | | 100.00 | | | | 2,869 | | | | 7,551 | | | | 5,727 | | | | 2,105 | | | | (281 | ) |
| MEDITERRANIA DE PROMOCIONS I GESTIONS INMOBILIARIES, S.A. | | SPAIN | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 779 | | | | 1,391 | | | | 193 | | | | 776 | | | | 422 | |
| MEGABANK FINANCIAL CORPORATION | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| MERCURY TRUST LIMITED | | CAYMAN ISLANDS | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 3,786 | | | | 3,820 | | | | 38 | | | | 3,857 | | | | (75 | ) |
| MILANO GESTIONI, SRL. | | ITALY | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 46 | | | | 4,184 | | | | 3,816 | | | | 350 | | | | 18 | |
| MIRADOR DE LA CARRASCOSA, S.L. | | SPAIN | | REAL STATE | | | — | | | | 55.90 | | | | 55.90 | | | | 9,724 | | | | 34,572 | | | | 17,518 | | | | 17,062 | | | | (8 | ) |
| MISAPRE, S.A. DE C.V. | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 9,793 | | | | 17,890 | | | | 8,463 | | | | 6,912 | | | | 2,515 | |
| MONESTERIO DESARROLLOS, S.L. | | SPAIN | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 20,000 | | | | 56,323 | | | | 36,506 | | | | 19,820 | | | | (3 | ) |
| MONTEALIAGA,S.A. | | SPAIN | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 21,154 | | | | 101,228 | | | | 74,417 | | | | 20,056 | | | | 6,755 | |
| MULTIASISTENCIA OPERADORA S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 32 | | | | 614 | | | | 582 | | | | 25 | | | | 7 | |
| MULTIASISTENCIA SERVICIOS S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 17 | | | | 1,059 | | | | 1,042 | | | | 57 | | | | (40 | ) |
| MULTIASISTENCIA, S.A. DE C.V. | | MEXICO | �� | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 8,298 | | | | 17,808 | | | | 8,473 | | | | 6,651 | | | | 2,684 | |
| MULTIVAL, S.A. | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 67 | | | | 234 | | | | 136 | | | | 104 | | | | (6 | ) |
| OCCIVAL, S.A. | | SPAIN | | NO ACTIVITY | | | 100.00 | | | | — | | | | 100.00 | | | | 8,211 | | | | 9,950 | | | | 132 | | | | 9,495 | | | | 323 | |
| OPCION VOLCAN, S.A. | | MEXICO | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 49,153 | | | | 53,520 | | | | 4,366 | | | | 45,741 | | | | 3,413 | |
| OPPLUS OPERACIONES Y SERVICIOS, S.A. | | SPAIN | | SERVICES | | | 100.00 | | | | — | | | | 100.00 | | | | 1,067 | | | | 13,264 | | | | 10,926 | | | | 975 | | | | 1,363 | |
| OPPLUS S.A.C | | PERU | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 196 | | | | 1,191 | | | | 1,014 | | | | 152 | | | | 25 | |
| PALADIN BROKERAGE SOLUTIONS, INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 8,454 | | | | 8,769 | | | | 316 | | | | 8,375 | | | | 78 | |
| PARTICIPACIONES ARENAL, S.L. | | SPAIN | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 6,458 | | | | 7,922 | | | | 1,238 | | | | 6,456 | | | | 228 | |
| PENSIONES BANCOMER, S.A. DE C.V. | | MEXICO | | INSURANCES | | | — | | | | 100.00 | | | | 100.00 | | | | 98,732 | | | | 1,395,384 | | | | 1,296,646 | | | | 74,490 | | | | 24,248 | |
| PERI 5.1 SOCIEDAD LIMITADA | | SPAIN | | REAL STATE | | | — | | | | 54.99 | | | | 54.99 | | | | 1 | | | | — | | | | — | | | | — | | | | — | |
| PHOENIX LOAN HOLDINGS, INC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 571,034 | | | | 589,469 | | | | 18,435 | | | | 541,310 | | | | 29,724 | |
| PI HOLDINGS NO. 1, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 12,558 | | | | 13,732 | | | | 1,175 | | | | 10,549 | | | | 2,008 | |
| PI HOLDINGS NO. 3, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 53 | | | | 53 | | | | — | | | | 53 | | | | — | |
| PI HOLDINGS NO. 4, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| PORT ARTHUR ABSTRACT & TITLE COMPANY | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 2,143 | | | | 2,466 | | | | 323 | | | | 2,265 | | | | (122 | ) |
| PREMEXSA, S.A. DE C.V. | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 375 | | | | 679 | | | | 348 | | | | 313 | | | | 18 | |
| PRESTACIONES ADMINISTRATIVAS LIMITADA — PROEX LIMITADA | | CHILE | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 80 | | | | 635 | | | | 626 | | | | 3 | | | | 6 | |
II-10
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of voting rights
| | | | | | | |
| | | | | | | controlled by the bank | | | | | | Investee data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | for the
| |
| | | | | | | | | | | | | | | | carrying
| | | as of
| | | as of
| | | Equity
| | | period ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of Euros (*) | |
| |
| PREVENTIS, S.A. | | MEXICO | | INSURANCES | | | — | | | | 90.27 | | | | 90.27 | | | | 3,639 | | | | 11,753 | | | | 7,780 | | | | 4,959 | | | | (986 | ) |
| PRO-SALUD, C.A. | | VENEZUELA | | SERVICES | | | — | | | | 58.86 | | | | 58.86 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| PROMOCION EMPRESARIAL XX, S.A. | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 1,522 | | | | 12,728 | | | | 10,797 | | | | 2,101 | | | | (170 | ) |
| PROMOTORA DE RECURSOS AGRARIOS, S.A. | | SPAIN | | SERVICES | | | 100.00 | | | | — | | | | 100.00 | | | | 139 | | | | 125 | | | | — | | | | 127 | | | | (2 | ) |
| PROMOTORA RESIDENCIAL GRAN EUROPA, S.L. | | SPAIN | | REAL STATE | | | — | | | | 58.50 | | | | 58.50 | | | | 254 | | | | 441 | | | | 7 | | | | 432 | | | | 2 | |
| PROVIDA INTERNACIONAL, S.A. | | CHILE | | PENSIONS | | | — | | | | 100.00 | | | | 100.00 | | | | 29,453 | | | | 29,520 | | | | 67 | | | | 28,695 | | | | 758 | |
| PROVINCIAL DE VALORES CASA DE BOLSA, C.A | | VENEZUELA | | FINANCIAL SERV. | | | — | | | | 90.00 | | | | 90.00 | | | | 2,561 | | | | 10,550 | | | | 7,009 | | | | 3,725 | | | | (184 | ) |
| PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA, C.A. | | VENEZUELA | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 2,336 | | | | 2,321 | | | | 131 | | | | 1,716 | | | | 474 | |
| PROVIVIENDA, ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A. | | BOLIVIA | | PENSIONS | | | — | | | | 100.00 | | | | 100.00 | | | | 490 | | | | 2,284 | | | | 1,755 | | | | 452 | | | | 77 | |
| PROXIMA ALFA INVESTMENTS (IRELAND) LIMITED | | IRELAND | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 125 | | | | 125 | | | | — | | | | 125 | | | | — | |
| PROXIMA ALFA INVESTMENTS (UK) LLP | | UNITED KINGDOM | | FINANCIAL SERV. | | | — | | | | 51.00 | | | | 51.00 | | | | — | | | | 1,397 | | | | 1,265 | | | | 15 | | | | 117 | |
| PROXIMA ALFA INVESTMENTS (USA) LLC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 24,803 | | | | 28,670 | | | | (6,999 | ) | | | 3,132 | |
| PROXIMA ALFA INVESTMENTS HOLDINGS (USA) II INC. | | UNITED STATES | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 4 | | | | 4 | | | | — | | | | — | |
| PROXIMA ALFA INVESTMENTS HOLDINGS (USA) INC. | | UNITED STATES | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 344 | | | | 390 | | | | 390 | | | | — | | | | — | |
| PROXIMA ALFA INVESTMENTS, SGIIC S.A. | | SPAIN | | FINANCIAL SERV. | | | 100.00 | | | | — | | | | 100.00 | | | | 16,785 | | | | 15,848 | | | | 4,431 | | | | 14,942 | | | | (3,525 | ) |
| PROXIMA ALFA MANAGING MEMBER LLC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 2 | | | | 1 | | | | 4 | | | | — | | | | (3 | ) |
| PROXIMA ALFA SERVICES LTD. | | UNITED KINGDOM | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 2,292 | | | | 1,852 | | | | 185 | | | | 1,657 | | | | 10 | |
| PROYECTO MUNDO AGUILON, S.L. | | SPAIN | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 9,317 | | | | 24,194 | | | | 1,412 | | | | 23,276 | | | | (494 | ) |
| PROYECTOS EMPRESARIALES CAPITAL RIESGO I,S.C.R.SIMP., S.A. | | SPAIN | | VENTURE CAPITAL | | | 100.00 | | | | — | | | | 100.00 | | | | 155,700 | | | | 145,411 | | | | 886 | | | | 137,351 | | | | 7,174 | |
| PROYECTOS INDUSTRIALES CONJUNTOS, S.A. DE | | SPAIN | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 3,148 | | | | 8,327 | | | | 5,030 | | | | 3,432 | | | | (135 | ) |
| RESIDENCIAL CUMBRES DE SANTA FE, S.A. DE C.V. | | MEXICO | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 8,858 | | | | 10,538 | | | | 2,065 | | | | 8,809 | | | | (336 | ) |
| RIVER OAKS BANK BUILDING, INC. | | UNITED STATES | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 14,977 | | | | 15,924 | | | | 947 | | | | 14,551 | | | | 426 | |
| RIVER OAKS TRUST CORPORATION | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| RIVERWAY HOLDINGS CAPITAL TRUST I | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 223 | | | | 7,454 | | | | 7,231 | | | | 202 | | | | 21 | |
| S.GESTORA FONDO PUBL.REGUL.MERCADO HIPOTECARIO, S.A. | | SPAIN | | FINANCIAL SERV. | | | 77.20 | | | | — | | | | 77.20 | | | | 138 | | | | 213 | | | | 67 | | | | 148 | | | | (2 | ) |
| SCALDIS FINANCE, S.A. | | BELGICA | | PORTFOLIO | | | — | | | | 100.00 | | | | 100.00 | | | | 3,416 | | | | 3,661 | | | | 141 | | | | 3,513 | | | | 7 | |
| SEGUROS BANCOMER, S.A. DE C.V. | | MEXICO | | INSURANCES | | | 24.99 | | | | 75.01 | | | | 100.00 | | | | 301,667 | | | | 1,465,656 | | | | 1,264,620 | | | | 63,865 | | | | 137,171 | |
| SEGUROS PROVINCIAL, C.A | | VENEZUELA | | INSURANCES | | | — | | | | 100.00 | | | | 100.00 | | | | 22,347 | | | | 44,857 | | | | 22,502 | | | | 8,957 | | | | 13,398 | |
| SERVICIOS CORPORATIVOS BANCOMER, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 90 | | | | 3,161 | | | | 3,072 | | | | 23 | | | | 66 | |
II-11
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | %of Voting Rights
| | | | | | | |
| | | | | | | controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | for the
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of Euros (*) | |
| |
| SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 438 | | | | 3,814 | | | | 3,374 | | | | 129 | | | | 311 | |
| SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 2,310 | | | | 4,423 | | | | 2,113 | | | | 1,685 | | | | 625 | |
| SERVICIOS TECNOLOGICOS SINGULARES, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 103 | | | | 10,637 | | | | 10,835 | | | | 103 | | | | (301 | ) |
| SMARTSPREAD LIMITED (UK) | | UNITED KINGDOM | | SERVICES | | | — | | | | 63.52 | | | | 63.52 | | | | — | | | | 1 | | | | — | | | | 1 | | | | — | |
| SOCIEDAD DE ESTUDIOS Y ANALISIS FINANC.,S.A. | | SPAIN | | COMERCIAL | | | 100.00 | | | | — | | | | 100.00 | | | | 114,518 | | | | 195,905 | | | | 1,438 | | | | 190,950 | | | | 3,517 | |
| SOCIETE INMOBILIERE BBV D’ILBARRIZ | | FRANCIA | | REAL STATE | | | — | | | | 100.00 | | | | 100.00 | | | | 1,589 | | | | 1,647 | | | | 45 | | | | 1,590 | | | | 12 | |
| SOUTHEAST TEXAS TITLE COMPANY | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 699 | | | | 938 | | | | 237 | | | | 861 | | | | (160 | ) |
| SPORT CLUB 18, S.A. | | SPAIN | | PORTFOLIO | | | 100.00 | | | | — | | | | 100.00 | | | | 21,923 | | | | 37,451 | | | | 15,662 | | | | 22,237 | | | | (448 | ) |
| ST. JOHNS INVESTMENTS MANAGMENT CO. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 3,653 | | | | 3,816 | | | | 163 | | | | 3,565 | | | | 88 | |
| STATE NATIONAL CAPITAL TRUST I | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 338 | | | | 11,117 | | | | 10,778 | | | | 317 | | | | 22 | |
| STATE NATIONAL PROPERTIES LLC | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 13 | | | | 14 | | | | 1 | | | | 16 | | | | (3 | ) |
| STATE NATIONAL STATUTORY TRUST II | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 223 | | | | 7,423 | | | | 7,199 | | | | 211 | | | | 13 | |
| STAVIS MARGOLIS ADVISORY SERVICES, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 20,363 | | | | 21,152 | | | | 791 | | | | 19,393 | | | | 968 | |
| TARUS, INC. | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| TEXAS LOAN SERVICES, LP. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 842,681 | | | | 843,680 | | | | 1,001 | | | | 827,050 | | | | 15,629 | |
| TEXAS REGIONAL STATUTORY TRUST I | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 1,114 | | | | 37,117 | | | | 36,001 | | | | 1,051 | | | | 65 | |
| TEXASBANC CAPITAL TRUST I | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 563 | | | | 18,751 | | | | 18,189 | | | | 530 | | | | 32 | |
| TRANSITORY CO. | | PANAMA | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | 135 | | | | 2,674 | | | | 2,524 | | | | 155 | | | | (5 | ) |
| TSB PROPERTIES, INC. | | UNITED STATES | | REAL ESTATE INSTR. | | | — | | | | 100.00 | | | | 100.00 | | | | (1,419 | ) | | | 762 | | | | 2,181 | | | | (1,419 | ) | | | — | |
| TUCSON LOAN HOLDINGS, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 553,469 | | | | 553,549 | | | | 80 | | | | 524,864 | | | | 28,605 | |
| TWOENC, INC. | | UNITED STATES | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | (357 | ) | | | 299 | | | | 655 | | | | (356 | ) | | | — | |
| UNICOM TELECOMUNICACIONES S.DE R.L. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 99.98 | | | | 99.98 | | | | 1 | | | | 2 | | | | 2 | | | | (12 | ) | | | 12 | |
| UNIDAD DE AVALUOS MEXICO S.A. DE C.V. | | MEXICO | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | 1,163 | | | | 1,593 | | | | 733 | | | | 649 | | | | 211 | |
| UNITARIA GESTION DE PATRIMONIOS INMOBILIARIOS, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 2,410 | | | | 2,634 | | | | 33 | | | | 2,525 | | | | 76 | |
| UNIVERSALIDAD “E5” | | COLOMBIA | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 3,645 | | | | 3,644 | | | | 1 | | | | — | |
| UNIVERSALIDAD — BANCO GRANAHORRAR | | COLOMBIA | | FINANCIAL SERV. | | | — | | | | 100.00 | | | | 100.00 | | | | — | | | | 5,464 | | | | 5,805 | | | | (2,277 | ) | | | 1,936 | |
| UNO-E BANK, S.A. | | SPAIN | | BANKING | | | 67.35 | | | | 32.65 | | | | 100.00 | | | | 174,751 | | | | 1,296,768 | | | | 1,167,220 | | | | 142,336 | | | | (12,788 | ) |
| URBANIZADORA SANT LLORENC, S.A. | | SPAIN | | NO ACTIVITY | | | 60.60 | | | | — | | | | 60.60 | | | | — | | | | 108 | | | | — | | | | 108 | | | | — | |
| VALANZA CAPITAL RIESGO S.G.E.C.R. S.A. UNIPERSONAL | | SPAIN | | VENTURE CAPITAL | | | 100.00 | | | | — | | | | 100.00 | | | | 1,200 | | | | 8,863 | | | | 1,692 | | | | 3,662 | | | | 3,509 | |
| VALLEY MORTGAGE COMPANY, INC. | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
II-12
APPENDIX II
ADDITIONAL INFORMATION ON CONSOLIDATED SUBSIDIARIES
COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of voting rights
| | | | | | | |
| | | | | | | controlled by the bank | | | | | | Investee data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (Loss)
| |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | for the
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Period Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of Euros (*) | |
| |
| VIRTUAL DOC, S.L. | | SPAIN | | SERVICES | | | — | | | | 70.00 | | | | 70.00 | | | | 467 | | | | 618 | | | | 114 | | | | 667 | | | | (163 | ) |
| VISACOM, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.00 | | | | 100.00 | | | | 860 | | | | 860 | | | | 1 | | | | 221 | | | | 638 | |
| WESTERN BANCSHARES OF ALBUQUERQUE, INC. | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| WESTERN MANAGEMENT CORPORATION | | UNITED STATES | | NO ACTIVITY | | | — | | | | 100.00 | | | | 100.00 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | Profit
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | (Loss)
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | |
| | | | | | | | | | | | | | | | Thousands of euros(*) | |
| |
| ADMINISTRADORA DE FONDOS DE PENSIONES (AFP) PROVIDA, S.A. | | CHILE | | PENSION FUNDS MANAGEMENT | | | 12.7 | | | | 51.6 | | | | 64.3 | | | | 299,781 | | | | 604,814 | | | | 133,974 | | | | 336,179 | | | | 134,661 | |
| ADMINISTRADORA DE FONDOS PARA EL RETIRO-BANCOMER, S.A DE C.V. | | MEXICO | | PENSION FUNDS MANAGEMENT | | | 17.5 | | | | 82.5 | | | | 100.0 | | | | 378,280 | | | | 253,580 | | | | 57,106 | | | | 121,296 | | | | 75,178 | |
| AFP GENESIS ADMINISTRADORA DE FONDOS Y FIDEICOMISOS, S.A. | | ECUADOR | | PENSION FUNDS MANAGEMENT | | | — | | | | 100.0 | | | | 100.0 | | | | 5,705 | | | | 9,911 | | | | 4,191 | | | | 1,251 | | | | 4,469 | |
| AFP HORIZONTE, S.A. | | PERU | | PENSION FUNDS MANAGEMENT | | | 24.9 | | | | 75.2 | | | | 100.0 | | | | 57,956 | | | | 93,038 | | | | 23,097 | | | | 53,875 | | | | 16,066 | |
| AFP PREVISION BBV-ADM.DE FONDOS DE PENSIONES S.A. | | BOLIVIA | | PENSION FUNDS MANAGEMENT | | | 75.0 | | | | 5.0 | | | | 80.0 | | | | 2,063 | | | | 9,634 | | | | 4,263 | | | | 3,942 | | | | 1,429 | |
| AMERICAN FINANCE GROUP, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 15,599 | | | | 16,529 | | | | 930 | | | | 14,370 | | | | 1,229 | |
| ANIDA DESARROLLOS INMOBILIARIOS, S.L. | | SPAIN | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 264,143 | | | | 570,278 | | | | 350,002 | | | | 244,826 | | | | (24,550 | ) |
| ANIDA DESARROLLOS SINGULARES, S.L. | | SPAIN | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | (485,076 | ) | | | 1,613,790 | | | | 2,134,176 | | | | (293,829 | ) | | | (226,557 | ) |
| ANIDA GERMANIA IMMOBILIEN ONE, GMBH | | GERMANY | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 4,358 | | | | 20,130 | | | | 15,566 | | | | 4,289 | | | | 275 | |
| ANIDA GRUPO INMOBILIARIO, S.L | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | — | | | | 186,112 | | | | 596,399 | | | | (42,568 | ) | | | (367,719 | ) |
| ANIDA INMOBILIARIA, S.A. DE C.V. | | MEXICO | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 106,704 | | | | 98,004 | | | | 9 | | | | 97,847 | | | | 148 | |
| ANIDA INMUEBLES ESPAÑA Y PORTUGAL, S.L. | | SPAIN | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | (11,543 | ) | | | 333,936 | | | | 385,249 | | | | (7,631 | ) | | | (43,682 | ) |
| ANIDA OPERACIONES SINGULARES, S.L | | SPAIN | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | (436,849 | ) | | | 2,152,664 | | | | 2,644,200 | | | | (293,202 | ) | | | (198,334 | ) |
| ANIDA PROYECTOS INMOBILIARIOS, S.A. DE C.V. | | MEXICO | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 97,027 | | | | 143,976 | | | | 46,949 | | | | 97,016 | | | | 11 | |
| ANIDA SERVICIOS INMOBILIARIOS, S.A. DE C.V. | | MEXICO | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 499 | | | | 919 | | | | 420 | | | | 349 | | | | 150 | |
| ANIDAPORT INVESTIMENTOS IMOBILIARIOS, UNIPESSOAL, LTDA | | PORTUGAL | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 21,948 | | | | 24,040 | | | | (1,207 | ) | | | (885 | ) |
| APLICA SOLUCIONES ARGENTINAS, S.A. | | ARGENTINA | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,399 | | | | 1,604 | | | | 122 | | | | 1,546 | | | | (64 | ) |
| APLICA SOLUCIONES TECNOLOGICAS CHILE LIMITADA | | CHILE | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | (76 | ) | | | 431 | | | | 506 | | | | 3 | | | | (78 | ) |
| APLICA TECNOLOGIA AVANZADA OPERADORA, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 3 | | | | 3 | | | | — | | | | 3 | | | | — | |
| APLICA TECNOLOGIA AVANZADA SERVICIOS, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 3 | | | | 3 | | | | — | | | | 3 | | | | — | |
| APLICA TECNOLOGIA AVANZADA, S.A. DE C.V.- ATA | | MEXICO | | SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 4 | | | | 60,114 | | | | 46,651 | | | | 7,129 | | | | 6,334 | |
| APOYO MERCANTIL S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 2,115 | | | | 268,134 | | | | 267,388 | | | | 1,122 | | | | (376 | ) |
| ARIZONA FINANCIAL PRODUCTS, INC | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 718,853 | | | | 721,440 | | | | 2,586 | | | | 705,529 | | | | 13,325 | |
| AUTOMERCANTIL-COMERCIO E ALUGER DE VEICULOS AUTOM.,LDA | | PORTUGAL | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 4,720 | | | | 45,950 | | | | 37,434 | | | | 8,795 | | | | (279 | ) |
| BAHIA SUR RESORT, S.C | | SPAIN | | INACTIVE | | | 100.0 | | | | — | | | | 100.0 | | | | 1,436 | | | | 1,438 | | | | 15 | | | | 1,423 | | | | — | |
| BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A. | | PANAMA | | BANKING | | | 54.1 | | | | 44.8 | | | | 98.9 | | | | 19,464 | | | | 1,585,516 | | | | 1,379,245 | | | | 174,908 | | | | 31,363 | |
| BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL), S.A. | | PORTUGAL | | BANKING | | | 9.5 | | | | 90.5 | | | | 100.0 | | | | 338,916 | | | | 8,094,054 | | | | 7,801,158 | | | | 301,751 | | | | (8,855 | ) |
| BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A. | | CHILE | | BANKING | | | — | | | | 68.2 | | | | 68.2 | | | | 543,201 | | | | 11,637,734 | | | | 10,840,980 | | | | 725,374 | | | | 71,380 | |
| BANCO BILBAO VIZCAYA ARGENTARIA PUERTO RICO, S.A. | | PUERTO RICO | | BANKING | | | — | | | | 100.0 | | | | 100.0 | | | | 178,673 | | | | 3,614,532 | | | | 3,205,830 | | | | 403,714 | | | | 4,988 | |
| BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY, S.A. | | URUGUAY | | BANKING | | | 100.0 | | | | — | | | | 100.0 | | | | 17,049 | | | | 754,090 | | | | 697,780 | | | | 58,543 | | | | (2,233 | ) |
| BANCO CONTINENTAL, S.A.(1) | | PERU | | BANKING | | | — | | | | 92.2 | | | | 92.2 | | | | 835,381 | | | | 10,077,559 | | | | 9,175,857 | | | | 632,731 | | | | 268,971 | |
| BANCO DE PROMOCION DE NEGOCIOS, S.A. | | SPAIN | | BANKING | | | — | | | | 99.8 | | | | 99.8 | | | | 15,165 | | | | 32,901 | | | | 172 | | | | 32,561 | | | | 168 | |
| BANCO DEPOSITARIO BBVA, S.A. | | SPAIN | | BANKING | | | — | | | | 100.0 | | | | 100.0 | | | | 1,595 | | | | 986,755 | | | | 906,042 | | | | 56,174 | | | | 24,539 | |
| BANCO INDUSTRIAL DE BILBAO, S.A. | | SPAIN | | BANKING | | | — | | | | 99.9 | | | | 99.9 | | | | 97,220 | | | | 212,691 | | | | 1,120 | | | | 191,414 | | | | 20,157 | |
| BANCO OCCIDENTAL, S.A. | | SPAIN | | BANKING | | | 49.4 | | | | 50.6 | | | | 100.0 | | | | 16,464 | | | | 18,014 | | | | 272 | | | | 17,576 | | | | 166 | |
| BANCO PROVINCIAL OVERSEAS N.V.(2) | | NETHERLANDS ANTILLES | | BANKING | | | — | | | | 100.0 | | | | 100.0 | | | | 35,236 | | | | 424,812 | | | | 388,592 | | | | 25,019 | | | | 11,201 | |
| BANCO PROVINCIAL S.A. — BANCO UNIVERSAL | | VENEZUELA | | BANKING | | | 1.9 | | | | 53.8 | | | | 55.6 | | | | 159,952 | | | | 8,492,775 | | | | 7,587,925 | | | | 792,625 | | | | 112,225 | |
| BANCOMER FINANCIAL SERVICES INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,930 | | | | 778 | | | | (1,152 | ) | | | 1,922 | | | | 8 | |
| BANCOMER FOREIGN EXCHANGE INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 7,412 | | | | 8,593 | | | | 1,181 | | | | 5,945 | | | | 1,467 | |
| BANCOMER PAYMENT SERVICES INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 34 | | | | 22 | | | | (11 | ) | | | 37 | | | | (4 | ) |
| | |
| (*) | | Information on foreign companies at exchange rate on12-31-08 December 31, 2010 |
|
