SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

For the fiscal year ended December 31, 20032004

OR

Commission file number: 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)

Plaza de San Nicolás 4

48005 Bilbao

Spain

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

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 at December 31, 20032004 was:

Ordinary shares, par value €0.49 per share—3,195,852,0433,390,852,043

Non-Cumulative Guaranteed Preference Shares, nominal value $25 each, of BBVA Preferred Capital Ltd.—9,600,000

Non-Cumulative Guaranteed Preference Shares, Series D, nominal value $0.01 each, of BBVA Privanza International (Gibraltar) Ltd.—70

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  x     No  ¨

Indicate by check mark which financial statement item the registrant has elected to follow.     Item 17  ¨     Item 18  x

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

TABLE OF CONTENTS

i

ii

GLOSSARY

The terms below are used as follows throughout this Annual Report:

FORWARD-LOOKING STATEMENTS

This Annual Report contains statements that constitute “forward-looking statements”forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, 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 under

identifies important factors that could cause such differences. Readers are cautioned not to place undue reliance on thosesuch forward-looking statements, which speak only as of the date hereof. BBVA undertakes 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 its business or acquisition strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

CERTAIN TERMS AND CONVENTIONS

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 “euro” refer to Euro and “ARP” refers to Argentinean Pesos.Argentine pesos.

PRESENTATION OF FINANCIAL INFORMATION

Accounting Principles

The merger of BBV and Argentaria approved by the shareholders of each institution on December 18, 1999, was effected through a merger by absorption of Argentaria with and into BBV and was accounted for under the purchase method of accounting under generally accepted accounting principles in the United States (“U.S. GAAP”) and under the method of “pooling of interests” under generally accepted accounting principles for banks in Spain, which include the accounting requirements established by the Bank of Spain (“Spanish GAAP”).

Unless otherwise indicated, the financial information contained in this Annual Report has been derived from financial statements that have been prepared in accordance with generally accepted accounting principles for banks in Spain, which include the accounting requirements established by the Bank of Spain (“Spanish GAAP.GAAP”). See Note 32.2 to the Consolidated Financial Statements for a discussion of some respects in which Spanish GAAP differs from generally accepted accounting principles in the United States (“U.S. GAAP.GAAP”).

The Consolidated Financial Statements have been presented in the same format as that used in the consolidated financial statements included in BBVA’s annual and interim reports to shareholders. This format differs from that required by the United States

Securities and Exchange Commission (the “SEC”“SEC” or “Commission”“Commission”) for the consolidated financial statements of bank holding companies. Consolidated balance sheets and summary statements of income that reflect the reclassifications required by the Commission are included in Note 32.2 to the Consolidated Financial Statements.

We manage our business along four segmental lines which are discussed in “Item 4. Information on the Company” and whose operating results are described in “Item 5. Operating and Financial Review and Prospects”. In addition, due to the special conditions that have continued to affect our operations in Argentina in 2003, we have elected to provide additional disclosure, as we did in our Annual Report on Form 20-F for 2002, on our Argentinean operations and discuss these operations as if they comprised a separate segment, “Argentina”, and not part of the “Banking in America” business segment, where they were included in our Annual Report on Form 20-F for 2001 and prior years.

Certain numerical information in this Annual Report may not sum due to rounding.

Accelerated Amortization of Goodwill

The Consolidated Financial Statements are based on the Spanish statutorily approved financial statements included in BBVA’s reports to shareholders. The auditors’ reportsreport for the yearsyear ended December 31, 1999 and 2000 werewas qualified with respect to the early amortization of goodwill arising mainly from the acquisition of our Latin American subsidiaries. In accordance with Spanish GAAP, this goodwill should have been capitalized and amortized over 10 years. U.S. securities regulations do not currently allow the use in filings with the Commission of financial statements on which the auditors’ report is qualified with respect to a material departure from generally accepted accounting principles. The financial statements included herein reflect adjustments of the Spanish statutorily approved financial statements solely for purposes of complying with U.S. securities regulations. The adjustments consist of the reversal of the early amortization of goodwill and the amortization of such goodwill over a period of five years, the estimated period of the associated assets’ useful life. The following table reflects these adjustments for the periods presented. This adjustment does not affect the yearyears ended December 31, 2002, 2003 and 2003.2004.

Statistical and Financial Information

The following principles should be noted in reviewing the statistical and financial information contained herein:

Disclosures in this Annual Report with respect to the amount of “substandard loans” at any date reflect Bank of Spain classifications at such date. See “Item 4. Information on the Company—Selected Statistical Information—Assets—Loan Loss Reserve”, “—Substandard Loans” and “—Foreign Country Outstandings”. These classifications differ from the classifications applied by U.S. banks in reporting loans as non-accrual, past due, restructured and as potential problem loans. One of the most important differences is that under Bank of Spain classifications, in the case of loans which are classified as substandard because any payment of principal or interest is 90 days or more past due, initially only past due payments of principal or interest (to the extent accruing at the time that the relevant loan is classified as substandard) are treated as substandard. If any payment on a loan is past due for more than one year, or if, regardless of the time past due, the aggregate amount of past due principal and interest exceeds 25% of the principal amount of the loan, then the entire principal amount of the loan is required to be classified as substandard.

Translation into Euro Currency

The Consolidated Financial Statements are stated in euro. Financial data as of and for periods prior to December 31, 2001 included elsewhere in this Annual Report have been restated from pesetas into euro using the exchange rate in effect as of January 1, 1999 of Ptas.166.386 = €1.00. Data in pesetas converted to euro at such exchange rates show the same trends as would have been presented if the data had been presented in pesetas.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

Not Applicable.

Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

Spanish GAAP 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 32.2 of the Consolidated Financial Statements for a presentation of our balance sheetshareholders’ equity and net income statement reconciled to U.S. GAAP.

U.S. GAAP Information

(2)

We generally refer to our income after taxes and minority interests as “net attributable profit”. In the case of the U.S. GAAP information provided above, the term “net income” is used for consistency with Note 32.2 to our Consolidated Financial Statements, which includes additional U.S. GAAP information and generally refers to “net income” in cases in which we would otherwise use the term “net attributable profit”.

(3)	Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period.

(4)	Each ADS represents the right to receive one ordinary share.

(5)

Dividends per share/ADS are translated into dollars for 20032004 through 1999,2000, at an average exchange rate for each year, calculated based on the average of the noon buying rates for euro from the Federal Reserve Bank of New York on the last date of each month during the relevant period, expressed in dollars per €1.00.

(6)	At the end of the reported period.

(7)	Total assets were restated for 2000 from €313,120 million to €308,612 million due to a reclassification of certain assets of Bancomer, as reported in our Annual Report on Form 20-F for 2001.

Exchange Rates

On January 1, 1999, the euro was introduced as a new currency in the following 11 European Union (“EU”EU”) member states, forming the European Monetary and Economic Union at such date: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. As of January 2001, the euro was also introduced as the new currency in Greece. The currencies of the participating member states were nondecimal subdivisions of the euro until January 1, 2002 and for up to six months thereafter. The exchange rate at which the peseta has been irrevocably fixed against the euro is Ptas.166.386 = €1.00. Beginning January 1, 2002, the participating member states issued new euro-denominated bills and coins for use in cash transactions. By July 1, 2002, the participating member states withdrew from circulation the bills and coins denominated in their respective currencies, and they are no longer legal tender for any transactions.

The following table sets forth, As used in this Annual Report, the term “noon buying rate” refers to the rate of exchange for euros, expressed in U.S. dollars per euro, in the years indicated, the average exchange rateCity of New York for each year, which reflects the average of the noon buying rates for euro fromcable transfers payable in foreign currencies as certified by the Federal Reserve Bank of New York on the last date of each month during the relevant period, for the years ended December 31, 1999 through 2003, and for the year ended December 31, 2004 (through June 30), expressed in dollars per €1.00.customs purposes.

The following table describes,tables describe, for the periods and dates indicated, information concerning the noon buying rate for euro, from the Federal Reserve Bank of New York, expressed in dollars per €1.00.

The noon buying rate for euro from the Federal Reserve Bank of New York, expressed in dollars per €1.00, on June 25, 2004,29, 2005, was $1.2145.$1.2101. Unless otherwise indicated, 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 on December 31 of the relevant year.

At December 31, 2003,2004, approximately 30.8%29.0% of our assets and approximately 33.2%32.2% of our liabilities were denominated in currencies other than euro (principally dollars).

For a discussion of our foreign currency exposure, please see “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Market Risk Management—Management by Business Area—Market risk in 2003—2004—Structural Exchange Rate Risk”.

Not applicable.

Not applicable.

Risks Relating to us

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 historically have developed our lending business in Spain, which continues to be our main place of business. As of December 31, 2003,2004, business activity in Spain accounted for 76.25%76.46% of our loan portfolio. See “Item 4. Information on the Company—Selected Statistical Information—Loans by Geographic Area”. 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 and results of operations.

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-size companies and middle and 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 income customers and commercial loans to medium and small 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 portfolio to these customer segments in the event of adverse developments in the economy.

Increased exposure to real estate in Spain makes us more vulnerable to developments in this market.