| (1) | | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 46.1%. |
|
| (2) | | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 48.0%. |
II-13II-1
APPENDIX III. BBVA Group’s securitization funds
| | | | | | | | | | | | | | | |
| | | | | | | | Total Securitized
| | | Securitized
| |
| | | | | Origination Date
| | | Exposures at the
| | | Exposures
| |
Securitization | | COMPANY | | (month/year) | | | Origination Date | | | Total | |
| | | | | | | | | | | (Thousand of euros) | |
| |
| BBVA AUTOS I FTA | | BBVA, S.A. | | | 10/2004 | | | | 1,000,000 | | | | 347,929 | |
| BBVA-3 FTPYME FTA | | BBVA, S.A. | | | 11/2004 | | | | 1,000,000 | | | | 246,486 | |
| BBVA HIPOTECARIO 3 FTA | | BBVA, S.A. | | | 06/2005 | | | | 1,450,000 | | | | 626,210 | |
| BBVA-4 PYME FTA | | BBVA, S.A. | | | 09/2005 | | | | 1,250,000 | | | | 338,192 | |
| BBVA AUTOS 2 FTA | | BBVA, S.A. | | | 12/2005 | | | | 1,000,000 | | | | 680,709 | |
| GAT FTGENCAT 2005 FTA | | BBVA, S.A. | | | 12/2005 | | | | 700,000 | | | | 92,139 | |
| BBVA CONSUMO 1 FTA | | BBVA, S.A. | | | 05/2006 | | | | 1,500,000 | | | | 1,116,144 | |
| BBVA-5 FTPYME FTA | | BBVA, S.A. | | | 10/2006 | | | | 1,900,000 | | | | 949,701 | |
| BBVA CONSUMO 2 FTA | | BBVA, S.A. | | | 11/2006 | | | | 1,500,000 | | | | 1,366,022 | |
| BBVA RMBS 1 FTA | | BBVA, S.A. | | | 02/2007 | | | | 2,500,000 | | | | 2,070,860 | |
| BBVA RMBS 2 FTA | | BBVA, S.A. | | | 03/2007 | | | | 5,000,000 | | | | 4,142,290 | |
| BBVA LEASING 1 FTA | | BBVA, S.A. | | | 06/2007 | | | | 2,500,000 | | | | 2,311,172 | |
| BBVA-6 FTPYME FTA | | BBVA, S.A. | | | 06/2007 | | | | 1,500,000 | | | | 958,144 | |
| BBVA RMBS 3 FTA | | BBVA, S.A. | | | 07/2007 | | | | 3,000,000 | | | | 2,720,745 | |
| BBVA EMPRESAS 1 FTA | | BBVA, S.A. | | | 11/2007 | | | | 1,450,000 | | | | 981,441 | |
| BBVA RMBS 4 FTA | | BBVA, S.A. | | | 11/2007 | | | | 4,900,000 | | | | 4,352,863 | |
| BBVA-7 FTGENCAT FTA | | BBVA, S.A. | | | 02/2008 | | | | 250,000 | | | | 193,353 | |
| BBVA CONSUMO 3 FTA | | BBVA, S.A. | | | 04/2008 | | | | 975,000 | | | | 314,168 | |
| BBVA RMBS 5 FTA | | BBVA, S.A. | | | 05/2008 | | | | 5,000,000 | | | | 4,810,142 | |
| BBVA-8 FTPYME FTA | | BBVA, S.A. | | | 07/2008 | | | | 1,100,000 | | | | 989,947 | |
| BBVA RMBS 6 FTA | | BBVA, S.A. | | | 11/2008 | | | | 4,995,000 | | | | 4,935,419 | |
| BBVA RMBS 7 FTA | | BBVA, S.A. | | | 11/2008 | | | | 8,500,000 | | | | 8,367,252 | |
| PEP80040F110 | | BBVA BANCO CONTINENTAL | | | 12/2007 | | | | 17,964 | | | | 14,305 | |
| BBVA-FINANZIA AUTOS 1 FTA | | FINANZIA BANCO DE CREDITO, S.A. | | | 04/2007 | | | | 800,000 | | | | 661,284 | |
| BBVA CONSUMO 3 FTA | | FINANZIA BANCO DE CREDITO, S.A. | | | 04/2008 | | | | 975,000 | | | | 632,517 | |
| 2 PS Interamericana | | BBVA CHILE | | | 09/2004 | | | | 14,506 | | | | 12,925 | |
| 2 PS Interamericana | | BBVA SDAD. LEASING HABITACIONAL BHIF | | | 09/2004 | | | | 9,755 | | | | 8,692 | |
| 11 PS BICE | | FORUM SERVICIOS FINANCIEROS (*) | | | 03/2005 | | | | 25,657 | | | | 19,152 | |
| 11 PS Banchile | | FORUM SERVICIOS FINANCIEROS (*) | | | 09/2005 | | | | 10,743 | | | | 9,904 | |
| 23 PS BICE | | FORUM SERVICIOS FINANCIEROS (*) | | | 02/2006 | | | | 9,784 | | | | 9,397 | |
| 4 PS Itau | | FORUM SERVICIOS FINANCIEROS (*) | | | 09/2006 | | | | 9,802 | | | | 9,558 | |
| FannieMae- Lender No. 227300000 | | COMPASS BANK | | | 12/2001 | | | | 176,774 | | | | 28,833 | |
| Home Equity — 2003-HE1 | | COMPASS BANK | | | 05/2003 | | | | 542,092 | | | | 66,187 | |
| Fannie Mae — Lender No. 227300027 | | COMPASS BANK | | | 12/2003 | | | | 268,215 | | | | 117,794 | |
| Mortgages — LLC 2004-R1 | | COMPASS BANK | | | 03/2004 | | | | 424,636 | | | | 132,088 | |
| | | | | | | | | | 56,254,927 | | | | 44,633,962 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | Profit
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | (Loss)
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | |
| | | | | | | | | | | | | | | | Thousands of euros(*) | |
| |
| BANCOMER TRANSFER SERVICES, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 27,707 | | | | 71,644 | | | | 43,936 | | | | 18,342 | | | | 9,366 | |
| BBV AMERICA, S.L. | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 479,328 | | | | 880,779 | | | | 21 | | | | 880,228 | | | | 530 | |
| BBVA & PARTNERS ALTERNATIVE INVESTMENT A.V., S.A. | | SPAIN | | SECURITIES DEALER | | | 70.0 | | | | — | | | | 70.0 | | | | 1,331 | | | | 9,880 | | | | 2,239 | | | | 6,463 | | | | 1,178 | |
| BBVA ASESORIAS FINANCIERAS, S.A. | | CHILE | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 3,990 | | | | 5,374 | | | | 1,385 | | | | 1,174 | | | | 2,815 | |
| BBVA ASSET MANAGEMENT (IRELAND) LIMITED | | IRELAND | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 245 | | | | 270 | | | | 34 | | | | 311 | | | | (75 | ) |
| BBVA ASSET MANAGEMENT ADMINISTRADORA GENERAL DE FONDOS S.A. | | CHILE | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 15,821 | | | | 18,002 | | | | 2,181 | | | | 9,875 | | | | 5,946 | |
| BBVA ASSET MANAGEMENT, S.A., SGIIC | | SPAIN | | FINANCIAL SERVICES | | | 17.0 | | | | 83.0 | | | | 100.0 | | | | 11,436 | | | | 152,334 | | | | 69,240 | | | | 57,373 | | | | 25,721 | |
| BBVA AUTORENTING SPA | | ITALY | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 66,793 | | | | 314,830 | | | | 281,221 | | | | 30,091 | | | | 3,518 | |
| BBVA BANCO DE FINANCIACION S.A. | | SPAIN | | BANKING | | | — | | | | 100.0 | | | | 100.0 | | | | 64,200 | | | | 703,047 | | | | 630,388 | | | | 72,438 | | | | 221 | |
| BBVA BANCO FRANCES, S.A. | | ARGENTINA | | BANKING | | | 45.7 | | | | 30.4 | | | | 76.0 | | | | 64,589 | | | | 5,249,989 | | | | 4,563,209 | | | | 459,362 | | | | 227,418 | |
| BBVA BANCOMER FINANCIAL HOLDINGS, INC. | | UNITED STATES | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 48,091 | | | | 42,900 | | | | (5,324 | ) | | | 37,394 | | | | 10,830 | |
| BBVA BANCOMER GESTION, S.A. DE C.V. | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 30,613 | | | | 54,585 | | | | 23,972 | | | | 12,548 | | | | 18,065 | |
| BBVA BANCOMER OPERADORA, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 41,407 | | | | 304,008 | | | | 262,600 | | | | 30,568 | | | | 10,840 | |
| BBVA BANCOMER SERVICIOS ADMINISTRATIVOS, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 534 | | | | 24,503 | | | | 23,969 | | | | 394 | | | | 140 | |
| BBVA BANCOMER, S.A. DE C.V. | | MEXICO | | BANKING | | | — | | | | 100.0 | | | | 100.0 | | | | 6,561,797 | | | | 69,666,830 | | | | 63,107,804 | | | | 5,212,420 | | | | 1,346,606 | |
| BBVA BRASIL BANCO DE INVESTIMENTO, S.A. | | BRASIL | | BANKING | | | 100.0 | | | | — | | | | 100.0 | | | | 16,166 | | | | 47,756 | | | | 6,722 | | | | 39,060 | | | | 1,974 | |
| BBVA BROKER, CORREDURIA DE SEGUROS Y REASEGUROS, S.A. (Ex-BBVA CORREDURIA TECNICA ASEGURADORA, S.A.) | | SPAIN | | FINANCIAL SERVICES | | | 99.9 | | | | 0.1 | | | | 100.0 | | | | 297 | | | | 35,016 | | | | 3,907 | | | | 25,730 | | | | 5,379 | |
| BBVA CAPITAL FINANCE, S.A. | | SPAIN | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 60 | | | | 2,983,028 | | | | 2,982,710 | | | | 267 | | | | 51 | |
| BBVA CARTERA DE INVERSIONES,SICAV,S.A. | | SPAIN | | VARIABLE CAPITAL | | | 100.0 | | | | — | | | | 100.0 | | | | 118,444 | | | | 120,093 | | | | 121 | | | | 118,880 | | | | 1,092 | |
| BBVA COLOMBIA, S.A. | | COLOMBIA | | BANKING | | | 76.2 | | | | 19.2 | | | | 95.4 | | | | 265,416 | | | | 8,634,332 | | | | 7,753,127 | | | | 714,310 | | | | 166,895 | |
| BBVA COMERCIALIZADORA LTDA. | | CHILE | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | (1,154 | ) | | | 3,050 | | | | 4,205 | | | | (710 | ) | | | (445 | ) |
| BBVA COMPASS CONSULTING & BENEFITS, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 13,449 | | | | 13,723 | | | | 275 | | | | 13,143 | | | | 305 | |
| BBVA COMPASS INSURANCE AGENCY, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 146,614 | | | | 155,943 | | | | 9,328 | | | | 140,493 | | | | 6,122 | |
| BBVA COMPASS INVESTMENT SOLUTIONS, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 51,158 | | | | 56,021 | | | | 4,862 | | | | 40,773 | | | | 10,386 | |
| BBVA CONSOLIDAR SEGUROS, S.A. | | ARGENTINA | | INSURANCES SERVICES | | | 87.8 | | | | 12.2 | | | | 100.0 | | | | 6,496 | | | | 48,124 | | | | 29,304 | | | | 17,334 | | | | 1,486 | |
| BBVA CONSULTING ( BEIJING) LIMITED | | CHINA | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 477 | | | | 683 | | | | 182 | | | | 440 | | | | 61 | |
| BBVA CONSULTORIA, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 2,227 | | | | 4,257 | | | | 707 | | | | 2,933 | | | | 617 | |
| BBVA CORREDORA TECNICA DE SEGUROS LIMITADA | | CHILE | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 13,377 | | | | 15,902 | | | | 2,501 | | | | 7,075 | | | | 6,326 | |
| BBVA CORREDORES DE BOLSA LIMITADA | | CHILE | | SECURITIES DEALER | | | — | | | | 100.0 | | | | 100.0 | | | | 48,415 | | | | 573,180 | | | | 524,768 | | | | 41,467 | | | | 6,945 | |
| BBVA DINERO EXPRESS, S.A.U | | SPAIN | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | �� | 2,186 | | | | 14,524 | | | | 9,298 | | | | 4,820 | | | | 406 | |
| BBVA FACTORING LIMITADA (CHILE) | | CHILE | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 6,765 | | | | 31,974 | | | | 25,207 | | | | 5,443 | | | | 1,324 | |
| BBVA FIDUCIARI1A, S.A. | | COLOMBIA | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 23,453 | | | | 26,094 | | | | 2,614 | | | | 17,487 | | | | 5,993 | |
| BBVA FINANCE (UK), LTD. | | UNITED KINGDOM | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 3,324 | | | | 24,867 | | | | 13,603 | | | | 11,198 | | | | 66 | |
| BBVA FINANCE SPA. | | ITALY | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 4,648 | | | | 6,860 | | | | 1,332 | | | | 5,398 | | | | 130 | |
| BBVA FINANCIAMIENTO AUTOMOTRIZ, S.A. | | CHILE | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 145,494 | | | | 145,529 | | | | 35 | | | | 120,467 | | | | 25,027 | |
| BBVA FINANZIA, S.p.A | | ITALY | | FINANCIAL SERVICES | | | 50.0 | | | | 50.0 | | | | 100.0 | | | | 29,200 | | | | 600,187 | | | | 573,633 | | | | 38,061 | | | | (11,507 | ) |
| BBVA FUNDOS, S.Gestora Fundos Pensoes, S.A. | | PORTUGAL | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 998 | | | | 8,679 | | | | 445 | | | | 6,448 | | | | 1,786 | |
| BBVA GEST, S.G.DE FUNDOS DE INVESTIMENTO MOBILIARIO, S.A. | | PORTUGAL | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 998 | | | | 7,206 | | | | 120 | | | | 6,834 | | | | 252 | |
| BBVA GLOBAL FINANCE LTD. | | CAYMAN ISLANDS | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | — | | | | 688,846 | | | | 685,142 | | | | 3,776 | | | | (72 | ) |
| BBVA GLOBAL MARKETS B.V. | | NETHERLANDS | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 18 | | | | 256,964 | | | | 256,960 | | | | 17 | | | | (13 | ) |
| | |
| (*) | | Proportionate consolidationInformation on foreign companies at exchange rate on December 31, 2010 |
II-2
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | Profit
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | (Loss)
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | |
| | | | | | | | | | | | | | | | Thousands of euros (*) | |
| |
| BBVA HORIZONTE PENSIONES Y CESANTIAS, S.A. | | COLOMBIA | | PENSION FUNDS MANAGEMENT | | | 78.5 | | | | 21.4 | | | | 100.0 | | | | 62,061 | | | | 162,934 | | | | 35,812 | | | | 102,872 | | | | 24,250 | |
| BBVA INMOBILIARIA E INVERSIONES, S.A. | | CHILE | | REAL ESTATE | | | — | | | | 68.1 | | | | 68.1 | | | | 5,652 | | | | 44,049 | | | | 35,750 | | | | 8,641 | | | | (342 | ) |
| BBVA INSTITUIÇAO FINANCEIRA DE CREDITO, S.A. | | PORTUGAL | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 33,148 | | | | 443,576 | | | | 402,234 | | | | 39,123 | | | | 2,219 | |
| BBVA INTERNATIONAL LIMITED | | CAYMAN ISLANDS | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 1 | | | | 503,692 | | | | 501,107 | | | | 2,751 | | | | (166 | ) |
| BBVA INTERNATIONAL PREFERRED, S.A.U | | SPAIN | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 60 | | | | 1,697,891 | | | | 1,697,121 | | | | 378 | | | | 392 | |
| BBVA INVERSIONES CHILE, S.A. | | CHILE | | FINANCIAL SERVICES | | | 61.2 | | | | 38.8 | | | | 100.0 | | | | 580,584 | | | | 1,254,723 | | | | 2,328 | | | | 1,088,536 | | | | 163,859 | |
| BBVA IRELAND PLC | | IRELAND | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 180,381 | | | | 881,138 | | | | 514,594 | | | | 344,782 | | | | 21,762 | |
| BBVA LEASIMO — SOCIEDADE DE LOCAÇAO FINANCEIRA, S.A. | | PORTUGAL | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 11,576 | | | | 28,620 | | | | 18,456 | | | | 10,422 | | | | (258 | ) |
| BBVA LUXINVEST, S.A. | | LUXEMBOURG | | INVESTMENT COMPANY | | | 36.0 | | | | 64.0 | | | | 100.0 | | | | 255,843 | | | | 1,477,238 | | | | 65,971 | | | | 1,406,909 | | | | 4,358 | |
| BBVA MEDIACION OPERADOR DE BANCA-SEGUROS VINCULADO, S.A. | | SPAIN | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 60 | | | | 85,311 | | | | 73,962 | | | | 5,784 | | | | 5,565 | |
| BBVA NOMINEES LIMITED | | UNITED KINGDOM | | SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | — | | | | 1 | | | | — | | | | 1 | | | | — | |
| BBVA PARAGUAY, S.A. | | PARAGUAY | | BANKING | | | 100.0 | | | | — | | | | 100.0 | | | | 22,598 | | | | 1,121,259 | | | | 1,010,091 | | | | 71,269 | | | | 39,899 | |
| BBVA PATRIMONIOS GESTORA SGIIC, S.A. | | SPAIN | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 3,907 | | | | 28,634 | | | | 3,404 | | | | 20,143 | | | | 5,087 | |
| BBVA PENSIONES, SA, ENTIDAD GESTORA DE FONDOS DE PENSIONES | | SPAIN | | PENSION FUNDS MANAGEMENT | | | 100.0 | | | | — | | | | 100.0 | | | | 12,922 | | | | 72,968 | | | | 34,106 | | | | 25,939 | | | | 12,923 | |
| BBVA PLANIFICACION PATRIMONIAL, S.L. | | SPAIN | | FINANCIAL SERVICES | | | 80.0 | | | | 20.0 | | | | 100.0 | | | | 1 | | | | 502 | | | | 3 | | | | 493 | | | | 6 | |
| BBVA PROPIEDAD F.I.I | | SPAIN | | REAL ESTATE INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 1,384,561 | | | | 1,469,283 | | | | 74,743 | | | | 1,474,196 | | | | (79,656 | ) |
| BBVA PUERTO RICO HOLDING CORPORATION | | PUERTO RICO | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 322,837 | | | | 179,048 | | | | 6 | | | | 179,107 | | | | (65 | ) |
| BBVA RE LIMITED | | IRELAND | | INSURANCES SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 656 | | | | 67,631 | | | | 39,901 | | | | 22,296 | | | | 5,434 | |
| BBVA RENTING, S.A. | | SPAIN | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 20,976 | | | | 840,056 | | | | 747,739 | | | | 85,809 | | | | 6,508 | |
| BBVA RENTING, SPA | | ITALY | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 8,453 | | | | 56,154 | | | | 50,629 | | | | 7,891 | | | | (2,366 | ) |
| BBVA SECURITIES INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 41,796 | | | | 45,580 | | | | 12,452 | | | | 27,484 | | | | 5,644 | |
| BBVA SECURITIES OF PUERTO RICO, INC. | | PUERTO RICO | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 4,726 | | | | 6,963 | | | | 755 | | | | 6,082 | | | | 126 | |
| BBVA SEGUROS COLOMBIA, S.A. | | COLOMBIA | | INSURANCES SERVICES | | | 94.0 | | | | 6.0 | | | | 100.0 | | | | 9,490 | | | | 42,797 | | | | 27,578 | | | | 14,065 | | | | 1,154 | |
| BBVA SEGUROS DE VIDA COLOMBIA, S.A. | | COLOMBIA | | INSURANCES SERVICES | | | 94.0 | | | | 6.0 | | | | 100.0 | | | | 13,242 | | | | 329,602 | | | | 278,040 | | | | 41,754 | | | | 9,808 | |
| BBVA SEGUROS DE VIDA, S.A. | | CHILE | | INSURANCES SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 56,178 | | | | 397,262 | | | | 341,085 | | | | 45,780 | | | | 10,397 | |
| BBVA SEGUROS INC. | | PUERTO RICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 187 | | | | 5,459 | | | | 629 | | | | 3,895 | | | | 935 | |
| BBVA SEGUROS, S.A., DE SEGUROS Y REASEGUROS | | SPAIN | | INSURANCES SERVICES | | | 94.3 | | | | 5.7 | | | | 100.0 | | | | 414,659 | | | | 10,913,118 | | | | 10,164,287 | | | | 508,373 | | | | 240,458 | |
| BBVA SENIOR FINANCE, S.A.U | | SPAIN | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 60 | | | | 15,154,181 | | | | 15,153,452 | | | | 346 | | | | 383 | |
| BBVA SERVICIOS CORPORATIVOS LIMITADA | | CHILE | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,297 | | | | 10,949 | | | | 9,648 | | | | (1,968 | ) | | | 3,269 | |
| BBVA SERVICIOS, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 354 | | | | 10,791 | | | | 1,189 | | | | 7,031 | | | | 2,571 | |
| BBVA SOCIEDAD DE LEASING INMOBILIARIO, S.A. | | CHILE | | FINANCIAL SERVICES | | | — | | | | 97.5 | | | | 97.5 | | | | 15,901 | | | | 64,945 | | | | 48,633 | | | | 14,795 | | | | 1,517 | |
| BBVA SUBORDINATED CAPITAL S.A.U | | SPAIN | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 130 | | | | 3,434,727 | | | | 3,434,217 | | | | 403 | | | | 107 | |
| BBVA SUIZA, S.A. (BBVA SWITZERLAND) | | SWITZERLAND | | BANKING | | | 39.7 | | | | 60.3 | | | | 100.0 | | | | 58,107 | | | | 1,406,692 | | | | 1,008,595 | | | | 377,797 | | | | 20,300 | |
| BBVA TRADE, S.A. | | SPAIN | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 6,379 | | | | 21,274 | | | | 11,035 | | | | 8,171 | | | | 2,068 | |
| BBVA U.S. SENIOR S.A.U. | | SPAIN | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 169 | | | | 898,687 | | | | 898,650 | | | | 138 | | | | (101 | ) |
| BBVA USA BANCSHARES, INC. | | UNITED STATES | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 9,268,740 | | | | 9,106,626 | | | | 7,897 | | | | 9,355,563 | | | | (256,834 | ) |
| BBVA VALORES COLOMBIA, S.A. COMISIONISTA DE BOLSA | | COLOMBIA | | SECURITIES DEALER | | | — | | | | 100.0 | | | | 100.0 | | | | 4,747 | | | | 9,330 | | | | 4,583 | | | | 3,581 | | | | 1,166 | |
| BBVA WEALTH SOLUTIONS, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 25,398 | | | | 25,990 | | | | 591 | | | | 25,269 | | | | 130 | |
| BCL INTERNATIONAL FINANCE. LTD. | | CAYMAN ISLANDS | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | — | | | | 4 | | | | 4 | | | | (5 | ) | | | 5 | |
| BILBAO VIZCAYA AMERICA B.V. | | NETHERLANDS | | INIVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 746,000 | | | | 629,416 | | | | 22 | | | | 608,766 | | | | 20,628 | |
| | |
| (*) | | Information on foreign companies at exchange rate on December 31, 2010 |
II-3
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | Profit
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | (Loss)
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | |
| | | | | | | | | | | | | | | | Thousands of euros (*) | |
| |
| BILBAO VIZCAYA HOLDING, S.A. | | SPAIN | | INVESTMENT COMPANY | | | 89.0 | | | | 11.0 | | | | 100.0 | | | | 34,771 | | | | 251,089 | | | | 21,027 | | | | 223,504 | | | | 6,558 | |
| BLUE INDICO INVESTMENTS, S.L. | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 49,106 | | | | 55,957 | | | | 207 | | | | 60,897 | | | | (5,147 | ) |
| C B TRANSPORT ,INC. | | UNITED STATES | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 12,427 | | | | 13,622 | | | | 1,195 | | | | 12,803 | | | | (376 | ) |
| CAPITAL INVESTMENT COUNSEL, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 22,807 | | | | 24,088 | | | | 1,280 | | | | 21,037 | | | | 1,771 | |
| CARTERA E INVERSIONES S.A., CIA DE | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 92,016 | | | | 253,247 | | | | 48,030 | | | | 201,140 | | | | 4,077 | |
| CASA DE BOLSA BBVA BANCOMER , S.A. DE C.V. | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 77,423 | | | | 99,183 | | | | 21,758 | | | | 47,743 | | | | 29,682 | |
| CASA DE CAMBIO MULTIDIVISAS, SA DE CV | | MEXICO | | IN LIQUIDATION | | | — | | | | 100.0 | | | | 100.0 | | | | 171 | | | | 170 | | | | — | | | | 169 | | | | 1 | |
| CIA. GLOBAL DE MANDATOS Y REPRESENTACIONES, S.A. | | URUGUAY | | IN LIQUIDATION | | | — | | | | 100.0 | | | | 100.0 | | | | 108 | | | | 187 | | | | 2 | | | | 185 | | | | — | |
| CIDESSA DOS, S.L. | | SPAIN | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 12,062 | | | | 12,183 | | | | 117 | | | | 12,047 | | | | 19 | |
| CIDESSA UNO, S.L. | | SPAIN | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 4,754 | | | | 898,460 | | | | 22,374 | | | | 994,155 | | | | (118,069 | ) |
| CIERVANA, S.L. | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 53,164 | | | | 70,156 | | | | 3,232 | | | | 66,879 | | | | 45 | |
| COMERCIALIZADORA CORPORATIVA SAC(1) | | PERU | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 449 | | | | 1,050 | | | | 601 | | | | 142 | | | | 307 | |
| COMERCIALIZADORA DE SERVICIOS FINANCIEROS, S.A. | | COLOMBIA | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 587 | | | | 1,738 | | | | 752 | | | | 680 | | | | 306 | |
| COMPASS ASSET ACCEPTANCE COMPANY, LLC | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 363,575 | | | | 363,575 | | | | — | | | | 362,726 | | | | 849 | |
| COMPASS AUTO RECEIVABLES CORPORATION | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 3,125 | | | | 3,125 | | | | — | | | | 3,127 | | | | (2 | ) |
| COMPASS BANCSHARES, INC. | | UNITED STATES | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 9,083,594 | | | | 9,178,765 | | | | 95,174 | | | | 9,339,985 | | | | (256,394 | ) |
| COMPASS BANK | | UNITED STATES | | BANKING | | | — | | | | 100.0 | | | | 100.0 | | | | 9,049,899 | | | | 51,111,008 | | | | 42,061,111 | | | | 9,289,908 | | | | (240,011 | ) |
| COMPASS CAPITAL MARKETS, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 5,626,344 | | | | 5,626,344 | | | | — | | | | 5,509,976 | | | | 116,368 | |
| COMPASS CUSTODIAL SERVICES, INC. | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPASS FINANCIAL CORPORATION | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 6,886 | | | | 53,984 | | | | 47,099 | | | | 6,824 | | | | 61 | |
| COMPASS GP, INC. | | UNITED STATES | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 34,802 | | | | 43,807 | | | | 9,005 | | | | 34,272 | | | | 530 | |
| COMPASS INVESTMENTS, INC. | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPASS LIMITED PARTNER, INC. | | UNITED STATES | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 4,872,688 | | | | 4,873,129 | | | | 440 | | | | 4,770,173 | | | | 102,516 | |
| COMPASS LOAN HOLDINGS TRS, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 58,163 | | | | 60,101 | | | | 1,938 | | | | 58,118 | | | | 45 | |
| COMPASS MORTGAGE CORPORATION | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,938,209 | | | | 1,938,459 | | | | 249 | | | | 1,924,839 | | | | 13,371 | |
| COMPASS MORTGAGE FINANCING, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 26 | | | | 26 | | | | — | | | | 26 | | | | — | |