The sound economic growth, the strength of the labor market and a decrease in interest rates in Spain hashave caused an increase in the demand of mortgage loans in the last few years. This has had repercussions in housing prices, which have also risen significantly. As residential mortgages are one of our main assets, comprising 30%40%, 40%42% and 42%44% of our loan portfolio at December 31, 2001, 2002, 2003 and 2003,2004, respectively, we are currently highly exposed to developments in real estate markets. A strong increase in interest rates or unemployment in Spain might have a significant negative impact in mortgage payment delinquency rates. An increase in such delinquency rates could have an adverse effect on our business, financial condition and results of operations.

Highly-indebted households and corporations could endanger our asset quality and future revenues.

Spanish households and firms have reached, in recent years, a high level of indebtedness, level, which represents increased risk for the Spanish banking system. The increase of loans referenced to variable interest rates make debt service on such loans more vulnerable to changes in interest rates than in the past. The increase in households’ and firms’ indebtedness also limits their ability to incur additional debt, decreasing the number of new products we may otherwise be able to sell them.

A sudden shortage of funds could cause an increase in our costs of funding and an adverse effect on our operating revenues.

Historically, one of our principal sources of funds has been savings and demand deposits. Time deposits represented 36.2%35.0%, 35.0%31.1% and 31.1%29.3% of our total funding at December 31, 2001, 2002, 2003 and 20032004, respectively. Large-denomination time deposits may, under some circumstances, such as during periods of significant changes in market interest rates for these types of deposit products and resulting increased competition for such funds, be a less stable source of deposits than savings and demand deposits. In addition, 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.

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. For example, the adoption of the euro as the common currency throughout the EU is making it easier for European banks to compete against us in Spain. In addition, the trend towards consolidation in the banking industry has created larger and stronger banks with which we must now compete.

We also face competition from non-bank competitors, such as:

We cannot assure you that this competition will not adversely affect our business, financial condition 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 national governments, domestic and international economic and political conditions and other factors.

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.

In addition, income from treasury operations is particularly vulnerable to interest rate volatility. Since 64.30%approximately 69% of our portfolio consists of variable interest rate loans maturing in more than one year, rising interest rates may also bring about an increase in the non-performing loan portfolio.

We must adopt new accounting standards in 2005 that will impact our financial reporting.

In 2004 we prepared our financial statements in accordance with Spanish GAAP, and prepared a reconciliation of certain items to U.S. GAAP as required by SEC regulations. Under current European Union (EU) law, listed EU companies had to apply from January 1, 2005 International Financial Reporting Standards (IFRS) adopted by the EU in preparing their consolidated financial statements.

Applying these standards to our consolidated financial statements will imply a change in the presentation of our financial information since the financial statements will include more components and reflect classification differences, and additional disclosure will be required. Additionally, there will be a change in the valuation of certain items. Regarding the former, at this moment it is not possible to determine the exact impact that this new regulation will entail compared to Spanish GAAP, since new pronouncements from the International Accounting Standards Board (IASB), or pronouncements that are not endorsed by the European Union (EU) prior to the preparation of our December 31, 2005 consolidated financial statements, may have an impact on our financial statements. Regarding the latter, we have performed a preliminary analysis of how the adoption of IFRS will impact our financial condition and results of operations. We cannot assure you, however, that we will not experience any decreases in our shareholders’ equity or that our net income, each as calculated under IFRS, will not decrease or increase, respectively, when we prepare our 2005 consolidated financial statements under IFRS. We also cannot assure you that any such decrease in shareholders’ equity or net income would not have a material adverse effect on our results of operations and financial condition. See “Operating and Financial Review and Prospects-International Financial Reporting Standards (IFRS)”.

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 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 with Spanish GAAP, which differs in certain respects from U.S. GAAP, the financial reporting standard to which many investors in the United States may be better accustomed.

Risks Relating to Latin America

The devaluation of the ArgentineanArgentine peso, thehigh inflation and other adverse macroeconomic conditions prevailing in Argentina and related emergency measures adopted by the Argentinean governmentArgentine Government in 2001 and 2002 have had, and may continue to have, a material adverse effect on our business, financial condition and results of operations.

Argentina’s economic situation deteriorated sharplyThe Argentine economy experienced a severe crisis in late 2001. The beginning of2001 and 2002, was marked by the continued movement of capital out of Argentina, the end of convertibility of the peso, devaluation, and the return of inflation. The crisis had a strong impact on the financial system and jeopardized the solvency and liquidity of banks. In 2003 macroeconomic conditions in Latin America and Argentina improved,2004, the Argentine economy stabilized and experienced significant growth, but significant uncertainty regarding the scope, sustainability and pace of the recovery remained. The Argentine economic and social situation has quickly deteriorated in the past and may quickly deteriorate in the future and we cannot assure you that the Argentine economy will continue to experience sustained growth.

The emergency measures adopted by the Argentine government in response to the economic crisis at the end of 2001 and during 2002 that affected our results of operations included: freezing public debt payments, ending convertibility between the Argentinean peso and the dollar, imposing cash withdrawal limits on sight and savings accounts, re-scheduling of term deposit maturities and converting dollar assets and liabilities to pesos at different exchange rates.

As a result of the emergency measures described in “Item 4. Information on the Company––Business Overview—Business Areas—Argentina”,above, we have written off our entire investment in Argentina to date. However, despite our provisions and write-downs, a deterioration in the situationArgentine economy or further emergency measures adopted by the government in Argentina may continue tocould have a material adverse effect on our business, financial condition and results of operations.

We cannot assure you that the laws and regulations currently governing the Argentinean economy will not change in the future, or that any changes which may occur will not adversely affect our business, financial condition or results of our operations in the country, or the business which we transact with counterparties located in the country.

Risks relating to our investments in Argentina in light of the current social and political crises include the potential for: (i) civil unrest, rioting, looting, nationwide protests, widespread social unrest and strikes, (ii) expropriation, nationalization and forced renegotiation or modification of existing contracts, (iii) additional restrictions on repatriation of investments and transfer of funds abroad, (iv) adverse changes to taxation policies, including retroactive tax claims and (v) further changes in laws and policies of Argentina affecting foreign trade and investment.

Our Latin American subsidiaries’ growth, asset quality and profitability may be affected by volatile macroeconomic conditions, including government default on public debt, in the Latin American countries where they operate.

The Latin American countries where we operate have experienced significant economic volatility in recent decades, characterized by slow growth, declining investment 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.

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 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 the conservative risk policies described in “Item 11. Quantitative and Qualitative Disclosures About Market Risk”, no assurance can be given that our Latin American subsidiaries’ growth, asset quality and profitability will not be 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, particularly in an emerging market, may have a negative impact on other emerging market economies. These developments may adversely affect the business, financial condition and operating results of our subsidiaries in Latin America.

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 and results of operations.

We operate commercial banks in 10 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 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. Our expansion in these markets 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.

Regulatory changes in Latin America that are beyond our control may have a material effect on our business, financial condition and results of operations.

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. 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 and results of operations.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

BBVA’s predecessor bank, BBV, was incorporated as a limited liability company (asociedad anónima or “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. It 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, Spain, 48005, telephone number 34-94-420-3001. BBVA’s agent in the U.S. for U.S. federal securities law purposes is Raúl Santoro de Mattos Almeida (BBVA New York, 1345 Avenue of the Americas, 45^th floor, NY, New York, 10105). BBVA is incorporated for an unlimited term.

On March 29, 2005, our Board of Directors approved the launch of an exchange offer for the approximately 85.3% of the shares of Banco Nacionale del Lavoro, S.p.A. (“BNL”) which we did not already own (the “BNL Exchange Offer”). Under the terms of the BNL Exchange Offer, BBVA is offering one of its ordinary shares for every five ordinary shares of BNL. On April 8, 2005, BNL’s board of directors announced that it considered the terms of the BNL Exchange Offer to be fair and on April 27, 2005, the Commission of European Union approved the BNL Exchange Offer as compatible with the European common market. On April 14, 2005, the Commissione Nazionale per la Borsa (the Italian securities regulator) approved the BNL Exchange Offer and on May 13, 2005, the Bank of Italy authorized BBVA to acquire more than 50% of BNL’s shares. On June 14, 2005, an Extraordinary Meeting of Shareholders of BBVA approved a capital increase to finance the BNL Exchange Offer. Under the terms of the proposed capital increase, BBVA will issue up to a maximum of 531,132,133 new ordinary shares. BBVA’s shareholders also resolved to delegate to our Board of Directors the authority to determine the appropriate moment to undertake the capital increase. On June 21, 2005, the Bank of Spain announced that it would not oppose the capital increase.

We launched the exchange offer on June 20, 2005 and the final day on which acceptances will be accepted will be July 22, 2005. The BNL Exchange Offer is not being made and will not be made, directly or indirectly, in or into the United States, Canada, Japan, Australia or any other jurisdiction in which any such exchange offer would require the authorization of the relevant regulatory authorities or would violate applicable laws or regulations. In particular, no offer to purchase BNL shares or to sell BBVA shares is being made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation by mail, telephonically or electronically by way of internet or otherwise) of interstate or foreign commerce, or any facility of any securities exchange, of the United States and the BNL Exchange Offer will not be capable of acceptance by any such use, means, instrumentality or facility. Accordingly, under the terms of the BNL Exchange Offer, we will not accept tenders from the United States or from Canada, Japan, Australia or any other jurisdiction in which the BNL Exchange Offer would require the authorization of the relevant regulatory authorities or would violate applicable laws or regulations.

Capital Expenditures

Our principal capital expenditures from 20012002 to the date of this Annual Report were the following:

20042005

On April 28, 2005, we acquired all of the common shares of Laredo National Bancshares Inc., a privately-owned financial holding company and bank holding company headquartered in Laredo, Texas for $850 million. The acquisition closed after receiving regulatory approvals from the Board of Governors of the Federal Reserve System and the Bank of Spain.

On January 7, 2005, our Mexican affiliate Grupo Financiero BBVA Bancomer, S.A. de C.VC.V. (“Bancomer”) acquired all of the common shares of Hipotecaria Nacional de Mexico, a privately held Mexican mortgage bank, for $356 million. The acquisition closed after receiving regulatory approvals from the relevant Mexican authorities.

Bancomer2004”).

On January 30, 2004, our Board of Directors adopted a resolution to launch a tender offer for the approximatedapproximately 40.6% of the shares of Bancomer, our Mexican affiliate, which were not already owned by BBVA. The tender offer was launched on February 19, 2004 and expired on March 19, 2004. As a result of the successful completion of the tender offer and subsequent purchases amounting to 0.56%during 2004 of Bancomer’s capital stock, at MarchDecember 31, 2004, we owned 99.44%99.70% of Bancomer’s outstanding shares. On February 5, 2004, to strengthen our capital ratios and finance a portion of the cost of the Bancomer tender offer, we sold 195,000,000 of our newly-issued ordinary shares to institutional investors in Spain and outside of Spain at the offer price of €10.25 per share.

BBVA Banco Francés, S.A. (“Banco Francés”). On March 18, 2004, the Board of Directors of BBVA Banco Francés, S.A. (“Banco Francés”), our Argentine affiliate, resolved to implement a plan intended to improve Banco Frances’sFrancés’s adjusted stockholders’ equity and enable Banco FrancesFrancés to comply with new minimum capital requirements established by the Argentine Central Bank. TheUnder this plan, provides for:we:

BBVA, as Banco Francés’s largest shareholder, intends to participate in this plan by:

Furthermore, BBVA will acquire

The two transactions involving Banco FrancesFrancés described above willdid not affect BBVA’s consolidated operating results because (i) in the case of the loan capitalization, BBVA had previously fully provisioned the loan, and (ii) in the case of the purchase of Banco FrancesFrancés (Cayman) Limited, this entity was already fully consolidated by BBVA.

On October 8, 2004, we acquired all the shares of Valley Bank, a bank licensed in the state of California, for U.S.$16.7 million, which was BBVA’s first commercial banking acquisition in the United States.

2003

During 2003, BBVA acquired 0.176% of the capital stock of Gas Natural S.D.G, S.A. (“Gas Natural”) for €12.7 million, raising its interest in Gas Natural to 3.241%.

During 2003, BBVA purchased 4.76% of the capital stock of Bancomer for a total of €304 million, raising its interest to 59.43% as of December 31, 2003.

2002

On May 14, 2002, Banco Francés sold its interest in BBVA Uruguay (60.88%) to BBVA for $55 million, after obtaining authorization from the Central Bank of Uruguay. As a result of this transaction, BBVA’s ownership interest in BBVA Uruguay increased from 80.66% to 100%.

On May 15, 2002, Terra Networks, S.A. (“Terra Networks”) and BBVA entered into a preliminary agreement for the integration of Uno-e Bank, S.A. and the individual consumer financing business of Finanzia Banco de Crédito, S.A. (“Finanzia”), BBVA’s wholly-owned subsidiary, whereby Terra Networks’ holding in Uno-e Bank would decrease to 33%. This integration transaction and the percentage of ownership held by Terra Networks were subject to the formalization of final contracts, which were

executed on January 10, 2003, and approved at extraordinary shareholders’ meetings of Finanzia and Uno-e Bank held on April 23, 2003. In connection with the integration transaction, Terra Networks was granted a put option over its shares in the resulting combined entity giving it the right to require BBVA to purchase such shares. For more information relating to this transaction, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Agreement with Terra Networks” and “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Uno-e Bank Agreement”.

On June 8, 2004, the European Commission approved plans by BBVA and Banca Nazionale del Lavore (“BNL”) to form a consumer-finance 50-50 joint venture in Italy. The new company will provide consumer credit products, such as credit cards, personal loans and salary advances.

In two transactions in June and November 2002, BBVA purchased from the Mexican government its 3% and 2.5% interests in Bancomer for approximately €240 million and €175 million, respectively. As a result of these transactions, BBVA’s ownership interest in Bancomer increased to 54.67% as of December 31, 2002.

2001

In January 2001, BBVA acquired 200 million shares of Bancomer from the Bank of Montreal, representing approximately 2.2% of Bancomer’s capital stock, for approximately $125 million. On April 4, 2001, BBVA reached an agreement with Bank of Montreal to purchase in two tranches 812 million shares of Bancomer for a total of $558 million. The first tranche, consisting of 500 million shares, was acquired in April 2001, and the second tranche, consisting of 312 million shares, in May 2001, raising BBVA’s holding in Bancomer to 48%. Additional purchases of shares of Bancomer amounting to $140 million were made in October and November 2001, increasing BBVA’s stake in Bancomer to 49% as of December 31, 2001.

BBVA acquired in the first and last quarters of 2001 a 4.87% interest in BNL for approximately €398 million, increasing its holding in BNL to 14.8% as of December 31, 2001. BBVA increased its holding to 14.9% as of January 31, 2002.

Capital Divestitures

Our principal capital divestitures from 20012002 to the date of this Annual Report were the following:

20042005

On June 18, 2004 BBVA sold its 5.01% interestWe engaged in Acerinox,a series of purchases and sales of shares of Iberdrola, S.A. for €146.6 million,during the three months ended March 31, 2005, resulting in a 0.3% net reduction of our holding and giving rise to a capital gain of €35€74.76 million.

2004

In January 2004, BBVA sold 2.2% of the capital stock of Gas Natural.Natural, S.D.G. S.A. At the time the transaction closed, BBVA had not completed preparation of its 2003 Consolidated Financial Statements and therefore, in accordance with Spanish GAAP, reflected the amortization of €70 million of consolidation goodwill which resulted from the transaction in such financial statements rather than in its 2004 Consolidated Financial Statements.

In March 2004, the Group sold its 24.4% holding in Banco Atlántico, S.A. at the price established by Banco Sabadell, S.A. in its tender offer for all the shares of Banco Atlántico, S.A. This sale gave rise to a gain of €217.7 million for the BBVA Group.

In March 2004, the Group sold its 50% holding in Hilo Direct Seguros y Reaseguros, S.A, which represented all of the Group’s interests. This sale gave rise to a gain of €26 million for the BBVA Group.

In June 2004, the Group sold its 5.0% holding in Acerinox, S.A., which represented all of the Group’s interests. This sale gave rise to a gain of €34.6 million for the BBVA Group.

On September 6, 2004, the Group sold its 17.2% holding in Vidrala, S.A., giving rise to a gain of €19.3 million.

In December 2004, the Group sold its 3% holding in Gamesa, S.A., which represented all of the Group’s interests. This sale gave rise to a gain of €53.1 million for the BBVA Group.

In the second quarter of 2004, the Group exercised a sale option it had on its 33.3% holding in Grubarges Inversión Hotelera, S.L., and recognized a gain of €26.3 million on such sale.

During the first six months of 2004, the Group sold its 0.6% holding in Repsol YPF, S.A. These sales gave rise to a loss of €6.5 million for the BBVA Group.

During 2004, The Group purchased and sold several shares of Telefónica de España, S.A. without any material variation in its aggregate holding in such company as of December 31, 2003. These sales gave rise to a gain of €141.7 million.

2003

On January 13, 2003, BBVA announced its intention to sell its Brazilian affiliate, Banco Bilbao Vizcaya Argentaria Brasil, S.A. (“BBV Brasil”) to Banco Bradesco, S.A. (“Bradesco”). On June 9, 2003, upon completion of due diligence, receipt of authorizations from regulatory authorities and approval by the corresponding corporate bodies, BBVA transferred 100% of BBV Brasil to Bradesco, in consideration for which Bradesco paid 35,481,460,311 of its newly-issued ordinary shares and 34,948,501,563 of its newly-issued preferred shares, totaling 4.44% of Bradesco’s share capital, as well as 1,864 million Brazilian Reais in cash, for a total consideration of approximately 2,626 million Brazilian Reais (approximately $900 million). We were required, under Spanish GAAP, to take an extraordinary charge in 2002 relating to exchange rate differences relating to our investment in BBV Brasil accumulated up to December 31, 2002. Under the transaction agreements with Bradesco, in addition to the cash consideration and equity participation described above, we have been granted the right to nominate one member of Bradesco’s board of directors so long as we maintain, subject to exceptions relating to capital increases where shareholders are not offered preemptive rights, at least a 4.0% interest in Bradesco’s share capital. We have agreed for a period of two years from the closing date or so long as we have a right to nominate one member of Bradesco’s board of directors, whichever is longer, that we will not control and/or manage a financial institution in Brazil. See Note 32.2.D.13 to the Consolidated Financial Statements.