| COMPASS MULTISTATE SERVICES CORPORATION | | UNITED STATES | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 2,807 | | | | 2,862 | | | | 55 | | | | 2,807 | | | | — | |
| COMPASS SOUTHWEST, LP | | UNITED STATES | | BANKING | | | — | | | | 100.0 | | | | 100.0 | | | | 4,008,054 | | | | 4,008,406 | | | | 351 | | | | 3,916,928 | | | | 91,127 | |
| COMPASS TEXAS ACQUISITION CORPORATION | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1,694 | | | | 1,711 | | | | 17 | | | | 1,693 | | | | 1 | |
| COMPASS TEXAS MORTGAGE FINANCING, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 26 | | | | 26 | | | | — | | | | 26 | | | | — | |
| COMPASS TRUST II | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPASS WEALTH MANAGERS COMPANY | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| COMPAÑIA CHILENA DE INVERSIONES, S.L. | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 580,313 | | | | 590,050 | | | | 3,534 | | | | 585,508 | | | | 1,008 | |
| COMUNIDAD FINANCIERA ÍNDICO, S.L. | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 69 | | | | 62 | | | | — | | | | 160 | | | | (98 | ) |
| CONSOLIDAR A.F.J.P., S.A. | | ARGENTINA | | PENSION FUNDS MANAGEMENT | | | 46.1 | | | | 53.9 | | | | 100.0 | | | | 4,025 | | | | 19,566 | | | | 12,099 | | | | 10,727 | | | | (3,260 | ) |
| CONSOLIDAR ASEGURADORA DE RIESGOS DEL TRABAJO, S.A. | | ARGENTINA | | INSURANCES SERVICES | | | 87.5 | | | | 12.5 | | | | 100.0 | | | | 29,434 | | | | 237,856 | | | | 199,586 | | | | 33,211 | | | | 5,059 | |
| CONSOLIDAR CIA. DE SEGUROS DE RETIRO, S.A. | | ARGENTINA | | INSURANCES SERVICES | | | 33.8 | | | | 66.2 | | | | 100.0 | | | | 32,612 | | | | 608,698 | | | | 559,442 | | | | 36,596 | | | | 12,660 | |
| CONSOLIDAR COMERCIALIZADORA, S.A. | | ARGENTINA | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,440 | | | | 12,577 | | | | 11,139 | | | | 8,864 | | | | (7,426 | ) |
| CONTENTS AREA, S.L. | | SPAIN | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 1,251 | | | | 1,456 | | | | 44 | | | | 3,789 | | | | (2,377 | ) |
| CONTINENTAL BOLSA, SDAD. AGENTE DE BOLSA, S.A.(2) | | PERU | | SECURITIES DEALER | | | — | | | | 100.0 | | | | 100.0 | | | | 6,243 | | | | 12,399 | | | | 6,156 | | | | 5,283 | | | | 960 | |
| | |
| (*) | | Information on foreign companies at exchange rate on December 31, 2010 |
|
| (1) | | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 50.0%. |
|
| (2) | | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 46.1%. |
II-4
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | Profit
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | (Loss)
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | |
| | | | | | | | | | | | | | | | Thousands of euros(*) | |
| |
| CONTINENTAL DPR FINANCE COMPANY(1) | | CAYMAN ISLANDS | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 350,885 | | | | 350,885 | | | | — | | | | — | |
| CONTINENTAL S.A. SOCIEDAD ADMINISTRADORA DE FONDOS(1) | | PERU | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 9,013 | | | | 10,700 | | | | 1,686 | | | | 6,587 | | | | 2,427 | |
| CONTINENTAL SOCIEDAD TITULIZADORA, S.A.(1) | | PERU | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 440 | | | | 467 | | | | 27 | | | | 437 | | | | 3 | |
| CONTRATACION DE PERSONAL, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 2,633 | | | | 11,486 | | | | 8,853 | | | | 2,221 | | | | 412 | |
| CORPORACION DE ALIMENTACION Y BEBIDAS, S.A. | | SPAIN | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 138,508 | | | | 164,685 | | | | 1,282 | | | | 162,956 | | | | 447 | |
| CORPORACION GENERAL FINANCIERA, S.A. | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 509,716 | | | | 1,704,190 | | | | 44,359 | | | | 1,604,045 | | | | 55,786 | |
| DESARROLLADORA Y VENDEDORA DE CASAS, S.A | | MEXICO | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 13 | | | | 15 | | | | 2 | | | | 16 | | | | (3 | ) |
| DESARROLLO URBANISTICO DE CHAMARTIN, S.A. | | SPAIN | | REAL ESTATE | | | — | | | | 72.5 | | | | 72.5 | | | | 52,210 | | | | 91,653 | | | | 19,698 | | | | 72,086 | | | | (131 | ) |
| DESITEL TECNOLOGIA Y SISTEMAS, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,616 | | | | 1,616 | | | | — | | | | 1,569 | | | | 47 | |
| DINERO EXPRESS SERVICIOS GLOBALES, S.A. | | SPAIN | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 2,042 | | | | 1,771 | | | | 229 | | | | 2,005 | | | | (463 | ) |
| ECONTA GESTION INTEGRAL, S.L. | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 372 | | | | 1,829 | | | | 1,639 | | | | 1,305 | | | | (1,115 | ) |
| EL ENCINAR METROPOLITANO, S.A. | | SPAIN | | REAL ESTATE | | | — | | | | 99.0 | | | | 99.0 | | | | 6,253 | | | | 7,240 | | | | 1,056 | | | | 5,378 | | | | 806 | |
| EL OASIS DE LAS RAMBLAS, S.L. | | SPAIN | | REAL ESTATE | | | — | | | | 70.0 | | | | 70.0 | | | | 167 | | | | 473 | | | | 191 | | | | 257 | | | | 25 | |
| ENTRE2 SERVICIOS FINANCIEROS, E.F.C., S.A. | | SPAIN | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 9,139 | | | | 9,515 | | | | 12 | | | | 9,570 | | | | (67 | ) |
| ESPANHOLA COMERCIAL E SERVIÇOS, LTDA | | BRASIL | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | — | | | | 985 | | | | 313 | | | | 6,945 | | | | (6,273 | ) |
| ESTACION DE AUTOBUSES CHAMARTIN, S.A. | | SPAIN | | SERVICES | | | — | | | | 51.0 | | | | 51.0 | | | | 31 | | | | 30 | | | | — | | | | 30 | | | | — | |
| EUROPEA DE TITULIZACION, S.A., S.G.F.T. | | SPAIN | | FINANCIAL SERVICES | | | 87.5 | | | | — | | | | 87.5 | | | | 1,974 | | | | 23,916 | | | | 1,328 | | | | 16,407 | | | | 6,181 | |
FIDEICOMISO28991-8 TRADING EN LOS MCADOS FINANCIEROS | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 2,259 | | | | 2,259 | | | | — | | | | 2,150 | | | | 109 | |
FIDEICOMISO BBVA BANCOMER SERVICIOS No F/47433-8, S.A. | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 41,490 | | | | 48,139 | | | | 6,648 | | | | 39,573 | | | | 1,918 | |
| FIDEICOMISO F/29763-0 SOCIO LIQUIDADOR DE OPERACIONES FINANCIERAS DERIVADAS CUENTA PROPIA | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 24,506 | | | | 24,947 | | | | 440 | | | | 23,083 | | | | 1,424 | |
| FIDEICOMISO F/29764-8 SOCIO LIQUIDADOR DE OPERACIONES FINANCIERAS DERIVADAS CUENTA TERCEROS | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 39,772 | | | | 40,540 | | | | 767 | | | | 36,556 | | | | 3,217 | |
FIDEICOMISO HARES BBVA BANCOMER F/47997-2 | | MEXICO | | REAL ESTATE | | | — | | | | 80.3 | | | | 80.3 | | | | 28,371 | | | | 35,433 | | | | 2,275 | | | | 28,979 | | | | 4,179 | |
| FIDEICOMISO N.847 EN BANCO INVEX, S.A.,INSTITUCION DE BANCA MULTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO (FIDEIC. 4 EMISION) | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 29 | | | | 270,963 | | | | 273,221 | | | | (355 | ) | | | (1,903 | ) |
FIDEICOMISO No.402900-5 ADMINISTRACION DE INMUEBLES | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 2,522 | | | | 2,734 | | | | 201 | | | | 2,533 | | | | — | |
FIDEICOMISO No.711, EN BANCO INVEX, S.A. INSTITUCION DE BANCA MÚLTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO (FIDEICOMISO INVEX 1a EMISION) | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 111,196 | | | | 107,748 | | | | 5,365 | | | | (1,917 | ) |
FIDEICOMISO No.752 EN BANCO INVEX, S.A.,INSTITUCION DE BANCA MULTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO(FIDEIC.INVEX 2a EMISION) | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 51,183 | | | | 49,731 | | | | 2,185 | | | | (733 | ) |
FIDEICOMISO No.781EN BANCO INVEX, S.A.,INSTITUCION DE BANCA MULTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO (FIDEIC. 3ra EMISION) | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 295,754 | | | | 275,519 | | | | 5,549 | | | | 14,686 | |
| FINANCEIRA DO COMERCIO EXTERIOR S.A.R. | | PORTUGAL | | INACTIVE | | | 100.0 | | | | — | | | | 100.0 | | | | 51 | | | | 35 | | | | — | | | | 36 | | | | (1 | ) |
| FINANCIERA AYUDAMOS S.A. DE C.V., SOFOMER | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 3,405 | | | | 7,428 | | | | 4,023 | | | | 4,811 | | | | (1,406 | ) |
| FINANZIA AUTORENTING, S.A. | | SPAIN | | SERVICES | | | 27.1 | | | | 72.9 | | | | 100.0 | | | | 49,879 | | | | 540,085 | | | | 528,174 | | | | 13,250 | | | | (1,339 | ) |
| FINANZIA, BANCO DE CREDITO, S.A. | | SPAIN | | BANKING | | | — | | | | 100.0 | | | | 100.0 | | | | 174,207 | | | | 7,778,930 | | | | 7,689,540 | | | | 197,799 | | | | (108,409 | ) |
| FRANCES ADMINISTRADORA DE INVERSIONES, S.A. | | ARGENTINA | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 7,118 | | | | 10,436 | | | | 3,318 | | | | 6,091 | | | | 1,027 | |
| FRANCES VALORES SOCIEDAD DE BOLSA, S.A. | | ARGENTINA | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 2,255 | | | | 3,686 | | | | 1,431 | | | | 1,482 | | | | 773 | |
| FUTURO FAMILIAR, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 439 | | | | 1,176 | | | | 736 | | | | 340 | | | | 100 | |
| GESTION DE PREVISION Y PENSIONES, S.A. | | SPAIN | | PENSION FUNDS MANAGEMENT | | | 60.0 | | | | — | | | | 60.0 | | | | 8,830 | | | | 27,725 | | | | 2,587 | | | | 20,873 | | | | 4,265 | |
| GESTION Y ADMINISTRACION DE RECIBOS, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 150 | | | | 2,780 | | | | 405 | | | | 1,887 | | | | 488 | |
| GOBERNALIA GLOBAL NET, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 947 | | | | 2,977 | | | | 1,408 | | | | 1,553 | | | | 16 | |
| GRAN JORGE JUAN, S.A. | | SPAIN | | REAL ESTATE | | | 100.0 | | | | — | | | | 100.0 | | | | 110,115 | | | | 515,862 | | | | 457,176 | | | | 60,453 | | | | (1,767 | ) |
| GRANFIDUCIARIA | | COLOMBIA | | IN LIQUIDATION | | | — | | | | 90.0 | | | | 90.0 | | | | — | | | | 218 | | | | 128 | | | | 136 | | | | (46 | ) |
| GRUPO FINANCIERO BBVA BANCOMER, S.A. DE C.V. | | MEXICO | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 6,677,124 | | | | 7,562,447 | | | | 1,002 | | | | 5,984,850 | | | | 1,576,595 | |
| | |
| (*) | | Information on foreign companies at exchange rate on December 31, 2010 |
|
| (1) | | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 46.1%. |
II-5
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | Profit
| | | | |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | (Loss)
| | | | |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | | |
| | | | | | | | | | | | | | | | Thousands of euros (*) | |
| |
| GRUPO PROFESIONAL PLANEACION Y PROYECTOS, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 58.4 | | | | 58.4 | | | | 4,049 | | | | 23,913 | | | | 16,981 | | | | 7,368 | | | | (436 | ) | | | | |
| GUARANTY BUSINESS CREDIT CORPORATION | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 27,132 | | | | 28,524 | | | | 1,391 | | | | 25,838 | | | | 1,295 | | | | | |
| GUARANTY PLUS HOLDING COMPANY | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | (23,927 | ) | | | 45,646 | | | | 69,571 | | | | (22,290 | ) | | | (1,635 | ) | | | | |
| GUARANTY PLUS PROPERTIES LLC-2 | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 35,040 | | | | 35,193 | | | | 153 | | | | 34,866 | | | | 174 | | | | | |
| GUARANTY PLUS PROPERTIES LLC-3 | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | | | | | |
| GUARANTY PLUS PROPERTIES LLC-4 | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | | | | | |
| GUARANTY PLUS PROPERTIES LLC-5 | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | | | | | |
| GUARANTY PLUS PROPERTIES LLC-6 | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | | | | | |
| GUARANTY PLUS PROPERTIES LLC-7 | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | | | | | |
| GUARANTY PLUS PROPERTIES LLC-8 | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | | | | | |
| GUARANTY PLUS PROPERTIES LLC-9 | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | | | | | |
| GUARANTY PLUS PROPERTIES, INC-1 | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 9,349 | | | | 9,351 | | | | 2 | | | | 9,730 | | | | (381 | ) | | | | |
| HIPOTECARIA NACIONAL MEXICANA INCORPORATED | | UNITED STATES | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 312 | | | | 408 | | | | 95 | | | | 183 | | | | 130 | | | | | |
| HIPOTECARIA NACIONAL, S.A. DE C.V. | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 58,701 | | | | 91,122 | | | | 11,779 | | | | 80,170 | | | | (827 | ) | | | | |
| HOLDING CONTINENTAL, S.A. | | PERU | | INVESTMENT COMPANY | | | 50.0 | | | | — | | | | 50.0 | | | | 123,678 | | | | 884,998 | | | | 5 | | | | 628,029 | | | | 256,964 | | | | | |
| HOMEOWNERS LOAN CORPORATION | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 7,786 | | | | 8,062 | | | | 275 | | | | 7,970 | | | | (183 | ) | | | | |
| HUMAN RESOURCES PROVIDER | | UNITED STATES | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 698,212 | | | | 698,237 | | | | 24 | | | | 703,161 | | | | (4,948 | ) | | | | |
| HUMAN RESOURCES SUPPORT, INC. | | UNITED STATES | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 696,453 | | | | 696,511 | | | | 59 | | | | 701,608 | | | | (5,156 | ) | | | | |
| IBERNEGOCIO DE TRADE, S.L. | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 3,687 | | | | 3,688 | | | | — | | | | 1,688 | | | | 2,000 | | | | | |
| INGENIERIA EMPRESARIAL MULTIBA, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| INMOBILIARIA BILBAO, S.A. | | SPAIN | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 3,842 | | | | 3,847 | | | | 1 | | | | 3,837 | | | | 9 | | | | | |
| INMUEBLES Y RECUPERACIONES CONTINENTAL S.A(1) | | PERU | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 5,392 | | | | 6,583 | | | | 1,192 | | | | 1,873 | | | | 3,518 | | | | | |
| INVERAHORRO, S.L. | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | — | | | | 77,630 | | | | 79,210 | | | | (918 | ) | | | (662 | ) | | | | |
| INVERSIONES ALDAMA, C.A | | VENEZUELA | | IN LIQUIDATION | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| INVERSIONES BANPRO INTERNATIONAL INC. N.V. | | NETHERLANDS ANTILLES | | IN LIQUIDATION | | | 48.0 | | | | — | | | | 48.0 | | | | 11,390 | | | | 37,837 | | | | 1,173 | | | | 25,460 | | | | 11,204 | | | | | |
| INVERSIONES BAPROBA, C.A | | VENEZUELA | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 1,307 | | | | 1,258 | | | | 132 | | | | 801 | | | | 325 | | | | | |
| INVERSIONES P.H.R.4, C.A. | | VENEZUELA | | IN LIQUIDATION | | | — | | | | 60.5 | | | | 60.5 | | | | — | | | | 26 | | | | — | | | | 26 | | | | — | | | | | |
| INVERSORA OTAR, S.A. | | ARGENTINA | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 3,276 | | | | 65,392 | | | | 8 | | | | 42,299 | | | | 23,085 | | | | | |
INVESCO MANAGEMENT No 1, S.A. | | LUXEMBOURG | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 9,753 | | | | 10,344 | | | | 623 | | | | 9,825 | | | | (104 | ) | | | | |
INVESCO MANAGEMENT No 2, S.A. | | LUXEMBOURG | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 7,769 | | | | 17,071 | | | | (8,564 | ) | | | (738 | ) | | | | |
| JARDINES DE SARRIENA, S.L. | | SPAIN | | INVESTMENT COMPANY | | | — | | | | 85.0 | | | | 85.0 | | | | 255 | | | | 457 | | | | 159 | | | | 172 | | | | 126 | | | | | |
| LIQUIDITY ADVISORS, L.P | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 900,046 | | | | 902,819 | | | | 2,774 | | | | 890,086 | | | | 9,959 | | | | | |
| MEDITERRANIA DE PROMOCIONS I GESTIONS INMOBILIARIES, S.A. | | SPAIN | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1,189 | | | | 1,251 | | | | 60 | | | | 1,187 | | | | 4 | | | | | |
| MISAPRE, S.A. DE C.V. | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 17,342 | | | | 23,937 | | | | 8,087 | | | | 16,910 | | | | (1,060 | ) | | | | |
| MULTIASISTENCIA OPERADORA S.A. DE C.V. | | MEXICO | | INSURANCES SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 121 | | | | 877 | | | | 757 | | | | 76 | | | | 44 | | | | | |
| MULTIASISTENCIA SERVICIOS S.A. DE C.V. | | MEXICO | | INSURANCES SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 381 | | | | 1,971 | | | | 1,589 | | | | 208 | | | | 174 | | | | | |
| MULTIASISTENCIA, S.A. DE C.V. | | MEXICO | | INSURANCES SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 16,913 | | | | 25,983 | | | | 7,868 | | | | 14,470 | | | | 3,645 | | | | | |
| OPCION VOLCAN, S.A. | | MEXICO | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 65,964 | | | | 69,684 | | | | 3,719 | | | | 61,801 | | | | 4,164 | | | | | |
| OPPLUS OPERACIONES Y SERVICIOS, S.A. (Antes STURGES) | | SPAIN | | SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 1,067 | | | | 19,109 | | | | 11,467 | | | | 4,602 | | | | 3,040 | | | | | |
| OPPLUS S.A.C | | PERU | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 600 | | | | 1,710 | | | | 938 | | | | 754 | | | | 18 | | | | | |
| | |
| (*) | | Information on foreign companies at exchange rate on December 31, 2010 |
|
| (1) | | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 46.1%. |
II-6
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | Profit
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | (Loss)
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | |
| | | | | | | | | | | | | | | | Thousands of euros(*) | |
| |
| PARTICIPACIONES ARENAL, S.L. | | SPAIN | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 7,574 | | | | 7,582 | | | | 4 | | | | 7,553 | | | | 25 | |
| PECRI INVERSION S.A | | SPAIN | | OTHER INVESTMENT COMPANIES | | | 100.0 | | | | — | | | | 100.0 | | | | 78,500 | | | | 95,512 | | | | 17,013 | | | | 97,355 | | | | (18,856 | ) |
| PENSIONES BANCOMER, S.A. DE C.V. | | MEXICO | | INSURANCES SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 156,591 | | | | 2,529,143 | | | | 2,372,547 | | | | 89,097 | | | | 67,499 | |
| PHOENIX LOAN HOLDINGS, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 319,718 | | | | 338,561 | | | | 18,844 | | | | 331,675 | | | | (11,958 | ) |
| PI HOLDINGS NO. 1, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 57,372 | | | | 57,768 | | | | 397 | | | | 58,917 | | | | (1,546 | ) |
| PI HOLDINGS NO. 3, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 21,423 | | | | 21,650 | | | | 228 | | | | 21,055 | | | | 367 | |
| PI HOLDINGS NO. 4, INC. | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| PORT ARTHUR ABSTRACT & TITLE COMPANY | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,839 | | | | 2,176 | | | | 336 | | | | 1,878 | | | | (38 | ) |
| PREMEXSA, S.A. DE C.V. | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 375 | | | | 1,282 | | | | 571 | | | | 463 | | | | 248 | |
| PREVENTIS, S.A. | | MEXICO | | INSURANCES SERVICES | | | — | | | | 90.3 | | | | 90.3 | | | | 11,130 | | | | 28,533 | | | | 16,379 | | | | 8,316 | | | | 3,838 | |
| PRO-SALUD, C.A | | VENEZUELA | | SERVICES | | | — | | | | 58.9 | | | | 58.9 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| PROMOCION EMPRESARIAL XX, S.A. | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 1,039 | | | | 12,641 | | | | 11,112 | | | | 1,120 | | | | 409 | |
| PROMOTORA DE RECURSOS AGRARIOS, S.A. | | SPAIN | | SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 139 | | | | 122 | | | | — | | | | 125 | | | | (3 | ) |
| PROMOTORA RESIDENCIAL GRAN EUROPA, S.L. | | SPAIN | | REAL ESTATE | | | — | | | | 58.5 | | | | 58.5 | | | | 184 | | | | 339 | | | | 26 | | | | 384 | | | | (71 | ) |
| PROVIDA INTERNACIONAL, S.A. | | CHILE | | PENSION FUNDS MANAGEMENT | | | — | | | | 100.0 | | | | 100.0 | | | | 44,125 | | | | 48,133 | | | | 4,010 | | | | 32,246 | | | | 11,877 | |
| PROVINCIAL DE VALORES CASA DE BOLSA, C.A | | VENEZUELA | | FINANCIAL SERVICES | | | — | | | | 90.0 | | | | 90.0 | | | | 2,344 | | | | 11,277 | | | | 7,966 | | | | 1,362 | | | | 1,949 | |
| PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA, C.A | | VENEZUELA | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,489 | | | | 1,488 | | | | 143 | | | | 1,105 | | | | 240 | |
| PROVIVIENDA ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A. | | BOLIVIA | | PENSION FUNDS MANAGEMENT | | | — | | | | 100.0 | | | | 100.0 | | | | 776 | | | | 2,913 | | | | 2,066 | | | | 707 | | | | 140 | |
| PROXIMA ALFA INVESTMENTS (UK) LLP | | UNITED KINGDOM | | IN LIQUIDATION | | | — | | | | 51.0 | | | | 51.0 | | | | — | | | | 85 | | | | 2,298 | | | | (617 | ) | | | (1,596 | ) |
| PROXIMA ALFA INVESTMENTS (USA) LLC | | UNITED STATES | | IN LIQUIDATION | | | — | | | | 100.0 | | | | 100.0 | | | | 7,212 | | | | 1,293 | | | | 201 | | | | 1,163 | | | | (71 | ) |
| PROXIMA ALFA INVESTMENTS HOLDINGS (USA) II INC. | | UNITED STATES | | IN LIQUIDATION | | | — | | | | 100.0 | | | | 100.0 | | | | 72 | | | | 68 | | | | 42 | | | | 25 | | | | 1 | |
| PROXIMA ALFA INVESTMENTS HOLDINGS (USA) INC. | | UNITED STATES | | IN LIQUIDATION | | | 100.0 | | | | — | | | | 100.0 | | | | 72 | | | | 7,216 | | | | 3,349 | | | | 3,718 | | | | 149 | |
| PROXIMA ALFA SERVICES LTD. | | UNITED KINGDOM | | FINANCIAL SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 105 | | | | 2,342 | | | | 1 | | | | 2,364 | | | | (23 | ) |
| RESIDENCIAL CUMBRES DE SANTA FE, S.A. DE C.V. | | MEXICO | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 8,938 | | | | 9,456 | | | | 1,145 | | | | 8,433 | | | | (122 | ) |
| RIVER OAKS BANK BUILDING, INC. | | UNITED STATES | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 24,530 | | | | 29,231 | | | | 4,701 | | | | 16,014 | | | | 8,516 | |
| RIVER OAKS TRUST CORPORATION | | UNITED STATES | | INACTIVE | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | — | |
| RIVERWAY HOLDINGS CAPITAL TRUST I | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 233 | | | | 7,765 | | | | 7,531 | | | | 210 | | | | 24 | |
| RWHC, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 542,101 | | | | 542,734 | | | | 634 | | | | 539,968 | | | | 2,132 | |
| S.GESTORA FONDO PUBL.REGUL.MERCADO HIPOT | | SPAIN | | INACTIVE | | | 77.2 | | | | — | | | | 77.2 | | | | 138 | | | | 213 | | | | 67 | | | | 146 | | | | — | |
| SCALDIS FINANCE, S.A. | | BELGIUM | | INVESTMENT COMPANY | | | — | | | | 100.0 | | | | 100.0 | | | | 3,416 | | | | 3,652 | | | | 145 | | | | 3,514 | | | | (7 | ) |
| SEGUROS BANCOMER, S.A. DE C.V. | | MEXICO | | INSURANCES SERVICES | | | 25.0 | | | | 75.0 | | | | 100.0 | | | | 412,330 | | | | 2,432,075 | | | | 2,083,508 | | | | 191,517 | | | | 157,050 | |
| SEGUROS PROVINCIAL, C.A. | | VENEZUELA | | INSURANCES SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 31,340 | | | | 53,778 | | | | 22,546 | | | | 16,946 | | | | 14,286 | |
| SERVICIOS CORPORATIVOS BANCOMER, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 317 | | | | 2,501 | | | | 2,182 | | | | 401 | | | | (82 | ) |
| SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,099 | | | | 6,000 | | | | 4,899 | | | | 858 | | | | 243 | |
| SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 3,603 | | | | 5,266 | | | | 1,663 | | | | 3,304 | | | | 299 | |
| SERVICIOS TECNOLOGICOS SINGULARES, S.A. | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 20,216 | | | | 24,042 | | | | (297 | ) | | | (3,529 | ) |
| SMARTSPREAD LIMITED (UK) | | UNITED KINGDOM | | SERVICES | | | 100.0 | | | | — | | | | 100.0 | | | | 1 | | | | 137 | | | | — | | | | (188 | ) | | | 325 | |
| SOCIEDAD DE ESTUDIOS Y ANALISIS FINANCIERO.,S.A. | | SPAIN | | COMERCIAL | | | 100.0 | | | | — | | | | 100.0 | | | | 114,518 | | | | 193,810 | | | | 116 | | | | 194,130 | | | | (436 | ) |
| SOCIETE INMOBILIERE BBV D’ILBARRIZ | | FRANCE | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 1,637 | | | | 1,537 | | | | 30 | | | | 1,682 | | | | (175 | ) |
| SOUTHEAST TEXAS TITLE COMPANY | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 529 | | | | 727 | | | | 198 | | | | 529 | | | | — | |
| | |
| (*) | | Information on foreign companies at exchange rate on December 31, 2010 |
II-7
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the
| | | | | | | |
| | | | | | | Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | Profit
| |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | (Loss)
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | |
| | | | | | | | | | | | | | | | Thousands of euros(*) | |
| |
| SPORT CLUB 18, S.A. | | SPAIN | | INVESTMENT COMPANY | | | 100.0 | | | | — | | | | 100.0 | | | | 23,412 | | | | 53,093 | | | | 29,785 | | | | 25,183 | | | | (1,875 | ) |
| STATE NATIONAL CAPITAL TRUST I | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 352 | | | | 11,580 | | | | 11,228 | | | | 339 | | | | 13 | |
| STATE NATIONAL STATUTORY TRUST II | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 233 | | | | 7,725 | | | | 7,493 | | | | 225 | | | | 7 | |
| TEXAS LOAN SERVICES, LP. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 894,559 | | | | 895,031 | | | | 472 | | | | 882,589 | | | | 11,970 | |
| TEXAS REGIONAL STATUTORY TRUST I | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,159 | | | | 38,627 | | | | 37,468 | | | | 1,123 | | | | 36 | |
| TEXASBANC CAPITAL TRUST I | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 582 | | | | 19,396 | | | | 18,813 | | | | 565 | | | | 18 | |
| TMF HOLDING INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 7,601 | | | | 10,388 | | | | 2,787 | | | | 7,354 | | | | 247 | |
| TRAINER PRO GESTION DE ACTIVIDADES, S.A. | | SPAIN | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 2,886 | | | | 2,931 | | | | — | | | | 3,261 | | | | (330 | ) |
| TRANSITORY CO | | PANAMA | | REAL ESTATE | | | — | | | | 100.0 | | | | 100.0 | | | | 124 | | | | 1,435 | | | | 1,407 | | | | 154 | | | | (126 | ) |
| TUCSON LOAN HOLDINGS, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 345,706 | | | | 345,789 | | | | 83 | | | | 341,069 | | | | 4,637 | |
| TWOENC, INC. | | UNITED STATES | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | (1,164 | ) | | | 1,117 | | | | 2,282 | | | | (1,165 | ) | | | — | |
| UNICOM TELECOMUNICACIONES S.DE R.L. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1 | | | | 3 | | | | 2 | | | | — | | | | 1 | |
| UNIDAD DE AVALUOS MEXICO, S.A. DE CV | | MEXICO | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,918 | | | | 3,533 | | | | 1,970 | | | | 1,235 | | | | 328 | |
| UNITARIA GESTION DE PATRIMONIOS INMOBILIARIOS | | SPAIN | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 2,410 | | | | 2,633 | | | | 1 | | | | 2,624 | | | | 8 | |
| UNIVERSALIDAD “E5” | | COLOMBIA | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 3,250 | | | | 1,085 | | | | 1,888 | | | | 277 | |
UNIVERSALIDAD TIPS PESOSE-9 | | COLOMBIA | | FINANCIAL SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | — | | | | 94,309 | | | | 81,086 | | | | 3,882 | | | | 9,341 | |
| UNO-E BANK, S.A. | | SPAIN | | BANKING | | | 67.4 | | | | 32.7 | | | | 100.0 | | | | 174,751 | | | | 1,361,488 | | | | 1,255,492 | | | | 107,729 | | | | (1,733 | ) |
| URBANIZADORA SANT LLORENC, S.A. | | SPAIN | | INACTIVE | | | 60.6 | | | | — | | | | 60.6 | | | | — | | | | 108 | | | | — | | | | 108 | | | | — | |
| VALANZA CAPITAL RIESGO S.G.E.C.R. S.A. UNIPERSONAL | | SPAIN | | VENTURE CAPITAL | | | 100.0 | | | | — | | | | 100.0 | | | | 1,200 | | | | 16,026 | | | | 491 | | | | 14,743 | | | | 792 | |
| VIRTUAL DOC, S.L. | | SPAIN | | IN LIQUIDATION | | | — | | | | 70.0 | | | | 70.0 | | | | — | | | | 467 | | | | 620 | | | | 318 | | | | (471 | ) |
| VISACOM, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 100.0 | | | | 100.0 | | | | 1,134 | | | | 1,135 | | | | — | | | | 1,052 | | | | 83 | |
| | |
| (*) | | Information on foreign companies at exchange rate on December 31, 2010 |
II-8
APPENDIX III. Additional information on the jointly controlled companies accounted for using the proportionate consolidating method in BBVA Group
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | Assets
| | | Liabilities
| | | | | | | |
| | | | | | | | | | | | | | | | Carrying
| | | as of
| | | as of
| | | Equity
| | | Profit (Loss)
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | | | 12.31.10 | |
| | | | | | | | | | | | | | | | Thousands of euros (*) | |
| |
| ALTURA MARKETS, SOCIEDAD DE VALORES, S.A. | | SPAIN | | SECURITIES DEALER | | | 50.0 | | | | — | | | | 50.0 | | | | 12,600 | | | | 1,038,431 | | | | 998,424 | | | | 30,381 | | | | 9,626 | |
| ECASA, S.A. | | CHILE | | FINANCIAL SERVICES | | | — | | | | 51.0 | | | | 51.0 | | | | 5,515 | | | | 7,102 | | | | 7,018 | | | | (4,943 | ) | | | 5,027 | |
| FORUM DISTRIBUIDORA, S,A, | | CHILE | | FINANCIAL SERVICES | | | — | | | | 51.0 | | | | 51.0 | | | | 7,480 | | | | 107,008 | | | | 97,848 | | | | 6,995 | | | | 2,165 | |
| FORUM SERVICIOS FINANCIEROS, S.A. | | CHILE | | FINANCIAL SERVICES | | | — | | | | 51.0 | | | | 51.0 | | | | 56,493 | | | | 719,366 | | | | 643,861 | | | | 29,489 | | | | 46,016 | |
| INVERSIONES PLATCO, C.A | | VENEZUELA | | FINANCIAL SERVICES | | | — | | | | 50.0 | | | | 50.0 | | | | 11,832 | | | | 26,803 | | | | 3,137 | | | | 24,972 | | | | (1,306 | ) |
| PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA, S.A. | | ARGENTINA | | FINANCIAL SERVICES | | | — | | | | 50.0 | | | | 50.0 | | | | 12,451 | | | | 137,358 | | | | 112,456 | | | | 18,707 | | | | 6,195 | |
| RENTRUCKS, ALQUILER Y SERVICIOS DE TRANSPORTE, S.A. | | SPAIN | | FINANCIAL SERVICES | | | — | | | | 50.0 | | | | 50.0 | | | | 3,959 | | | | 42,281 | | | | 34,364 | | | | 11,358 | | | | (3,441 | ) |
| | |
| | Information on foreign companies at exchange rate on December 31, 2010 |
|
| (*) | | Jointly controlled companies accounted for using the equity method |
III-1
APPENDIX IV
ADDITIONAL INFORMATION ON JOINTLY CONTROLLED COMPANIES PROPORTIONATELY
CONSOLIDATED IN THE BANCO BILBAO VIZCAYA ARGENTARIA GROUPIV. Additional information on investments and jointly controlled companies consolidated using the equity method in BBVA Group
(Including the most significant entities, jointly representing 98% of all investment in this collective)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights | | | | | | | | | | | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | (Loss)
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | for the
| |
| | | | | | | | | | | | | | | | Net
| | | | | | | | | | | | Period
| |
| | | | | | | | | | | | | | | | Carrying
| | | Assets
| | | Liabilities
| | | Equity
| | | Ended
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | | | 31.12.08 | |
| | | | | | | | | | | | | | | | Thousand of Euros (*) | |
| |
| ECASA, S.A. | | CHILE | | FINANCIAL SERV. | | | — | | | | 51.00 | | | | 51.00 | | | | 5,469 | | | | 6,794 | | | | 1,326 | | | | (812 | ) | | | 6,280 | |
| FORUM DISTRIBUIDORA, S,A, | | CHILE | | FINANCIAL SERV. | | | — | | | | 51.04 | | | | 51.04 | | | | 4,723 | | | | 18,825 | | | | 13,543 | | | | 4,883 | | | | 399 | |
| FORUM SERVICIOS FINANCIEROS, S.A. | | CHILE | | FINANCIAL SERV. | | | — | | | | 51.00 | | | | 51.00 | | | | 43,705 | | | | 474,870 | | | | 413,581 | | | | 37,977 | | | | 23,312 | |
| INVERSIONES PLATCO, C.A | | VENEZUELA | | FINANCIAL SERV. | | | — | | | | 50.00 | | | | 50.00 | | | | 1,004 | | | | 3,287 | | | | 1,280 | | | | 2,007 | | | | — | |
| PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA, S.A. | | ARGENTINA | | FINANCIAL SERV. | | | — | | | | 50.00 | | | | 50.00 | | | | 6,926 | | | | 92,089 | | | | 78,234 | | | | 11,702 | | | | 2,153 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controlled by the Bank | | | | | | Affiliate Entity Data | |
| | | | | | | | | | | | | | | | Net
| | | | | | Liabilities
| | | | | | | | | | |
| | | | | | | | | | | | | | | | Carrying
| | | Assets of
| | | as of
| | | Equity
| | | Profit (Loss)
| | | | |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | 12/31/10 | | | 12/31/10 | | | 12/31/10 | | | 12/31/10 | | | | |
| | | | | | | | | | | | | | | | Thousands of euros (*) | |
| |
| ADQUIRA ESPAÑA, S.A. | | SPAIN | | SERVICES | | | — | | | | 40.0 | | | | 40.0 | | | | 2,037 | | | | 17,162 | | | | 9,357 | | | | 6,872 | | | | 934(2 | ) | | | | |
| ALMAGRARIO, S.A. | | COLOMBIA | | SERVICES | | | — | | | | 35.4 | | | | 35.4 | | | | 3,956 | | | | 31,858 | | | | 15,261 | | | | 20,406 | | | | (3,809 | )(2) | | | | |
| ALTITUDE SOFTWARE SGPS, S.A.(*) | | PORTUGAL | | SERVICES | | | — | | | | 30.5 | | | | 30.5 | | | | 9,842 | | | | 18,619 | | | | 9,994 | | | | 6,144 | | | | 2,481(2 | ) | | | | |
| AUREA, S.A. (CUBA) | | CUBA | | REAL ESTATE | | | — | | | | 49.0 | | | | 49.0 | | | | 3,922 | | | | 8,421 | | | | 811 | | | | 7,485 | | | | 125(2 | ) | | | | |
| BBVA ELCANO EMPRESARIAL II, S.C.R., S.A. | | SPAIN | | VENTURE CAPITAL | | | 45.0 | | | | — | | | | 45.0 | | | | 37,491 | | | | 104,885 | | | | 15,355 | | | | 89,454 | | | | 77(2 | ) | | | | |
| BBVA ELCANO EMPRESARIAL, S.C.R., S.A. | | SPAIN | | VENTURE CAPITAL | | | 45.0 | | | | — | | | | 45.0 | | | | 37,487 | | | | 104,958 | | | | 15,355 | | | | 89,457 | | | | 146(2 | ) | | | | |
| CAMARATE GOLF, S.A.(*) | | SPAIN | | REAL ESTATE | | | — | | | | 26.0 | | | | 26.0 | | | | 4,091 | | | | 39,396 | | | | 18,764 | | | | 17,798 | | | | 2,835(3 | ) | | | | |
| CHINA CITIC BANK LIMITED CNCB | | CHINA | | BANKING | | | 15.0 | | | | — | | | | 15.0 | | | | 3,557,759 | | | | 180,608,192 | | | | 169,601,243 | | | | 9,478,880 | | | | 1,528,069(2 | ) | | | | |
| CITIC INTERNATIONAL FINANCIAL HOLDINGS LIMITED CIFH | | HONG-KONG | | FINANCIAL SERVICES | | | 29.7 | | | | — | | | | 29.7 | | | | 464,339 | | | | 11,063,029 | | | | 9,619,672 | | | | 1,357,742 | | | | 85,616(1 | )(2) | | | | |
| COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO S.A. | | SPAIN | | FINANCIAL SERVICES | | | 21.8 | | | | — | | | | 21.8 | | | | 14,413 | | | | 61,967 | | | | 7,126 | | | | 53,086 | | | | 1,755(2 | ) | | | | |
| COMPAÑIA MEXICANA DE PROCESAMIENTO, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 50.0 | | | | 50.0 | | | | 4,706 | | | | 8,854 | | | | 1,558 | | | | 6,564 | | | | 732(2 | ) | | | | |
| CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A.(*) | | SPAIN | | INVESTMENT COMPANY | | | — | | | | 50.0 | | | | 50.0 | | | | 71,027 | | | | 808,482 | | | | 371,929 | | | | 402,838 | | | | 33,715(1 | )(2) | | | | |
| FERROMOVIL 3000, S.L.(*) | | SPAIN | | SERVICES | | | — | | | | 20.0 | | | | 20.0 | | | | 6,275 | | | | 649,334 | | | | 619,575 | | | | 27,470 | | | | 2,289(2 | ) | | | | |
| FERROMOVIL 9000, S.L.(*) | | SPAIN | | SERVICES | | | — | | | | 20.0 | | | | 20.0 | | | | 4,614 | | | | 413,798 | | | | 391,994 | | | | 19,410 | | | | 2,394(2 | ) | | | | |
| FIDEICOMISO F/70191-2 PUEBLA(*) | | MEXICO | | REAL ESTATE | | | — | | | | 25.0 | | | | 25.0 | | | | 5,017 | | | | 44,360 | | | | 11,668 | | | | 28,189 | | | | 4,503(3 | ) | | | | |
| I+D MEXICO, S.A. DE C.V.(*) | | MEXICO | | SERVICES | | | — | | | | 50.0 | | | | 50.0 | | | | 22,127 | | | | 70,158 | | | | 34,068 | | | | 29,080 | | | | 7,010(1 | )(2) | | | | |
| IMOBILIARIA DUQUE D’AVILA, S.A.(*) | | PORTUGAL | | REAL ESTATE | | | — | | | | 50.0 | | | | 50.0 | | | | 5,346 | | | | 24,149 | | | | 13,713 | | | | 10,058 | | | | 377(2 | ) | | | | |
| LAS PEDRAZAS GOLF, S.L.(*) | | SPAIN | | REAL ESTATE | | | — | | | | 50.0 | | | | 50.0 | | | | 9,647 | | | | 66,286 | | | | 49,189 | | | | 27,279 | | | | (10,183 | )(2) | | | | |
| OCCIDENTAL HOTELES MANAGEMENT, S.L.(*) | | SPAIN | | SERVICES | | | — | | | | 41.7 | | | | 41.7 | | | | 87,579 | | | | 756,194 | | | | 493,789 | | | | 336,310 | | | | (73,906 | )(1)(2) | | | | |
| PARQUE REFORMA SANTA FE, S.A. DE C.V. | | MEXICO | | REAL ESTATE | | | — | | | | 30.0 | | | | 30.0 | | | | 3,544 | | | | 66,363 | | | | 55,103 | | | | 9,923 | | | | 1,337(3 | ) | | | | |
| PROMOTORA METROVACESA, S.L(*) | | SPAIN | | REAL ESTATE | | | — | | | | 50.0 | | | | 50.0 | | | | 4,412 | | | | 76,919 | | | | 64,518 | | | | 14,491 | | | | (2,089 | )(3) | | | | |
| ROMBO COMPAÑIA FINANCIERA, S.A. | | ARGENTINA | | FINANCIAL SERVICES | | | — | | | | 40.0 | | | | 40.0 | | | | 9,849 | | | | 86,232 | | | | 65,463 | | | | 13,868 | | | | 6,901(2 | ) | | | | |
| SERVICIOS DE ADMINISTRACION PREVISIONAL, S.A. | | CHILE | | PENSION FUNDS MANAGEMENT | | | — | | | | 37.9 | | | | 37.9 | | | | 5,460 | | | | 15,263 | | | | 4,506 | | | | 6,387 | | | | 4,370(2 | ) | | | | |
| SERVICIOS ELECTRONICOS GLOBALES, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 46.1 | | | | 46.1 | | | | 4,992 | | | | 14,226 | | | | 5,297 | | | | 8,811 | | | | 118(2 | ) | | | | |
| SERVICIOS ON LINE PARA USUARIOS MULTIPLES, S.A. (SOLIUM)(*) | | SPAIN | | SERVICES | | | — | | | | 66.7 | | | | 66.7 | | | | 4,056 | | | | 7,710 | | | | 4,488 | | | | 2,902 | | | | 320(2 | ) | | | | |
| SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO, S.A. | | SPAIN | | FINANCIAL SERVICES | | | 20.4 | | | | 0.9 | | | | 21.4 | | | | 15,489 | | | | 206,836 | | | | 78,920 | | | | 119,659 | | | | 8,257(1 | )(2) | | | | |
| TELEFONICA FACTORING, S.A. | | SPAIN | | FINANCIAL SERVICES | | | 30.0 | | | | — | | | | 30.0 | | | | 3,694 | | | | 101,408 | | | | 90,408 | | | | 6,849 | | | | 4,151(2 | ) | | | | |
| TUBOS REUNIDOS, S.A. | | SPAIN | | INDUSTRIAL | | | — | | | | 23.0 | | | | 23.0 | | | | 50,726 | | | | 664,368 | | | | 436,637 | | | | 226,672 | | | | 1,059(1 | )(2) | | | | |
| VITAMEDICA S.A DE C.V.(*) | | MEXICO | | INSURANCES SERVICES | | | — | | | | 51.0 | | | | 51.0 | | | | 2,586 | | | | 9,833 | | | | 4,407 | | | | 4,964 | | | | 462(2 | ) | | | | |
| OTHER COMPANIES | | | | | | | | | | | | | | | | | | | 90,554 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | �� | | | | TOTAL | | | | 4,547,037 | | | | 196,149,259 | | | | 182,110,166 | | | | 12,429,047 | | | | 1,610,047 | | | | | |
Information on foreign companies at exchange rate on12/31/08
IV-1
APPENDIX V
ADDITIONAL INFORMATION ON INVESTMENTS AND JOINTLY CONTROLLED
COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD IN THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
(Includes the most significant companies which, taken as a whole, represent 95% of the total investment in this respect)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controllend by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | Net
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Carrying
| | | | | | | | | | | | Profit
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | Assets | | | Liabilities | | | Equity | | | (Loss) | |
| | | | | | | | | | | | | | | | Thousand of euros | |
| |
| ADQUIRA ESPAÑA, S.A. | | SPAIN | | SERVICES | | | — | | | | 40.00 | | | | 40.00 | | | | 3,742 | | | | 24,151 | | | | 15,852 | | | | 6,674 | | | | 1,625 | (2) |
| ALMAGRARIO, S.A. | | COLOMBIA | | SERVICES | | | — | | | | 35.38 | | | | 35.38 | | | | 6,222 | | | | 26,494 | | | | 5,200 | | | | 18,126 | | | | 3,168 | (2) |
| AUREA, S.A. (CUBA) | | CUBA | | REAL ESTATE | | | — | | | | 49.00 | | | | 49.00 | | | | 4,168 | | | | 8,619 | | | | 626 | | | | 7,867 | | | | 126 | (2) |
| BBVA ELCANO EMPRESARIAL II, S.C.R., S.A. | | SPAIN | | VENTURE CAPITAL | | | 45.00 | | | | — | | | | 45.00 | | | | 38,506 | | | | 59,494 | | | | 486 | | | | 71,555 | | | | (12,547 | )(2) |
| BBVA ELCANO EMPRESARIAL, S.C.R., S.A. | | SPAIN | | VENTURE CAPITAL | | | 45.00 | | | | — | | | | 45.00 | | | | 38,502 | | | | 59,499 | | | | 486 | | | | 71,557 | | | | (12,544 | )(2) |
| CAMARATE GOLF, S.A.(*) | | SPAIN | | REAL ESTATE | | | — | | | | 26.00 | | | | 26.00 | | | | 5,170 | | | | 68,873 | | | | 50,992 | | | | 17,927 | | | | (46 | )(3) |
| CITIC INTERNATIONAL FINANCIAL HOLDINGS LIMITED CIFH | | HONG-KONG | | FINANCIAL SERV. | | | 29.68 | | | | — | | | | 29.68 | | | | 541,221 | | | | 11,531,795 | | | | 9,224,863 | | | | 2,133,662 | | | | 173,270(1 | )(2) |
| COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO S.A. | | SPAIN | | SERVICES | | | 21.82 | | | | — | | | | 21.82 | | | | 11,502 | | | | 63,052 | | | | 12,600 | | | | 48,248 | | | | 2,204 | (2) |
| COMPAÑIA MEXICANA DE PROCESAMIENTO, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 50.00 | | | | 50.00 | | | | 3,189 | | | | 7,983 | | | | 1,832 | | | | 8,913 | | | | (2,762 | )(3) |
| CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A.(*) | | SPAIN | | PORTFOLIO | | | — | | | | 50.00 | | | | 50.00 | | | | 385,062 | | | | 1,537,225 | | | | 382,240 | | | | 747,225 | | | | 407,760 | (1)(2) |
| DISTRANSA RENTRUCKS, S.A.(*) | | SPAIN | | SERVICES | | | — | | | | 50.00 | | | | 50.00 | | | | 14,994 | | | | 16,305 | | | | 15,069 | | | | 806 | | | | 430 | (2) |
| ECONTA GESTION INTEGRAL, S.L.(*) | | SPAIN | | SERVICES | | | — | | | | 60.00 | | | | 60.00 | | | | 2,745 | | | | 4,023 | | | | 491 | | | | 4,613 | | | | (1,081 | )(2) |
| FERROMOVIL 3000, S.L.(*) | | SPAIN | | SERVICES | | | — | | | | 20.00 | | | | 20.00 | | | | 5,089 | | | | 632,971 | | | | 603,297 | | | | 29,977 | | | | (303 | )(2) |
| FERROMOVIL 9000, S.L.(*) | | SPAIN | | SERVICES | | | — | | | | 20.00 | | | | 20.00 | | | | 3,453 | | | | 366,389 | | | | 347,594 | | | | 18,773 | | | | 22 | (2) |
| FIDEICOMISO F/70191-2 PUEBLA(*) | | MEXICO | | REAL ESTATE | | | — | | | | 25.00 | | | | 25.00 | | | | 8,778 | | | | 73,626 | | | | 28,000 | | | | 42,995 | | | | 2,631 | (2) |
| FIDEICOMISO F/403853-5 BBVA BANCOMER SERVICIOS ZIBATA(*) | | MEXICO | | REAL ESTATE | | | — | | | | 30.00 | | | | 30.00 | | | | 19,807 | | | | — | | | | — | | | | — | | | | — | (4) |
| FIDEICOMISO HARES BBVA BANCOMER F/47997-2(*) | | MEXICO | | REAL ESTATE | | | — | | | | 50.00 | | | | 50.00 | | | | 11,713 | | | | 23,913 | | | | 339 | | | | 21,864 | | | | 1,710 | (2) |
| GRUPO PROFESIONAL PLANEACION Y PROYECTOS, S.A. DE C.V.(*) | | MEXICO | | SERVICES | | | — | | | | 44.39 | | | | 44.39 | | | | 7,063 | | | | 26,971 | | | | 17,749 | | | | 8,614 | | | | 608 | (1)(2) |
| HESTENAR, S.L.(*) | | SPAIN | | REAL ESTATE | | | — | | | | 43.34 | | | | 43.34 | | | | 6,454 | | | | 27,835 | | | | 21,969 | | | | 5,909 | | | | (43 | )(3) |
| IMOBILIARIA DUQUE D’AVILA, S.A.(*) | | PORTUGAL | | REAL ESTATE | | | — | | | | 50.00 | | | | 50.00 | | | | 5,011 | | | | 26,138 | | | | 16,504 | | | | 9,848 | | | | (214 | )(3) |
V-1
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of Voting Rights
| | | | | | | |
| | | | | | | Controllend by the Bank | | | | | | Investee Data | |
| | | | | | | | | | | | | | | | Net
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Carrying
| | | | | | | | | | | | Profit
| |
Company | | Location | | Activity | | Direct | | | Indirect | | | Total | | | Amount | | | Assets | | | Liabilities | | | Equity | | | (Loss) | |
| | | | | | | | | | | | | | | | Thousand of euros | |
| |
| INMUEBLES MADARIAGA PROMOCIONES, S.L.(*) | | SPAIN | | REAL ESTATE | | | 50.00 | | | | — | | | | 50.00 | | | | 3,681 | | | | 18,717 | | | | 4,055 | | | | 6,313 | | | | 8,349(2 | ) |
| JARDINES DEL RUBIN, S.A.(*) | | SPAIN | | REAL ESTATE | | | — | | | | 50.00 | | | | 50.00 | | | | 6,569 | | | | 31,265 | | | | 21,642 | | | | 5,900 | | | | 3,723(2 | ) |
| LA ESMERALDA DESARROLLOS, S.L.(*) | | SPAIN | | REAL ESTATE | | | — | | | | 25.00 | | | | 25.00 | | | | 4,998 | | | | 56,571 | | | | 36,571 | | | | 20,000 | | | | 0(3 | ) |
| LAS PEDRAZAS GOLF, S.L.(*) | | SPAIN | | REAL ESTATE | | | — | | | | 50.00 | | | | 50.00 | | | | 15,808 | | | | 74,949 | | | | 45,204 | | | | 31,837 | | | | (2,092 | )(2) |
| MONTEALMENARA GOLF, S.L.(*) | | SPAIN | | REAL ESTATE | | | — | | | | 50.00 | | | | 50.00 | | | | 2,876 | | | | 86,561 | | | | 51,518 | | | | 15,606 | | | | 19,437(3 | ) |
| OCCIDENTAL HOTELES MANAGEMENT, S.L. | | SPAIN | | SERVICES | | | — | | | | 38.53 | | | | 38.53 | | | | 127,823 | | | | 917,019 | | | | 543,599 | | | | 387,477 | | | | (14,057 | )(1)(2) |
| PARQUE REFORMA SANTA FE, S.A. DE C.V. | | MEXICO | | REAL ESTATE | | | — | | | | 30.00 | | | | 30.00 | | | | 4,408 | | | | 82,225 | | | | 67,377 | | | | 19,612 | | | | (4,764 | )(2) |
| ROMBO COMPAÑIA FINANCIERA, S.A. | | ARGENTINA | | FINANCIAL SERV. | | | — | | | | 40.00 | | | | 40.00 | | | | 7,830 | | | | 105,558 | | | | 89,082 | | | | 15,662 | | | | 814(2 | ) |
| SERVICIOS ELECTRONICOS GLOBALES, S.A. DE C.V. | | MEXICO | | SERVICES | | | — | | | | 46.14 | | | | 46.14 | | | | 3,924 | | | | 13,610 | | | | 3,938 | | | | 9,626 | | | | 46(2 | ) |
| SERVICIOS ON LINE PARA USUARIOS MULTIPLES, S.A. (SOLIUM)(*) | | SPAIN | | SERVICES | | | — | | | | 66.67 | | | | 66.67 | | | | 3,381 | | | | 4,722 | | | | 2,048 | | | | 2,287 | | | | 387 (2 | ) |
| SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO, S.A. | | SPAIN | | FINANCIAL SERV. | | | 20.50 | | | | 0.93 | | | | 21.43 | | | | 36,849 | | | | 54,138 | | | | 4,512 | | | | 49,394 | | | | 232 (2 | ) |
| TELEFONICA FACTORING, S.A. | | SPAIN | | FINANCIAL SERV. | | | 30.00 | | | | — | | | | 30.00 | | | | 2,962 | | | | 90,854 | | | | 81,268 | | | | 6,905 | | | | 2,682 (2 | ) |
| TUBOS REUNIDOS, S.A. | | SPAIN | | INDUSTRIAL | | | — | | | | 23.40 | | | | 23.40 | | | | 54,296 | | | | 762,413 | | | | 405,924 | | | | 271,388 | | | | 85,101 (1 | ) |
| VITAMEDICA S.A DE C.V.(*) | | MEXICO | | INSURANCE | | | — | | | | 50.99 | | | | 50.99 | | | | 2,275 | | | | 9,794 | | | | 4,221 | | | | 5,491 | | | | 82 (2 | ) |
| OTHER COMPANIES | | | | | | | | | | | | | | | | | | | 66,784 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | TOTAL | | | | 1,466,855 | | | | 16,893,752 | | | | 12,107,150 | | | | 4,122,650 | | | | 663,953 | |
Data relating to the lastest financial statements approved at the date of preparation of these notes to the consolidated financial statements.