In March 2003, BBVA sold its 25% interest in Metrovacesa Residencial, S.A., resulting in a capital gain of €2.1 million.

On June 5, 2003, BBVA agreed to sell its holding in Crédit Lyonnais, S.A., to Crédit Agricole, S.A. in exchange for €482 million in cash, representing 67% of consideration, and 16.3 million shares of Crédit Agricole, S.A., representing the remaining 33% of consideration. BBVA immediately sold the Crédit Agricole shares to institutional investors at a price of €16.64 per share, for a total consideration of €271 million. As a result of this transaction, BBVA liquidated its participation in Crédit Lyonnais and recorded a capital gain of €342 million.

In July 2003, BBVA sold 3% of the capital stock of Gamesa, giving rise to a capital gain of €29.9 million.

In the last quarter of 2003, BBVA sold 2.465% of the capital stock of Repsol-YPF, giving rise to a loss of €73.3 million.

In 2003, a series of purchases and sales of shares of Telefónica de España, S.A., resulting in a 0.57% net reduction of our holding, gave rise to a capital gain of €220 million.

In 2003, a series of purchases and sales of shares of Iberdrola, S.A., resulting in a 1.02% net reduction of our holding, gave rise to a capital gain of €45.3 million.

In December 2003, BBVA sold its entire 9.9% interest in the Moroccan bank Wafabank, S.A. to Omnium Nord Africain, S.A. The total sale price was 529,505,625 dirhams (approximately €48 million) and gave rise to a capital gain of €3.5 million.

In December 2003, Banco Sabadell, S.A. launched a tender offer for the shares of Banco Atlántico, S.A. at a price of €71.79 per share. The transaction was completed in March, 2004 and BBVA sold its entire 24.37% interest in Banco Atlántico, which gave rise to a capital gain of approximately €218 million.

2002

In the first quarter of 2002, BBVA sold 3.82% of its holding in Metrovacesa, S.A., giving rise to a capital gain of €14 million. In June 2002, BAMI, S.A. Inmobiliaria de Construcciones y Terrenos agreed to purchase BBVA’s 23.9% interest in the capital stock of Metrovacesa, S.A. for €545.4 million (€36.55 per share). This transaction closed on July 17, 2002. As a result of this sale, as of December 31, 2002, BBVA had a 0.58% interest in Metrovacesa, S.A. The transaction gave rise to a capital gain of approximately €361 million.

2001

In March 2001, BBVA sold its interest in Profuturo GNP, S.A. de C.V. Administradora de Fondos de Pensiones for $190 million.

B. Business Overview

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 industrial holdings in some of Spain’s leading companies.

Business Areas

Reorganization in 2003

In 2003, we reorganized our business areas with a view to optimizing the earnings and value-creation of each line of business and to more closely align our organizational structure with the manner in which management has been setting business strategy and monitoring our operating results. The principal features of the reorganization were the following: (i) our Retail Banking in Spain and Portugal area now includes retail banking, and asset management and private banking, (which had been included in a separate Asset Management and Private Banking business area in 2002) in Spain and Portugal, (ii) our Banking in America area now includes all of our Latin American operations, including our Mexican operations (which had been a separate business area in 2002) and asset management and private banking in Latin America (but excluding our operations in Argentina, which is a separate business area, and in Brazil, as discussed below) and (iii) as a result of our agreement to sell our entire interest in BBV Brasil in January 2003, and the closing of such sale in June 2003, our Corporate Activities and Other business area included our interest in BBV Brasil for the period January to June 2003, accounted for under the equity method, and for 2002 and 2001, accounted under full consolidation. Due to the special conditions that have affected our operations in Argentina in 2003, we have continued to provide additional disclosure on our Argentinean operations and discuss these operations as if they comprised a separate business area, “Argentina”, and not part of the business area “Banking in America”, where they were included in our Annual Report on Form 20-F for 2001 and prior years. See “Presentation of Financial Information—Accounting Principles”.

The following is a description of our business areas:

The foregoing description of our business areas is consistent with our current internal organization. The financial information for our business areas for the years 2004, 2003 2002 and 20012002 presented below has been prepared on a uniform basis to reflect the reorganization of our business areas in 2003 described above.basis. Unless otherwise indicated, the financial information provided below for each business area does not reflect the elimination of transactions between companies 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 the presentation and discussion of our consolidated operating results in “Item 5—Operating and Financial Review and Prospects” and elsewhere in this Annual Report, however, such intra- and inter-business area transactions are eliminated and the eliminations are generally reflected in the operating results of the Corporate Activities and Other business area.

In our Annual Report for the years ended December 31, 2003 and 2002, due to the economic, political and social crises that affected our Argentinean operations in such period, we provided additional disclosure on our Argentinean operations and discussed such operations as if they comprised a separate business area. In 2004, economic, political and social conditions in Argentina have stabilized and the Argentine economy has experienced significant growth. As a result of such stabilization and growth, our management no longer tracks our Argentine operations as a separate business area and, accordingly, in this Annual Report we do not discuss our Argentinean operations separately, but rather as part of the business area Banking in America, where these operations were included in our Annual Report for 2001 and for prior years.

The following table provides net attributable profit information for our business areas for the years ended December 31, 2004, 2003 2002 and 2001.2002.

Retail Banking in Spain and Portugal

LendingThe Retail Banking in Spain and Portugal area’s main lines of activity focused on providing banking services to private individuals, retailers and small and medium-sized entities, as well as managing mutual funds, pensions and insurance brokerage. This area developed its business activities through 3,397 branch offices.

The business units included in the Retail Banking in Spain and Portugal business area are:

Total net lending in this business area as of December 31, 2003,2004, was approximately €91,295€109,591 million, an increase of 13.9%20.0% from €80,152€91,295 million as of December 31, 2002,2003, principally due to growth in mortgage lending.lending and personal loans.

The non-performing loan (“NPL”NPL”) ratio fell to 0.88%0.61% as of December 31, 2003,2004, from 1.00%0.85% as of December 31, 2002.2003. The loan coverage ratio rose to 271.1%379.4% as of December 31, 2003,2004 from 220.8%269.5% as of December 31, 2002.2003.

CustomerTotal customer funds (mainly deposits, mutual and marketable debt securities, whichpension funds), were €51,894€115,399 million as of December 31, 2004, an increase of 48.7% compared to 2003 decreased by 1.3%, principally due to the cancellationas a result of an agreement to manage certain government accountsincrease in January 2003.deposits collected during the year. Mutual and pension funds under management were €49,334€41,988 million as of December 31, 2003,31,2004, an increase of 12.2%, due13.7% compared to the launch2003. Pension funds under management were €13,731 million as of new funds duringDecember 31,2004, an increase of 10.5% compared to 2003.

TheCommercial Banking and Small and Medium Entities (SME) Banking

This business area’sunit’s main lines of activity were focused on implementingthe development of the Financial Services Plan including the Personal, Commercial and Special Plans described below, which are the focus of the new(our business model launched by BBVA at the end of 2002. Significant progress was made in 2003 in the development of the three customer approach methods devised byfor this business area: (i)area adopted in 2002) including Personal Financial Services aimed at residential customers (ii)and Commercial Financial Services for SMEs and businesses and (iii) Special Financial Services, which are offered through Finanzia and Uno-e Bank.businesses.

The business units included in the Retail Banking in Spain and Portugal business area are:

Commercial Banking in Spain

The Commercial Banking in Spain unit makes the biggest contribution to the Retail Banking Spain and Portugal business area and accounts for 73% (80% in 2002) of the business area’s ordinary revenue, 78% (85% in 2002) of customer funds and 71% (72% in 2002) of lending. The Commercial Banking in Spain unit serves the residential, commercial and small business customer segments, providing specialist mortgage banking, personal banking and private banking, among other services.

In 2003, lending by the Commercial Banking in Spain unit increased significantly to €85.2 billion, an increase of 14.2% from €74.6 billion in 2002, principally due to strong growth in mortgage products.products such as Hipoteca Fácil (Easy Mortgage). Mortgages increased 20.2% in 2003 to €15,734€13,646 million due to the wideduring 2004, an increase of 39.8% over 2003. The Commercial Banking unit reinforced its range of mortgageinnovative products we offer, which includefor car owners through several credit card products offered through joint ventures. These products included the first 30-year fixed-rate mortgage inMaster Solred and Mutua Automovilística credit cards.

Mutual and pension funds managed by the Spanish market, the Hipoteca Mix Dos Tramos. This product guarantees a fixed rate for the first five yearsCommercial Banking business unit increased during 2004 by 7.1% and may include an interest rate cap to protect customers against severe interest rate increases.12.9%, respectively.

OurThe SME financing business focused in 2003 on increasing leasing activity and, in addition, a significant effortBanking unit’s total loan portfolio was made to increase point-of-sales (“POS”) to generate increased fee revenue—13,250 new POS terminals (for credit card payments) were installed during the year.

To increase customer funds in 2003, we endeavored to increase the breadth and attractiveness of our products. One example was the Libreta Flexible, a deposit product that combines the simplicity of a traditional passbook account with guaranteed returns. As of December 31, 2003, the Libreta Flexible’s deposit balance was €2,353 million.

We also launched several new mutual fund products designed to provide investors with favorable returns in a rising stock market, but also afford them a level of investment protection during market declines. Two versions of our Extra 5 fund, which were launched in September, attracted more than €3.4over €36 billion as of December 31, 2004, a 20% increase compared to 2003. InBilling for leasing and billing for renting, factoring and confirming registered an increase of 25% and 30% compared to 2003, we also launched a set of pension plan products under the brand name BBVA Protección. These plans are tailored to each customer’s needs and risk profile and attracted more than €800 million as of December 31, 2003.respectively.

By launching several innovativeCustomer funds under management by the SME Banking increased by €791 million in 2004, primarily due to the success of five mutual funds distributed by the SME Banking network and designed by the Asset Management unit to enable SME’s to optimize their cash-flow management.

The SME Banking unit also distributed insurance products such as theTarjeta Diez (Ten card)Segurpyme, Seguleasing, Keyman and theTarjeta Infinite (Infinite card), BBVA was ableKeyman Plus to issue more than 7 million new credit cards in 2003. BBVA was also active in developing new means of payment, such as BBVA VIA T,provide coverage for toll road payment, or the Mobipay service, which employs mobile telephony.

BBVA continued to focus on moving customers to alternative channels to accomplish their banking transactionscompanies’ assets, business and in 2003 the number of transactions performed at our branches decreased by approximately 20 million with 72% of such transactions being completed through alternative channels. In addition, telephone banking users increased by approximately 15% in 2003 and internet transactions increased by 29.2% to 77.5 million. BBVA was named, for the second consecutive year, the Best Consumer Internet Bank in Europe by Global Finance magazine.

Small and Medium Entities (SME) Banking

SME Banking, the second most significant unit in the Retail Banking in Spain and Portugal business area, in terms of both business volume and contribution to net attributable profit, specializes in the management of the SME segment in Spain.people. As of December, 31, 2003,2004, the SME Banking unit managed a loan portfolioUnit insured approximately 7,000 of €20.5 billion and approximately €7 billion of customer deposits, with year-on-year growth of 14.5% and 12.2%, respectively. In addition, in 2003, our leasing, renting and confirming businesses saw year-on-year increases of 22.3%, 30.2% and 34.3%, respectively.

In 2003, we were the leading Spanish bank in issuing SME loans funded by the Instituto de Crédito Oficial (ICO), a Spanish government agency,BBVA’s clients with a market sharetotal of 19.7%, according to ICO statistics.

Regarding customer funds managed, we launched five new mutual funds targeted at SMEs41,270 policies and were successfulgenerated €14.5 million in increasing funds captured by 40.6% to €765 million as of December 31, 2003.

Consistent with our strategy to increase use of alternative channels and, in particular, the Internet, we launched a new product, SIETE net, which along with our prior Internet products, BBVA net c@sh and BBVA net office, had as users over 42,000 companies, which transacted collections and payments worth €58 billion through this electronic channel, in 2003.premium revenue.

Asset Management and Private Banking

This unit is the result of the reorganization of our private banking activities carried out in 2003. The Asset Managementgoal of this reorganization was to align product creation with our distribution networks and Private Banking business unit consistssimultaneously give an overall view of eightthe high-income customer segment. Together with subunits that can be grouped together, by business activity, in three blocks:

segment.

Total fundsassets managed by the Asset Management and Private Bankingthis unit as of December 31, 2003, were approximately €182004, was €66 billion, an increase of 11.4%14.4% over 2002.2003.

The Pension subunit’s assets under management as of December 31, 2003 were €12.2 billion, an increase of 10.7% over 2002, for more than 1,280,000 participants. More than €6.4 billion of such funds relate to individual pension plans and approximately €5.8 billion to corporate pension and similar plans.

With respect toBBVA’s private banking in Spain, thebusiness, through its BBVA Patrimonios and Personal Banking subunits, managemanaged total fundsassets of €12,105 million.€13.5 billion in 2004, an increase of 12.6% over 2003. BBVA Patrimonios focuses onPatrimonios’s business strategy is aimed at increasing the returns it offers to high-net worth individuals (with financial assetscustomers by employing a team of over €2 million) and manages funds of €6,315 million belongingprivate banking specialists directly accessible to more than 1,000such customers. The Personal Banking provides customized advisory services to our medium-to-high income customers. This subunit has more than 70,000 customers and totalimproved the services it offers to its customer base by marketing funds under management of €5,790 million as of December 31, 2003.from the principal mutual funds companies available internationally.

BBVA Portugal

In 2003, the BBVA Portugal unit’s customerexperienced significant growth in 2004. Customer loans increased by 7.6%21.3%, boosted by a 32.8%43% increase in mortgage lending whiledue primarily to the non-performing loan ratio fell to 0.65% assuccess of December 31, 2003, from 0.91% as of December 31, 2002.the Hipoteca Cuota Final mortgage product.

The BBVA Portugal unit’s funds under management increased by 3.9%16.6% in 20032004 principally due to strong 20% growth in mutual fundsfund assets, which increased by 19.8%20% over 2002. In 2003, we2003. We also launched three new mutual funds, including the first guaranteed fund to be marketed in Portugal, Extra 5 BBVA. Seven new types of structured deposit products were also launched in 2003.2004, as well as mixed deposits that combine fixed deposits with mutual funds.

Special Financial Services

The Special Financial Services unit, is comprised ofwhich operates through Finanzia and and our on-lineonline bank Uno-e Bank S.A., operates in the following lines of business: the financing of cars, consumer items and Dinero Express. In June 2003, Uno-e Bank was acquired byequipment, e-banking, bill payment and the consumer finance divisioncar and equipment renting. The workforce is made up of our subsidiary Finanzia. As885 employees; with a resultdistribution network of this transaction, we increased our ownership in Uno-e Bank to 67%.37 branches and a customer base of 2.4 million.

-

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- Dinero Express provides fast remittance services for immigrantsAs of December 31, 2004, total net lending and customer funds managed by this unit was €3,123 million and €941 million, respectively, and the NPL ratio improved by 81 basis points to send money from Spain to their home countries1.47%, with a coverage ratio of Ecuador, Colombia, Peru, the Dominican Republic and Argentina, where it has more than 1,000 payment points.162.7%.

European Insurance Business in Europe

ThisThe European Insurance business unit engagescomprises several subunits that manage our insurance business in Spain and Portugal. Such subunits engage in direct insurancesales of coverage (through BBVA Seguros) for life, savings, multi-peril, home and construction insurances, as well as reinsurance and insurance broking in Spainbrokering through BBVA Correduría and Portugal and markets its products mainly through BBVA’s branches. In January 2004, BBVA entered into an agreement to sell to AXA Aurora Iberica, S.A. de Seguros y Reaseguros its 50% holding in Hilo Direct, S.A. de Seguros y Reaseguros, although BBVA’s products will still be distributed through the BBVA network until mid 2007.Broker.

Wholesale and Investment Banking

The Wholesale and Investment Banking business area focuses on large corporate, governmental, non-governmental organizations and institutional investor clients.

The business units included in this business area are:

As of December 31, 2004, lending in this area was €41,672 million, an increase of 5.9% over 2003. Nonperforming loans decreased 57.6% to an NPL ratio of 0.19% as of December 31, 2004, compared to 0.50% as of December 31, 2003, principally due to an improvement in risk quality. Funds managed (deposits and mutual funds) recorded an increase of 14.1% compared to 2003.

Global Corporate Banking

The Global Corporate Banking business unit was created in 2003provides services to strengthen BBVA’s relationship with its large Spanish and multi-national customersmultinational corporations. Its organizational structure is aimed at improving the capacity to satisfy customer needs with an integral offer of products and take advantageservices that feature special characteristics for each local market. The unit is represented in 15 countries by the following subunits:

In 2004, The Global Corporate Banking unit is further subdivided into the following four subunits to manage its corporate banking activities: Corporate Banking Iberia, Corporate Banking Europemanaged over €21.6 billion in loans and Asia, Corporate Banking America and Global and Investment Banking.approximately €10 billion of customer funds. The Global Corporate Banking unit has branches in New York, London, Paris, Milan and Hong Kong.

Global Corporate Banking also includes the Capital Markets subunit which handles the unit’sis responsible for our syndicated loan and structured financefinancing transaction activities. In 2003, the Capital Markets subunitactivities, including significant transactions in Spain during 2004 carried out by Telefónica, Iberdrola, Enagas, Red Eléctrica de España and Ferrovial, while in Latin America BBVA was particularly activeinvolved as mandated lead arranger in designingsyndicated loans to Pemex, Telmex and structuring leveraged finance transactions and project financings. Also in 2003, the Capital Markets subunit, in conjunction with the Global Markets and Distribution unit, acted as joint book runner in more than ten public offerings of fixed-income securities, including a €5 billion offering by the Kingdom of Spain and a €1 billion offering by Repsol, S.A. The Capital Markets subunit also participated in public offerings by John Deere, Altadis, Caminhos de Ferro and Enersis and private placement offerings for Ford Motor Credit, HSH Nordbank and Dexia,Codelco as well as over 20 euro medium term note program offerings, including for Volvo, Cadbury Schweppes, Portugal Telecom, Valeo and L’Oréal, for which BBVA acted as onethe financing of the dealers.