For the companies abroad the exchange rates rulig at the reference date are applied,
| | |
| (*) | | Jointly controlled companies accounted for using the equity method |
|
| (**) | | Data relating to the latest financial statements approved at the date of preparation of these notes to the consolidated statements |
|
| | Information on foreign companies at exchange rate on reference date |
|
| (1) | | Consolidated Data |
| |
| (2) | | Financial statementsstatetement as of December 31, 20072009 |
| |
| (3) | | Financial statementsstatetement as of December 31, 2006 |
|
(4) | | New incorporation |
|
(*) | | Jointly controlled entities accounted for using the equity method2008 |
V-2
IV-1
APPENDIX VI.Appendix V. Changes and notification of investments in the BBVA Group in 2008
BUSINESS COMBINATIONS AND OTHER ACQUISITIONS OR INCREASE OF INTEREST OWNERSHIP
IN CONSOLIDATED SUBSIDIARIES AND JOINTLY CONTROLLED COMPANIES ACCOUNTED FOR
USIN THE PROPORTIONATE METHOD2010
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Fair value of
| | | | | | | | | | |
| | | | | | | Price paid in the
| | | Equity
| | | %
| | | | |
| | | | | | | Transaction +
| | | Instruments
| | | Voting Rights | | | | |
| | | | | | | Expenses Directly
| | | Issued for the
| | | Acquired in
| | | Voting rights
| | | | |
| | | Type of
| | | | Attributable to the
| | | Acquisition of the
| | | the Period
| | | Controlled After
| | | Effective Date (or
| |
Company | | Transaction | | Activity | | Acquisition | | | Company | | | (Net) | | | the Acquisition | | | Notification Date) | |
| | | | | | | (Thounsand of
| | | | | | | | | | | | | |
| | | | | | | euros) | | | | | | | | | | | | | |
| |
| BBVA LEASING S.A. Cia,FINANC, COMERC, (COLOMBIA) | | FOUNDING | | FINANCIAL SERV. | | | 7,892 | | | | — | | | | 100.000 | % | | | 100.000 | % | | | 1/2/2008 | |
| FINANZIA AUTORENTING* | | ACQUISITION | | SERVICES | | | 10,999 | | | | — | | | | 11.681 | % | | | 100.000 | % | | | 3/14/2008 | |
| ANIDA CARTERA SINGULAR, S.L. | | FOUNDING | | PORTFOLIO | | | 5,300 | | | | — | | | | 100.000 | % | | | 100.000 | % | | | 6/6/2008 | |
| ANIDA DESARROLLOS SINGULARES, S.L | | FOUNDING | | REAL ESTATE | | | 5,000 | | | | — | | | | 100.000 | % | | | 100.000 | % | | | 6/6/2008 | |
| MARINA LLAR, S.A.* | | ACQUISITION | | REAL ESTATE | | | 100 | | | | — | | | | 50.000 | % | | | 100.000 | % | | | 7/18/2008 | |
| PREVENTIS | | ACQUISITION | | INSURANCES | | | 2,486 | | | | — | | | | 15.262 | % | | | 90.272 | % | | | 01/03/2008
01/06/2008
01/08/2008 | |
| PROXIMA ALFA INVESTMENTS, SGIIC, S.A* | | ACQUISITION | | FINANCIAL SERV. | | | 11,678 | | | | — | | | | 49.000 | % | | | 100.000 | % | | | 11/14/2008 | |
| EUROPEA DE TITULIZACION, S.A.,S.G.F.T.* | | ACQUISITION | | FINANCIAL SERV. | | | 309 | | | | — | | | | 3.018 | % | | | 85.988 | % | | | 14/02/2008
03/06/2008
09/12/2008 | |
| BBVA PROPIEDAD, F.I.I | | ACQUISITION | | OTHER INVEST.ENTITIES | | | 1,532,798 | | | | — | | | | 95.654 | % | | | 95.654 | % | | | 12/30/2008 | |
VI-1
BUSINESS COMBINATIONS AND OTHER ACQUISITIONS OR INCREASE OF INTEREST OWNERSHIP
IN ASSOCIATEDCONSOLIDATED SUBSIDIARIES AND JOINTLY CONTROLLED COMPANIES ACCOUNTED FOR USING THE EQUITY
PROPORCIONATE METHOD
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Fair Value of
| | | %
| | | | |
| | | | | | | Price Paid in the
| | | Equity
| | | Voting Rights | | | | |
| | | | | | | Transaction +
| | | instruments
| | | Acquired
| | | | | | | |
| | | | | | | Expenses Directly
| | | Issued for the
| | | in the
| | | Voting Rights
| | | | |
| | | Type of
| | | | Attributable to the
| | | Acquisition of the
| | | Period
| | | Controlled After
| | | Effective Date (or
| |
Company | | Transaction | | Activity | | Acquisition | | | Company | | | (Net) | | | the Acquisition | | | Notification Date) | |
| | | | | | | (Thounsand
| | | | | | | | | | | | | |
| | | | | | | of euros) | | | | | | | | | | | | | |
| |
| FIDEICOMISO F/402770-2 ALAMAR | | FOUNDING | | REAL ESTATE | | | 11,756 | | | | — | | | | 42.400 | % | | | 42.400 | % | | | 12/7/2007 | |
| FIDEICOMISO F/403112-6 DE ADMINISTRACION DOS LAGOS | | FOUNDING | | REAL ESTATE | | | 10,865 | | | | — | | | | 46.914 | % | | | 46.914 | % | | | 4/23/2008 | |
| SERVICIOS ON LINE PARA USUARIOSMULTIPLES (SOLIUM)* | | ACQUISITION | | SERVICES | | | 2,450 | | | | — | | | | 33.333 | % | | | 66.667 | % | | | 6/3/2008 | |
| DISTRANSA RENTRUCKS, S.A.* | | ACQUISITION | | SERVICES | | | 15,200 | | | | — | | | | 42.922 | % | | | 42.922 | % | | | 6/10/2008 | |
FIDEICOMISO F/403853-5 BBVA BANCOMER SoS ZIBATA | | FOUNDING | | REAL ESTATE | | | 22,503 | | | | — | | | | 30.000 | % | | | 30.000 | % | | | 11/30/2008 | |
| CITIC INTERNATIONAL FINANCIAL HOLDINGS LIMITED CIFH | | ACQUISITION | | FINANCIAL SERV. | | | 654,827 | | | | — | | | | 15.163 | % | | | 29.679 | % | | | 11/30/2008 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Thousands of Euros | | | % of Voting Rights | | | | |
| | | | | | | Price Paid in the
| | | Fair Value of
| | | | | | Total Voting
| | | | |
| | | | | | | Transactions +
| | | Equity
| | | % Participation
| | | Rights
| | | Effective Date for
| |
| | | | | | | Expenses directly
| | | Instruments
| | | (net)
| | | Controlled after
| | | the Trasaction
| |
| | | | | | | attributable to the
| | | Issued for the
| | | Acquired
| | | the
| | | (or Notification
| |
Company | | Type of Transaction | | Activity | | Transactions | | | Transactions | | | in the Period | | | Transactions | | | Date) | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| APLICA SOLUCIONES TECNOLOGICAS CHILE LIMITADA | | FOUNDING | | SERVICES | | | 7 | | | | — | | | | 99.99 | % | | | 99.99 | % | | | 4-1-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| MONTEALMENARA GOLF, S.L.* | | ACQUISITION | | REAL ESTATE | | | 6,515 | | | | — | | | | 50.00 | % | | | 100.00 | % | | | 26-2-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| GRUPO PROFESIONAL PLANEACION Y PROYECTOS, S.A. DE C.V. | | ACQUISITION | | SERVICES | | | 904 | | | | — | | | | 14.02 | % | | | 58.40 | % | | | 26-2-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BANCO CONTINENTAL, S.A. | | ACQUISITION | | BANKING | | | 998 | | | | — | | | | 0.07 | % | | | 92.15 | % | | | 31-3-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| ECONTA GESTION INTEGRAL, S.L.* | | ACQUISITION | | SERVICES | | | 591 | | | | — | | | | 29.92 | % | | | 100.00 | % | | | 22-4-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | REAL ESTATE | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BBVA PROPIEDAD F.I.I. | | ACQUISITION | | INVESTMENT COMPANY | | | 55,774 | | | | — | | | | 3.89 | % | | | 99.57 | % | | | 30-4-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BANCO CONTINENTAL, S.A. | | ACQUISITION | | BANKING | | | 1,490 | | | | — | | | | 0.07 | % | | | 92.22 | % | | | 31-5-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | REAL ESTATE | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BBVA PROPIEDAD F.I.I. | | ACQUISITION | | INVESTMENT COMPANY | | | — | | | | — | | | | 0.15 | % | | | 99.75 | % | | | 31-5-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
RENTRUCKS, ALQUILER Y SoS DE TRANSPORTE, S.A.* | | ACQUISITION | | FINANCIAL SERVICES | | | 8 | | | | — | | | | 7.08 | % | | | 50.00 | % | | | 30-6-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BBVA SEGUROS DE VIDA, S.A. | | ACQUISITION | | INSURANCES SERVICES | | | — | | | | — | | | | 0.00 | % | | | 100.00 | % | | | 31-7-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| OCCIVAL, S.A. | | ACQUISITION | | INVESTMENT COMPANY | | | — | | | | — | | | | 0.00 | % | | | 100.00 | % | | | 31-7-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| IBERDROLA SERVICIOS FINANCIEROS, E.F.C., S.A.* | | ACQUISITION | | FINANCIAL SERVICES | | | 1,849 | | | | — | | | | 16.00 | % | | | 100.00 | % | | | 31-7-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | REAL ESTATE | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BBVA PROPIEDAD F.I.I. | | ACQUISITION | | INVESTMENT COMPANY | | | — | | | | — | | | | 0.25 | % | | | 100.00 | % | | | 31-8-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| APLICA TECNOLOGIA AVANZADA OPERADORA, S.A. DE C.V. | | FOUNDING | | SERVICES | | | 3 | | | | — | | | | 100.00 | % | | | 100.00 | % | | | 24-9-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| APLICA TECNOLOGIA AVANZADA SERVICIOS, S.A. DE C.V. | | FOUNDING | | SERVICES | | | 3 | | | | — | | | | 100.00 | % | | | 100.00 | % | | | 24-9-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BANCO PROMOCIÓN | | ACQUISITION | | BANKING | | | 13 | | | | — | | | | 0.00 | % | | | 99.84 | % | | | 30-11-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BANCO CONTINENTAL, S.A. | | ACQUISITION | | BANKING | | | — | | | | — | | | | 0.02 | % | | | 92.24 | % | | | 31-12-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
FIDEICOMISO HARES BBVA BANCOMER F/47997-2 | | ACQUISITION | | REAL ESTATE | | | 8,833 | | | | — | | | | 30.31 | % | | | 80.31 | % | | | 31-12-2010 | |
| | |
*(*) | | NotificationsNotification realized |
VI-2V-1
APPENDIX VI. Changes and notification of investments in the BBVA Group in 2008
DISPOSALS OR REDUCTION OF INTEREST OWNERSHIP IN CONSOLIDATED SUBSIDIARIES AND JOINTLY
CONTROLLED COMPANIES ACCOUNTED FOR USING THE PROPORTIONATE CONSOLIDATION METHOD
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | %
| | | | | | | | | | | % of Voting Rights | |
| | | | | | | | | Voting Rights | | | | | | | | | | | | | | | Effective Date for
| |
| | | | | | | | | | | Totally
| | | | | | | | | | | % Participation
| | Total Voting Rights
| | the Transaction
| |
| | | Type of
| | | | Profit in the
| | %
| | Controlled After
| | Effective Date (or
| | | Type of
| | | | Profit (Loss)
| | Sold
| | Controlled after the
| | (or Notification
| |
Company | | Transaction | | Activity | | Transaction | | Sold | | the Disposal | | Notification date) | | | Transaction | | Activity | | in the Transaction | | in the Period | | Disposal | | Date) | |
| | | | | | | | | | | | | Thounsand euros | | | | | | | Thousands of euros | | | | | |
| |
| BBVA CONSOLIDAR SALUD, S.A. | | | DISPOSAL | | | | INSURANCE | | | | 3,610 | | | | 99.999 | % | | | 0.000 | % | | | 10/31/2008 | | |
| BBVA LEASING S.A.COMPAÑIA DE FINANCIAMIENTO COMERCIAL | | | MERGER | | FINANCIAL SERVICES | | | — | | | | 100.00 | % | | | — | | | | 04-01-10 | |
| GFIS HOLDINGS INC. | | | MERGER | | FINANCIAL SERVICES | | | — | | | | 100.00 | % | | | — | | | | 01-02-10 | |
| GUARANTY FINANCIAL INSURANCE SOLUTIONS, INC. | | | MERGER | | FINANCIAL SERVICES | | | — | | | | 100.00 | % | | | — | | | | 01-02-10 | |
BBVAE-COMMERCE, S.A. | | | MERGER | | SERVICES | | | — | | | | 100.00 | % | | | — | | | | 15-03-10 | |
| UNIVERSALIDAD- BANDO GRANAHORRAR | | | LIQUIDATION | | FINANCIAL SERVICES | | | 557 | | | | 100.00 | % | | | — | | | | 30-04-10 | |
| PROXIMA ALFA MANAGING MEMBER LLC | | | LIQUIDATION | | FINANCIAL SERVICES | | | (1 | ) | | | 100.00 | % | | | — | | | | 30-04-10 | |
| BIBJ MANAGEMENT, LTD. | | | LIQUIDATION | | SERVICES | | | — | | | | 100.00 | % | | | — | | | | 31-05-10 | |
| BIBJ NOMINEES, LTD. | | | LIQUIDATION | | SERVICES | | | — | | | | 100.00 | % | | | — | | | | 31-05-10 | |
| CANAL COMPANY, LTD. | | | LIQUIDATION | | FINANCIAL SERVICES | | | (191 | ) | | | 100.00 | % | | | — | | | | 31-05-10 | |
| COMPASS TRUST IV | | | LIQUIDATION | | FINANCIAL SERVICES | | | (1 | ) | | | 100.00 | % | | | — | | | | 31-05-10 | |
| APLICA SOLUCIONES GLOBALES, S.L. | | | LIQUIDATION | | SERVICES | | | (14 | ) | | | 100.00 | % | | | — | | | | 31-07-10 | |
| BBVA PRIVANZA (JERSEY), LTD. | | | LIQUIDATION | | FINANCIAL SERVICES | | | (1,272 | ) | | | 100.00 | % | | | — | | | | 31-08-10 | |
| BBVA CAPITAL FUNDING, LTD. | | | LIQUIDATION | | FINANCIAL SERVICES | | | 1,723 | | | | 100.00 | % | | | — | | | | 31-08-10 | |
| ADPROTEL STRAND, S.L. | | | DISPOSAL | | REAL ESTATE | | | 27,139 | | | | 100.00 | % | | | — | | | | 29-09-10 | |
| PRESTACIONES ADMINISTRATIVAS LIMITADA-PROEX LIMITADA | | | MERGER | | FINANCIAL SERVICES | | | — | | | | 100.00 | % | | | — | | | | 01-09-10 | |
| ALTITUDE INVESTMENTS LIMITED | | | LIQUIDATION | | FINANCIAL SERVICES | | | (86 | ) | | | 51.00 | % | | | — | | | | 05-10-10 | |
| ATUEL FIDEICOMISOS, S.A. | | | MERGER | | SERVICES | | | — | | | | 100.00 | % | | | — | | | | 26-10-10 | |
| EMPRESA INSTANT CREDIT, C.A. | | | LIQUIDATION | | REAL ESTATE | | | — | | | | 100.00 | % | | | — | | | | 18-11-10 | |
| INVERSIONES T, C.A. | | | LIQUIDATION | | REAL ESTATE | | | — | | | | 100.00 | % | | | — | | | | 18-11-10 | |
| PROXIMA ALFA INVESTMENTS, SGIIC, S.A. | | | LIQUIDATION | | FINANCIAL SERVICES | | | — | | | | 100.00 | % | | | — | | | | 12-11-10 | |
| ST. JOHNS INVESTMENTS MANAGMENT CO | | | MERGER | | FINANCIAL SERVICES | | | — | | | | 100.00 | % | | | — | | | | 30-11-10 | |
| DEUSTO, S.A. DE INVERSION MOBILIARIA | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 10-12-10 | |
| ELANCHOVE, S.A. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 10-12-10 | |
| FINANCIERA ESPAÑOLA, S.A. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 10-12-10 | |
| OCCIVAL, S.A. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 10-12-10 | |
| BBVA SECURITIES HOLDINGS, S.A. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 21-12-10 | |
| ALMACENES GENERALES DE DEPOSITO, S.A.E. DE | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 21-12-10 | |
| MULTIVAL, S.A. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 21-12-10 | |
| S.A. DE PROYECTOS INDUSTRIALES CONJUNTOS | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 21-12-10 | |
| HOLDING DE PARTICIPACIONES INDUSTRIALES 2000, S.A. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 21-12-10 | |
| MIRADOR DE LA CARRASCOSA, S.L. | | | MERGER | | REAL ESTATE | | | — | | | | 100.00 | % | | | — | | | | 28-12-10 | |
| MONTEALMENARA GOLF, S.L. | | | MERGER | | REAL ESTATE | | | — | | | | 100.00 | % | | | — | | | | 28-12-10 | |
| BBVA GLOBAL MARKETS RESEARCH, S.A. | | | LIQUIDATION | | FINANCIAL SERVICES | | | 46 | | | | 100.00 | % | | | — | | | | 15-12-10 | |
| ANIDA CARTERA SINGULAR, S.L, | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 28-12-10 | |
| BBVA PARTICIPACIONES INTERNACIONAL, S.L. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 22-12-10 | |
| BROOKLINE INVESTMENTS,S.L. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 22-12-10 | |
| ARAGON CAPITAL, S.L. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 22-12-10 | |
| GRELAR GALICIA, S.A. | | | MERGER | | INVESTMENT COMPANY | | | — | | | | 100.00 | % | | | — | | | | 21-12-10 | |
| MARQUES DE CUBAS 21, S.L, | | | MERGER | | REAL ESTATE | | | — | | | | 100.00 | % | | | — | | | | 28-12-10 | |
V-2
BUSINESS COMBINATIONS AND OTHER ACQUISITIONS OR INCREASES OF INTEREST OWNERSHIP IN CONSOLIDATED SUBSIDIARIES AND JOINTLY CONTROLLED COMPANIES ACCOUNTED FOR USING THE PROPORTIONATE METHOD
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | % of Voting Rights | | | | |
| | | | | | | Price Paid in the
| | | Fair Value of
| | | | | | Total Voting
| | | | |
| | | | | | | Transactions +
| | | Equity
| | | % Participation
| | | Rights
| | | Effective Date for
| |
| | | | | | | Expenses Directly
| | | Instruments
| | | (Net)
| | | Controlled After
| | | the Transaction
| |
| | | Type of
| | | | Attributable to the
| | | Issued for the
| | | Acquired
| | | the
| | | (or Notification
| |
Company | | Transaction | | Activity | | Transactions | | | Transactions | | | in the Period | | | Transactions | | | Date) | |
| | | | | | | Thousands of Euros | | | | | | | | | | |
| |
| TELEFONICA FACTORING COLOMBIA, S.A. | | ACQUISITION | | COMERCIAL | | | 350 | | | | — | | | | 24.30 | % | | | 24.30 | % | | | 31-1-2010 | |
| MICROMEDIOS DIGITALES, S.A. | | ACQUISITION | | SERVICES | | | — | | | | — | | | | — | | | | 48.99 | % | | | 26-2-2010 | |
| OPERADORA HITO URBANO, S.A. DE C.V. | | FOUNDING | | SERVICES | | | 1 | | | | — | | | | 35.00 | % | | | 35.00 | % | | | 26-2-2010 | |
| CHINA CITIC BANK LIMITED CNCB | | ACQUISITION | | BANKING | | | 1,197,475 | | | | — | | | | 4.93 | % | | | 15.00 | % | | | 30-4-2010 | |
| TELEFONICA FACTORING CHILE, S.A. | | FOUNDING | | COMERCIAL | | | 139 | | | | — | | | | 24.30 | % | | | 24.30 | % | | | 31-5-2010 | |
| DESARROLLO URBANÍSTICO CHAPULTEPEC, S.A.P.I. DE C.V. | | FOUNDING | | SERVICES | | | 280 | | | | — | | | | 50.00 | % | | | 50.00 | % | | | 24-6-2010 | |
| SOLIUM MEXICO, S.A. DE C.V. | | FOUNDING | | SERVICES | | | — | | | | — | | | | 100.00 | % | | | 100.00 | % | | | 4-11-2010 | |
| ALTITUDE SOFTWARE SGPS, S.A. | | ACQUISITION | | SERVICES | | | 9,842 | | | | — | | | | 30.47 | % | | | 30.47 | % | | | 29-12-2010 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
DISPOSAL OR REDUCTION OF INTEREST OWNERSHIP IN ASSOCIATESCONSOLIDATED SUBSIDIARIES AND JOINTLY CONTROLLED COMPANIES
ACCOUNTED FOR USING THE EQUITYPROPORTIONATE METHOD
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | %
| | | | |
| | | | | | | | | | | | voting Rights | | | | |
| | | | | | | | | | | | | | | Totally
| | | | |
| | | Type of
| | | | | | Profit in The
| | | %
| | | Controlled After
| | | Effective Date (or
| |
Company | | Transaction | | | Activity | | | Transaction | | | Sold | | | the Disposal | | | Notification Date) | |
| |
| TUBOS REUNIDOS* | | | DISPOSAL | | | | INDUSTRIAL | | | | 8,362 | | | | 0.853 | % | | | 23.403 | % | | | 16/01/2008 28/02/2008 | |
| TRIBUGEST GESTION DE TRIBUTOS, S.A. | | | DISPOSAL | | | | SERVICES | | | | 1,000 | | | | 39.979 | % | | | 0.000 | % | | | 12/23/2008 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | % of Voting Rights | | | Effective Date for
| |
| | | | | | | | | | % Participation
| | | Total Voting Rights
| | | the Transaction
| |
| | | | | | | Profit (Loss)
| | | Sold
| | | Controlled after the
| | | (or Notification
| |
Company | | Type of Transaction | | Activity | | in the Transaction | | | in the Period | | | Disposal | | | Date) | |
| | | | | | | Thousands of euros | | | | | | | |
| |
| SERVICIO MERCANTIL DE OCCIDENTE, S.A. | | LIQUIDATION | | SERVICES | | | — | | | | 25.00 | % | | | — | | | | 31-05-10 | |
| INMUEBLES MADARIAGA PROMOCIONES, S.L. | | LIQUIDATION | | REAL ESTATE | | | (34 | ) | | | 50.0 | % | | | — | | | | 31-05-10 | |
SDAD PARA LA PRESTACION SoS ADMINISTRATIVOS, S.L. | | DISPOSAL | | SERVICES | | | 485 | | | | 30.0 | % | | | — | | | | 30-06-10 | |
| INMOBILIARIA RESIDENCIAL LOS ARROYOS, S.A. | | CHARGE-OFF | | REAL ESTATE | | | — | | | | 33.3 | % | | | — | | | | 30-06-10 | |
| PRUBI, S.A. | | CHARGE-OFF | | REAL ESTATE | | | — | | | | 24.0 | % | | | — | | | | 30-06-10 | |
| FIDEICOMISO F/401555-8 CUATRO BOSQUES | | DISPOSAL | | REAL ESTATE | | | 85 | | | | 50.0 | % | | | — | | | | 31-08-10 | |
| MOBIPAY INTERNATIONAL, S.A. | | LIQUIDATION | | SERVICES | | | 1 | | | | 50.0 | % | | | — | | | | 06-08-10 | |
| TUBOS REUNIDOS, S.A. | | DISPOSAL | | INDUSTRIAL | | | 141 | | | | 0.1 | % | | | 23.25 | % | | | 30-09-10 | |
| TUBOS REUNIDOS, S.A. | | DISPOSAL | | INDUSTRIAL | | | 278 | | | | 0.2 | % | | | 23.03 | % | | | 31-10-10 | |
| FIDEICOMISOS DE ADMINISTRACION (COLOMBIA) | | DISPOSAL | | SERVICES | | | 30 | | | | 20.5 | % | | | — | | | | 30-11-10 | |
| TUBOS REUNIDOS, S.A. | | DISPOSAL | | INDUSTRIAL | | | 28 | | | | 0.0 | % | | | 23.00 | % | | | 30-11-10 | |
| MICROMEDIOS DIGITALES, S.A. | | DISPOSAL | | SERVICES | | | (129 | ) | | | 49.0 | % | | | — | | | | 31-12-10 | |
| TUBOS REUNIDOS, S.A. | | DISPOSAL | | INDUSTRIAL | | | 53 | | | | 0.0 | % | | | 22.95 | % | | | 31-12-10 | |
V-3
CHANGES IN OTHER COMPANIES QUOTED RECOGNIZE ASAVAILABLE-FOR-SALE
| | | | | | | | | | | | | | | | | |
| | | | | | | % Voting rights | | | Effective Date
| |
| | | | | | | % Participation
| | | | | | for the Transaction
| |
| | | Type of
| | | | Acquired (Sold)
| | | Totally Controlled
| | | (or Notification
| |
Company | | Transaction | | Activity | | in the Period | | | after Transaction | | | Date) | |
| |
| INMOBILIARIA COLONIAL, S.A.(*)(1) | | ACQUISITION | | REAL ESTATE | | | 3.302 | % | | | 3.302 | % | | | 18-3-2010 | |
| INMOBILIARIA COLONIAL, S.A.(*)(2) | | DILUCION PARTIC. | | REAL ESTATE | | | 2.519 | % | | | 0.783 | % | | | 24-3-2010 | |
| ACS, ACTIVIDADES DE CONSTRUCCIÓN Y SERVICIOS, S.A.(*) | | ACQUISITION | | SERVICES | | | 0.888 | % | | | 3.560 | % | | | 13-5-2010 | |
| TECNICAS REUNIDAS, S.A.(*) | | DISPOSAL | | SERVICES | | | 0.434 | % | | | 2.685 | % | | | 29-6-2010 | |
| ACS, ACTIVIDADES DE CONSTRUCCIÓN Y SERVICIOS, S.A.(*) | | DISPOSAL | | SERVICES | | | 0.010 | % | | | 2.998 | % | | | 27-10-2010 | |
| ACS, ACTIVIDADES DE CONSTRUCCIÓN Y SERVICIOS, S.A.(*) | | ACQUISITION | | SERVICES | | | 0.150 | % | | | 3.022 | % | | | 10-11-2010 | |
| REPSOL YPF, S.A.(*) | | ACQUISITION | | SERVICES | | | 0.803 | % | | | 3.284 | % | | | 28-12-2010 | |
| | |
*(*) | | Notifications realized |
|
| (1) | | Operation of change of ownership in favor of BBVA by enforcement actions of 58,012,836 shares. |
|
| (2) | | Dilution of our percentage of investment for increase of the issuer resulting from the conversion into shares of convertifbles obligations. |
VI-3
ANEXO VI. Changes and notification of investments in the BBVA Group in 2008
COMPLEMENT APPENDIX IV REST OF QUOTED SUBSIDIARIES AND JOINTLY CONTROLLED
COMPANIES
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | % Voting Rights | | | Effective Date
| |
| | | | | | | | Net Acquired
| | | Totally Controlled
| | | (or Notification
| |
Company | | Type of Transaction | | Activity | | | in the Year | | | After Acquisition | | | Date) | |
| | | | | | | | | | | | | | Thounsand € | |
| |
| ACS, ACTIVIDADES DE CONSTRUCCION Y SERVICIOS, S.A.* | | Refresh dates | | | SERVICES | | | | | | | | 3.216 | % | | | 1/11/2008 | |
| ACS, ACTIVIDADES DE CONSTRUCCION Y SERVICIOS, S.A.* | | Disposal | | | SERVICES | | | | —0.411 | % | | | 2.805 | % | | | 8/13/2008 | |
| GAMESA CORPORACION TECNOLOGICA, S.A.* | | Acquisition | | | INDUSTRIAL | | | | 4.626 | % | | | 4.684 | % | | | 3/11/2008 | |
| GAMESA CORPORACION TECNOLOGICA, S.A.* | | Disposal | | | INDUSTRIAL | | | | —2.711 | % | | | 1.973 | % | | | 14/08/2008
25/08/2008 | |
| SOL MELIA, S.A.* | | Acquisition | | | SERVICES | | | | 3.116 | % | | | 3.495 | % | | | 3/10/2008 | |
VI-4V-4
APPENDIX VI. Fully consolidated subsidiaries with more than 10% owned by non-Group shareholders as of 31 December, 2010
| | | | | | | | | | | | | | | |
| | | | | % of Voting Rights
| |
| | | | | Controlled by the Bank | |
Company | | Activity | | Direct | | | Indirect | | | Total | |
| |
| BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A. | | BANKING | | | — | | | | 68.2 | | | | 68.2 | |
| BANCO PROVINCIAL S.A. — BANCO UNIVERSAL | | BANKING | | | 1.9 | | | | 53.8 | | | | 55.6 | |
| BBVA & PARTNERS ALTERNATIVE INVESTMENT A.V., S.A. | | SECURITIES DEALER | | | 70.0 | | | | — | | | | 70.0 | |
| BBVA INMOBILIARIA E INVERSIONES, S.A. | | REAL ESTATE | | | — | | | | 68.1 | | | | 68.1 | |
| DESARROLLO URBANISTICO DE CHAMARTÍN, S.A. | | REAL ESTATE | | | — | | | | 72.5 | | | | 72.5 | |
| EL OASIS DE LAS RAMBLAS, S.L. | | REAL ESTATE | | | — | | | | 70.0 | | | | 70.0 | |
| ESTACIÓN DE AUTOBUSES CHAMARTÍN, S.A. | | SERVICES | | | — | | | | 51.0 | | | | 51.0 | |
FIDEICOMISO HARES BBVA BANCOMER F/47997-2 | | REAL ESTATE | | | — | | | | 80.3 | | | | 80.3 | |
| GESTIÓN DE PREVISIÓN Y PENSIONES, S.A. | | PENSION FUND MANAGEMENT | | | 60.0 | | | | — | | | | 60.0 | |
| GRUPO PROFESIONAL PLANEACION Y PROYECTOS, S.A. DE C.V. | | SERVICES | | | — | | | | 58.4 | | | | 58.4 | |
| HOLDING CONTINENTAL, S.A. | | INVESTMENT COMPANY | | | 50.0 | | | | — | | | | 50.0 | |
| INVERSIONES BANPRO INTERNATIONAL INC. N.V. | | IN LIQUIDATION | | | 48.0 | | | | — | | | | 48.0 | |
| INVERSIONES P.H.R.4, C.A. | | IN LIQUIDATION | | | — | | | | 60.5 | | | | 60.5 | |
| JARDINES DE SARRIENA, S.L. | | REAL ESTATE | | | — | | | | 85.0 | | | | 85.0 | |
| PROMOTORA RESIDENCIAL GRAN EUROPA, S.L. | | REAL ESTATE | | | — | | | | 58.5 | | | | 58.5 | |
| PRO-SALUD, C.A. | | SERVICES | | | — | | | | 58.9 | | | | 58.9 | |
| VIRTUAL DOC, S.L. | | IN LIQUIDATION | | | — | | | | 70.0 | | | | 70.0 | |
VI-1
APPENDIX VII. Subsidiaries fully consolidated with more than 5% owned by
non-Group shareholdersBBVA Group’s securitization fund
| | | | | | | | | | | | | | | |
| | | | | % of Voting Rights
| |
| | | | | Controlled by the Bank | |
Company | | Activity | | Direct | | | Indirect | | | Total | |
| |
| ALTITUDE INVESTMENTS LIMITED | | FINANCIAL SERV. | | | 51.00 | | | | — | | | | 51.00 | |
| ALTURA MARKETS, SOCIEDAD DE VALORES, S.A. | | BROKERING | | | 50.00 | | | | — | | | | 50.00 | |
| BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A. | | BANKING | | | 55.97 | | | | 12.21 | | | | 68.18 | |
| BANCO PROVINCIAL S.A. — BANCO UNIVERSAL | | BANKING | | | 1.85 | | | | 53.75 | | | | 55.60 | |
| BBVA & PARTNERS ALTERNATIVE INVESTMENT A.V., S.A. | | BROKERING | | | 70.00 | | | | — | | | | 70.00 | |
| BBVA BANCO FRANCES, S.A. | | BANKING | | | 45.65 | | | | 30.35 | | | | 76.00 | |
| BBVA INMOBILIARIA E INVERSIONES, S.A. | | REAL ESTATE | | | — | | | | 68.11 | | | | 68.11 | |
| DESARROLLO URBANISTICO DE CHAMARTÍN, S.A. | | REAL ESTATE | | | — | | | | 72.50 | | | | 72.50 | |
| EL OASIS DE LAS RAMBLAS, S.L | | REAL ESTATE | | | — | | | | 70.00 | | | | 70.00 | |
| ESTACIÓN DE AUTOBUSES CHAMARTÍN, S.A. | | SERVICES | | | — | | | | 51.00 | | | | 51.00 | |
| GESTIÓN DE PREVISIÓN Y PENSIONES, S.A. | | PENSIONS | | | 60.00 | | | | — | | | | 60.00 | |
| HOLDING CONTINENTAL, S.A. | | PORTFOLIO | | | 50.00 | | | | — | | | | 50.00 | |
| IBERDROLA SERVICIOS FINANCIEROS, E.F.C, S.A. | | FINANCIAL SERV. | | | — | | | | 84.00 | | | | 84.00 | |
| INVERSIONES BANPRO INTERNATIONAL INC. N.V. | | PORTFOLIO | | | 48.00 | | | | — | | | | 48.00 | |
| INVERSIONES P.H.R.4, C.A | | NO ACTIVITY | | | — | | | | 60.46 | | | | 60.46 | |
| JARDINES DE SARRIENA, S.L | | REAL ESTATE | | | — | | | | 85.00 | | | | 85.00 | |
| MIRADOR DE LA CARRASCOSA, S.L | | REAL ESTATE | | | — | | | | 55.90 | | | | 55.90 | |
| PERI 5.1 SOCIEDAD LIMITADA | | REAL ESTATE | | | — | | | | 54.99 | | | | 54.99 | |
| PREVENTIS, S.A. | | INSURANCE | | | — | | | | 90.27 | | | | 90.27 | |
| PROMOTORA RESIDENCIAL GRAN EUROPA, S.L | | REAL ESTATE | | | — | | | | 58.50 | | | | 58.50 | |
| PRO-SALUD, C.A | | SERVICES | | | — | | | | 58.86 | | | | 58.86 | |
| PROVINCIAL DE VALORES CASA DE BOLSA, C.A | | FINANCIAL SERV. | | | — | | | | 90.00 | | | | 90.00 | |
| SMARTSPREAD LIMITED | | SERVICES | | | — | | | | 63.52 | | | | 63.52 | |
| VIRTUAL DOC, S.L | | SERVICES | | | — | | | | 70.00 | | | | 70.00 | |
| | | | | | | | | | | | | |
| | | | | | | Total Securitized
| | | Total Securitized
| |
| | | | | Origination
| | Exposures at the
| | | Exposures as of
| |
Securitization Fund | | Company | | Date | | Origination Date | | | December 31, 2010 | |
| | | | | | | Thousands of euros | |
| |
| BBVA AUTOS I FTA | | BBVA, S.A. | | 10/2004 | | | 1,000,000 | | | | 92,588 | |
| BBVA-3 FTPYME FTA | | BBVA, S.A. | | 11/2004 | | | 1,000,023 | | | | 106,617 | |
| BBVA AUTOS 2 FTA | | BBVA, S.A. | | 12/2005 | | | 1,000,000 | | | | 294,326 | |
| BBVA HIPOTECARIO 3 FTA | | BBVA, S.A. | | 06/2005 | | | 1,450,013 | | | | 346,643 | |
| BBVA-4 PYME FTA | | BBVA, S.A. | | 09/2005 | | | 1,250,025 | | | | 141,447 | |
| BBVA CONSUMO 1 FTA | | BBVA, S.A. | | 05/2006 | | | 1,499,999 | | | | 415,721 | |
| BBVA-5 FTPYME FTA | | BBVA, S.A. | | 10/2006 | | | 1,900,022 | | | | 402,815 | |
| BCL MUNICIPIOS I FTA | | BBVA, S.A. | | 06/2000 | | | 1,205,059 | | | | 154,217 | |
| 2 PS RBS (ex ABN) | | BBVA SDAD DE LEASING INMOBILIARIO, S.A. | | 09/2001 | | | 8,982 | | | | 6,393 | |
| 2 PS INTERAMERICANA | | BBVA CHILE, S.A. | | 09/2004 | | | 14,149 | | | | 6,830 | |
| 2 PS INTERAMERICANA | | BBVA SDAD DE LEASING INMOBILIARIO, S.A. | | 09/2004 | | | 20,211 | | | | 10,175 | |
| BBVA-2 FTPYME ICO FTA | | BBVA, S.A. | | 12/2000 | | | 899,393 | | | | 13,848 | |
| BBVA CONSUMO 2 FTA | | BBVA, S.A. | | 11/2006 | | | 1,500,000 | | | | 582,053 | |
| BBVA CONSUMO 3 FTA | | FINANZIA BANCO DE CRÉDITO, S.A. | | 04/2008 | | | 651,788 | | | | 354,982 | |
| BBVA CONSUMO 3 FTA | | BBVA, S.A. | | 04/2008 | | | 323,212 | | | | 153,544 | |
| BBVA CONSUMO 4 FTA | | FINANZIA BANCO DE CRÉDITO, S.A. | | 12/2009 | | | 684,530 | | | | 687,429 | |
| BBVA CONSUMO 4 FTA | | BBVA, S.A. | | 12/2009 | | | 415,470 | | | | 390,774 | |
| BBVA CONSUMO 5 FTA | | FINANZIA BANCO DE CRÉDITO, S.A. | | 12/2010 | | | 827,819 | | | | 821,700 | |
| BBVA CONSUMO 5 FTA | | BBVA, S.A. | | 12/2010 | | | 72,180 | | | | 72,185 | |
| BBVA UNIVERSALIDAD E10 | | BBVA COLOMBIA, S.A. | | 03/2009 | | | 29,033 | | | | 15,838 | |
| BBVA UNIVERSALIDAD E11 | | BBVA COLOMBIA, S.A. | | 05/2009 | | | 19,166 | | | | 11,175 | |
| BBVA UNIVERSALIDAD E12 | | BBVA COLOMBIA, S.A. | | 08/2009 | | | 30,789 | | | | 17,566 | |
| BBVA UNIVERSALIDAD E9 | | BBVA COLOMBIA, S.A. | | 12/2008 | | | 55,052 | | | | 28,747 | |
| BBVA EMPRESAS 1 FTA | | BBVA, S.A. | | 11/2007 | | | 1,450,002 | | | | 436,485 | |
| BBVA EMPRESAS 2 FTA | | BBVA, S.A. | | 03/2009 | | | 2,850,062 | | | | 1,654,301 | |
| BBVA EMPRESAS 3 FTA | | BBVA, S.A. | | 12/2009 | | | 2,600,011 | | | | 1,921,757 | |
| BBVA EMPRESAS 4 FTA | | BBVA, S.A. | | 07/2010 | | | 1,700,025 | | | | 1,513,222 | |
| BACOMCB 07 | | BBVA BANCOMER, S.A. | | 12/2007 | | | 159,755 | | | | 107,803 | |
| BACOMCB 08 | | BBVA BANCOMER, S.A. | | 03/2008 | | | 69,783 | | | | 50,165 | |
| BACOMCB 08U | | BBVA BANCOMER, S.A. | | 08/2008 | | | 344,198 | | | | 291,279 | |
BACOMCB08-2 | | BBVA BANCOMER, S.A. | | 12/2008 | | | 351,925 | | | | 269,905 | |
| BACOMCB 09 | | BBVA BANCOMER, S.A. | | 08/2009 | | | 395,526 | | | | 344,219 | |
| FannieMae- Lender No. 227300000 | | COMPASS BANK | | 12/2001 | | | 184,116 | | | | 22,763 | |
| FANNIE MAE — LENDER No. 227300027 | | COMPASS BANK | | 12/2003 | | | 279,356 | | | | 86,990 | |
| BBVA-FINANZIA AUTOS 1 FTA | | FINANZIA BANCO DE CRÉDITO, S.A. | | 04/2007 | | | 800,000 | | | | 309,971 | |
| GAT FTGENCAT 2005 FTA | | BBVA, S.A. | | 12/2005 | | | 249,943 | | | | 46,081 | |
| GC GENCAT II FTA | | BBVA, S.A. | | 03/2003 | | | 224,967 | | | | 10,517 | |
| BBVA RMBS 1 FTA | | BBVA, S.A. | | 02/2007 | | | 2,500,000 | | | | 1,787,623 | |
| BBVA RMBS 2 FTA | | BBVA, S.A. | | 03/2007 | | | 5,000,000 | | | | 3,536,270 | |
| BBVA RMBS 3 FTA | | BBVA, S.A. | | 07/2007 | | | 3,000,000 | | | | 2,366,245 | |
| BBVA RMBS 4 FTA | | BBVA, S.A. | | 11/2007 | | | 4,900,001 | | | | 3,508,024 | |
| BBVA RMBS 5 FTA | | BBVA, S.A. | | 05/2008 | | | 5,000,001 | | | | 4,053,846 | |
| BBVA RMBS 6 FTA | | BBVA, S.A. | | 11/2008 | | | 4,995,005 | | | | 4,113,627 | |
| BBVA RMBS 7 FTA | | BBVA, S.A. | | 11/2008 | | | 8,500,005 | | | | 6,530,597 | |
| BBVA RMBS 9 FTA | | BBVA, S.A. | | 04/2010 | | | 1,295,101 | | | | 1,258,406 | |
| BBVA LEASING 1 FTA | | BBVA, S.A. | | 06/2007 | | | 2,500,000 | | | | 921,962 | |
| BBVA-6 FTPYME FTA | | BBVA, S.A. | | 06/2007 | | | 1,500,101 | | | | 452,240 | |
| BBVA-7 FTGENCAT FTA | | BBVA, S.A. | | 02/2008 | | | 250,010 | | | | 98,519 | |
| BBVA-8 FTPYME FTA | | BBVA, S.A. | | 07/2008 | | | 1,100,127 | | | | 539,816 | |
| BBVA RMBS 8 FTA | | BBVA, S.A. | | 07/2009 | | | 1,220,000 | | | | 1,089,584 | |
VII-1
APPENDIX VIII ReconciliationVIII. Details of the consolidated financial statements for the
years 2008, 2007outstanding subordinated debt and 2006 elaborated in accordance with the models of Circular
6/2008 ofpreferred securities issued by the Bank or entities in the Group consolidated as of Spain with respect to those elaborated in accordance with
Bank of Spain Circular 4/2004.December 31, 2010.