Global Corporate Banking’s Corporate Finance subunit is responsible for advising on mergers and acquisitions and providing general corporate advisory services.“Sistema Carretero del Oriente” of the Mexican federal government.

Institutional Banking

The Institutional Banking business unit focuses on governmental and institutional clients, including the Spanish government and the governments of Spain’s autonomous communities andas well as private organizations, associations, foundations and insurance companies. This unit has a network of 42 branches in Spain, Portugal and Belgium.

In 2003, the Institutional Banking unit submitted bids for over 38 public contracts offered by the Spanish government. Among the new contracts awarded to the Institutional Banking unit were management of the Spanish Ministry of Defense’s treasury and payments departments, management of the payrolls of the Spanish Ministries of Justice, Finance and Public Authorities, the National Statistics Institute (INE) and of the National Employment Institute (INEM).

The Institutional Banking unit operates in these markets under the BBVA brand name and through Banco de Crédito Local (BCL), a BBVA subsidiary that specializesan entity specializing in long-term financing. To finance its lending activities, BCL has a euro commercial paper program

In 2004, the Institutional Banking unit submitted 44 bids for up to €1.5 billion and a euro medium-term note program and a fixed-income security program for €4 billion each. In 2003, BCL carried out the first-ever issue of public covered bonds in the euro market with the sale of €1.5 billion aggregate principal amount of fixed-income securities guaranteed by loans and credits grantedcontracts launched by the issuerCentral Government. Among the new contracts awarded to the public sector.Institutional Banking unit were the management of the treasury of the State Lotteries and Bets Organization and the Official Gazette of Spain and designation by the European Commission as its treasurer bank in Spain.

Global Markets and Distribution

The Global Markets and Distribution business unit focuses on a wide range of securities market-oriented activities. This business unit engages in both treasury operations on behalf of BBVA and transactions for third-parties, which, as of December 31, 2003, accounted for approximately 60% ofthird parties. In the equity securities area the Global Markets and Distribution unit’s net attributable profit. In 2003,business unit acted as book runner in BBVA’s securities brokerage affiliate, BBVA Bolsa, S.A., was merged into thecapital increase and Banco Sabadell’s public bid to finance its purchase of Banco Atlántico. Global Markets and Distribution unit, broadeningwas also the rangeglobal coordinator in the initial public offerings of products available to offer BBVA’s clients through this business unit.Cintra and Fadesa.

In 2003, weak securities markets encouraged investors to purchase fixed-income and government debt securities. The Global Markets and Distribution unit also experienced strong activityunit’s derivatives trading activities decreased in 2004 due to downward trends in these markets, while the fixed-income securities lending business foreign exchange transactions and interest rate-related products. In addition, the Global Markets and Distribution unit participates actively in theincreased during 2004 principally due to cross-selling of products and services with other BBVA business areas and units. For example, the Global Markets and Distribution unit has made fixed-income and equity security products, as well as mutual funds, available for marketing and sale through BBVA’s retail banking branch network.

The Global Markets and Distribution unit is particularly active in a number of securities and trading markets, including the AIAF fixed-income market, the Spanish stock market, the Spanish foreign exchange market for euro/U.S. dollar transactions and the Spanish government debt securities market.

Business and Real Estate Projects

The Business and Real Estate Projects unit manages a portfolio of 127enterprises and real estate businesses, with an approach based on four key elements: profitability, rotation, liquidity and optimization of the use of economic capital. The unit manages a portfolio of 116 investments with a book value as of December 31, 20032004 of €992€841 million and unrealized gains amounting to €749 million, which is an increase of €200€859 million compared to total unrealized gains€749 million as of December 31, 2002.2003. Its investment portfolio is diversified among the real estate, capital goods and services sectors.

Divestitures from this investment portfolio in 20032004 amounted to approximately €230over €550 million giving rise togenerating capital gains of €100€250 million. The most significant disposition related todispositions were the sale by Corporación IBV, which is 50%-owned by BBVA, of its 6% interest3%, 5%, 33.3% and 17.2% interests in the capital stock of Gamesa, Corporación Tecnológica, giving rise to a capital gain of €30 million. Following this transaction, Corporación IBV’s interest in Gamesa decreased to 31.8%.Acerinox, Grubarges and Vidrala, respectively.

In 2003,2004, the Business and Real Estate Projects unit made investments totaling €140launched the brand Anida, which currently has a property development portfolio of 3 million in 10 real estate development projects with approximately 700,000 m²m2 of buildable land and sold mature real estate projects with a total of 550,000 m² of buildable land, giving rise to capital gains of approximately €70 million. As of December 31, 2003, the Business and Real Estate Projects unit’s real estate development portfolio consisted of 2.5 million m² of buildable land andalmost 4,000 dwellingsbuildings under management, distributed among 44 projects.management.

Global Transaction Services

The Global Transaction Services unit was created in 2003 to manage BBVA’ssupports the specialized management of corporate and institutional transaction business which is globalboth in scopethe wholesale area and offersin the Group’s other areas, offering a wide range of products and services, including domestic and international collections and payments, loans, trade bill discounting, factoring, confirming, credit cards, foreign trade, electronic banking, correspondent banking and cash pooling systems services.

Banking in America

Because political and economic conditions in Argentina in the last several years had a significant negative effect on the entire Argentinean banking sector and have consequently severely affected the operating results of our Argentinean subsidiaries during this period, during 2002 and 2003, management evaluated and managed our Argentinean operations as if they comprised a separate business area and not part of the Banking in America business area where such operations would otherwise be included. Accordingly, our Argentinean subsidiaries’ operations are discussed under the separate business area, “Argentina”, and not as part of the Banking in America business area.

In addition, as a result of the reorganization of our business areas in 2003, the Banking in America business area now includes our Mexican operations, which had been included in a separate business area in 2002, and excludes our Brazilian operations, which were sold in June 2003. In this Annual Report, the operating results of our Brazilian operations have been included in the Corporate Activities and Other business area. See “Item 5. Operating and Financial Review and Prospects—Operating Results—Results of operations by business area”. Unless otherwise specified, information included below relating to macroeconomic data in the Latin American countries in which we operate, such as GDP or inflation, has been drawn from our internal statistical studies based on information published by local governmental or regulatory authorities.

EconomicThe economic conditions in the Latin AmericaAmerican countries in which we operate generally improved in 2003,2004, with average growth in gross domestic product (GDP), excluding Argentina, of 1.0%, compared to 0.2%6%. Inflation was relatively moderate in 2002, according to our internal statistical studies.2004, whereas trends in interest rates have been mixed. In addition,Mexico, increased interest rates had a positive effect on the average rate of inflationBanking in America area’s net interest income, whereas the region declined to 6.3% in 2003, compared to 8.0% in 2002, according to our internal statistical studies. These positive macroeconomic developments, however, were offset by the sharp and widespread decrease in interest rates throughoutin Venezuela and Chile had a negative effect on the area’s net interest income. The majority of Latin American currencies experienced lower declines in value against the dollar in 2004 compared to 2003, with some currencies appreciating in value against the dollar. However, the depreciation of the dollar’s value against the euro has negatively impacted the Banking in America and particularly in Mexico. In this context, BBVA soughtbusiness area’s contribution to take advantage of rebounding economies by adapting its business strategies to the new interest rate levels, addressing each customer segment with individually tailored products and services, improving efficiency and reducing costs and intensifying overall risk management.our consolidated profits.

The Banking in America business area includes the banks, pension fund managers and insurance companies managed by BBVA in fourteen Latin American countries, as well as our international private banking business, some of whose customers also come from this geographical area.business. Our Banking in America activities are carried out through 3,300 branches in the region with over 51,000 employees.

The Banking in America business area strategy in 2004 has been to restore growth in lending, where after years of restrictions, conditions are now more favorable. This strategy was reflected in specific acquisitions, which sought to complement the strong growth potential of the area’s existing businesses with growth by acquiring other businesses with similarly strong potential for growth. Examples of such acquisitions include the purchase of minority holdings in Bancomer and the purchase of Hipotecaria Nacional to improve the area’s position within the growing mortgage segment in Mexico, as well as the acquisitions of Laredo National Bancshares in Texas and Valley Bank in California (each of which were integrated into the area’s new U.S. subunit), which were selected as targets because of their potential for increased growth within our Banking in America area due to this area’s experience in specific customer segments traditionally serviced by these acquired businesses.

As of December 31, 2003, this2004, the Banking in America business area had total assets of €73,778€74,992 million, which represented 25.7%24.1% of BBVA’s total assets, and, forassets. In 2004, the year 2003, net attributable profit of €715 million,this business area was €1.2 billion, which represented 32%44.2% of BBVA’s totalthe Group’s net attributable profit.

Our Banking in America business activities are carried out through our subsidiaries in Mexico, Colombia, Chile, Panama, Paraguay, Peru, Puerto Rico, Uruguay and Venezuela, which in the aggregate had 2,950 branches in the region and 47,877 employees as of December 31, 2003.

Our Mexican operations form the core of our activities in Latin America and they contributed approximately two thirdstwo-thirds of the Banking in America business area’s total assets, operating profit and pre-tax profit as of December 31, 2003. The three investment-grade countries in Latin America in which we operate, Mexico, Chile and Puerto Rico, represented approximately 80% and 70% of the Banking in America business area’s assets and net attributable profit, respectively, as of December 31, 2003.2004.

The following is a description of our operations and the economic and political factors that most significantly affect such operations, on a country-by-country basis, in the Banking in America business area. The operating results described below refer to each individual unit’s contribution to the Banking in America business area’s operating results, unless otherwise stated.

Mexico

The slow recovery of the United States economy in 2003 had a negative impact on Mexico’s GDP, which grewBBVA reaffirmed it’s strategic commitment to Mexico by 1.1% in 2003, compared to 0.7% in 2002. Due to the low rate of inflation of 4.0%, market interest rates also remained very low by historical standards and decreased to 5.85% in 2003, compared to 7.11% in 2002. Low prevailing market interest rates resulted in an overall increase in lending in Mexico, though such lower rates reduced margins and therefore decreased Mexican banks’ net interest income for the year.

Our Mexican operations are conducted by Bancomer, which includes a commercial bank, investment bank, capital markets, insurance, pensions and other related operations. On January 30, 2004, our Board of Directors adopted a resolution to launchsuccessfully launching a tender offer for the approximated 40.6%40.6 % of the shares of Bancomer which wereit did not already owned by BBVA. The tender offer was launched onown in February 19, 2004 and expired on March 19, 2004. As a result ofAfter the successful completionconclusion of the tender offer process and subsequent purchases, amountingour interest in Bancomer increased to 0.56%a 99.7% interest in its share capital as of Bancomer’s capital stock, at MarchDecember 31, 2004.

The continued recovery of the U.S. economy in 2004, particularly in terms of industrial output, benefited our business in Mexico, which had the highest rate of growth in GDP in the last three years (approximately 4%). This economic growth led to a moderate rise in inflation (approximately 5%). Exchange rates, however, were volatile. As of December 31, 2004, we owned 99.42%exchange rates for the Mexican peso had depreciated 4.3% and 13% against the dollar and the euro, respectively, from exchange rates as of December 31, 2003. This volatility in exchange rates, as well as the increase in interest rates in the U.S., led the Bank of Mexico to implement a restrictive monetary policy, which led to a rise in interest rates. The TIIE (Mexico’s Interbank offered rate), which had fallen below the 5% mark at the beginning of 2004, was at 8.9% at December 31, 2004. The average TIIE rate for 2004 was 7.2%, compared 6.8% in 2003). Long-term interest rates experienced a sharp increase in 2004, which had a negative effect on Bancomer’s outstanding shares.results of operations.

In 2003,Within this economic background, Bancomer focused on improving productivity, reducing cost and expandinghas experienced increased growth in its operations, in spite of increasing competition in the rangeMexican banking sector. Total net lending at December 31, 2004, was €13.5 billion, an increase of products and services offered. In addition, an effort was made15.8% compared to decentralize many of the decisions previously made only in Bancomer’s central offices, such as relating to the approval of certain loans. Bancomer’s total lending in 2003 increased by 4.8% over 2002, which was sufficient for2003. Bancomer to maintainretained its position as one of the Mexican market leader in lending,leaders, with a market share of 31.7%28.6% as of December 31, 2003, compared to 32.2% for 20022004 (source:Sistema de Intercambio de Bancos, December 2003)2004). The fastest growing loan category in 2003 was the consumer loan and credit card segment, which grew by 24.9% over 2002. In addition, the Creditón Nómina consumer loan was also a strong performer in 2003, increasing by approximately 40% over 2002 in terms of total credits granted.

Bancomer also focused on increasing the number of its credit card clients and in 2003 launched several new cards, including the Mini Bancomer card and the Cash Back card. As of December 31, 2003, Bancomer’s clients had opened up approximately 3.5 million credit card accounts, an increase of approximately 900,000 accounts over 2002. Bancomer also launched the Business Card in 2003, which is marketed to small and medium sized corporate clients and allows them to access their credit lines through the Internet, cash dispensers, point of sale terminals in commercial establishments or Bancomer branches.

Bancomer’s retail products that experienced the highest growth rates were consumer loans and credit cards, which jointly increased by 62.8% in lending2004. Bancomer issued 1.5 million credit cards during 2004 and nearly 500,000 “Creditón Nómina” loans were granted. Bancomer also granted more than 39,000 car loans in 2004.

Bancomer’s Corporate and Institutional Banking subunit focused its resources on granting loans to SMEs, with an increase of 46% compared to 2003. The commercial loan portfolio for large corporations was accompaniedapproximately €5.9 billion by its developmentDecember 31, 2004, a 28% increase compared to 2003. Bancomer’s mortgage portfolio began to improve in 2004. The total mortgage portfolio (excluding UDI trusts) was €865 million, an increase of enhanced risk management mechanisms, such as22.9% over 2003.

In January 2005, Bancomer bought Hipotecaria Nacional, one of the leading home financiers in Mexico, with the goal of complementing BBVA Bancomer’s commercial mortgage loan business with residential mortgage loans, while also providing Bancomer with a new systemsegment of credit scoring and fraud control, resulting in an improvement in overall loan quality. Bancomer’s NPL ratio decreased to 3.95% from 4.22% as of December 31, 2003 and December 31, 2002, respectively. As of December 31, 2003 the coverage ratio was 221.8%.customers for cross-marketing purposes.

Bancomer is the leader in Mexico in terms of customer deposits, with a market share of 32.7%, compared to 31.8% as of December 31, 20022004 (source:Sistema de Intercambio de Bancos,December 2003)2004). To increase customer deposits, In 2004, Bancomer focusedcontinued its policy of increasing the range of deposit products available while focusing on increasing the volume of lower-costlower cost deposits. Much of the growth in deposits is due to the success of the various “Savings Fortnights” organized during 2004, which allowed Bancomer to maintain its position as market leader in this segment.

As part of its initiative to offer diversified products in the area of mutual funds, Bancomer launched the “Fondo Triple,” a guaranteed-return fund that proved highly successful in 2004. BBVA Bancomer had a market share in mutual funds of 19.3%, 26 basis points higher than at the close of 2003.

In the area of pension fund management and insurance, the Group operates in Mexico through Afore BBVA Bancomer in pensions, BBVA Pensiones Bancomer in the annuities business, BBVA Seguros Bancomer in insurance and Preventis-Meximed (recently merged with Vitamédica) in the area of health.

Pension funds in Mexico did not experience positive growth or returns in 2004 as a result of both the slow recovery of employment rates and the volatility of financial markets, all of which had a negative impact on the income of pension fund managers. However, even under these circumstances, Afore Bancomer increased its fee income slightly and enjoyed increases of 13.3% in net profit and 65.6% in net attributable profit.

BBVA’s insurance companies in Mexico had a joint net attributable profit of €55 million, a 23.8% increase over 2003. BBVA Seguros Bancomer experienced a 15.8% increase in the volume of premiums managed.

Argentina

In our Annual Report for the years ended December 31, 2003 and 2002, due to the economic, political and social crises that affected our Argentinean operations in such period, we provided additional disclosure on our Argentinean operations and discussed such operations as current accountsif they comprised a separate business area. In 2004, economic, political and social conditions in Argentina have stabilized and the Argentine economy has experienced significant growth. As a result of such stabilization and growth, our management no longer tracks our Argentine operations as a separate business area and, accordingly, in this Annual Report we do not discuss our Argentinean operations separately, but rather as part of the business area Banking in America, where these operations were included in our Annual Report for 2001 and for prior years.

The Argentine economy experienced a severe crisis in 2001 and 2002, marked by the continued movement of capital out of Argentina, the end of convertibility of the peso, the devaluation of the peso and the return of inflation. The emergency measures adopted by the Argentine government in response to the economic crisis at the end of 2001 and during 2002 that affected our results of operations included: freezing public debt payments, ending convertibility between the Argentinean peso and the dollar, imposing cash withdrawal limits on sight and savings accounts, which rose 19.5% despitere-scheduling of term deposit maturities and converting dollar assets and liabilities to pesos at different exchange rates. In 2001, we took substantial provisions and write-downs totaling €1,354 million relating to our investments in, and exposure to, Argentina. In 2002, we took an additional provision of €131 million. In 2004, the relatively low level of economicArgentine economy stabilized and experienced significant growth, in Mexico. Two specific products werebut uncertainty regarding the focus of Bancomer’s drive to increase deposits; the Libretón, a highly successful savings product,scope, sustainability and time deposits, which took advantagepace of the recovery remained.

In 2004, the GDP of Argentina grew by 8% and the Argentine economy also benefited from an increase in domestic and foreign investment. Inflation increased to 6.1% in 2004 and interest rates remained steady at an average rate spreadof approximately 3%, which was similar to the average rate in 2003. The exchange rate of the Argentine peso against the U.S. dollar ranged between bank promissory notesARP2.85 and treasury securities. Overall, customerARP3.00 to $1.00, which was similar to the exchange rates between these currencies in 2003. However, the Argentine peso depreciated 8.1% against the euro in 2004.