The Group’s consolidated financial statements for the years 2007 and 2006 have been modified with respect to those originally prepared by the Group at that dates and in accordance with the model used in the consolidated financial statements for 2007 and 2006, in order to adapt them to the disclosure and presentation requirements set out in the Circular 6/2008Outsanding as of the BankDecember 31, 2010 of Spain. This change in format has no effect on the equity or on profit attributable to the Group.subordinated issues
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Prevailing
| | | | |
| | | | | | December
| | | December
| | | December
| | | Interest Rate
| | | Maturity
| |
Issuer Entity and Issued Date | | Currency | | | 2010 | | | 2009 | | | 2008 | | | at 2010 | | | Date | |
| | | Millions of euros | |
| |
Issues in Euros | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA | | | | | | | | | | | | | | | | | | | | | | | | |
| July-96 | | | EUR | | | | 27 | | | | 27 | | | | 27 | | | | 9.37 | % | | | 22-12-16 | |
| November-03 | | | EUR | | | | — | | | | 750 | | | | 750 | | | | — | | | | 12-11-15 | |
| October-04 | | | EUR | | | | 992 | | | | 992 | | | | 992 | | | | 4.37 | % | | | 20-10-19 | |
| February-07 | | | EUR | | | | 297 | | | | 297 | | | | 297 | | | | 4.50 | % | | | 16-02-22 | |
| March-08 | | | EUR | | | | 125 | | | | 125 | | | | 125 | | | | 6.03 | % | | | 03-03-33 | |
| July-08 | | | EUR | | | | 100 | | | | 100 | | | | 100 | | | | 6.20 | % | | | 04-07-23 | |
| September-09 | | | EUR | | | | 2,000 | | | | 2,000 | | | | — | | | | 5.00 | % | | | 15-10-14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | EUR | | | | 3,541 | | | | 4,291 | | | | 2,291 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA GLOBAL FINANCE, LTD.(*) | | | | | | | | | | | | | | | | | | | | | | | | |
| July-99 | | | EUR | | | | 73 | | | | 73 | | | | 73 | | | | 6.35 | % | | | 16-10-15 | |
| February-00 | | | EUR | | | | — | | | | 442 | | | | 442 | | | | — | | | | 25-02-10 | |
| October-01 | | | EUR | | | | 60 | | | | 60 | | | | 60 | | | | 5.73 | % | | | 10-10-11 | |
| October-01 | | | EUR | | | | 40 | | | | 40 | | | | 40 | | | | 6.08 | % | | | 10-10-16 | |
| October-01 | | | EUR | | | | 50 | | | | 50 | | | | 50 | | | | 1.58 | % | | | 15-10-16 | |
| November-01 | | | EUR | | | | 55 | | | | 55 | | | | 55 | | | | 1.75 | % | | | 02-11-16 | |
| December-01 | | | EUR | | | | 56 | | | | 56 | | | | 56 | | | | 1.72 | % | | | 20-12-16 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | EUR | | | | 334 | | | | 776 | | | | 776 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA SUBORDINATED CAPITAL, S.A.U.(*) | | | | | | | | | | | | | | | | | | | | | | | | |
| May-05 | | | EUR | | | | 423 | | | | 456 | | | | 484 | | | | 1.34 | % | | | 23-05-17 | |
| October-05 | | | EUR | | | | 126 | | | | 130 | | | | 150 | | | | 1.28 | % | | | 13-10-20 | |
| October-05 | | | EUR | | | | 205 | | | | 231 | | | | 250 | | | | 1.25 | % | | | 20-10-17 | |
| October-06 | | | EUR | | | | 822 | | | | 900 | | | | 1,000 | | | | 1.33 | % | | | 24-10-16 | |
| April-07 | | | EUR | | | | 623 | | | | 700 | | | | 750 | | | | 1.11 | % | | | 03-04-17 | |
| April-07 | | | EUR | | | | 100 | | | | 100 | | | | 100 | | | | 3.32 | % | | | 04-05-22 | |
| May-08 | | | EUR | | | | 50 | | | | 50 | | | | 50 | | | | 0.00 | % | | | 19-05-23 | |
| July-08 | | | EUR | | | | 20 | | | | 20 | | | | 20 | | | | 6.11 | % | | | 22-07-18 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | EUR | | | | 2,369 | | | | 2,587 | | | | 2,804 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA BANCOMER, S.A. de C.V. | | | | | | | | | | | | | | | | | | | | | | | | |
| May-07 | | | EUR | | | | 601 | | | | 560 | | | | 610 | | | | 5.00 | % | | | 17-07-17 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | EUR | | | | 601 | | | | 560 | | | | 610 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
ALTURA MARKETS A.V., S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| November-07 | | | EUR | | | | 2 | | | | 2 | | | | 3 | | | | 3.03 | % | | | 29-11-17 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | EUR | | | | 2 | | | | 2 | | | | 3 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total issued in Euros | | | | | | | 6,847 | | | | 8,216 | | | | 6,484 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
The main differences between the financial statement models set out in Circular 6/2008 of the Bank of Spain and the formats included in the Group’s consolidated financial statements at December 31, 2007 and 2006 are as follows:
| | |
| • | Consolidated balance sheet: in contrast to the consolidated balance sheet forming part of the consolidated financial statements at December 31, 2007, the model balance sheet included in these consolidated financial statements: |
| (*) | | |
| • | Includes within “Tangible assets — Tangible fixed assets” both “Tangible assets — For own use” and “Tangible assets — Other assets leased out under and operating lease”, included in the asset sideAs of the consolidated balance sheet forming partMarch 23, 2010 issues of the Group’s consolidated financial statements for 2007 and 2006.BBVA Capital Funding, Ltd. have been assumed by BBVA Global Finance Ltd. |
| |
| • | Includes under “Loans and advances to credit institutions” and “Loans and advances to customers,” all the amounts previously classified in under “Loans and receivables — Other financial assets” in the asset side of consolidated balance sheet forming part of the Group’s consolidated financial statements for 2007 and 2006. |
|
| • | Includes “Other assets — Other,” which combines the captions “Prepayments” and “Other assets” presented in the asset side of consolidated balance sheet forming part of the Group’s consolidated financial statements for 2007 and 2006. |
|
| • | Includes on the liability side of the balance sheet “Other liabilities”, which combines the “Accrued expenses” and “Other liabilities” headings included on the consolidated balance sheet forming part of the annual financial statements at December 31, 2007 and 2006. |
| | |
| • | Consolidated income statement: in contrast to the model consolidated income statement used in the consolidated financial statements at December 31, 2007 and 2006, the consolidated income statement presented in these consolidated financial statements: |
A new margin called “Net interest income” representingThe issues of BBVA Subordinated Capital, S.A.U. and BBVA Global Finance, LTD. are guaranteed (secondary liability) by the difference between “Interest and similar income” and “Interest expense and similar charges”. Both “Interest income” and “Interest expense” include income and expenses of this nature arising on the insurance business and on non-financial activities.
As explained in the previous paragraph dealing with “Interest income” and “Interest expense”, income and expense arising on the Group’s insurance activities are no longer offset. Rather, they are now recognized in the corresponding income or expense captions of the consolidated income statement, with the resulting effect on each of the margins and on the captions comprising that statement.
The new “Gross income” is similar to the previous “Gross income” except for the fact that it includes other operating income and expense which previously did not form part of the ordinary margin. In addition, the new model includes interest income and charges arising on non-financial activities (see letter g, below) and comprises other items previously recognized under “Other gains” and “Other losses”.
Eliminates the headings “Sales and income from the provision of non-financial services” and “Cost of sales” from the consolidated income statement. These amounts are now recognized primarily under “Other operating income” and “Other operating expenses,” respectively, in the consolidated income statement.Bank.
VIII-1
“Staff expenses” and “General and administrative expenses” include amounts previously recognized under “Other gains” and “Other losses” in the earlier model.Outsanding as of December 31, 2010 of subordinated issues
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Prevailing
| | | | |
| | | | | | December
| | | December
| | | December
| | | Interest Rate
| | | Maturity
| |
Issuer Entity and Issued Date | | Currency | | | 2010 | | | 2009 | | | 2008 | | | at 2010 | | | Date | |
| | | Millions of euros | |
| |
Issues in foreign currency | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA PUERTO RICO, S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| September-04 | | | USD | | | | 38 | | | | 35 | | | | 36 | | | | 1.74 | % | | | 23-09-14 | |
| September-06 | | | USD | | | | 28 | | | | 26 | | | | 27 | | | | 5.76 | % | | | 29-09-16 | |
| September-06 | | | USD | | | | 22 | | | | 21 | | | | 22 | | | | 0.86 | % | | | 29-09-16 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | USD | | | | 88 | | | | 82 | | | | 85 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA GLOBAL FINANCE, LTD.(*) | | | | | | | | | | | | | | | | | | | | | | | | |
| December-95 | | | USD | | | | 96 | | | | 139 | | | | 144 | | | | 7.00 | % | | | 01-12-25 | |
| October-95 | | | JPY | | | | 92 | | | | 75 | | | | 79 | | | | 6.00 | % | | | 26-10-15 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BANCO BILBAO VIZCAYA ARGENTARIA, CHILE | | | | | | | | | | | | | | | | | | | | | | | | |
| Various issues | | | CLP | | | | 624 | | | | 336 | | | | 287 | | | | Various | | | | Various | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | CLP | | | | 624 | | | | 336 | | | | 287 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA BANCOMER, S.A. de C.V. | | | | | | | | | | | | | | | | | | | | | | | | |
| July-05 | | | USD | | | | — | | | | 241 | | | | — | | | | — | | | | 22-07-15 | |
| May-07 | | | USD | | | | 373 | | | | 345 | | | | — | | | | 6.00 | % | | | 17-05-22 | |
| April-10 | | | USD | | | | 670 | | | | — | | | | — | | | | 7.00 | % | | | 22-04-20 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | USD | | | | 1,043 | | | | 586 | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| September-06 | | | MXN | | | | 151 | | | | 132 | | | | — | | | | 5.00 | % | | | 18-09-14 | |
| July-08 | | | MXN | | | | 73 | | | | 63 | | | | — | | | | 5.00 | % | | | 16-07-18 | |
| October-08 | | | MXN | | | | 181 | | | | 156 | | | | — | | | | 6.00 | % | | | 24-09-18 | |
| December-08 | | | MXN | | | | 166 | | | | 146 | | | | — | | | | 6.00 | % | | | 26-11-20 | |
| January-09 | | | MXN | | | | 2 | | | | 2 | | | | — | | | | 6.00 | % | | | 26-11-20 | |
| February-09 | | | MXN | | | | 2 | | | | 2 | | | | — | | | | 6.00 | % | | | 26-11-20 | |
| March-09 | | | MXN | | | | 1 | | | | 1 | | | | — | | | | 6.00 | % | | | 26-11-20 | |
| April-09 | | | MXN | | | | 1 | | | | 1 | | | | — | | | | 6.00 | % | | | 26-11-20 | |
| June-09 | | | MXN | | | | 158 | | | | 138 | | | | — | | | | 6.00 | % | | | 07-06-19 | |
| July-09 | | | MXN | | | | 5 | | | | 5 | | | | — | | | | 6.00 | % | | | 07-06-19 | |
| September-09 | | | MXN | | | | 1 | | | | 1 | | | | — | | | | 6.00 | % | | | 07-06-19 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | MXN | | | | 741 | | | | 647 | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA SUBORDINATED CAPITAL, S.A.U. | | | | | | | | | | | | | | | | | | | | | | | | |
| October-05 | | | JPY | | | | 184 | | | | 150 | | | | 159 | | | | 2.75 | % | | | 22-10-35 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | JPY | | | | 184 | | | | 150 | | | | 159 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| October-05 | | | GBP | | | | — | | | | 277 | | | | 315 | | | | — | | | | 21-10-15 | |
| March-06 | | | GBP | | | | 326 | | | | 325 | | | | 315 | | | | 5.00 | % | | | 31-03-16 | |
| March-07 | | | GBP | | | | 284 | | | | 282 | | | | 262 | | | | 5.75 | % | | | 11-03-18 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | GBP | | | | 610 | | | | 884 | | | | 892 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
RIVERWAY HOLDING CAPITAL TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| March-01 | | | USD | | | | 7 | | | | 7 | | | | 7 | | | | 10.18 | % | | | 08-06-31 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | USD | | | | 7 | | | | 7 | | | | 7 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
TEXAS REGIONAL STATUTORY TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| February-04 | | | USD | | | | 37 | | | | 35 | | | | 36 | | | | 3.15 | % | | | 17-03-34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | USD | | | | 37 | | | | 35 | | | | 36 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
“Impairment losses (net)” is now divided into two headings: “Impairment on financial assets (net)”, which comprises net impairment on the financial assets other than equity instruments classified as shareholdings; and “Impairment losses on other assets (net)”, which includes net impairment losses on equity instruments classified as shareholdings and on non-financial assets.
Eliminates the headings “Financial income from non-financial activities” and “Financial expense on non-financial activities.” These amounts are now recognized under “Interest income” and “Interest income,” respectively, in the consolidated income statement.
| | |
| (*) | | As of March 23, 2010 issues of BBVA Capital Funding, Ltd. have been assumed by BBVA Global Finance Ltd. |
Changes “Net operating income”. These measuresThe issues of profit mainly differ in that includesBBVA Subordinated Capital, S.A.U. and BBVA Global Finance, LTD. are guaranteed (secondary liability) by the financial interest income and expense arising on the Group’s non-financial activity, net impairment on financial instruments and net provisions, as well as the amounts previously recognized under “Other gains” and “Other losses” in the earlier statement format.
Does not include “Other gains” and “Other losses,” instead creating the following new headings: “Gains/(losses) on derecognised assets not classified as non-current assets held for sale,” “Negative goodwill” and “Gains/(losses)on non-current assets held for sale not classified as discontinued operations” which comprise, basically, the captions that previously formed part of the two eliminated headings mentioned above.Bank.