The financial sector of the Argentine economy benefited from an increase in deposits grew 13.7% in 2003, compared2004, principally due to 2002.the increased liquidity resulting from government tax incentives that encouraged customers to deposit their savings in banking products. Banco Francés also benefited from an increase in lending of 25% in 2004, which had fallen for several prior years.

Banco Francés increased its lending activity during 2004, which had been significantly reduced in prior years due to the Argentine financial crisis, and continued to provide basic bill payment and check cashing services, which had generated the majority of its revenues in 2002 and 2003. The financial brokerage business of Banco Francés also improved in 2004.

Loans to the private sector (mainly personal loans, credit cards to individuals and export financing, through financial trusts and short-term credit lines, for companies) increased by 19.3% in 2004. Banco Francés focused successfully on reducing its credit exposure to the public sector in 2004, leading to an improvement in its asset mix.

BancomerAs a result of these developments, Banco Frances’s net interest income increased 286.3% in 2004, compared to 2003, while its net fee income increased 29.3% in 2004 compared to 2003. The efficiency ratio of Banco Frances improved to 47.7%. Banco Frances also implemented a debt rescheduling policy of the non performing loans portfolio, leading to a decrease in provisions for non performing loans during 2004 compared to 2003.

These improvements have lead to an increase in net attributable profit in 2004, despite the significant costs incurred in making payments to clients under judicial orders which permitted clients to withdraw deposits at a higher peso-dollar exchange rate than the prevailing market rate.

Banco Francés designed a compliance plan to comply with new minimum capital requirements established by the Argentine Central Bank in January 2004. The most important measures taken were (i) a capital increase with a par value of ARP385 million, which we subscribed to by capitalizing a €78 million loan we granted to Banco Francés and (ii) the sale to us by Banco Francés of its entire interest in Banco Francés (Cayman) Limited for $238.5 million. As a result of these and other measures, Banco Francés had nearly 900,000 on-line banking customers who performed an averagenet assets of over ARP1.6 billion at December 31, 2004, more than 22 million transactions per month,ARP1.0 billion above the required minimum.

BBVA’s affiliate, the Consolidar Group, operates in the Argentine pension fund sector and had more than 750,000 telephone banking customers who generated more than 3.51.5 million calls per month in 2003. Bancomer Transfer Services (BTS) performed approximately 15 million money transfer transactions in 2003, an increase of 18.8% over 2002, in the amount of approximately US$6 billion, which was an increase of 16.8% over 2002.

As of December 31, 2003, Bancomer’s pension fund affiliate, Afore BBVA Bancomer, had 4.3 million plan participants and €6,007 million in assets under management.management of ARP 10,378 million, with a market share of 19.6% as of November, 2004 (source:Superintendecia Administradora de Fondos de Jubilaciones y Pensiones). For 2004, Consolidar Group’s net attributable profit was €17 million.

Chile

In 2003,2004, the macroeconomic situation in Chile was generally favorable and the country experienced GDP growth of 3.2%5.6%, compared to 3.0%3.2% in 2002.2003. Favorable economic growth was due in part to improvements in exports and the recovery of internal demand. An increase in the prices of raw materials and the appreciation in the value of the Chilean peso kept inflation low inflation andin 2004. However, interest rates which were cut byrose 50 basis points following increases in U.S. lending rates, to close at December 31, 2004 at 2.25%.

The financial sector in Chile experienced a considerable increase in loans, from a growth rate of 5.7% during the year2003 to 2.25%approximately 13% in 2004. BBVA Chile had lending growth of 16.9% and a market share in lending of 7.7% in 2004, compared to 7.2% in 2003 (source: theSupertintendencia Bancaria as of DecemberNovember 31, 2003,2004). BBVA Chile’s consumer-banking subunit experienced a growth rate of 16.9%, with a good performance in mortgage loans and annew products such as the Mini Visa. BBVA Chile’s corporate banking subunit’s total net lending increased by 5.1% and experienced a 22.4% increase in the price of copper, Chile’s main export. In addition, the Chilean government signed free trade agreements with the EU, the United States and South Korea, which reflects Chile’s strong relative economic position compared to that of its Latin American neighbors.

For BBVA Chile, 2003 was the second year of development and implementation of the New Stage strategic plan for the 2002-2005 period. The objective of this plan is to enhance BBVA Chile’s innovation and, consequently, growth in all market segments. Part of this plan calls for BBVA Chile to develop products and services that are tailored to individual customer’s needs, such as with products like BBVA Plus, a new type of time deposit paying monthly interest, the Hipotecón, the first peso-denominated mortgage loan not linked to inflation and the Hipotecón Cien, the first mortgage loan to finance the full value of the purchased property. BBVA Chile was also the first bank in Chile to offer euro-denominated current accounts and time deposits for the corporate customer segment.overall wholesale banking.

In 2003, BBVA Chile experienced lending growthChile’s deposits increased by 27% in 2004, primarily due to the success of 15.3%, which increasedproducts such as the PLUS time deposit. BBVA Chile’s market share in lendingdeposits increased to 7.2%, compared to 6%8.6% in 20022004 (source: theSupertintendencia Bancariaas of DecemberNovember 31, 2003).2004) compared to 7.8% in 2003.

BBVA’s Chilean pension fund manager affiliate, AFP Provida, had funds under management of €12,347$19,134 million as of December 31, 2003, an increase of 16.5%, compared to 2002.2004. Provida’s market share in pension fund management was 31.7%31.5% as of December 31, 2003,2004, according to theSuperintendencia de Administradoras de Fondos de Pensionesof Chile, with approximately 32.9 million pension fund participants. Consistent with the trend in the overall market, the numberIn 2004, Provida earned a net attributable profit of demands for payment against Provida increased in 2003, resulting in a significant increase in Provida’s costs. This increase in costs, however, was offset by an increase in fees collected and higher returns from funds invested.€15 million.

Colombia

The Colombian economy experienced stronger than expected growth in 2003, with an increase in GDP of 3.2%, lower3.8% in 2004, as well as moderate inflation and record lowrelatively stable interest rates. After several years of economic crisis, in this improved economic environment Colombia’s financial system made major progress both in terms of banking income, overall business activity and credit risk quality.

Our Colombian affiliate,Total net lending by BBVA Colombia (formerly known as Banco Ganadero (“Banco Ganadero”) had a strong 2003, due,Ganadero) exceeded €1.3 billion in part,2004, an increase of 28.1% compared to the success of Plan Líder, under which Banco Ganadero focused on more profitable customer segments, improved the structure of its loans and deposits, cut back on its marginal low-profit businesses and increased the rate of recovery of past-due loans during the year. In 2003, Banco Ganadero’s deposits grew 21.6%, increasing its2003. BBVA Colombia’s market share of lending increased by 0.48%1% in 2004 to 7.7%, while lending also increased 10.1%, which resulted in a 0.30% increase in market share to 7.0%, in each case compared to 20028.0% (source:Superintendencia Bancaria of Colombia, November 2003)2004). This growth was experienced across all BBVA Colombia’s subunits. In its consumer banking subunit some of the most important products were the “Creditón”, “easy mortgages” and the launch of the mini-sized cards. Its corporate banking subunit, some new products were the first credit card for SMEs in Colombia, business cards, the agricultural credit campaign and the CDT business gift.

AsIn 2004, BBVA Colombia’s deposits increased by 21.6%, increasing its market share to 8.1% (source: Superintendencia Bancaria of December 31, 2003, BBVA’sColombia, November, 2004). This growth was principally due to the success of low-cost products, particularly savings accounts.

BBVA operates in the Colombian pension fund manager affiliate,pensions market through AFP BBVA Horizonte Pensiones y Cesantías, had the third-highestwith an 18.2% market share in “compulsory pensions,” which are pensions employers are required to establish for their employees, in terms of assets under management, with an 18.9% market share, and ranked second in number of plan participantspension funds managed (source:Superintendencia Bancaria of Colombia, December 2003)November, 2004). In January 2003, a pension reform law came into effect in Colombia. Under the law, the fees that Colombian pension fund managers are permitted to charge for managing compulsory pensions dropped from 1.5% to 1% of net asset value. This decrease in fees had a corresponding negative effect on BBVA Horizonte’s netNet attributable profit which fell 25.9% compared to 2002.

from AFP BBVA has two affiliatesHorizonte Pensiones y Cesantías was €7 million in Colombia operating in the insurance sector: BBVA Ganadero Vida, which, in 2003, was awarded the contract to provide disability and survival insurance policies to BBVA Horizonte’s pension plan participants, and BBVA Ganadero Seguros Generales.2004, a 24.2% increase from 2003.

Panama

Panama’sThe Panamanian economy recoveredexperienced an increase in GDP of 4% during 2004, which allowed the second half of 2003 after slow start in the first halffinancial sector of the year. Foreconomy to improve the year, Panamanian GDP grewquality of its credit portfolio. BBVA Panama’s total net lending increased by approximately 2.7% over 2002. In this economic context, BBVA maintained lending14.7% while deposits increased by 11.1%, principally due to strong growth in banking business with private individuals and the success of new products targeted at 2002 levels, but focusedspecific groups based on improving its position in the retail banking sector, where it achieved lending growth of 42%, compared to 2002.