VIII-2
A reconciliation between the consolidated income statement for 2008, 2007 and 2006, prepared by the Group in accordance with the modelOutsanding as of Circular 4/2004December 31, 2010 of Bank of Spain and the model of Circular 6/2008 of Bank of Spain.subordinated issues
| | | | | | | | | | | | | | | |
INCOME STATEMENT IN ACCORDANCE WITH BANK OF SPAIN
CIRCULAR 4/2004 | | | 2008 | | | | Reconciliation | | | | 2008 | | | INCOME STATEMENT IN ACCORDANCE WITH BANK OF SPAIN CIRCULAR 6/2008 |
| INTEREST AND SIMILAR INCOME LESS INTEREST EXPENSE AND SIMILAR CHARGES | | | 11,444 | | | | 242 | | | | | | | |
| | | | | | | | | | | | 11,686 | | | NET INTEREST INCOME |
| INCOME FROM EQUITY INSTRUMENTS | | | 447 | | | | — | | | | 447 | | | DIVIDEND INCOME |
NET INTEREST INCOME | | | 11,891 | | | | | | | | | | | |
| SHARE OR PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD | | | 293 | | | | — | | | | 293 | | | SHARE OR PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD |
| NET FEES AND COMMISSIONS | | | 4,687 | | | | (159 | ) | | | 4,527 | | | NET FEES AND COMMISSIONS |
| INSURANCE ACTIVITY INCOME | | | 851 | | | | (851 | ) | | | | | | |
| GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES AND EXCHANGE DIFFERENCES (NET) | | | 2,132 | | | | (574 | ) | | | 1,558 | | | INCOME FROM INSURANCE ACTIVITIES (NET) AND EXCHANGE DIFFERENCES (NET) |
| | | | | | | | 466 | | | | 466 | | | OTHER OPERATING INCOME AND EXPENSES (NET) |
GROSS INCOME | | | 19,853 | | | | (876 | ) | | | 18,978 | | | GROSS INCOME |
| COST OF SALES (NET) | | | 82 | | | | (82 | ) | | | | | | |
| PERSONNEL EXPENSES AND OTHER ADMINISTRATIVE EXPENSES | | | (7,756 | ) | | | — | | | | (7,756 | ) | | ADMINISTRATION COSTS |
| DEPRECIATION AND AMORTIZATION | | | (699 | ) | | | — | | | | (699 | ) | | DEPRECIATION AND AMORTIZATION |
| OTHER OPERATING INCOME (NET) | | | (201 | ) | | | 201 | | | | | | | |
| | | | | | | | (2,940 | ) | | | (2,940 | ) | | IMPAIRMENT ON FINANCIAL ASSETS (NET) |
| | | | | | | | (1,431 | ) | | | (1,431 | ) | | PROVISIONS (NET) |
NET OPERATING INCOME | | | 11,279 | | | | (5,127 | ) | | | 6,151 | | | NET OPERATING INCOME |
| IMPAIRMENT LOSSES (NET) | | | (3,026 | ) | | | 2,981 | | | | (45 | ) | | IMPAIRMENT LOSSES OF OTHER ASSETS (NET) |
| PROVISION EXPENSE (NET) | | | (1,433 | ) | | | 1,433 | | | | | | | |
| FINANCIAL INCOME AND EXPENSES FROM NON-FINANCIAL ACTIVITIES | | | — | | | | — | | | | | | | |
| OTHER GAINS AND LOSSES (NET) | | | 106 | | | | (106 | ) | | | | | | |
| | | | | | | | 72 | | | | 72 | | | GAINS (LOSSES) IN WRITTEN OFF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE |
| | | | | | | | — | | | | — | | | NEGATIVE GOODWILL |
| | | | | | | | 748 | | | | 748 | | | GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS |
INCOME BEFORE TAX | | | 6,926 | | | | — | | | | 6,926 | | | INCOME BEFORE TAX |
| INCOME TAX | | | (1,541 | ) | | | — | | | | (1,541 | ) | | INCOME TAX |
INCOME FROM ORDINARY ACTIVITIES | | | 5,385 | | | | — | | | | 5,385 | | | INCOME FROM ORDINARY ACTIVITIES |
| INCOME FROM DISCONTINUED OPERATIONS (NET) | | | | | | | — | | | | | | | INCOME FROM DISCONTINUED OPERATIONS (NET) |
INCOME FOR THE YEAR (+/-) | | | 5,385 | | | | — | | | | 5,385 | | | NET INCOME |
| INCOME ATTRIBUTED TO MINORITY INTEREST | | | (366 | ) | | | — | | | | (366 | ) | | PROFIT OR LOSS ATRIBUTABLE TO MINORITY INTEREST |
INCOME ATRIBUTED TO THE GROUP | | | 5,020 | | | | — | | | | 5,020 | | | NET INCOME ATRIBUTED TO PARENT COMPANY |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Prevailing
| | | | |
| | | | | | December
| | | December
| | | December
| | | Interest Rate
| | | Maturity
| |
Issuer Entity and Issued Date | | Currency | | | 2010 | | | 2009 | | | 2008 | | | at 2010 | | | Date | |
| | | Millions of euros | |
| |
STATE NATIONAL CAPITAL TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| July-03 | | | USD | | | | 11 | | | | 10 | | | | 11 | | | | 3.35 | % | | | 30-09-33 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | USD | | | | 11 | | | | 10 | | | | 11 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
STATE NATIONAL STATUTORY TRUST II | | | | | | | | | | | | | | | | | | | | | | | | |
| March-04 | | | USD | | | | 7 | | | | 7 | | | | 7 | | | | 3.09 | % | | | 17-03-34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | USD | | | | 7 | | | | 7 | | | | 7 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
TEXASBANC CAPITAL TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| July-04 | | | USD | | | | 19 | | | | 17 | | | | 18 | | | | 2.89 | % | | | 23-07-34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | USD | | | | 19 | | | | 17 | | | | 18 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
COMPASS BANK | | | | | | | | | | | | | | | | | | | | | | | | |
| March-05 | | | USD | | | | 212 | | | | 195 | | | | 201 | | | | 5.50 | % | | | 01-04-20 | |
| March-06 | | | USD | | | | 195 | | | | 180 | | | | 186 | | | | 5.90 | % | | | 01-04-26 | |
| September-07 | | | USD | | | | 261 | | | | 242 | | | | 250 | | | | 6.40 | % | | | 01-10-17 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | USD | | | | 668 | | | | 617 | | | | 637 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA COLOMBIA, S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| August-06 | | | COP | | | | 156 | | | | 136 | | | | 128 | | | | 7.92 | % | | | 28-08-11 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | COP | | | | 156 | | | | 136 | | | | 128 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA PARAGUAY, S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| Various | | | PYG | | | | 2 | | | | 2 | | | | 2 | | | | Various | | | | Various | |
| Various | | | USD | | | | 6 | | | | 6 | | | | 6 | | | | Various | | | | Various | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BANCO CONTINENTAL, S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| December-06 | | | USD | | | | 22 | | | | 21 | | | | 22 | | | | 1.84 | % | | | 15-02-17 | |
| May-07 | | | USD | | | | 15 | | | | 14 | | | | 9 | | | | 6.00 | % | | | 14-05-27 | |
| September-07 | | | USD | | | | 15 | | | | 14 | | | | 14 | | | | 1.59 | % | | | 24-09-17 | |
| February-08 | | | USD | | | | 15 | | | | 14 | | | | 14 | | | | 6.47 | % | | | 28-02-28 | |
| June-08 | | | USD | | | | 22 | | | | 21 | | | | 14 | | | | 3.11 | % | | | 15-06-18 | |
| November-08 | | | USD | | | | 15 | | | | 14 | | | | 14 | | | | 2.89 | % | | | 15-02-19 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | | | | | 104 | | | | 98 | | | | 87 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| May-07 | | | PEN | | | | 11 | | | | 10 | | | | 9 | | | | 5.85 | % | | | 07-05-22 | |
| June-07 | | | PEN | | | | 16 | | | | 14 | | | | 14 | | | | 3.88 | % | | | 18-06-32 | |
| November-07 | | | PEN | | | | 15 | | | | 13 | | | | 12 | | | | 3.91 | % | | | 19-11-32 | |
| July-08 | | | PEN | | | | 13 | | | | 11 | | | | 11 | | | | 3.22 | % | | | 08-07-23 | |
| September-08 | | | PEN | | | | 14 | | | | 12 | | | | 12 | | | | 3.23 | % | | | 09-09-23 | |
| December-08 | | | PEN | | | | 8 | | | | 7 | | | | 7 | | | | 4.30 | % | | | 15-12-33 | |
| October-10 | | | PEN | | | | 150 | | | | — | | | | — | | | | 7.38 | % | | | 15-12-33 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | | | PEN | | | | 227 | | | | 67 | | | | 65 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total issues in foreign currencies (Millions of Euros) | | | | | | | 4,722 | | | | 3,901 | | | | 2,650 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
VIII-3
Outsanding as of December 31, 2010 of Preferred Issues
| | | | | | | | | | | | | | | |
INCOME STATEMENT IN ACCORDANCE WITH BANK OF SPAIN
CIRCULAR 4/2004 | | | 2007 | | | | Reconciliation | | | | 2007 | | | INCOME STATEMENT IN ACCORDANCE WITH BANK OF SPAIN CIRCULAR 6/2008 |
| INTEREST AND SIMILAR INCOME LESS INTEREST EXPENSE AND SIMILAR CHARGES | | | 9,422 | | | | 206 | | | | | | | |
| | | | | | | | | | | | 9,628 | | | NET INTEREST INCOME |
| INCOME FROM EQUITY INSTRUMENTS | | | 348 | | | | — | | | | 348 | | | DIVIDEND INCOME |
NET INTEREST INCOME | | | 9,769 | | | | | | | | 9,976 | | | |
| SHARE OR PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD | | | 242 | | | | — | | | | 242 | | | SHARE OR PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD |
| NET FEES AND COMMISSIONS | | | 4,723 | | | | (164 | ) | | | 4,559 | | | NET FEES AND COMMISSIONS |
| INSURANCE ACTIVITY INCOME | | | 729 | | | | (729 | ) | | | | | | |
| GAINS OR LOSSES ON FINANCIAL ASSETS AND | | | | | | | | | | | | | | |
| LIABILITIES AND EXCHANGE DIFFERENCES (NET) | | | 2,670 | | | | (714 | ) | | | 1,956 | | | INCOME FROM INSURANCE ACTIVITIES (NET) AND EXCHANGE DIFFERENCES (NET) |
| | | | | | | | 538 | | | | 538 | | | OTHER OPERATING INCOME AND EXPENSES (NET) |
GROSS INCOME | | | 18,133 | | | | (862 | ) | | | 17,271 | | | GROSS INCOME |
| COST OF SALES (NET) | | | 188 | | | | (188 | ) | | | | | | |
| PERSONNEL EXPENSES AND OTHER ADMINISTRATIVE EXPENSES | | | (7,053 | ) | | | (200 | ) | | | (7,253 | ) | | ADMINISTRATION COSTS |
| DEPRECIATION AND AMORTIZATION | | | (577 | ) | | | — | | | | (577 | ) | | DEPRECIATION AND AMORTIZATION |
| OTHER OPERATING INCOME (NET) | | | (146 | ) | | | 146 | | | | | | | |
| | | | | | | | | | | | 9,441 | | | |
| | | | | | | | (1,903 | ) | | | (1,903 | ) | | IMPAIRMENT ON FINANCIAL ASSETS (NET) |
| | | | | | | | (235 | ) | | | (235 | ) | | PROVISIONS (NET) |
NET OPERATING INCOME | | | 10,544 | | | | (3,241 | ) | | | 7,303 | | | NET OPERATING INCOME |
| IMPAIRMENT LOSSES (NET) | | | (1,938 | ) | | | 1,925 | | | | (13 | ) | | IMPAIRMENT LOSSES OF OTHER ASSETS (NET) |
| PROVISION EXPENSE (NET) | | | (210 | ) | | | 210 | | | | | | | |
| FINANCIAL INCOME AND EXPENSES FROM NON-FINANCIAL ACTIVITIES | | | 1 | | | | (1 | ) | | | | | | |
| OTHER GAINS AND LOSSES (NET) | | | 97 | | | | (97 | ) | | | | | | |
| | | | | | | | 13 | | | | 13 | | | GAINS (LOSSES) IN WRITTEN OFF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE |
| | | | | | | | — | | | | — | | | NEGATIVE GOODWILL |
| | | | | | | | 1,191 | | | | 1,191 | | | GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS |
INCOME BEFORE TAX | | | 8,495 | | | | — | | | | 8,495 | | | INCOME BEFORE TAX |
| INCOME TAX | | | (2,080 | ) | | | — | | | | (2,080 | ) | | INCOME TAX |
INCOME FROM ORDINARY ACTIVITIES | | | 6,415 | | | | — | | | | 6,415 | | | INCOME FROM ORDINARY ACTIVITIES |
| INCOME FROM DISCONTINUED OPERATIONS (NET) | | | | | | | — | | | | | | | INCOME FROM DISCONTINUED OPERATIONS (NET) |
INCOME FOR THE YEAR (+/-) | | | 6,415 | | | | — | | | | 6,415 | | | NET INCOME |
| INCOME ATTRIBUTED TO MINORITY INTEREST | | | (289 | ) | | | — | | | | (289 | ) | | PROFIT OR LOSS ATRIBUTABLE TO MINORITY INTEREST |
INCOME ATRIBUTED TO THE GROUP | | | 6,126 | | | | — | | | | 6,126 | | | NET INCOME ATRIBUTED TO PARENT COMPANY |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 2010 | | | December 2009 | | | December 2008 | |
| | | | | | Amount Issued
| | | | | | Amount Issued
| | | | | | Amount Issued
| |
Issuer Entity and Issued Date | | Currency | | | (Millions) | | | Currency | | | (Millions) | | | Currency | | | (Millions) | |
| |
BBVA International, Ltd. | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| December-02 | | | EUR | | | | 500 | | | | EUR | | | | 500 | | | | EUR | | | | 500 | |
BBVA Capital Finance, S.A.U. | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| December-03 | | | EUR | | | | 350 | | | | EUR | | | | 350 | | | | EUR | | | | 350 | |
| July-04 | | | EUR | | | | 500 | | | | EUR | | | | 500 | | | | EUR | | | | 500 | |
| December-04 | | | EUR | | | | 1,125 | | | | EUR | | | | 1,125 | | | | EUR | | | | 1,125 | |
| December-08 | | | EUR | | | | 1,000 | | | | EUR | | | | 1,000 | | | | EUR | | | | 1,000 | |
BBVA International Preferred, S.A.U | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| September-05 | | | EUR | | | | 85 | | | | EUR | | | | 85 | | | | EUR | | | | 85 | |
| September-06 | | | EUR | | | | 164 | | | | EUR | | | | 164 | | | | EUR | | | | 164 | |
| April-07 | | | USD | | | | 600 | | | | USD | | | | 600 | | | | USD | | | | 600 | |
| July-07 | | | GBP | | | | 31 | | | | GBP | | | | 31 | | | | GBP | | | | 31 | |
| October-09 | | | EUR | | | | 645 | | | | EUR | | | | 645 | | | | EUR | | | | — | |
| October-09 | | | GBP | | | | 251 | | | | GBP | | | | 251 | | | | GBP | | | | — | |
Banco Provincial, S.A. — Banco Universal | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| October-07 | | | VEF | | | | 150 | | | | VEF | | | | 150 | | | | VEF | | | | 150 | |
| November-07 | | | VEF | | | | 58 | | | | VEF | | | | 58 | | | | VEF | | | | 58 | |
Phoenix Loan Holdings Inc. | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| November-00 | | | USD | | | | 25 | | | | USD | | | | 25 | | | | USD | | | | 25 | |
VIII-4
| | | | | | | | | | | | | | | |
INCOME STATEMENT IN ACCORDANCE WITH BANK OF SPAIN
CIRCULAR 4/2004 | | | 2006 | | | | Reconciliation | | | | 2006 | | | INCOME STATEMENT IN ACCORDANCE WITH BANK OF SPAIN CIRCULAR 6/2008 |
| INTEREST AND SIMILAR INCOME LESS INTEREST EXPENSE AND SIMILAR CHARGES | | | 7,995 | | | | 143 | | | | 8,138 | | | |
| | | | | | | | | | | | 8,138 | | | NET INTEREST INCOME |
| INCOME FROM EQUITY INSTRUMENTS | | | 379 | | | | — | | | | 380 | | | DIVIDEND INCOME |
NET INTEREST INCOME | | | 8,374 | | | | | | | | 8,518 | | | |
| SHARE OR PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD | | | 308 | | | | — | | | | 308 | | | SHARE OR PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD |
| NET FEES AND COMMISSIONS | | | 4,335 | | | | (144 | ) | | | 4,191 | | | NET FEES AND COMMISSIONS |
| INSURANCE ACTIVITY INCOME | | | 650 | | | | (650 | ) | | | | | | |
| GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES AND EXCHANGE DIFFERENCES (NET) | | | 2,034 | | | | (396 | ) | | | 1,638 | | | INCOME FROM INSURANCE ACTIVITIES (NET) AND EXCHANGE DIFFERENCES (NET) |
| | | | | | | | 490 | | | | 490 | | | OTHER OPERATING INCOME AND EXPENSES (NET) |
GROSS INCOME | | | 15,701 | | | | (558 | ) | | | 15,143 | | | GROSS INCOME |
| COST OF SALES (NET) | | | 131 | | | | (131 | ) | | | | | | |
| PERSONNEL EXPENSES AND OTHER ADMINISTRATIVE EXPENSES | | | (6,330 | ) | | | — | | | | (6,330 | ) | | ADMINISTRATION COSTS |
| DEPRECIATION AND AMORTIZATION | | | (472 | ) | | | — | | | | (472 | ) | | DEPRECIATION AND AMORTIZATION |
| OTHER OPERATING INCOME (NET) | | | (146 | ) | | | 146 | | | | | | | |
| | | | | | | | | | | | 8,340 | | | |
| | | | | | | | (1,457 | ) | | | (1,457 | ) | | IMPAIRMENT ON FINANCIAL ASSETS (NET) |
| | | | | | | | (1,338 | ) | | | (1,338 | ) | | PROVISIONS (NET) |
NET OPERATING INCOME | | | 8,883 | | | | (3,338 | ) | | | 5,545 | | | NET OPERATING INCOME |
| IMPAIRMENT LOSSES (NET) | | | (1,504 | ) | | | 1,492 | | | | (12 | ) | | IMPAIRMENT LOSSES OF OTHER ASSETS (NET) |
| PROVISION EXPENSE (NET) | | | (1,338 | ) | | | 1,338 | | | | | | | |
| FINANCIAL INCOME AND EXPENSES FROM NON-FINANCIAL ACTIVITIES | | | 2 | | | | (2 | ) | | | | | | |
| OTHER GAINS AND LOSSES (NET) | | | 987 | | | | (987 | ) | | | | | | |
| | | | | | | | 956 | | | | 956 | | | GAINS (LOSSES) IN WRITTEN OFF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE |
| | | | | | | | — | | | | — | | | NEGATIVE GOODWILL |
| | | | | | | | 541 | | | | 541 | | | GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS |
INCOME BEFORE TAX | | | 7,030 | | | | — | | | | 7,030 | | | INCOME BEFORE TAX |
| INCOME TAX | | | (2,059 | ) | | | — | | | | (2,059 | ) | | INCOME TAX |
INCOME FROM ORDINARY ACTIVITIES | | | 4,971 | | | | — | | | | 4,971 | | | INCOME FROM ORDINARY ACTIVITIES |
| INCOME FROM DISCONTINUED OPERATIONS (NET) | | | | | | | — | | | | | | | INCOME FROM DISCONTINUED OPERATIONS (NET) |
INCOME FOR THE YEAR (+/-) | | | 4,971 | | | | — | | | | 4,971 | | | NET INCOME |
| INCOME ATTRIBUTED TO MINORITY INTEREST | | | (235 | ) | | | — | | | | (235 | ) | | PROFIT OR LOSS ATRIBUTABLE TO MINORITY INTEREST |
INCOME ATRIBUTED TO THE GROUP | | | 4,736 | | | | — | | | | 4,736 | | | NET INCOME ATRIBUTED TO PARENT COMPANY |
VIII-5
| | |
| • | Consolidated statement of recognised income and expense and consolidated statement of total changes in equity. |
The consolidated statement of changes in equity and the detail of the changes in consolidated equity disclosed in the notes to the Group’s consolidated financial statements for the year ended 31 December 2007 are replaced by the consolidated statement of recognised income and expense and the consolidated statement of total changes in equity, respectively, which are included in the consolidated financial statements for 2008 and present, basically, the following significant differences:
a) The consolidated statement of total changes in equity and the consolidated statement of recognised income and expense presented in these consolidated financial statements for 2008 should be understood as the two parts of the former consolidated statement of changes in equity and replace the aforementioned statements presented in the statutory financial statements for 2007. The statement of recognised income and expense does not include “Other Financial Liabilities designated at Fair Value” and the related balance is recognised under “Other Recognised Income and Expense”.
b) The statement of recognised income and expense includes “Actuarial Gains/(losses) on Pension Plans”, for the recognition of changes in equity resulting from the recording of such actuarial gains and losses, if appropriate, against reserves; “Entities Accounted for Using the Equity Method”, which includes the changes in consolidated equity valuation adjustments arising from the application of the equity method to associates and jointly controlled entities; and “Other Recognised Income and Expense”, for the recognition of the items recorded as consolidated equity valuation adjustments and not included in any other specific line item in this statement.
c) The statement of recognised income and expense includes the line item “Income Tax” for the recognition of the tax effect of the items recognised directly in equity, except for “Entities Accounted for Using the Equity Method”, which is presented net of the related tax effect. Accordingly, each item recognised in equity valuation adjustments is recognised gross.
All the items recognised as valuation adjustments in the format of the consolidated statement of changes in equity included in the consolidated financial statements for 2007 were presented net of the related tax effect.
d) The consolidated statement of recognised income and expense no longer includes the effect on equity of changes in accounting policies or of errors allocable to prior years.
Consolidated cash flow statement: the format of consolidated cash flow statement included in these consolidated financial statements contains, at the end of the statement, a detail of the items composing cash and cash equivalents, which was not included in the consolidated cash flow statement presented in the Group’s statutory consolidated financial statements for the year ended 31 December 2007. Also, certain disclosures relating to certain operating assets and liabilities, adjustments to profit or loss and cash flows from financing activities are eliminated; the wording and disclosures relating to certain items which compose the cash flows from investing activities are changed.
VIII-6
APPENDIX IX. DetailConsolidated balance sheets as of the most significant issuances, repurchases or refunds of debt instruments issued by the bank or entities of the GroupDecember 31, 2010, 2009 and 2008 held in 2008, 2007 and 2006.foreign currency
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Prevailing
| | | | |
| | | | | | | | | | | | | | | Interest Rate
| | | Maturity
| |
Issuer | | Currency | | | 2008 | | | 2007 | | | 2006 | | | December 08 | | | Date | |
| | | Millions of euros | |
| |
ISSUES IN EUROS | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA | | | | | | | | | | | | | | | | | | | | | | | | |
| july-96 | | | EUR | | | | 27 | | | | 27 | | | | 27 | | | | 9.37 | % | | | 22-dec-16 | |
| february-97 | | | EUR | | | | — | | | | — | | | | 60 | | | | 6.97 | % | | | 18-dec-07 | |
| september-97 | | | EUR | | | | — | | | | — | | | | 36 | | | | 6.65 | % | | | 17-dec-07 | |
| december-01 | | | EUR | | | | — | | | | — | | | | 1,500 | | | | 3.50 | % | | | 01-jan-17 | |
| july-03 | | | EUR | | | | — | | | | 600 | | | | 600 | | | | 4.32 | % | | | 17-jul-13 | |
| november-03 | | | EUR | | | | 750 | | | | 750 | | | | 750 | | | | 4.50 | % | | | 12-nov-15 | |
| october-04 | | | EUR | | | | 992 | | | | 992 | | | | 991 | | | | 4.37 | % | | | 20-oct-19 | |
| february-07 | | | EUR | | | | 297 | | | | 297 | | | | — | | | | 4.50 | % | | | 16-feb-22 | |
| may-08 | | | EUR | | | | 125 | | | | — | | | | — | | | | 6.03 | % | | | 03-mar-33 | |
| july-08 | | | EUR | | | | 100 | | | | — | | | | — | | | | 6.20 | % | | | 04-jul-23 | |
BBVA CAPITAL FUNDING, LTD. | | | | | | | | | | | | | | | | | | | | | | | | |
| march-97 | | | EUR | | | | — | | | | — | | | | 46 | | | | 2.71 | % | | | 20-mar-07 | |
| october-97 | | | EUR | | | | — | | | | — | | | | 77 | | | | 4.10 | % | | | 08-oct-07 | |
| october-97 | | | EUR | | | | 229 | | | | 229 | | | | 229 | | | | 6.00 | % | | | 24-dec-09 | |
| july-99 | | | EUR | | | | 73 | | | | 73 | | | | 73 | | | | 6.35 | % | | | 16-oct-15 | |
| february-00 | | | EUR | | | | 442 | | | | 497 | | | | 498 | | | | 6.38 | % | | | 25-feb-10 | |
| july-01 | | | EUR | | | | | | | | — | | | | — | | | | — | | | | 04-jul-11 | |
| october-01 | | | EUR | | | | 60 | | | | 60 | | | | 60 | | | | 5.73 | % | | | 10-oct-11 | |
| october-01 | | | EUR | | | | 40 | | | | 40 | | | | 40 | | | | 6.08 | % | | | 10-oct-16 | |
| october-01 | | | EUR | | | | 50 | | | | 50 | | | | 50 | | | | 5.92 | % | | | 15-oct-16 | |
| november-01 | | | EUR | | | | 55 | | | | 55 | | | | 55 | | | | 5.49 | % | | | 02-nov-16 | |
| december-01 | | | EUR | | | | 56 | | | | 56 | | | | 56 | | | | 3.83 | % | | | 20-dec-16 | |
BBVA SUBORDINATED CAPITAL, S.A.U | | | | | | | | | | | | | | | | | | | | | | | | |
| may-05 | | | EUR | | | | 484 | | | | 497 | | | | 497 | | | | 4.38 | % | | | 23-may-17 | |
| october-05 | | | EUR | | | | 150 | | | | 150 | | | | 150 | | | | 5.69 | % | | | 13-oct-20 | |
| october-05 | | | EUR | | | | 250 | | | | 250 | | | | 250 | | | | 5.34 | % | | | 20-oct-17 | |
| october-06 | | | EUR | | | | 1,000 | | | | 1,000 | | | | 1,000 | | | | 5.24 | % | | | 24-oct-16 | |
| april-07 | | | EUR | | | | 750 | | | | 750 | | | | — | | | | 5.51 | % | | | 03-apr-17 | |
| april-07 | | | EUR | | | | 100 | | | | 100 | | | | — | | | | 4.47 | % | | | 04-apr-22 | |
| may-08 | | | EUR | | | | 50 | | | | — | | | | — | | | | 4.75 | % | | | 19-may-23 | |
| july-08 | | | EUR | | | | 20 | | | | — | | | | — | | | | 6.11 | % | | | 22-jul-18 | |
BBVA BANCOMER, S.A. de C.V. | | | | | | | | | | | | | | | | | | | | | | | | |
| may-07 | | | EUR | | | | 610 | | | | 596 | | | | — | | | | 4.80 | % | | | 17-may-17 | |
ALTURA MARKETS A.V., S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| november-07 | | | EUR | | | | 3 | | | | 3 | | | | — | | | | 5.90 | % | | | 29-nov-17 | |
ISSUES IN FOREIGN CURRENCIES | | | | | | | | | | | | | | | | | | | | | | | | |
BBVA PUERTO RICO, S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| september-04 | | | USD | | | | 36 | | | | 34 | | | | 38 | | | | 4.20 | % | | | 23-sep-14 | |
| september-06 | | | USD | | | | 27 | | | | 25 | | | | 28 | | | | 5.76 | % | | | 29-sep-16 | |
| september-06 | | | USD | | | | 22 | | | | 21 | | | | 23 | | | | 2.02 | % | | | 29-sep-16 | |
BBVA GLOBAL FINANCE, LTD. | | | | | | | | | | | | | | | | | | | | | | | | |
| december-95 | | | USD | | | | 144 | | | | 136 | | | | 152 | | | | 7.00 | % | | | 01-dec-25 | |
| december-95 | | | USD | | | | | | | | — | | | | — | | | | — | | | | 09-may-06 | |
BANCO BILBAO VIZCAYA ARGENTARIA, CHILE | | | CLP | | | | 287 | | | | 283 | | | | 276 | | | | Various | | | | Various | |
| | | | | | | | | | | | | | | | | |
| | | | | | Mexican
| | | Other Foreign
| | | Total Foreign
| |
2010 | | USD | | | Pesos | | | Currencies | | | Currencies | |
| | | Millions of euros | |
| |
Assets - | | | | | | | | | | | | | | | | |
| Cash and balances with Central Banks | | | 4,358 | | | | 6,002 | | | | 5,333 | | | | 15,693 | |
| Financial assets held for trading | | | 2,347 | | | | 11,142 | | | | 4,031 | | | | 17,520 | |
Available-for-sale financial assets | | | 8,547 | | | | 10,150 | | | | 5,102 | | | | 23,799 | |
| Loans and receivables | | | 61,994 | | | | 35,465 | | | | 31,288 | | | | 128,747 | |
| Investments in entities accounted for using the equity method | | | 5 | | | | 112 | | | | 3,658 | | | | 3,775 | |
| Tangible assets | | | 804 | | | | 916 | | | | 655 | | | | 2,375 | |
| Other assets | | | 3,972 | | | | 2,768 | | | | 1,830 | | | | 8,570 | |
| | | | | | | | | | | | | | | | | |
Total | | | 82,027 | | | | 66,555 | | | | 51,897 | | | | 200,479 | |
| | | | | | | | | | | | | | | | | |
Liabilities- | | | | | | | | | | | | | | | | |
| Financial liabilities held for trading | | | 1,420 | | | | 3,349 | | | | 1,073 | | | | 5,842 | |
| Financial liabilities at amortised cost | | | 90,444 | | | | 50,708 | | | | 42,645 | | | | 183,797 | |
| Other liabilities | | | 928 | | | | 5,976 | | | | 2,889 | | | | 9,793 | |
| | | | | | | | | | | | | | | | | |
Total | | | 92,792 | | | | 60,033 | | | | 46,607 | | | | 199,432 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | Mexican
| | | Other Foreign
| | | Total Foreign
| |
2009 | | USD | | | Pesos | | | Currencies | | | Currencies | |
| | | Millions of euros | |
| |
Assets - | | | | | | | | | | | | | | | | |
| Cash and balances with Central Banks | | | 3,198 | | | | 5,469 | | | | 4,278 | | | | 12,945 | |
| Financial assets held for trading | | | 2,607 | | | | 12,121 | | | | 2,459 | | | | 17,187 | |
Available-for-sale financial assets | | | 8,451 | | | | 7,277 | | | | 5,227 | | | | 20,955 | |
| Loans and receivables | | | 59,400 | | | | 27,618 | | | | 27,953 | | | | 114,971 | |
| Investments in entities accounted for using the equity method | | | 5 | | | | 112 | | | | 2,328 | | | | 2,445 | |
| Tangible assets | | | 753 | | | | 777 | | | | 653 | | | | 2,183 | |
| Other assets | | | 3,699 | | | | 2,123 | | | | 1,763 | | | | 7,585 | |
| | | | | | | | | | | | | | | | | |
Total | | | 78,113 | | | | 55,497 | | | | 44,661 | | | | 178,271 | |
| | | | | | | | | | | | | | | | | |
Liabilities- | | | | | | | | | | | | | | | | |
| Financial liabilities held for trading | | | 893 | | | | 2,507 | | | | 968 | | | | 4,368 | |
| Financial liabilities at amortised cost | | | 121,735 | | | | 43,300 | | | | 42,502 | | | | 207,537 | |
| Other liabilities | | | 1,050 | | | | 4,316 | | | | 2,835 | | | | 8,201 | |
| | | | | | | | | | | | | | | | | |
Total | | | 123,678 | | | | 50,123 | | | | 46,305 | | | | 220,106 | |
| | | | | | | | | | | | | | | | | |
IX-1
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Prevailing
| | | | |
| | | | | | | | | | | | | | | Interest Rate
| | | Maturity
| |
Issuer | | Currency | | | 2008 | | | 2007 | | | 2006 | | | December 08 | | | Date | |
| | | Millions of euros | |
| |
BBVA BANCOMER, S.A. de C.V. | | | | | | | | | | | | | | | | | | | | | | | | |
| november-98 | | | | | | | — | | | | — | | | | — | | | | — | | | | 28-sep-06 | |
| july-05 | | | USD | | | | 360 | | | | 340 | | | | 377 | | | | 5.38 | % | | | 22-jul-15 | |
| september-06 | | | MXN | | | | 130 | | | | 156 | | | | 174 | | | | 8.23 | % | | | 18-sep-14 | |
| may-07 | | | USD | | | | 360 | | | | 340 | | | | — | | | | 6.01 | % | | | 17-may-22 | |
| july-08 | | | MXN | | | | 62 | | | | — | | | | — | | | | 9.35 | % | | | 16-jul-18 | |
| october-08 | | | MXN | | | | 156 | | | | — | | | | — | | | | 9.38 | % | | | 24-sep-18 | |
| december-08 | | | MXN | | | | 1 | | | | — | | | | — | | | | 9.74 | % | | | 26-nov-20 | |
| december-08 | | | MXN | | | | 142 | | | | — | | | | — | | | | 9.74 | % | | | 26-nov-20 | |
BBVA CAPITAL FUNDING, LTD. | | | | | | | | | | | | | | | | | | | | | | | | |
| october-95 | | | JPY | | | | 79 | | | | 60 | | | | 64 | | | | 6.00 | % | | | 26-oct-15 | |
| february-96 | | | USD | | | | — | | | | — | | | | — | | | | — | | | | 14-feb-06 | |
| november-96 | | | USD | | | | — | | | | — | | | | — | | | | — | | | | 27-nov-06 | |
BBVA BANCOMER CAPITAL TRUST, INC. | | | | | | | | | | | | | | | | | | | | | | | | |
| february-01 | | | USD | | | | — | | | | — | | | | — | | | | — | | | | 16-feb-11 | |
LNB CAPITAL TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| november-01 | | | USD | | | | — | | | | — | | | | — | | | | — | | | | 08-dic-31 | |
LNB STATUTORY TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| december-01 | | | USD | | | | — | | | | — | | | | — | | | | — | | | | 18-dic-31 | |
BBVA SUBORDINATED CAPITAL, S.A.U | | | | | | | | | | | | | | | | | | | | | | | | |
| october-05 | | | JPY | | | | 159 | | | | 122 | | | | 127 | | | | 2.75 | % | | | 22-oct-35 | |
| october-05 | | | GBP | | | | 315 | | | | 409 | | | | 447 | | | | 6.28 | % | | | 21-oct-15 | |
| march-06 | | | GBP | | | | 315 | | | | 409 | | | | 447 | | | | 5.00 | % | | | 31-mar-16 | |
| march-07 | | | GBP | | | | 262 | | | | 343 | | | | — | | | | 5.75 | % | | | 11-mar-18 | |
RIVERWAY HOLDING CAPITAL TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| march-01 | | | USD | | | | 7 | | | | 7 | | | | 9 | | | | 10.18 | % | | | 08-jun-31 | |
TEXAS REGIONAL STATUTORY TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| july-01 | | | USD | | | | — | | | | — | | | | 4 | | | | 9.30 | % | | | 25-jul-31 | |
| february-04 | | | USD | | | | 36 | | | | 34 | | | | 38 | | | | 7.84 | % | | | 17-mar-34 | |
COMPASS BANCSHARES INC | | | | | | | | | | | | | | | | | | | | | | | | |
| july-01 | | | USD | | | | — | | | | 2 | | | | — | | | | 10.18 | % | | | 31-jul-31 | |
STATE NATIONAL CAPITAL TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| july-03 | | | USD | | | | 11 | | | | 10 | | | | — | | | | 5.23 | % | | | 30-sep-33 | |
STATE NATIONAL STATUTORY TRUST II | | | | | | | | | | | | | | | | | | | | | | | | |
| march-04 | | | USD | | | | 7 | | | | 7 | | | | — | | | | 4.66 | % | | | 17-mar-34 | |
TEXASBANC CAPITAL TRUST I | | | | | | | | | | | | | | | | | | | | | | | | |
| july-04 | | | USD | | | | 18 | | | | 17 | | | | — | | | | 6.43 | % | | | 23-jul-34 | |
COMPASS BANK | | | | | | | | | | | | | | | | | | | | | | | | |
| august-99 | | | USD | | | | 128 | | | | 124 | | | | — | | | | 8.10 | % | | | 15-agu-09 | |
| april-99 | | | USD | | | | 72 | | | | 69 | | | | — | | | | 6.45 | % | | | 01-may-09 | |
| march-05 | | | USD | | | | 201 | | | | 188 | | | | — | | | | 5.50 | % | | | 01-apr-20 | |
| march-06 | | | USD | | | | 186 | | | | 175 | | | | — | | | | 5.90 | % | | | 01-apr-26 | |
| sep-07 | | | USD | | | | 250 | | | | 236 | | | | — | | | | 6.40 | % | | | 01-oct-17 | |
BBVA COLOMBIA, S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| august-06 | | | COP | | | | 128 | | | | 135 | | | | 136 | | | | 13.33 | % | | | 28-agu-11 | |
BBVA PARAGUAY, S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| Various | | | PYG | | | | 2 | | | | — | | | | — | | | | Various | | | | Various | |
| Various | | | USD | | | | 6 | | | | — | | | | — | | | | Various | | | | Various | |
| | | | | | | | | | | | | | | | | |
| | | | | | Mexican
| | | Other Foreign
| | | Total Foreign
| |
2008 | | USD | | | Pesos | | | Currencies | | | Currencies | |
| | | Millions of euros | |
| |
Assets - | | | | | | | | | | | | | | | | |
| Cash and balances with Central Banks | | | 2,788 | | | | 5,179 | | | | 3,612 | | | | 11,579 | |
| Financial assets held for trading | | | 4,137 | | | | 13,184 | | | | 3,003 | | | | 20,324 | |
Available-for-sale financial assets | | | 10,321 | | | | 5,613 | | | | 4,846 | | | | 20,780 | |
| Loans and receivables | | | 65,928 | | | | 26,168 | | | | 28,072 | | | | 120,168 | |
| Investments in entities accounted for using the equity method | | | 5 | | | | 103 | | | | 481 | | | | 589 | |
| Tangible assets | | | 802 | | | | 729 | | | | 485 | | | | 2,016 | |
| Other assets | | | 2,093 | | | | 1,843 | | | | 1,716 | | | | 5,652 | |
| | | | | | | | | | | | | | | | | |
Total | | | 86,074 | | | | 52,819 | | | | 42,215 | | | | 181,108 | |
| | | | | | | | | | | | | | | | | |
Liabilities- | | | | | | | | | | | | | | | | |
| Financial liabilities held for trading | | | 1,192 | | | | 3,919 | | | | 1,057 | | | | 6,168 | |
| Financial liabilities at amortised cost | | | 116,910 | | | | 42,288 | | | | 42,097 | | | | 201,295 | |
| Other liabilities | | | 1,005 | | | | 3,896 | | | | 2,565 | | | | 7,466 | |
| | | | | | | | | | | | | | | | | |
Total | | | 119,107 | | | | 50,103 | | | | 45,719 | | | | 214,929 | |
| | | | | | | | | | | | | | | | | |
IX-2
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Prevailing
| | | | |
| | | | | | | | | | | | | | | Interest Rate
| | | Maturity
| |
Issuer | | Currency | | | 2008 | | | 2007 | | | 2006 | | | December 08 | | | Date | |
| | | Millions of euros | |
| |
BANCO CONTINENTAL, S.A. | | | | | | | | | | | | | | | | | | | | | | | | |
| december-06 | | | USD | | | | 22 | | | | 20 | | | | — | | | | 4.35 | % | | | 15-feb-17 | |
| may-07 | | | PEN | | | | 9 | | | | 9 | | | | — | | | | 5.85 | % | | | 07-may-22 | |
| may-07 | | | USD | | | | 14 | | | | 14 | | | | — | | | | 6.00 | % | | | 14-may-27 | |
| june-07 | | | PEN | | | | 14 | | | | 12 | | | | — | | | | 3.72 | % | | | 18-jun-32 | |
| september-07 | | | USD | | | | 14 | | | | 14 | | | | — | | | | 3.65 | % | | | 24-sep-17 | |
| november-07 | | | PEN | | | | 12 | | | | 11 | | | | — | | | | 3.56 | % | | | 19-nov-32 | |
| february-08 | | | USD | | | | 14 | | | | — | | | | — | | | | 6.46 | % | | | 28-feb-28 | |
| june-08 | | | USD | | | | 22 | | | | — | | | | — | | | | 5.30 | % | | | 15-jun-18 | |
| july-08 | | | PEN | | | | 11 | | | | — | | | | — | | | | 3.06 | % | | | 08-jul-23 | |
| september-08 | | | PEN | | | | 12 | | | | — | | | | — | | | | 3.09 | % | | | 09-sep-23 | |
| november-08 | | | USD | | | | 14 | | | | — | | | | — | | | | 4.47 | % | | | 15-feb-19 | |
| december-08 | | | PEN | | | | 7 | | | | — | | | | — | | | | 4.19 | % | | | 15-dec-33 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL | | | | | | | 10,785 | | | | 10,834 | | | | 9,385 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
IX-3
APPENDIX X. Consolidated income statements offor the first half of 2008 and 2007 and second half of 20082010 and 2007.2009
| | | | | | | | | | | | | | | | | | |
| | | | Six Months
| | Six Months
| | Six Months
| | Six Months
| |
| | | | | | | | | | | Ended
| | Ended
| | Ended
| | Ended
| |
| | | Six Months Ended
| | Six Months Ended
| | | June 30,
| | December 31,
| | June 30,
| | December 31,
| |
| | | December 31, 2008 | | December 31, 2007 | | | 2010 | | 2010 | | 2009 | | 2009 | |
| | | Millions of euros | | | Millions of euros | |
| |
| INTEREST AND SIMILAR INCOME | | | 15,622 | | | | 14,297 | | | | 10,457 | | | | 10,677 | | | | 12,911 | | | | 10,864 | |
| | | | |
| | | | |
| INTEREST EXPENSE AND SIMILAR CHARGES | | | (9,491 | ) | | | (9,167 | ) | |
| | | | |
| | | | |
| REMUNERACION DE CAPITAL REEMBOLSABLE A LA VISTA | | | 6,131 | | | | 5,130 | | |
| | | | |
| | | | |
| INTEREST AND SIMILAR EXPENSES | | | | (3,520 | ) | | | (4,294 | ) | | | (6,053 | ) | | | (3,840 | ) |
NET INTEREST INCOME | | | 206 | | | | 150 | | | | 6,937 | | | | 6,383 | | | | 6,858 | | | | 7,024 | |
| | | | | | | | | | | | |
| | | | |
| DIVIDEND INCOME | | | 2,762 | | | | 2,883 | | | | 257 | | | | 272 | | | | 248 | | | | 195 | |
| | | | |
| | | | |
| SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD | | | | 151 | | | | 184 | | | | 27 | | | | 93 | |
| FEE AND COMMISSION INCOME | | | (518 | ) | | | (530 | ) | | | 2,678 | | | | 2,704 | | | | 2,638 | | | | 2,667 | |
| | | | |
| | | | |
| FEE AND COMMISSION EXPENSES | | | 310 | | | | 622 | | | | (406 | ) | | | (439 | ) | | | (457 | ) | | | (418 | ) |
| | | | |
| | | | |
| NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES | | | 89 | | | | 181 | | | | 1,067 | | | | 374 | | | | 446 | | | | 446 | |
| | | | |
| | | | |
| NET EXCHANGE DIFFERENCES | | | 1,628 | | | | 1,787 | | | | 56 | | | | 397 | | | | 352 | | | | 300 | |
| | | | |
| | | | |
| OTHER OPERATING INCOME | | | | | | | | | | | 1,771 | | | | 1,772 | | | | 1,755 | | | | 1,645 | |
| | | | |
| | | | |
| OTHER OPERATING EXPENSES | | | (1,375 | ) | | | (1,535 | ) | | | (1,631 | ) | | | (1,617 | ) | | | (1,487 | ) | | | (1,666 | ) |
| | | | |
| | | | |
GROSS INCOME | | | 9,352 | | | | 8,826 | | | | 10,880 | | | | 10,030 | | | | 10,380 | | | | 10,286 | |
| | | | | | | | | | | | |
| | | | |
| ADMINISTRATION COSTS | | | (3,940 | ) | | | (3,708 | ) | | | (4,015 | ) | | | (4,192 | ) | | | (3,734 | ) | | | (3,928 | ) |
| | | | |
| | | | |
| Personnel expenses | | | (2,373 | ) | | | (2,268 | ) | | | (2,364 | ) | | | (2,450 | ) | | | (2,291 | ) | | | (2,360 | ) |
| | | | |
| | | | |
| General and administrative expenses | | | (1,567 | ) | | | (1,440 | ) | | | (1,651 | ) | | | (1,742 | ) | | | (1,443 | ) | | | (1,568 | ) |
| | | | |
| | | | |
| DEPRECIATION AND AMORTIZATION | | | (361 | ) | | | (330 | ) | | | (365 | ) | | | (396 | ) | | | (354 | ) | | | (343 | ) |
| | | | |
| | | | |
| PROVISIONS (NET) | | | (819 | ) | | | (55 | ) | | | (270 | ) | | | (212 | ) | | | (152 | ) | | | (306 | ) |
| | | | |
| | | | |
| IMPAIRMENT ON FINANCIAL ASSETS(NET) | | | (1,776 | ) | | | (1,033 | ) | |
| | | | |
| | | | |
| IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET) | | | | (2,419 | ) | | | (2,299 | ) | | | (1,945 | ) | | | (3,528 | ) |
NET OPERATING INCOME | | | 2,455 | | | | 3,700 | | | | 3,811 | | | | 2,931 | | | | 4,195 | | | | 2,181 | |
| | | | | | | | | | | | |
| | | | |
| IMPAIRMENT ON OTHER ASSETS (NET) | | | (39 | ) | | | (11 | ) | |
| | | | |
| | | | |
| GAINS (LOSSES) IN WRITTEN OF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE | | | 51 | | | | 9 | | |
| | | | |
| | | | |
| IMPAIRMENT LOSSES ON OTHER ASSETS (NET) | | | | (196 | ) | | | (293 | ) | | | (271 | ) | | | (1,347 | ) |
| GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE | | | | 11 | | | | 30 | | | | 9 | | | | 11 | |
| NEGATIVE GOODWILL | | | — | | | | — | | | | 1 | | | | — | | | | — | | | | 99 | |
| | | | |
| | | | |
| GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS | | | (31 | ) | | | 96 | | | | 24 | | | | 103 | | | | 70 | | | | 789 | |
| | | | |
| | | | |
INCOME BEFORE TAX | | | 2,436 | | | | 3,794 | | | | 3,651 | | | | 2,771 | | | | 4,003 | | | | 1,733 | |
| | | | | | | | | | | | |
| INCOME TAX | | | | (941 | ) | | | (486 | ) | | | (961 | ) | | | (180 | ) |
INCOME FROM CONTINUING TRANSACTIONS | | | | 2,710 | | | | 2,285 | | | | 3,042 | | | | 1,553 | |
| | | | | | | | | | | | |
| TAX EXPENSE (INCOME) | | | (328 | ) | | | (902 | ) | |
| | | | |
| | | | |
INCOME FROM CONTINUED OPERATIONS | | | 2,108 | | | | 2,891 | | |
| | | | |
| | | | |
| INCOME FROM DISCONTINUED OPERATIONS (NET) | | | — | | | | — | | |
| | | | |
| INCOME FROM DISCONTINUED TRANSACTIONS (NET) | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
NET INCOME | | | 2,108 | | | | 2,891 | | | | 2,710 | | | | 2,285 | | | | 3,042 | | | | 1,553 | |
| | | | | | | | | | | | |
| | | | |
| Net Income attributed to parent company | | | | 2,527 | | | | 2,079 | | | | 2,799 | | | | 1,411 | |
| Net income attributed to non-controlling interests | | | | 183 | | | | 206 | | | | 243 | | | | 142 | |
| | | | | | | | | | | | | | | | | |
| | | Six Months
| | | | | | Six Months Ended
| | | | |
| | | Ended June 30,
| | | Six Months Ended
| | | June 30,
| | | Six Months Ended
| |
| | | 2010 | | | December 31, 2010 | | | 2009 | | | December 31, 2009 | |
| | | Euros | |
| |
EARNINGS PER SHARE | | | | | | | | | | | | | | | | |
| Basic earnings per share | | | 0.63 | | | | 0.54 | | | | 0.73 | | | | 0.35 | |
| Diluted earnings per share | | | 0.63 | | | | 0.54 | | | | 0.73 | | | | 0.35 | |
X-1
| | | | | |
Exhibit
| | |
Number | | Description |
| |
| | 1 | .1 | | Amended and Restated Bylaws (Estatutos) of the Registrant*. |
| | 4 | .1 | | Plan of Merger between Banco Bilbao Vizcaya, S.A. and Argentaria, Caja Postal y Banco Hipotecario, S.A.** |
| | 4 | .2 | | Master Agreement of Strategic Alliance between Telefónica and BBVA, together with an English translation.*** |
| | 4 | .3 | | Transaction Agreement by and between Banco Bilbao Vizcaya Argentaria, S.A. and Compass Bancshares, Inc. dated as of February 16, 2007.**** |
| | 8 | .1 | | Consolidated Companies Composing Registrant (see Appendix I to XI to our Consolidated Financial Statements included herein). |
| | 12 | .1 | | Section 302 Chairman and Chief Executive Officer Certification. |
| | 12 | .2 | | Section 302 President and Chief Operating Officer Certification. |
| | 12 | .3 | | Section 302 Chief Accounting Officer Certification. |
| | 13 | .1 | | Section 906 Certification. |
| | 15 | .1 | | Consent of Independent Registered Public Accounting Firm |
APPENDIX XI. GLOSSARY
| | |
* Adjusted acquisition cost | Incorporated | The acquisition cost of the securities less accumulated amortizations, plus interest accrued, but not net of any other valuation adjustments. |
| Amortized cost | | The amortized cost of a financial asset is the amount at which it was measured at initial recognition minus principal repayments, plus or minus, as warranted, the cumulative amount taken to profit or loss using the effective interest rate method of any difference between the initial amount and the maturity amount, and minus any reduction for impairment or change in measured value. |
| Assets leased out under operating lease | | Lease arrangements that are not finance leases are designated operating leases. |
| Associates | | Companies in which the Group is able to exercise significant influence, without having control. Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly. |
| Available-for-sale financial assets | | Available-for-sale (AFS) financial assets are debt securities that are not classified as held-to-maturity investments or as financial assets designated at fair value through profit or loss (FVTPL) and equity instruments that are not subsidiaries, associates or jointly controlled entities and have not been designated as at FVTPL. |
| Basic earnings per share | | Calculated by referencedividing profit or loss attributable to BBVA’s Registration Statement onForm F-3 (FileNo. 333-144784) filedordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period |
| Business combination | | The merger of two or more entities or independent businesses into a single entity or group of entities. |
| Cash flow hedges | | Derivatives that hedge the exposure to variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could effect profit or loss. |
| Commissions and fees | | Income and expenses relating to commissions and similar fees are recognized in the Securitiesconsolidated income statement using criteria that vary according to their nature. The most significant income and Exchange Commission on July 18, 2008.expense items in this connection are: |
| |
** | Incorporated by reference• Feed and commissions relating linked to BBVA’s Registration Statement onForm F-4 (FileNo. 333-11090) filed with the Securitiesfinancial assets and Exchange Commission on November 4, 1999.liabilities measured at fair value through profit or loss, which are recognized when collected. |
| |
*** | Incorporated by reference to BBVA’s 1999 Annual Report onForm 20-F.• Fees and commissions arising from transactions or services that are provided over a period of time, which are recognized over the life of these transactions or services. |
| | | • Fees and commissions generated by a single act are accrued upon execution of that act. |
**** Contingencies | Incorporated | Current obligations arising as a result of past events, certain in terms of nature at the balance sheet date but uncertain in terms of amount and/or cancellation date, settlement of which is deemed likely to entail an outflow of resources embodying economic benefits. |
| Contingent commitments | | Possible obligations that arise from past events and whose existence will be confirmed only by reference to BBVA’s 2006 Annual Report onForm 20-F.the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. |
XI-1
| | |
| Contingent risks | | Transactions through which the entity guarantees commitments assumed by third parties in respect of financial guarantees granted or other types of contracts. |
| Current tax assets | | Taxes recoverable over the next twelve months. |
| Current tax liabilities | | Corporate income tax payable on taxable profit for the year and other taxes payable in the next twelve months. |
| Debt obligations/certificates | | Obligations and other interest-bearing securities that create or evidence a debt on the part of their issuer, including debt securities issued for trading among an open group of investors, that accrue interest, implied or explicit, whose rate, fixed or benchmarked to other rates, is established contractually, and take the form of securities or book-entries, irrespective of the issuer. |
| Deferred tax assets | | Taxes recoverable in future years, including loss carryforwards or tax credits for deductions and tax rebates pending application. |
| Deferred tax liabilities | | Income taxes payable in subsequent years. |
| Defined benefit commitments | | Post-employment obligation under which the entity, directly or indirectly via the plan, retains the contractual or implicit obligation to pay remuneration directly to employees when required or to pay additional amounts if the insurer, or other entity required to pay, does not cover all the benefits relating to the services rendered by the employees when insurance policies do not cover all of the corresponding post-employees benefits. |
| Defined contribution commitments | | Defined contribution plans are retirement benefit plans under which amounts to be paid as retirement benefits are determined by contributions to a fund together with investment earnings thereon. The employer’s obligations in respect of its employees current and prior years’ employment service are discharged by contributions to the fund. |
| Deposits from central banks | | Deposits of all classes, including loans and money market operations, received from the Bank of Spain and other central banks. |
| Deposits from credit institutions | | Deposits of all classes, including loans and money market operations received, from credit entities. |
| Deposits from customers | | Redeemable cash balances received by the entity, with the exception of debt certificates, money market operations through counterparties and subordinated liabilities, that are not received from either central banks or credit entities. This category also includes cash deposits and consignments received that can be readily withdrawn. |
XI-2
| | |
| Diluted earnings per share | | This calculation is similar to that used to measure basic earnings per share, except that the weighted average number of shares outstanding is adjusted to reflect the potential dilutive effect of any stock options, warrants and convertible debt instruments outstanding the year. For the purpose of calculating diluted earnings per share, an entity shall assume the exercise of dilutive warrants of the entity. The assumed proceeds from these instruments shall be regarded as having been received from the issue of ordinary shares at the average market price of ordinary shares during the period. The difference between the number of ordinary shares issued and the number of ordinary shares that would have been issued at the average market price of ordinary shares during the period shall be treated as an issue of ordinary shares for no consideration. Such shares are dilutive and are added to the number of ordinary shares outstanding in the calculation of diluted earnings per share. |
| Early retirements | | Employees that no longer render their services to the entity but which, without being legally retired, remain entitled to make economic claims on the entity until they formally retire. |
| Economic capital | | Eligible capital for regulatory capital adequacy calculations. |
| Effective interest rate | | Discount rate that exactly equals the value of a financial instrument with the cash flows estimated over the expected life of the instrument based on its contractual period as well as its anticipated amortization, but without taking the future losses of credit risk into consideration. |
| Equity | | The residual interest in an entity’s assets after deducting its liabilities. It includes owner or venturer contributions to the entity, at incorporation and subsequently, unless they meet the definition of liabilities, and accumulated net profits or losses, fair value adjustments affecting equity and, if warranted, minority interests. |
| Equity instruments | | An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. |
| Equity method | | The equity method is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the investee, adjusted for dividends received and other equity eliminations. |
| Exchange/translation differences | | Gains and losses generated by currency trading and the differences arising on translating monetary items denominated in foreign currency to the functional currency, exchange differences on foreign currency non-monetary assets accumulated in equity and taken to profit or loss when the assets are sold and gains and losses realized on the disposal of assets at entities with a functional currency other than the euro. |
| Fair value | | The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. |
| Fair value hedges | | Derivatives that hedge the exposure of the fair value of assets and liabilities to movements in interest rates and/or exchange rates designated as a hedged risk. |
| Fees | | See Commissions, fees and similar items |
XI-3
| | |
| Financial guarantees | | A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument, irrespective of its instrumentation. These guarantees may take the form of deposits, technical or financial guarantees, irrevocable letters of credit issued or confirmed by the entity, insurance contracts or credit derivatives in which the entity sells credit protection, among others. |
| Financial instrument | | A financial instrument is any contract that gives rise to a financial asset of one entity and to a financial liability or equity instrument of another entity. |
| Financial liabilities at amortized cost | | Financial liabilities that do not meet the definition of financial liabilities designated at fair value through profit or loss and arise from the financial entities’ ordinary activities to capture funds, regardless of their instrumentation or maturity. |
| Full consolidation | | • preparing consolidated financial statements, an entity combines the balance sheets of the parent and its subsidiaries line by line by adding together like items of assets, liabilities and equity. Intragroup balances and transactions, including amounts payable and receivable, are eliminated in full. |
| | • Group entity income statement income and expense headings are similarly combined line by line into the consolidated income statement, having made the following consolidation eliminations: a) income and expenses in respect of intragroup transactions are eliminated in full. b) profits and losses resulting from intragroup transactions are similarly eliminated. |
| | • The carrying amount of the parent’s investment and the parent’s share of equity in each subsidiary are eliminated. |
| Gains or losses on financial assets and liabilities, net | | This heading reflects fair value changes in financial instruments - except for changes attributable to accrued interest upon application of the interest rate method and asset impairment losses (net) recognized in the income statement - as well as gains or losses generated by their sale - except for gains or losses generated by the disposal of investments in subsidiaries, jointly controlled entities and associates an of securities classified as held to maturity. |
| Goodwill | | Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation of future economic benefits from assets that are not able to be individually identified and separately recognized. |
| Hedges of net investments in foreign operations | | Foreign currency hedge of a net investment in a foreign operation. |
| Held-to-maturity investments | | Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. |
XI-4
| | |
| Held for trading (assets and liabilities) | | Financial assets and liabilities acquired or incurred principally for the purpose of selling or repurchasing them in the near term with a view to profiting from variations in their prices or by exploiting existing differences between their bid and ask prices. |
| | This category also includes financial derivatives not qualifying for hedge accounting, and in the case of borrowed securities, financial liabilities originated by the firm sale of financial assets acquired under repurchase agreements or received on loan (“short positions”). |
| Impaired/doubtful/non-performing portfolio | | Financial assets whose carrying amount is higher than their recoverable value, prompting the entity to recognize the corresponding impairment loss |
| Impaired financial assets | | A financial asset is deemed impaired, and accordingly restated to fair value, when there is objective evidence of impairment as a result of one or more events that give rise to: |
| | 1. A measurable decrease in the estimated future cash flows since the initial recognition of those assets in the case of debt instruments (loans and receivables and debt securities). |
| | 2. A significant or prolonged drop in fair value below cost in the case of equity instruments. |
| Income from equity instruments | | Dividends and income on equity instruments collected or announced during the year corresponding to profits generated by investees after the ownership interest is acquired. Income is recognized gross, i.e., without deducting any withholdings made, if any. |
| Insurance contracts linked to pensions | | The fair value of insurance contracts written to cover pension commitments. |
| Inventories | | Assets, other than financial instruments, under production, construction or development, held for sale during the normal course of business, or to be consumed in the production process or during the rendering of services. Inventories include land and other properties held for sale at the real estate development business. |
| Investment properties | | Investment property is property (land or a building — or part of a building — or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for own use or sale in the ordinary course of business. |
| Jointly controlled entities | | Companies over which the entity exercises control but are not subsidiaries are designated “jointly controlled entities”. Joint control is the contractually agreed sharing of control over an economic activity or undertaking by two or more entities, or controlling parties. The controlling parties agree to share the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. It exists only when the strategic financial and operating decisions require unanimous consent of the controlling parties. |
| Leases | | A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time, a stream of cash flows that is essentially equivalent to the combination of principal and interest payments under a loan agreement. |
XI-5
| | |
| Liabilities associated with non-current assets held for sale | | The balance of liabilities directly associated with assets classified as non-current assets held for sale, including those recognized under liabilities in the entity’s balance sheet at the balance sheet date corresponding to discontinued operations. |
| Liabilities under insurance contracts | | The technical reserves of direct insurance and inward reinsurance recorded by the consolidated entities to cover claims arising from insurance contracts in force at period-end. |
| Loans and advances to customers | | Loans and receivables, irrespective of their type, granted to third parties that are not credit entities and that are not classified as money market operations through counterparties. |
| Loans and receivables | | Financing extended to third parties, classified according to their nature, irrespective of the borrower type and the instrumentation of the financing extended, including finance lease arrangements where the consolidated subsidiaries act as lessors. |
| Minority interests | | Minority interest is that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent, including minority interests in the profit or loss of consolidated subsidiaries for the reporting period. |
| Mortgage-backed bonds | | Fixed-income securities guaranteed with the mortgage loans for the issuing entity, which, in accordance with current legislation to that effect, are not subject to the issuance of mortgage bonds. |
| Non-current assets held for sale | | A non-current asset or disposal group, whose carrying amount is expected to be realized through a sale transaction, rather than through continuing use, and which meets the following requirements: |
| | a) it is immediately available for sale in its present condition at the balance sheet date, i.e. only normal procedures are required for the sale of the asset. |
| | b) the sale is considered highly probable. |
| Other equity instruments | | This heading reflects the increase in equity resulting from various forms of owner contributions, retained earnings, restatements of the financial statements and valuation adjustments. |
| Other financial assets/liabilities at fair value through profit or loss | | • Assets and liabilities that are deemed hybrid financial assets and liabilities and for which the fair value of the embedded derivatives cannot be reliably determined. |
| | • These are financial assets managed jointly with “Liabilities under insurance contracts” valued at fair value, in combination with derivatives written with a view to significantly mitigating exposure to changes in these contracts’ fair value, or in combination with financial liabilities and derivatives designed to significantly reduce global exposure to interest rate risk. |
| | These headings include customer loans and deposits effected via so-called unit-linked life insurance contracts, in which the policyholder assumes the investment risk. |
| Own/treasury shares | | The amount of own equity instruments held by the entity. |
XI-6
| | |
| Personnel expenses | | All compensation accrued during the year in respect of personnel on the payroll, under permanent or temporary contracts, irrespective of their jobs or functions, irrespective of the concept, including the current costs of servicing pension plans, own share based compensation schemes and capitalized personnel expenses. Amounts reimbursed by the state Social Security or other welfare entities in respect of employee illness are deducted from personnel expenses. |
| Post-employment benefits | | Retirement benefit plans are arrangements whereby an enterprise provides benefits for its employees on or after termination of service. |
| Property, plant and equipment/tangible assets | | Buildings, land, fixtures, vehicles, computer equipment and other facilities owned by the entity or acquired under finance leases. |
| Proportionate consolidation method | | The venturer combines and subsequently eliminates its interests in jointly controlled entities’ balances and transactions in proportion to its ownership stake in these entities. |
| | The venturer combines its interest in the assets and liabilities assigned to the jointly controlled operations and the assets that are jointly controlled together with other joint venturers line by line in the consolidated balance sheet. Similarly, it combines its interest in the income and expenses originating in jointly controlled businesses line by line in the consolidated income statement. |
| Provisions | | Provisions include amounts recognized to cover the Group’s current obligations arising as a result of past events, certain in terms of nature but uncertain in terms of amount and/or cancellation date. |
| Provision expenses | | Provisions recognized during the year, net of recoveries on amounts provisioned in prior years, with the exception of provisions for pensions and contributions to pension funds which constitute current or interest expense. |
| Provisions for contingent exposures and commitments | | Provisions recorded to cover exposures arising as a result of transactions through which the entity guarantees commitments assumed by third parties in respect of financial guarantees granted or other types of contracts, and provisions for contingent commitments, i.e., irrevocable commitments which may arise upon recognition of financial assets. |
| Provisions for pensions and similar obligation | | Constitutes all provisions recognized to cover retirement benefits, including commitments assumed vis-à-vis beneficiaries of early retirement and analogous schemes. |
| Reserves | | Accumulated net profits or losses recognized in the income statement in prior years and retained in equity upon distribution. Reserves also include the cumulative effect of adjustments recognized directly in equity as a result of the retroactive restatement of the financial statements due to changes in accounting policy and the correction of errors. |
| Securitization fund | | A fund that is configured as a separate equity and administered by a management company. An entity that would like funding sells certain assets to the securitization fund, which, in turn, issues securities backed by said assets. |
| Share premium | | The amount paid in by owners for issued equity at a premium to the shares’ nominal value. |
XI-7
| | |
| Short positions | | Financial liabilities arising as a result of the final sale of financial assets acquired under repurchase agreements or received on loan. |
| Subordinated liabilities | | Financing received, regardless of its instrumentation, which ranks after the common creditors in the event of a liquidation. |
| Subsidiaries | | Companies which the Group has the power to control. Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than one half of an entity’s voting power, unless, exceptionally, it can be clearly demonstrated that ownership of more than one half of an entity’s voting rights does not constitute control of it. Control also exists when the parent owns half or less of the voting power of an entity when there is: |
| | • an agreement that gives the parent the right to control the votes of other shareholders; |
| | • power to govern the financial and operating policies of the entity under a statute or an agreement; power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; |
| | • power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body. |
| Substandard risk | | All debt instruments and contingent risks which do not meet the criteria to be classified individually as non-performing or written-off, but show weaknesses that may entail for the entity the need to assume losses greater than the hedges for impairment of risks subject to special monitoring. |
| Tax liabilities | | All tax related liabilities except for provisions for taxes. |
| Trading derivatives | | The fair value in favor of the entity of derivatives not designated as accounting hedges. |
| Value at Risk (VaR) | | Value at Risk (VaR) is the basic variable for measuring and controlling the Group’s market risk. This risk metric estimates the maximum loss that may occur in a portfolio’s market positions for a particular time horizon and given confidence level |
| | VaR figures are estimated following two methodologies: |
| | • VaR without smoothing, which awards equal weight to the daily information for the immediately preceding last two years. This is currently the official methodology for measuring market risks vis-à-vis limits compliance of the risk. |
| | • VaR with smoothing, which weights more recent market information more heavily. |
| | This is a metric which supplements the previous one. |
| | VaR with smoothing adapts itself more swiftly to the changes in financial market conditions, whereas VaR without smoothing is, in general, a more stable metric that will tend to exceed VaR with smoothing when the markets show less volatile trends, while it will tend to be lower when they present upturns in uncertainty. |
XI-8
